Legal Entity Identifier or LEI were introduced following the global financial crisis in 2008 so that all participants in the financial system would be identifiable to facilitate monitoring of worldwide financial transactions. A LEI is a unique 20-digit alphanumeric code which is specific to legal entities including investment firms, corporations, charities and Trusts.
Effective 3 January 2018, legal entities will be required to hold a LEI if transacting reportable instruments. Reportable instruments include:
- Exchange Traded Funds – ETFs
- Venture Capital Trusts – VCTs
- Corporate Bonds
- Structured Products
Bare Trusts are currently exempt from acquiring a LEI.
Natural persons are not required to hold a LEI although may be asked by Platform Providers to provide National Insurance, Passport Numbers and details of nationality (or dual nationality) to transact investments if the information has not been recorded.
LEIs must be obtained via an LEI issuer that has been accredited by the Global Legal Entity Identifier Foundation (GLEIF) or an entity endorsed by the LEI Regulatory Oversight Committee (LEI ROC). In the UK the designated LEI issuer is the London Stock Exchange (LSE) https://www.lseg.com/LEI
The legal entity will provide to the designated LEI issuer the following information: Official name of the legal entity, Country of formation, legal form of the entity, current registered address and reference number of the legal entity e.g. company registration number. Supporting documentation may be submitted, including Articles of Incorporation, Trust Deed etc.
Registration does not come free of charge. The initial cost per LEI is £115 + VAT with annual renewal fees of £70 + VAT. Fee savings can be made if you batch requests (10) however this generally only reduces the initial fee by £25 per request.
It is anticipated that the expected volume of LEI requests during January 2018 could slow down the issue of LEI codes. Therefore we recommend that any affected legal entities register for a LEI code without delay.
In summary, act now and consider if you need to obtain a LEI code for your clients otherwise after 3 January 2018 you will not be able to buy or sell shares or ETFs.