Are you wondering how MiFID II will impact Legal Entity Identifiers (LEIs)? This post will outline what may be important to you regarding MiFID II and LEIs.
MiFID II is expected to present a significant compliance challenge for all firms already within the scope of MiFID and, potentially, for many more that may come within the scope of the new Directive.
How will MiFID II impact LEI holders?
From 3 January 2018, firms subject to MiFID II transaction reporting obligations will not be able to execute a trade on behalf of a client who is eligible for a Legal Entity Identifier (LEI) and does not have one.
What is an LEI?
An LEI is a unique identifier for persons that are legal entities or structures, including companies, charities and trusts. The obligation for legal entities or structures to obtain an LEI was endorsed by the G20 (the leaders of the 20 largest economies).
If you are subject to MiFID II transaction reporting obligations, or are a UK branch of a third country firm, you will need to ensure that your clients that are eligible for an LEI have one before executing a transaction in a financial instrument subject to the MiFID II transaction reporting obligations on their behalf, from 3 January 2018. These financial instruments include:
- Collective Investment Schemes,
- Derivatives, and
- Emission allowances meeting the conditions in article 26 of MiFIR
How can LEIs be obtained?
An LEI is available from bodies endorsed by the Legal Entity Identifier Regulatory Oversight Committee as an authorised Local Operating Unit for the global allocation of LEIs.
The Global Legal Entity Identity Foundation has also introduced the concept of a ‘registration agent’ to assist legal persons to access Local Operating Units. Issuing and arranging for the issue of an LEI is a not an activity required to be regulated by the FCA.