MIFID II Update and LEI’s

The second Markets in Financial Instruments Directive (MIFID) comes into effect on 3 January 2018. The changes will have a major impact in Financial Services firms; including a wide-ranging overhaul of the exiting directive with a particular focus on market transparency.

A key impact of the new regulations is that from this date, Wellian will only be able to continue trading in financial markets on behalf of certain clients if those clients have obtained a Legal Entity Identifier (LEI).

What is an LEI?

An LEI is a 20 character alphanumeric code that is unique to each legal entity investing in financial markets.

Who requires one?

Investors falling within the category of a ‘legal entity’ will need to obtain an LEI and those relevant to Wellian investors are:

  • Trusts – excluding bare trusts
  • Pension funds – excluding Self Invested Personal Pensions
  • Offshore bonds
  • Company accounts

What is the purpose of an LEI?

From 3 January 2018, UK Investment management firms will be obliged to report more information to the Financial Conduct Authority about trades they execute on behalf of a legal entity. The unique LEI has been introduced so that all counterparties to transactions on financial markets can be quickly identified.

How do you obtain an LEI?

The LEI can be obtained directly from the London Stock Exchange (LSE) for an initial fee of £115 + VAT and there is an annual renewal fee of £70 + VAT.

A legal entity can only be issued with one LEI. So if a trust has two investment managers, only one of these will need to apply for the LEI. The trustees would then need to share the code with the other manager.

Please also refer to the FCA’s website – www.fca.org.uk/markets/mifid-ii/legal-entity-identifier– lei-update for further information.

What next

Identity all entities and structures where an LEI is required. We will only be carrying out this process for entities and structures managed by Wellian Investment Solutions in A J Bell Securities’ custody for our clients.

Communicate to those responsible for assessing suitability for the entity or structure i.e. the adviser, to ensure they are aware of the LEI requirement.

All advisers have been contacted and provided with a list of the relevant entity and details of how to apply for the LEI, with details of deadlines.

If you use one of our platform services, then the responsibility for obtaining an LEI falls on yourselves, the client or the platform itself.

We strongly recommend that you make contact with the relevant platform provider in relation to their requirements on LEIs.

Our application form is in the process of being amended to incorporate the need for an LEI, therefore this will become a future onboarding requirement.

While the information provided has been prepared with due care and attention. Wellian Investment Solutions Limited cannot guarantee the accuracy or completeness of the information.

This information does not constitute advice or a recommendation.

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