The Markets in Financial Instruments Regulation (“MiFIR”) came into force on the 3rd January 2018 forming part of the wider legislative package introduced by the Markets in Financial Instruments Directive 2014/65/EU (“MiFID II”) and amongst other matters introduces requirements for a number of categories of entities to be identified through a Legal Entity Identifier (“LEI”) code. The LEI is a 20-digit, alpha-numeric code that enables clear and unique identification of legal entities participating in financial instruments. LEIs, like other identifiers, are required by firms to fulfil their reporting obligations under financial regulations and directives.

According to MiFID II accurate identification of all relevant parties in transaction reports is key for efficient and effective monitoring of the activities of investment firms and ensuring that they act honestly, fairly and professionally and in a manner which promotes the integrity of the market. In order to allow proper market monitoring, transaction reports should identify the legal person who has made the investment decision, as well as those responsible for its execution.

Accordingly, MiFIR not only obliges an EU investment firm to obtain an LEI code for identification purposes under MiFID II transaction reporting but also obliges the investment firm to identify its clients that are legal persons with LEIs. In this respect, MiFIR introduces a requirement for clients (buyer/seller) on whose behalf an investment firm executes transactions in financial instruments to be identified through an LEI code. The requirement applies when the clients are legal entities. The term ‘legal entity’ includes parties that are legally or financially responsible for the performance of financial transactions, or have the legal right in their jurisdiction to enter independently into legal contracts, regardless of whether they are incorporated or constituted in some other way (e.g. trust or partnership) and includes individuals acting in a business capacity.

Eligible legal entities have until the 3rd June 2018 to obtain their LEI code following which an EU investment firm shall not be permitted to provide any service triggering the obligation to submit a transaction report for a transaction entered into on behalf of a client who is eligible for the LEI code, prior to obtaining the LEI code from that client. Until the 3rd June 2018 deadline, an EU investment firm may offer its services to an eligible entity provided that it obtains the client’s LEI code or the necessary documentation is obtained from the client to apply for an LEI code on behalf of its client.

For further information on the LEI code and for assistance in applying for the same please contact us at financial.services@whpartners.eu

 

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