The recent updates to the European Union (EU) Markets in Financial Instruments Directive and Regulation (MiFID II/MiFIR), have imposed the use of the Legal Entity Identifier (LEI) in a much wider context than was previously the case.
Under the new regime, investment firms operating in Europe will, in many situations, not be able to service clients eligible for a Legal Entity Identifier (LEI) who do not have one. Accordingly, without the LEI, various entities will be unable to continue to trade listed securities or to participate in certain related corporate actions.
The use of LEIs is also required or recommended under a number of other European regulations, namely the European Market Infrastructure Regulation (EMIR), the Capital Requirements Regulation (CRR) and the Central Securities Depositories Regulation (CSDR).
The LEI is also used by regulators to detect and investigate potential cases of market abuse and to monitor the fair and orderly functioning of markets. It also enables regulators to quickly assess the extent of market vulnerability and to identify market participants which are connected and which may be at risk.
The LEI is a 20-character, alphanumeric code, unique and exclusive to an entity and used globally across financial markets in order to identify that entity in relation to financial transactions it is a party to (including transactions in different jurisdictions and those executed on EU trading venues). Once allocated, the LEI is registered in a global data system.
Entities including private or public limited companies and funds (including UCITS and AIFs), which are a party to transactions in various financial instruments, need to identify themselves through a LEI.
Such transactions mainly refer to those involving transferable securities, including investments which are negotiable on the capital markets such as equities, bonds, money-market instruments, units in collective investment undertakings and derivative instruments for the transfer of credit risk.
Legal entities are required to register for and confirm their registration on an annual basis. There is a minor administrative fee for both registration and the annual confirmation process.
The Financial Stability Board (FSB) together with the G20 have, amongst others, established Local Operating Units (LOUs).
These are local implementers of the global LEI system which are endorsed by the Regulatory Oversight Committee (ROC) - the worldwide administrative supervisory body. LOUs enable the registration, validation and maintenance of reference data and issue LEIs via online portals.
We have streamlined the process to obtain LEIs via online registrations with various endorsed LOUs approved to issue LEIs. An application should be submitted and supplemented by documentation verifying the existence of the entity applying and any direct/indirect parents.
Our team is well placed to assist you with the initial registration together with the annual compliance routine, as well as provide you with further detail on the LEI.
Head of Tax, PwC Malta
Tel: +356 2564 6791
Tax Partner, PwC Malta
Tel: +356 2564 6738