Legal Entity Identifiers for Pensions

According to the MiFID II regulation, which I wrote extensively about in a previous blog, investments and trade reporting done by Pension Schemes from the 3^rd January 2018 will need to be associated with a Legal Entity Identifier (LEI). An additional 6 month grace period was given by the European Securities and Markets Authority (ESMA) to allow time for firms to obtain an LEI.

Investments, including equities and bonds are reported under this LEI in order to increase transparency and trust on the financial market.

Does My SSAS Pension Scheme Need an LEI Code?

If your SSAS does not intend to trade in listed securities then you will not be obliged under MiFID II to report on these trades in the format defined by ESMA. To clarify, if the pension fund or SSAS comprises of investments such as commercial property, loan backs, cash deposit accounts or other non-listed securities, there is no need to obtain an LEI.

However, it is worth noting that pensions schemes should, if they have even the intention of trading or placing investments with a counterparty such as a stockbroker or investment manager, ask them if they’re treated as “trading listed securities” in MiFID II.

Additionally, if there is any intention of trading in listed securities in the future, SSAS’ are advised to obtain an LEI in advance so as not to risk trading before an LEI is obtained.

Who is Responsible for Obtaining the LEI?

SSAS trustees are ultimately responsible for their pension scheme’s associated LEI number. This responsibility can be handed over to investment firms who can obtain an LEI on the pension scheme’s behalf although many will charge a fee for doing so and for managing the LEI itself.

Where Do I Get an LEI?

LEIs can be purchased from a Local Operating Unit or from a Registration Agent. LOUs are managed by the Global Legal Entity Identifier Foundation (GLEIF) and RAs are managed by the LOU they’re partnering with.

ManagedLEI can deliver LEIs in minutes after application is completed. We also have a very useful management service for investment firms who manage large numbers of LEIs and want to reduce the burden of management without increasing the risk of lapsed LEIs.

You can leave the management to us and pass the savings onto your customers.

Risks of Trading Without an LEI

If a pension scheme does not obtain an LEI before trading, regulators have the right to delay trade until an LEI is obtained and could ultimately hand your organisation a large non-compliance fine.

What Should Trustees Do Next?

LEIs are simple and cheap to obtain. Trustees can use the ManagedLEI website to immediately purchase a 10 year LEI for under £30 a year. Every year, we check your details are the same and renew for you, so you don’t have to worry about anything except submitting your trade reports!

Alternatively, you can speak to your investment manager who can obtain your LEI but may charge you an additional fee and obtain your LEI from a more expensive LOU. They could also reduce the number of years so that you have to manage the LEI on renewal.

How Pensions Can Apply for an LEI

I recently wrote a blog on how trusts and funds can apply for an LEI. Please read this for further details on the application itself.

10 year LEIs are currently 15% off at £26.60 a year. Get yours here.