Whether you’re investing your money as part of a group (a fund) or you’re investing long term in a trust, as per the requirements under the MiFID II and Alternative Investment Fund Managers and amending Directives (AIFM), both require an LEI to report on trade and transactions using the framework provided by ESMA.
ESMA have published a briefing in October 2017 to say:
A client who is a legal entity or structure, including a charity or trust, need to make arrangements to obtain an LEI code if it wants the investment firm to continue to act on its instructions or make a decision to trade on its behalf from 3 January 2018 onwards.
Trusts who do not apply for a Legal Entity Identifier to carry out compliant reporting will not be able to provide investment services. Ultimate responsibility for obtaining an LEI is with the legal entity itself; however, trusts may wish to manage and maintain a portfolio of LEIs for all their clients as part of their service. ManagedLEI can help with large LEI portfolios, just check out our Managed LEI Pro Service.
Some trusts may be unaware of the requirement for LEIs; for example, if they hold a static share portfolio. They may only be aware of the requirement for LEIs once there is a need to sell shares or acquire new shares. The only trusts exempt from these rules are bare trusts, which are often used to pass assets onto young people.
According to the AIFM regulation, funds should report to the competent authorities of its home member state on the principle markets and instruments in which it trades on behalf of the funds it manages. Other regulations such as the US Dodd-Frank Act Title IV also require LEIs for reporting.
If you are a fund manager with many funds and sub-funds you should note that funds are treated as a legal entity under these new regulations and as such, an umbrella fund with sub-funds would require an LEI for each where the LEI itself can hold hierarchical data to identify which LEIs are the ultimate parent fund and which are sub-funds. Investment manager and brokers also require an LEI.
Guidance on the policy for funds and Legal Entity Identifiers can be found on the LEI Regulatory Oversight Committee (LEI ROC) website.
New reporting requirements under the EMIR regulation are set to go live on 1st November 2020. LOUs like us are preparing for new validation procedures and assessment of fund relationships. The major difference after 1st November will be the common data file format. Originally, the “associated entity” field was for all kinds of fund relationships. Going forward, there will be separate fields to identify different relationships such as umbrella fund or sub-funds. This creates new relationships in the relationship record and more transparency in the common data file format.
When applying for an LEI for your fund or trust, you should select the appropriate entity type in the “Entity Type” field to ensure a quick and smooth application process.
Details of your entity such as “Company Name” mean the Trust/Fund/Pension Scheme’s name. You should write this exactly how it is written in your Deed or official documents. In the Company Number section, if there is no Companies House registration, trusts and funds can leave this blank.
Before completing the registration process, if your entity is not registered with the Companies House, please attach your trust/fund deed, resolution or annex here. Or indeed any document you might have to confirm the address and the signatory person or trustee. If you’re in doubt about what document to attach, please write to us on the Live Chat or call us on 01622 535 535.
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