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Legal Entity Identifiers (LEI)

This article explains who needs a Legal Entity Identifier.

Legal Entity Identifier (LEI)

A Legal Entity Identifier (LEI) is a unique reference required by legal entities or structures, which includes companies’, charities and trusts. The LEI allows the parties to financial transactions to be identified in any jurisdiction.

Who needs to apply for a LEI?

Legal entities trading on regulated exchanges, such as the London Stock Exchange, will require a LEI for all transactions, from 3 January 2018.

Legal entities include companies, charities and trusts. Bare (Absolute) trusts are excluded and will not require a LEI.

The need for a LEI will depend on the investment wrapper and type of investment

Life assurance and Redemption Bonds.

Legal entities investing using a bond will not require a LEI. This is because the life company is the owner of the underlying asset which is used to value the bond -  the policy holder owns the investment wrapper.

Unwrapped Investments

Legal entities holding unwrapped investments may require a LEI if they hold funds which are traded on a regulated exchange. For example; Investment Trusts and Exchange Traded Funds (ETFs)

Open-ended Investment Companies (OEICs) and Unit Trusts are not traded on the exchange and do not require a LEI.

Where investing through a platform, the provider holds the investments as nominee for the account holder. Unlike the bond wrapper, the legislation looks through this arrangement and requires the account holder to have a LEI.

Example scenarios

  1. The trustees of a discretionary trust wish to use trust money, currently held in a trustee bank account, to invest into a Select Bond with Quilter International. This will be the only asset of the trust.

    In this scenario, the trustees do not require a LEI to instruct the investment.

  2. The officers of a charity wish to invest charity money. They choose to invest into a Collective Investment Account, selecting a mix of Unit Trusts and OEICs to hold in the account. They also purchase shares XYZ limited, a company listed on the London Stock Exchange, via a stockbroker.

    In respect of the Collective Investment Account, the charity does not require a LEI as there is no direct trade on the stock market. However, they will need to obtain a LEI before they can purchase shares in XYZ limited.

Article created: 19/09/17

Last updated: 23/03/18

For financial advisers only. Not to be relied on by consumers.



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