10 Jun Legal Entity Identifier For Trusts
The Global Legal Entity Identification Foundation (GLEIF) has designed a system where every legal entity will need to register and obtain a unique identification number called the Legal Entity Identifier (LEI) according to the new European legislation, the Markets in Financial Instruments Directive and Regulation in the UK.
Almost every country around the globe now makes the use of LEI for clear and transparent transactions.
Who is the GLEIF?
The Global LEI Foundation (GLEIF) is a not for profit body responsible for managing the Global LEI System. They are tasked with running the system on a global basis ensuring consistency and accuracy through data quality programs, reporting, and their open data policy. This also allows mistakes to be spotted and updated through their test process.
What is LEI?
The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization. It connects to important reference information that enables clear and unique identification of legal entities participating in financial transactions.
Each LEI contains information about an entity’s ownership structure. Thus, the LEI also knows about the ownership, hierarchy, the past and present of the company. In other words, the publicly available LEI data pool can be considered as a global directory, which hugely enhances transparency in the global marketplace.
The London Stock Exchange (LSE) requires investors who are trusted to be legal entities to obtain the LEI to perform any transactions.
Legal entities include trusts, public and private companies, pension funds, charities and unincorporated bodies that are parties to financial transactions.
Purpose of the LEIs
Complete LEI data is consolidated into one database to improve global entity identification and standardization, which will enable regulators and organizations to measure and manage counterparty exposure.
In addition, it will also enable every legal entity or structure with an LEI to be identified in any jurisdiction. Once the legal firm has the LEI, it is required to quote it to the requisite service provider when it enters into a reportable financial transaction. Thus there is loads of information about a company, its nature, other information before we decide to engage in a transaction.
Trusts and LEI
The regulations under LEI require trustees who are using capital markets in relation to trust funds to obtain the LEI for the trust.
In the case of discretionary trusts which have legal restrictions and cannot disclose trust details, the LSE will accept validation from the trust, and will not ask for the trust deed. Entities other than trusts are obliged to provide information about their official registry details and business address.
When you apply for an LEI you will be asked to provide a reference to the source of its identity, such as Companies House(if you are operating from London) and if it is a company registered there. However, there is no equivalent register for trusts. It may be possible to use the trust’s Unique Tax Reference (UTR) from HMRC’s tax return to identify it.
Why You Need To Apply?
If the LEI has not been obtained, the investment firms will be unable to participate in any investment or financial transaction activities with any other financial institutes. The Legal Entity Identifier can be procured by the firm itself or some investment firms may agree to apply for the LEI on behalf of their legal entity clients. The London Stock Exchange has produced a draft format which will be acceptable in order to transfer the application authority from the entity to a third party such as a management company.
Having an LEI for your firm or trust means you are participating in making global transactions transparent and less fraudulent.
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