Legal Entity Identifiers

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1 Factsheet What is MiFIDII? MiFID is the Markets in Financial Instruments Directive. It originates from the European Commission and has been in force since vember MiFIDII is effectively an update concerning the framework of trading venues in which financial instruments are traded. It extends the original MiFID seeking to regulate the operation of the markets trading in financial instruments. All MiFID investment firms (excluding collective portfolio management investment firms but including authorised credit institutions), operators of trading venues and UK branches of third country investment firms must comply with transaction reporting obligations. It is in respect of this transaction reporting that legal entity identifiers (LEIs) have been introduced for those that trade in financial instruments. Financial instruments include shares, bonds, collective investment schemes, derivatives and emission allowances (those that meet the conditions of Article 26 MiFIR 1 ). What relevance does MiFIDII have to our firm in Jersey and customers who aren t in Europe and don t need to comply with MiFIDII? MiFIDII currently has no direct application in Jersey. However, in practice you and your customer may need to apply for an LEI. For example, if your firm (or your customer) trades through a Jersey broker, and that broker places orders in the UK or European market with a UK or EU broker, then it is likely your firm would not need an LEI. Your firm would be a customer of the Jersey broker and therefore, in this example, it is most likely that the Jersey broker would require an LEI. Further, if your firm (or your customer) trades in financial instruments directly through a UK or EU broker, then the UK or EU broker will require you (or your customer) to provide an LEI before you place a trade. 1 MiFIR, comprising part of MiFID II, is an acronym for the Regulation on Markets in Financial Instruments and Amending Regulation. It focuses on regulating the operation of trading venues (including systems, controls and governance). In Partnership with:

2 Factsheet What is an LEI? An LEI is a 20-digit number which has an ISO2 designation (i.e. ISO 17442) and has been designed to uniquely and unambiguously identify participants in financial transactions. The body responsible for this number is the Global Legal Entity Identifier Foundation (GLEIF), a non-profit foundation incorporated by the Financial Stability Board under the laws of Switzerland. According to the GLEIF, there are four key principles underlying the LEI: it is a global standard; a single, unique identifier is assigned to each legal entity; it is supported by high data quality; and it is for the public good, available free of charge to all users [of the LEI search database]. To obtain an LEI, an application is required; an LEI is not provided free of charge (see below). te that countries outside of the EU (e.g. Canada) are adopting the practice of using LEIs. What is a legal entity? The term legal entities 3 includes, but is not limited to, unique parties that are legally or financially responsible for the performance of financial transactions, or have the legal right in their jurisdiction to enter independently into legal contracts, regardless of whether they are incorporated or constituted in some other way (e.g. trust, partnership, contractual). It excludes natural persons, but includes governmental organisations and supranationals. My customer is a trust - is that a legal entity?, a trust is considered a legal entity and it may (as outlined above) require an LEI. A regulated entity may act as agent in respect of each of its customers, but note that a corporate trustee must obtain a single LEI in respect of each trust to which the regime applies (note an omnibus LEI cannot be obtained for a trustee in respect of each applicable trust). ISO specifies the elements of an unambiguous LEI scheme to identify the legal entities relevant to any financial transaction. 2 International Organisation for Standardisation 3 Source

3 Examples of eligible legal entities include: All financial intermediaries Banks and finance companies All entities that issue equity, debt or other securities for other capital structures All entities listed on an exchange All entities that trade stock or debt, investment vehicles, including mutual funds, pension funds and alternative investment vehicles constituted as corporate entities or collective investment agreements (including umbrella funds, as well as funds under an umbrella structure, hedge funds, private equity funds, etc.) All entities under the purview of a financial regulator and their affiliates, subsidiaries and holding companies Counterparties to financial transactions In Jersey the following, without limitation, may require an LEI: Trusts Foundations Charities Limited partnerships Incorporated cell companies Protected cell companies Employee benefit trusts Unit trusts Funds and sub-funds

4 Factsheet Do I require a LEI?* Are you (or your customer) a relevant legal entity? Are you (or your customer) a participant in a financial market transaction? (for example, you or your customer buys or sells stocks traded on an EU trading venue) Do you (or your customer) trade solely with a Jersey (non-eu) broker? You do not require an LEI Do you (or your customer) trade with a UK or EU broker? You do require an LEI * There may be other circumstances where an LEI might be required, for example, we understand the LSE requires its non-mifid members to obtain an LEI number from its clients for trade reporting purposes. From where do I obtain an LEI? An LEI is available from bodies accredited by the GLEIF, or bodies endorsed by the LEIROC (Legal Entity Identifier Regulatory Oversight Committee 4 ). These bodies are referred to as LOUs local operating units. Examples, of LOUs include the London Stock Exchange and Irish Stock Exchange. It is recommended that reference is made to the GLEIF website 5 to ensure that application is made to an eligible LOU. Alternatively, The International Stock Exchange (TISE) is able to act as an easily accessible conduit through which both members and non-members are able to obtain LEIs from the LSE. For more information, visit 4 ROC is a group of more than 70 public sector authorities that have signed the ROC charter 5

5 So what does my firm need to do? If you (or your customer) are already a customer of a UK or EU broker, then it is likely that your broker has written to you advising that an LEI is required in order to continue using their services to trade in financial instruments. It is advisable to assess your position (or that of your customer) to determine what you hold and how you (or your customer) will trade going forward. When do I have to take action? There has been reprieve from ESMA on the requirement for all EU entities subject to MiFID II and non-eu entities wishing to transact with such entities to have an LEI by 3 January On 20 December 2017, ESMA announced they will allow for a temporary period of 6 months that: 1. investment firms provide a service triggering a transaction report to the client, from which it did not obtain an LEI code, under the condition that before providing the service the investment firm obtains the documentation to apply for an LEI code on the clients behalf; and 2. trading venues report their own LEI codes instead of LEI codes of non-eu issuers not having their own LEI codes. What happens if I don t do anything? Your UK or European based broker will not be able to trade in financial instruments for any customer until it has an LEI. What information will our firm, as trustee, need to provide about the trust? An LEI is only issued to a legal entity, which has been verified by the LOU as being in existence. Where there is a central register (of, for example, companies or charities) it is possible to refer to such a register to prove the existence of a legal entity. In the case of trusts, there is not a central database and therefore it is not possible for an LOU to independently verify a trust s existence (unless, for example, it is a registered charity with the Charities Commission). In order to verify its existence, as part of the application process, the London Stock Exchange (as an example of one LOUs process) will accept an HMRC statement or alternatively will require a copy of a trust instrument (note it is our understanding that it is not always necessary to provide the complete trust deed 6, however the LOU with whom you have dealings will outline what it requires). What is the cost of an LEI? Each LOU may apply charges for an LEI. An agent may be appointed to apply for multiple LEIs, for example, ABC123 Trust Co (Jersey) Limited may apply as agent for all its customers and consequently can receive discounts. The following is an example of the charges applied by one LOU, the London Stock Exchange 7 : 6 Please bear in mind any future GDPR requirements 7 Please independently verify

6 Factsheet Numbers of applications for an LEI Cost * 1 LEI LEIs 115 per LEI LEIs 90 per LEI 51+ LEIs 70 per LEI More than 500 please refer to the London Stock Exchange it has a bulk management tool and has indicated it may be able to provide further discounts * Please note these are indicative costs from the London Stock Exchange. Is this a one-off cost?, it is not a one-off cost. An LEI lasts for one year from date of issuance. For example, if an LEI was issued in September, it will expire in September the following year. An LEI must be renewed each year and there is a cost for renewal. The London Stock Exchange will, as an example, issue a renewal notice to each LEI (which it issued) 60 days before the date of expiry. Renewal fees are less than application fees for example, the London Stock Exchange indicates that the renewal for one LEI is 70, the renewal of 50+ LEIs is 60. Costs when applying through TISE Initial setup fee 155 per LEI Annual renewal fee 95 If my customer is a trust, what will be disclosed on the LEI database? According to the London Stock Exchange it is the name of the trust that will be disclosed; its rules do not allow for the inclusion of the trustee. So, for example, the GLEIF database will state The ABC123 Trust; it will not state ABCDEF Trustees as trustees of the ABC123 Trust. Contact us For more information on legal entity identifiers, please contact a member of the Jersey Finance team on: T: +44 (0) E: jersey@jerseyfinance.je linkedin.com/company/jersey-finance youtube.com/jerseyfinance Disclaimer: This document is provided for general information purposes only and does not constitute or offer legal, financial or other advice upon which you may act or rely. Specific professional advice should be taken in respect of any individual matter. Whilst every effort has been made to ensure the accuracy and completeness of the information contained herein, Jersey Finance cannot be held liable for any error or omission. In Partnership with: