Following the implementation of The European Markets Infrastructure Regulation (648/2012/EU) ("EMIR") all counterparties to a derivative contract must report details of any derivative contract to a registered or recognised trade repository ("TR").
As a consequence of the financial crisis, international regulators recognised the importance of a Legal Entity Identifier ("LEI") to improve transparency in financial data systems. The G-20 supported the creation of a LEI and called on the Financial Stability Board ("FSB") to co-ordinate recommendations on the LEI system. The purpose was to put in place a system that could deliver unique identifiers to all legal entities participating in financial markets across the globe. Each entity would be registered and assigned a unique code and no more than one code may be assigned to any legal entity.
The FSB define a legal entity as a legal person or structure organised under the laws of any jurisdiction. Legal entities include, but are not limited to, unique parties that are legally 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 (eg trust, partnership, contractual, etc).
Examples of eligible legal entities include, without limitation: 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 equities, etc).
Legal Entity Identifiers
A LEI is a unique 20-character alphanumeric code which will be assigned to all entities that are counterparties to financial transactions and any legal entity that enters into a financial transaction. This includes any UCITS, Qualifying Investor Alternative Investment Funds ("QIAIF"), offshore funds and structured finance vehicles that enter into derivative contracts under EMIR.
The global standard setter, the Central Operating Unit ("COU") is not yet established, therefore a pre-LEI code will be issued by the Irish Stock Exchange ("ISE"). The Central Bank of Ireland ("CBI") has sponsored the ISE's pre-Local Operating Unit ("LOU") status for the issuance of a pre-LEI.
The ISE will charge a fee of €150 (ex VAT) per pre-LEI. There will be an annual renewal cost per pre-LEI of €100. For further information relating to the above, please contact your usual Maples and Calder contact.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
