I. Reporting obligation under Art. 26 of the MiFIR for transactions in financial instruments

Since 3 January 2018 onwards a legal entity identifier (LEI) is necessary for identifying the entity that has executed the transaction as well as its client in reportable transactions pursuant to Article 26 of the Markets in Financial Instruments Regulation (MiFIR).

Investment firms subject to the reporting obligation for such transactions, as well as branches located inside the European Economic Area (EEA) whose head office is based in a third country, must ensure before executing the transaction that their clients have an LEI in order to be able to correctly identify them in the reports. Otherwise, the institution cannot execute the reportable transactions. The customers are therefore required to apply for an LEI.

II. Reporting obligation under Art. 27 of the MiFIR / Art. 4 of the MAR for reference data of financial instruments

Trading venues and systematic internalisers are also obliged to use the LEI to identify the issuer of he reported financial instruments when reporting reference data under Article 27 MiFIR / Article 4 of the European Market Abuse Regulation (MAR). All issuers of financial instruments who are eligible for an LEI (e.g. including municipalities and firms based outside the union) should therefore apply for an LEI in order to enable the trading venue or systematic internaliser subject to the reporting requirement to identify the issuer correctly and thereby comply with its reporting obligation.

III. Reporting obligation under Art. 9 of the EMIR

Since 1 November 2017 the LEI is also mandatory in reports under Article 9 of the European Regulation on OTC derivatives, central counterparties and trade repositories (EMIR) in order to identify counterparties, brokers and clearing members that are part of the reported transaction and that are eligible for an LEI. All such entities should therefore apply for an LEI in order to allow their proper identification in derivative reporting.

IV. Reporting obligation under Art. 4 SFTR

In 2020 the reporting obligation under Article 4 of the Regulation (EU) 2015/2365 (SFTR) will come into effect. There will be a phased-in approach under which the new requirment will come into effect first from 13 April 2020 onwards for credit institutions and investment firms under Art. 3 (3) (a) and (b) SFTR as well as for third country entities under Art. 3 (3) (i) SFTR.¹

Under Art. 2 (1) of the Delegated Regulation (EU) 2019/363 all relevant parties to a SFT transaction (such as beneficiaries, counterparties, broking entities and clearing members) need to be identified by the reporting entity with the correct LEI.

Background

The LEI is a globally valid identification number which uniquely identifies the companies involved in a transaction. Its use was expedited at the behest of the G20 countries after the emergence of the financial crisis and it is already being actively used, amongst other things, for the reporting of derivatives transactions pursuant to Article 9 of the European Market Infrastructure Regulation (EMIR) (see BaFinJournal of August 2014 – only available in German).

The global framework for use of the LEI is coordinated by the Legal Entity Identifier Regulatory Oversight Committee (LEI ROC). LEIs are allocated by Local Operating Units (LOUs). Fees are levied for issuing an LEI and after each yearly certification. These fees can be viewed in the terms and conditions of the respective LOU. Companies which use an LEI must update their reference data every year and transmit these to the LOU.

A list of all LOUs as well as further information on the subject can be found on the website of the Global LEI Foundation (GLEIF). Amongst other things, the site includes information on registration agents who can provide help when making an application. BaFin will answer any questions you may have on using an LEI. Please e-mail A26MiFIR@bafin.de.

Fußnoten:

1 Please note the relevant ESMA publication in the context of COVID-19 from 26 March 2020.