My colleagues and I have a lot of diary reminders popping up to renew LEIs we obtained for trusts last year.
Several asset management firms have provided us with conflicting views as to whether trusts need to renew LEIs annually. One large firm advised that only asset management firms need to renew their own LEIs as they are subject to the MIFIR reporting requirements and that, as trusts can trade on a lapsed LEI that renewing a trust’s LEI is not necessary.
I have not been able to find guidance confirming if the above stance is correct or not.
The alternative would be that both the asset management firm and the trust need up to date LEIs to trade.
I would be grateful for your views on this.
My understanding is that a valid (i.e. current) LEI is required before a trust can trade.
However, if a trust is not likely to enter into any further trades for a while trades I understand it does not need to renew its LEI, but must do so before it next trades.
Do Trustees have a duty to enable themselves to be ready to change investments quickly if necessary? I think they do. And therefore any trust with investments must be able (at the point when the brokers phone them to tell them that because of Brexit the shares in British Gas are going through the floor and should be sold immediately, to minimise loss) to deal. Any failure to renew the LEI would, in my view, be negligent.
We also have had conflicting advice from Stockbrokers. Two major stockbroking firms have advised that we do not need to renew the LEI for the trusts we and they are managing. However, the other firms have said we do.
Brewin Dolphin say that their
“Technical Specialists have liaised with PIFMA (Personal Investment Management and Financial Advice Association - the UK’s leading trade association for firms that provide investment management and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies) and their guidance is that if the LEI is to be used purely for Transaction Reporting purposes, then there is no requirement under EU or UK regulation to renew. As the Investment Firm, we Brewin Dolphin, are required to renew our LEI and we will manage our relationship with the LSE under the terms of the agreement, such as it is, with them.
This is the link to the FCA website page and specifically the section headed ‘Renewing your LEI annually’
Charles Stanley say:-
You may be aware that there are conflicting views in the industry regarding the renewal of LEIs. The various facts/positions (as at today) are:
• The LSE and GLEIF have stated that LEIs do have to be renewed.
• However, the FCA have clarified that, strictly speaking, MiFID II says that (except for some clients that are themselves authorised firms) an LEI does not have to be renewed, and firms are not obliged to check if clients have done so.
• We believe the FCA is relatively relaxed because a lapsed LEI can continue to be used for transaction reporting to them. This is because, operationally, where an LEI is renewed the number stays the same, however if an LEI is not renewed the number is not reallocated to anyone else and thus also remains unique to that client. It can still be used for FCA transaction reporting, therefore, and does not compromise the FCA’s ability to monitor for market abuse.
• The GLEIF database entry will be listed with a status to indicate that it has or hasn’t been renewed.
• Brewin Dolphin have written to clients to say that they WILL NOT be renewing LEIs.
• Smith and Williamson have written to clients saying that they WILL be renewing LEIs.
Charles Stanley’s Enterprise Risk Committee (ERC) met and concluded that we will not mandate renewal. Charles Stanley will write to clients who, when we originally applied for LEIs, asked that we handle their renewals to inform them that the FCA are not mandating that LEIs be renewed and therefore we are proposing not to renew. Any client may choose to renew for their own purposes, and may instruct us to do so on their behalf where we originally applied for them. We are not proposing to monitor whether or not clients have renewed their LEIs.
We have also been advised by one investment manager that LEIs do not need to be renewed but others say otherwise.
The majority of trustees are happy not to renew but one has asked if STEP has issued any guidance. I have searched on STEP but there is nothing to advise what should / should not be done.
Can anyone confirm if STEP have issues any guidance and if so where it can be found?
Lester Aldridge LLP