No LEI – No Problemo
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ESMA has delivered a Christmas surprise in the shape of a six month forbearance period in respect of LEIs under MiFIR. Article 13(2) MiFIR prohibits an investment firm from transacting any reportable trade with a client, without first obtaining their LEI. The gift horse’s dentistry is not entirely flawless, the following condition must be met:
- if a client does not have an LEI, investment firms must obtain the LEI forms from the client to apply on its behalf
- for no-LEI non-EEA issuers trading venues can report their own LEIs
The FCA said in a statement that this will require the temporary suspension of the relevant validation rule in its transaction reporting system. This amendment will not be made by 3 January 2018, the FCA will inform firms and Approved Reporting Mechanisms of the date. Until the change has been made, reports should not be submitted without an LEI. The FCA expects firms to make “every effort to secure a clients’ LEI before trading on their behalf” and expects that the missing LEI population will “represent a very small fraction of total trading volumes”.
Although last-minute deferrals to major aspects of long-planned legislation are tiresomely predictable, the MiFIR LEI obligation has been absolute until today. ESMA recognises that “not all investment firms will succeed in obtaining LEI codes from all their clients ahead of the entry-into-force of MiFIR” and introduces the deferment “to support the smooth introduction of the LEI requirements”. The FCA statement strikes a different note from that of ESMA- delinquencies will be tracked, eyebrows will be raised and there will be even less latitude for excuses when the deferral period ends on 3 July 2018.