Charities holding investments – the need to obtain a Legal Entity Identifier code

08/02/2018

The Legal Entity Identifier (LEI) system was developed following overhaul of European legislation and came into effect in the UK on the 3 January 2018.  It is aimed at improving the functioning of financial markets in the light of the financial crisis and to increase investor protection.

If your charity or trust needs to hedge against foreign currency risks, or purchase equities or bonds to invest or generate an income stream, these rules will affect you. If you don’t act to obtain an LEI you may lose your ability to execute these trades in future.  LEI’s are obtained from the LEI issuing organisations – a list of which is available on the Global Legal Entity Identifier Foundation website.

An LEI is a 20 digit alpha-numeric code that is unique to your legal entity or structure. Codes are included, on issue, on the freely available Global LEI index (LEI search tool). This enables every legal entity or structure that is a party to a relevant financial transaction to be identified in any jurisdiction.

The new rules also introduce the requirement for portfolio valuations to be issued every quarter by investment managers. In addition, investment managers must notify their clients in the event that the performance of their portfolio decreases by 10% or more between reporting periods.  Annual details of all costs and charges incurred in managing your portfolio, including underlying fund charges, must be disclosed.

Your investment managers should be aware of these new requirements, and we suggest that you contact them as a matter of urgency if you do not have an LEI.

More details about LEI’s can be found on the Financial Conduct Authority (FCA) website.

For help and advice on charity governance, contact Elizabeth Irvine.