An LEI number is a ‘Legal Entity Identifier’ that has been required since 3rd January 2018 for any legal entities (excluding individuals) that buy or sell exchanged traded financial instruments. In plain English this means that organisations such as companies, charities or public bodies must have this number in order to buy or sell financial products that are traded on an exchange: this would include publicly traded shares, treasury bills, bonds (including gilts) and certificates of deposit but would not include for example bank deposits which cannot be traded. It is our understanding that investing in most money market funds and pooled funds will not require an LEI number as these are not traded through an exchange. An LEI may be required for some REITs (Real Estate Investment Funds) and ETFs (Exchange Traded Funds).
An LEI is a 20-digit alphanumeric code that enables financial transactions to be tracked and reported on in a standardised way. The initiative is global and based on the ISO (International Organisation for Standardisation) 17442 standard. Having LEI numbers helps regulators keep track of what’s happening and can assist in preventing money laundering and other offences.
Many if not most local authorities will not require an LEI, particular those that only use deposits and money market funds for investing. However, if you are a local authority who use any of the relevant investment products you should already have an LEI number and if you don’t it is recommended that you obtain one. You will probably find you are asked for your LEI number from time to time when filling out forms or requesting for transactions to be completed. Each ‘legal entity’ should only have one single LEI number so an individual authority will only need one; however subsidiary companies and trust funds are separate legal entities and will require their own number. Arlingclose’s understanding is that local authority pension funds would also be considered a separate legal entity.
Obtaining and maintaining an LEI is a relatively straight forward and inexpensive process. LEI numbers are issued by ‘Local Operating Units’ (LOUs) which have to be authorised by the Global Legal Entity Identifier Foundation (GLEIF). Historically the only issuer of LEI numbers in the UK was the London Stock Exchange but Arlingclose is now aware of more than one supplier in the UK market. It may be worth shopping around to get the best deal. LEI numbers need to be renewed (and paid for) on an annual basis: prices may be cheaper overall if you pay for more than one year up front. The price of an LEI would generally be expected to be between £35 and £70 a year with the potential for some additional fees for the initial registration. You should be able to apply for an LEI number online and the number would be expected to be issued within one business day of the application.