Why Trusts Need an LEI:
Enhanced Transparency and Regulatory Compliance
The LEI system boosts transparency in the global financial system. It assigns trusts a unique identifier, allowing regulators and market participants to track financial transactions more effectively and understand relationships between entities.Reporting and Record-Keeping Requirements
LEIs play a vital role in regulatory reporting and record-keeping. Trusts, like other legal entities, conduct financial transactions that require accurate reporting to regulatory bodies. Using an LEI ensures consistency and precision across various jurisdictions.Mitigating Financial Risks
The LEI reduces financial risks by offering a clear picture of ownership structures and the financial activities of trusts. Financial institutions and regulators rely on this information for effective risk assessment and management.
LEI Requirements for Trusts in Different Markets:
1. European Union (EU)
MiFID II and MiFIR:
Under the Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR), trusts engaging in financial transactions within the EU must obtain an LEI. Specifically, this includes transactions involving securities, derivatives, and other financial instruments.
EMIR:
Similarly, the European Market Infrastructure Regulation (EMIR) requires trusts involved in derivatives trading to report their transactions to trade repositories. Therefore, obtaining and using an LEI becomes necessary for compliance.
2. United States (US)
Dodd-Frank Act:
In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act mandates that trusts participating in swaps and other derivatives transactions must have an LEI. Consequently, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) enforce these requirements to ensure compliance.
FINRA:
Furthermore, the Financial Industry Regulatory Authority (FINRA) requires brokers and dealers to report transactions involving trusts by using an LEI. This requirement emphasizes the importance of standardized identification for trusts.
3. Rest of the World
Global LEI System (GLEIS):
The Global Legal Entity Identifier System (GLEIS), which is managed by the Global LEI Foundation (GLEIF), is used by countries worldwide to standardize the identification of legal entities, including trusts. For example, countries such as Canada, Australia, and Japan have adopted LEI requirements for financial transactions involving trusts.
Country-Specific Regulations:
In addition, many countries have their own regulations that require trusts to obtain an LEI for financial reporting and regulatory compliance. For instance, Canada’s Office of the Superintendent of Financial Institutions (OSFI) mandates LEIs for trusts engaged in certain financial activities.
Conclusion:
The need for trusts to obtain an LEI arises from the global financial system’s focus on transparency, accurate reporting, and risk management. Although specific requirements vary by jurisdiction, the primary goal is to establish a standardized system. This system enhances regulators’ and market participants’ ability to track and understand trusts’ financial activities and relationships.
How do you get an LEI number for a trust?
Trusts are responsible for getting their own LEI number and having it renewed when necessary. Are you in need of an LEI for a trust? LEI System is here for you.
We take care of the application process for you—it’s fast, easy and affordable. Once your application is submitted all you have to do is wait. Within 10 minutes to 48 hours you will receive your LEI code.
At LEI System we offer the lowest LEI registration price in the US. Our service includes English-speaking customer service and free phone and email support. You can view our LEI prices here.
We also offer renewal of your LEI number so you don’t have to worry about your LEI expiring. Our price for an LEI renewal is the price for a new LEI code. You can also choose one of our multi-year renewal plans which allow us to automatically renew your LEI registration for you. With our renewal plans you also save money on your subscription, making our low rates even more affordable.
Click here to see our LEI renewal rates.
Do you have an LEI for a trust that is registered with a different service provider? LEI System offers LEI transfer and renewal. If you want to benefit from LEI System’s low management prices and great customer service you can transfer your LEI to our LEI issuing organization. This allows us to manage your LEI for you.
Transfer and renewal does not cost you anything, and your LEI code will not undergo any changes when you choose this service. An LEI transfer is a purely administrative process that we take care of for you. Until your LEI has been transferred we will not be able to renew your LEI registration.
Key Considerations
- Renewal: LEIs need to be renewed annually. LEI System keep track of the renewal date and follow the renewal process to avoid the LEI becoming inactive.
- Accurate Information: Make sure all information provided is accurate and up-to-date to avoid delays or rejection.
- Documentation: Be prepared to submit additional documentation if requested by the LOU for verification purposes.
