The major financial regulator in Dubai, the Dubai Financial Services Authority, DFSA, said it will require EU firms to obtain Legal Entity Identifiers as a result of the implementation of MiFID II
The DFSA said in a statement that the pieces of EU legislation, which cover investment firms, trading venues and intermediaries, have implications for non-EU firms trading with EU firms and clients of EUfirms. We have been asked by some of our EU counterparts to point out the implications of this legislation to DFSA-regulated firms.
From 3 January 2018, EU firms are required to have obtained Legal Entity Identifiers (LEIs) from their non-EU clients before providing services to them, if the proposed services would trigger reporting obligations in respect of transactions carried out on behalf of those clients.
However, bearing in mind the imminence of the entry into force of the LEI requirement, and some implementation delays, on 20 December, the European Securities and Markets Authority (ESMA) issued a statement, in which it grants a temporary additional six-month period for obtaining the LEI, provided certain conditions are satisfied. In particular, EU investment firms may provide services to non-EU firms or clients, on condition that before they do so they obtain from the latter the documentation necessary to apply for an LEI code on their behalf.
A different process is adopted for non-EU issuers (please refer to the statement for more details). Please note that after the expiry of this period, there may be negative consequences related to your firm’s ability to continue trading with an EU counterparty, or the EU firm acting on your behalf, until you take the necessary steps and obtain the LEI. In other words, the likely response thereafter from EU counterparts is “no LEI, no trade”.
If in doubt as to whether the LEI obligation applies to your firm, please contact your EU counterparty or seek legal advice. By way of background, the requirement to implement the LEI has been agreed at the G20 level. On this basis, jurisdictions other than the EU, e.g., USA, Canada, and some in AsiaPacific, are also in the process of implementation. The LEI provides a unique identifier for all entities participating in financial transactions that can also be used on a cross border basis, through a free and open database updated on a daily basis.
The LEI is a 20-digit, alpha-numeric code linked to a set of key reference information relating to the legal entity in question, e.g., name and address. Once a legal entity obtains an LEI code, the code is assigned to that legal entity for its entire life.