Having a Legal Entity Identifier (LEI) number has become a requirement for any company or organization that wants to trade within certain regions. So, if you're going to do business in regions such as the USA, EU, and the UK, life will be a lot easier for you if you have an LEI number. Since funds are legal entities, they will also need to have an LEI number to legally operate within these regions.
Here is what the European Securities and Markets Authority (ESMA) briefing published in 2018 says; "A client who is a legal entity or structure, including a charity or trust, need to make arrangements to obtain an LEI code if it wants the investment firm to continue to act on its instructions or make a decision to trade on its behalf from 3 January 2018 onwards."
According to the Alternative Investment Fund Managers Directive (AIFMD) regulations, Funds need to report to the respective authorities in their home countries on the principal markets and instruments in which it trades on behalf of the funds it runs. This requires them to have an LEI number.
So, if you are running a fund, you should note that funds also fall under the legal entities and need to have an LEI number to legally do business with other organizations. Likewise, investment brokers and managers also need to have LEI numbers to operate.
If your Fund is not registered with Companies House, you can leave the company number entry blank. But remember to attach your trust/fund deed, resolution. The goal here is to attach a document that can confirm the address and the signatory person or trustee.
Why should funds get an LEI?
There are several benefits that funds with an LEI have over those that don’t:
- Global recognition: If you want to be recognized globally as a legitimate Fund, having an LEI is a must. LEI is recognized by the G20 Financial Stability Board and regulated by the Global LEI Foundation, making it one of the most trusted systems for verifying the legitimacy of any entity on an international level.
- Trust from potential investors: Having an LEI code will make it easier for potential investors worldwide to trust your Fund.
- It eases international transactions: If you want your Fund to make financial transactions with other organizations outside your country, then acquiring an LEI code should become one of your priorities. Governments, especially those under the G20, have made it a must to have an LEI before doing business with organizations in their countries.