Pension providers denied trading amid Mifid II concerns

Pension providers denied trading amid Mifid II concerns

Self-invested personal pension (Sipp) providers have seen investment managers insist on Legal Entity Identifier (LEI) codes to allow them to trade on behalf of clients, a provider has said.

Elaine Turtle, director at Sipp and Ssas provider DP Pensions, said some investment managers have refused to accept their clients’ national insurance numbers for trades under incoming Mifid II rules and have instead asked for the LEI codes.

LEIs are codes that those classed as legal entities must obtain to be able to trade in any reportable financial instrument such as equities and bonds under Mifid II rules. In the UK they can be obtained from the London Stock Exchange.

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There is no specific definition of a legal entity but it includes trusts, companies, pension funds, charities and unincorporated bodies.

But Sipps, unlike small self administered schemes (Ssas), are not typically classed as legal entities, Ms Turtle said.

She said: “Ssas are defined as a legal entity under Mifid II hence their registration requirement however, because Sipps are individual pension schemes, they aren’t legal entities. 

“This means that many investment managers are able to use the individual’s national insurance number as a proxy for the LEI to enable trading after 3 January.” 

But she said some investment managers “have taken a position that they can’t use the NI number” and so have requested an LEI from Sipp operators.

This is not necessarily an issue for Sipps, as the trustee may already have registered for an LEI previously under the EMIR regulations, she said.

But Ssas administrators need to act now to ensure there is no disruption to business when the rules come into force on 3 January, she warned.

Sipps first became exposed to LEIs back in 2014 when reporting obligations under the European Market Infrastructure Regulation (EMIR) came into force, Ms Turtle said.

The requirement back then was to enable reporting of derivative transactions, such as futures and options rather than the wider definition under Mifid II.

An LEI costs £115 plus VAT in the first year and then £70 thereafter.