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MiFID - Markets in Financial Instruments Directive

After 3rd January 2018, new rules of the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) will come into force and will affect each investor who engages in transactions in financial instruments.

What do MiFID II and MiFIR mean?

The Markets in Financial Instruments Directive (MIFID) that regulates the rendering of financial investment services has been effective in Latvia since 2007. The requirements of MiFID II are to be regarded as the next step aimed to provide additional protection to investors and promote the transparency of financial markets in terms of transactions in financial instruments. Whereas the Markets in Financial Instruments Regulation (MiFIR) is more applicable directly to the execution of transactions in financial instruments, publication of data and reporting to competent authorities.

What will MiFID II mean to investors?

The requirements of the new directive will ensure the following to investors:

  • additional protection, through receiving from the issuers of financial instruments and providers of services more detailed information on financial instruments and investment services;
  • greater transparency of financial markets.

Under the new EU regulatory framework requirements, all legal entities engaged in carrying out transactions in financial instruments will need to have an international identifier.

From 3 January 2018 on, in carrying out their activity, the providers and recipients of investment services and investment ancillary services will have to comply with the requirements of the Markets In Financial Instruments Directive 2014/65/EU (MiFID II) and the Markets In Financial Instruments Regulation No. 600/2014 (MiFIR), under which all legal entities carrying out transactions in financial instruments will need to be additionally identified with a unique international legal entity identifier (LEI).

An LEI is a unique 20 alphanumeric identifier, which allows identification of the counterparties of transactions in financial instruments regardless of the country. The LEI does not replace the registration number assigned to the company by the Register of Enterprises of the Republic of Latvia.

Who needs LEI and why?

As of 3 January 2018, all legal entities engaged in transactions (e.g., acquisitions or disposals) in various financial instruments (such as stocks, bonds, ETFs, derivatives, etc.) would be required to have LEI to comply with the reporting duty under MiFID II and MiFIR. LEIs would also be required for such transactions of legal entities, which are aimed to dispose of the financial instruments that were acquired before the date on which the new requirements started to apply.

The purpose of LEIs is to ensure better supervision and transparency of the financial market because in the future, reporting the financial transactions carried out by legal entities to supervisory authorities (the Financial and Capital Market Commission), credit institutions will be required to use LEIs as company identifiers. Unless the company notifies the bank of its LEI until 2 January 2018, SEB bank will not be allowed to accept such financial instrument transaction orders.

Where can an LEI be obtained?

LEIs are issued by the Local Operating Unit of the Global Legal Entity Identifier Foundation (GLEIF).

Without recommending any particular local operating unit, below we have listed the contact information of some of the most favoured local operating units issuing LEIs in the Baltic and Nordic countries:

A full list of the local operating units that issue and maintain LEIs

If your company already has an LEI, a new identifier would not be required. The LEI must be submitted to the bank under the procedure described below. If you do not know whether your company has a valid LEI, you can check it on the GLEIF website by reference to the company’s name.

What needs to be done to get an LEI?

To apply for an LEI, choose an LEI issuer (the local operating unit from the list of the institutions mentioned on the www.gleif.org list. Then fill in the application on the website of the relevant local operating unit, specifying the required information therein.

Usually, the information required will include the company's full name, business form (e.g., a limited liability company), registration number, country, and registered office.

How much does an LEI cost and what is the waiting time before I get it?

Registration and annual subscription fees are charged for an LEI. Therefore, before you buy an LEI, you should by all means ascertain the likely costs – they may vary depending on the LEI issuer selected by you.

Currently, the registration of an LEI costs about 65-200 euros, whereas the annual subscription fee is in the range of 50-100 euros.

It usually takes two weeks to receive an LEI; in 2017, the waiting time might be considerably longer.

If your company is not contemplating to engage in new financial transactions immediately after the entry of the requirements into force, purchasing of an LEI needs not to be done immediately, however, it should be taken into consideration that upon resuming transactions, an LEI will be a mandatory company identifier for transactions in financial instruments to be specified before carrying out the first transaction.

Where and to whom can I submit the received LEI at SEB bank?

To be able to continue to engage in transactions in financial instruments after 2 January 2018, please contact us before the contemplated transaction or notify your transaction manager of your LEI.

From December this year, you will be able to submit your LEI through Internet Bank section Securities/Securities accounts.

Who to contact to in case of further questions?

If you have any further questions, please call +371 26668777, +371 67779988, Skype (SEB_Latvia) You can also contact your financial manager at SEB.

Key Investor Information Documents regarding investment funds and Key Information Documents regarding Life insurance with savings and derivatives you can find in SEB bank’s web page.

  1. What does MiFID II mean?
    Since 2007, Markets in Financial Instruments Directive (MIFID) of the European Union was effective in Latvia, regulating provision of financial investment services. Requirements of MiFID II should be considered as the next step in order to ensure additional protection to the investors and to promote transparency of the financial market in transactions with financial instruments.

  2. When does MiFID II Directive become effective?
    In Latvia, MIFID II Directive should be complied with as of 3 January 2018. In addition, providers of investment service must also adhere to MiFIR Regulation which is linked to MIFID II Directive. Requirements arising from the MiFID II Directive in 2018 will be incorporated also in the Latvian legislation, including the Law on Financial Instruments Market; but the provider of investment services should observe the requirements arising from MIFIR directly.

  3. What is the main purpose of MiFID II?
    The main purpose of the Directive is to increase protection and awareness of investors, as well as to promote transparency and orderliness of the financial market of the European Union.

  4. How does MIFID II differ from MiFID I Directive, which was implemented in 2007?
    When evaluating the implementation process of MIFID I and the consequences of the financial crisis observed during its validity time, the regulators proposed additional amendments: MiFID II / MIFIR, which actually continues to establish the effective regulation of the financial market and to enhance the applicable area, for example, MIFID II is applicable to a wider range of financial assets.

  5. Which investment products and services are included in MiFID II?
    MiFID II is applicable to such financial instruments as funds, shares, structured deposits, bonds, currency swap transactions, interest rate swap transactions, etc., as well as such investment services as acceptance and execution of orders, investment advice and portfolio management.

  6. Is MiFID II applicable to savings products as well?
    MiFID II is not directly applicable to such savings products as the savings account or pension savings.

  7. What will change for me as a customer in 2018?
    Along with implementation of MiFID II, the customers will be able to receive more information on financial instruments, related risks, potential costs, etc. They will receive more information on financial transactions as well.

  8. What is LEI (Legal Entity Identifier), and which customers will need it?
    All legal entities performing transactions with various financial instruments (for example, with shares, bonds, exchange traded funds, derivative financial instruments and other financial instruments) as of 3 January 2018 will need a special Legal Entity Identifier – a LEI code. Investment companies will not be further allowed to provide investment services to the customer, unless the legal entity has acquired a LEI code. More information on LEI is available in the LEI section.

LEI

Under the new EU regulatory framework requirements, all legal entities engaged in carrying out transactions in financial instruments will need to have an international identifier.

From 3 January 2018 on, in carrying out their activity, the providers and recipients of investment services and investment ancillary services will have to comply with the requirements of the Markets In Financial Instruments Directive 2014/65/EU (MiFID II) and the Markets In Financial Instruments Regulation No. 600/2014 (MiFIR), under which all legal entities carrying out transactions in financial instruments will need to be additionally identified with a unique international legal entity identifier (LEI).

An LEI is a unique 20 alphanumeric identifier, which allows identification of the counterparties of transactions in financial instruments regardless of the country. The LEI does not replace the registration number assigned to the company by the Register of Enterprises of the Republic of Latvia.

Who needs LEI and why?

As of 3 January 2018, all legal entities engaged in transactions (e.g., acquisitions or disposals) in various financial instruments (such as stocks, bonds, ETFs, derivatives, etc.) would be required to have LEI to comply with the reporting duty under MiFID II and MiFIR. LEIs would also be required for such transactions of legal entities, which are aimed to dispose of the financial instruments that were acquired before the date on which the new requirements started to apply.

The purpose of LEIs is to ensure better supervision and transparency of the financial market because in the future, reporting the financial transactions carried out by legal entities to supervisory authorities (the Financial and Capital Market Commission), credit institutions will be required to use LEIs as company identifiers. Unless the company notifies the bank of its LEI until 2 January 2018, SEB bank will not be allowed to accept such financial instrument transaction orders.

Where can an LEI be obtained?

LEIs are issued by the Local Operating Unit of the Global Legal Entity Identifier Foundation (GLEIF).

Without recommending any particular local operating unit, below we have listed the contact information of some of the most favoured local operating units issuing LEIs in the Baltic and Nordic countries:

A full list of the local operating units that issue and maintain LEIs

If your company already has an LEI, a new identifier would not be required. The LEI must be submitted to the bank under the procedure described below. If you do not know whether your company has a valid LEI, you can check it on the GLEIF website by reference to the company’s name.

What needs to be done to get an LEI?

To apply for an LEI, choose an LEI issuer (the local operating unit from the list of the institutions mentioned on the www.gleif.org list. Then fill in the application on the website of the relevant local operating unit, specifying the required information therein.

Usually, the information required will include the company's full name, business form (e.g., a limited liability company), registration number, country, and registered office.

How much does an LEI cost and what is the waiting time before I get it?

Registration and annual subscription fees are charged for an LEI. Therefore, before you buy an LEI, you should by all means ascertain the likely costs – they may vary depending on the LEI issuer selected by you.

Currently, the registration of an LEI costs about 65-200 euros, whereas the annual subscription fee is in the range of 50-100 euros.

It usually takes two weeks to receive an LEI; in 2017, the waiting time might be considerably longer.

If your company is not contemplating to engage in new financial transactions immediately after the entry of the requirements into force, purchasing of an LEI needs not to be done immediately, however, it should be taken into consideration that upon resuming transactions, an LEI will be a mandatory company identifier for transactions in financial instruments to be specified before carrying out the first transaction.

Where and to whom can I submit the received LEI at SEB bank?

To be able to continue to engage in transactions in financial instruments after 2 January 2018, please contact us before the contemplated transaction or notify your transaction manager of your LEI.

From December this year, you will be able to submit your LEI through Internet Bank section Securities/Securities accounts.

Who to contact to in case of further questions?

If you have any further questions, please call +371 26668777, +371 67779988, Skype (SEB_Latvia) You can also contact your financial manager at SEB.
 

KID

Key Investor Information Documents regarding investment funds and Key Information Documents regarding Life insurance with savings and derivatives you can find in SEB bank’s web page.

Questions and answers

  1. What does MiFID II mean?
    Since 2007, Markets in Financial Instruments Directive (MIFID) of the European Union was effective in Latvia, regulating provision of financial investment services. Requirements of MiFID II should be considered as the next step in order to ensure additional protection to the investors and to promote transparency of the financial market in transactions with financial instruments.

  2. When does MiFID II Directive become effective?
    In Latvia, MIFID II Directive should be complied with as of 3 January 2018. In addition, providers of investment service must also adhere to MiFIR Regulation which is linked to MIFID II Directive. Requirements arising from the MiFID II Directive in 2018 will be incorporated also in the Latvian legislation, including the Law on Financial Instruments Market; but the provider of investment services should observe the requirements arising from MIFIR directly.

  3. What is the main purpose of MiFID II?
    The main purpose of the Directive is to increase protection and awareness of investors, as well as to promote transparency and orderliness of the financial market of the European Union.

  4. How does MIFID II differ from MiFID I Directive, which was implemented in 2007?
    When evaluating the implementation process of MIFID I and the consequences of the financial crisis observed during its validity time, the regulators proposed additional amendments: MiFID II / MIFIR, which actually continues to establish the effective regulation of the financial market and to enhance the applicable area, for example, MIFID II is applicable to a wider range of financial assets.

  5. Which investment products and services are included in MiFID II?
    MiFID II is applicable to such financial instruments as funds, shares, structured deposits, bonds, currency swap transactions, interest rate swap transactions, etc., as well as such investment services as acceptance and execution of orders, investment advice and portfolio management.

  6. Is MiFID II applicable to savings products as well?
    MiFID II is not directly applicable to such savings products as the savings account or pension savings.

  7. What will change for me as a customer in 2018?
    Along with implementation of MiFID II, the customers will be able to receive more information on financial instruments, related risks, potential costs, etc. They will receive more information on financial transactions as well.

  8. What is LEI (Legal Entity Identifier), and which customers will need it?
    All legal entities performing transactions with various financial instruments (for example, with shares, bonds, exchange traded funds, derivative financial instruments and other financial instruments) as of 3 January 2018 will need a special Legal Entity Identifier – a LEI code. Investment companies will not be further allowed to provide investment services to the customer, unless the legal entity has acquired a LEI code. More information on LEI is available in the LEI section.

 

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