LEI code before a private foundation securities order: transaction reporting and client identification

Article 26(1) MiFIR links the reporting duty to transactions in financial instruments carried out by an investment firm. Complete and accurate details must be transmitted to the competent authority as soon as possible and no later than the end of the following working day. The report is made for supervisory purposes and is not a private confirmation to the foundation.

Article 26(2) covers financial instruments admitted to trading, traded on a trading venue or subject to an application for admission. It also covers certain instruments with such a financial instrument as an underlying asset and indices or baskets made up of such instruments. The reporting duty applies even where the transaction is concluded away from a trading venue.

For the foundation, the order must therefore be classified by instrument and transaction type. The fact that money leaves a foundation account or that a custody position changes does not answer the MiFIR question by itself.

Commission Delegated Regulation (EU) 2017/590 defines the transaction concept in greater detail. It includes, in particular, the purchase and sale of a financial instrument. Entering into a derivative contract or increasing the notional amount of a derivative can also qualify as an acquisition.

Article 2(5) of the Delegated Regulation excludes specific events. Subject to the conditions stated there, examples include securities financing transactions, transactions solely for clearing or settlement, certain events that result merely from custody activity and an acquisition under a dividend reinvestment plan. The actual process must fit the relevant exclusion.

A book entry, custody transfer or automatic reinvestment must therefore be assessed by its substance. The key questions are whether an acquisition or disposal within the applicable rules has occurred and whether the investment firm must submit a transaction report because of its service.

Article 13(2) of Delegated Regulation (EU) 2017/590 provides in substance that an investment firm may not provide a service that obliges it to submit a transaction report where the transaction is concluded on behalf of a client eligible for an LEI and the firm has not yet received that client's LEI. The rule therefore connects the reporting duty with the specific client.

The provision does not prescribe one technical label such as “rejection” for every provider. It prohibits the service that triggers the report until the required LEI has been received. The firm may hold the order, decline execution or use another internal clarification process. Execution followed by later delivery of the LEI does not satisfy the rule in that situation.

Article 13(3) adds that the code must comply with ISO 17442, be recorded in the global LEI database and belong to the relevant client. A company register number or another identification value cannot replace these requirements.

Section 1(1) PSG describes the private foundation as a legal entity to which assets are dedicated and expressly states that it has legal personality. Article 26(6) MiFIR requires a Legal Entity Identifier for clients that are legal persons. Together, these provisions provide the legal basis for treating the private foundation as an identifiable institutional client.

An LEI is a unique 20-character alphanumeric identifier for a legal entity. The Global Legal Entity Identifier Foundation describes it as a link to verified reference data from authoritative local sources. The private foundation itself is therefore the relevant entity. The LEI of the founder, a beneficiary, a board member or an external manager cannot replace it.

General eligibility for an LEI does not create an automatic reporting duty for every investment decision. The financial instrument, transaction and role of the foundation still require a transaction-specific review. The record must also match the current legal entity and be properly maintained.

Before execution, it should be clear who gives the order and on whose behalf the transaction is concluded. In discretionary asset management, the investment decision may follow from the client mandate. The client identity and the allocation of the transaction still have to be documented clearly.

The investment firm will typically compare the foundation's name and legal entity data with the LEI record. It must also review the instrument, transaction and service route. The foundation should not assume that an existing LEI can be used for every custody account or group company without further checking.

Article 26(3) and (6) MiFIR concern identification of the client on whose behalf the transaction is concluded. The board should therefore identify the foundation as client, the authorised representative and any external manager separately.

A useful preliminary file combines the current foundation deed, a current register extract and the account or custody documents. It should also contain the asset management mandate or power of attorney, the order details and evidence of the foundation's LEI.

The documents should use the same legal entity name. Differences in name, registered office, register data or authority must be clarified before execution. A printout of the LEI record may support the review, but it does not replace checking that the record belongs to the client and relates to the order.

Where an external manager submits the order, the file should show whether the foundation remains the client and the manager acts under a mandate. The LEI question follows the identity of the client, not the person who technically transmits the order.