Cyprus: MiFID II - Cyprus Paves The Way For The "Legal Identifier"

Last Updated: 3 November 2017
Article by A.G. Erotocritou LLC

The revised EU Markets in Financial Instruments Directive, 2014/65/EU (MiFID II), within the context of the associated legislative provisions of the EU Markets in Financial Instruments Regulation No. 600/2014 (MiFIR) and Market Abuse Regulation No. 596/2014 (MAR), calls for the obligatory implementation of the so-called Legal Entity Identifier (LEI), the nature and purpose of which will be addressed in this article, with due regard as to how this impacts the financial transactions landscape in the Republic of Cyprus.

January 2018, LEI shall be a mandatory requirement for those financial transactions that are reportable under Article 26 of MiFIR. Accordingly, with effect from the applicable date, legal entities engaged in the execution of such transactions shall be obliged to ensure that they have applied for and secured their respective LEI's. This essentially serves as a publicly accessible identifier facility of accurate data, embodied in and represented by a 20-digit alpha numeric reference code, the primary function of which is to reveal key identification particulars pertaining to those legal entities which are actively concerned with the execution of legal transactions. In effect, the LEI concept, which is based on the global standard technical specification ISO 17442 : 2012 of the International Organisation for Standardisation, has the ultimate objective of ensuring enhanced transparency, whilst also serving as a crucial stabilising mechanism in bringing about a tangible diminution of economic risk.

Following the conclusions drawn as to the core root causes of the global financial crisis, it became apparent that a remedial and irregularity-prevention initiative in the form of LEI, would do much to pre-empt and preclude the recurrence of the adverse state of affairs which contributed to its economically catastrophic emergence, and served as a catalyst for market abuse and fraudulent behaviour. Little wonder therefore that the Financial Stability Board's proposals for LEI were readily endorsed by the Group of Twenty, in recognition of the positive implications of bringing to the fore a credible, practical and efficacious cross-border mechanism for the substantive, precise and instantaneous identification of entities executing transactions within the global financial arena.

Reference information stored in the LEI data base comprises, inter alia, key particulars such as the legal entity's official name, head office address, the applicable date of the first LEI assignment (if applicable), the last update etc. The first four of the code's 20 characters relate to the Local Operating Unit (LOU) responsible for the issuance of the LEI (addressed below), whilst digits 5 and 6 in the code chain are inserted as 00 characters, purely for reserve purposes. It is the digital numerical sequence 7 to 18 which in fact represents that unique component of the code that is specifically assigned to a particular legal entity. This is followed by the last two characters 19 and 20 of the chain which represent so-called checksum digits for the detection of errors in the data transmission stage or storage phase of the LEI process.

As of 20th September 2017, the Chairman of the Cyprus Securities and Exchange Commission (CYSEC) issued a circular duly notifying issuers of financial instruments on the need to obtain an LEI pursuant to satisfying EU transaction reporting requirements. In this regard, CYSEC has drawn due attention to the applicable EU regulations which call for such issuers to secure an LEI for the purpose of enabling the following entities to furnish their competent authorities with relevant identifying reference data in relation to financial instruments traded on their respective systems:

  1. Trading venues, as with a regulated market (Cyprus Stock Exchange), Multilateral Trading Facility (MTF), or Organised Trading Facility (OTF).
  2. Systematic internalisers, as with investment firms dealing on their own account when executing client orders outside a regulated market, MTF or OTF.

In light of the above, and with specific regard to investment firms which are subject to MiFID II reporting obligations (including those firms whose respective head offices are situated in third countries, but whose branches located in Cyprus or other territories within the European Economic Area), will effectively be precluded from executing a trade on behalf of a client who is eligible for LEI and has duly omitted to obtain same.

The Chief Officer of the Cyprus Stock Exchange (CSE), as a Trading Venue, has periodically issued circulars duly notifying legal entities of the MIFID II requirements and its "imminent implementation", with a reminder to recipients of the CSE's obligation to notify the European Securities and Markets Authority (ESMA) on information pertaining to its Market, including the relevant LEI code assigned to and held by each of its listed users.

The Global Legal Entity Identifier Foundation (GLEIF) oversees the operational efficiency of the global LEI system, whilst the competent supervisory authority co-ordinating the issuance of LEI codes is the Legal Entity Regulatory Oversight Committee (LEIROC) which represents public financial market authorities from around the world and is entrusted with designating selected bodies as authorised Local Operating Units (LOU'S) who are responsible for undertaking the issuance of the codes to those legal entities applying for same.

In the context of the foregoing, the Cyprus Stock Exchange (CSE), being a designated key domestic player in relation to the LOU function, has as of 7th October 2016, entered into a co-operation agreement with the London Stock Exchange (LSE)/Unavista, for the purpose of issuing the relevant legal entities with LEI'S, through the so-called Assisted Registration Process. This is an exercise which entails the gathering of relevant particulars which, in turn, are duly uploaded on the Unavista platform (in furnishing its application details, it is incumbent on the registering entity concerned to submit accurate reference data which, as part of the LEI issuing process, shall be duly verified with local authoritative sources). Thereafter, and in conformity with the LEI applicants' prior authorisation, the CSE thereby undertakes to oversee the ensuing issuing process and assumes responsibility for due notification of the code to the legal entity concerned. Once assigned in this manner, the code, as issued, is regarded for all intents and purposes as being unique to that particular recipient, and shall thereafter be stored in a global data system which effectively serves as the nerve centre of the LEI mechanism.

The above-mentioned procedure for issuance of the LEI code is set in motion with the submission of the "Application for the Issuance of Legal Identifier" which, inter alia, is to be accompanied by the Certificate of Directors, copy of signatory's passport or identity document, and the applicant entity's Certificate of Incorporation. Within two working days of having received the relevant documentation, the CSE will thereby undertake a preliminary evaluation, whereupon it shall notify Unavista accordingly, for due issuance of the relevant LEI code.

It is evident that the LEI concept of a unified identification system, as an effective monitoring device in the narrower context of effecting compliance with the EU's financial transactions reporting requirement will, from a broader perspective, play a tangible role in rectifying the fault lines of the global financial system, and shall serve to accentuate efforts to erode the adverse catalytic factors which indiscriminately fuelled the debilitating economic crisis of 2008. The upshot of these measures is that market stability will be enhanced, consumer protection reinforced and confidence in financial markets restored. In this context Cyprus, on its part, has set in motion efforts to make a relatively humble, but important and tangible contribution to this initiative, by paving the way for the due implementation of the LEI on 3rd January 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions