Miffed at MiFID II

Fifty-two.  That’s how many triple packs of Jaffa Cakes I could have bought with the £138 I have just had to shell out to buy an LEI for my company.  That’s a Legal Entity Identifier: a 20-digit identifying number required under MiFID II for all companies, trusts, charities and unincorporated bodies that wish to indulge in any financial transactions.  Here in the UK the appointed keeper and distributor of LEIs is the London Stock Exchange, and for this service they charge £115 + VAT to issue the LEI and then an annual maintenance fee of £70 + VAT.  (That’s another thirty-two triple packs a year.)  This is, according to the LSE website, charged simply on a “cost recovery basis”.

In principle, of course, I can see the point: how could I not, after decades of promoting the joys of due diligence and client identification?  But I do find it interesting that in this instance the cost of compliance is being passed directly to the client.  I realise that in a roundabout way, the cost of much compliance eventually ends up being shared between the service provider and its clients.  And in some cases it is more overt: I know of institutions that charge higher fees to PEP clients, to cover the additional costs of the enhanced due diligence and monitoring that such clients entail.  But that is a commercial decision: the law of the land does not mandate the passing on of due diligence costs to the subject of that due diligence.

It occurs to me that there might be a reason for that.  LEIs are, by definition, issued only to companies, trusts, charities and unincorporated bodies.  Individuals are not required to have them.  And when it comes to election time, only individuals have votes.  Demanding that individuals pay for their own due diligence checks would soon have a negative impact on the ballot box.  So perhaps the risk-based approach is not as objective as it might appear; political expediency also plays its part when deciding who will accept what level of intrusion and expense.  And loss of Jaffa Cakes.

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