In a situation, for example, where a client was born in Spain to Spanish parents but moved to the UK at a young age, they will have a UK national insurance number, but they are very unlikely to have a Spanish tax identification number, having never worked there.
As Spain is above the UK in the hierarchy, it is the Spanish NCI that the investment provider will insist on, and some providers may refuse to open an account for them without it.
It is worth touching back on the definition of reportable instruments here. Some providers may be happy to open the account but block access to equities, ETFs and investment trusts. If you are able to find suitable investments for your clients that are unit trusts or OEICs, this may be a way forward.
Legal entity identifier
Where the investment account holder is an entity, no nationality or NCI is required. Instead, the entity is required to obtain a legal entity identifier (LEI). This is a 20-digit alphanumeric code that is unique to that entity.
An LEI can be obtained from a local operating unit (LOU). In the UK, the London Stock Exchange is an LOU but there are several others. Unfortunately, buying an LEI comes at a cost – around £50 to £100 depending on the LOU. There is also a renewal fee, which is typically around £50.
Entities that will require an LEI are trusts, limited companies and charities. Small self-administered schemes will also require one. However, self-invested personal pensions will not, nor will bare trusts with a sole beneficiary. In those latter two scenarios, it would be the member’s or beneficiary’s nationality and NCI that would get reported.
Decision-maker
So far, we have focused on the details of account holder. However, it is important to be aware that details of the decision-maker are also included in the report.
The starting assumption is that the client is the decision-maker, but this will not always be the case. The two scenarios you are most likely to come across are powers of attorney and discretionary investment mandates.
With the former, it means the investment provider will need the nationality and NCI of the attorney (assuming it is actually the attorney signing off the investment decisions). With the latter, it will need the LEI of the firm making discretionary decisions.
Deceased clients
One scenario where advisers may need to pay particular care is where investments are being passed onto beneficiaries following the death of a client.
As mentioned earlier, this represents a change in beneficial ownership. But given that most EU countries do not have executors like in the UK, the rules do not reflect how this intermediate stage of the process works in the UK where assets are collected and held by an executor before distribution, and this can create unintended consequences.
