Pension schemes and trustees must obtain LEI numbers prior to the introduction of MiFID II next year, Sackers has highlighted.

In preparation for the new regulation, pension schemes must obtain an LEI number - a global reference number that identifies legal entities that are involved in financial transactions across all jurisdictions. Without an LEI number, Sackers explained, scheme managers will be unable to execute trades on behalf of the scheme. These numbers can be obtained from the London Stock Exchange.

Although MiFID II will not have a direct impact on pension scheme trustees, the new rules for brokers and asset managers may affect UK pensions schemes’ contractual relationships and will bring areas that trustees should consider, the law firm has said.

With MiFID II due to come into force on 3 January 2018, trustees have been encouraged to consider their charging structures, conflicts and best execution and reporting requirements, among other areas that may be affected.

Discussing pre-MiFID II requirements for trustees, Sackers partner Sebastien Reger explained that while trustees “won’t want to confront” charging structures, they should be considering whether these will updated or altered, as well as looking at how research will be paid for in the future.

In addition, MiFID II requires managers to review and update their policies on best execution and conflicts of interest. To approach these, the focus will move from simply disclosing the approach to showing how best execution was achieved.

Reger noted that: “This is a welcome development for investors as they will get further clarity on how managers view and handle best execution and conflicts of interest. However, it does mean that more time will be needed to review these policies in future.”

A final requirement that should be addressed is reporting requirements. Discussions should take place with managers regarding new reporting requirements and how these will be covered in any existing agreements, Sackers highlighted.

Reger concluded: “MiFID II will significantly change the way financial markets operate, and we expect the full impact of these changes to emerge gradually over time. The most important message for trustees is to get familiar with the changes. Even though schemes won't be directly affected, this is all about being alert to the indirect positive and negative consequences.

“While some of the changes offer an opportunity to push for greater reporting transparency from asset managers, it will be up to each individual pension scheme to decide how far they want to take it. We will be keeping a close eye on how the market reacts and making sure we reflect this in our negotiations with banks, funds and asset managers."

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