Whenever a reportable instrument changes hands, the transaction must be reported to the FCA. Typically, these will be sales on the open market, but it includes any situation where there is a change in beneficial ownership, such as investments being gifted to a spouse, paid out of a discretionary trust, or inherited on death.
If an investment provider is not able to report a transaction, perhaps due to not having the right information, it may refuse to carry it out.
Nationality
In order to fulfil its reporting requirements, the investment provider needs two pieces of information from the client: their nationality and their national client identifier (NCI). Both of these need further explanation.
Nationality itself is not defined in the rules, it simply follows the rules of the countries in question. Where it gets a bit more complicated is where a client has dual nationality.
For the purposes of transaction reporting, one nationality is given priority over the other, and this is determined by a strict hierarchy (which is available on the FCA website). The hierarchy is essentially alphabetical, but it is based on the two-letter ISO code for the country. A client cannot decide which nationality to put forward.
So, for example, if a client is dual national Spanish and French, it is Spanish that takes priority as Spain is higher in the hierarchy (‘ES’ comes before ‘FR’).
At the very bottom of the hierarchy is ‘all other countries’. Therefore, if a client is dual national and one of their nationalities is a non-EU nationality, it is the EU nationality that takes precedence.
Note that UK nationality is still in the hierarchy despite the UK no longer being in the EU. Therefore, for a client with UK nationality and Irish nationality, for example, it is their UK nationality that takes precedence as the UK (‘GB’) is above Ireland (‘IE’) in the hierarchy.
National client identifier
In addition to nationality, the investment provider will require the NCI for your client. This is specific to their nationality, and the different countries have allowed different NCIs.
For the most part, these are tax ID references or personal identify codes. In the UK, for example, the NCI is the national insurance number.
Some countries allow two or three different types of NCI. The majority also allow a concatenation – a series of characters strung together – of numbers and letters based on nationality, date of birth and name.
Concatenation itself is a generic term, but the transaction reporting rules have a set format for this particular concatenation that is the same across the board.
A small number of countries only allow one reference, this being the main tax code, and they do not allow concatenation. Spain only allows the tax identification number. Italy, Iceland and Estonia are similar, and this can create challenges.
