The Legal Entity Identifier (LEI) is an internationally standardized identifier used by financial market participants. It is valid worldwide and ensures greater transparency in the capital markets. The financial crisis has shown how difficult it was for banks and regulators to quickly and clearly clarify complicated company networks and links between issues and issuers. The global LEI system counteracts this: an LEI makes it possible to identify business partners beyond doubt and helps to ensure that certain reporting obligations to supervisory authorities can be met. The Legal Entity Identifier is intended to prevent abuse, concealment and, in the best case, further financial crises. If a company wants to be active on the financial market, a legal entity identifier is mandatory. The LEI code is a 20-digit alphanumeric combination (that is in accordance with ISO standard 17442).
LEI in a nutshell:
- It is a unique identification code for companies trading in financial markets ( bonds, shares, futures, etc.).
- Each transaction carried out on the markets is linked to the trading partner via an LEI number (LEI Code).
- This allows for more transparency, as it links businesses, financial markets, and their regulators
- It is required by law, you cannot trade without an LEI
- By default, it is valid for up to a year
Who needs an LEI number?
An LEI is currently required by companies in order to comply in particular with the obligations arising from EMIR (European Market Infrastructure Regulation) and the European financial market regulations (MiFIR, MiFID II). The first addressees are therefore the financial counterparties: Banks and credit institutions, insurance companies, investment services companies capital management companies, and investment funds. In view of the trend in increasingly stricter worldwide regulations of the global financial markets, it is to be expected that the use of the LEI number will be required by many authorities and institutions worldwide. Accordingly, it will also be required for non-financial counterparties (i.e., all other entities in the real economy) that enter into derivative contracts. Private individuals and legally dependent parts of companies do not require an LEI.
How to get an LEI number?
Prerequisite to apply for an LEI is the successful registration and authentication of your company/institution. Renowned agents like Leiregister.se allow you to register your LEI number within a few minutes. Services like this also make the renewal and transfer of LEI numbers a seamless process.
What does the ISO 17442 standard regulate?
The ISO 17442 standard defines the four principles underlying the LEI:
1. the LEI is a global standard.
2. only one LEI can be assigned per legal entity of a company.
3. The LEI provides quality data to regulators.
4. The LEI number is considered a public good.
In addition, ISO 17442 regulates the data you are obliged to provide for your LEI application:
- Name of the legal entity
- Registered address
- Country of incorporation
- Codes for the representation of the country names
- Date of the first assignment of the LEI
- Date of last update
- Expiration date of the LEI
After registering your LEI number, the following data will be visible:
- LEI data
- Company data
- Legal domicile
- Head office
What is GLEIF and LOU?
GLEIF is the abbreviation for Global Legal Entity Identifier Foundation. This is the institution that supports the establishment and implementation of LEIs. GLEIF is coordinated and monitored by the Legal Entity Identifier Regulatory Oversight Committee (LEI ROC). On the GLEIF website, you can also check the validity of any LEI number.
LEI number applications can be submitted to authorized LEI operators. LEI numbers are issued by LOUs (Local Operating Units). A Local Operating Unit is an organization authorized by GLEIF to issue LEI numbers. LOUs work closely with registrars (RA) who assist organizations in applying for LEI numbers.
What do the 20 digits represent?
As mentioned, an LEI number consists of 20 letters and digits.
- The digits 1-4 always show the ID of the LOU from which the LEI was issued.
- The digits 5-6 always have the value 0.
- The digits/letters 7-18 are unique for each company.
- The digits 19-20 are used for verification.