Is LEI and CIN the same?
LEI and CIN are not the same. A Corporate Identity Number (CIN) is a number assigned to an entity by a local register. Legal Entity Identifier (LEI) needs to be obtained if you wish to participate in the global financial markets. The Global Legal Entity Identifier System (GLEIS) provides a uniform method of unique identification on an international scale. The database is free and accessible to anyone!
LEI vs CIN
A Corporate Identity Number or Company Identification Number (CIN) is a unique 21 digit alpha-numeric number given to all Private Limited Company, One Person Company, Limited Company, Section 8 Company, Nidhi Company, and Producer Company registered in India.
CIN number is used to track many aspects of the company from incorporation by the Registrar of Companies and must be quoted on all transactions with the Registrar of Companies.
Whenever a company registers itself at a local register it is assigned a unique registration number like CIN by the business registrar. Today there are hundreds of such reference numbers existing in every country and jurisdiction. Evidently, this does not solve the purpose of unique identification at a global scale and explains why Legal Entity Identifiers (LEI) came into the picture.
The Legal Entity Identifier (LEI) is also a unique 20 digit alpha-numeric number (otherwise referred to as a code), that allows the identification of any organization or legal entity on a worldwide database.
LEI provides a unique global identification system that is based on standards laid down by ISO 17442. The database has been considered to be the most valuable since it offers very high-quality data and everyone can access this information for free, which also includes many value-added features such as capturing hierarchy info from each entity – all soon to come available!
Why do you need an LEI?
The purpose of the LEI is to help you recognize legal entities free of charge, on a globally accessible database. This results in more security around international transactions, shortcuts to know your customer (KYC) processes, and all that whilst boosting transparency throughout the global financial system. Every deal conducted within the markets will connect to the other counterpart with an LEI.
LEI Code in India
LEI was introduced in India by the Reserve Bank in a phased manner for participants in over-the-counter (OTC) derivative and non-derivative markets and large corporate borrowers.
It is now mandatory that the LEI system be adopted for all payment transactions of value ₹50 crore and above, handled by entities using the Reserve Bank’s Centralised Payment Systems viz. Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT).
Who needs an LEI number?
LEI (The Legal Entity Identifier) will be issued to any legal identity including but not limited to all
- Banks, lenders, and investment companies
- Commodities traders
- CFDs (Contracts For Differences)
- Entities listed on the stock exchange
- Financial intermediaries
- Investors in mutual funds and hedge funds
- Trade OTC derivatives
- Self-Managed Superannuation Fund traders and investors
- Pension schemes
- Any entity needing to comply with the SFTR (Securities Financing Transaction Regulation)
Check with a local registration agent if unsure about your need for an LEI.
LEI will be assigned on application from the legal entity and after due validation of data.
For an organization, LEI will be:
- Used as a means of identification for a financial entity
- Facilitate transaction reporting to Trade Repositories
- Ensure compliance with regulatory requirements