Why is an LEI number required?
A Legal Entity Identifier number or code is required to ensure a more transparent financial market. The initiative was created after the 2008 global financial crisis, with hopes to avoid any future global economic shocks of that severity. The LEI code is now essential for legal entities that operate within today’s financial system. A company’s LEI record will contain public information, that is accessible through a global database.
Why was LEI created?
The Global LEI System (GLEIS) was developed by the G20 in 2011, in response to the 2008 global financial crisis. This is when the need for a more transparent financial system became evident.
The Legal Entity Identifier (LEI) is a unique number, otherwise referred to as a code, that allows the identification of any organization or legal entity on a worldwide database. The LEI code is a combination of 20 letters and numbers.
Just like us citizens have some form of a national identification number, your business should now have a global identification code as well.
What is the purpose of LEI?
The purpose of the LEI is therefore simple, it helps you to 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.
A company’s LEI record will contain public data such as their name, address, where they are registered, and whether they are a branch, or owned by another parent company. You’ll be able to access the database by using the LEI Register’s Search Tool.
What happens if I don’t renew my LEI?
The LEI is an ISO standard and is primarily required for any legal entity that undertakes financial transactions or operates within today’s financial system, especially within the US, UK, or EU.
The statement “no LEI, no trade”, speaks for itself. Without an LEI number, your trades will be blocked.
Currently, the legal entities that most certainly require an LEI, include financial institutions such as brokerages, banks, investment & insurance companies, and credit unions. Whereas at this point, individuals are not required to have one.
Having an LEI ensures your business is compliant with the 184 international regulations mandating the use of a Legal Entity Identifier around the world and that alone will help to streamline onboarding with different financial institutions.
Find out more information about who needs an LEI here.
How to obtain an LEI?
After forming the G20 concept, the Financial Stability Board (FSB) appointed a new not-for-profit organization, The Global Legal Entity Identifier Foundation (GLEIF) to watch over it. The foundation doesn’t issue the codes itself, but rather leaves it to a network of public and private companies acting as Local Operating Units (LOUs). Furthermore, in order to obtain an LEI code, you’ll need to reach an LEI Registration Agent.
LEI Register’s role is to provide you with verified information about LEIs, authenticate data and manage communication between LOUs. We understand the value of your time and have put in great work to become the fastest, most secure global registration service provider.
Key Takeaways
- The global LEI system was created as a reliable information source; providing unique identifiers for all entities that undertake financial transactions around the world
- An LEI code is needed can be obtained through an official LEI Registration Agent
- The LEI public database is free to use and provides authenticated information about your counterparts
- “No LEI, No trade”