Definition of Legal Entity Identifier: A legal entity identifier (LEI) is a code that is unique to a legal entity such as a limited company, fund or trust, or an organization. The LEI code includes a mixture of 20 characters and numbers (see LEI structure here). This code allows each entity to be identified by number instead of a name in the global database of searchable entities, as multiple entities may have identical names. These entities can be searched by number rather than names, as many entities may have the same or similar names. The LEI code is given as per ISO (International Organization for Standardization) benchmarks. This code is now a legal necessity within the international financial system for many companies. These days many companies are trading in the global financial market.
Public data in companies’ LEI records such as their name, address, where they are registered, and whether they are a branch, or will be owned by another ‘parent’ company. To date, more than 2 million LEIs have been created globally, and it is increasingly being adopted as a global standard in business transactions. Visit leiservice.com to know more.
Importance of LEI system
Formerly, it was very tough to find a counterpart if they did not have a digital presence. This became an issue in the global financial crisis a decade ago. The absence of transparency has weakened financial institutions as a large number of organizations and funds were unknown. In addition, it made complications related to risk inspection and transparency. Some of the importance of the LEI system for dealing in the global financial market are:
• Helps in evading problems faced before finding out about the counterparty without any digital presence. Digital absence was a lot challenging during the global financial crisis a decade ago.
• With the introduction of the LEI code, financial institutions are now in the place of determining vast numbers of entities and funds. Also with this, it has cracked the complications relating to risk assessment and transparency.
• The G20 has founded the LEI code system in the year 2011 and has ensured to stop the complications that are going on in the past.
• LEI code helps in assembling a digital database, where all the legal entities are easily accessible, accurate, and up to date. It can be said as a centralized source of information, which is competent in attaining high-quality data. The database can be accessed by utilizing the LEI search tool.
• The LEIs code enables the business houses in linking data sets and improving their analysis.
• It also obliges in building a complete image of the business, by linking the data, as it could aid small business houses to access finance.
Where do LEI numbers come From?
Following the G20’s concept of the Legal Entity Identification (LEI) Code, the Financial Stability Board (FSB) appointed a new regulatory body to enforce it. This association is comprehended as the Global Legal Entity Identifier Foundation (GLEIF).
GLEIF was given the role of approving and supervising financial institutions with the ability to issue legal entity identifiers. These entities are called Local Operating Units (LoUs) and are the only entities that can issue LEI.
Who regulates the system?
The legal entity identifier is controlled by the ROC through the GLEIF i.e the Global Legal Entity Identifier Foundation. Even the regulatory use of the LEI codes is mainly handled by the regional and jurisdictional authorities.
Who Needs An LEI?
LEI is essential for any legal entity involved in financial transactions or operating within today’s global financial ecosystem. There are currently several mandates that state “no LEI, no trading”, meaning that both reporting parties and traders require LEI.
What Benefits are there to having an LEI?
Having an LEI number, or LEI certificate immediately improves your international identity and business credibility. Investors, consumers, and probable stakeholders can access your expected LEI data in real-time. Similarly, you can take benefit from the additional layer of security that comes from knowing what you’re selling.
The Legal Entity Identifier system is resistant to the changes that happen in the lifetime of a business entity. If the business entity is dissolved through a merger or a closure or completely subsumed by another business entity then the original identifier code shall remain in the working position. Hence the return of data from reference corresponds to the time of the entity’s activity.
The LEI codes are wholly unbiased. From their essence, they form a single data field and do not hold any embedded intelligence. It indicates that the value of an identifier cannot be used to compromise neutrality.
A trusted method is supporting the LEI system for verifying the uniqueness of the legal entity in the question. Maintenance of all individual references and identification of data is guaranteed by the issuer (LOUs). The gathered data is however sufficient for validation of the authenticity of an entity’s informed identification. The trustworthiness of the system is also supported by very clear, high-quality assurance criteria guaranteed by the issuers.
How to get a legal entity identifier
If you are a financial institution that functions on behalf of your clients, or you need an LEI for your private company, you can get an LEI at www.lei-worldwide.com or by clicking the Log button below Can do Try reading our guide, which provides a step-by-step guide on how to obtain a legal entity identifier.
The procedure is very simple and if you need any advice, please do not hesitate to contact our support team who can take you through the procedure, and suggest a specific LEI solution for your needs.
Even though you are a financial institution filing for LEI on behalf of its client or you need to register for your company, the process remains the same. For personalized support or any other question, you can go to a website like LEI Worldwide and contact them directly for support and you will find the solution according to your LEI needs.