Legal Entity Identifier

Introduction

What is a Legal Entity Identifier?

This guide will show you everything you need to know about this identification measure, who exactly is affected by it, why the introduction of this policy is important and finally the relatively simple process of getting your LEI-number.

Overview

LEIs are designed to guarantee transparency
LEIs are a legal requirement
An LEI is valid for one year

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What is the Legal Entity Identifier – LEI?

A Legal Entity Identifier is a globally unique code, a legal requirement to participate in the financial market.

An LEI can identify parties and illiuminate ownership structures.

This mandatory measure guarantees transparency in security trading and is designed to prevent misuse.

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Who needs an LEI?

Every legal entity – regardless company size – that wants to deal in bonds or derivatives of any kind has to register a Legal Entity Identifier.

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Why does my company need an LEI?

The introduction of the Legal Entity Identifier is based on the necessity to keep financial transactions transparent. The consequences of the financial crisis of 2008 would have been less severe if the activities and dependencies of the involved corporations would have been apparent and open.

An LEI can reveal parties and their dependences. This transparency is an increasingly important measure for a stable gobal market and for a trustful client partnership.

The legal entity identifier is designed to prevent abuse, financial cover ups and – ideally – another financial crisis. A Legal Entity Identifier is mandatory for a company to be active on the financial market.

Michael Fux CEO, Register-LEI

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Why is an LEI necessary?

The LEI was introduced to illuminate ownership structures of active companies and to increase the transparency of the global financial market. The LEI prevents fraud through ownership structures.

1. the LEI displays the ownership structure of a corporation

2. the LEI discloses the interrelations of companies

The Legal Entity Identifier provides information about…

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What does the ISO 17442 standard regulate?

The ISO 17442 standard defines the four key principles which the LEI is based on:

1. The LEI is a global standard.
2. A unique LEI is assigned to each legal entity.
3. The LEI is supported by high data quality.
4. The LEI is a public good.

Furthermore, ISO 17442 specifies minimum reference data, that must be supplied for each LEI:

Name of the legal entity
Registered address
Country of foundation
Codes for the representation of country names
Date of the first assignment of the LEI
Date of last update
Expiration date of the LEI

The ISO 17442 standard thus regulates the structure of the LEI.

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The structure of an LEI

The Legal Entity Identifier is a globally unique alphanumerical code consisting of 20 numbers and letters.

Numbers 1-4: The first four numbers reveal the identity of the issuing Local Operating Unit (LOU). This unit acts in the name of the Global Legal Entity Identifier Foundation (GLEIF) who outsources issuance and allocation of the LEI to certain authorized issuing agencies.

Numbers 5-6 always have a value of 00.

Numbers/letters 7-18 are uniquely generated by the LOU with ISO standard 17442. This part of the LEI identifies the legal entity.

Numbers 19-20 are checksum for verification purposes.

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Who can order an LEI?

You can apply for a Legal Entity Identifier for your company if you are either

– an authorized representative with signatory powers of the applying company, or

– recognized by another authorized representative of the company to apply for the LEI.

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How do I get an LEI?

The process can be done online and only takes a few minutes.

After entering the company data, selecting the period of validity of the LEI and the preferred method of payment, a confirmation email will inform you about the status of the order and the initiation of the registration process.

Within a few hours, the new LEI will be sent to you in a second email, completing both the successful registration and the publication on the GLEIF website.

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What is the GLEIF?

The Global Legal Entity Identifier Foundation (GLEIF) is the international body overseeing the implementation and use of the Legal Entity Identifier and provides a global database of all LEIs. The GLEIF is monitored and coordinated by the Legal Entity Identifier Regulatory Oversight Committee (LEI ROC).

What is an LOU?

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The LEI can be issued by a Registration Agent. Local Operating Units (LOUs) allocate LEI-numbers.

A Local Operating Unit is an organisation authorized by the GLEIF to allocate LEI numbers. LOUs are working closely with Registration Agents (RA), who assist organizations with LEI applications.

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Legal Entity Identifier – The Status

Technically there are two options: Your LEI status is either ACTIVE or INACTIVE.

ACTIVE means that your LEI is legally registered and operating, all legal requirements are being met.

If a company is no longer registered or not operational anymore, the status is INACTIVE. Any investment activities are prohibited.

In addition to the status of the entity you can check the status of your LEI registration.

How long is an LEI valid?

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An LEI is valid for one year from the first date of issuance. Depending on the Registration Agent it may be renewed automatically upon expiration for it to stay active and meet all legal requirements.

Why do LEI numbers have to be renewed?

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The regular renewal of the Legal Entity Identifier is necessary to ensure all company information associated with the LEI is up-to-date. The yearly renewal guarantees a regular update.

LEI – The Legal Background

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The European financial instruments directive MiFID II

MiFID II is a directive within the European economic market.

The MiFID II directive 2014/65/EU replaced the MiFID directive 2004/39/EG about markets in financial instruments on January 3, 2008. MiFID aims for a coordination of the financial markets in the European Single Market.

The goals of the MiFID II directive are the continuing stabilization of the protection of investors and the restructuring of the bonds- and derivative-markets. This includes the regulation of trade infrastructures, commodity futures markets, high frequency trading or protection of investors. With the MiFID II taking effect, the powers of intervention and of sanction have been expanded.

Implementing Regulation 2017

With the Implementing Regulation (EU) No. 2017/105 taking effect at the end of 2017, the use of an LEI-number for reporting all derivative transactions was mandated.

All companies participating in the global financial market are now identified and networks are made transparent.

As an example, LEI numbers are being used under the European Market Infrastructure Regulation (EMIR) to identify counterparties to over-the-counter (OTC) derivatives.

Additionally, an LEI number for issuers has been mandatory since the beginning of 2017.

LEI search & LEI database

The Global Legal Entity Identifier Foundation lists all LEIs in its database. Here you can access this database and search for LEIs and companies.