Legal entity identifiers (LEIs) help to make it easier for financial markets to identify and connect with entities. They link to a set of key reference data that answers critical questions like ‘who owns whom?’.

LEIs are issued by Local Operating Units, or LOUs. These are authorised by the Global LEI Foundation (GLEIF) to issue and maintain LEIs. The LOUs collect a minimum set of reference data, known as Level 1 data.

What is an LEI?

The LEI is a 20-character alphanumeric code that uniquely identifies legal entities on a global scale. It is a requirement for any legal entity involved in financial transactions or operating within the world’s financial system. LEIs are required by many regulations around the world to help improve transparency, reduce risk and enable regulatory compliance. The code consists of a prefix to ensure uniqueness among codes from different LEI issuers (Local Operating Units or LOUs), followed by an entity-specific part and two check digits.

The LEI system was developed by the G20 countries at the height of the 2008 global financial crisis to solve a number of problems: it increases transparency in financial markets, standardises data across jurisdictions and allows companies to be easily identified, even if they don’t have a digital presence. It also allows for the linking of LEIs to International Securities Identification Numbers (ISIN), which further simplifies onboarding processes.

Since the launch of the LEI system in 2011, the number of organisations using it has grown to over 40,000, with more than 200 countries and regions actively supporting its use. It is expected that more than 80% of the global economy will have an LEI by 2020.

While a legal entity can get an LEI on its own, most register through one of the numerous LEI service providers. These agents, such as LEI Lookup, offer registration, renewal, transfer and other services. They are accredited by GLEIF to act as an intermediary between the end customer and the LEI issuer.

Once an LEI is assigned, the reference data for that legal entity is available to anyone with access to the database. This data is free to view and can be used for many purposes. Depending on the level of information that is publicly available, LEI reference data can answer questions such as “who is who?” and, at higher levels, reveal parent-child relationships in corporate structures.

An LEI is valid for one year and must be renewed annually. Each renewal involves the same checks and verifications as the original assignment. If an LEI is not renewed by the end of its year of validity, it will be marked as Lapsed and will no longer function in the global LEI pool.

How do I get an LEI?

The LEI system is based on the ISO standard and is mandatory for any legal entity that participates in financial transactions. It is a combination of 20 letters and numbers that helps identify businesses on a global scale, regardless of their name or location. This unique number can be easily retrieved using a search engine, making it easier to manage and access information about companies on a consistent basis. The LEI also allows for greater transparency between companies and reduces systemic risk.

The process for getting an LEI begins with registering with an accredited Registration Agent. This is an organization that is approved by the Global Legal Entity Identifier Foundation (GLEIF) to issue LEIs. Registration Agents work in conjunction with Local Operating Units (LOU) to provide a simple and convenient channel for the mass adoption of the LEI. These channels are provided through a variety of providers such as financial exchanges and data vendors.

A company can register for its LEI through its LOU of choice, typically by submitting a letter of authorization signed by someone with the appropriate authority to act on behalf of the legal entity. Some additional documentation may be required depending on the type of entity being registered (for example, a fund or trust will need to submit a prospectus).

Once the application has been processed, the LOU will issue the LEI code to the legal entity. The LEI code itself consists of several parts:

Level 1 data: This is basic business card-type information, such as the legal name, the LEI Registration Date and the registered jurisdiction.

Level 2 data: This is more detailed information, such as the corporate structure including parent relationships and branch offices.

It is important to consider not just the initial cost of obtaining an LEI, but the management system that will be required to keep the information up to date on a regular basis. Having a reliable, robust and user friendly system will help ensure that you maintain compliance with the 184 international regulations that mandate an LEI for market participants. We recommend partnering with a trusted and well established provider like LEI Worldwide, who can offer you a complete solution that includes onboarding, renewals and updates of your LEI.

What are the benefits of getting an LEI?

Getting an LEI is the best way to standardize how financial markets identify and track entities across borders. The unique 20 digit code allows companies to connect disparate data sources and provide a consistent view of their risk exposure. This allows effective risk management, lowers mistakes, and guarantees that companies fulfil reporting requirements on time.

The centralized LEI database also improves data consistency and eases compliance with regulatory reporting, by eliminating the duplication of identifiers. Regulatory bodies around the world have adopted LEI to help them trace exposures and connections amongst businesses. This helps improve overall market integrity and prevents fraud, by ensuring that companies are identified correctly across global financial systems – and with that, see here for a step-by-step LEI registration process.

For many regulated industries, LEIs are required as part of new EU regulations such as MiFID II, MiFIR and EMIR. Additionally, LEIs can be used to fulfill other reporting standards such as SFTR, TRACE and CTR. While LEIs are not mandatory for all business types, they are strongly recommended to help make global transactions more efficient and transparent.

While some may think that LEIs are only for large corporations involved in international finance, the reality is that small and medium sized businesses can benefit just as much as their larger counterparties. For example, an LEI can level the playing field in terms of access to foreign markets and business opportunities, enabling companies to connect with new investors from around the globe.

LEI registration is simple and cost-effective, and can be done online by submitting relevant documentation. Once a company is approved, an LEI is valid for one year and must be renewed annually. Typically, LEI Lookup offers discounts for multi-year packages, which include both the registration and renewal fees. Moreover, registering for an LEI is fast and straightforward, with the process usually completed within 48 hours. This means that even the busiest of companies can get their LEI quickly. Once registered, a company can use their LEI to onboard clients faster and more efficiently and link their LEI with their ISIN in a process called LEI to ISIN Mapping. This can reduce onboarding costs for investment banks by 10%, saving them tens of millions of dollars every year.

How do I renew my LEI?

The LEI is a globally unique identifier for legal entities. The code is similar to national business IDs (such as Company House in the UK, CVR-register in Denmark or Bronnoysundregistrene in Norway), but instead of being based on the location of the entity it is a code assigned by an international standardised global registry. The LEI is also crucial for fulfilling regulatory reporting obligations imposed on financial markets in Europe such as EMIR and MiFID II.

Companies and other legal entities that wish to trade on capital markets or trade OTC derivatives are required to have an LEI. The LEI code is not only a requirement to be able to comply with financial regulations but also helps improve transparency in the financial market by matching and aggregating data.

If you already have an LEI you need to ensure that it is renewed before the expiry date. The LEI Issuer is obligated to inform the legal entity that its LEI is up for renewal at least six weeks in advance. This should give you enough time to handle the renewal process.

The process for renewing your LEI can be done at any service provider – it does not need to be the same provider that issued you the LEI. Each service provider can set their own price for registration and renewal and may also offer additional services. Many services providers will offer a multi-year package that takes care of the annual renewal for you.

When you submit your LEI renewal application it is important to include any required documentation and to confirm that the reference data is up-to-date. The LEI is a global standardised system and the information that is entered into it needs to be accurate at all times. This is essential to prevent any disruptions in trading or reporting requirements in the future.

If you are looking to register a new LEI or have a LAPSED LEI it is possible to re-activate it quite quickly. The RapidLEI team will guide you through the process and ensure that you have all the information needed to re-activate your LEI. The re-activation process is easy to follow and can be completed within a few hours.