Legal Entity Identifier

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The Legal Entity Identifier (LEI) is a unique global identifier for legal entities participating in financial transactions.[1] Also known as an LEI code or LEI number, its purpose is to help identify legal entities on a global database. Legal entities are organisations such as companies or government entities that participate in financial transactions. An individual person may not obtain an LEI.[2] The identifier is used in regulatory reporting to financial regulators and all financial companies and funds are required to have an LEI.

The identifier is formatted as a 20-character, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). It connects to key reference information that enables clear and unique identification of legal entities participating in financial transactions. Each LEI contains information about an entity's ownership structure and thus answers the questions of 'who is who’ and ‘who owns whom’. Simply put, the publicly available LEI data pool can be regarded as a global directory of participants in the financial market.

There are a number of LEI issuers around the world that issue and maintain the identifiers and act as primary interfaces to the global directory, these are typically financial exchanges or financial data vendors. These are accredited by the Global Legal Entity Identifier Foundation (GLEIF) to issue LEIs.

History[edit]

At the time of the financial crisis of 2007–2008, regulators realised that a single identification code unique to each financial institution was not available worldwide. It means that each country had different code systems to recognize the counterpart corporation of financial transactions. Accordingly, it was impossible to identify the transaction details of individual corporations, identify the counterpart of financial transactions, and calculate the total risk amount. This resulted in difficulties in estimating individual corporation's amount of risk exposure, analyzing risks across the market, and resolving the failing financial institutions. This is one of the factors that made it difficult for the early evolution of the financial crisis.

In response, the LEI system was developed by the 2011 G20[3] in response to this inability of financial institutions to identify organisations uniquely, so that their financial transactions in different national jurisdictions could be fully tracked.[4] Currently, the Legal Entity Identifier Regulatory Oversight Committee (LEI ROC), a coalition of financial regulators and central banks across the globe, is encouraging the expansion of the LEI. The U.S. and European countries require corporations to use the legal entity identifier when reporting the details of transactions with over-the-counter derivatives to financial authorities.[citation needed] Today, authorities of 45 jurisdictions mandate the use of LEI code to identify legal entities involved in different financial transactions.[citation needed]

The first LEIs were issued in December 2012.[5]

Code structure[edit]

Structure of LEI codes
1 2 3 4 5 6 7 8 9 ... 18 19 20
LOU
code
Res-
erved
Entity-
Identification
Check-
sum
G.E. Financing GmbH
5493 00 84UKLVMY22DS 16
Jaguar Land Rover Ltd
2138 00 WSGIIZCXF1P5 72
British Broadcasting Corporation
5493 00 0IBP32UQZ0KL 24

The technical specification for LEI is ISO 17442.[4] An LEI consists of a 20-character alphanumeric string, with the first four characters identifying the local operating unit (LOU) that issued the LEI. Characters 5-18 are the unique alphanumeric string assigned to the organisation by the LOU. The final two characters are checksum digits.[6]

Even the LEI code of an entity follows the technical ISO specification, the LEI code by itself does not provide any valuable information, it is only used to uniquely identify each legal entity.

Information contained in LEI reference data (Level 1 and Level 2 data)[edit]

The LEI reference data contains basic 'business card' type information, also referred to a 'Level 1' data.[7] It answers the question 'who is who?'.

The other part of the reference data, the 'Level 2' data anwers the question ‘who owns whom?'. If applicable, it will allow identification of direct and ultimate parents of any legal entity.

Global Operating System[edit]

G-20
FSB (Financial Stability Board)
LEI ROC
GLEIF

- Board of Directors

LOU 1, LOU 2, LOU 3 ...

[8]

  • G20: An international organization consisting twenty major countries (ninety per cent of the world's GDP) comprising seven developed countries (G7), the chair countries of the European Union, and twelve rising nations.
  • Financial Stability Board: An organization founded to enhance the stability of the global financial system and to oversee international finance.
  • Regulatory Oversight Committee: The best decision making organization for LEI Systems under FSB. The forty countries' financial authorities, the central bank, and IMF are represented as members by international organizations.
  • GLEIF (Global LEI Foundation): Responsible for controlling the LOUs in each region as a practical operating organization within the LEI system.
  • Local operating units: As the operating organization for issuing and maintaining the LEI code in each region, 31 LOUs are currently active worldwide.

Obtaining a Legal Entity Identifier[edit]

The Global Legal Entity Identifier Foundation (GLEIF) is not directly issuing Legal Entity Identifiers, but instead delegates this responsibility to local operating units (LOUs). These LEI issuers supply different services. Local operating units can have different prices and LEI issuing speed for the registration services they offer. The LEI can be obtained from couple of hours to days or weeks, depending on the service provider. GLEIF is responsible for monitoring LEI data quality and integrity of the LEI system.[9]

It is also possible to register an LEI through LEI registration agents. LEI registration agents work closely with LOUs to facilitate the LEI registration process and generally offer faster LEI registration service than some of the LOUs. For example, it is possible to receive an LEI code from official GLEIF registration agents, or directly from LEI Register[9]

Validity of LEI[edit]

  • The validity period for LEI is one year from the date that the Legal Entity Identifier is registered
  • Annual renewal of LEI is a must for a company or organization that wants to continue to participate in financial transactions
  • Renewal can be done through any accredited registration agent and the code remains unchanged even when transferring between different LOUs (local operating units)

See also[edit]

Other formal authority UID in legal context:

References[edit]

  1. ^ http://www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei
  2. ^ http://www.gleif.org/en/about-lei/questions-and-answers
  3. ^ "What is the LEI system?". Open LEIs. Retrieved 26 May 2016.
  4. ^ a b "The Legal Entity Identifier (LEI) Is Good News for Financial Technology Developers". Data.gov. 21 May 2014. Retrieved 26 May 2016.
  5. ^ "Legal Entity Identifier Resource Center". Sifma. Retrieved 26 May 2016.
  6. ^ "The Structure of the LEI Code". GLEIF. Retrieved 26 May 2016.
  7. ^ "Free LEI number infographic - All about Legal Entity Identifier (LEI code)!". LEI Prices. Retrieved 2020-06-02.
  8. ^ "Korean Securities Depository".
  9. ^ a b GLEIF. "How to Get an LEI: Find LEI Issuing Organizations – About LEI – GLEIF". www.gleif.org. Retrieved 2017-10-18.

External links[edit]