Add Transparency and Trust With an LEI

Every business needs transparency to win clients’ trust. One of the best ways to achieve these two fundamental metrics is getting a Legal Entity Identifier (LEI). The LEI is an alpha-numeric code with 20 characters based on ISO 17442 standard. This standardization was developed by the International Organization for Standardization (ISO) to offer key information about financial institutions. This standardization is a compulsory requirement for all businesses involved in financial transactions.

Information classification

Note that every LEI generated from an LEI Register has data structured into two levels.

Level one

This information lists who is who in a business. Your business registration details are captured in this section. The legal and HQ address details, official legal name, and the number of registration are entered in this part. The registered address, country of registration, and country codes are also captured. Note that LEI assignment date, expiry date, and last update timings are also made public.

Level two

The second data version details who owns whom in an entity. This section reveals the ownership structure. The information has been proven to improve transparency in the business world. You are only required to provide consolidated financial accounts if you are the parent or ultimate parent company.

What is GLEIF?

The supra-national not-for-profit organization, Global Legal Entity Identifier Foundation (GLEIF), was established in June 2014 by the Financial Stability Board. Its role is to govern the global use and implementation of Legal Entity Identifier (LEI). The oversight role against GLEIF is under the LEI Regulatory Oversight Committee. This committee has membership from public authorities worldwide intending to increase global financial markets transparency. This vital financial body has its headquarters in Basel, Switzerland, and has helped increase financial integrity by making important business information public.

Why do you need an LEI?

The main force behind the introduction of LEI was to improve financial transparency. It is a mechanism that aims to provide a standardized global legal entity identification framework. Unfortunately, the jurisdiction governing LEI usage is not evenly applied worldwide leading to low adoption. Legal Entity Identifier is needed in the European Union, Canada, United States, and India, where the Reserve Bank of India (RBI) has to use for FX deals, large corporate borrowers, and over-the-counter derivatives market. This need makes having a reliable LEI Register in India vital.

European Markets Infrastructure Regulation (EMIR) demands EU trade repositories reject trade reports that do not provide an LEI. Additionally, Markets in Financial Instruments Directive (MiFID II) and Markets in Financial Instruments (MiFIR) state that in-scope investment firms should not trade with market participants who do not have an LEI. Another requirement demands an LEI from any legal entity planning to exchange derivatives and securities in European financial markets.

The above facts make an LEI a requirement despite it not being compulsory. Legal Entity Identifier is vital when exchanging securities and derivatives. They include ETFs, Bonds, Stocks, Interest rate Swaps, and general Swaps. Therefore, you need a reputable LEI Register.

An LEI pricing

After understanding what an LEI is and its critical importance, the cost of getting one is a valid concern. Note that what you will pay to an LEI Register entirely depends on the individual pricing structure. The fee charged does not reflect a better code. The total price is a combination of 11 USD GLEIF’s annual fee and initial registration cost. The quoted 11 USD is an LEI license fee.

LEI subscription

The standard subscription in this space is one year. You are required to renew this code every year after expiry. There is also a provision to have a multi-year subscription. This option allows you to save some money because it is cheaper. It also saves you the inconvenience of annual renewal. Lastly, you can opt for a monthly plan.

How to get an LEI

An LEI Registration agent and Local Operating Unit (LOU) are two options that can help you get an LEI. A convenient and simplified way to register this code is using an LEI Register. This convenience eliminates the need to create an account before getting this code. Filling the LEI registration form is possible via company data autofill alternative or fill manually.

Local Operating Unit (LOU) works with local registration agents who help legal entities get LEI codes.

The third method of getting this financial code is through the LEI Lookup website. The website is an LEI Search tool that helps you renew or register your codes.

You need a validated Letter of Authorization if you plan to manage LEI codes for other entities. The authorization allows a private individual or an entity to help other financial institutions to manage their LEI.

How do you make payments?

After settling on your registration entity, you have to get a secure payment channel. LEI Register accepts a variety of payment modes. Razorpay, Bank transfer, Netbanking, and Credit card. Encouragingly, all major credit cards are also accepted. You can use your MAESTRO), MASTERCARD, AMEX, and VISA.

LEI renewal

There is a provision for annual renewal. The Legal Entity Identifier renewal helps entities do data verification to increase the quality. Failure to renew on time will make your code status lapse in the GLEIF database. This failure messes with your corporate branding and might be the reason you will be blocked from future financial reporting or prevent you from making an important transaction.

Renewing is an easy process compared to changing your service provider. The change might take as many days as seven. You have the freedom to change your service provider if you are not happy with the data quality, fees, or poor service. During this process, the code does not change.

The renewal price is the same as the registration fee. You are encouraged to use a multi-year registration to avoid an annual renewal headache.

Validity confirmation

LEI Register provides a search space, which allows you to validate the code you get. As you continue investing in authenticity and credibility, confirm what you get. Just type the code or company name in the search section. You will be able to see the registration date and scheduled renewal date.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes