Add transparency and trust with an LEI

Every business needs transparency to gain customer trust. One of the best ways to achieve these two fundamentals is to obtain a Legal Entity Identifier (LEI). The LEI is a 20-character alphanumeric code based on the ISO 17442 standard. This standard was developed by the International Organization for Standardization (ISO) to provide key information about financial institutions. This standardization is a mandatory requirement for all companies involved in financial transactions.

Classification of information

Note that each LEI generated from a LEI register has data structured in two levels.

First level

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

level two

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

What is GLEIF?

The supranational non-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 the Legal Entity Identifier (LEI). GLEIF’s oversight role falls under the LEI Regulatory Oversight Committee. This committee is made up of public authorities from around the world who intend to increase the transparency of global financial markets. This vital financial organization is headquartered in Basel, Switzerland, and has helped increase financial integrity by making important business information public.

Why do you need an LEI?

The main driver for the introduction of the LEI was to improve financial transparency. It is a mechanism that aims to provide a global standardized framework for the identification of legal entities. Unfortunately, the jurisdiction governing the use of the LEI is not applied uniformly around the world, resulting in low adoption. The Legal Entity Identifier is required in the European Union, Canada, the United States and India, where the Reserve Bank of India (RBI) must use it for foreign exchange transactions, large corporate borrowers and the over-the-counter derivatives market. This need makes the presence of a reliable LEI registry in India vital.

The European Market Infrastructure Regulation (EMIR) requires EU trade repositories to reject trade reports that do not provide an LEI. In addition, the Markets in Financial Instruments Directive (MiFID II) and Markets in Financial Instruments Directive (MiFIR) stipulate that relevant investment firms must not deal with market participants who do not have an LEI. Another requirement requires an LEI from any legal entity planning to trade derivatives and securities on European financial markets.

The facts above make an LEI a requirement although it is not mandatory. The Legal Entity Identifier is essential when trading securities and derivatives. They include ETFs, bonds, stocks, interest rate swaps and general swaps. Therefore, you need a reputable LEI registry.

LEI pricing

After understanding what an LEI is and its critical importance, the cost of obtaining an LEI is a valid concern. Note that what you will pay to an LEI registry depends entirely on the individual fee structure. Fees charged do not reflect a better code. The total price is a combination of the $11 annual GLEIF membership fee and the initial registration cost. The $11 shown is an LEI license fee.

LEI subscription

The standard subscription in this space is for one year. You must renew this code every year after expiration. It is also planned to have a multi-year subscription. This option allows you to save money because it is cheaper. It also saves you the inconvenience of annual renewal. Finally, you can opt for a monthly plan.

How to get an LEI

An LEI registrar and Local Operating Unit (LOU) are two options that can help you obtain an LEI. A convenient and simplified way to register this code is to use an LEI register. This convenience eliminates the need to create an account before obtaining this code. Filling in the LEI registration form is possible via an alternative of auto-filling company data or filling in manually.

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

The third way to get this financial code is to use the LEI Lookup website. The website is an LEI lookup 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. Authorization allows an individual or entity to assist other financial institutions in managing their LEI.

How do you make payments?

After defining your registration entity, you must obtain a secure payment channel. The LEI Registry accepts a variety of payment methods. 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 an annual renewal clause. Renewing the Legal Entity Identifier helps entities verify data to improve data quality. If you do not renew in time, your code status will expire in the GLEIF database. This failure damages your company’s brand image and could be the reason why you will be blocked from future financial reports or prevented from carrying out an important transaction.

Renewal is an easy process compared to changing service providers. The change can take up to seven days. You have the freedom to switch service providers if you are unhappy with data quality, charges, or poor service. During this process, the code does not change.

The renewal price is the same as the registration fee. We encourage you to use a multi-year registration to avoid an annual renewal headache.

Certificate of validity

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

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

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