All you need to know: what is LEI code, who needs it, how to register LEI?

All you need to know: what is LEI code, who needs it, how to register LEI?

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What is LEI code?

The LEI code is a unique combination of numbers that helps identify companies in global financial markets. European Union (EU) countries have made the LEI code mandatory for companies that make transactions in the financial markets. The US, India and other countries have also made the LEI code mandatory for certain types of companies.

If you want to invest in your company or trade on the stock and bond markets or other financial markets, you must probably register the LEI code for your company.

Why is LEI code needed?

The LEI code system was created in 2011-2012 as a measure to help assess the risks in the global economy and also to assess the risk level of individual companies. Better risk measurement will help prevent financial crises such as the global recession of 2007-2008 and make financial markets more transparent to all parties.

The LEI code system was created by the G-20 Forum, which brings together finance ministers and central bankers from the world’s largest countries and the EU to address important issues in the global economy.

Before the LEI code, each country had its own system for measuring how many financial instruments different companies had. However, there was no common standard and the national systems were not compatible. As the world economy had become significantly more international, there was no overview of what was happening in the market overall. The need for a single system was recognized earlier, but it was hoped that it would be addressed by the private sector – but that did not happen.

After the financial collapse of 2007-2008, financial leaders of countries began to think how to prevent and better manage such crises. As one solution, the LEI code was created as an international standard for identifying companies in the financial markets. Since the establishment of the LEI system, many countries have introduced it.

For whom is LEI code mandatory?

The LEI code is mandatory in many countries for companies that own, want to buy or trade financial instruments (shares, bonds, etc.). The LEI code is necessary for the company and not for the individual. The exact requirements vary from country to country.

The EU requires investment firms and their clients to have a LEI code. EU financial companies are required to refuse financial transactions if their customers do not have a LEI code.

Most LEI codes have been issued to EU countries, a quarter of LEI codes to the United States, but also to Great Britain, Canada, the Cayman Islands, Australia and Japan. LEI code breakdown by country:

  • United States – 24.9%
  • Italy – 9.6%
  • Germany – 9.4%
  • France – 6.3%
  • United Kingdom – 6.0%
  • Luxembourg – 4.5%
  • Canada – 4.3%
  • Spain – 3.9%
  • Netherlands – 3.9 %
  • Cayman Islands – 2.6%
  • Sweden – 2.2%
  • Ireland – 2.0%
  • Belgium – 1.8%
  • Poland – 1.7%
  • Denmark – 1.6%
  • Austria – 1.6%
  • Australia – 1.1%
  • Japan – 1.1%
  • other countries – 11.5%.

LEI code format

The LEI code, or legal entity identifier, consists of 20 numbers and letters and is unique to each organization. The LEI code is standardized with ISO certificate 17442.

LEI code format:

  • Numbers 1-4 identify the accredited issuer of the LEI code
  • Numbers 5-6 always have a value of 0
  • Numbers / letters 7-18 are unique to each legal entity
  • Numbers 19-29 are for verification of the entire LEI code sequence

What does LEI code mean?

The LEI code can be used to uniquely identify legal entities: its name, registry code, legislation where the company is registered, company status and LEI registration date. Contact information such as legal address and head office address can also be found in the LEI code.

And, of course, the LEI code can be used to check the data that helps the LEI code to fulfil its purpose – which companies own a particular company and which companies a particular company owns.

The LEI system can answer three important questions:

  • Who is who (company details)
  • Who owns whom (which company owns which company)
  • Who owns what (what financial instruments does the company own)

How to register LEI code? Who issues them?

To register a LEI code for your company, you must go to the service provider who issues the LEI code in your region.

The LEI code system is administered by an international non-profit organization called GLEIF (Global Legal Entity Identifier Foundation). The GLEIF was established by the FSB (Financial Stability Board) and approved by the G-20. GLEIF manages and supports a network of organizations issuing LEI codes. Only organizations accredited by GLEIF have the right to issue LEI codes. 

There are dozens of GLEIF-accredited LEI-issuing organizations. These organizations either sell LEI code registration and renewal services to end users directly or resell LEI codes to agent companies that provide these services to end users.

Price of LEI code

The price of using the LEI code can be in a very different price range. Prices can vary up to three times or more. The price depends on how the service provider has priced its services and what are their costs in marketing, registering and updating LEI codes.

Although one might think that the price of the LEI code is the best when buying directly from GLEIF accredited service providers, this is not always the case. The reason is that not all accredited service providers are focused on end users, but some are focused on wholesale LEI codes, and buying a single LEI is even more expensive than buying through an intermediary.

Each service provider has a region or countries for which companies they can issue a LEI code. Not all service providers can provide the LEI code for each region and this must be considered when choosing a service provider. However, since the LEI code is standard, LEI codes do not need to be registered with the service providers in your country, but you can choose between all the global service providers that have the right to issue the LEI code in your area.

How to choose a LEI provider?

As the LEI code is standardized, there is no difference between the LEI codes of different service providers. The main aspect according to which to choose a LEI code service provider is the price.

Is there anything else to consider besides price? Not really in most cases. However, some companies may have a more user-friendly LEI code registration form or renewal form, or a slightly faster LEI code issuance speed. Although registration is an activity that you only do once and renewal once a year. Some providers also advertise their customer support, but generally you don’t need customer support with such a simple process.

Price comparison of LEI providers

We have created a comparison table for comparing the prices of LEI codes. Choose the country where your company is registered, and you will see where it is most advantageous to register the LEI code.

The pricing is quite different between different service providers. Some providers have a very favourable price in the first year, but in the following years the price is significantly higher. In others, on the contrary, the price in the first year is more expensive and in the following years more favourable. It is important to look at the long-term price together. You probably don’t make the LEI code for just one year, but you trade or invest for many years. Therefore, it is worth comparing prices for a longer period, taking into account both the initial registration of the LEI code and the later price of renewing the LEI code.

In addition, some LEI code providers offer 3- or 5-year package prices. This way you can get the best price per year. At the same time, it is worth considering that the advance payment is also something that you could invest in the meantime and earn income from it. You can also prefer the flexibility of changing service provider or unsubscribing from the LEI code altogether.

What else to consider when comparing prices is that if you buy a LEI code in a different currency, there is also currency risk. For example, if you earn income in euros, but by buying the LEI code in US dollars, one moment the offer in dollars may be cheaper than alternative offers in euros, another time it’s the opposite. It may be more secure to purchase the LEI code in the same currency that you use otherwise.

How to renew LEI code?

As long as you have financial instruments, you need to update the LEI code regularly. This is done once a year or less if you purchased a package deal and paid for several years in advance.

Renewal of the LEI code is required by the international system in order to keep the data of the companies who use LEI codes up-to-date and accurate and to keep account of only those LEI codes that are in use.

Depending on the legislation and the company’s field of activity, the law may require you to have an active LEI code. The GLEIF database shows whether the company’s LEI code is lapsed or active. The lapsed LEI code cannot be used by financial companies for reporting. If an active LEI code required by law, but your LEI code has expired, your company’s financial transactions will be restricted, and fines may be imposed. Expired LEI code can be reactivated by renewing it.

Usually, your LEI code provider will send you a reminder that the LEI code is about to expire and, depending on the settings you have set, either the LEI code will be automatically updated and paid by your credit card or you will need to confirm the update separately.

You can also change service providers. To do this, you need to register your LEI code with the new service provider. It is worth changing the service provider, for example, if you pay too high a price for the LEI code. You can see if this is the case from the comparison table. Generally, switching is free.

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