About Legal Entity Identifier (LEI)
A Legal Entity Identifier (LEI) is an alphanumeric 20-character code that is used to identify different parties that are involved in financial transactions. The code is based on the ISO 17442 standard which is developed by the International Organization for Standardization (ISO). Most companies use an LEI code in order to reference important information from a company when it’s involved in a financial transaction.
A LEI number is a unique global identifier that enables businesses and regulators to identify parties that are involved in financial transactions. Since the code is used around the world and stored in the same LEI database, it’s often used to reference information internationally. This means that large international organisations such as banks will often have an LEI code that can be used to search for relevant information.
There are a number of companies that issue LEI codes around the world, but these companies also act as ways to interface with the global directory. However, every LEI number is accredited by the Global Legal Entity Identifier Foundation (GLEIF) before it is accepted into the system.
What is the GLEIF?
The Global Legal Entity Identifier Foundation (GLEIF) is a not-for-profit organisation that was created to support and implement the use of LEI codes. It was founded in June 2014 and its main duties involve overseeing implementations and registrations of LEI numbers. They host the main LEI database that contains all of the LEI codes and information related to them. The GLEIF is backed and overseen by the LEI Regulatory Oversight Committee and is headquartered in Basel, Switzerland.
What are Level 1 and Level 2 LEIs?
While an international bank typically has an LEI to reference their data, they will also have separate LEI numbers for entities that are a part of the larger organization. For example, it may have an LEI number for its legal entities that buy and sell stocks, or one for the branch that engages in financial market transactions.
To separate these entities, we refer to those LEI numbers as either Level 1 or Level 2 data.
According to the GLEIF, Level 1 data is used to answer the question “who is who”. For example, if you wanted to know the standard information of an organization before engaging in a financial transaction with them, you would search for the Level 1 data. This is essentially the same information that one could find on a business card. For example, it would show the official business name, its headquarters, address, and often the contact information as well.
On the other hand, Level 2 data is used to answer the question of “who owns whom”. The collection of Level 2 data started in 2017 and firms were required to provide details about their parental and ultimate owners. As per the example given with a bank, this could be a certain branch of an international bank listing information about its parental organisation. This allows people to see who the ultimate owner is. This can also be considered the highest legal entity.
In order for the GLEIF to maintain consistency when collecting Level 2 data, entity ownership is typically defined by an accounting basis. The ultimate owner should therefore be the highest legal entity that prepares financial statements and accounts which are typically consolidated into one report.
Why are LEIs needed?
The global LEI system was established as a means to better regulate, monitor and analyse threats to financial stability. This was mainly in response to the financial crisis in 2008 after the collapse of Lehman Brothers Holdings Inc. With a global LEI system in place, it offered better transparency when dealing with large financial transactions, especially if it was across multiple countries. Since there are currently multiple systems that mimic the purpose of an LEI, this global system hopes to consolidate all of that information into a single database that accounts for all of the legal entities in the world.
Today, companies use LEI codes to help identify legal entities across the world. If a company is unsure about engaging in a financial transaction with another company, then they can use LEI numbers to improve transparency and better understand where the company is from, who their parent companies are, and ultimately control risks with more safety.
Who needs an LEI?
Any legal entity may fill in an LEI application and request an unique legal entity identifier. Anything that is recognised by law as an organisation can request one. This means the vast majority of companies in the world are able to register for a global identifier.
As a general rule of thumb, here are the most common entities that would require an LEI:
- Any registered company or a subsidiary of another company
- Government bureaus
- Financial intermediaries
- International banks
- Investment companies
- Branch offices
- Hedge funds and mutual funds
- Any entity listed on a stock exchange
- Commodity traders
- Nonprofit organisations
- Nongovernmental organisations
- Registered sole proprietors
While this is a fairly exhaustive list of entities that would require an LEI, it doesn’t cover everything and there are some cases where these entities may not require one.
In some cases, legal entities may actually be required to have an LEI number. This is usually the case in many EU-based and international regulations. The purpose of this requirement is to enhance transparency when engaging in certain transactions and financial reporting tasks. In most cases, a company will likely register for an LEI code if they are involved in financial transactions. Currently, there are several mandates across the world that state if an entity does not have an legal entity identifier, it cannot be allowed to trade.
The global LEI system may also be used by regulators in their reports. This is an easy and reliable way to identify both parties in a transaction, once again leading to more transparency. There may also be cases where an individual can actually request an LEI too. However, this only occurs when an individual acts in a business capacity. If you’re unsure if this applies to you, then you may want to check this statement on Individuals Acting in a Business Capacity in relation to the global LEI system.
How much does an LEI cost?
The cost of applying for a LEI is down to the issuer’s discretion. As such, you may notice that different companies can offer to register an LEI for you at different prices, and they may offer discounts depending on how long you register the LEI for. LEI Lookup offers a low cost LEI registration fee, starting from 50€ per year.
The cost of a LEI includes the mandatory GLEIF fee, initial application cost and typically a renewal fee. Registrants can choose the period of their LEI registration.
One-year LEI registrations
The most typical choice for legal entities is to register for just one year. After registering with this process, you’ll receive your LEI number and can offer it to other legal entities when engaging in financial transactions. Alternatively, people will be able to search for your company name to find your LEI code and the information associated with it.
The price for a one-year LEI registration is 69€ with us.
Multi-year LEI registrations
We also offer multi-year registrations for Legal Entity Identifiers. This means lower prices per year for subsequent renewals, offering great savings if you plan to make use of your LEI code for a longer period of time. For multiple years, please check our pricing list for more details.
What happens to an expired LEI number?
If an LEI is not renewed within the one-year time period, the legal entity’s registration status will turn to Lapsed. In this situation, you will not be able to participate in certain regulatory reporting or specific financial transactions if it was to require a valid LEI. However, your information will still be on the database, but it will be outdated and you won’t be able to edit it until you renew your LEI code.
When your LEI code has expired, it’s important to renew it to switch the status from Lapsed back to Issued. You can choose any service provider to renew your LEI number and it doesn’t need to be with the same company. This means you can choose to apply for an LEI with one service provider, then choose another to renew it if you can find a cheaper price or a better service.
Renewing an LEI
Since an LEI is only valid for one year, it does mean that you’ll need to renew it manually. The exception to this is if you purchase a multi-year LEI renewal service. If you purchase an LEI renewal for multiple years, then this process is automatically done for you by the service provider and you personally don’t need to do anything.
However, if you do neglect to renew your LEI, then you’ll need to apply for a renewal. Thankfully, this process is often much quicker because your information is saved on the system. As soon as the payment is made and the application is submitted, you can typically expect your legal entity to switch back to the “Issued” status.
What is the GLEIF fee?
In order to apply for an LEI, you need to pay an LEI license fee directly to GLEIF. The GLEIF uses this fee to cover costs related to the system and ensures that it can stay open and free to use for everyone. Our prices already include the GLEIF fee and you do not need to worry about this mandatory payment.
Obtaining an LEI code
An LEI is obtained from service providers known as a Local Operating Units (LOUs) or from LEI Registration Agents, such as ourselves. Companies like us act as a means to interface with the GLEIF. This means that any new registrations or submitted changes typically go through us. We then communicate with the GLEIF to submit new applications and make changes to existing data.
As a service provider that helps legal entities register for an LEI, our goal is to make the process as smooth and seamless as possible. Our goal is to make it simple for a registrant to apply for an LEI by simply requesting the right information and documents, then passing the task to our specialists who will complete the process and return with a valid LEI number for your legal entity.
How long does it take to apply for an LEI?
Once an application has been submitted with all of the right information, you can typically expect to receive an LEI within a few hours.
Searching for an LEI number
One of the benefits of having a freely accessible global LEI system is that anyone can search for legal entities that are registered in the database. To do this, you can enter a search term in our LEI search tool.
Using the LEI search feature
The LEI search feature is extremely easy to use and is functional even if you don’t know the exact LEI code of another legal entity. For example, you can enter a partial LEI code and the search feature will automatically fill out potential results. Alternatively, you can enter the legal entity’s name and receive multiple results. This also has an autofill function that makes it simple for you to find the right entity that you’re looking for.
However, it’s usually best if you have the full LEI number as there could be a situation where multiple companies have registered similar names with different capitalisation. This makes it difficult to tell which legal entity you’re looking for. However, there are a couple of ways to differentiate different legal entities to narrow your search.
Searching via country
This is a helpful option if you know what country the legal entity is based in. Searches can be sorted by country, making it easy to categorise results and search for the entity that you’re looking for.
Searching via entity status
You can also filter results by the entity status. This usually means an “Active” entity or “Inactive” entity and is used to describe their current status.
Searching via registration status
It might also be helpful to search via the registration status. This differs from the entity status because an entity can still be active, yet have a lapsed registration status because they neglected to renew their LEI. The most common registration statuses are:
- ANNULLED - This means that the LEI was issued due to an error or if there was a registration problem.
- DUPLICATE - This means that there was a duplicate entry in the LEI registry, meaning it was removed to make way for the other one.
- LAPSED - This means that the entity once had a valid LEI code but has since expired and is waiting for renewal.
- ISSUED - This means that the entity currently has an active LEI that is valid.
- RETIRED - This means the entity has since stopped operating.
- MERGED - This means the entity has merged with another entity and thus no longer exists.
- PENDING_ARCHIVAL - This means the entity is in the process of being transferred to a different managing LOU.
- PENDING_TRANSFER - This means the entity has requested to be transferred to a different LOU.
If you believe that the status of your registration has an error, then you may request for your LOU to assist you by contacting them.
Information shown on an LEI entry
Once you’ve found the LEI entry, you’ll be presented with a wealth of information. For example, you’ll see the basic Level 1 data that includes the entity’s legal name, where their registered address is, their authority entity ID, legal jurisdiction, and so on.
Further down, you’ll find multiple addresses and even details of their registration. This can include when they first registered for an LEI and also when their last update or renewal was. It can also show the managing LOU that is in charge of their LEI.
Below that, you’ll also see the entity’s parent entities, children entities, and ultimate children. This is typically empty for individual entities but may contain many different entities if they are part of a large branch or organization. You can also find a separate tab that displays a log of changes made to the LEI entry. This can be useful for examining changes to the entity information and referencing the dates those changes occurred.
LEI Lookup has an LEI search tool that is free for anyone to use.