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Legal Entity Identifier: A Code for Businesses

by / ⠀Entrepreneurship Startup Advice / January 6, 2022
Any company that participates in financial transactions for buying stocks, bonds, or other securities needs a legal entity identifier or LEI.

LEI is an acronym for Legal Entity Identifier. All companies that make financial transactions such as trading and investing in the stock market must have an LEI code.

Some argue that an LEI is only needed at the time of making a transaction. However, we need to understand that LEI is more of an international level recognition. The LEI is a far more evolved and structural system that makes identification work globally. An LEI serves as the identification for every company or legal entity that’s needed on the global level.

Accordingly, any company that participates in financial transactions for buying stocks, bonds, or other securities, needs an LEI. One can acquire an LEI Register UK with minimum hassle and cost-efficiency.

Understanding an LEI Number

An LEI is a unique, 20-digit alphanumeric code that gives identities to businesses and organizations. This is especially the case when these companies are in the financial market.

Since LEI works on a global level, it makes the data easy to access and transparent. Additionally, it’s a time-saving approach. It is far more useful than any other country-specific way of identification.

The following organizations require businesses to obtain an LEI number.

Financial Institutions

An LEI number is only needed by legal entities such as companies and corporations. These companies typically participate in financial trading and investment. Individual traders do not need the LEI. They can invest or trade without any such identification.

Investment Firms and Their Clients (EU)

In European countries, the LEI is mandatory. Organizations that serve as investment firms, along with their clients, need the LEI. This has been the case since January 2018. At that time, MiFID II/MiFiR regulations were put into effect.

Investment or trade between an EU firm and its clients risks refusal if both parties don’t have the LEI. Thus an organization should always check if they fall under the MiFID II/MiFiR requirements and obtain the LEI accordingly.

Government Agencies (USA)

Other than EU corporations, many U.S. agencies also require the LEI number. Many government financial agencies need the LEI to operate smoothly and successfully. Additionally, the Office of Financial Research has made obtaining an LEI mandatory. Some additional agencies include the Federal Reserve System (FED), the Commodity Futures Trading Commission (CFTC ), and the National Association of Insurance Commissioners (NAIC). 

RTOs and ISOs

Finally, the U.S. government has made it mandatory for Regional Transmission Organizations and Independent System Operators to obtain an LEI.

​Where Do LEI Numbers Come From?

An entity was created by the Financial Stability Board after the LEI was made mandatory. The purpose of this was to help companies obtain their code. We now know this entity as the Global Legal Entity Identifier Foundation (GLEIF). ​GLEIF has been monitoring financial institutions and aiding them in obtaining the LEI since that time.

GLEIF generally appoints the Local Operating Units (LOUs), which work as the only institutions to issue the LEI. These LOUs work with many agencies for making LEI registration possible. These agents facilitate different institutions and companies with their LEI numbers. This way, the legal entities obtain the LEI within minimum time and at competitive prices since there are many agencies and hence there is competition among them.

Why Should You Obtain an LEI?

By having the LEI number, organizations give themselves a global identity which makes the data easier to locate in real-time. LEI also provides businesses an additional level of security as it gives the proper identification of the client or agency your firm is dealing with.

Having an LEI number ensures that your business follows all the international regulations needed for trading by the legal entities.

How to Get a Legal Entity Identifier?

Now you know what an LEI is and how useful it is for financial institutions. However, you might wonder how to obtain an LEI successfully.

Many agencies offer LEI services. One such company is LEI Register. They first opened their firm in 2018, and since then, have been assisting firms and agencies in getting their LEI codes. Their primary goal is to provide smooth services plus LEI numbers within a budget.

Opt for the LEI number today and give your business the new and global identity it deserves!

About The Author

Becca Williams

Becca Williams is the editor of SmallBizTechnology.com.

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