A Legal Entity Identifier (LEI) is an exclusive identifier assigned to bodies that engage in financial transactions. It is a 20-character alphanumeric code that acts as a standardized way to identify legal entities participating in financial transactions globally. Its evolution started in response to the 2008 financial crisis, which discovered challenges in identifying and tracking entities involved in global financial markets. The Legal entity identifier system officially took shape in 2011 when the Global Legal Entity Identifier Foundation (GLEIF) was established to manage its implementation.
LEIs are used to increase transparency in financial markets and to help regulators and businesses better understand the connections and relationships between entities. They are particularly important for regulatory reporting and conformity purposes. LEIs are delivered by Local Operating Units (LOUs), which are organizations authorized by the Global Legal Entity Identifier Foundation (GLEIF), the body responsible for managing the global LEI system.
The LEI consists of information about the legal entity, including its name, registration details, and the country in which it is located. This standardized identification system helps avoid confusion and reduces risks associated with entity identification, ultimately improving the overall efficiency and reliability of financial transactions. LEIs are commonly used in different financial instruments, to enhance the transparency and stability of financial markets.
Here are some reasons why Legal Entity Identifiers are important:
Global Standardization: Legal entity identifiers provide a standardized and globally recognized way of identifying legal bodies involved in financial transactions. This helps in improving consistency and transparency in the global financial system.
Risk Management: Legal entity identifiers play an important role in risk management by facilitating the identification and tracking of legal entities engaged in financial transactions. This helps financial institutions and regulators determine and manage risks more effectively.
Regulatory Reporting: Many regulatory authorities around the world require the use of Legal entity identifiers in various reporting and regulatory conforming processes. For example, LEIs are often a compulsory component in reporting for derivative transactions under regulations such as the European Market Infrastructure Regulation (EMIR) and the Dodd-Frank Act in the United States.
In January 2022, the Legal Entity Identifier (LEI) code is not compulsory for all entities in India. While some countries may have regulatory requirements for certain entities to obtain an LEI, this may not be the case for every jurisdiction.
In India, the need for obtaining an LEI may vary depending on the type of financial transactions and the regulatory groundwork. Financial regulators, such as the Reserve Bank of India (RBI), may introduce or mandate LEI requirements for specific entities engaged in financial markets.
It’s important to check with the relevant regulatory authorities in India to get the most up-to-date information on whether obtaining an LEI is compulsory for your specific situation and industry. Regulations can change, so staying updated or informed about any changes is crucial.
LEI Code Structure
LEI Code consists of 20 characters which is regulated with ISO certificate 17442 by the International Organization for Standardization (ISO).
The first 4 characters – identify the Local Operating Unit (LOU) that issued the LEI
Characters 5 and 6 will always have 0 value.
Characters 7 to 18 have different values for each entity.
Characters 19 and 20 are digits for verification purposes.
Documents needed to obtain LEI (Legal Entity Identifier) Code
- PAN card proof
- GST certificate
- IEC Document
- Incorporation certificate
- Audited financial statements
- General board resolution or General power of attorney
Take the Next Step with PWIP:
For complete comprehensive guidance on LEI registration and to streamline the entire process, we encourage you to contact PWIP. Our team of experts is dedicated to providing complete assistance and ensuring that your organization obtains its Legal Entity Identifier without unnecessary complications.