Given the difficulties during the Lehman Brothers crisis to know and properly assess the inter dependencies existing in global financial markets, the G20 launched the LEI regulatory project in order to provide these markets with greater transparency. The ultimate goal is to improve the evaluation and management of systemic risk, by offering a more accurate and complete view of the risks assumed by each participant. Likewise, the LEI will contribute to improve risk management by the entities themselves.
What is the LEI code?
The LEI code is a 20-character alphanumeric global code designed in particular for those organizations that are part of a financial contract as it uniquely identifies legal entities. It is unique, permanent, consistent and portable by each entity.
Each LEI Record contains the following information about the entity:
- Official name
- Legal address
- Royal domicile of the entity’s headquarters
- Country / region of legal jurisdiction
- Social form
- Number in the Registry of entities and name of the Registry
- LEI code of the LOU responsible for the entity’s LEI Registry
- LEI initial registration date
- Date of last data update
- Date and reason for termination of the LEI
- Who must have the LEI?
All legal entities that participate in financial markets must provide their LEI to investment services companies and credit institutions that execute transactions on financial instruments so that they can identify them before executing operations. If the client does not provide his LEI, the instructed operations cannot be executed.
At this time, all companies that participate in the derivatives trade need an LEI. The first recipients are financial institutions:
- Banks and financial companies
- Entities that issue shares, debt or securities for other capital structures
- Publicly traded entities
- Entities that trade stocks or debt
- Means of investment, including investment funds, pension funds and alternative investment means constituted as corporate entities or collective investment agreements (umbrella funds, hedge funds, venture capital, etc.)
- Entities under the supervision of a financial regulator and its affiliates, subsidiaries and portfolio companies
- Counterparties for financial transactions
Who is involved in the LEI system?
The Global LEI System (GLEIS) is an international system with a federal organization that is guided by the Global LEI Foundation (GLEIF), created in June 2014 as a GLEIS administrative center.
Global Legal Entity Identifier Foundation (GLEIF): a non-profit foundation designated as the Central Operating Unit (COU) and upon which the responsibility of managing the system falls. It is responsible for ensuring the application of uniform operating standards, the implementation and use of LEI in line with the agreed principles and for promoting its progressive adoption in the market.
Regulatory Oversight Committee (ROC): is responsible for monitoring the system.
Central Operating Unit (COU): manages the system under the supervision of the ROC and is responsible for the application of uniform standards worldwide and for coordinating and supervising the actions of LOUs and their interrelations.
Local Operating Units (LOU): they are public entities.
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The agent offers 3 different services; basic, pro and enterprise. Ultimately, the LEI code is all about preparing your company for modern commerce.