What is an LEI Number?
The LEI number stands for a Legal Entity Identifier number. It is a unique code for identifying different entries while trading in the financial world in bonds, stocks, forex, futures, etc. Any deals that are finalized in the market have to connect from both sides with the help of a legal entity identifier code. Thus, an LEI number acts as a regulator to keep an eye on the financial markets and connect them with other companies. The accredited Global Legal Entity Identifier Foundation LOUs are responsible for issuing the LEI number. This implies that if a company does not have an LEI code registration number, it will no longer trade in the market.
Purpose of LEI Number
The Legal Entity Identifier was a worldwide need for the last few decades. An identifier like LEI was a desperate need of the hour as there has been an exponential increase in trade since the 1900s. To promote trade further through transparent transactions and increase trust between the two parties when they are borders apart, a unique identifier was required. But, unfortunately, there was no such unique identifier applied to different legal entities to various industries, companies, and governments for funding in the previous days. This is why there was a need for LEI numbers.
As per LEI ROC, the reason behind the launch of the LEI code registration number was to support the private sector in the longer run. The LEI number improves risk management, increases operational efficiency, accurate exposure calculations, and various other needs. It brings together all the information in a centralized platform which will provide vast amounts of high-quality and attainable data.
When the banks and the capital market went digital, there was again a need for the common identifier. A sudden chaotic situation existed where there was a dire need for an identifier in the financial and corporate world. Many companies were owned by some other companies that had other parent companies. There was massive chaos about who was the actual owner of the company and who the clients were dealing with. It became challenging to identify the real dealers in the market, which led to the biggest frauds and seamless travel of dirty money from here to there. To avoid chaos, an LEI identifier was badly needed!
Who needs an LEI?
The introduction of LEI code registration also enhanced onboarding new clients as the KYC practices still relied on old and outdated procedures. In addition, the registry information was quite difficult to access and required the collection of data in a single database. This lacked a trustworthy and reliable identifier as it was a costly and laborious task to take new clients onboard and confirm their identity.
In 2008, a market crash occurred, and a transparency issue happened in the markets as there was no identifier to identify the partners and companies in transactions. As a result, there were numerous crashes in the market and identification issues that were unaddressable. This led to a crack in the stock market; millions of funds remained unidentified and caused great confusion among companies. Moreover, due to no proper transparency measures, the banks and other financial institutions were in a state of vulnerability. This whole state of analysis in the G20 Summit in June 2011 led to the concept of LEI. the entire idea behind the summit was to develop a vast digital database consisting of all entities that are easily updated, accessed, and trusted.
How to get an LEI Code Registration Number?
Getting the LEI code registration is a simple and straightforward process. Everything is automated, fast, and reliable. The Global Legal Entity Identifier Foundation has created a straightforward LEI registration process, and it takes less than 5 minutes to register. Before registration, do an LEI lookup/search before you put an order to issue an LEI number. It can only be assigned to a single entity. All you have to do is follow the process as mentioned below:
- Select the package of your choice and make the payment using the available methods of payment.
- Look up your company in the global database.
- Receive the LEI code over your email and by the management platform you are using.
Who can get a Legal Entity Identifier?
Any actual entity which can be considered as legal is eligible for the Legal Entity Identifier. For example, an association, an Ltd company, a charity, a trust, or anything that is legally recognized by law as an organization can get an LEI code registration. The LEI codes are now mandatory for a legal entity involved in any operations in financial systems or are a part of financial transactions within the EU, US, or the UK. This reveals that if a company does not have an LEI code registration number, it will no longer trade in the market.
