What is LEI code?

As mentioned, A Legal Entity Identifier (LEI) is a distinct 20-digit alphanumeric code assigned to registered legal entities globally. This code enhances market transparency by facilitating the straightforward identification of entities involved in financial transactions. It is important to note that the LEI differs from local registration numbers or CINs provided by regional regulatory bodies.

LEI adheres to a standardised universal format recognised worldwide. This code adheres to the ISO 17442 standard developed by the International Organization for Standardization (ISO).

An LEI code can be obtained from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), which oversees the implementation and use of LEIs worldwide. In India, the Legal Entity Identifier India Ltd. (LEIL) serves as an official issuer recognised by the Reserve Bank of India (RBI).

Structure of an LEI Code

The structure of a Legal Entity Identifier Code, which is standardised under ISO 17442, comprises a 20-character alphanumeric sequence. Here is a LEI code example:

8 9 4 5 0 0 2 7 A K 4 L S O G X G Y 1 8

The structure of the LEI code is as follows:

• LOU identification code: Always 00
• Unique identifier: Characters 7-18 are unique to each entity and differ from one LEI to another.
• Control numbers: Characters 19-20 are check digits used for verification purposes.

Purpose of LEI Code

The primary purpose of an LEI - Legal Entity Identifier code is to enhance transparency and improve risk management in the global financial system. By providing a unique identifier for each legal entity that engages in financial transactions, the LEI Code helps to ensure that entities can be easily and distinctly identified worldwide, facilitating more accurate and efficient tracking of financial transactions.

LEI Code Applicability

Here's a breakdown of the entities required to have an LEI:

• Financial Institutions: Banks, insurance companies, and non-banking financial companies must have an LEI to facilitate the monitoring and regulation of financial transactions.
• Stock Market Participants: Entities listed on stock exchanges or those participating in the depository system need an LEI, as mandated by the Securities and Exchange Board of India (SEBI).
• Derivatives and Forex Markets: Participants in over-the-counter derivatives and foreign exchange markets are required to possess an LEI to help track transactions and manage counterparty risk.
• High-Value Transaction Entities: Any legal entity involved in transactions exceeding Rs.50 crore through systems like the Real Time Gross Settlement (RTGS) must have an LEI.
• Large Borrowers: Entities with fund-based or non-fund-based exposures of Rs.5 crore or more, as well as corporations with financial exposures of Rs.50 crore or more sourced from banks, UCBs, NBFCs, and AIFIs, are required to obtain an LEI.
• Public Securities Transactions: Issuers, guarantors, borrowers, or security providers dealing with securities issued to the public, listed on a stock exchange, or included in the depository system must secure an LEI.

Importance of LEI Code

The importance of a Legal Entity Identifier (LEI) code lies in its ability to enhance transparency and security within the global financial system. Here are the key reasons why LEI codes are crucial:

• Improved Transparency: LEIs clearly identify legal entities engaged in financial transactions worldwide, reducing the ambiguity that can arise from similar names or different business units within the same company.
• Risk Management: By providing precise and accessible data about entities, LEIs help financial institutions and regulators manage counterparty and credit risks more effectively.
• Regulatory Compliance: Many regulatory frameworks require LEIs for reporting and compliance purposes. Entities without an LEI may face restrictions or be unable to participate in certain financial transactions.
• Operational Efficiency: LEIs simplify various operational processes by providing each entity with a standardised, universal identifier. This can streamline transactions, reporting, and record-keeping.
• Fraud Prevention: With LEIs, the financial sector can more easily trace transactions back to the entities involved, helping to detect and prevent fraudulent activities.
• Market Integrity: LEIs contribute to the integrity of financial markets by ensuring that all participants are clearly and consistently identified, making it easier to assess and control systemic risk.

LEI Code Validity

LEI codes are valid for one year from the date of issuance and require annual renewal to ensure the information they contain remains current and accurate. For example, an LEI issued on February 1, 2023, must be renewed by February 1, 2024.

LEI Code Renewal

An LEI code requires annual renewal to remain active. Failure to renew by the deadline results in the LEI becoming inactive. Regular renewals are essential to maintain the accuracy and relevance of the data within the Global LEI Pool.

LEI Register provides options for renewing LEIs for 1, 3, or 5 years. Regardless of the selected duration, you will receive a reminder 59 days before your current registration expires, ensuring you have ample time to renew your LEI. For multiyear renewals, the LEI Register will also update your information using official company registries to keep all data current.

Documents Required for LEI Code

Here are the documents required for obtaining an LEI, as specified by LEIL:

• Audited Financial Statements: These are mandatory and provide a detailed account of the financial health and transactions of the entity.
• Letter of Authority: This must be in the format specified by LEIL or a General Board Resolution authorising the application for an LEI.
• Documents for Holding and Ultimate Parent Companies: For entities that are holding companies or ultimate parents, audited financial statements are needed. Alternatively, an Auditor’s Certificate in the format specified by LEIL can be submitted to demonstrate compliance and financial integrity.

What Information is Identifiable with an LEI Code?

An LEI (Legal Entity Identifier) code provides publicly accessible data that enhances transparency in the global marketplace by offering detailed information about legal entities. The code includes:

Level 1 Data:

This covers basic entity information, such as the legal name, the registry where the entity is registered, the registration number, legal jurisdiction, legal form, entity status, and contact details, including the legal and headquarters addresses. This data helps clarify the identity of the entity involved in a transaction.

Level 2 Data:

This pertains to the entity's ownership structure, providing insights into who owns the legal entity and which entities it owns. This data is essential for understanding corporate relationships and ownership hierarchies.

According to the Global Legal Entity Identifier Foundation (GLEIF), an LEI is designed to answer three pivotal questions in corporate financial transactions clearly:

• Who is who?
• Who owns whom?
• Who owns what?

How to Get LEI Code?

LEI Code Registration code involves a series of structured steps through the Legal Entity Identifier India Limited (LEIL). Here is a brief guide on how to get your LEI code:

Step 1: Prepare Required Documents

Begin by downloading the necessary document list and formats for your legal entity type from the LEIL website, specifically from the "Downloads ? Legal Docs Download" tab. This will ensure that you gather all required documents before starting the application process.

Step 2: Self-Registration on the Online Portal

Visit LEIL's website and create an account using your official email address. Only authorised officials, defined as those empowered through a Letter of Authority or General Board Resolution, can submit applications. During registration, you'll fill out forms that include:

• Company Information
• Direct Parent Information (if applicable)
• Ultimate Parent Information (if applicable)

Step 3: Payment and Document Submission

After entering all necessary details, proceed to the payment page. You can choose between net banking, credit/debit card, or demand draft. Upon payment, you'll receive a reference number via email and SMS, which will be used for further communications and document submissions. Ensure all submitted documents mention this reference number, including the demand draft (if used).

Step 4: Verification Process

LEIL will verify the submitted documents and payment. If additional documents are needed or adjustments to the online forms are required, LEIL will notify you. You can make any necessary changes by logging back into the portal and editing your details.

Step 5: LEI Code Issuance

Once verification is successfully completed, LEIL will issue the LEI number. This number, along with a digitally signed invoice, will be emailed to you. The LEI number should be shared with all your banks and financial institutions where necessary.

LEI Code Search

To conduct an LEI Code search, the most reliable method is to use the resources provided by the Local Operating Unit (LOU) responsible for issuing LEI codes in your specific region or country. For example:

• In India, you can find an entity's LEI number by using the 'Search' feature on the Legal Entity Identifier India Limited (LEIL) website.
• Globally: The best resource for LEI Code search for entities worldwide is the 'Global LEI Index' hosted by the Global Legal Entity Identifier Foundation (GLEIF).

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