Legal Entity Identifier (LEI) came in as a worldwide endeavor aimed at addressing the lack of a harmonised method of identifying legal entities involved in financial transactions. The global financial crisis of 2008 exposed major vulnerabilities in financial information disclosure and regulators’ inability to recognise system risks because of dispersed and incongruent information on market participants. Here, in its 2011 meeting in Cannes, the G20 supported the creation of a global system for LEIs to increase transparency, traceability, and accountability in financial markets.
The Financial Stability Board (FSB), in collaboration with global regulators and financial institutions, was tasked with creating the LEI framework. The LEI system was initiated in 2012 under the direction of the FSB, and the Global Legal Entity Identifier Foundation (GLEIF) was set up in 2014 to manage its implementation and operational integrity. The LEI system follows the ISO 17442 standard, which offers a uniform framework for the identification of legal entities globally.
The LEI system is underpinned by Local Operating Units (LOUs), which are empowered to issue and host LEIs within local jurisdictions. Many nations, such as India, have increasingly implemented the LEI system across the banking, securities, and insurance industries, thus making it a building block of financial stability worldwide and regulatory compliance.
Legal Entity Identifier
The Legal Entity Identifier (LEI) is a 20-character alphanumeric identification code that is intended to uniquely identify the legal entities conducting financial transactions on a worldwide basis. This standardised identification is intended to contribute to financial system transparency through the provision of correct, consistent, and up-to-date information regarding legally distinct firms.
LEI codes are allocated to companies, banks, mutual funds, insurance companies, and government institutions in line with the ISO 17442 standard. A single LEI record contains crucial reference information regarding the entity, e.g., its official name, registration number, legal form, ownership information, and headquarters address. Such information is stored in an open global LEI database that is updated on a regular basis.
The idea of the LEI came about as a reaction to the 2008 financial crisis, which brought to the fore the absence of a unified approach to identifying counterparties in financial transactions. The G20 and the Financial Stability Board (FSB) pushed for the introduction of an international LEI system to reduce financial risk, increase transparency, and heighten regulatory control.
The Global Legal Entity Identifier Foundation (GLEIF) is in charge of the global LEI framework, with Local Operating Units (LOUs) in different jurisdictions being responsible for issuing and keeping LEIs. In India, LEIs are issued by Legal Entity Identifier India Ltd. (LEIL), a fully owned subsidiary of the Clearing Corporation of India Ltd.
Today, the LEI is required in some financial activities such as transactions involving derivatives, large borrowings by corporations, and bond market investments. It is a key instrument used for anti-fraud purposes, enhancing compliance, and promoting safer and more efficient financial markets.
Documentation Required to Obtain the LEI Code
In order to facilitate the quick processing and issuing of the Legal Entity Identifier (LEI) that is valid for one year and must be renewed every year, there is a need to submit complete and accurate documentation. A legal entity has to submit special proof that authenticates its identity, legal status, and presence in operations to obtain an LEI. These papers allow the Local Operating Unit (LOU) or a registered issuer, like Legal Entity Identifier India Ltd. (LEIL), to verify the entity’s data before providing the LEI.
1. Certificate of Incorporation or Registration
- Provided by the concerned government agency (e.g., Registrar of Companies, India).
- Verifies the existence of the entity under the law, name, and incorporation date.
2. PAN Card (For Indian Entities):
- Mandatory for all entities with operations in India.
- Confirms the entity’s legal name and tax registration.
3. Memorandum and Articles of Association/Partnership Deed/Trust Deed
- Subject to the legal structure of the entity, companies are required to file the Memorandum of Association (MOA) and Articles of Association (AOA).
- Partnership requires submitting a partnership document.
- Trust requires filing a trust deed or other legal document.
- Verifies the nature, structure, and rules of the entity.
4. Proof of Registered Office Address
- Utility bill, leasing arrangement, or government document that has the entity’s official address.
- Must be new (last 3 months).
5. Board Resolution / Authorisation Letter
- Directs a specific person (e.g., director, partner, trustee) to apply and administer the LEI on behalf of the entity.
- Must be signed and stamped on official letterhead.
6. Identity and Address Proof of the Authorised Signatory
Acceptable forms include a PAN card, Aadhaar card, passport, or other government-issued identification. A utility bill or bank statement can serve as address proof (not older than 3 months).
7. Audited Financial Statements or Declaration of Ownership
- Required for Level 2 data (i.e., information on the parent and ultimate parent entity).
- Helps establish direct and ultimate ownership relationships, if applicable.
8. LEI Application Form
- Completed and signed by the authorised representative.
- Contemplate the declaration of information accuracy provided.
Notes:
- Certain LOUs can perform further verification or ask for additional documentation in case of ownership information or legal status ambiguity.
- Any documents submitted should be in the country’s official language or translated into English.
How to Obtain the Legal Entity Identifier?
Obtaining a Legal Entity Identifier (LEI) is an organised and regulated process that ensures the applicant is a legally admitted business entity involved in financial markets. The process is performed by Local Operating Units (LOUs) who are accredited by the Global Legal Entity Identifier Foundation (GLEIF) to delegate LEIs. In India, the nominated LOU is Legal Entity Identifier India Ltd. (LEIL), which is a subsidiary of the Clearing Corporation of India Ltd.
1. Determine Eligibility
The LEI can be obtained by any legal entity that is
- involved in financial transactions, which include derivatives, bonds, and securities
- duly registered under accepted laws, like the Companies Act, LLP Act, Partnership Act, and Trust Act.
- possess an active Permanent Account Number (PAN) in India (for local entities).
Eligible parties include private and public companies, limited liability partnerships, trusts, societies, and associations. Government bodies and autonomous institutions • Banks, NBFCs, insurance companies, Mutual funds and other regulated market players.
2. Choose a LOU or Registration Agent
Organisations need to apply through an LOU (for example, LEIL in India). The LOU’s Registration Agent may help with document preparation and submission of the application. To register, go to the website of the selected LOU.
3. Fill in the LEI Application Form
The applicants are required to include the legal name of the entity (as mentioned in the registration documents) when filling out the online LEI registration form, registered office address, operating address (if any), incorporation date and place, business registration number (for example, CIN, LLPIN, Registration Number), PAN (compulsory for Indian companies), legal form (for example, private company, LLP, trust, etc.), information on the parent company or ultimate parent company (where applicable).
Also, the form might demand a statement confirming that the information provided is accurate.
4. Upload the Documents Required
Documents should be provided to support the application. All supporting documents should be self-attested and, if required, translated into English.
5. Pay the Relevant Fees
An application fee needs to be remitted to the LOU. LEIL generally levies the following fees in India (liable to change):
- One-time LEI registration fee
- Renewal fee (one-year validity requiring renewal annually).
Fees can be paid online by net banking, UPI, credit/debit cards, or NEFT.
6. Verification and Issuance
Upon submission of the application and documents:
- The LOU performs a thorough verification process, matching the information against government databases (e.g., MCA, PAN, SEBI, etc.)
- In case any discrepancies or missing information are found, the LOU can request clarifications or further documentation.
On successful verification, the LOU issues the LEI.
7. Publication and Global Visibility
Once issued, the LEI is:
- Published within the GLEIF Global LEI Index, becoming openly available
- Available to regulators, financial institutions, and counterparties all over the world
- Lasts for one year, and it needs to be renewed every year
Renewal of LEI Code
Annual renewal of the LEI is important to ensure continuous updated information about the entity. Failure to renew will cause the LEI status to become “Lapsed,” potentially causing noncompliance in financial transactions. The renewal process is identical to the original registration, including the need for new documentation and a renewal fee.
Need and Purpose of LEI Code
- Identification Globally: It provides a uniform identity to legal entities dealing in financial transactions across different jurisdictions.
- Financial Transparency: Promotes financial market transparency through the revelation of ownership relationships.
- Compliance with Regulation: Facilitates regulators to monitor market activity, determine counterparties, and evaluate systemic risks.
- Risk Management: Assists banks and regulators in examining interlinked risks and exposures of companies.
- Fraud Avoidance: Enhances the traceability of transaction entities, thus lowering the risk of financial fraud.
- Enhances operational effectiveness by automating data gathering, client enrollment, and transaction processing.
- Standardizes data to ensure precise and uniform entity references throughout financial systems and platforms.
- Enables KYC and AML checks with confirmed legal identification.
- International Mandates: Regulators in many countries impose compliance requirements for trading in derivatives, bond markets, and large corporate borrowings.
- Enhanced Market Integrity: Promotes trust and confidence by facilitating accurate identification and reporting of legal entities within the financial landscape.
Conclusion
Obtaining an LEI code is an essential compliance practice for legal entities that deal in financial markets. It ensures harmonised identification over jurisdictions, promotes financial transparency, and is becoming increasingly mandated by regulators. By following the above detailed procedure and having proper documentation, entities are able to successfully register and maintain their LEI in good standing.
