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What is the Purpose of an LEI?

Written by Contributor, on 5th Aug 2022. Posted in General

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A Legal Entity Identifier number can be thought of a bit like a bar code – it is a set of unique numbers that allow an entity to be identified. They’re used within the financial industry for companies that partake in financial transactions such as stocks, shares and bonds. Different industries will have different needs when it comes to how organisations need to be registered and how they are regulated. It is important that companies research this and ensure that they are registered with all of the right places. For those that take part in any of these transactions, a Legal Entity Identifier (LEI) number is essential.

What Exactly is an LEI?

A Legal Entity Identifier (LEI) number is a 20-character code which is unique to companies that are registered. It allows those that want to take part in a financial transaction to look up the details of the companies that they are dealing with. It was developed by the International Organisation of Standardisation (ISO) as a way of ensuring that the global market could operate in a completely transparent way.

The code itself is always 20 characters long and is made up of different sets of numbers, which are then put together to complete the LEI. The number itself is made up of the ID of the Local Operating Unit that issues the LEI, some blank numbers, some numbers used to identify the entity that has applied and a set of numbers unique to that application.

The Information Available

Once a company has gone through the process to register LEI code and get approved, this information becomes publicly available. This means that people can access the data that is on the register. Data available for anyone that wishes to check include the legal name and contact details of the company, the headquarters details, their entity status and who they registered with. The idea is that any questions that someone may have before going ahead with a corporate financial transaction can be answered on the register in advance. 

Do I Need an LEI Number?

For a number of years now, companies that operate and take part in financial transactions regularly need to have an LEI Number. This isn’t just those that take part in financial trading and investments but includes insurance companies, credit unions, brokers and banks.

What is the Purpose of an LEI?

The idea behind the numbers being developed is that there would be a standard set of numbers that companies can easily use to be identified and to identify others. Undertaking any financial transaction is a big commitment, so having a way that companies could easily identify who they are going to be dealing with. In the past, this hasn’t always been available which meant that for companies to feel safe and confident in taking part in transactions was a much lengthier process. Knowing that the contact details are available for companies via their LEI helps to ensure that financial transactions are much more transparent and therefore safer.

 

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