What is a Legal Entity Identifier and why do companies need it?
A Legal Entity Identifier code or LEI number is a unique global identification number for a company that is issued by a GLEIF accredited Local Operating Unit. Financial institutions and regulators use LEIs to identify participants in financial markets.
The LEI system was devised after the 2008 financial crisis in an effort to better regulate and to promote transparency within the global financial market. It is being increasingly adopted in jurisdictions around the world in an effort to achieve these aims. Companies that operate within jurisdictions that mandate the use of LEIs will need to obtain one before they are allowed to transact in that financial market. The use of LEIs for transactions involving OTC derivatives has been mandated in all provinces and territories across Canada since July 2016 (earlier in Manitoba, Quebec and Ontario).
Further, Canadian entities transacting in the European market were required to obtain an LEI in 2018 in order to continue operating within that jurisdiction following the introduction of the MiFID II.
How to get LEI code for your company?
To apply for an LEI code, a GLEIF-accredited code issuer LOU (Local Operating Unit) is needed. Canadian LEI is a LOU contractual registration agent that registers LEI codes in Canada.
Canadian LEI’s database is interfaced with the Companies Registry, which allows us to automatically query and update data related to your company. We offer Canadian companies a fast and affordable service and keep the data in the GLEIF database in line with your current information.
1. Complete the application form on our website. We validate data using the Companies Registry or other sources.
2. Pay by bank transfer or invoice. We will send an invoice and receipt that comply with your accounting standards.
3. After submitting the application on our website, we will send you a power of attorney for signing.
4. We will send the LEI code to your email.
It takes just 2 minutes to complete the application and LEI number is usually issued within 1-2 working days of payment.
How are LEI codes issued?
The global Legal Entity Identifier system is made up of 3 levels, which can seem confusing at first. In this section, we outline some important definitions and details to bolster your understanding of the logics behind LEI number issuance.
1. Umbrella organisation
GLEIF – Global Legal Entity Identifier Foundation
GLEIF was established by the Financial Stability Board with its primary mission being to invent, develop and manage the global LEI system. GLEIF is also the umbrella organisation for LEI registrar, which stores up all the LEI data. GLEIF is a non-profit organisation with its head office located in Basel, Switzerland.
2. Organisations which may issue LEIs
LOU – Local Operating Unit
An LOU is an organisation that has been accredited by GLEIF and has permission to issue LEIs. LOU’s are usually required to gather and verify data and to generate LEIs according to the Protocol. LOU’s must request all of the relevant information from companies seeking an LEI, and they must confirm this data with the National Business Registry. Globally there are around 30 LOU’s and, of this number, only a few of them are able to issue LEI numbers for Canadian companies.
3. Agents for LEI registration
A Registration agent transfers client data to the LOU in accordance with GLEIF standards and requests additional information from the local Business Registry. GLEIF introduced the concept of an LEI Registration Agent in April 2017 in order to assure the quality of the data in the databases, and to simplify the process of applying for an LEI. Canadian LEI is an Official Registration Agent that operates in the Canada.
LEI code structure
An LEI number (Legal Entity Identifier) is a unique identification number which is issued to companies which operate in the global financial system. LEIs are based on ISO standard 17442:2012. An LEI is issued only once for each company and consists of 20 characters:The first 4 characters are unique to the LOU which has issued the LEI.
|LOU unique numbers||Unique characters for the company|
- The 5th and 6th characters are the same for each company – 0.
- The following 12 characters consist of letters and numbers and are unique for each company.
- The final 2 characters are known as the checking characters.
The first LEIs were issued in December 2012. As of 3 January 2018, LEIs are mandatory for all companies that are registered in European Union and that trade in securities. You can find more information regarding the LEI system umbrella organisation GLEIF web.
Each LEI number that is issued to a company is only active for a period of 1 year. After each year, the LEI needs to be renewed for the following 12 month period. We strongly recommend that you renew your LEIs in a timely manner, as the process can take some time. When the LEI status becomes LAPSED, your LEI is no longer active and therefore it is not possible to use it for financial reporting. In cases where you know in advance that you require your LEI to be active for a longer period of time, you can renew your LEI 2 months before the renewal date. For example, if an LEI was issued on 1 November 2018 and is valid until 31st of October 2020; if you renew your LEI in September 2020 for 1 year, your LEI will be valid until 31 October 2021.
Canadian LEI monitors the validity dates of our client’s LEIs and will let you know when you need to renew your LEI. You can apply to renew your LEI via the application form on our website. More information about LEI renewal here.
Companies apply for an LEI through a service provider, like Canadian LEI. They need to do this because companies can’t apply for or update details within the LEI database, which is managed by the Global Legal Entity Identifier Foundation – GLEIF. Instead, a service provider (LOU – Local Operating Unit) is assigned to each LEI code and has permission to make changes to data on behalf of the company. Read more about tansferring an LEI code to Canadian LEI.