Why are more entities increasingly being asked for a Legal Entity Identifier (LEI)?

The recent updates to the European Union (EU) Markets in Financial Instruments Directive and Regulation (MiFID II/MiFIR), have imposed the use of the Legal Entity Identifier (LEI) in a much wider context than was previously the case.

Under the new regime, investment firms operating in Europe will, in many situations, not be able to service clients eligible for a Legal Entity Identifier (LEI) who do not have one. Accordingly, without the LEI, various entities will be unable to continue to trade listed securities or to participate in certain related corporate actions.

The use of LEIs is also required or recommended under a number of other European regulations, namely the European Market Infrastructure Regulation (EMIR), the Capital Requirements Regulation (CRR) and the Central Securities Depositories Regulation (CSDR).

The LEI is also used by regulators to detect and investigate potential cases of market abuse and to monitor the fair and orderly functioning of markets. It also enables regulators to quickly assess the extent of market vulnerability and to identify market participants which are connected and which may be at risk.

What is a LEI?

The LEI is a 20-character, alphanumeric code, unique and exclusive to an entity and used globally across financial markets in order to identify that entity in relation to financial transactions it is a party to (including transactions in different jurisdictions and those executed on EU trading venues). Once allocated, the LEI is registered in a global data system.

 

Which entities need a LEI?

Entities including private or public limited companies and funds (including UCITS and AIFs), which are a party to transactions in various financial instruments, need to identify themselves through a LEI.

Such transactions mainly refer to those involving transferable securities, including investments which are negotiable on the capital markets such as equities, bonds, money-market instruments, units in collective investment undertakings and derivative instruments for the transfer of credit risk.

Legal entities are required to register for and confirm their registration on an annual basis. There is a minor administrative fee for both registration and the annual confirmation process.

 

How do you obtain a LEI?

The Financial Stability Board (FSB) together with the G20 have, amongst others, established Local Operating Units (LOUs).

These are local implementers of the global LEI system which are endorsed by the Regulatory Oversight Committee (ROC) - the worldwide administrative supervisory body. LOUs enable the registration, validation and maintenance of reference data and issue LEIs via online portals.

 

How can we help?

We have streamlined the process to obtain LEIs via online registrations with various endorsed LOUs approved to issue LEIs.  An application should be submitted and supplemented by documentation verifying the existence of the entity applying and any direct/indirect parents.

Our team is well placed to assist you with the initial registration together with the annual compliance routine, as well as provide you with further detail on the LEI.

 

1. A Legal Entity Identifier (or LEI) is a 20-character identifier that identifies distinct legal entities that engage in financial transactions.

2. It is defined by ISO 17442.

3. The LEI is a global standard, designed to be non-proprietary data that is freely accessible to all. As of October 2017, over 630,000 legal entities from more than 195 countries have now been issued with LEIs

Structure

1. The structure of the global LEI is determined in detail by ISO Standard 17442 and takes into account Financial Stability Board (FSB) stipulations.

Legal Entity Identifier (LEI)

  • Why LEI is required for the Organization

1. The Legal Entity Identifier (LEI) is a global reference number that uniquely identifies every legal entity or structure that is party to a financial transaction, in any jurisdiction.

2. Legal Entity Identifier India Limited (LEIL) will assign LEIs to any legal identity including but not limited to all intermediary institutions, banks, mutual funds, partnership companies, trusts, holdings, special purpose vehicles, asset management companies and all other institutions being parties to financial transactions.

3. LEI will be assigned on application from the legal entity and after due validation of data. For the organization, LEI will

1. Serve as a proof of identity for a financial entity

2. Help to abide by regulatory requirements

3. Facilitate transaction reporting to Trade Repositories

LEI in India – Legal Entity Identifier India Private Limited (LEIL)

1) Legal Entity Identifier India Limited – A Wholly Owned Subsidiary of The Clearing Corporation of India Ltd. acts as a Local Operating Unit (LOU) for issuing globally compatible Legal Entity Identifiers (LEIs) in India

  • LEI Applicability

1) RBI Circular No. RBI/2016-17/314 dated June 01, 2017

1. RBI has decided to decided to implement the LEI system for all participants in the Over-the-Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives and credit derivatives in India in a phased manner

Phase Entities Date by which the LEI code is to be obtained
Phase I Entities regulated by RBI / SEBI / IRDA / PFRDA and Corporates With Net Worth above Rs 10000 mn August 1, 2017
Phase II Corporates With Net Worth between Rs 2000 mn and Rs 10000 mn October 1, 2017
Phase III Corporates With Net Worth between Rs 700 mn and Rs 2000 mn December 1, 2017
Phase IV Corporates With Net Worth between Rs 700 mn and below March 31, 2018

1. RBI Circular No. RBI/2017-18/82 dated November 02, 2017

1) As per RBI Circular No. RBI/2017-18/82 dated November 02, 2017, Banks shall advise their existing large corporate borrowers having total exposures of 50 crore and above to obtain LEI

2) A separate roadmap for borrowers having exposure between 5 crore and upto 50 crore would be issued in due course.

Schedule for Implementation of LEI
Total Exposure to SCBs (Scheduled Commercial Banks) To be completed by
1000 crore and above Mar 31, 2018
Between 500 crore and 1000 crore Jun 30, 2018
Between 100 crore and 500 crore Mar 31, 2019
Between 50 crore and 100 crore Dec 31, 2019
  • Requirements/Procedure for LEI

1. Get the Documents with Formats

2. Authorized Applicant by Board – for Creation of Account

3. Submission of Online Registration Form

4. Posting of Physical Documents

5. Verification by LEIL

6. Payment of Rs.5,000/- + Applicable Taxes (GST @ 18%) = 5,900/-

Note: Payment needs to be made only after receiving Email from LEIL

Account Holder Name: Legal Entity Identifier India Limited

Account number : 05420350001234

Bank Name  : HDFC Bank Ltd. Bank

Branch Name : Kamala Mills Compound, Lower Parel

IFSC Code : HDFC0000542

1. After Payment 3-5 Working Days to issue LEI by LEIL.

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