Legal Entity Identifier (LEI) Registration and Compliance
After the global financial crisis of 2007- 2008 the need for greater global financial security became an issue which can no longer be relegated to the background. In an effort to increase the global financial security in the world a Legal Identifier Number hereinafter or alternatively referred to as LEI was introduced under the auspices of the G20.
The objective of this study will be attained by understanding; who is G20, what Legal Identifier Number entails, the persons who are under the obligation to have the said identifier number, the purpose of introducing the number, the body in charge of issuing the said number including the procedure of and the advantages of having the said number.
What is a Legal Entity Identifier (LEI)?
The term LEI stands for Legal Entity Identifier. This is a unique set of alphanumeric identification number assigned to legal entities. The intendment of creating an LEI is to form a database and a unique mode of identifying a legal entity participating in any financial activity in any jurisdiction of the world.
The introduction of the LEI is traceable to the G20 after the world financial crisis which occurred far back in 2007 up to 2008.
Who is/are the G20?
G20 simply refers to the group of Nineteen (19) Countries, their respective central banks together with the European Union. The membership of the G20 comprises of:
- Saudi Arabia
- South Africa
- South Korea
- United Kingdom
- United States
- The European Union
The principal concern of the G20 is the betterment of the world economy. Having listed India as a member-state of the G20 it is pertinent to inform at this juncture that the idea of LEI will be discussed with emphasis on India.
The Reason For Introducing Legal Entity Identifier
The essence of the LEI is to substantially identify parties in global financial transactions thereby reducing risks and crisis in the global financial sector. The LEI aids in the assessment and guarding of systemic financial risks.
Who Administers the Issuance of the LEI?
The Global LEI Foundation, hereinafter or alternatively called the GLEIF is designated to administer the issuance and compliance with LEI globally. Global LEI Foundation is a non-profit oriented institution with the enormous task of running the system and structure of the LEI on a global scale and basis.
The operation of the LEI is in three classifications namely: (a) LEI Regulatory Oversight committee saddled with the task of representing all public financial institutions of the world, (b) the GLIEF which coordinates the daily global operation of the LEI, and (c) the local or municipal operating Units who are responsible for the issuance of LEI to the legal entities within their respective jurisdictions.
How Can a Legal Entity Obtain a LEI?
The procedure which a legal entity will follow in order to get LEI are as follows:
- The representative of the company will first download and fill an authorization form showing the extent of his authority to represent the legal entity seeking to enrol for the LEI.
- After establishing your authority to represent the legal entity seeking to enrol for the LEI, Create an account with the name and email address of the legal entity or your name as the representative of the legal entity.
- Select the company on whose behalf you are making the application for LEI.
- Indicate whether you are making a fresh application or for the LEI to be reissued.
- Make the necessary payment based on the nature of the application.
- The local LEI administrators will gather all the available information on the legal entity for your verification and confirmation.
- Sign the terms and conditions electronically and forward a counterpart to any alternative signatory.
- Indicate if the legal entity making the application has a parent or subsidiary company.
- After submission, the information will be scrutinized for the purpose of issuing or reissuing the applicants LEI.
In addition to the above-stated procedure of application, an LEI the underlisted are the basic or glossary of information expected to be filled while making an application for an LEI. They are:
- The registered name of the legal entity seeking to enrol for an LEI,
- The legal form of the entity including a letter of authorization issued on the agent undertaking the application for LEI on behalf of the Legal entity.
- It is important to state during application whether the legal entity seeking to enrol is in active business or otherwise.
- The applicant must state the regulatory agencies and registration authorities which the legal; entity is subject to.
- The registered office address and the corporate headquarters of the legal entity must be provided at the time of application.
- In the case of a renewal of LEI, it is mandatory to state the date of the first LEI issuance and the last time the information provided during registration was updated
- The date and what led to the expiry of the LEI.
In order to effectively undergo the entire process of enrolling for an LEI the applicant must:
- Have a valid and functional email address (an email address he will be able to log in to)
- Stable internet access (chose the most the stable Internet Service Provider and a modern),
- A modern, fast and secure web browser the likes of Google Chrome, Phoenix Browser, Mozilla Firefox, Microsoft Edge and the Safari browser for Apple/iOS products.
- The use of a mobile phone is highly discouraged. It is important to use a desktop/laptop system in order to have a full view of all the features of the registration portal of the rapidly and make use of all the tips and guidelines which can only be available on a desktop screen for a speedy registration.
What is the Lifespan of an LEI?
An LEI usually expires after one year and can be renewed, the procedure for the renewal is impari material with the procedure for application at the first instance. Upon application for renewal RapidLEI will:
- Promptly and automatically verify Legal Entity Reference Data the regulatory agency of the entity for the purpose of ascertaining any change in the composition, object and business of the legal entity.
- Upon verification, an electric form for the terms and conditions governing the renewal will be made available to the applicant to sign electronically while a duplicate will be sent to an alternate signatory.
- In the case of a parent or subsidiary company, the applicant will verify with proof the basis of the relationship with the said company claimed as a parent or subsidiary.
It is immaterial to wait till the effluxion of the term of an existing LEI before a legal entity can make an application for an LEI because where a renewal is made earlier than the date of expiration all the rights, interest and benefits attached to the subsisting LEI will be transferred and rolled over with the new LEI.
Who Are The Legal Entities Eligible To Apply For An Lei?
Any company registered in India which engages in a business that involves any form of financial commitment is expected to enrol and have LEI. Some of these legal entities include:
- A business existing as a Sole Proprietorships,
- A Limited Liability Partnership,
- A firm of Partners,
- Any form of Trust entity,
- Private Limited Liability Companies,
- Public Limited Liability Companies,
- Statutory Companies or corporations,
- A single owned Company,
- Insurance Companies, and all forms of a financial institution including non-Banking Finance Companies etc.
The Reserve Bank of India is responsible for the issuance of notices for the phases of the accreditation and enrolment to be undergone by all legal entities that are mandated to have LEI. While RapidLEI trading under the name and style of Ubisecure the local or municipal accredited agency in charge of issuing LEI.
On the other hand, the following legal entities are fully exempted from enrolling and obtaining an LEI: (a) an individual or private person, (b) legal entity existing as a division(s), (c) branch offices of a company in the same jurisdiction with a subsisting LEI.
All business entities existing as a branch, division or subsidiary of a parent company enjoys the LEI of the said parent company.
Advantages Of Having An LEI
There are attendant benefits of enrolling and obtaining an LEI and they include:
- Where all legal entities involved in any form of financial activity undergoes the LEI the usual risk associated with financial transactions is reduced to the barest minimal. With the LEI each intending legal entity to a financial transaction will be able to assess and evaluate the risk in the business and the antecedents of each other.
- With the enrollment for the LEI once a legal entity obtains an LEI, the cost of gathering information on the said entity reduces drastically.
- With the availability of the records of every legal entity due to the LEI, the market transparency in the global financial sector will be greatly advanced. Frauds, insider trading and manipulations will be easily detected therefore making transactions safer for all the parties.
The cost of obtaining an LEI
With the available information on the operation of LEI in India the schedule of fees for the obtaining and renewal of LEI is as follows:
- It costs about $86.00 (US Dollars) to enrol and have a new LEI.
- If at the time of registration the applicant intends to make payment for the subsequent years a discount of about 25% will be granted on the applicant.
- the registration fee encompasses the Global Legal Entity Identifier Foundation fee
- Where an applicant is seeking for renewal the fee is fixed at $71.00 US Dollars with an incentive of 25% discount for an applicant willing to make payment for successive years.
- Similar to the fee of a first time applicant the renewal fee accounts for the GLEIF fee.
The introduction and operation of LEI by the G20 is a welcome development to such extent same is used to enhance the financial security of the global financial sector participants.
A closer look at the nature of the information which is gathered in the course of enrolling or renewing an LEI seems an official way of institutionalizing breach of privacy of companies as well as serving as a medium of the advanced economies to spy on the economic growth of the developing economies. In other words, the information gathered under LEI is likely subject to abuse in the long run by the superpowers who have an overwhelming influence in the G20.