Benefits Of LEI In The US?

The first question that strikes our mind is, What does lei code mean? Legal Entity Identifier i.e, LEI is a unique code consisting of 20 characters of alphabet and numbers i.e alphanumeric code. The LEI code came into existence by the International Organization of Standardization (ISO) based on the IOS 17442.

All the entities which trade in financial markets (forex, futures, bonds, stocks, etc.) need LEI code. Financial markets, companies, and regulators can be connected with the help of this code. In the year 2007-08, the worldwide financial crisis hit that has given rise to the need for financial transactions transparency.

Every single LEI code consists of crucial information regarding the entity’s ownership structure. So the code is capable of answering questions like ‘who is who and who owns whom’. It  is a must to own an LEI code as the LEI data works as a global database, which helps in enhancing transparency in the global marketplace. The financial risk of individuals and business identity can be avoided. It is better to obtain the LEI code, this offers transaction reliability. 

Various benefits of obtaining LEI system are:

The introduction of the LEI system is very much beneficial in many forms.

Uniqueness and Singularity

The LEI code system assumes that to a legal entity only one legal entity identifier can be assigned. Also, the LEIs cannot be used more than once. 

Persistence

The Legal Entity Identifier system is immune to the changes that happen in the lifetime of a business entity. If the business entity is completely dissolved through a merger or a closure or completely subsumed by another business entity then the original identifier code shall remain in the working position. Hence the retrieval of data from reference corresponds to the time of the entity’s activity. 

Neutrality

The LEI codes are wholly neutral. From their core, they form a single data field and do not hold any embedded intelligence. It means that the value of an identifier cannot be used to compromise neutrality. 

Reliability

A trusted method is supporting the LEI system for verifying the identity of the legal entity in the question. Maintenance of all respective references and identification of data is guaranteed by the issuer’s (LOUs). The collected data is however sufficient for verification of the authenticity of an entity’s revealed identification. The reliability of the system is also supported by very clear, high-quality assurance criteria guaranteed by the issuers. 

Openness and public availability

The whole LEI system is built on the concept of complete openness and the non-proprietary public good. The fundamental data for all registered entities is made available free of charge unlike other systems such as DUNS. the services such as LEI.INFO also contain some extra features that are generally available to the registered users only. The data which forms the ground of the whole LEI system is available without any charge. 

Extensibility

The LEI system is designed to become the global standard, especially for the unique identification of the legal entities across the globe who are indulged in the financial sector globally. In respect of achieving this goal, it is necessary that it remains open for potential future extensions related to new forms of legal entities as well as the elements of reference data concerning those entities. 

Who needs an LEI?

LEIs are required by any legal entity that is indulged in financial transactions or working within today’s global financial system. In recent days obtaining LEI got compulsory, there are several states which say that without the LEI code there will be no trade. It means the LEI code is required by both the parties, reporting parties, and traders.

Leave a Comment