What is an LEI?
Core Definition: A Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization. It serves as a globally recognized identifier for legal entities participating in financial transactions.
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Definition and Purpose
The Legal Entity Identifier (LEI) provides a standardized, consistent way to identify legal entities involved in financial market activities. Each LEI connects to essential reference information enabling clear and unique identification, thus improving transparency and reducing ambiguity in financial transactions worldwide.
Established following the 2008 financial crisis, the LEI system addresses the critical need for improved counterparty identification and risk management. Endorsed by the G20 and overseen by the Regulatory Oversight Committee (ROC), the system aims to enhance market stability by providing a universal standard for tracking financial transactions across different markets and jurisdictions.
Key Characteristics of the LEI:
- Standardized 20-character alphanumeric code (ISO 17442)
- Links to publicly available entity reference data (Level 1 data)
- Administered globally by the Global Legal Entity Identifier Foundation (GLEIF)
- Increasingly required for regulatory reporting across jurisdictions (e.g., MiFID II, EMIR)
- Requires annual renewal to ensure data accuracy and active status
Entities Typically Requiring an LEI
The requirement or strong recommendation for obtaining an LEI typically applies to entities involved in specific financial activities, particularly those subject to regulatory reporting:
Financial Institutions
Banks, investment firms, credit institutions, and insurance companies often require LEIs for transaction reporting, regulatory filings, and risk aggregation purposes.
Corporate Entities
Companies engaging in financial market activities such as trading securities, derivatives (including those under EMIR thresholds), or issuing financial instruments may need an LEI.
Investment Funds & Vehicles
Mutual funds, hedge funds, pension funds, special purpose vehicles (SPVs), and other collective investment schemes often require LEIs under regulations like AIFMD or UCITS.
Structure of the LEI Code
The 20-character LEI code follows a defined structure specified by ISO 17442:
5493 00 1KJTIIGC8Y1R 17
(Example shown with notional spacing for clarity)
Characters 1-4:
Prefix assigned to the LEI issuer (Local Operating Unit - LOU).
Characters 5-18:
Entity-specific part of the code generated and assigned by the LOU.
Characters 19-20:
Two checksum digits calculated according to the ISO 17442 standard for verification.
The Global LEI System (GLEIS)
The Global LEI System is the framework ensuring the operational integrity and accessibility of LEIs worldwide. Key components include:
- Global Legal Entity Identifier Foundation (GLEIF): A non-profit organization responsible for coordinating the system, ensuring data quality, and managing the network of LEI issuers.
- Regulatory Oversight Committee (ROC): A group of public authorities from around the globe providing governance and oversight of the GLEIS.
- Local Operating Units (LOUs): Organizations accredited by GLEIF to issue LEIs to legal entities, performing validation and ensuring data accuracy according to established protocols.
- Registration Agents: Organizations assisting entities in accessing LEI issuing services provided by LOUs.
Next Steps
Now that the fundamentals of the LEI are clear, understand the practical steps involved by exploring how to obtain an LEI for your entity.