code lei entreprise

Is the LEI Code mandatory for all businesses?

You have certainly already encountered the acronym LEI if your company carries out financial transactions. However, do you know precisely what it is and, above all, how it works?

THE LEI code which corresponds to the anglicism Legal Entity Identifier, which we translate into the language of Molière by a legal entity identifier, corresponds to a series of twenty characters which have the role of determining the companies which practice specific financial exchanges such such as currency, bond or even stock trading.

It acts as a global company registration number which attests to the transparency of financial movements through the collection of essential information.

Does your company trade securities locally or globally? Then you need an LEI number.

What does the LEI actually refer to?

Like many number sequences such as the social security number, numbers refer to different aspects. The 20 characters of the LEI number can be read as follows:

The first 4 digits allow the identification of the LOU which defines the local operational unit.

From the 5th to the 18th character, we determine the company registration code, and finally the last two digits refer to the identity verification of the legal entity.

This alphanumeric code governed by the ISO 17442 standard was created to promote clarity of transactions in financial markets.

The LEI can be read and interpreted through two distinct levels. The first characterizes information about the company name, its registration number and its legal address. The second defines the information essential to the law and the ownership structure.

Please note that any legal entity that carries out operations in financial markets in a number of countries, including the United States and the EU, is obliged to obtain an LEI number.

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It is also important to know that this service is not free, it is formalized through annual fees which correspond to registration or renewal. This sum takes into account regulations, system maintenance and all administrative aspects.

company lei code obligation

Let’s go a little further…

The international financial crisis that rumbled in 2007-2008 encouraged the creation of the LEI code in the years that followed. Effective on the market in 2012, its primary objective was to reduce the fraud rate and eliminate money laundering.

Its organization facilitates the identification of company owners by tracing international financial transactions. The LEI code is also intended as a whole to standardize the global financial system. Concretely, to make it readable and usable in all countries, in all markets.

For efficient and optimized operation of the LEI system, it is important that it is subject to controls. These are carried out by three distinct entities:

  • The regulatory oversight committee that you will most often find under the acronym ROC. This verifies the principles of governance are respected.
  • The International LEI Code Organization, materialized by the non-profit acronym GLEIF this time and whose role is to order and administer the numbers.
  • And finally the operational unit hidden under the acronym LOU that we mentioned at the start of the article, predominant in this system since it is it which issues the LEI codes.