What is an LEI code?
Have you been asked to get an LEI code but still wonder what it is? Then you have come to the right place! On this page we will give you the answer to the question, what is an LEI code?
What is LEI code in banking?
An LEI code, or an LEI number, is a 20-character code used globally to identify companies that trade in securities. LEI is an abbreviation for Legal Entity Identifier. Since 3 January 2018, it has been statutory in the EU that companies that trade in securities must have an LEI code.
Although it is not required to have an LEI code in all countries outside the EU, many companies still choose to have an LEI code, as it gives a serious impression and can facilitate trading through certain banks and institutions. There are international banks that choose to require their customers to hold an LEI code in order to trade according to the coined expression "No LEI, no trade".
The non-profit organization responsible for the system for LEI codes is called GLEIF - Global Legal Entity Identifier Foundation - and is based in Basel, Switzerland. The validity of an LEI code is 1 year. Thereafter, it must be renewed annually.
Who needs an LEI number?
The short answer is that all companies in the EU that trade in securities need an LEI code.
On 3 January 2018, new European rules came into force - called Mifid 2 / Mifir - where requirements for natural and legal persons performing securities transactions must be identifiable in a clear and transparent manner. This applies to the various company forms:
If you have a limited company and intend to make securities transactions, you must have an LEI code.
No, individual companies do not need to have an LEI number if they do not trade in derivative instruments. If you buy ordinary shares through your individual company, you do not need an LEI number, as you will instead be identified by your social security number.
Yes, a trading company must have an LEI number to be able to trade shares.
Yes, the same goes for foundations. You need an LEI number.
Yes, associations need LEI numbers.
However, there is one exception that applies to all company forms, and that is if you trade your securities through endowment insurance. Then it is instead the insurance company that is formally considered to be the holder of the securities.