In the financial world, LEI codes are essential for transparency and traceability in transactions. Whether you're looking to invest your company's excess liquidity or are simply curious, this article will explain everything you need to know about LEI codes.
The LEI (Legal Entity Identifier) is a unique identifier consisting of 20 alphanumeric characters. It is used to uniquely identify legal entities participating in financial markets transactions. LEI codes are standardized globally under ISO 17442. They provide information about the legal entity, such as the entity's official name, registered office address, country of incorporation, local business identification code, and entity status.
Any legal entity involved in financial markets transactions must obtain an LEI code. This includes:
It is crucial to apply for an LEI code before commencing any activity that requires its use. For instance, if you wish to invest your company’s cash, an LEI will be necessary. Generally, companies must obtain an LEI before trading derivatives, engaging in cross-border transactions, or complying with certain financial regulations.
The LEI code plays a critical role in enhancing transparency in financial markets. It helps identify counterparties in financial transactions, reduces fraud risk, and improves the accuracy of financial reporting.
The application for an LEI code must be made by a person with legal authority to represent the legal entity. This can be:
Applying for an LEI code is typically done through accredited issuing organizations, known as Local Operating Units (LOUs). Here are the typical steps:
An LEI code is valid for one year from the date of issuance, but some issuers offer automatic renewal for longer periods. To keep the LEI active, it must be renewed annually, which typically involves verifying the initially provided information and paying the fees.
The cost of obtaining and renewing an LEI code varies by issuer. On average, the initial registration fee ranges from 50 to 100 euros excluding VAT, and the annual renewal fee is slightly lower. Since this purchase is made by the company, the VAT is recoverable and the annual fees are deductible for the company.
When a legal entity invests in stocks, bonds, or ETFs, it must apply for an LEI. Therefore, an LEI is required to open an Easyvest portfolio in the name of a company. This process can be particularly advantageous for managing a company’s excess liquidity through the liquidation reserve mechanism or for withdrawing liquidity from a company. If you want to know your potential return by investing your company's cash, start a simulation without delay on our website or contact one of our wealth managers.