What is a Legal Entity Identifier Number (LEI)?

If you hold any form of investment such as stock, company shares or bonds, you may have heard, or come across the term Legal Entity Number. Commonly shortened to LEI, it is a number to help the Financial Conduct Authority (FCA) detect and deter market abuse across the European Economic Area (EEA.) It was part of a new legislation that was introduced in 2018 by the Markets in Financial Instruments Directive. Here we explain a bit about what is LEI and if you need it.

What is a Legal Entity Identifier Number and who needs one?

A Legal Entity Identifier Number is a unique alphanumeric 20-character code that is used to identify legal entities that undertake investment transactions in ‘reportable financial instruments.’ Legal Entities include charities, trusts, public and private companies, unincorporated bodies and pension funds (apart from self-invested personal pensions). It includes, but is not limited to, unique parties that are legally or financially responsible for the performance of financial transactions or have the right in their jurisdiction to enter independently into legal contracts. It’s important to tell the difference between if you are eligible for an LEI number and whether or not you need one as these are two different circumstances. It can be noted that in principle, individuals can’t get an LEI, however, some acting in a business capacity are eligible to. For this, you can check out the LEI Regulatory Oversight Committee’s statement from September 2015 which explains this in more detail.

What happens if you don’t have a Legal Entity Number?

You need an LEI in order to trade on any financial markets in the UK. Since the law was introduced in 2018 if you don’t have this unique code you are forbidden to trade. Luckily it is easy to apply for and obtain an LEI, you just need to follow the steps below. It is also important to note that it is up to LEI owners to be responsible for keeping LEI issuing organizations up to date and aware of any changes to the legal entity reference data.

How to apply for a Legal Entity Identifier Number

It is easy to apply for a Legal Entity Identifier Number, you simply need to contact a preferred business partner from LEI issuing organizations and apply this way. The role of LEI issuers is to supply registration, renewal and other services as well as act as the primary interface for legal entities wishing to obtain an LEI so are the best point of contact for this. Prices differ depending on how long you wish to have your LEI number. It is £59 for one year, £139 for three years (£46 per year) or £195 for five years (£39 per year.)

There are a number of advantages to having an LEI. The first is that in financial transactions you can reduce the risk associated with the transaction and the other party. You can determine the risk of a particular trading partner’s concentration, reduce the cost of reporting tasks and enhance market transparency. It’s important to do your research and ensure you have an LEI if you need it for your business.