1. What is a legal entity identifier (LEI), and what is its purpose?
Ans. The Legal Entity Identifier (LEI) is a 20-character alpha-numeric code used to uniquely identify parties to financial transactions worldwide. It has been implemented to improve the quality and accuracy of financial data reporting systems for better risk management. It is used to create a global reference data system that uniquely identifies every legal entity in any jurisdiction that is party to a financial transaction. It can be obtained from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), the body tasked to support the implementation and use of LEI. In India, LEI can be obtained from Legal Entity Identifier India Ltd. (LEIL), which is also recognised as an issuer of LEI by the Reserve Bank.
2. What is the purpose of Legal Entity Identifier (LEI) globally?
Ans. The global LEI system (GLEIS) has been set up by regulatory authorities [including G20 and the Financial Stability Board (FSB)] after the 2008 Global Financial Crisis. The Legal Entity Identifier (LEI) is designed to enable the identification and linkage of parties to financial transactions across the world.. Its goal is to help improve the measurement and monitoring of systemic risk and support more cost-effective compliance with regulatory reporting requirements.
3. Is LEI required for individual customer transactions? or Can an individual apply for LEI?
Ans. No, Legal Entity Identifier (LEI) is not required for customer transactions where both remitter and beneficiary are individuals. For transactions, where either or both parties are non-individual/s, LEI will be required.
Any legal entity that is a party to financial transactions can obtain a LEI. This entity could be an incorporated entity, partnership firm, proprietorship firm, bank, mutual fund, asset management company, trust, holding company, special purpose vehicle (SPVs) etc.
4. Who needs to apply for LEI codes?
Ans. Various regulators around the world mandate the use of the LEI. In India, regulators such as RBI, SEBI and IRDAI may require entities to obtain the LEI for certain transactions. The list of entities eligible to apply for LEI codes include Sole Proprietorships, Limited Liability Partnerships, Partnership Firms, Trusts, Private Limited Companies, Public Limited Companies, Government Companies, One Person Company, Insurance Companies, Housing Finance Companies, Non-Banking Finance Companies, Non-profit companies, Special Purpose Vehicles – ARC Trusts, Special Purpose Vehicles – Companies, SPV – Partnership Firms, SPV – Co-operative Societies or Multi-state Co-operative Societies, Mutual Fund, Mutual Funds-Sub Scheme, Pension Fund, Pension Fund Sub-Scheme, Alternative Investment Fund (AIF), AIF- Sub Scheme, Nationalised Banks, Scheduled Urban Cooperative Bank, RRBs, Payment Banks, Banking Companies – Others, Stand Alone Primary Dealers, Public Financial Institutions, Unlimited Companies, Cooperative Societies or Multi-state Cooperative Societies, Government Organizations, Companies Limited by Guarantee, Provident/Superannuation/Gratuity/Insurance Fund, HUF, etc. Other entities may be added from time to time.
5. When will the Legal Entity Identifier (LEI) become widely used by market participants and regulators?
Ans. The Reserve Bank of India (RBI) is committed to promoting widespread adoption of the global LEI and is working with Indian regulators to expand the use of the LEI in regulatory reporting requirements.
Already, financial regulators from the European Union, the United Kingdom, the United States, India, Canada, Australia, Singapore and other markets around the world have adopted reporting rules that require companies to use the LEI.
In India, the SEBI, the RBI and many others have all adopted rules requiring or are encouraging companies to use the LEI.
6. What is the process to apply for Legal Entity Identifier (LEI)? or How to obtain for the LEI Code?
Ans. The Legal Entity Identifier (LEI) will be assigned on receipt of an application by Rubix Data Sciences from the legal entity and after due validation of data provided by it.
- Rubix is India’s first LEI Validation Agent and assists companies and organisations with the LEI application process and in validating the information that they provide.
- Rubix makes it easy for companies to obtain the LEI through Legal Entity Identifier India Ltd.
7. How much time does it take to process a Legal Entity Identifier (LEI) application?
Ans. Rubix generally takes 1-2 working days to process the LEI application after receipt / upload of complete application form and payment.
8. What happens if I don’t renew my LEI code?
Ans. LEI code shall be valid for a term of one year after assignment or renewal. It shall be the duty of the entity to apply for renewal of LEI before expiry of the validity of the LEI. The status of your Legal Entity Identifier (LEI) will change to ‘LAPSED’ if not renewed on the next renewal date.
9. Our application for LEI was rejected, what happened?
Ans. Usually, this happens if Local Operating Unit (LOU) validation team finds your requested LEI either to be a duplicate or the presence of inaccurate information included in your application. In both cases, no LEI will be published, and you will receive an email or phone call from the Legal Entity Identifier (LEI) team explaining the reason for the rejection.
10. What if there is an error in an LEI data record?
Ans. LEI owners are responsible for keeping the LEI issuing organization aware of updates to the legal entity reference data. Also, any LEI data user may challenge an LEI and/or its legal entity reference data. A challenge triggers a review of the record by the respective LEI issuing organization to determine the validity of the updated information being submitted. Verification and updates of the LEI and/or its legal entity reference data resulting from challenges are processed free of charge by the managing Legal Entity Identifier (LEI) issuer.
11. What is the Legal Entity Identifier (LEI) structure?
Ans. The Legal Entity Identifier (LEI) is a 20-digit, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). LEI is a global reference number that uniquely identifies every legal entity or structure that is party to a financial transaction, in any jurisdiction.
- Characters 1-4: Prefix used to ensure the uniqueness among codes from LEI issuers (Local Operating Units or LOUs).
- Characters 5-18: Entity-specific part of the code generated and assigned by LOUs according to transparent, sound, and robust allocation policies. As required by ISO 17442, it contains no embedded intelligence.
- Characters 19-20: Two check digits as described in the ISO 17442 standard.