Legal Entity Identifier [LEI Code – RBI MANDATE]

The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). It connects to key reference information that enables clear and unique identification of legal entities participating in financial transactions. Each LEI contains information about an entity’s ownership structure and thus answers the questions of ‘who is who’ and ‘who owns whom’. Simply put, the publicly available LEI data pool can be regarded as a global directory, which greatly enhances transparency in the global marketplace.

The Financial Stability Board (FSB) has reiterated that global LEI adoption underpins “multiple financial stability objectives” such as improved risk management in firms as well as better assessment of micro and macro prudential risks. As a result, it promotes market integrity while containing market abuse and financial fraud. Last but not least, LEI rollout “supports higher quality and accuracy of financial data overall”.

The publicly available LEI data pool is a unique key to standardized information on legal entities globally. The data is registered and regularly verified according to protocols and procedures established by the LEI Regulatory Oversight Committee.

In cooperation with its partners in the Global LEI System, the Global Legal Entity Identifier Foundation (GLEIF) continues to focus on further optimizing the quality, reliability and usability of LEI data, empowering market participants to benefit from the wealth of information available with the LEI population. GLEIF Established by the Financial Stability Board in June 2014, the Global Legal Entity Identifier Foundation (GLEIF) is tasked to support the implementation and use of the Legal Entity Identifier (LEI).

Obtaining LEI is easy. Registrants simply contact their preferred business partner from the list of LEI issuing organizations available on the GLEIF website.

What is the purpose of LEI?

The LEI system was initiated as a response to the financial crisis and is aimed at improving transparency in financial data systems. Presently, there are several methods of identifying entities across various markets and countries. However, the Global LEI System (GLEIS), when fully operational will ensure that there is just one standard system. There are a numerous regulations among jurisdictions that require the use of LEI’s. However the main idea of Global Legal Entity Identifier is to simplify, standardize and provide the ease of identification of any legal entity worldwide.

Source: https://www.gleif.org/en/

LEI code structure

An LEI number (Legal Entity Identifier) is a unique identification number which is issued to companies which operate in the global financial system. LEIs are based on ISO standard 17442:2012. An LEI is issued only once for each company and consists of 20 characters: The first 4 characters are unique to the LOU which has issued the LEI.

• The 5th and 6th characters are the same for each company – 0.
• The following 12 characters consist of letters and numbers and are unique for each company.
• The final 2 characters are known as the checking characters.

Each LEI contains well-structured reference data which is categorized into 2 sections –

Level 1 – “who is who”

Level 2 – “who owns whom.”

Level 1 data includes entity registration details, such as legal name, number of registration, legal and HQ address etc.

Level 2 contains information about an entity’s ownership structure and thus answers the question who owns whom. Simply put, the publicly available LEI data pool transfers unstructured entity registration data into standardized global directory, which greatly enhances transparency in the global marketplace.

How to search LEI of a particular entity?

Link: https://search.gleif.org/#/search/

LEI Applicability:

Who needs a Legal Entity Identifier?

An entity registered in India needs to apply for LEI code from time to time. The list of entities eligible to apply for LEI codes are Sole Proprietorship’s, 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 – 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, Nationalized 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 etc. Other entities as may be specified from time to time.

RBI MANDATE:

1) RBI Circular No. RBI/2016-17/314 dated June 01, 2017

1. RBI has decided to implement the LEI system for all participants in the Over-the-Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives and credit derivatives in India in a phased manner

Source: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI3143399AEE12E684FCF9FEEA7E03E0E9064.PDF

2) RBI Circular No. RBI/2017-18/82 dated November 02, 2017

1) As per RBI Circular No. RBI/2017-18/82 dated November 02, 2017, Banks shall advise their existing large corporate borrowers having total exposures of 50 crore and above to obtain LEI

2) A separate road map for borrowers having exposure between 5 crore and upto 50 crore would be issued in due course.

Source: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI827FB2CBDDD52D4E2C941681CE92E5678C.PDF

3) RBI Circular No. RBI/2018-19/83 dated November 29, 2018 read with RBI/2018-19/177 dated April 26, 2019

Schedule for Implementation of LEI in the Non- Derivative Market includes Money market, G-sec market and non-derivative Forex market

Source:1) https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NT8365250BB4E43B466BBDCA941515498FBB.PDF

2) https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI1770EA1DB41CD8A4567BBC6E71114F7E5BE.PDF

*Based on the feedback and requests received from market participants, in the context of the difficulties arising from the outbreak of novel coronavirus disease (COVID-19), and with a view to enabling smoother implementation of the LEI system in non-derivative markets, the timeline for implementation (Phase III) is extended by RBI vide notification RBI/2019-20/185 dated March 27, 2020.

Source: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOT185246CB2BC78DA4F7188740B5528CA73D2.PDF

IRDAI Mandate – Legal Entity Identifier (LEI) code

The Insurance Regulatory and Development Authority of India (IRDAI) has mandated implementation of the LEI system for all insurers and their corporate borrowers. Entities without an LEI code are not to be granted renewal / enhancement of credit facilities, after the date specified in the schedule. Kindly refer to the IRDAI Notification:

Source: https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4145&flag=1

What is the scope of the IRDAI circular dated June 05, 2020?

A: The IRDAI circular is applicable to both term loan borrowers and debenture issuers. Debentures, term loans as well as Bonds both would be included in computing the overall exposure that an insurer or financial institution has to a corporate borrowers either in the form of term loan or debentures or in any other form of debt.

Requirements/Procedure for LEI

Legal Entity Identifier India Limited (CIN- U74900MH2015PLC268921) – A Wholly Owned Subsidiary of The Clearing Corporation of India Ltd. acts as a Local Operating Unit (LOU) for issuing globally compatible Legal Entity Identifiers (LEIs) in India.

“LEIL has been recognized by the Reserve Bank of India as an “Issuer” of Legal Entity Identifiers under the Payment and Settlement Systems Act, 2007 (as amended in 2015).” LEIL has been Accredited by the Global Legal Entity Identifier Foundation (GLEIF) as a Local Operation Unit (LOU) for issuance and management of LEI’s.

1. Get the Documents with Formats

2. Authorized Applicant by Board – for Creation of Account

3. Submission of Online Registration Form

4. Posting of Physical Documents

Online Document Upload Facility:

(A new facility to upload supporting documents online in order to simplify the process of obtaining LEIs is now made available. Entities are requested to avail this new service and upload documents. No physical copy of documents is required to be sent once this facility is availed. The earlier facility of providing hard copies of supporting documents will also continue to be available – however it is requested that entities may utilize the online upload facility for seamless application experience.)

1. Verification by LEIL

2. Payment

Source: https://www.ccilindia-lei.co.in/

Do investment service providers, such as banks, have the right to request an LEI?

Investment service providers must request customers that are legal entities to provide all information which is necessary for submitting information about transactions to supervisory authorities. Such information includes Legal Entity Identifier.

What happens if a customer does not provide LEI?

If a customer who is a legal entity does not provide the investment service provider with the necessary information, including an LEI, for reporting a security transaction, the service provider will not be able to fulfil their legal reporting obligation. Consequently, the investment service provider may refuse to provide the service.

How do you report a parent-subsidiary relationship?

Since, 1 May 2017 entities have been required to disclose direct and ultimate parent company relationships when they apply for a Legal Entity Identifier (an LEI) or when they renew their existing LEI code. Any entity applying for, or renewing, an LEI is required to disclose certain information regarding their parent companies to the Local Operating Unit (LOU) – or to the agent company who will make an application to an LOU on behalf of the entity – when they make the application.

Why is a Legal Entity Identifier required for organization?

The Legal Entity Identifier (LEI) is a global reference number that uniquely identifies every legal entity or structure that is party to a financial transaction, in any jurisdiction.

LEIs will issued to any legal identity including but not limited to all intermediary institutions, banks, mutual funds, partnership companies, trusts, holdings, special purpose vehicles, asset management companies and all other institutions being parties to financial transactions.

LEI will be assigned on application from the legal entity and after due validation of data. For the organization, LEI will

• Serve as a proof of identity for a financial entity
• Help to abide by regulatory requirements
• Facilitate transaction reporting to Trade Repositories

What will happen if LEI is lapsed?

If Legal Entity Identifier (LEI) is lapsed, legal entity will not able to avail loans from Scheduled Commercial Banks & Insurance companies as per schedule of Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority (IRDA).

Also legal entity will not be able to participate in Money Market, G- Sec Market and Forex Market as per schedule of regulators Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Others.

In case of any further Information/query, feel free to contact at [email protected]

AUTHOR: CS Manish Bhardwaj, Owner/Proprietor at Manish Bhardwaj & Associates, Company Secretaries, Uttarakhand. 

DISCLAIMER: AUTHOR ACCEPTS NO RESPONSIBILITY WHATSOEVER AND WILL NOT BE LIABLE FOR ANY LOSSES, CLAIMS OR DAMAGES WHICH MAY ARISE BECAUSE OF THE CONTENTS OF THIS WRITE UP. The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users/Viewers of this information are expected to refer to the relevant existing provisions of applicable Laws.