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LEI - Legal Entity Identifier

Many legal entities will be obligated from 3rd January 2018 to have a LEI number (acronym for “Legal Entity Identifier”).

This obligation originates from the commitments made by the G20 Group and the iniciative from the “Financial Stability Board” (FSB) in November 2012 to provide more transparency to the financial markets as well as to evaluate and reduce the systemic financial risks.

As a consequence of the recommendations from these organizations, the “Regulatory Oversight Committee” (ROC) was created to coordinate and oversee an effective system to identify legal entities at a global scale. The public authorities and the financial sector have developed the LEI global system as a result.

The transposition and schedule for adapting the LEI system to domestic Law come with the MIFID II European Directive and its development regulations MIFIR. Each Companies Registry has been assigned the management and issuance of the LEI for entities in its jurisdiction.

The LEI number is based on an alphanumeric code of 20 digits, by which any legal entity (therefore excluding individuals and entities without its own legal status) will be identified when operating in the financial markets, either exchange markets or OTCs. The LEI informs on the name, registered address, registered address of the headquarters, jurisdiction, etc. of the entity.

The lack of a LEI involves for those entities required to obtain it, being unable to operate in the financial markets from 3rd January 2018, so that the derivatives, stocks, bonds, or any other financial asset traded in the market would be blocked thereon. You should just consider that the fact that a company could have decided to invest part of its cash overflow in stocks, forces it to obtain the LEI.

In the light of the relevance of obtaining the LEI for those entities required to get one to operate, we recommend contacting your nearest UHY office in order to start the application process when compulsory, or should you have any doubt on this requirement.