It links to important reference data, making it possible to identify legal entities involved in financial transactions in a clear and unique manner. Each LEI comprises well-organized reference data divided into two sections: Level 1 identifies who is who, and Level 2 identifies who owns whom. Level 1 data provides information about an entity’s registration, such as its legal name, registration number, legal and headquarters addresses, and so on.
Level 2 includes the information about an entity’s ownership structure, thereby addressing the question of who owns whom. Clearly stated, the LEI information source converts unorganized entity user information into a company’s marketing directory, improving consistency and reliability greatly. To know more info then Click here for more.
The Global Legal Entity Identifier Foundation (GLEIF) was established by the Financial Stability Board in June 2014 to facilitate the implementation and usage of the Legal Entity Identifier (LEI). The LEI Regulatory Oversight Committee, which represents public authorities from around the world who have joined forces to advance openness in global financial markets, supports and oversees the foundation.
The Global LEI System’s operational integrity is ensured by GLEIF services. GLEIF is constantly increasing the amount and quality of data available in the LEI data pool, as well as making public access to the data easier.
ISO 17442 is a global standard.
The ISO 17442 standard defines a set of qualities or legal entity reference data that are the most important parts of identification. The LEI code is fully neutral, with no information or country codes that could cause customers to become confused.
The ISO 17442 standard establishes the minimal reference data that each LEI must include. This information is known as Level 1 Data – Who is Who:
- The legal entity’s formal name is recorded in the official registries.
- The legal entity’s registered address.
- The country where the formation took place.
- The codes are used to represent the names of countries and sub-national units.
Level 2 Data – Who owns who?
Level 2 data provides an answer to the question of who owns who. Its goal is to find mother-daughter ties within the business hierarchy. Level 2 data can only be reported by entities whose parent or ultimate parent centralizes the daughter entity’s financial statements. The daughter entity’s ownership alone does not meet the Level 2 reporting criterion for the daughter entity.
Prepare to give the most recent consolidated financial statement of a parent and/or ultimate parent to authenticate the mother-daughter relationship if you choose to disclose Level 2 data (ownership structure).
Financial regulation and the use of LEI
Different jurisdictions use LEIs throughout the world. LEI was originally used in financial reporting in the United States and the European Union. Despite the fact that LEI implementation is still uneven among jurisdictions, with coverage centered in Canada, the EU, and the US, many other countries are trying to follow suit. The Reserve Bank of India (RBI) has made LEI mandatory in the over-the-counter derivatives market, as well as for major corporate borrowers and foreign exchange transactions.