The LEI (Legal Entity Identifier) is a global legal entity identifier, consisting of a 20-digit alphanumeric code. The LEI code is unique, it shall be issued once for a specific legal entity and the same code cannot be issued to another legal entity. The LEI code does not replace the registry code of the commercial register of the Republic of Estonia. In Estonia, the registry code is still used to identify a legal entity.
The LEI code associates a legal entity with key information, which allows legal entities participating in global financial markets to be clearly and uniquely identified.
LEI codes are already used to identify the parties to EMIR derivative instruments transactions and due to the application of implementing regulation EU/2017/105, no other alternative codes can be used when providing notification of transactions made with derivative instruments starting from 1 November 2017.
The LEI code shall be used for reporting as of 3 January 2018, pursuant to the MiFID II and MiFIR regulation, transaction reports shall, among other things, also be used for investigating market abuse. The format of the transaction reports is established by an implementation regulation of the European Commission.
Legal entities that have been assigned the right to provide investment services are obliged to notify surveillance authorities of transactions made with the securities of a legal entity client by using the LEI code. In case a legal entity client does not have a LEI code, the reporting obligation cannot be performed and as a result the transaction orders of such legal entities cannot be fulfilled.
Legal entities are required to submit an LEI code in the event that they wish to use an LHV Broker, LHV Trader, or LHV portfolio management service, and when they wish to buy or sell listed securities. In addition, an LEI code is necessary in the case of FOP and DVP transactions involving listed securities if there is a change in the owner of the securities (for example, shares are transferred from the account of a legal person to the account of a private person).
An LEI code is not necessary in the case of unlisted shares and private limited company shares, unlisted bonds and transactions involving traditional fund shares.
Without an LEI code, LHV Pank is unable to correctly report transactions to regulatory agencies, which means that it is no longer possible to perform the corresponding transactions. Transaction restrictions will enter into force on 03 January 2018, at the latest.
An LEI code can be applied for from separately authorised agencies, information on which can be found on the Global Legal Entity Identifier Foundation homepage. There are a number of different opportunities and the selection can be made freely. For example, LHV has enjoyed smooth and fast cooperation with the following: Bloomberg LEI, Slovenian Central Securities Clearing Corporation, and WM Datenservice.
Unfortunately, there is no agency in Estonia that issues LEI codes. Since each LEI code is unique, a code issued elsewhere is also valid in Estonia.
The LEI code shall be issued for a fee and is also subject to a yearly maintenance fee.
It is worth noting that the price may vary substantially depending on the service provider.
To correctly perform the reporting duty, the LEI code of a legal entity must be valid. The company providing the investment service shall check the validity of the code before completing the transaction.
An investment service provider must ask a legal entity client all information which is required for submitting transaction-related information to a regulatory authority. This information also includes the LEI code.
In case a legal entity client does not submit to the investment service provider all the information required for completing a securities transaction, including the LEI code, the service provider shall not be able to perform the reporting duty pursuant to law. In this case, the transaction orders of such legal entities cannot be executed starting from 3 January 2018.