When do you need a Legal Entity Identifier? - American LEI
Important notice: from 13th April 2021 LEI is mandatory for non-EU (third country) issuers under SFTR regulation

When do you need a Legal Entity Identifier?

American LEI - Why do you need LEI

When do you need a Legal Entity Identifier?

Whilst there is no regulation equivalent to the MiFID II within the US market, its use is becoming more widespread. The Dodd-Frank Act has accellerated the adoption of universal LEIs within the US and further changes that mandate more widespread adoption of LEIs are expected in the future. The CFCT, NAIC, FED and SEC now require LEIs for certain transactions and many other bodies now request the production of an LEI when a company undertakes certain activities. A comprehensive list outlining the use of LEIs is available on the GLEIF website.

Whilst individuals are not required to possess an LEI, entities such as trusts, companies, pension funds, charities, academy schools, partnerships, and some unincorporated societies may be. LEIs are designed to identify the legal entity that is entering into financial transactions, not the financial instrument, so the process for applying for an LEI is the same for all legal entities, regardless of what instrument they will be trading.

LEIs should not be requested for individuals or for divisions of a company. If an operating division of a company requires an LEI, they should use the LEI obtained by their parent company. Separate branches of a legal entity are eligible to obtain a separate LEI if they are situated in different countries. Branches within the same country are only eligible to receive one LEI, so careful consideration should be given to which branch acquires the LEI. Moreover, the validity of the branch’s LEI is linked to that of the main branch. As such, it will be deemed to be invalid in circumstances where the main branch’s LEI is invalid (ie. If the LEI isn’t renewed). Needless to say, it is also not possible for a branch of a company to apply for an LEI if the main branch does not yet have one.

Individual jurisdictions determine whether they require an LEI to be held by entities operating within that jurisdiction. A detailed list which sets out the status of LEIs in a number of global jurisdictions is available here: https://www.gleif.org/en/about-lei/regulatory-use-of-the-lei. You will note that LEIs are now required by the Central Banks of Argentina, Mexico, Russia, and India, as well as for certain transactions in Canada, the EU, Russia, Singapore, the US, the UK, Switzerland, South Africa and Malaysia, amongst others.