23 Jan The Top Seven Reasons why LEIs need to be renewed
The twenty character alphanumeric code based on the ISO standard connects to vital reference information and unique identification of legal organizations participating in a financial transaction Thus, promoting transparency, visibility and healthy financial transactions globally.
The LEI needs to be renewed annually. The Local Operating Unit(LOU) will send a reminder to the financial organizations 60 days,30 days and 7 days before your renewal date.
Any LEI if not actively re-verified within one year of its creation will lapse, resulting in certain regulatory and reporting issues and in some countries like the ones in the European Union, it may affect organization’s ability to trade.
Renew Your LEI
Given the importance of LEI, here are the top seven reasons why one must renew the LEI:
- Trustworthy Database
One of the main reasons why you must renew the license of the Legal Entity Identifier is the verification of the data, ensuring trustworthy high-quality data necessary for transparent transactions.
- Operational Efficiency
With a regularly updated list, the firms can rely on LEI database search to reduce counterparty risk and improve the operational efficiency.
- Credibility
Having an LEI number in itself gives you an upper hand in global transactions. It gives your financial institution credibility in transactions. By renewing your LEI annually and being on top of the game ensures that the legal entities trust you and want to have transactions with you.
- Reliability
The Legal Entity Identifier (LEI) system utilizes a method of verifying the identity of legal entities which are trustworthy and reliable. The Local Operating unit (LOU) guarantees the maintenance of all the reference and identification data of the financial institutions participating in global transactions. Renewing this kind of essential data verifies the authenticity and guarantees reliability.
- Persistence
Renewing the LEI registers important data such as merger or closure. Also if there is any change in the company’s lineage. The renewal ensures that the LEI system captures any changes that occur in the lifetime of an entity. Also according to the LEI system even if a given financial institution is dissolved through closure or merger, or even if it is completely subsumed by another entity, its original identifier shall remain operational. This allows the retrieval of reference data corresponding to the time of the institute’s activity. Thus annual renewal makes the LEI system persistent helping transactions
- Better Business & Growth
If an entity doesn’t renew its LEI on time, they are highlighted as ‘Lapsed’ on the dashboard, thus hindering their reliability and thereafter the business.
A financial institute must hence make sure they renew their LEI on time, which in turn helps them in having goodwill, which ensures better business and growth. Nobody would like to work with defaulters or entities with no updated information on a global scale. Would they?
- Transparency
The main USP of having an LEI for your legal entity is to ensure a fair and transparent, mutually-beneficial global transaction. By not renewing your LEI, you are not letting transparent transactions take place, because any vital information could have changed over a year, which isn’t updated because of failure in renewal.
With over 1million LEIs now in existence, the importance of timely renewal of the Legal Entity Identifier (LEI) has increased. The firms are required to contact their Local Operating Unit with updated information, who then in turn manually re-verifies the data. This process ensures transparency, validity, and authenticity.
A ‘Lapsed’ LEI may result in problems in regulatory reporting regimes and in some cases may also affect an organization’s ability to trade. Thus making it even the more vital to renew LEI license annually.
By annually renewing your LEI license you provide necessary details like a merger, name change, headquarters change and/or acquisition that has happened over a year to a possible client interested in trading with your organization.
For example, the European Securities and Markets Authority has specified when it is not permissible to use lapsed LEIs in the area of trade reporting. Consequently, organizations subject to relevant regulations and specific markets are no longer able to trade if their LEI has lapsed.
The process of renewal also has been made easier and simple, with the elapsing date mentioned in the dashboard itself. In par with the Common Data File Format, in the registration section of an LEI data record the data element ‘Next Renewal Date’ is also included, stating the date by which the LEI registration should be renewed and re-certified by the legal entity.
Given all these reasons and importance, have you renewed your license yet?
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