What’s an LEI?
The Legal Entity Identifier, or LEI for short, is a twenty-character code that acts as an identifier for entities participating in derivatives transactions. Following the collapse of Lehman in 2008, it was difficult to quickly assess the connection/exposure of market participants to Lehman, and the creation of LEIs was the solution. The Commodity Futures Trading Commission (CFTC) now uses this as a way of tracking swap exposure among counterparties.
Why do I need one?
The CFTC requires that all entities register an LEI prior to transacting in derivatives, such as caps and swaps. Additionally, the LEI is supposed to be renewed on an annual basis until the hedge expires to ensure the entity’s data remains accurate. If an LEI is not renewed 12 months after its initial registration, it would change from “Active” to “Lapsed” status in the global system.
While a lapsed LEI is still valid for use in regulatory reporting, the failure to renew could mean not being compliant with the regulators best practices and many banks will require it be renewed before transacting again.
Where Do I Get One?
As a part of our involvement when placing a hedge, Pensford typically handles the initial LEI registration on behalf of our clients and will monitor its status for the initial registration period of one year. The initial registration costs $65 and we pass this cost through on our final invoice.
Once you’re 30 days out from your LEI’s expiration, we reach out with a reminder that it’s due for renewal. Some clients will handle the LEI renewal internally, but most have Pensford continue to renew and monitor on their behalf.
If you would like our assistance monitoring your LEIs or getting them back current, shoot us an email at firstname.lastname@example.org or give us a call at (704) 887-9880.
For more information about LEIs, check out the official GLEIF website.