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5 Common Mistakes to Avoid When Applying for a Legal Entity Identifier (LEI)

Common mistakes to avoid when applying for a Legal Entity Identifier (LEI)

Introduction

Legal entities that take an active role in international financial transactions are given the 20-character Legal Entity Identifier (LEI), a unique identification number. The LEI is a key component for businesses that operate in the world’s financial markets, as it is used to identify the legal entity in financial transactions. Although applying for an LEI can be simple, it’s important to avoid common mistakes that might cause a delay or even prevent the LEI from being issued. In this article, we will discuss the common mistakes to avoid when applying for an LEI.

What is a Legal Entity Identifier (LEI)?

A Legal Entity Identifier (LEI) is a distinctive code comprising 20 characters that is assigned to legal entities engaged in financial transactions worldwide. The Global Legal Entity Identifier Foundation (GLEIF) established this widely recognized standard with the intention of giving legal entities in financial transactions a distinctive identity. The LEI is used to recognize the legal entity participating in a financial transaction and is widely used across the globe.

Mistakes to avoid when applying for a Legal Entity Identifier (LEI)

Mistake #1: Providing incorrect data

 

Giving insufficient or incorrect data is one of the most frequent errors applicants make when submitting an LEI application. The legal name of the entity, its registered address, and other identifying information like its tax identification number need to be given accurately and completely as part of the LEI application process. Any mistake or omission in this information can result in the application being rejected or delayed, leading to a potential loss of business opportunities. It’s necessary to double-check all the information before applying to prevent this error.

 

Mistake #2: Choosing the Improper Entity Type

 

It’s important to choose the right entity type when applying for an LEI. The legal entity can be categorized by its entity type, which may include a corporation, partnership, or sole proprietorship, depending on how it does business. Choosing the wrong entity type can lead to the application being rejected or delayed. To avoid this mistake, it is important to review the options carefully and select the one that accurately describes the legal entity.

 

Mistake #3: Making multiple LEI requests for the same entity

 

Applying for numerous LEIs for the same legal company is another common mistake. Each legal entity is only allowed to have one LEI, and applying for multiple LEIs for the same entity can lead to confusion and delays in financial transactions. To avoid this mistake, it is important to check if the entity already has an LEI before submitting a new application.

 

Mistake #4: Failure to renew the LEI

 

The renewal of LEIs is required every year to keep them active after their initial year of validity. If the LEI is not renewed, financial transactions may be delayed or even stopped. Keeping track of the LEI renewal date and submitting the renewal application before the expiration date will help you avoid making this error.

 

Mistake #5: Providing a questionable business justification

 

For the LEI to be issued, a legitimate business justification is required. The LEI may be rejected or issued later if a legitimate business explanation is not provided. The business justification is an essential part of the LEI application procedure and is required to ensure that the legal entity applying for an LEI has a legitimate business purpose.

Final Thoughts

It requires careful accuracy and attention when trying to apply for an LEI. By avoiding these typical errors, one may guarantee a quick and easy LEI application procedure that will result in effective participation in international financial markets.

Categories: Company law
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