What to Know Before Entering EU Financial Markets
If your company plans to enter the European Union’s financial markets—by opening a securities account or starting to use investment services—you’ll likely discover that you must obtain a Legal Entity Identifier (LEI) before taking any further steps.
Many businesses are unaware that without a valid LEI, it’s impossible to trade on stock exchanges, place trade orders, or even open a securities account. This is not just administrative formalism—it’s a binding regulatory requirement across the EU that ensures transparency and security within the financial system.
What Is an LEI and Why Does the EU Require It?
The LEI is a 20-character international identifier that uniquely identifies legal entities involved in financial transactions. It works like a digital passport for your company. It clearly shows who you are, what you own, and how you’re connected to other entities.
Following the 2008 financial crisis, the G20 mandated the Financial Stability Board (FSB) to develop a global system to identify legal entities and reduce systemic risks caused by lack of transparency. This led to the creation of the Global Legal Entity Identifier System (GLEIS), governed by GLEIF, a non-profit organization based in Switzerland.
The Legal Framework: MiFID II, MiFIR and the LEI Obligation
The requirement to use LEIs is established in several core EU regulations:
-
MiFID II – Directive 2014/65/EU
-
MiFIR – Regulation (EU) No 600/2014
-
Commission Delegated Regulation (EU) 2017/394
These regulations mandate that investment firms must report securities transactions and identify all parties involved. The only accepted method for identifying a legal entity is via a valid LEI code. Full legal details are available on EUR-Lex.
In simple terms:
If your company wants to buy, sell, or trade securities in the EU, an LEI is mandatory. Financial institutions are not allowed to process transactions without it.
How to Apply for an LEI
LEIs are issued by Local Operating Units (LOUs) that are accredited by GLEIF. Most businesses use registration agents such as LEI System, who streamline the process by collecting and validating your company’s data and then coordinating with the issuing LOU.
Once approved, the LEI is published in the GLEIF global database, where banks, regulators, and other parties can easily access and verify it.
LEI Validity and Renewal
A Legal Entity Identifier is valid for one year. After this period, it becomes expired, and the company is no longer compliant with EU financial regulations.
The European Securities and Markets Authority (ESMA) has made the requirement clear:
Transactions may only be conducted with entities whose LEI status in the GLEIF database is marked as “ISSUED.”
If your LEI expires, financial institutions must reject your trade orders by law. Fortunately, renewal is simple. You can renew your LEI up to 60 days before expiration, and with LEI System, the process takes just a few minutes.
Why the EU LEI Requirement Matters
The EU is working toward a future-proof financial system, where trust, transparency, and accountability are key.
The LEI system helps to:
-
Fight money laundering and hidden ownership
-
Simplify regulatory reporting
-
Ensure that all market participants are identifiable and traceable
-
Lay the groundwork for digital legal identities, including the emerging vLEI standard
If someone asks you for your LEI, it’s not just a formality. It plays a key role in the EU’s vision of building a transparent financial future.
📘 Apply for or renew your LEI now at:
👉 leisystem.com
