There are now quite a few LEI code providers on the market - both globally and here in Denmark. All providers are similar in that they must be accredited by GLEIF to sell LEI codes, they have to offer a platform to register, renew and move LEI codes, and they are responsible for obtaining and validating company data for their customers. But that’s where the similarities end. There are huge differences between LEI code providers and what they offer you as a customer.
You may think that it's not really worth your while to think about what you get for your money when you buy an LEI code. As a business owner, you are forced to acquire an LEI code if you trade in securities. It has been mandatory for all companies to have an LEI code in Denmark since 2018. Most people consider it to be a necessary evil, and they go for the cheapest LEI code on the market.
But still, take a moment to think about this forced acquisition: if you are required by law to renew your LEI code every single year - and you must as long as you have a business dealing in securities - then you will have to spend both time and money on it. So why not choose a provider where you get a little more for your money than just an LEI code? Why not make it as easy and convenient for yourself as possible?
The quality of LEI providers
If you just want a cheap LEI code and you want to renew it yourself once a year, there are plenty of providers that offer this. They have neither the technical ability nor the ambition to offer you other services, and that's fair enough as long as you know that's the premise.
One might venture the claim that anyone can settle down and sell LEI codes. What separates a good LEI code provider from a bad one is the service they offer you in addition to the LEI code itself.
There are providers around that offer you more than just an LEI code. Their service includes automatic updating and maintenance of your LEI code when obtaining your company information through the local business registry. This means that you don't have to remember to update your information in multiple places yourself. They also remind you when it's time to renew your LEI code and offer to do it for you too, free of charge.
This way, you save time and effort. If you choose a validity period of 3 or 5 years, you can also save money. But check your provider's finances if you buy a long validity period. A provider with poor finances is likely in imminent danger of bankruptcy and may be planning to sell your LEI code to a third party.
Checklist for choosing an LEI code provider
Before choosing an LEI code provider, you should consider the following:
- Is my provider accredited through GLEIF?
- Does the price of my LEI code include all GLEIF fees and charges, so I don't get unexpected extra bills?
- What do I get for the money? (Is Danish-speaking customer service a priority for me? If so, then I must choose a Danish provider.)
- Do I get a service that benefit me and my business - e.g., do I save time and trouble by buying my LEI code from this provider?
- Does my provider know Danish company legislation and structure?
- Does my provider have a profitable and stable business (how long have they been around, are they sticking around for the long term, and are the company finances in order)?
If at any time you get an eery feeling that your LEI code provider regards you as a commodity that they can possibly resell to a third party, then you need to beware.
Why you shouldn’t choose the cheapest LEI code
It's tempting to go for the cheapest LEI code you can find. But there are several reasons why it is not a good idea to buy the cheapest LEI code: some providers offer cheap LEI codes just to attract new customers, after which they increase the price significantly. They may also resell your LEI code to another LEI provider.
It is very important that you ensure that you do not pay for a long validity period with a cheap LEI code provider that suddenly dissolves or goes bankrupt, and that your LEI provider does not resell your information to a third party.
Beware of offers of a cheap or free LEI number
How do you know if an LEI code provider is in imminent danger of going bankrupt? You can check this by looking up the company in your local business register (e.g., U.S. SECURITIES AND EXCHANGE COMMISSION in US or GOV.UK in UK). But there are other, less time-consuming ways of feeling out a provider. If you are offered an LEI code at a price that is significantly below the average market price, then this in itself is a red flag. And if a provider starts offering free LEI codes - as we have recently seen examples of - then you really need to watch out.
There is only ONE reason why a provider would dump prices or offer free LEIs: the business is not profitable, and they are in imminent danger of shutting down. In a last-ditch effort to attract a buyer to their business, they try to increase the number of customers so that the evaluation of their company increases. This means that your LEI code, which contains your company information, may end up in the hands of a third party, potentially outside of Denmark.