Dishonest and devious LEI code providers

We have previously covered in an article why it’s not a good idea to buy the cheapest LEI code you can find online, and how a quality provider of LEI codes can save you both time and money.

But what happens if you fall into the clutches of a dishonest provider, and how do you get yourself out of trouble? You can read more about the subject in this article.

What characterizes a dishonest LEI provider?

There are good, reputable LEI code providers who take pride in providing their customers with a secure platform for managing their LEI codes. They wouldn't dream of reselling their customers' information, and they offer both excellent customer service and continuous updating of their customers' company data.

But unfortunately, there are also providers for whom it is simply a matter of getting as many LEI codes under administration as possible. They do this by dumping their prices and offering the cheapest LEI code on the market. You can read more about why it is not a good idea to go for the cheapest LEI code in this article.

These providers are known for making false claims about their country of origins, e.g., passing themselves off as Danish or British when they are not. They may find themselves breaking various marketing laws by spreading falsehood about their competitors and soliciting their competitors' customers directly in an attempt to get them to switch providers.

Such solicitations may happen via email or physical postcards. These communications often contain misleading or blatantly false information that ends up confusing and worrying business owners. Here they were thinking that their LEI code was well taken care of, and then they are told that it has expired and must be renewed immediately - and even with a new provider! Of course, this is not true, and if you are the victim of such solicitations, you should contact your current provider immediately to clear up any misunderstandings.

Why do dishonest LEI providers exist in the first place?

There may be several reasons why certain LEI providers try to acquire competitors' customers or offer (too) cheap LEIs to new customers. Perhaps they have been operating at a loss for several years and need to boost the number of customers before they can sell their company to a competitor. Or perhaps they make money by selling their customers' information to unknown third parties.

What happens if you end up with a dishonest LEI provider?

We regularly hear about the following experiences from customers who choose the cheapest LEI code they can find on the internet:

• They suddenly get a lot of spam mail
• The company data is not being registered correctly
• The LEI code expires without the customer being notified
• The company data is not updated

It can have serious consequences for a business owner if his or her LEI code is not registered correctly or expires. This may mean that the bank or asset manager suspends any trading activities.

How do you tell the difference between a good and a bad LEI provider?

We have said it before: if an LEI code is for sale at a price significantly below the market price, that's a red flag. The same goes for free LEI codes.

There can be several reasons why an LEI provider chooses to dump the prices of its LEI codes or starts giving them out for free - which you can read more about in the section below - and none of these reasons benefit you as a consumer.

So watch out for low prices and offers of free LEI codes.

What's the problem with a cheap or free LEI code?

An LEI code costs money. It is not possible to sell an LEI code below the market price without losing money yourself. It is also not possible to distribute free LEI codes. If this happens, then that is a clear indication that the LEI provider will do anything to attract you as a customer - and it is likely to result in one of the following scenarios:

• The price of your LEI code will increase drastically without warning
• Your information is sold to an unknown third party
• The LEI provider tries to get as many customers as possible to attract a buyer of their business

A provider purchases its LEI codes from one of the LOUs, which in turn must pay registration fees and taxes to GLEIF. An LOU, which stands for Local Operating Unit, is the issuing organization that must be certified by GLEIF to be allowed to issue LEI codes.

In addition, the LEI provider must be able to offer you an online platform for when you need to buy, renew or move your LEI code. That platform must be continuously developed and updated so it is safe, fast and intuitive for you to use. The provider should also have a customer service team ready by the phones, so the customers can get help at any time. All these things cost money, and the LEI provider has to make enough to cover these costs. This should give you some idea of why it is not possible to offer (very) cheap or free LEI codes.

How do you quality-check an LEI provider?

There are some basic things you should check before choosing an LEI provider. If the provider's website is poorly written, it is usually the first indication that the provider is not who they make themselves out to be.

You may also want to ask yourself the following questions:

• Does the price of my LEI code include all fees and charges to GLEIF?
• Does the provider know about company structure and legislation in my jurisdiction?
• Will I save time and trouble by purchasing my LEI code from this provider?
• What do I get for the money? (If English-speaking customer service is a priority, then you must choose accordingly).
• Does my provider have a profitable and stable business (how long has the company been around and is it a viable business )?

You may think that it sounds like a lot of time spent checking an LEI code provider, seeing that an LEI code is merely a formal requirement that doesn’t cost a lot of money to acquire.

Yes, but please keep in mind that your company will need an LEI code for many years to come - and that by choosing the right provider, you can avoid thinking about it in the future. Imagine if you can rest assured that your LEI code is both updated and renewed for years to come. If you look at it that way, there is both time and money to be saved by choosing a trustworthy and dependable LEI provider.

How do I avoid a dishonest LEI provider?

If you have ended up in the clutches of a dishonest LEI provider, do not despair. There are ways for you to escape the relationship.

In most cases, we can help you stop the transfer of your LEI code to another provider, and also get you a refund of your money. The majority of LEI providers offer the right of cancellation and refund paid amounts. Depending on whether you have requested to move an existing LEI code to a new provider, or whether you have created an LEI code for the first time, there are a number of options that can help ensure that you end up registered with an honest LEI provider.

In order to reject a transfer request of your LEI code to another provider, you must confirm this to us in writing within 3 days. Once you do this, we can reject the transfer immediately. If we receive a request to move your LEI code away from us, we will always contact you directly to ask you to confirm the move.

If you have already paid the amount in full to the other provider, you must contact them directly and request that the amount be refunded. In most instances, this will not be a problem, although we do know of one LEI provider who will refuse to issue a refund. While it is their legal right to do so, it’s hardly morally upstanding behaviour, and it’s definitely not considered good customer service.

If you have ordered a new LEI code from another provider, you must be quick to act if you wish to cancel the request. Once the LEI code is issued, it cannot be changed. However, you can move an existing LEI code, including validity period, to our platform.

If you want to move your LEI code to our platform, we handle all the practicalities for you - free of charge. We also ensure that all your company information is registered correctly, so you do not risk unnecessary interruptions or fines when conducting financial transactions.

All we need from you is a power of attorney (POA) giving us the necessary authorization to transfer the LEI code from your previous provider to us. You keep your current validity period for up to 1 year, and if your LEI code has expired or is close to expiration, we can renew it for you.

Click here to move your LEI code to our platform now or contact our customer service to find out more.

In summary

It’s a good idea to spend some time on finding the right LEI provider. Once you are in safe hands, you can sit back knowing that your LEI code is always valid and up to date. It saves you time and trouble - and ultimately money.

However, if the damage is done, i.e., if you have fallen for an offer that is a little too good to be true and now find yourself being bombarded with emails from an unknown third party - or if you are suddenly told by your bank that your LEI code is not valid, and that you can’t trade in securities - then find yourself an LEI provider with a good reputation and a solid financial foundation and ask them for help.

At Global FinReg, we are always ready to help if you have any questions.