Does investing through a holding company require an LEI code? Does having a sole proprietorship require an LEI code? Can you invest through a company? We have collected the most frequently asked questions about investments through a holding company in this article.
Do you need to have an LEI code when investing through a holding company?
Do you want to make an investment through a holding company? Then there is one thing that you have to be aware of before you get started. If you are to invest via your holding company, your company needs to have an LEI code. An LEI code is a unique identification code that is required by law for all companies that trade in securities.
At Global FinReg, you can easily and quickly get an LEI code; it takes 0-2 business days. If you need an LEI code immediately, e.g., before the stock exchange closes, you can use the Express LEI Service. To get directly to the Express LEI Service application, you can click here.
Can you invest through a holding company without an LEI code?
What if your holding company does not have an LEI code? The short answer is that you cannot invest via your holding company without an LEI code. All financial institutions, including banks and asset managers, are subject to a legal requirement of having to provide an LEI code for all their customers' financial transactions. This means that your investment bank cannot complete your trade if you don’t have a valid LEI code.
The legal requirement to use the LEI code comes from two EU directives, which are called the MiFIR regulation and the MIDID II directive. The two directives entered into force on 3 January 2018, and state in brief that all companies dealing in securities must have an LEI code.
Can you invest in shares through a holding company?
Yes, you can invest in shares through a holding company. You need an LEI code and a company depository. You can easily order the LEI code here.
A corporate depository gives you access to real-time analysis and share prices; in short, everything you need when you want to invest on behalf of your company. You can set up a company depository with the largest banks or trading platforms.
Remember that your trading platform cannot approve your trade in securities if you do not have an LEI code. As such, it is a good idea to have an LEI code created immediately if you want to invest via a holding company.
Why does my holding company need an LEI code in order to invest?
The LEI system emerged in the wake of the financial crisis in 2008 at the request of the G20 countries. The G20 countries wanted a global company identifier that could provide accurate information about the companies trading on the financial markets - and thus help create the transparency and stability that was lacking in 2008.
The LEI code tells us who is who, who owns whom, and who owns what. The LEI system thus plays a major role in the fight against money laundering and terrorist financing, Customer Due Diligence (CDD), and Know Your Customer (KYC). You can read more about KYC here.
The LEI system became mandatory for all companies in 2018, which is why you must have an LEI code if your holding company is to invest in securities.
How do I get an LEI code for my holding company?
Ordering an LEI code is both easy and fast. At Global FinReg, it takes less than two minutes to create your application.
As one of the only LEI providers on the market, Global FinReg automatically receives information about your company through your country's business register. This means that when you create your LEI code, you only have to fill in the following:
- The company's CVR number, or the company's name
- Your name
- Email address
- Telephone number
It's easy and fast to get an LEI code, and we also remind you when it's time to renew your code.
When we create your LEI code using your CVR number, it also has the advantage that most banks and investment institutions automatically get your LEI code. This means that you do not need to send it to them. You can read more about LEI codes and banks here.
Do you have to have an LEI code if you invest privately?
It is only if you invest as a company, aka invest through a company, that you must use an LEI code. If you trade in securities as a private person, you do not need to have an LEI code.
The LEI code is used to identify companies' investments in the financial markets and is therefore not relevant for private individuals.
Should an LEI code be used for sole proprietorships?
Does a sole proprietorship need an LEI code? No, as a rule, it is not necessary for sole proprietorships to have an LEI code. However, there are a few investment instruments that require a sole proprietorship to have an LEI code.
To be absolutely sure whether your sole proprietorship needs an LEI code, you should contact your bank or asset manager. They can provide you with additional information about exactly which requirements apply to your sole proprietorship.