All companies, foundations, endowments, investment funds, etc., must have an LEI code in order to trade in securities. This is due to a requirement from the EU called MiFID II. The requirement came into force to increase transparency and security in the market. The LEI code makes it possible to identify your company as an investor. Therefore, there is a requirement that as a company, you must be able to present an LEI code to Nordea, Danske Bank, Nykredit, etc.
If you provide your CVR number when you apply for your LEI code, the largest banks automatically receive your LEI code. If not, then you must send it to your bank advisor. At Global FinReg, you always fill in your CVR number when you submit an application for an LEI code. We then automatically retrieve your company information from Virk.
Do you need an LEI code for Nordea, Danske Bank, and Jyske Bank?
Do you have any doubts about whether you need an LEI code when you invest through Danske Bank, Nordea and Jyske Bank? If you are a legal entity that wants to buy or sell securities, it is a requirement that you can provide an LEI code to your investment bank. As a company, you must therefore provide your LEI code to Danske Bank, Nordea or Jyske Bank when you trade in securities through them. As previously mentioned, your investment bank will automatically retrieve your LEI code if your company has a CVR number. The CVR number must be provided when applying for and registering your LEI code. You can register your LEI code with us at Global FinReg’s website: www.globalfinreg.com.
Do I need an LEI code at Nordnet?
If you invest through Nordnet as a company, you must also have an LEI code. Nordnet also falls under the MiFID II directive, which means that they must be able to report an LEI code on all their business customers. You can read more about how Nordnet handles LEI codes on their website. You will also see that on their website, Nordnet refers to Global FinReg as the LEI provider.
If Nordnet cannot automatically retrieve your LEI code, e.g., because your company is registered outside the Nordic countries, or because your company does not have a registration number, you will receive a message from Nordnet about the LEI code.
Why do banks like Danske Bank need to see my LEI code?
On 3 January 2018, the MiFID legislation entered into force. This means that all legal entities must have an LEI code when trading in securities. This helps to create security and make the financial markets more transparent. A securities dealer may only carry out a transaction subject to reporting if the company has an LEI code. This is the reason why, as a legal entity, you must have an LEI code, and this is why banks such as Danske Bank are subject to the requirement to report your LEI code. You can read more about the MiFID scheme at Financial Conduct Authority.
LEI codes in banking
What value does the LEI system bring to the banks, you might ask? The truth is that LEI system is constantly evolving and becoming increasingly more valuable to banks. They deal with thousands of legal entities, many of which have similar names. With a unique identification register, it is possible for the banks to search for information in a central register. This means that Danske Bank can see the LEI code here rather than searching multiple other registers to find the same information. The LEI system therefore plays a major role in the banks' customer due diligence (CDD), know your customer (KYC), and anti-money laundering (AML).
The future of banks and the LEI system
Today, the LEI system is used to identify customers and onboard new customers quickly and efficiently. Previously, banks had to check and verify documents themselves, a highly time-consuming procedure that often resulted in incorrect or falsified information. Today, banks can easily find the necessary information with a unique, up-to-date system. As such, the LEI system also helps in the fight against anti-money laundering and financing of terror, as it is possible to identify the transactions on the financial markets. When creating an LEI code, you must indicate the ownership structure of your company. Ownership structures and who owns whom thus play a major role in the banks' procedures when it comes to customer due diligence (CDD), know your customer (KYC), anti-money laundering (AML), and the fight against terrorist financing.
The LEI system will become increasingly more significant for banks as more countries adopt the regulations - and as further legislation follows in 2024. Stay tuned.