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ISIN Code, LEI Code: Definition, Function, Differences

With several million financial securities and stock market operators around the world, the sector has equipped itself with quick identification systems. The first is the ISIN code (International Securities Identification Number). The second is the Legal Entity Identification number (also known as LEI).
The LEI and ISIN are both used to increase the transparency of financial transactions. Thus, it is possible to map out the financial system to optimally secure the markets.

Reading Time : 5 minut(s) - | Updated on 13-02-2024 10:43 | Published on 14-06-2023 14:12 

What is the ISIN code

A ISIN code corresponds to the identification code of a security listed on the stock exchange. It was put into place in 2003. All securities traded on the markets have a distinct ISIN code. This allows them to be identified without risk of error, in the same way as a license plate number. This series of numbers and letters appears whenever the instrument is mentioned: stock market order, prospectus, tracking of quotes, financial communication, deposit statements, commercial notifications, etc.

For investors, the ISIN code proves to be convenient as it allows to easily locate a financial title, especially when the name of the support is complex or unreadable, or when there are several compartments. It is indeed possible to easily:

- Find information about the latest communications related to the financial title,
- Monitor a course's progress,
- Buying or selling the title,
- Verify the composition of an investment fund...

For example, the shares of the Renault company listed on Euronext Paris are referenced under the ISIN code FR0000131906. The "Lyxor CAC 40 (DR) UCITS ETF - Dist" ETF's is FR0007052782. The real estate investment fund "OPCI PREIM ISR VIE" is listed under the code FR0014000AM9.

Assurance Vie

How does the ISIN code work

The ISIN code is an alphanumeric code. It is made up of 12 characters, divided into three parts.

• The first two letters correspond to the country in which the parent company is located. This code is based on the ISO 6166 standard created by the ISO organization (International Organization for Standardization). For example, an ISIN starting with "FR" pertains to France, "LU" to Luxembourg, "US" to the United States, "IE" to Ireland, "ES" to Spain... This refers only to the country of the company, the title to which it refers remains accessible internationally.

• The security identification number made up of 9 digits. It is computer-generated according to a complex formula. This number is unique for each title.

• The last character is a unique control digit obtained using an algorithm. It is calculated from the previous 11 characters and is intended to guard against fake numbers.

The ISIN code: for whom

An ISIN code is a unique identifier that can be assigned to most financial instruments, including:
• Stocks and bonds,
• Investment funds: UCITS (Undertakings for Collective Investment in Transferable Securities, composed of SICAVs and FCPs), OEICs (Open-Ended Investment Companies), real estate funds such as REIT, OPCI...,
ETFs (Exchange Traded Funds), also known as trackers,
• State bonds or private entity bonds,
• Derivatives of other financial assets... In France, this code is assigned by the French Agency for Codification (AFC), a service of Euroclear, international depository of financial instruments. The ISIN code is in principle final and can only be changed in the context of certain specific operations.

How to find the ISIN code of a financial security

The ISIN numbering system has become a standard on an international scale. Therefore, you can easily find it on most exchange sites: if you find the title, its ISIN will inevitably be associated with it.

Aside from platforms, the ISIN code can be found on any documents issued by the parent company about the financial title: legal documents, investment documents, reports, prospectuses, press releases...

How to request an ISIN code

Only companies that issue publicly traded financial securities can obtain a code. In this case, the request forms part of the overall long and laborious process of going public. The website allows you to get one for stocks, bonds, hedge funds, mutual funds, or even special funds.

The request for an ISIN code can take from one to several days. It greatly depends on the characteristics of the company. The fees vary according to the needs and will only be determined after the submission of the request. Simply click on the request link for an ISIN code and fill out a form with all the requested contact information. The next steps are then communicated to you after validation of the form.

What's the difference between ISIN code and LEI code? Examples

LEIs and ISINs share many similarities. Both codes are used to increase transaction transparency, consist of alphanumeric characters, and are recognized worldwide. The difference between LEIs and ISINs primarily lies in their respective objectives and the types of entities that may obtain them.

The LEI code identifies a legal entity. It is mandatory for organizations that place stock exchange orders without an intermediary, otherwise, these orders are not executed. Any company may also request an LEI. Conversely, the ISIN code solely identifies financial securities listed on a stock exchange, for which it is mandatory.

Thus, the same entity can hold both an LEI number (to trade on markets) and an ISIN number (if it is listed on the Stock Exchange). For instance, financial securities under ISIN are not obliged to acquire an LEI if these entities do not themselves operate on the financial markets by placing orders. Conversely, an unlisted investment fund may have an LEI code but will not have an ISIN.

Schematically, a publicly traded bank may have an ISIN number (to identify its shares on the market) as well as an LEI number (mandatory as a stock market intermediary). This may not necessarily be the case for a publicly traded pharmaceutical company, which will only hold an ISIN code for its shares in the stock market. A non-listed SME that does not conduct stock market operations on its own can also request an LEI number if it wishes, but cannot have an ISIN.

Since 2018, an initiative has been launched to link ISINs with their corresponding LEIs. This means that a negotiable financial asset can be associated with the legal entity that buys, issues, or sells the security. This represents a significant advance in aggregating data necessary for a precise analysis of risk exposure.

What is the purpose of the LEI code

The LEI code is a unique 20-character number that allows financial regulators worldwide to track transactions with the aim of ensuing financial stability, and to intervene if necessary. Its objective is to increase the transparency of financial markets, to better manage investment risks and to protect investors.

An LEI code is required for entities such as companies, charitable organizations and government agencies that buy or sell financial securities on their behalf or on behalf of others: stocks, bonds, warrant bonds, government bonds or other instruments. As of June 2023, nearly 130,000 French companies had one.

How to obtain an LEI code

A LEI code is issued by a Local Operating Unit accredited by GLEIF (Global Legal Entity Identifier Foundation). Financial institutions and regulators use the LEI to identify players in the financial markets. Under the MiFID II directive, the LEI is mandatory from 2018 for all market players who have their own legal entity registered in Europe. However, any company can nowadays request an LEI, which allows for quick identification of the company by its business or financial partners internationally. The cost is quite affordable, at less than 100 € HT per year.

How to know the LEI code of a company or an investment fund?

If an investment fund places its own stock market orders, it must hold a LEI number. To find it, an open database has been created by GLEIF. With the use of the LEI search tool, you can check several pieces of information such as:
• the ownership structure of the company,
• the address of the headquarters,
• the LEI issue date.

This search tool is accessible to everyone.
You can also search via the website by simply indicating the legal identity of the company.

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