Understanding the LEI Data Hierarchy

The Two-Tier Structure of LEI Data

The Global Legal Entity Identifier (LEI) system organizes data in a hierarchical structure with two distinct levels. This architecture allows for comprehensive entity identification and relationship mapping within the global financial ecosystem.

Level 1 Data: "Who is Who"

Level 1 data provides the fundamental identity information about a legal entity. It answers the basic question: "Who is this entity?"

Level 1 data includes:

• Official entity name: The legal name of the entity as registered in its jurisdiction
• Legal address: The registered address of the entity
• Headquarters address: The location of the entity's headquarters (if different from legal address)
• Legal jurisdiction: The country or region where the entity is registered
• Entity status: Whether the entity is active, inactive, or in another state
• Entity category: The type of legal entity (corporation, fund, partnership, etc.)
• Legal form: The specific legal structure of the entity
• Business registry information: Identifiers from local business registries

Level 2 Data: "Who Owns Whom"

Level 2 data expands beyond basic identification to capture the relationships between legal entities, particularly ownership structures. It answers the question: "Who owns whom?"

Level 2 data focuses on two types of relationships:

1. Direct Parent: The immediate owning entity with majority control (>50% voting rights)
2. Ultimate Parent: The highest-level entity in the ownership chain with majority control

For each parent relationship, the system records:

• The parent entity's LEI (if available)
• The relationship type
• The percentage of ownership (when available)
• The accounting consolidation method used
• Documentation supporting the relationship claim

The Value of Hierarchical Data

This two-level approach to LEI data provides significant benefits:

• Risk Assessment: Financial institutions can better understand their exposure to interconnected entities
• Regulatory Oversight: Regulators can monitor systemic risks across complex corporate structures
• Market Transparency: Investors can understand the true ownership of entities they interact with
• Compliance Efficiency: Organizations can more easily fulfill regulatory reporting requirements

"The hierarchical structure of LEI data is transforming our ability to understand and monitor the intricate web of relationships in the global financial system." — Global Financial Data Expert

Challenges in Relationship Data Collection

While Level 1 data has been well-established, Level 2 data collection has faced several challenges:

• Complex corporate structures that span multiple jurisdictions
• Differing definitions of "control" across accounting standards
• Privacy laws that restrict information sharing in some regions
• Reluctance of some entities to disclose ownership structures

Despite these challenges, the Global LEI Foundation continues to enhance the collection and validation of relationship data, improving the value of the LEI system for all participants in the global economy.