Posted Nov 28, 2018 by Martin Armstrong
QUESTION: Hi Marty,
I wanted to ask you if you know anything about the LEI (legal entity identifier) that brokers are now requesting from clients who trade forex and other derivatives and who have accounts under a business structure?
I recently opened a trading account under a business structure (company/trust) and was only told yesterday I have a month to get an LEI (which I have to pay for myself and renew every year) otherwise I cant trade.
I have tried to gather info on it but there is only limited info and it is mainly info from the perspective of the reporting entities (such as brokers) and virtually nothing from the traders perspective. It seems like something that has been imposed by the EU.
I was wondering if you have also had to obtain an LEI?
ANSWER: A Legal Entity Identifier (or LEI) is a 20-character identifier that identifies distinct legal entities that engage in financial transactions. The LEI is a global standard, designed to be non-proprietary data that is freely accessible to all so they can track what entities are doing worldwide. More than 600,000 legal entities have registered from 195 countries. This was created as a consequence of the 2007-2008 Financial Crisis. It is interesting how all governments manage to expropriate more power and control with each financial crisis. It was the CDOs created by Goldman Sachs which blew up the world just as the Black & Schol models in options blew up the financial world back in 1998 with the Long Term Capital Management crisis. But the legal entities that have created these catastrophes are NEVER punished. Not a single entity lost its license and not a single director ever when to jail. The people who blow-up the world are always UNTOUCHABLE and the rest of us lose our rights and freedom in the process.
The argument back during the 2007-2009 financial crisis was that there was no way to identify corporations and financial institutions to recognize the counterpart corporation on financial transactions. Therefore, the GOVERNMENTS could not figure it out while the counterparties knew who they were dealing with and accepted their credit position. Accordingly, it was impossible for governments to identify the transaction details and track the money flows of individual corporations and institutions. Governments argued they needed a simple identification method of everyone in the world.
In 2011, the G20 (Group of Twenty) called on the Financial Stability Board (FSB) to provide recommendations for a global Legal Entity Identifier (LEI). They wanted a cross-border entity to track everyone in the world. This led to the development of the Global LEI System which began issuing these LEIs to create a unique identification of legal entities acting within the entire world economy. The G20 claims this is necessary so they can know the total risk amount in a crisis. However, the G20 is still incapable of estimating individual corporations’ and the financial institution’s amount of total risk exposure. They are incompetent when it comes to analyzing risks across the entire global marketplace. They cannot even resolve the failing financial institutions in Europe because of local regulation that prevents cross-border solutions within the Eurozone.
The G20 blames this lack of knowledge was one of the factors that made it difficult for the early detection of the financial crisis, they will NEVER act to prevent anything in the first place. Adding more regulation simply reduces liquidity and shrinks the world economy. The G20, in response to these inabilities of financial institutions to identify organisations uniquely, claim that was the problem so that their solution was that financial transactions in different national jurisdictions can be fully tracked. Currently, the ROC (Regulatory Oversight Committee), a coalition of financial regulators and central banks across the country, cannot possibly act in advance for they fail to comprehend the dynamics of the world economy.
Hence, this is just another means of collecting data to be able to hunt for global taxation.