25 October 2016–In the rapidly moving world of reference data, LEI codes now as important as ISIN codes, CUSIP numbers..
The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code, to uniquely identify legally distinct entities that engage in financial transactions.Below extract is courtesy of 25 Oct retrospective by Michael Shashoua, the soon-to-depart editor of Inside Reference Data
(WatersTechnology) Implementation of the legal entity identifier (LEI), put into motion after the 2008 financial crisis to avoid future inability to track holdings with counterparties should those firms fail, has had many twists and turns over the past five years. It still has a few years to go to reach the goal set by the body that now administers it, the Global Legal Entity Identifier Foundation (GLEIF).
Along the way, the LEI picked up steam as European regulations such as the Markets in Financial Instruments Directive (MiFID) II, the European Market Infrastructure Regulation (EMIR) and Basel III required firms to better track their transactions and holdings. Those rules presage a complication now apparent in LEI implementation—reconciling differences being allowed by local operating systems, as discussed in a 2013 column, “It’s Not Easy Being Extraterritorial.” It could also be debated whether the entrenched interests of local for-profit service providers make such reconciliation and standardization more difficult.
Once LEI issuance actually began, the concerns shifted to the quality and accuracy of LEI data, and standardization is being seen as a key element to improve those traits. By early 2015, quality was just starting to appear on the radar of LEI concerns, as noted in “The LEI’s Next Frontier.” DTCC and Swift had by then formed the Global Markets Entity Identifier (GMEI) utility, which is the registrar of record in many jurisdictions, and their executives have been cognizant of the importance of LEI data quality.
By this year, the issue of LEIs that had already lapsed became more apparent, as noted in “Identification and Verification.” GLEIF has now jumped on the problem of keeping LEIs current, launching a verification effort this July, as noted in the column. It could also be debated whether this was soon enough, but with only about a quarter of GLEIF’s eventual goal of 2 million LEI registrations complete, the verification and weeding out of lapsed LEIs could have come along much later in the process. GLEIF has demonstrated aptitude and credibility as it heads into the latter phases of instituting LEIs. Although many more still need to be registered, the identifier is well on its way.
The Regulatory Oversight Committee (ROC) is a group of over 70 public authorities from more than 40 countries established in January 2013 to coordinate and oversee a worldwide framework of legal entity identification, the Global LEI System. The ROC was established as a stand-alone committee after recommendations by the international Financial Stability Board (FSB) and endorsement of the ROC Charter by the Group of Twenty (G-20) nations in November 2012.
LEIs are issued by “Local Operating Units” (LOUs) of the Global LEI System. As of end January 2016, over 415,000 entities from 195 countries had obtained LEIs from 29 operational issuers endorsed by the ROC
A result of joint public and private sectors efforts, the LEI supports authorities and market participants in identifying and managing financial risks. In particular, LEIs may be used for reporting and other regulatory purposes in the various jurisdictions represented in the ROC (more about LEI uses). The LEI code is associated with reference data for each entity, currently including core identification information, such as the official name of the legal entity, the address of its headquarters and address of legal formation
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