The formation of the Global Legal Entity Identifier Foundation (GLEIF) and the first meeting of its board of directors late last month signal a final push towards completion of the Global LEI System (GLEIS). A CEO for the foundation is expected to be appointed in October and will manage the Central Operating Unit (COU) of the global system, which is due to be operational in early 2015.
Gerard Hartsink, chair of the GLEIF and chair of CLS Bank International, says: “Realising the simple concept of a global LEI system will be a challenge as it is difficult to work with many different participants, but following the naming of nominees to the board of the foundation in January, we have started to analyse what we should do and how we can achieve a global system.
“The board directors of the foundation will oversee the operational rules of the GLEIS from a legal and technical perspective. There will be legal contracts between the foundation and Local Operating Units (LOUs) and the foundation will consult with LOUs and other interested parties such as data vendors before making rules that all must abide by. It will also ensure that the federated system remains compliant with rules set by the board and it will be accountable for the operation of the COU and overseeing the CEO and executive management team that will run the COU.”
Recruitment of a CEO for the GLEIF is underway through an advertisement in The Economist and with the help of a search firm. The skill and expertise requirements are considerable, with the foundation looking for someone who can demonstrate significant experience as a CEO or senior leader; experience of running a complex business; experience in data, information or infrastructure management in a financial services organisation; outstanding leadership; a public service orientation; unquestionable integrity; and commitment to the foundation for a period of three to five years.
Hartsink says there are potential candidates for the role and that the board would like to appoint as soon as possible, hopefully by October. The CEO will hire a team of about 30 people to run the COU, although it has not yet been decided whether all members of the team will be on the pay roll in-house or whether some or all will come from partner organisations.
Once the CEO is in place, the COU will be developed and is expected to be operational in January 2015. The COU will manage a central repository of LEI data, although this is expected to be outsourced. Not surprisingly, the foundation has already received interest from organisations keen to operate the repository, but Hartsink says: “The board has agreed that a legal and technical infrastructure must be in place before anything is built and that there must be a clear procurement process in place before anything is bought.”
With statutory requirements for the foundation to have both legal counsel and an auditor, the board has run a rigorous selection process and named CMS and Niederer Kraft & Frey as its legal counsel, and EY as its auditor. Hartsink says the technical infrastructure of the GLEIS will be decided in partnership with LOU managers and policies will be put in place to ensure clarity of how the system should work, including how organisations with many subsidiaries should select an LOU with which to register for an LEI.
The relationship between the foundation and the Regulatory Oversight Committee (ROC) of the GLEIS is being formalised in a legal contract that defines the responsibilities of each organisation and requires four annual meetings of the board of the foundation and the ROC. The ongoing definition of LEI data that is required to meet the systems’ ultimate aim of monitoring systemic risk is not part of the foundation’s mandate and remains within the remit of the ROC.
While the formation of the GLEIF is a critical step in the creation of the COU and the transformation of the interim GLEIS into a complete global system, Hartsink assures: “There will be no fundamental changes to the interim system and it will continue to support the principle of providing free access to all LEI data.” He is, however, disappointed that the US Internal Revenue Service chose to create an identifier other than the LEI for reporting under the Foreign Account Tax Compliance Act.