The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Global LEI Foundation Swings into Action After Taking Operational Control of the Global LEI System

The Global Legal Entity Identifier Foundation (GLEIF) has become the central operating unit of the Global LEI System (GLEIS), ending the interim system overseen and coordinated by the Regulatory Oversight Committee (ROC) of the LEI and setting in motion activities including an accreditation process for pre-Local Operating Units (LOUs), a quality management programme, and expansion of the GLEIF’s LEI service that builds on the concatenated database of LEIs issued by pre-LOUs to include a search engine for additional download options. The expanded service will be available later this month.

While the GLEIF takes control of the operation of the GLEIS, the ROC will continue in its oversight role and is calling for feedback on a consultation paper covering LEI hierarchy data. The consultation paper was released in September – along with a questionnaire to be completed by market participants and returned to leiroc@bis.org by 19 October.

The consultation paper seeks input to the design of a process for collecting data on direct and ultimate parents of legal entities within the GLEIS. It proposes that entities with an LEI would include their ultimate accounting consolidating parent, defined as the highest level legal entity preparing consolidated financial statements, as well as their direct accounting consolidating parent. The ROC says accounting definitions have been chosen as a starting point because they apply to both financial and non-financial companies, their international comparability has increased following greater convergence between IFRS and US GAAP, and they are widely used, publicly available and periodically reviewed by external auditors.

The paper suggests the parent data should be provided as part of the information necessary for an LEI to be issued, but does not include entities between direct and ultimate parents, a gap that GLEIF CEO Stephan Wolf suggests may be filled at a later date. Meanwhile, the ROC repeats its previous proposal of implementing limited LEI hierarchy data towards the end of 2015.

The handover of operational aspects of the GLEIS to the GLEIF was made in a Memorandum of Understanding (MoU) published this week along with a Master Agreement covering the contractual relationship between the GLEIF and LOUs. The MoU describes the common understanding between the ROC and GLEIF of the implementation of the governance principles of the GLEIS and GLEIF statutes, and notes the division of responsibilities for overseeing various parts of the GLEIS. Going forward, the ROC will take responsibility for policy standards concerning data that is to be collected or used for official or regulatory purposes, while the GLEIF will take responsibility for operational and technical standards necessary for a consistent implementation of the GLEIS across a federated system.

Following publication of the MOU and Master Agreement, the GLEIF introduced an accreditation programme designed to confirm the suitability of pre-LOUs – or LEI issuers as the GLEIF calls them internally – issuing LEIs. The ROC previously endorsed organisations as pre-LOUs based on the sponsorship of a regulator within the ROC. The GLEIF accreditation programme, covering both existing and applicant LEI issuers, is a more rigid regime – requirements can be seen on the GLEIF website www.gleif.org – but is based on equal treatment of all applicants.

With 25 pre-LOUs already endorsed, Wolf hopes all will pass through the accreditation process successfully to become LOUs and expects more applicants to apply for accreditation. There is no limit on the number of accredited LOUs, although numbers are expected to rise as more jurisdictions implement regulatory reporting requirements including the LEI. Meantime, LEIs already issued remain valid regardless of whether the issuer succeeds in becoming GLEIF accredited. LEIs issued by a failing issuer will be transferred to a successful accredited issuer.

Beyond accreditation, the GLEIF has started work on other elements of the Master Agreement including a quality management programme that includes data quality and service level agreements for GLEIF and LOU services, and is due to start reporting on quality issues early next year.

Towards 400,000 LEIs have been issued on a global basis, a number Wolf suggests is representative of organisations required to use the identifier in derivatives trading. He expects the January 2016 compliance deadline for Solvency II, which also requires the use of LEIs, to push numbers up and ongoing adoption of the identifier to keep momentum going.

Related content

WEBINAR

Recorded Webinar: How to run effective client onboarding and KYC processes

Increasing cost, complexity and regulatory change continue to challenge firms implementing client onboarding and Know Your Customer (KYC) systems. With an effective strategy and a clearly defined pathway, it’s possible to gain a valuable competitive advantage whilst meeting those all-important compliance requirements. But how to get there? With a myriad of different options out there...

BLOG

The UK Regulatory Regime after Brexit – What Comes Next?

By Martin Lovick, Director, and Bobby Johal, Managing Director, ACA Compliance Group. A regime in transition Investment managers are – quite rightly – focusing near-term on the cliff-edge nature of the UK/EU negotiations on future trade arrangements. Their contingency planning will have already considered the likely loss of passporting rights for UK firms exporting their...

EVENT

Data Management Summit London

The Data Management Summit Virtual explores how financial institutions are shifting from defensive to offensive data management strategies, to improve operational efficiency and revenue enhancing opportunities. We’ll be putting the business lens on data and deep diving into the data management capabilities needed to deliver on business outcomes.

GUIDE

Regulatory Data Handbook 2020/2021 – Eighth Edition

This eighth edition of A-Team Group’s Regulatory Data Handbook is a ‘must-have’ for capital markets participants during this period of unprecedented change. Available free of charge, it profiles every regulation that impacts capital markets data management practices giving you: A detailed overview of each regulation with key dates, data and data management implications, links to...