SIFMA, along with the Clearing House, Enterprise Data Management Council, the Financial Services Roundtable, the Futures Industry Association, International Swaps and Derivatives Association, the Investment Company Institute, and the Managed Funds Association today submitted a comment letter to the Treasury Department’s Office of Financial Research (OFR) on a proposal to develop a system of uniform legal entity identifiers (LEIs) to measure and evaluate systemic risk in the financial system.
“SIFMA is actively engaged in the process of identifying an effective LEI standard. We have been in dialogue with OFR and other regulatory agencies to understand their goals and preferred approaches, and are working with other trade associations and industry stakeholders as well,” said Randy Snook, executive vice president at SIFMA. “It is critically important that the FSOC coordinate disparate LEI efforts taking place across regulatory agencies. We appreciate the OFR’s outreach to foreign regulators, as a globally coordinated approach will be necessary for effective implementation. SIFMA and the industry are committed to finding the right solution for an LEI standard, but we are working on a very tight timeframe and hope that pre-existing deadlines do not prevent us from developing the right structure to meet the FSOC’s policy goals.”
Currently, there is no universal system for identifying legal entities that participate in financial markets. To assist in their efforts to monitor connections in financial markets for systemic risk, OFR released a statement discussing its intent to standardise how parties to financial contracts are identified in the data OFR collects.
In the joint letter, the trade associations urged the Treasury Department to coordinate with all the major domestic and global financial services regulators so that there is only one LEI standard.
The trade associations also made preliminary observations, including:
* The entity responsible for the LEI process (the LEI “issuer”) should be a non-profit with a stable funding source and an open and transparent process;
* The Treasury Department should clearly define who is responsible for obtaining an LEI, and preliminarily the trade associations see benefits to a self-registration model in which legal entities would register a limited amount of information about themselves and then would certify that information periodically, or upon changes;
* The trades agree in concept with the LEI characteristics contained in the cross-regulatory whitepaper entitled “Creating a Linchpin for Financial Data: The Need for a Legal Entity Identifier,” especially that the LEI be neutral;
* The data elements for the LEI process should be considered carefully; and
* The trades believe it is important to have a carefully thought out strategy to phase in the use of LEIs.
The associations also noted that they will be working together to develop an industry proposal.