IASA 86TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Session 403 Legal Entity Identifier: Truth, Fiction, and Action
Dennis Lebar, CPA
Accounting and Regulatory Specialist - SunGard iWorks
Maria Bifulco
Director, Project Management – Investment Operations – Prudential
Agenda
LEI: What is it?
LEI: Why is it?
Alphabet Soup -Regulatory Guidance
Implementation - The Truth, Fiction, and Action
LEI: What is it?
What is it?
• Legal Entity Identifier
• 20 Character Global Code
• An unique identifier associated with a single corporate entity that identifies it
in the financial market place
•Provides a consistent means of identifying parties to financial transactions
Regulatory Objectives
• More effectively measure and monitor systemic risk
• Improve the efficiency of data aggregations and analysis across financial
market participants
• Better assess counterparty risk
• Facilitate sharing information globally
• Provide for the structural hierarchy of related companies
LEI: What is it?
Benefits to Industry
• Better identify, measure and manage counterparty exposure
• Improve the speed and accuracy of data aggregation
• Facilitate pre and post trade analysis
• Facilitate sharing of information within the organization
LEI: Why Is It?
“Indeed, the recent crisis has reaffirmed an old lesson – good
data and good analysis are the lifeblood of effective
surveillance and policy responses at both the national and
international levels.”
Financial Stability Board and International Monetary Fund (October 29, 2009)
LEI: Why Is It?
What are the impetuses for developing LEI?
• Globalization
• International markets
• Development of international standards and regulation
• Technology
• Large Data
• The Cloud
• Financial Meltdown of 2008
• Lehman Brothers Collapse
• AIG
• Bear Stearns
Alphabet Soup of Developing LEI
Making sense of the Alphabet Soup
Who’s Involved?
• United States
• OFR – Office of Financial Research
•Established under Dodd-Frank
• Improve quality of financial data
• SEC – Securities Exchange Commission
•Allowed for optional use of LEIs for hedge funds and commodity pools
• CFTC – Commodity Futures Trading Commission
•Mandated use of LEIs for Futures Trading
• NAIC – National Association of Insurance Commissioners
Making sense of the Alphabet Soup
Who’s Involved?
• International
•G-20 – Group of 20 Countries representing major world economies
» Seeks to strengthen international cooperation and ensure global
economic stability
•FSB - Financial Stability Board
» Established by G-20 to promote financial stability
•ROC – Regulatory Oversight Committee
» Established the legal underpinnings for the GLEIF
•GLEIF – Global Legal Entity Identifier Foundation
•COU – Central Operating Unit
» Assures adherence to consistent governing principles and standards
• LOU – Local Operating Units
» Assigns LEIs, validates and maintains associated reference data
Making sense of the Alphabet Soup
What is there, so far?
• CICI – Commodity Futures Trading Commission Interim Compliant
Identifier
• Required for all Swap Counterparties
• GMEI – Global Markets Entity Identifier
• Utility Provided by DTCC & SWIFT replaced the CICI Utility
• DTCC - Depository Trust & Clearing Corporation
• SWIFT - Society for Worldwide Interbank Financial Telecommunication
• GEI - General Entity Identifier
• Considered Pre-LEIs
• Globally recognized
LEI: Fact or Fiction?
NAIC
• Summer 2012 – Adopted Blanks change to report LEIS on Investment
Schedules
• Effective 1st Q, 2013
• “Electronic Only Columns”
• 2013 – Q&A published
• LEIs not “fully implemented and operational”
• CICIs and “Pre-LEIs” are NOT (yet) LEIs
• Companies can but are not required to report them in the LEI fields
• State specific requirements regarding insurer’s obligation to obtain an LEI
• Vendors of investment data including CUSIP, Bloomberg, Thomson Reuters
and FT Interactive, have stated their intent to include the LEI as a new field
available to their subscribers
Implementation – The Truth, Fiction, and Action
• Required for CFTC trades (futures and swaps)
• Mostly populated on Schedule DB
• Best Effort for Schedule D
The number of GMEI are growing (gmeiutility.org)
4Q13 download – 95,950
1Q14 download – 128,121
Implementation – The Truth, Fiction, and Action
Problem – How to match the LEIs to Issuers and Counterparties
• For DB, manually matching. Using address of brokers to pick a LEI
close enough. LEI stored only in reporting database
• For D, help from trade system. Only a .2% success match so far.
LEI stored in Accounting System.
A few examples of LEI:
Morgan Stanley and Co, Inc – 9R7GPTSO7KV3UQJZQ078
Exchange CME – SNZ2OJLFK8MNNCLQOF39
Implementation – The Truth, Fiction, and Action
What are we doing in 2014? Looking for better way to match LEIs to Issuers
•Cusip.com - Free file: initial total file and then updates only
•Bloomberg
•Waiting for more info from the NAIC
Questions??
IASA 86TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Please Complete the Session Evaluation Form on the Conference App and Include Your Conference Registration ID# to be Included in a Drawing for a Free Conference Registration for the 2014 Annual Conference! NOTE: Your Conference Registration ID# is Located at the
Bottom Left Hand Corner of Your Badge.