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

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