IGTA Journal - Winter 2020/2021

Delivered by Ingenta IP: 193.129.26.79 On: Tue, 28 Jan 2020 14:32:43 Copyright: Henry Stewart Publications - Cleland and Hartsink a global LEI system for parties to f inancial transactions. The LEI is a 20-character alphanum eric code, designed to uniquely identify any legally distinct entity that engages in f inancial transactions. Its aim is to provide a globally consistent and unique code for each legal entity; separate to any domestic registration. LEI records include reference data, including the domestic business regis ter number, and provide basic information on the legal entity itself, such as its name and address (‘who is who’), and its ownership structure (‘who owns whom’) with respect to direct and ultimate parent or children entities. The structure and underlying elements and features, which ensures that unique codes are issued to each entity, is def ined under the International Organisation for Standardisation (ISO) standard 17442. The standard was f irst def ined in 2012 and then revised in 2019. The structure of the LEI is designed to support automated processing (for example, the code includes two check digits). The global LEI system is designed to benef it both public and private sector users. It contributes to many f inancial stability objectives such as improved risk manage ment in f irms, better assessment of micro and macroprudential risks and facilitation of orderly resolution, and enables higher- quality and more accurate f inancial data overall. 2 To realise the G20 objectives, the FSB established two organisations: ● The Global Legal Entity Identifier Foundation (GLEIF) — a Swiss not-for-profit foun dation, 3 established in June 2014. GLEIF is mandated to support the implementation of the LEI programme on a nonprofit basis. To realise its mandate, GLEIF cooperates with LEI issuers as a partner. ● The LEI Regulatory Oversight Committee (https://www.leiroc.org ) — established in January 2013 to oversee the worldwide framework of identification of legal enti ties. Its main tasks are oversight of GLEIF (to ensure that GLEIF continues to meet the GLEIF Statutes 4 as determined by the FSB) and policy making for the global LEI system to ensure that policy is in the broad public interest. How LEIs are issued and tracked Any legal entity can obtain an LEI for business or regulatory purposes for a regis tration fee from a GLEIF-accredited LEI issuer, 5 also referred to as a local operating unit (LOU). LOUs are responsible for sup plying registration and renewal services to f irms. An LEI registrant can permit a third party (notary public, bank etc) to perform an LEI registration on its behalf, only if the registrant has provided explicit permission for such a registration to be performed. The GLEIF website explains the registration process and a list of all accredited LOUs in the 14 G20 languages. LOUs are accredited by GLEIF for each jurisdiction where they wish and are able to deliver services that meet the requirements set out in GLEIF’s Master Agreement. 6 For instance, although there are currently only two LOUs physically based in the UK (Bloomberg and the London Stock Exchange), registrants may choose the services of any of the 18 LOUs that are accredited to issue LEIs for UK entities. The global LEI system is designed to encourage competition between LOUs to minimise cost and prevent monopoly prof i teering. Fees are paid by legal entities when registering initially and renewing their LEI registration annually, on a cost-recovery basis. There has been a signif icant reduc tion in these fees since the early years of operations, with prices having more than halved in many jurisdictions. 7 LOUs must verify the reference data with the national registration authority 8 of the jurisdiction involved. The LEI registrants Page 323 - - - - - - - - IGTA eJournal | Winter 2020/21 | 39