Session 403 Legal Entity Identifier: Truth, Fiction, and Action

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2 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 IASA 86 TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW

3 Agenda LEI: What is it? LEI: Why is it? Alphabet Soup -Regulatory Guidance Implementation - The Truth, Fiction, and Action

4 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

5 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

6 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)

7 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

8 Alphabet Soup of Developing LEI

9 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

10 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

11 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

12 LEI: Fact or Fiction? NAIC Summer 2012 Adopted Blanks change to report LEIS on Investment Schedules Effective 1 st 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

13 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

14 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

15 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

16 Questions??

17 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. IASA 86 TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW