Challenges for the Legal Entity Identifier (LEI)
Operating under a self-registration model, the objective of the Legal Entity Identifier (LEI) initiative is to create a globally unique unambiguous identifier associated with a single corporate entity. To achieve buy-in, the initiative needs to be driven by strong regulatory pressure. A 2012 WatersTechnology survey, sponsored by Sybase, claimed 37% of participants felt the Legal Entity Identifier (LEI) would still be beneficial to implement even if it is not a regulatory requirement to do so.
The Regulatory Oversight Committee should undertake regular reviews of the scope and extent of coverage of the LEI to reflect emerging regulatory and market requirements for the LEI use according to an agreed schedule. The Regulatory Oversight Committee should undertake regular reviews of the LEI reference data according to a set schedule to monitor the required changes, additions, retirements and modifications.
In September 2003, the International Standards Organization began work on a code that would be allocated to legally independent entities, the IBEI. In November 2007 the IBEI was rejected for being too wide-ranging. The idea was resurrected in July 2008 with a smaller scope and renamed IGI, the scope being Issuers and Guarantors (ISO 16372). Why did IBEI fail? The scope was too large and was not driven by regulatory pressures.
End users submit data to the Local Operating Units (LOUs), this could lead to data quality issues. The LOUs will need to ensure the data they holds is complete, valid, consistant, accurate and up to date. Prior to publishing, a LOU has the responsibility to check registrations for data quality issues such as duplicates and accuracy by validating against public sources.
One of the major issues for Local Operating Units (LOUs) is duplication. Scenarios could arise where the same legal entity has a different Legal Entity Identifier (LEI) in different Local Operating Unit (LOU) repositories. This would be an issue for any federated registration model. To avoid duplication, each LOU will need to verify that a legal entity has not been previously registered with another LOU, although the onus will be on the legal entity itself to certify any entries. For the Local Operating Units (LOUs), deduplication could be challenging. Local Operating Unit (LOU) repositories will be set up in local languages. This not only complicates the porting of data between LOUs, but also makes entity name comparisons across borders difficult, especially if the comparison is between different character sets (e.g Cyrillic and Latin). This is why the Local Operating Units (LOUs) should hold the name of the entites in both the local language and English.
Data protection and cross-border sharing
Issues may arise with data protection and cross-border data sharing. The Swiss Federal Data Protection Act of 19 June 1992, covers information not only pertaining to individuals, but also legal entities including partnerships and trusts. Under Swiss Law, non-listed companies are not legally obligated to divulge their ownership structures, this would leave a gap in the data required for collection. There may also be similar issues with jurisdictions such as Liechtenstein (Data Protection Act 14 March 2002/Data Protection Ordinance 9 July 2002) and Austria (Bundesgesetz über den Schutz personenbezogener Daten -- Datenschutzgesetz 2000).
The Global Legal Entity Identifier System (GLEIS), by its global nature, has to contend with cross-border differences, for example, even the definition of a legal entity can vary between jurisdictions, compare the definition of a legal entity under English common law and Shari'ah law.
A legal entity identifier (LEI) can be registered by a method known as "Assisted Registration" that is by a third party. Although permission must be gained it is not clear which party would be liable for the quality and completeness of the data.
It is not clear what happens when corporate actions such as mergers, reverse mergers and spin-offs occur. Annual re-certification should update the records to the correct status although this will mean there will be a time lag between the action and the Local Operating Unit (LOU) record being updated.