Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The Dodd-Frank Wall Street Reform and Consumer Protection Act established the Office of Financial Research, or OFR, within the Treasury Department to improve the quality of financial data available to policymakers and to facilitate more robust and sophisticated analysis of the financial system.  The OFR has recently posted updated FAQs on legal entity identifiers, or LEIs.

The LEI is a reference code to uniquely identify a legally distinct entity that engages in a financial transaction. Currently, there are many ways to identify entities, but there is no unified global identification system for legal entities across markets and jurisdictions. The establishment of a global LEI system is expected to be a significant achievement in responding to the vulnerabilities of the global financial system and providing meaningful long-term benefits for both the public and private sectors. When Lehman Brothers collapsed in 2008, financial regulators and private sector managers were unable to assess quickly the extent of market participants’ exposure to Lehman or to explore quickly and fully how the vast network of market participants were connected to one another.

In January 2013, the FSB-sponsored work reached a milestone when an implementation group concluded its work, and handed responsibility for launching and overseeing the global LEI project to a stand-alone group called the Regulatory Oversight Committee, or ROC. On January 24-25 in Toronto, Canada, the ROC held its inaugural meeting and continued to make progress toward the G-20 target of March 2013 for launch of the system. Among the earliest decisions, ROC members appointed an OFR official as the first Chair.

In the United States, the Commodity Futures Trading Commission, or CFTC, has issued a rule requiring swap counterparties to be identified by a legal entity identifier by July 16, 2012. Because the global LEI system would not yet be functioning at that time, the CFTC provided for a CFTC Interim Compliant Identifier, or CICI, that conforms to the endorsed global LEI standard, and has made an explicit commitment for the CICI to transition to the global LEI. The U.S. Securities and Exchange Commission has also issued a proposed rule that would require the use of an LEI, if available, for derivatives reporting and a final rule for private fund use of an LEI in meeting reporting requirements.

Check frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.