Tine Thoresen: The VIP Treatment

It seems that every time I enter a department store or check out of a hotel, I’m now being offered the chance to sign up for some sort of loyalty scheme or awards program by filling in a form with my personal details.

The reference data industry is, as always, very much in tune with what’s hot, and it looks like this market is now moving in the same direction. The VIP benefit will be to have a unique universal legal entity identifier.

The 2 million or so entities that will be subject to this legal entity identifier are likely to have to go through the same self-registration process as any cash-savvy shopper or tourist has become used to.

In May, a coalition of financial services trade associations published recommendations for global legal entity identifier requirements, as requested by regulators and market participants.

It was perhaps not a big surprise that the coalition recommended the new identifiers be assigned via a self-registration process, meaning it would not be up to the financial services firm to register all the entities it deals with, but for the entity itself to register.

So does it make sense? Yes. Self-registration is a tried-and-tested model. In the retail industry, barcodes are assigned like this. And even without much prior knowledge of the barcode system, most people would easily guess that a company that wants to sell a product in retail outlets would be the organization responsible for registering its products and getting the barcode. The same is true for Bank Identifier Codes (BICs), which identify international financial institutions. The institution would have to fill in a form to request a code, verify and accept the information. When registering for either of these codes, there would also be cost involved that covers the expense associated with processing the request.

The Barcode Case
The interesting point, though, is that both these examples are relevant to today’s legal entity identification discussion. Barcodes are issued by the standards body GS1, and BIC codes are assigned by interbank utility Swift—both candidates for becoming a registration authority for the new legal entity identifier.

This means the self-registration process firms have now said they want is already the process used by these two contenders, presumably benefiting any future implementation process.

It may sound as though this is not particularly groundbreaking, but the statement from the coalition provides further backing for a process that is perhaps more challenging than it sounds. The reason is that even though the fill-in-a-form-to-register approach is pretty straightforward, it is less so when it comes to forcing entities to register for a code. The VIP benefit of assigning a number may not be as appealing as a free perfume sample or a complimentary suite upgrade to the average consumer.

In fact, introducing the self-registration process for legal entity identifiers is believed to require regulatory involvement—and not just in the US and Europe if this is to become a truly international identifier. International regulators may have to incorporate this into law to ensure legal entities are forced to register. It would not work if it was optional to register and entities failed to see the benefits. VIP treatment from pleased financial institutions could be a bonus, but the financial industry would then have to pay serious attention to the VIP benefits offered by the program. It is clear that self-registration is a model that works—now it is just about making it work for the LEI Insider scheme.