SEC Commissioner Stein Encourages Industry Incorporation of LEIs and Other Data Initiatives (with Lofchie Comment)
SEC Commissioner Kara Stein delivered remarks at Meet the Market, North America, urging the industry to accelerate the incorporation and acceptance of the legal entity identifier ("LEI") and advocating for the further development of an approach to standardizing and interpreting data.
According to Commissioner Stein, greater use of LEI "could increase profits while mitigating market risks." She reported that over 360,000 LEIs have been issued in 191 countries, and encouraged the industry to help accelerate this growth. She cited two recent SEC rulemakings that incorporate the use of LEI: (i) mandatory security-based swap transaction reporting and (ii) proposed rules that would modernize reporting for registered investment companies. Commissioner Stein further stated that the full benefits of LEI have yet to be realized.
Additionally, Commissioner Stein advocated for the creation of an Office of Data Strategy at the SEC to, among other things, "ensure a thoughtful and holistic approach to data collection, business analysis, data governance, and data standards." Finally, she asserted that the next challenge is "to bring to life additional coding schema that will enable a new depth of data aggregation," such as the developments of a unique product identifier and a unique trade identifier.
Lofchie Comment: Knowledge is good. But all of the regulators, acting as a group and not independently, should be getting together to formulate a long-term, unified plan to obtain the data that is actually useful for carrying out their duties. Our current "system" is that individual regulators formulate individual data reporting requirements that are sometimes hastily adopted and don't actually work in practice (Form PF being my favorite example to point to).In point of fact, I agree with Commissioner Stein that the use of LEIs is among the more sensible regulatory initiatives; on the other hand, product identifiers and trade identifiers have the potential to be bottomless pits of wasted resources. Do the regulators really need a report of the exact terms of every transaction? Is building such a data system really worth the expense? How will it be kept current? How will it be kept secure? Maybe instead, the SEC should focus on modernizing the technology currently used by it and market participants, such as EDGAR.