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GLEIF 2019 Annual Report Showcases Early Compliance with European Single Electronic Format and Demonstrates Benefits of LEI Inclusion

GLEIF showcases how the LEIs should be included within digital, machine-readable financial documentation on the basis of ESMA’s ESEF mandate, to enhance trust and ease data aggregation, and demonstrates how simple it is to incorporate the LEI into electronic signatures as an additional best practice.

Author: Stephan Wolf

  • Date: 2020-06-18
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For the second consecutive year, GLEIF has published its annual report in human and machine-readable Inline XBRL and HTML format, with its Legal Entity Identifier (LEI) embedded within both the annual report and the digital certificates of GLEIF’s signing executive officers. This was delivered in partnership with XBRL International and Workiva, and in cooperation with the European Securities and Markets Authority (ESMA).

There is enormous significance and a valuable message to all issuers of securities on EU regulated markets in this development:

  • GLEIF becomes a frontrunner in complying, on a voluntary basis, with new EU regulation which determines the electronic reporting format for issuers preparing their annual financial reports beginning on or after 1 January 2020 - the European Single Electronic Format (ESEF).
  • Secondly, by embedding its LEI into the document GLEIF showcases how issuers can meet the mandatory requirements of the ESEF.
  • Thirdly, by embedding the LEI into the electronic signatures of the signing officers, GLEIF demonstrates through a Proof of Concept how simple it is to incorporate an additional best practice step that could generate end user trust in the authenticity and integrity of the documents.

Embed LEIs in financial documents: Advance public good

At a time when many of us are taking important and extraordinary measures to protect the safety of society, there is currently an acute awareness of the public good that can result from collective efforts and a sense of ‘working together’. In the spirit of this sentiment, while using the 2019 annual report publication to showcase the progress made by GLEIF and its partners, we also want to take the opportunity to strongly encourage the financial industry to align on an approach that is in the best interest of all market participants.

“We are proud that our platform and our support teams are continuously available as our customers work towards ESEF compliance. As the global leader in Inline XBRL, Workiva helps thousands of companies improve data transparency and trust in their reporting and compliance.” - Marty Vanderploeg, CEO of Workiva.

GLEIF strongly encourages all issuers to step up their efforts to comply with the new single electronic format, the ESEF, specified by ESMA.

Embedding LEIs into financial documentation is mandated by ESMA, which strongly supports GLEIF’s effort to advocate for timely and high quality compliance with the ESEF requirements.

Steven Maijoor, Chair of ESMA said: “ESMA commends GLEIF’s efforts to showcase, on a voluntary basis, how preparers should comply with the ESEF requirements, including demonstrating how the LEI is embedded in ESEF reports. ESMA believes that the LEI is the only data element allowing a unique and persistent identification of market participants. That is why ESMA’s ESEF requirements mandate the use of the LEI identifier for annual financial reports prepared in electronic format.”

Significant advantages of this approach to financial market participants include:

  • Easy verification of the filing entity’s identity based on its LEI, resulting in greater end user trust in the authenticity and integrity of the documents.
  • Automated access to aggregated data on the filing entity. This will create multiple benefits including: enhanced visibility of the entity’s reference data available within the Global LEI Index; opportunities to create new online databases that collate key data assets of entities with an LEI; and easy aggregation of information on companies obtained from multiple sources supporting comparability of standardized financial information.
  • Increased transparency for end users on an entity’s ownership structure. Relationship networks between LEIs can be quickly and automatically established when the LEIs of the filing entity, its affiliates, subsidiaries and parent companies are provided in machine-readable financial reports.
  • Improved ability for regulators to minimize market abuse.

Furthermore, GLEIF strongly advocates for all issuers to follow suit on GLEIF’s example and as an additional step, embed their LEI in the signature of their accounts when filing their annual financial reports. Mass implementation of this approach will lead to industry-wide gains. Increased trust, enhanced data check methods and reduced fraud will benefit regulators and all financial market participants.

“GLEIF’s 2018 and now 2019 Annual Report demonstrate that the LEI, combined with the XBRL standard, is a powerful and global way to increase trust and transparency. It serves as an important marker for corporates, policy makers and regulators everywhere.” - John Turner, CEO of XBRL International.

LEIs beyond reporting: Supporting economic stability and digital transformation

Taking the broader context of the current global pandemic into consideration, we should also consider the valuable role that the LEI plays, together with the trust and transparency it delivers, in promoting and supporting economic stability and growth. The Global LEI System operates as a broad public good, designed to facilitate market transparency and efficiency, improve risk management and risk assessment, and to support financial stability. It was established as a result of the financial crash of 2008. This responsibility has become even more poignant as we prepare to navigate a significant period of economic uncertainty in coming months.

The LEI also has a vital role to play as the world becomes increasingly digital. From banking to supply chain management, industries everywhere are adjusting to the digitization of processes and transactions. Agile market entrants are embracing new technologies to challenge traditional business models and this is leading to global digital transformation, as organizations rethink their approach to managing data and interacting with suppliers and customers.

In a digital world, the role of trust is key to successful relationships. Successful trading conditions rely on a certainty of who is transacting with whom. From this perspective, identity management sits at the heart of all digital transformation. The Global LEI System is uniquely placed to enable digital transformation in a way that is truly interoperable, preventing user lock-in for vendors and consumers alike. The Global LEI System solves the problem of trust for legal entities on a global scale. As a regulatory endorsed system overseen by the LEI Regulatory Oversight Commission (LEI ROC) , it is the only system that establishes a recognized, monitored and standardized global identity for legal entities, linked to national ID systems. It is underpinned by open data , meaning any person or company can access the LEI and its associated reference data. Furthermore, the Global LEI System bridges traditional and online processes by serving as a tool to identify the counterparty in any transaction, and can aggregate data on legal entities held in repositories.

You can view the GLEIF 2019 Annual Report here.

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About the author:

Stephan Wolf is the CEO of the Global Legal Entity Identifier Foundation (GLEIF). Since January 2017, Mr. Wolf is Co-convener of the International Organization for Standardization Technical Committee 68 FinTech Technical Advisory Group (ISO TC 68 FinTech TAG). In January 2017, Mr. Wolf was named one of the Top 100 Leaders in Identity by One World Identity. He has extensive experience in establishing data operations and global implementation strategy. He has led the advancement of key business and product development strategies throughout his career. Mr. Wolf co-founded IS Innovative Software GmbH in 1989 and served first as its managing director. He was later named spokesman of the executive board of its successor IS.Teledata AG. This company ultimately became part of Interactive Data Corporation where Mr. Wolf held the role of CTO.

Tags for this article:
Client Relationship Management, Data Management, Digital Identity, Global Legal Entity Identifier Foundation (GLEIF), Global LEI Index, Know-Your-Customer (KYC), LEI Business Case, Open Data, Over-the-Counter (OTC) Derivatives, Risk Management, Standards