LEI Impact on Corp Actions May Have Been Over-Estimated, Claim Experts

Despite claims the upcoming legal entity identifier (LEI) may be able to involve issuers within corporate actions standardization debates, experts agree the LEI is expected to have very little impact, if any at all, on the corporate actions space.

While the LEI will ensure the corporate action is linked to the right entity,
challenges such as the increasing complexity of events and timeliness will remain untouched.

London-based Hugh Stewart, sales director at DClear Services, SmartStream Technologies, explains that the LEI, just like anything that can contribute to
the standardization of corporate actions, will have a positive impact in this space, but the value will remain limited in the short term.

“Every step of automation and standardization in corporate actions shaves costs, and while an LEI could be useful, if you have listings in more than one exchange, the impact will be limited in the grander scheme of event management costs,” says Stewart.

“All systems will not necessarily have all the right alphanumeric boxes to have the LEI as their sort index mechanism, and as a result, firms will still require translation tables,” he says.

However, an issuer may well have to stamp their corporate actions with the LEI, if they are part of a jurisdiction that requires this. Washington DC-based Mike Atkin, managing director at the EDM Council, says it all still depends on how the regulators implement the LEI, and what the reporting requirements will be.

“Regulators could mandate that every entity must use the LEI, meaning issuers would certainly use it when releasing their corporate actions. This could help improve quality, timeliness and processing efficiency, but these remain open issues the regulators have yet to show their stance on,” he explains.