On 18 October 2024, the European Securities and Markets Authority (ESMA) launched a survey on the use of legal identifiers in transaction reporting and record keeping obligations. Specifically, ESMA is consulting on how the optionality of legal identifiers would impact market participants were it to be introduced in future reporting regimes or in the review of existing reporting regimes.

By way of context, when conducting a review of draft Technical Standards mandating the LEI in the context of the Digital Operational Resilience Act (DORA) and Markets in Cryptoassets Regulation (MiCA), the European Commission raised concerns on mandating the use of the LEI for non-financial entities. The European Commission requested the introduction of optionality for EU entities that are not financial entities, giving non-financial companies the choice of using either LEI or the European Union Identifier (EUID). Optionality has since been introduced with regards to the legal identifiers to be used to identify buyers/sellers engaging in transactions in cryptoassets in the MiCA draft Regulatory Technical Standards on record keeping. ESMA replaced the initial approach with a ‘waterfall’ approach to identification of the parties involved in transactions which sets the LEI as the default identifier for legal persons but allows for the use of alternative identifiers where an entity does not have an LEI. Alternative identifiers will be defined at EU level and will meet the following criteria: is unique; neutral; reliable; open source; scalable; accessible; available for free or at a reasonable cost; and is subject to a governance framework. The European Commission has advocated for the use of the EUID as a potential alternative identifier for non-financial legal entities in the context of DORA. The EUID has been developed according to ISO 6523 to identify companies and branches for the purpose of exchanging information between national registers via the Business Register Interconnection System (BRIS) established under Article 22 of the Codified Company Law Directive (EU) 2017/1132 and managed by the European Commission. The EUID has not been assessed by ESMA members as an alternative identifier. ESMA notes that the EUID does not contain the same level of information as the LEI (for example, on group structure) and does not allow the same data validation possibilities as LEI for all actors in a reporting chain.

Market participants are invited to complete the survey until 12 November 2024. The survey has 9 questions (copied below), with an estimated completion time of 5-10 minutes.

1. Is your entity subject to any European reporting regime?
2. Have you already geared your systems towards reporting specific legal identifiers?
3. Have you already considered setting up processes to obtain an ISO 17442 LEI code to identify your clients or members of your platforms?
4. Have you considered the validation agent options offered by GLEIF to obtain and maintain LEIs for your clients/participants? https://www.gleif.org/en/lei-solutions/validation-agents
5. Is your entity subject to the record keeping requirements under MICA (Articles 68 and 76)?
6. How would you plan to retrieve and validate the EUID code provided by your clients or other non-financial entities?
7. Do you believe that the EUID meets the criteria to be used in the definition of "alternative identifiers"?
8. Given the choice, would you rather report: LEI or EUID?
9. Would you prefer to report another identifier other than LEI or EUID and which you deem meets the criteria (for alternative identifiers)?
10. Is there any other feedback you would like to provide on the topic of legal identifiers?

If you have any questions on the survey, please contact Aniqah Rao.