crossword-referenceA confluence of events is putting enormous pressure on financial institutions to get their reference data house in order. These events range from regulatory changes to internal mandates to reduce operational risk. While the LEI (Legal Entity Identifier) will ultimately help reduce some of the reference data burden, the LEI will solve only part of the problem and widespread adoption is still a few years off. In the meantime other regulations such as FATCA, EMIR and enhanced KYC requirements require up-to-date and accurate reference data and robust processes for maintaining such data.

In our meetings with customers we have found that the language of reference data has many dialects, and many people are unsure of what various terms mean. Personnel shifts at many firms have led to non database staff being thrown into the reference data mix. We decided to create a reference data glossary to more clearly explain what data professionals mean when they use each term. Take a look and let me know if I should add more.

Entity Reference Data Glossary

Reference data is the information commonly used in datasets to describe entities. Reference data might include a number of things, but an essential component is a systematic structure or code that uniquely identifies entities and their legal relationships with parent companies and subsidiaries and changes in these relationships over time.

Enterprise Data Management (EDM) is a concept that refers to the ability of an organization to precisely define, easily integrate, and effectively retrieve data for both internal applications and external communication. EDM emphasizes data precision, granularity, and meaning and is concerned with how content is integrated into business applications as well as how it is passed along from one business process to another.

Master Data Management (MDM) comprises a set of processes, governance, policies, standards and tools that consistently defines and manages the master data (i.e. non-transactional data entities) of an organization (which may include reference data).

Golden Copy implies a record that epitomizes the highest quality information, on which any application can depend. The expectation is that the data integration and consolidation features of the MDM program are able to absorb all the various and sundry records from across the enterprise into this perfect data set.

Data scrubbing also called data cleansing, is the process of amending or removing data in a database that is incorrect, incomplete, improperly formatted, or duplicated. An organization in a data-intensive field like banking, insurance, retailing, telecommunications, or transportation might use a data scrubbing tool to systematically examine data for flaws by using rules, algorithms, and look-up tables. Typically, a database scrubbing tool includes programs that are capable of correcting a number of specific types of mistakes, such as adding missing zip codes or finding duplicate records (de-duping).

Data validation also called data verification refers to a method used to establish if data is precise, inclusive or conforms to a particular business standard. Typically, this process is used to ensure that programs and processes operate on correct and accurate data.

Corporate action is any event that brings material changes to a company and affects its stakeholders. This includes shareholders, both common and preferred, as well as bondholders.

Corporate events: Alacra defines corporate events as a change to the legal entity structure that would have a material impact on the company’s risk characteristics, such as change of ownership, change of domicile or change to regulatory status.

Entity cross reference, also called entity identifier mapping, is the process of matching or mapping entities in one database to the corresponding entities in another database. This may involve connecting the “entity keys” such as the LEI (Legal Entity Identifier), matching on entity attributes such as legal name and location or using vendor keys to create a mapping between different entity keys.

Entity management refers to the process by which record comparison, data linking, and task creation occur. More recently linked to the LEI (Legal Entity Identifier) initiative, entity data management is the process and approach towards uniquely identifying and managing legal entity data within the various systems within an enterprise.

Client Reference Data,similar to Reference Data, is the information commonly used to describe firm’s clients or counterparties. This can include the entity legal name, the location, the business description, products and services purchased, or billing and contract information.

Corporate Hierarchy or Corporate Tree is a view of a legal entity ownership structure which includes an ultimate parent entity, parent entities and subsidiary entities. These nested relationships are applied to risk scoring of entities, credit exposure, and researching beneficial ownership structures.

White List is a list or register of those that are being provided a particular privilege, service, mobility, access or recognition. Only those on the list will be accepted, approved or recognized. Whitelisting is the reverse of blacklisting, the practice of identifying those that are denied, unrecognized, or ostracized. This term is often applied to the process of vetting counterparties and clients for Know Your Customer compliance.

Delta File: describes the output file created containing incremental changes to be applied to a database. Delta files are created by comparing files of two different time periods to determine those records that have changes including: update, insert and delete records. Delta files are typically used as part of a database update procedure where there are large datasets and the desire is to only update those database records that have changed.

Single Customer View or Customer Centricity: A “single customer view” is a readily accessible, consistent summary of a customer’s product relationships with an organization, combined with essential customer data such as name, address, date of birth and credit information.

Registered Office or Legal Address:  A registered office is the address listed by the company’s registered agent. The registered office is typically listed in the company’s formation documents and is where official documents are sent and legal notifications received.

Master Data Management comprises a set of processes, governance, policies, standards and tools that consistently defines and manages the master data (i.e. non-transactional data entities) of an organization (which may include reference data).

Legal entity is an association, corporation, partnership, proprietorship, trust, or individual that has legal standing in the eyes of law. A legal entity has legal capacity to enter into agreements or contracts, assume obligations, incur and pay debts, sue and be sued in its own right, and to be held responsible for its actions.

Counterparty is a term most commonly used in the financial services industry to describe a legal entity, unincorporated entity or collection of entities to which an exposure to financial risk might exist.

Data Governance refers to the overall management of the availability, usability, integrity, and security of the data employed in an enterprise. A sound data governance program includes a governing body or council, a defined set of procedures, and a plan to execute those procedures.

Data or Information Silo is an information management system that is unable to freely communicate with other information management systems. Communication within an information silo is always vertical, making it difficult or impossible for the system to work with unrelated systems.

Legal Entity Identifier Glossary

Central Operating Unit or COU was established by the Global LEI Foundation (GLEIF), which will coordinate and oversee the actions of Local Operating Units.

GLEIS is the Global LEI System which was endorsed by the G20 to register legal entities in order to assign and maintain LEIs on a global basis.

Legal Entity Identifier or LEI is a unique identifier associated with a legal person or structure that is organized under the laws of any jurisdiction (excluding natural persons) and created in accordance with the international standard ISO 17442.

Local Operating Units or LOUs are based in national jurisdictions, sponsored by local regulators, to assign and maintain LEIs that will feed into the COU.

Pre-LOUs and Pre-LEIs:  Official Pre-LOUs and Pre-LEIs have been introduced to provide an interim solution while the Global LEI System is being developed. Both Pre-LOUs and Pre-LEIs conform to the principles outlined by the FSB. As with the proposed official GLEIS model, Pre-LEIs are allocated by Pre-Local Operating Units (Pre-LOUs).

Regulatory Oversight Committee (ROC) comprised of financial regulators from jurisdictions across the globe designed to oversee the LEI system.

Remember to take a look at our Periodic Table of Entity Identifiers for more.