Public Interest Entities: How do I source this 'public' data?

In April 2014, the European Union adopted legislation to enhance the regulatory framework for statutory audits. These laws are just now coming into effect. A major component of the regulatory framework was the identification of certain legal entities that are in the public interest. Broadly speaking, four criteria exist to determine if an entity is in the public interest.

1. All entities that are both governed by the law of a member state and listed on a regulated market. A regulated market is defined in MIFID II, and there currently are over 100 markets across the 28 member states.
2. All credit institutions in the EU, irrespective of their listing status on a regulated market. A credit institution is a deposit taking organization and engages in loaning money (taking on credit risk).
3. All insurance undertakings in the EU, regardless of whether they are listed or not and regardless of whether they are life, non-life, insurance or reinsurance undertakings.
4. Entities designated by Member States as public-interest entities, for instance undertakings that are of significant public relevance because of the nature of their business, their size, or number of employees.

While much can be said about the first three criteria, we will focus our attention on the fourth criteria.

Entities designated by Member States…

This criterion is the most interesting, as each member state through their competent regulatory authority. Some member states have chosen to establish further criteria. For instance, multiple jurisdictions have included pension funds, investment companies, and other institutions. The complexity increases, as the definition of these categories may not be consistent in every jurisdiction. For instance, Spain includes criteria related to size and managing entities with respect to investment companies. These sub-criteria are not consistent across jurisdictions.

The result is that each member state has different rules, exemptions, and additional entities designated as a public interest entity.

What is the Data Management Impact?

The implication of this situation is that a single data sourcing strategy does not work well.  Instead, care must be taken to understand each jurisdiction, definition of legal entity classifications, and how to apply the exemptions.  This situation creates complexity that is not easily managed through traditional approaches with data vendors - just send a bunch of data and we will sort through it.

Kingland Approach

Data science approaches are essential to cutting through the complexity. We believe that a combination of the following techniques are essential:

• Diagnostic approach to your legal entities to understand quality to be able to apply rules
• Segmentation of your data by jurisdiction, market listing, and industry classification
• Rules applicability by jurisdiction by using flexibility to address future changes

The result of this approach is to cut through the complexity and provide you the data and ingestion rules that you need to comply with this regulation.  You are able to have confidence that you have a consistent, right answer that will stand up to scrutiny from the regulatory community.

To learn more, give us a call and follow this space for more information.