US financial agencies must adopt common data format for firms’ filings under congressionally passed bill

Congress has passed legislation requiring the US Securities and Exchange Commission, Federal Reserve and five other financial agencies to adopt uniform data standards, including a nonproprietary legal entity identifier, for submissions from banks, companies and firms.

“The data standards will enable better information processing, software-enabled filing preparation, and data reconciliation,” said the Data Coalition, an initiative of the Data Foundation, a nonpartisan think tank partially funded by technology and consulting firms.

The US Treasury Department, as leader of the Financial Stability Oversight Council, consisting of the US financial regulatory chiefs, is to promote “interoperability of financial regulatory data across members of the Council,” the bill says.

The data standards are to include common firm identifiers for collection of information reported to regulators, including a “common nonproprietary legal entity identifier” available under an open license, the legislation says.

A globally recognized firm identifier known as the Legal Entity Identifier, promoted by the Basel-based Global Legal Entity Identifier Foundation, can be considered by the US agencies.

Military bill

The Financial Data Transparency Act was tucked into the $858 billion National Defense Authorization Act, which includes a military pay increase, continued support for Ukraine, and provisions to strengthen air power and land warfare defense.

The bill passed the Senate 83-11 on Dec. 15, and the House 350-80 the week before. The overwhelming bipartisan majorities ensure President Joe Biden will sign it.

The bill “will finally make key information more accessible to regulators, investors and the public while reducing the burden for company compliance,” said Representative Carolyn Maloney this month in discussing an earlier version of similar legislation she sponsored.

The legislation specifies that SEC rules are to cover filings by companies, investment advisers, credit-rating agencies, and asset-based securities, among other entities.

'Fully searchable’

The information standards in the legislation are to render data “fully searchable and machine-readable,” the legislation says. In addition, they are to “incorporate standards developed and maintained by voluntary consensus standards bodies.” The standards also are to “use, be consistent with, and implement applicable accounting and reporting principles.”

The Government Finance Officers Association, a group of state and local officials, expressed concern that the development of data standards “is a significant unfunded mandate and places great cost and administrative burdens on governments and entities of all sizes.”

Local governments will likely have to “outsource this function or enable their current systems to create this format,” the group said.