November 16, 2017 - After much review and analysis by an LSTA Working Group, Markit Entity Identifier (“MEI”) Guidelines were published this week to clarify when an “MEI” will (and will not) be issued by IHS Markit to loan market participants.
But what, exactly, is an MEI and why does it matter? The MEI is a unique 10-digit code issued to distinctly identify legal entities in the loan market, including banks, buy-side institutions, custodians, trustees and corporate borrowers. Identifying the buyer, seller and agent by number rather than name is essential to transmitting information between systems to facilitate settlement, utilize FpML standard formats and reconcile positions. MEIs and CUSIPs are key ingredients to any technology development that aims to increase data quality and operational efficiency.
In general, MEIs are issued as expected – one per legal entity. However, since loan trades can be entered into by multiple fund managers on behalf of the same fund (aka Multi-Managed Funds), it is necessary that the fund be issued multiple MEIs to recognize each separate and distinct fund/fund manager relationship. This is perhaps the primary reason that the loan market veered toward the MEI and not the more popular Legal Entity Identifier (“LEI”) as only one LEI is issued per legal entity. Similarly to the LEI, MEIs will not be issued at the sleeve or strategy level as they do not represent separate legal entities but rather only the segments of a fund’s portfolio.
In addition, any legal entity that has been issued an MEI will receive an additional MEI for each country in which it has at least one foreign branch/office outside of its primary jurisdiction. Insurance company ‘separate accounts’, wherein assets are segregated and insulated from claims against the insurance company itself, shall receive a distinct MEI from that of the insurance company, provided that specific documentation more fully described in the Guidelines is submitted. MEIs will be issued to (i) each designated series of a limited liability company established under the Delaware Code, (ii) individual trusts issued under a collective trust agreement and (iii) separate pension plans governed by a single trust. Further, consistent with Australian and Cayman Islands laws, the trustee, acting on behalf of a trust, will be issued the MEI, not the trust itself. However, under Bermuda law, each trust is viewed as a separate legal entity and entitled to the MEI. An MEI may be assigned to any asset pool set up under a pool structure within an umbrella fund (or funds). Provided required legal documentation is submitted, public open ended funds including UCITS (EU and Ireland), SICAVs (France and Luxembourg) and OEICs (UK) will be issued MEIs.
While the above is a brief overview, if you want a more complete description of MEIs and how corporate actions affect MEIs, please refer to the MEI Guidelines. If you would rather speak with a human, please contact ehefferan@lsta.org
