The Corporate Actions National Users Group met with Hungarian regulators and market participants. By Beáta Szőnyi, Senior Relationship Manager, GSS Hungary
In preparation for Hungary’s T2S implementation in February 2017, the Hungarian CSD, KELER, convened the T2S Corporate Actions National User Group. Since February 2016, regular meetings have been held to discuss how the market can adapt to T2S standards with regards to market claims and transformations.
The Group identified five key points (listed below) that need to be resolved, not only to be compliant with T2S CASG/CAJWG standards, but also to drive the market towards harmonisation and standardisation in the area of corporate actions. Additionally, they identified the need for market regulators to be lobbied in order to adopt certain regulatory changes and therefore the need for them to be involved in the discussions.
The most recent meeting included representatives from the National Tax and Customs Administration of Hungary, the Ministry for National Economy, the Central Bank of Hungary and Budapest Stock Exchange, as well as KELER, local sub-custodians and issuers.
In a continuous dialogue between the market players in the framework of the Corporate Actions National User Group, the following issues have been identified:
- Standardisation of data and information provided by issuers for corporate events
- Effective from this year, the Capital Market Act defines KELER as the central source of corporate actions information. As the regulatory background has been clarified, the subsequent steps now need to be agreed upon.
- Simplification of the tax deduction process and harmonisation with international standards
- An important task will be to lobby for a reduction of the amount of data that must be provided by investors for tax deduction at the times of income payments. Having simplification and harmonisation in mind, an extension of the nominee concept should be applied to all types of securities.
- Introduction of a standardised income collection process via the CSD
- An operational process shall be developed for KELER, independently from whether or not it acts as a paying agent. The ultimate goal is to implement the full Christmas tree model in line with CAJWG standards.
- Handling of appropriate tax deductions for market claims and transformation processes
- The idea is to find a solution for the case where two parties are subject to different tax rates that could be applicable to both dividend and interest payments. In accordance with the current regulatory regime, automatic market claims would apply only for debt securities.
- Simplification of the tax reclaim process
- The aim is to reduce the documentary and data provision burdens and to assess the possibility of introducing quick refunds to the Hungarian market.
The T2S Corporate Actions National User Group will continue its work and conduct further meetings, which now include market regulators, to elaborate on these issues.