Market Consultation on Hungarian Corporate Actions Reforms

Hungary
UniCredit Bank Hungary Zrt.
Summary: 
KELER and MNB published the recommendations for the Hungarian Corporate Actions Reforms as the first step of the planned market reform process
Wed, 16/05/2018

 

KELER, the Hungarian Central Securities Depository, together with the Central Bank of Hungary (MNB) have invited the relevant market participants – issuers, investment services providers, the market infrastructures and the tax authorities – to consult on their recently published Corporate Actions Reforms document. The latter will be finalized upon receipt of the comments and recommendations of the above stakeholders and is expected to be approved by the National Stakeholder Group in June 2018.

The aim of the reforms is to align with the requirements of the TARGET2 Securities (T2S) standards, as well as to increase the automation and the effectiveness of the current market processes and also to facilitate transparency.

The main changes are expected to be as follows:

  • Building a reliable central corporate actions database, allowing  easier access to corporate actions details for investors
  • Amending the current ownership identification procedure related to income payments and creating a new, uniform payment process in line with the international standards, resulting in quick disbursing and less personal data movements among the service providers
  • Introducing of standardized proxy documentation for shareholder meetings
  • Finalizing the reform of the nominee concept by extending the applicability to all types of securities and allowing custodians to act as nominees
  • Standardizing the paying agent role and moving it to the investment services providers
  • Introducing maximum tax rate in case of lack of information on the entitled investors and implementing Quick Refund services
  • Automation of market claims, transformations and implementation of stronger buyer protection in line with international standards

The reform is foreseen to be implemented with maximum three years, hence both market practice and legislative changes are inevitable, and the co-operation of the market participants is essential.

Impact on investors: The planned changes of the market practices related to Corporate Actions may lead to a more investor friendly environment providing stronger protection to investors. By introducing simplified payments, tax processes and standardized documentation requirements, corporate actions related costs are likely to decrease.