Hungary to impose tough sanctions on bankrupt brokerages

By bne IntelliNews March 24, 2015

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Hungary’s ruling Fidesz party has drafted a bill imposing tough rules on brokerages under bankruptcy proceedings, the party’s parliamentary group leader Antal Rogan said on March 23.

The bill was drafted in response to a recent scandal in which the licences of three brokerages were suspended by the central bank over irregularities. The trio is suspected of fraud amounting to as much as €1bn.

The new legislation, which is expected to be discussed by the parliament’s economic committee on March 24, envisages not only freezing the assets of troubled brokerages but also those of the entire group to which they belong, MTI reports. Furthermore, the bill calls for freezing the assets of company managers and owners who are suspected of having been involved in fraudulent activities, Rogan added.

Commenting on the bill, Prime Minister Viktor Orban said that the assets of the troubled brokerages and of their owners and managers will be placed into an asset fund and used to compensate the victims, according to Portfolio.hu.

Hungary’s brokerage woes started in late February, when the MNB suspended the licence of Buda-Cash, saying the brokerage could not account for about HUF100bn of client cash. Days later, the licences of four banks linked to the brokerage were also revoked.

On March 6, the MNB partly suspended the licence of brokerage Hungaria Ertekpapir because of “irregularities”. The third brokerage to face regulatory action was Quaestor. Its licence was revoked on March 10 on suspicion that the company may have issued bogus bonds worth hundreds of millions of euros.

In order to prevent future scandals, the economy ministry and the MNB agreed that more stringent oversight rules should also be introduced for auditors. Zoltan Pankucsi, the ministry’s deputy state secretary for taxation and accountancy, told Vilaggazdasag that current legislation allows the auditors’ chamber to investigate the shortcomings, but procedures are being closed without any sanctions in the majority of cases.

According to Pankucsi, this practice should be changed so that the economy ministry is given the power to impose sanctions directly on auditors, without the need for the chamber to conduct a procedure.

The ongoing scandal is becoming a political hot potato. After the Fidesz government took effective control over the central bank in 2012, the MNB took over the role of financial markets regulator. That has prompted criticism from the opposition. However, the government and MNB are trying to push the point that the Buda-Cash scandal developed under the previous Socialist administration.

 
 

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