After the broker scandals of 2015, the government introduced new protective measures this year to restore Hungarian investors' trust in capital markets instruments and investment service providers. In 2015, it was discovered that some local broker houses had manipulated their information systems and as a result their reports on securities were not an accurate reflection of the reality. Hundreds of billions of Hungarian forints went missing, tens of thousands of depositors and investors have been aggrieved, and brokers have been arrested.
In the past few years people turned to capital markets instruments because of the low attainable interest rates on savings accounts held by banks. Several brokers offered three or four times higher interest rates, and some of them established fraudulent schemes to pay the early bird's due interest. Some broker houses falsified the reports sent to their clients and to the Hungarian National Bank (HNB), the HNB being the institution responsible for the supervision of capital markets.
To strengthen capital markets activities and to restore investors' trust, the government introduced a new checking scheme for investors as of 1 January 2016. The new scheme allows investors to check whether the information received from the broker is the same as that submitted to the HNB by the broker. Brokers must send their reports to investors and to the HNB on a monthly basis. The information sent to the HNB is anonymous, and contains only the account number and the list of securities deposited into the account; therefore, the HNB cannot identify the owner of the account.
Every investor receives their 24 digit account number which is identical to the one submitted to the HNB and a password from the broker. The password is renewed every month and sent to the investors via mail or any other secure form chosen. If the monthly balance sent to the investor is not identical to the one submitted to the HNB, the investor may initiate an HNB investigation against the broker. The investigation can be initiated anonymously as well.
The new scheme is promising, albeit not perfect, but in the future it may prevent systematic falsification of the reports.
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