Zsolt Nagygyorgy - Compliance teamleader Brussels, 6th July 2011

» As EU policy the MiFID is useful: ˃to ensure a stonger common framework for investment services ˃to provide higher level of consumer protection » As EU policy MiFID has not achived its goals in: ˃cheaper services ˃transparency of market » Lack of MiFID: ˃very different implementation in the member states ˃unregulated financial instruments and trading venues ˃regulatory arbitrage (same client, same product but different information and client handling in different in the member states) ˃employees protection

» Huge business pressures: ˃Applying the rules but not fullfilling the expactations ˃Achieve the expectations but not applying the rules » Increased work flow and client handling ˃Complex rules and internal procedure ˃After the MiFID some type of transactions can be done more than one hour. ˃No proper IT solution in order to help the work of the employees, because of the cost. ˃Instead of the IT solution manual process: means everything is on the employees. If there is a mistake by the employee, consequence is very serious for them (lost job).

Sanction: EUR IT Development: EUR

» Apropriateness test ˃According to the HFSA recommendation, clients who buy non-complex product (state guaranteed bonds) in the way of execution only, banks need to fill out appropriateness test and need to check whether it is appropriate for them or not. In this case Hungary is not applied the provision 69 of the preambulum of COMMISSION DIRECTIVE 2006/73/EC. » Financial products ˃Structured deposit, unit-linked products are not under the Hungarian MiFID law » Personal Transaction ˃All the employee need to report its transaction (for example: no any exemptions cleaning workers too). It’s very time consuming » Private entrepreneur ˃They cannot have any investment account as private entrepreneur because of the tax authority’s ruling. There are big contradiction between the Hungarian MiFID legislation and the tax rules.

» Consulting services ˃One MiFID test for all the client category (retail, professional, eligible) ˃MiFID tests recorded only in paper – no IT based storage ˃Investment advice given prior to or without suitability test ˃No portfolio based investment advice only for the certain transaction ˃Sales pressure – do not take into account the best interests of clients » Transparency principle ˃No detailed information (e.g.: risks) provided on certain financial product ˃Long and complicated legal texts about the rights and obligation ˃No published sales incentives regarding the selling products » Bonus/incentive system and commercial pressures ˃Hidden fees and commissions ˃No clear guidance from the Authority in this issue

» Enforcement the proper and unified MiFID implementation in the member states ˃No exemptions by the member states ˃All the financial products need to be under the MiFID Directive on EU level ˃Limiting the long-term investments, ˃Determine a minimum level of portfolio as a reserve, which can not be invested ˃Disclose a detailed account of all types of inducements (direct, indirect, third party or in-house) ˃Specific rules need to be set up in the channel of the recorded phone or e-channels. » Initiated industrial dialogue and aggreement about the basic rights of the employees ˃Amplification the MiFID Directive with minimum standards of the proper working enviroment (IT solutions, Internal Control Systems, civil liability of the firms) ˃Establish a list (black list) about those members who not follow the MiFID implementation fully. ˃Establish a list (black list) about those members who not ensure basic work conditions for the employees in order to be able to fullfil best interst of clients » Enforcement some responsible sales principles within the local laws or Authority recommendations ˃E.g. Model Charter on Responsible Sales of Financial Products