Dear Clients,
KELER, the Hungarian Central Securities Depository (CSD) and the Magyar Nemzeti Bank (MNB, Central Bank of Hungary) published its initiative about the revision of the current market model of corporate actions processing based on international standards and market practices. The concept shall be finalised in the framework of market consultation.
The objectives of this reform are twofold: both the international compliance in the framework of TARGET2-Securities (T2S) and increasing the transparency, the automatization and the effectiveness of the processes and the operation.
The most relevant stakeholders are the issuers, the investment service providers, the market infrastructures and the tax authority. In order to reach the international compliance legislative change or modification of market practice might be necessary. Therefore the reform process is expected to end in two or three years.
Projected major changes:
- Development of central corporate action database, which increases the accessibility of corporate action information. Market players shall be informed on the details of the corporate actions very soon after the announcement of the issuer, from a reliable source.
- In line with the international standards, the payments related to securities (e.g. dividend) might be processed in a uniform and swift manner – even on the next business day after record date based on the CSD securities account balances instead of the current ownership identification procedure.
- In connection with the payments, a more automated, shorter process unified for each securities types shall be introduced which enables the reduction of personal data moving among the service providers.
- The paying agent role shall be unified in connection with securities, that will be moved to the investment service providers.
- In line with international standards, automatic market claim, transformation and buyer protection shall be introduced in the market practice.
- Institutionalised tax refund procedure shall be introduced (quick refund).
The planned reform – in line with the international harmonisation process - makes a significant contribution to the establishment of a more investor-friendly Hungarian capital market, the protection of end-investors and the reduction of the overall costs related to the processing of corporate actions.
The concept shall be finalised based on the document following the market consultation, following the approval of the National Stakeholder Group (NSG) expectedly in June 2018.
Sincerely,
KELER Ltd.