MNB has warned investors in relation to the risks associated with crowdfunding investments
There is no specific legal regulation regarding crowdfunding in Hungary as of today. The following regulated services shall be examined in relation to crowdfunding:
- Investment services:
In terms of investment services (MiFID) the first issue to examine is whether the crowdfunding activity relates to a financial instrument (i.e. share, other security, derivative, interest, etc.). If not, then the crowdfunding activity may not be considered as an investment service. If yes, then – depending on the specific circumstances – the operation of the crowdfunding platform may qualify as one of the following investment (ancillary) services: (i) operation of an MTF (not likely if there is only one seller); (ii) Investment Advice (not likely if the transaction is not tailored on the individual investment needs of the investor); and (iii) Investment Recommendation (this is more likely if the crowdfunding campaign is not only available on a restricted website but is available to the broader public (i.e. it is advertised).
- Financial services:
Lending money in a “business-like manner” (as defined above) on the side of the private person investors may qualify as the provision of financial service. On the side of the project company, the applicability of the financial service of “taking deposits and other repayable funds” shall also be examined. (Only credit institutions are entitled to provide this financial service).
- Payment services:
If the operator of the crowdfunding platform is providing payment services, a payment services license/passport is required. Capital requirements and running costs vary depending on the specific circumstances of the case.
The crowdfunding market is not significant in Hungary at the moment. The first crowdfunding company on the Hungarian market was Creative Selector, which has been operating for five years. Another Hungarian based crowdfunding company is Goood, which is involved in donation based crowdfunding, and started about a year ago.