Name
Global FinTech Guide
Country Name
Hungary
SectionTitle
Financial advisory and broking services including robo advisory and auto-trading
Body
FinTechs belonging to this category offer advisory and broking services for investments usually via an internet platform.

Robo advisory services usually offer an investment proposition following a series of questions concerning the personal financial background and the risk-bearing capacity of the user. Sometimes the respective platform also enables the user to directly execute the proposed investment. 

Auto-trading concerns all services which automatically trade on behalf of the customer according to his or her specifications.

Apart from that some FinTechs collect and offer merely or as an ancillary service market information or operate comparison portals to increase the transparency of the capital markets and to help the investor with his decision-making. 

There are also FinTech-advertising-services which advertise various financial services or products.

Introduction

Attitude of the country towards modern financial advisory and broking services

There are some reservations; authorised or fraudulent players frequently appear in the FX trading and robo-advisory markets relatively.

Legal affairs

Obligations and requirements to provide financial advisory and broking services, or ancillary services described above

The provision of investment advice/consultancy and broking services basically qualifies as investment services and as such, these activities are subject to licensing or passporting requirements in the territory of Hungary if provided on a regular basis. Persons providing investment advice services in the course of providing another professional activity not covered by MiFID II and provided that the provision of such advice is not specifically remunerated are exempted from the regulated Investment Advice services. 

While the foregoing licensing obligation does not apply to making information, facts, circumstances, studies, reports, analyses, and advertisements available to the public (or to the information obligatorily provided to clients by investment firms before and after an investment is made), providing investment recommendations qualifies as an ancillary investment service and is subject to licensing/passporting requirements.

Companies offering FinTech-advertising services may qualify as agents of the investment service providers and must be reported to (but not licensed by) the MNB.

Regarding robo-advisory and auto-trading, the Hungarian Investment Services Act has implemented the relevant provisions of MiFID II regarding undertakings operating algorithmic trading techniques, extending the scope of risk management, and controlling regulation to undertakings operating algorithmic trading platforms. Furthermore, undertakings operating high-frequency algorithmic trading platforms must be licensed. The categories of other investment services shall also be examined in these cases depending on the specific circumstances (i.e. portfolio management, investment advice or investment recommendation).

We hereby refer to MiFID II and MiFIR, which have affected the business of investment advice, broking, robo-advisory and auto-trading service providers (i.e. algorithmic trading rules, suitability statement, concept of the independent basis investment advice etc.).

Additional comments regarding the legal situation for financial advisory and broking services, or adjacent services or what FinTech’s must be aware of in this business area

N/A.
 

Economic conditions

Market size for financial advisory and broking services as well as adjacent services and biggest companies in this business area

The market is relatively small, and there is no officially published information regarding the size of the market or the revenues or customers. The first robo-advisor company, Blueopes, started around mid-2016.

Additional comments regarding the economic situation for financial advisory and broking services as well as adjacent services or what FinTech’s must be aware of in this business area

N/A.

Authors

Disclaimer

© 2022, Lakatos, Köves and Partners Law Firm. All rights reserved by Lakatos, Köves and Partners Law Firm as author and the owner of the copyright in this chapter. Lakatos, Köves and Partners Law Firm has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this guide.

The information in this guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

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