1. Arrangements and procedure on the sales of financial products
Good practice and poor practice in Hungary
Zsolt Nagygyorgy -
Compliance teamleader
Brussels, 6th July 2011

2. MiFID Directive 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

3. Employees 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).

4. Comply MiFID or not
IT Development:
EUR
Sanction:
EUR

5. Differ from the original MiFID
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.

6. Poor practices in Hungary
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

7. What can trade unions do?
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