Guidance of the supervisory authority on fees payable to the Investor Protection Fund

If the account holder does not comply with his payment obligation relating to the account, the securities intermediary is entitled to terminate the securities account and transfer the balance available to its own omnibus account. According to the National Bank of Hungary (NBH) in such case, the transferred balance is not taken into account when determining the amount of Investor Protection Fund’s (Fund) annual fees payable by the Fund members.

Section 222 para 3 of the Capital Market Act states that the annual membership fees shall be calculated on the basis of all funds deposited by investors with the Fund member in the form of liquid assets or securities, to which the Fund’s protection applies. According to the NBH’s interpretation as the Fund’s protection applies to contractual relations relating to investment services, the membership fees should also be paid after services of the Fund member based on contractual relations existing between the investors and the Fund member.

However in case the Fund member transfers the balance of an account holder to its own omnibus account because the investor failed to comply with his payment obligation, the Fund member is subject to safeguarding obligation based on the Capital Market Act. It follows that the transferred balance does not constitute securities deposited by the investor with the Fund member.

This interpretation of the Section is also confirmed by the facts that until the Fund member is subject to this safeguarding obligation (i) the Fund member’s obligation of identification regarding to the disclosure of the holder’s particulars is suspended, and (ii) the Fund member may not be compelled to make out an ownership certificate.

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