Hungary’s National Bank Imposes Record Fine for Insider Trading, Initiates Criminal Proceedings

The financial landscape in Hungary was shaken this week with the National Bank of Hungary (MNB) imposing a substantial fine for insider trading, marking a first in the country’s financial history. The MNB also initiated criminal proceedings against the individual involved.

Unprecedented Case of Insider Trading

The following case unfolded at a local publicly-traded company:

1. Preliminary agreement for acquisition: There was an intention to list the acquired firm after a preliminary agreement for the acquisition of another company.
2. Guarantor company requirement: A third company was required to guarantee the transaction with shares of the acquiring company.

Insider Trading Allegations

A person classified as an insider by the National Bank of Hungary, holding a significant stake and management position in the company, transferred a vast number of shares to the guarantor company in an over-the-counter (OTC) transaction for a significantly lower price than the stock market value. This price discrepancy occurred prior to the actual stock exchange transaction.

Thus, the MNB considered this action to be insider trading, as per its determination that the transfer itself is the illicit act, regardless of the existence of financial benefits or harm to other market participants.

Legal Challenges

To date, the National Bank of Hungary has never handed down such a ruling. Consequently, the firm has initiated legal proceedings to challenge this unprecedented decision, as per the power of attorney granted by the client.

The Significance of the MNB’s Decision

These developments underscore the MNB’s dedication to upholding integrity within Hungary’s financial sector, while setting a significant precedent for insider trading cases going forward.

Stay tuned for updates on this developing story.