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Government submits modified bill to replace Quaestor law

Issues

The government on Wednesday submitted to Parliament a new bill on the compensation of investors who suffered losses caused by bond issues in which the distributor belonged to the same group as the issuer. The so-called Quaestor law, which was to regulate compensation for a special group of investors – those who suffered losses due to the failure of the Quaestor brokerage early in 2015 – will be nullified by the new law.

The bill was submitted after Hungaryʼs Constitutional Court on November 17 invalidated parts of the Quaestor law, passed earlier this year. That law effectively raised the compensation threshold for investors of the failed brokerage Quaestor to about €100,000 (about HUF 30 million) from the existing Beva compensation threshold of €20,000 (HUF 6 mln), and left Beva members to cover the difference.

The Constitutional Court had said that the manner in which the law involved Beva members in the payment of the compensation was unconstitutional, as were parts of the law which outlined eligibility for compensation, deemed discriminatory. It said, however, that lawmakers could correct these deficiencies. 

The new bill says that Beva compensation in cases where the liquidation of financial or capital market businesses is ordered by the court will be up to HUF 30 mln, with previous yields and some costs deducted, and 11% borne by the damaged investor over damages of HUF 3 mln.

Compensation to the investors will be financed from a central bank bridging loan or bond, which will be paid off from the payments of Beva members. The new bill specifies that the first payment by Beva members will take place in March 2017 and from then on annually. The bill also puts a combined annual limit of HUF 7 bln on the payments by Beva members.

The bill will require a four-fifth support in parliament so that it can be passed in an accelerated procedure as soon as next Tuesday. Otherwise parliamentary discussion could start only in February, justice ministry state secretary Pál Volner told the press on Wednesday.

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