The National Bank of Hungary (Magyar Nemzeti Bank) has imposed a substantial fine on one of our clients for violating the rules prohibiting insider trading, and it has also initiated criminal proceedings.
The facts of the case in short were that a listed public company wished to acquire a company, essentially with the intention for the acquired company to become a listed company. A precondition for this was that a third company would guarantee the transaction with the shares of the public company. The company, partly owned and managed by a person classified as an insider by the National Bank of Hungary, transferred a large number of shares to the guarantor company in an OTC transaction for a significantly lower price than the stock market price. This was a precondition for the actual stock exchange transaction. The person considered to be an insider did not directly benefit from the transaction.
According to the decision of the National Bank of Hungary, it is also deemed to be insider trading if the person considered to be an insider transfers shares to other persons as a transaction. The transfer itself constitutes insider trading, regardless of whether or not there were financial benefits and regardless of whether the position of other market participants was harmed by the transaction or not.
To our knowledge, the National Bank of Hungary has never before reached a similar decision. In view of this, we challenged the decision in court in accordance with the power of attorney from our client.