The Hungarian Financial Supervisory Authority (HFSA) plays a critical role in regulating and supervising Hungary’s financial markets and institutions. As the main regulatory body overseeing the financial sector, the HFSA aims to promote financial stability and transparency while protecting consumers. This article will provide a comprehensive overview of the HFSA, its history, responsibilities, organizational structure, and impact on Hungary’s economy and financial landscape.

A Brief History of the HFSA

The HFSA was established in 2000 by the Act CXXIV of 1999 on the Hungarian Financial Supervisory Authority. This Act integrated the previously separate regulators of banking, capital markets, and insurance into a single integrated regulatory agency.

The creation of the HFSA was part of Hungary’s efforts to modernize financial regulation and supervision in preparation for EU accession. Joining the European Union required Hungary to comply with EU legislation and standards for financial regulation.

The HFSA began operations on April 1, 2000, taking over regulatory responsibilities from the Hungarian Banking and Capital Market Supervision, the Supervision of Insurance Companies, and the Supervision of Private Pensions and Private Pension Funds.

Responsibilities and Powers of the HFSA

As an integrated regulator, the HFSA supervises and regulates all aspects of the financial system including banking, capital markets, insurance companies and pension funds. Its primary responsibilities include:

  • Licensing and registering financial institutions.
  • Supervising compliance with laws and regulations.
  • Setting prudential standards.
  • Conducting inspections of financial firms.
  • Investigating abuse and violations.
  • Imposing disciplinary measures and penalties.
  • Drafting financial regulations and policy.
  • Protecting consumers and investors.

To carry out these responsibilities, the HFSA has extensive investigative and enforcement powers. This includes the power to request information and reports, conduct onsite inspections, impose fines, restrict business activities, revoke licenses, and impose suspensions or bans. The HFSA can also make public its disciplinary actions as a deterrent measure.

Organizational Structure of the HFSA

The HFSA is governed by a Board of Directors appointed by the Minister of Finance. The Board is responsible for setting the policies and strategic direction of the agency.

Day-to-day operations are managed by the Chief Executive Officer who is appointed by the Prime Minister. The CEO oversees six deputy CEOs responsible for departments covering banking, capital markets, insurance/pensions, consumer protection, legal affairs, and support services.

In total, the HFSA employs approximately 450 staff members across these various departments. Its main office is located in Budapest.

The HFSA carries out its duties independently but is accountable to Hungary’s parliament. It must report annually to parliament on its supervisory activities, findings and actions. This reporting provides transparency and oversight of the regulatory agency.

Key Powers and Responsibilities in the Forex Sector

Within its broad regulatory scope, the HFSA has important powers related to the foreign exchange (forex) market and forex trading providers. Its oversight aims to protect retail investors and promote fairness and transparency in forex trading.

Some of the HFSA’s main responsibilities include:

  • Licensing Forex Brokers and Dealers – Entities that wish to provide forex trading services in Hungary must register with the HFSA. The HFSA reviews applications to ensure firms meet standards on capital adequacy, management competence, internal controls, and conduct of business.
  • Enforcing Conduct of Business Rules – Licensed forex brokers must comply with HFSA rules on marketing, terms and conditions, disclosure of risks, execution of orders, safeguarding funds, etc. HFSA inspects firms to verify compliance.
  • Investigating Abuses – HFSA has authority to investigate manipulative or abusive trading practices, excessive speculation, and fraud. Fines or other disciplinary action may be imposed.
  • Protecting Retail Investors – A key priority is to ensure forex brokers treat retail clients fairly through transparency, full disclosure, best execution, and recourse mechanisms. HFSA aims to reduce asymmetric information.
  • Promoting Financial Stability – Since forex markets can impact financial stability, HFSA monitors systemic risks and vulnerabilties including concentration, liquidity, credit exposures and linkages between institutions and markets.

Through this oversight and regulation of the forex sector, the HFSA promotes the integrity and stability of Hungary’s financial system.

Major Regulations Applicable to Forex Brokers and Traders

Forex brokers authorized by the HFSA face regulations stemming from both domestic laws and European Union directives. Some of the major regulations include:

  • Act CXX of 2001 on Capital Markets – Establishes regulatory framework including rules of conduct, disclosure requirements and enforcement powers. Implements MiFID for investment services.
  • Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises – Governs prudential regulation including capital, liquidity, risk management and other standards aligned with EU directives.
  • Act CXXXVIII of 2007 on Investment Firms – Regulations on operating conditions, conduct of business, conflicts of interest and risk management rules for investment firms.
  • Act XLVII of 2008 on Prohibiting Unfair Commercial Practices – Protections against false or deceptive advertisements and communications.
  • EU Market Abuse Regulation (596/2014/EU) – Prohibits market manipulation, unlawful disclosure of information, and insider trading.
  • EU Markets in Financial Instruments Directive (MiFID 2) – Rules on operating conditions, organizational requirements and investor protections for financial entities.

Staying current on these regulations is essential for authorized forex brokers in Hungary to maintain compliance and operate within the law.

Enforcement Actions Against Forex Firms

As part of its mandate, the HFSA actively monitors forex brokers for compliance and has taken enforcement actions against firms violating regulations. For example:

  • In 2018, the HFSA imposed a fine of 55 million HUF on Sparkasse Bank for rule violations regarding its forex margin trading services provided to retail clients.
  • The same year, a 95 million HUF fine was issued to Concorde Securities for numerous breaches in its forex trading services, including misleading clients about risks.
  • In 2019, Admiral Markets was instructed to correct unfair contract terms applied to forex and CFD traders on its Hungarian website platform.
  • Between 2017-2019, the HFSA revoked the licenses of over 15 forex brokers primarily due to failure to comply with capital adequacy and client fund protection rules.

These actions demonstrate the HFSA’s strict approach to enforcing regulations and protecting retail forex traders. Its oversight aims to ensure high industry standards.

Complaints and Investor Protection Measures

A key part of the HFSA’s consumer protection mandate is to facilitate complaints and resolve disputes between financial institutions and customers.

Several options are available for traders to file complaints against forex brokers for perceived violations including:

  • Direct Company Complaint – HFSA recommends traders first file a complaint directly with the forex broker and give reasonable time for resolution.
  • HFSA Complaint Process – If unresolved, traders can submit a complaint form to HFSA along with evidence. HFSA will review complaints and determine if regulatory violations occurred.
  • Opening Case with Arbitration Board – For certain unresolved disputes, HFSA may recommend submitting the case to the independent Financial Arbitration Board.
  • European Consumer Centre – Cross-border complaints within the EU/EEA can also be reported to the ECC-Net Hungary for further investigation and resolution.

To prevent complaints, the HFSA also has investor protection measures including mandatory disclosure rules, restrictions on certain products for retail investors, and capital requirements for brokers to ensure funding for potential compensations.

Overall, the HFSA provides important oversight and resolution mechanisms for traders with disputes against forex brokers licensed in Hungary.

Impact on the Forex Industry in Hungary

Since its inception, the HFSA has played an integral role in regulating and developing Hungary’s forex industry:

  • Its robust licensing process set clear standards for capital adequacy, management competence, and internal controls – raising the bar for forex brokers.
  • Ongoing supervision and enforcement compelled brokers to improve transparency, execution quality, and compliance practices.
  • Regulations boosted protections for retail traders leading to fairer contractual terms, disclosure, and business conduct.
  • Enhanced oversight reduced cases of excessive speculation, fraud, and manipulative practices – improving integrity.
  • Prudential regulations strengthened stability against market, credit, liquidity, and operational risks.

At the same time, the HFSA aimed to strike a balance in regulation to facilitate financial innovation and growth. Its regulatory framework gave clarity for forex brokers to operate in Hungary in a licensed and compliant manner.

Overall, the HFSA played an instrumental role in maturing Hungary’s forex industry and integrating it into the broader EU regulatory landscape. Its oversight instilled confidence in traders and improved standards across the sector.

Changes Under MiFID 2

In 2018, the implementation of the updated Markets in Financial Instruments Directive known as MiFID 2 introduced several key regulatory changes impacting forex brokers in Hungary and across the EU.

Some of the main changes led by MiFID 2 include:

  • Enhanced Investor Protections – Stricter rules around transparency of fees/costs, suitability assessments, product governance, and disclosure of risks.
  • Expanded Scope – Tighter regulation of electronic trading platforms and new rules governing investment research distribution.
  • Increased Reporting – Additional trade reporting requirements to regulators and transaction reporting to clients.
  • New Trading Obligations – Shifting of some derivatives trading onto regulated venues subject to transparency requirements.
  • Improved Supervision – Increased powers for regulators to ban harmful products, monitor conduct, and enforce rules.

As the national regulator, the HFSA is responsible for supervision and enforcement of MiFID 2 requirements on forex brokers authorized in Hungary. The new rules further strengthen oversight and protections for traders.


In summary, the Hungarian Financial Supervisory Authority plays a critical role in overseeing all aspects of the country’s financial system including the forex industry. Its robust regulatory framework and supervisory powers promote financial stability while protecting consumers and investors.

Since its founding over 20 years ago, the HFSA proved effective in developing Hungary’s forex sector by improving standards, oversight, transparency and protections for traders. Its enforcement actions also upheld integrity in the market by compelling brokers to comply with regulations.

With new requirements under MiFID 2, the HFSA continues adapting its oversight to ensure forex trading in Hungary keeps pace with evolving European Union regulations and global best practices. Going forward, the agency remains committed to fostering a thriving forex industry based on strong governance, innovation and consumer protection.