AIFM passporting in Hungary

1. EEA AIFMs

AIFMs authorised in their EEA home State may exercise passport rights for the relevant regulated services (including management and marketing distribution of funds) in Hungary in relation to most types of AIF, on a services and / or branch basis. In order to do so, Act XVI of 2014 on Collective Investment Firms and their Managers (“Investment Funds Act”) requires the AIFM to satisfy certain service conditions.

Regardless of whether an existing passport to conduct management business under another single market directive (such as UCITS) is held, EEA AIFMs are required to make a separate notification to their home State competent authority if they intend to manage or market an EEA AIF on a passported basis.

The home State competent authority will send the management passport notification to the Central Bank of Hungary (Magyar Nemzeti Bank) (“MNB”) on behalf of the EEA AIFM.

EEA AIFMs will need to comply with Hungarian legal requirements on prudential operations, outsourcing, conflicts of interest and risk management, as set out in the Investment Funds Act and other laws, if they are exercising a branch passport in Hungary.

A full scope EEA AIFM wishing to market either a Hungarian AIF or an EEA AIF to retail (as well as professional) investors in Hungary may do so if their home State competent authority has submitted a passport notification to the MNB to market the AIF to professional investors. However, if the AIF takes the form of an unregulated collective investment scheme, the AIFM may not promote any type of funds (including EEA AIFs) to Hungarian investors.

2. Pre-marketing by EU AIFMs

EU AIFMs may commence pre-marketing AIFs which are not yet established or established but not yet compliant with the applicable marketing procedures, to potential professional investors in Hungary, provided that the MNB receives a pre-marketing notification letter within two weeks of starting such pre marketing activity. EU AIFMs need to send this pre-marketing notification letter to their home State competent authority within two weeks of starting such pre-marketing activity, which in turn is directly transmitted to the MNB. Pre-marketing may include only the direct or indirect provision or communication of information on investment strategies or investment concepts.

The information provided to potential professional investors within the context of the pre-marketing activity should not enable such investors to commit to acquiring units or shares of the pre marketed AIF or amount to a subscription form or similar document, whether in draft or final form. 

For a period of 18 months after the start of the pre-marketing of the AIF, the AIFM may not rely on reverse solicitation in the jurisdiction where the pre-marketing has been notified.”

3. Third country AIFMs

AIFMs based in Non-EEA jurisdictions who wish to market AIFs in Hungary will be required to comply with the provisions of the Investment Funds Act on operational rules and reporting requirements. The MNB must also have a cooperation agreement in place with the relevant home State regulators and the Non-EEA AIFM may not be incorporated in a jurisdiction which appears on the FATF list as a non-cooperating country, with the exception of venture capital fund managers that in total do not exceed a threshold of EUR 100 million or EUR 500 million when the portfolios of AIFs consist of AIFs that are unleveraged and have no redemption rights exercisable during a period of five years following the date of initial investment in each AIF; and AIFMs managing AIFs whose only investors are the AIFM or related parties to the AIFM provided that none of those investors is an AIF.

4. Fees

Hungary does not charge an application fee for outward or inward AIFMD passport notifications. However, EEA AIFMs passporting into Hungary as a branch are required to pay periodic fees on the regulated activities they conduct in Hungary.

The MNB does not require AIFMs that passport into Hungary on a services basis to pay periodic fees.

Please note that on 2 August 2021 EU Directive 2019/1160 was transposed into national law in Hungary without additional gold-plating