How Protected Are Investors? A Look at Hungary vs. the EU and the US

As financial markets evolve and globalise, investor protection has become more critical than ever. Whether you're an expat investing in Budapest, a retail investor in Paris, or a seasoned trader in New York, the regulatory environment behind your investments can dramatically affect your financial safety. 

In this article, I explore the investor protection landscape in Hungary, compare it with other European Union countries, and draw a parallel with the more aggressive enforcement regime in the United States.

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Hungary: EU Standards, Local Execution

Hungary adheres to the MiFID II framework—just like other EU countries—ensuring solid fundamentals: asset segregation, suitability assessments, and standardized disclosures.

The Magyar Nemzeti Bank (MNB), Hungary's central bank, also acts as the financial supervisory authority. It oversees the market and administers BEVA, the national investor protection fund,

which protects up to €100,000 per investor in case of broker insolvency.

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European Union: A Harmonized Approach, with Local Flavors

All EU member states follow a common regulatory umbrella:

• MiFID II for investor protection and conduct

• UCITS and AIFMD for investment funds

• ICSD (Investor Compensation Schemes Directive) with a €20,000 minimum protection across the EU

However, some countries go further. Germany, for instance, offers more robust compensation coverage, while France’s AMF is known for proactive enforcement. This means that protection levels and regulatory efficiency can vary significantly between EU states

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United States: Tougher Enforcement, Higher Coverage

In the US, the SEC, FINRA, and SIPC form a powerful trio of regulation, enforcement, and investor insurance.

• SIPC covers up to $500,000 per investor (including $250,000 in cash) in case of broker-dealer failure.

• Enforcement actions are frequent, visible, and punitive—a clear deterrent to misconduct.

• Transparency is paramount: U.S. investors benefit from mandatory and detailed disclosures.

While the US tends to offer broader product access (with less interference in product design), it also places more responsibility on investors to read, understand, and ask questions.

What This Means for Investors

If you're an expat investing in Hungary, or you're comparing international options, keep in mind:

• Hungary offers solid baseline protections aligned with EU rules, but investor diligence remains key.

• The EU provides harmonized frameworks, but enforcement quality varies by country.

• The US offers high coverage limits, powerful regulators, and well-defined legal channels—but with a more "buyer beware" approach.

BEVA (Befektető-védelmi Alap) is the Hungarian Investor Protection Fund. It provides protection if a BEVA-member investment service provider in Hungary becomes insolvent or goes into liquidation and cannot return the client’s money or securities that are registered in the client’s name.

It does not protect against market losses (e.g., stock price drops) – only when the provider fails to return assets. It compensates private individuals and legal entities

 Final Thoughts

Investor protection is not just a legal concept—it’s the foundation of trust in the financial system. Whether you’re planning to diversify internationally or simply want peace of mind, understanding how protections compare across jurisdictions is essential.

If you’re investing in Hungary—or thinking of doing so—ensure your portfolio is not only well-diversified but also well-protected.