Irrespective the many secured transactions reform projects around the globe, field warehousing as a peculiar constructive pledge-based (or pledge by bailment) security device, and what it may offer especially to emerging markets, has largely escaped attention. The few international projects that devoted some attention to warehousing as a financing method were almost invariably limited to public (terminal) warehousing or have canvassed an incomplete picture about this many-faced security device.Scholarly neglect is characteristic also to the United States (US), where field warehousing as a security device has had presumably the richest history yet has declined after the adoption of the unitary Article 9 system of the Uniform Commercial Code by the States. In new forms, adapted to the changing business needs, however, the industry has survived to date. While what is of little importance in the US, should be invaluable to reform systems, which could enormously profit from the US experiences yet by taking a look not only at contemporary but more importantly on earlier law as well.English law, as another leading financial law system and thus a model for others, is taken a look at because it knows not about field warehousing. The conventional yet not fully explored justification is the earlier recognition of the floating charge in England compared to its kin on the other side of the Atlantic. The article counters this argument by juxtaposing not just the US but also the more recent Hungarian developments corroborating that floating securities and field warehouses are not mutually exclusive.This seminal article aims to remedy the hinted at cognitive gaps in comparative scholarship by revisiting the pertaining US law, reflecting on the English position and uniquely juxtaposing the parallel recent Hungarian experiences with field warehousing. The heightened importance of this analysis is linked also to the continued interest in the reform of secured transactions laws (recently also in Africa and China), and the unsatisfactory economic output of such recently reformed systems as those of Central and Eastern Europe (CEE) — well reflected in the third in-depth revamping of Hungarian secured transactions law by the new Civil Code of 2013.
Apart from a few shorter papers inspired by the nomination of a new crime prohibiting the organization of ‘pyramid games’ by the Hungarian Criminal Code in 1996, the topic of ‘pyramid and Ponzi schemes’ remained of little interest to Hungarian legal scholars. Internationally, the topic has garnered increased attention due to the grave socio-economic effects of ever newer scheme-collapses, from the high-profile American Madoff (2009) to the myriad less-known cases from emerging systems like the fiasco of the Albanian pyramid schemes in the mid-1990s, pyramid schemes camouflaged as multi-level marketing (MLM) ventures, or their online versions more recently. Comparative works that would juxtapose the pertaining laws and experiences of the United States with those of Hungary are lacking.
To fill the void, this article contrasts a select number of differing regulatory approaches. At one end of the spectrum is the United States (US), which, instead of passing sector-specific laws, mobilized and adapted the enforcement tools of all utilizable branches of law to combat the schemes. While in the US this has been uniquely primed by securities laws, in Hungary the task remains limited to what criminal law and the criminal justice system could offer, coupled with the dominantly ad hoc reactions of the Hungarian Securities and Exchange Commission (SEC). Development of tests to distinguish legitimate Multi-Level Marketing (MLM) companies from pyramid schemes disguised as such represents the only segment where significant rapprochement occurred between the US, the European Union (EU) and therefore also Hungary.
For contrast and illustration of the other end of the spectrum, the systems that were forced to react to risks corollary to the schemes by enacting sector-specific laws, the most recent regulatory reactions of India, Myanmar, and Sri Lanka had to be resorted to. As the latter two imposed complete bans on all MLMs, it is only the Indian 2019 comprehensive act that attempts to combat the schemes and akin forms of financial fraud relying on a new comprehensive regulatory model.
The Philippines is an interesting mixture made of local and transplants that readily proves that the solutions of the most developed US system could successfully be transplanted into a significantly different socio-economic environment.