The Capital Markets Board has amended certain provisions of the Communiqué Regarding Debt Instruments (published in the Official Gazette dated June 7, 2013 and numbered 28670) (“Communiqué”) on February 18, 2017 with immediate effect.
The Communiqué includes the below provisions:The term “note” has been changed to “financing note”. Domestic and cross border issuances are separated more clearly and the documents which are required for both type of issuance are slightly changed. Domestic issuances can be made through the public offering or without the public offering. The domestic bond issuances which are made without the public offering can be made through: (i) the sale to qualified investors, (ii) the private placement if the minimum nominal value is TL 100,000. The authority of the Capital Markets Board has been broadened. According to the amendment, Capital Markets Board may (i) request that a bank or a third party guarantees the payment obligations regarding the debt instruments (ii) request the limitations in the sale conditions (iii) reduce the validity period of the issuance document. In addition, the Amendment reduces the fee of application from 0.2% to 0.15% for the issuances of which their maturity period is longer than 730 days.
The Capital Markets Board has amended certain provisions of the Communiquéon Principles Regarding Investment Services, Activities and Ancillary Services (published in the Official Gazette July 11, 2013 and numbered 28704) (“Communiqué”) on February 10, 2017 with immediate effect.
Pursuant to amended Article 27 of the Communiqué the leverage ratio decreased from 100:1 to 10:1 in leveraged transactions and the initial margin requirement for leveraged transactions has been increased from TL 20,000 to TL 50,000 (or its equivalent in foreign currency).
A regulated money market (“Market”) has been established in the Turkish exchange; Borsa İstanbul A.Ş. (“BIST”), where collateralized borrowing and lending transactions of banks and brokerage firms supplying and demanding Turkish Lira are executed. Banks and brokerage firms authorized in accordance with the BIST regulations and İstanbul Takas ve Saklama Bankası A.Ş. (“Takasbank”) may trade on the Market.
Members may place orders for their own accounts, and for the accounts of investment funds / investment trusts and customers, whilst Takasbank provides central counterparty (CCP) service for the Market and guarantees the settlement by acting as buyer to the seller and seller to the buyer for any transaction executed.
In order to protect the interests of investors more efficiently and to satisfy compensation claims swiftly, the framework regarding the implementation of Customer Disputes Arbitral Tribunal before the Turkish Capital Markets Association (“Arbitral Tribunal”) has been finalized and it has been resolved by the Capital Market Board that the applications regarding the disputes arising from off-exchange transactions between investment institutions and their customers shall be made to the Turkish Capital Markets Association.
The disputes shall be settled by the independent Arbitral Tribunal consisting of 3 (three) members, and the parties may raise an objection to the decision of the Arbitral Tribunal before the Capital Market Board within the scope of the relevant provisions with their justifications within 10 (ten) business days upon the notification of such decision
A Communiqué on the Amendment to the Communiqué on Principles Of Investment Funds (“Communiqué”) has been published in the Official Gazette dated June 23, 2016 and numbered 29751 and has been put in effect at the same date.
The amendments brought by the Communiqué are as follows:
- The definition of “Precious Metals Umbrella Fund” has been broadened in order for gold based deposit and participation accounts to be within the scope of the type control of the 80%.
- The definition of share intensive funds has been amended in order for “Share Intensive Fund” control to be made based on the “fund portfolio value” rather than the “fund total value”.
- The provision enabling share sale and purchase over foreign currencies of which daily exchange rates are announced by the Central Bank of Turkey has been inserted to the Communiqué by forming share groups by funds which include the phrase “exchange” in their title. Also, it has also been enabled for the mentioned funds to be parties to OTC repo agreements.
- The condensation limit regarding capital market instruments issued by asset lease companies has been increased.
- It has been enabled for funds to carry out transactions in the domestic organized money markets.
The Ministry of Finance amended the Regulation on Measures regarding Prevention of Laundering the Proceeds of Crime and Financing of Terrorism (O.G. January 8, 2008, 26751) and the Regulation on Program of Compliance with Obligations of Anti-Money Laundering and Combating Financing of Terrorism (O.G. September 16, 2008, 26999) with a decision on March 18, 2016. Pursuant to the amendments, a compliance officer for the execution of compliance program shall be assigned in 30 days following the official operation permission of the relevant institution. Additionally, Central Bank of Republic of Turkey, development and investment banks, institutions other than banks who have the authority to issue bank cards or credit cards, authorized exchange offices given in legislation on foreign exchange, financing and factoring companies within the scope of legislation on money lending, reinsurance companies, financial leasing companies, institutions furnishing settlement and custody services within the framework of capital markets legislation are obliged to assign compliance officer at administrative level without developing a compliance program in 30 days following the operation permission of the relevant institution.
The CMB has published Communiqué on Shares No. VII-128.1 (O.G. June 22, 2013, 28685), within this publication, prospectus formats and manuals came into effect. Certain issues covered by the amendment of share prospectus formats and manuals are as follows:The summary document has been revised in accordance with European Union (EU) standards. On February 8, 2016 the European Securities and Markets Authority (“ESMA”) has reviewed the above-mentioned regulations and concluded that a prospectus drawn up in accordance with Turkish requirements can constitute a valid prospectus under the EU Prospectus Directive. The content of the statements given by the persons responsible from the prospectus has been amended. Hereinafter, statement of responsibility shall be taken from the institutions preparing the specialized agency reports.
Additionally, formats of certain offering documents have been updated.
The Communiqué Regarding Principles on Investment Services and Activities and Ancillary Services No. III-37.1 and Communiqué on Principles of Establishment and Operation of the Investment Institutions No. III-39.1 has been amended by the CMB on January 14, 2016 (O.G. January 14, 2016, 29593). With such amendments the items below entered into force:In order to encourage brokerage firms to conduct investment banking activities, investment and development banks are now allowed to make transactions on shares in Borsa Istanbul, provided that they take over an existing brokerage firm of the relevant banks. Before opening an account for leveraged transaction, in order for the investors to gain experience, they must be directed to a trial account first that will remain active for at least six business days to make at least 50 transactions. Brokerage firms’ advertising, marketing and announcement regarding the leveraged transactions are now subject to specific procedures and principles. In order to avoid conflict of interests, it is prohibited to provide individual portfolio management services and investment advisory services to leveraged transaction clients. Investment institutions licensed to deal on own account must produce a list of over-the-counter derivatives and underlying assets and publish these in their website. Brokerage firms may request from professional clients the indemnification of any losses occurred in their collaterals for leveraged transaction. Brokerage firms must report all electronic platforms, including their programs, modules and expansions used for their transactions and over the counter derivatives to the Turkish Capital Markets Association.
The Capital Market Board (the “CMB”) has published the Communiqué on Principles Regarding Record Keeping and Documentation in Investment Services and Activities and Ancillary Services (Communiqué No. III-45.1) (the “Communiqué”) (O.G. January 22, 2015, 29244) in order to be put in effect as of October 1, 2015 without prejudice to several articles which are provisioned to be applicable as of the date of publication of the Communiqué. Accordingly, the Communiqué has broadened the scope of the Communiqué on Principles Regarding Record Keeping and Documentation in Intermediary Activities (Serial No. V/6), combining the regulations of record keeping and documentation of derivatives, leverage procedures and share market transactions in one single regulation. With regard to the above, certain novelties which are included in the Communiqué are as follows:The time period for record keeping is increased from 5 years to 10 years in accordance with the relevant provisions stipulated under the Turkish Commercial Code (O.G. February 14, 2011, 27846). Furthermore, the required record keeping period for voice recordings is also increased from 2 to 3 years. The Communiqué provides that framework agreements can be executed in accordance with the Regulation on Contracts Executed Outside the Workplaces Regarding Financial Services (O.G. January 31, 2015, 29253) and can be amended in the electronic medium provided that the conditions stated in the Communiqué have been met. The Communiqué provides specific provisions regarding the record keeping and documentation of over the counter transactions such as swaps and forwards. The Communiqué also stipulates separate provisions for account abstracts of general customers and professional customers. In the light of the foregoing, the general customers shall no longer be able to reject receiving their monthly account abstracts while professional customers may instruct investment institutions that they do not require account abstracts. Accordingly, investment institutions are required to send account abstracts to the address of general customers. If approved by the customer in writing, such account abstracts may be sent via e-mail, or may be made accessible via the electronic medium. Lastly, the Communiqué requires investment institutions to instill their accounting records with regard to the capital markets transactions to their legal books within the next business day following the settlement.
Within the scope of the Capital Market Law No. 6362 (O.G. December 30, 2012, 28513), the CMB has published Communiqué No. III-48.5 on Principles Regarding Security Investment Companies (“Communiqué”) (O.G. May 27, 2015, 29368). This Communiqué brought a new financial instrument to the capital markets of Turkey which is shares of investment companies with variable capital.
An Investment Company with Variable Capital (“ICVC”) is a legal entity which represents an investment company model that provides an opportunity to access the flexibility created by investment funds and that has an open-ended capital structure.
Certain issues covered within the Communiqué include:Securities Investment Trusts are composed of two different forms: companies with a fixed capital and companies with a variable capital. ICVC can be defined as a capital market institution of which the capital is always equal to its net asset value and which is established in the form of a joint-stock company. The shares of ICVC are issued in two forms: founder shares and investor shares. The assets and instruments that can be taken into the portfolio of ICVC contain all assets that can be included into the portfolio of securities investment trusts and securities mutual funds. ICVC’s shall obtain portfolio management services from a portfolio management company.