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Overview: Regulatory updates in Turkish Capital Markets

Published on : 24 Jun 2019

Regulatory updates in Turkish Capital Markets

The Turkish Capital Markets Board is the financial, regulatory and supervisory agency where the Turkish Finance Ministry appoints its board. The Capital Market Law is passed for the regulation and supervision of the capital markets for ensuring the functioning and development via the security, transparency, efficiency, stability and in fairness and competitive environment together with protecting the investors’ rights and interest.

The Turkish financial framework has a sub-divided regulatory structure. Banking Regulation and Supervision Agency (BRSA) is accountable for the financial framework, though the Capital Markets Board of Turkey (CMB) is the fundamental controller or the regulator of the capital markets. The Undersecretariat of Treasury directs the insurance industry. For each section of the financial sector, there are self-administrative associations, to which membership is mandatory for market members.

The Capital Market Law was passed in 1981, and after one year, the regulatory body, Capital Markets Board (CMB) was set up. In 1984, the Regulation for the Establishment and Operations of Securities Exchanges prompted the establishment of the Istanbul Stock Exchange (ISE) in which exchanging began toward the finish of 1985. Supplanting the past one, the New Capital Market Law came into effect on December 30th, 2012.

The new law, as per the EU acquis sets another structure for financial markets with the objective of encouraging a progressively robust and well-working financial framework while fortifying the protection and securing the investor.

The Executive Board represents the Capital Markets Board. Being the highest primary leadership body, the Executive Board is enabled to choose any issue within the expertise of the CMB. The director of the Executive Board is the Chief Executive Officer. The Executive Board comprises of seven individuals.

Every one of the individuals from the Board is designated by the Council of Ministers for a time of five years and can be re-appointed once for a period of 5 years. One of the individuals is appointed as the Chairperson by the Council of Ministers while the Executive Board chooses one part as the deputy chairperson.

The Capital Markets Board of Turkey (CMB), Borsa Istanbul, the Central Registry Agency (Merkezi Kayıt Kuruluşu) (MKK) and Istanbul Clearing, Settlement and Custody Bank A.Ş. (Takasbank) are the fundamental controllers of the equity markets in Turkey.

On March 1, 2018, Capital Markets Board in its weekly Bulletin which included four provisions that have changed specific guidelines and standards concerning speculation reserves, retirement speculation reserves, funding speculation assets and investment organizations as well as the recent updates in the capital markets.

  1. Disclosure of Control Changes for Publicly Listed Companies

The Communique on Material Events No. II-15.1 was amended where the primary change was that any sale or acquisition that takes place and results in increasing or decreasing below the limits of 5, 10,15, 20, 25, 33, 50, 67 and 95% any kind of direct or indirect changes to the shareholding or the voting rights of the shareholders shall be disclosed to public via the Central Registry Agency. The indirect changes in the shareholding and the voting rights are to be revealed by the shareholders.

  1. Improved Rules in Trade and Reporting of Merkezi Kayıt İstanbul (MKK) -Trade Repository

The communique establishing the procedures and principles for the trade repositories states that the notifications are to be made via the electronic data storage system by the legal entities which are inclusive of investment organizations, management companies, etc. The primary responsibility of the trade repository is to compile and maintain the records of the derivatives. The Capital Markets Board recently authorized MKK as their trade repository.

  1. Amendments to the Guideline on Pension Funds

CMB underwent significant changes as far as the Pension funds were concerned. The bills called for an automatic enrolment standard (ASE) and first pension funds to be introduced as a primary type of pension funds.

  1. Portfolio of Investment Funds and Pension Funds

The Capital Markets Board allowed the trading of the capital market instruments with a commitment of purchasing them again under the CMB Bulletin issued on 13th December 2018

  1. Asset-Backed and Mortgage-Backed Securities

The CMB amended the Communiques dealing with the Asset-Backed and Mortgage-Backed Securities with an intention to provide a reasonable convenience for the institutions providing funds by securitization of the liquidity constrained assets.

  1. Simplified issuing process for Capital Markets Instruments

Under the recent amendments, the companies are allowed for the revision of their public offering prices, discount or interest rates and price ranges before launching the sale or book building.

  1. Allocation changes in the Capital Markets

Under the law, previously companies were required for the allocation of 20% of the nominal value of capital market instruments for the localized investor institutions which via the newly amended legislation has decreased down to 10%. The CMB is granted for the authority for decreasing the minimum allocation limits to 0 or increasing the limits by one-fold.

The Capital Markets Board regularly keeps on updating the regulatory structure of the financial system in Turkey.