Dear Friends and Clients,
The Banking Regulation and Supervisory Authority in Turkey (the "BRSA"), with the aim of protecting Turkish lira from the increasing speculative attacks and preventing its unusual loss of value due to certain macroeconomic concerns during COVID-19 health and economic crisis, published the Regulation1 on Manipulation and Misleading Transactions in Financial Markets (the "Regulation") relating to the transactions falling within the scope of Article 76/A of Banking Law No.5411 ("Law") added on 20 February 2020.
For your convenience, below we copied the full list of manipulation and misleading transactions listed in Article 4 of the Regulation and we also translated them into English.
Administrative Fine: Pursuant to Article 146(s) of the Law, those who carry out the transactions and practices accepted as manipulation and misleading transactions in the financial markets within the scope of Article 76/A will be imposed an administrative fines up to five percent of the total interest, profit share income, fees and commissions and banking service income in the financial statements of the previous year, not less than twice the benefit provided.
It is important for banks and financial institutions to pay attention to the provisions of this Regulation.
Manipulating and Misleading Transactions Listed in Article 4 of the Regulation
The following acts performed by banks are considered as manipulation and misleading transactions and practices in financial markets covered by Article 76/A of the Law:
a) Involving, intermediating in the transactions that provide or may provide false or misleading impression of the supply, demand and price of a financial instrument or that ensure or may ensure that the price of a financial instrument, including exchange rate and interest, be kept at an abnormal or artificial levels with the intention of achieving these purposes, placing orders for such transactions or performing similar activities.
b) Involving, intermediating in the transactions that will affect the price of a financial instrument or reference values such as interest, exchange rate, CDS, in order to increase the irregularity of the financial markets or negatively affect the stability of the financial markets by benefiting from the fluctuation or shallowness of the financial markets in times when the supply-demand balance is not realized under normal conditions, placing orders for such transactions or engaging in similar activities.
c) Carrying out or intermediating transactions and practices in order to overcome the decisions and limitations taken by the Board, using indirect methods, including early redemption of transactions, postponed transactions and / or failure to fulfill obligations, or to neutralize such Board decisions regarding the currency swap, forward, option and other derivative transactions of banks with foreign residents, one leg of which is foreign currency and the other is TL or regarding the provision of TL liquidity abroad by banks.
ç) Involving, intermediating in transactions that affect or may affect the price of a financial instrument including exchange rate and interest through a deceptive mechanism or setup, placing orders for such transactions or engaging in similar activities.
d) Disseminating false or misleading information or rumors that provide or may provide false or misleading impressions regarding the supply, demand, or exchange rate and price, including interest, of a financial instrument, or that ensure or may ensure that such price is kept an abnormal or artificial level via any means of mass media including the internet or any other means.
e) Making or trying to make an impact on the price of a financial instrument, including the interest rate and the exchange rate, by providing opinion via the Internet or other mass media about a financial instrument for which a position was previously taken and hiding from the public the conflict of interest relating to the position.
f) Conveying false or misleading information about a reference value or providing false or misleading input even though he or she knows or should know that it is false or misleading, or engaging in any behavior manipulating the calculation of a reference value.
g) Taking actions to fix the purchase and sale prices of the financial instrument or to make another unfair gain by using the dominant position on the supply or demand of a financial instrument.
ğ) In the opening and closing of the financial markets, ensuring the misleading of investors who take positions according to the opening or closing prices, by realizing purchase or sale transactions that affect or may affect the opening or closing prices of a financial instrument, including interest, exchange rate.
h) Directing savings account holders in an unrealistic or misleading way.
ı) Disseminating information and rumors that may harm the trust in the financial system and cause systemic risk.
For the avoidance of doubt, the BRSA, in Article 3(e) of the Regulation defined reference value in the Regulation as "the rate, index or number taken as a reference in determining the value of the financial instrument or the amount to be paid in return for the financial instrument which is disclosed to the public by publication or other means, periodically or regularly through a formula and determined based on the value of one or more reference assets or based on prices or surveys such as estimated prices, actual or estimated interest rates or other values".
In a similar fashion, it also defined what systemic risk means in Article 3(f) of the same, as "the risk that problems occurring in most or all of the financial system will disrupt financial services to a degree that will have significant negative effects on markets and/or the real economy,
Footnote
1. 7 Mayıs 2020 tarih ve 31120 sayılı Resmî Gazete'de yayımlanarak yürürlüğe girmiştir.
Originally published 7 May, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
