Turkey: Capital Markets Comparative Guide

1 Legal and regulatory framework

1.1 Which laws and regulations govern the capital markets in your jurisdiction?

The capital markets in Türkiye are governed by the following laws:

• the Turkish Commercial Code No. 6102 ("Turkish Commercial Code");
• the Capital Markets Law No. 6362 ("Capital Markets Law");
• secondary legislation including communiqués, regulations and guidelines issued by the Capital Markets Board;
• the Capital Markets Board Weekly Bulletin announcing recent legislative updates, Capital Markets Board decisions on administrative sanctions and Capital Markets Board approvals, including in relation to incorporation, debt and equity issuances; and
• sub-regulations, directives, letters, prospectuses and bylaws issued by:
• • Borsa Istanbul or BIST;
  • Merkezi Kayıt Kuruluşu A.Ş. ("MKK"), the central securities depository;
  • Istanbul Takas ve Saklama Bankası A.Ş. ("Takasbank"); and
  • the Turkish Capital Markets Association.

1.2 Is your jurisdiction part of a supranational, transnational or multinational framework with relevance to capital markets? If yes, how does this work?

Türkiye is not part of any supranational, transnational or multinational frameworks with relevance to the capital markets. However, the capital markets legislation applicable in Türkiye is compliant with EU capital markets laws and regulations.

1.3 Which bodies are responsible for regulating the capital markets in your jurisdiction? What powers do they have?

The main bodies that regulate the capital markets in Türkiye are as follows:

• The Capital Markets Board oversees the capital markets in Türkiye. Its structure, authority and duties are defined under the Capital Markets Law. Its primary objectives are to:
• • ensure that the capital markets in Türkiye operate fairly, efficiently and transparently;
  • protect the rights and interests of investors; and
  • enhance the competitive landscape of the Turkish capital markets.
• The Capital Markets Board regulates the activities of a variety of entities, including:
• • public companies;
  • capital market institutions (eg, banks, financial intermediaries, mutual funds, investment firms, appraisal firms, ratings agencies and other organisations involved in capital markets operations); and
  • investors.
• The Capital Markets Board also supervises the entire process of offering and issuing various types of securities, as stipulated by the Capital Markets Law and its secondary regulations.
• Borsa Istanbul is the stock exchange, which facilitates the trading of capital markets instruments, foreign currencies, precious metals and other assets authorised by the Capital Markets Board in an environment that ensures fair, transparent, efficient, competitive, equitable and stable trading.
• The MKK is the central securities depository, which provides members with depository, trade repository and reporting, corporate governance and investor services.
• Takasbank is the central clearing and settlement institution for various markets in Türkiye, such as the equities, debt securities, foreign securities, derivatives and precious metals markets of Borsa Istanbul. Takasbank:
• • settles cash and securities transactions for members of Borsa Istanbul; and
  • ensures the timely and accurate transfer of securities.
• The Turkish Capital Markets Association is a self-regulating professional agency that:
• • promotes professional standards and regulations for organisations functioning in the capital markets;
  • conducts research; and
  • plans industry events.
• The Public Disclosure Platform is an electronic platform on which publicly listed companies make specific announcements. Non-public companies also publish their announcements on the Capital Markets Board 's website.

1.4 How does enforcement work and what kinds of sanctions may be applied?

The Capital Markets Board has the authority to impose administrative, civil and criminal penalties on individuals or entities that violate the Capital Markets Law and its secondary regulations. These penalties may take the form of:

• monetary fines;
• suspensions or revocations of licences;
• prohibitions against engaging in trading activities; or
• imprisonment for specific offences related to capital markets operations, such as insider trading and market manipulation.

The Capital Markets Board publishes a weekly public bulletin of the penalties it imposes for such offences.

2 Capital markets infrastructure

2.1 What is the capital markets infrastructure in your jurisdiction (eg, trading venues, central counterparties, central securities depositaries (CSDs)?

• Borsa Istanbul is the sole stock exchange in Türkiye. Its primary objective is to facilitate the trading of capital markets instruments, foreign currencies, precious metals and other assets authorised by the Capital Markets Board in an environment that ensures fair, transparent, efficient, competitive, equitable and stable trading.
• MKK, the CSD, provides members with depository, trade repository and reporting, corporate governance and investor services.
• Takasbank is the central clearing and settlement institution for various markets in Türkiye such as the equities, debt securities, foreign securities, derivatives and precious metals markets of Borsa Istanbul. Takasbank:
• • settles cash and securities transactions for members of Borsa Istanbul; and
  • ensures the timely and accurate transfer of securities.
• The Turkish Capital Markets Association:
• • promotes professional standards and regulations for organisations functioning in the capital markets;
  • conducts research; and
  • plans industry events.
• The Public Disclosure Platform is an electronic platform on which publicly listed companies make specific announcements. Non-public companies also publish their announcements on the Capital Markets Board's website.

2.2 What are the main exchanges and other trading venues in your jurisdiction? What are the key differences between those various trading venues?

Borsa Istanbul is the sole exchange platform under the Turkish capital markets regulations. Prior to the formation of Borsa Istanbul, there were several exchanges – the Istanbul Stock Exchange, the Istanbul Gold Exchange and the Turkish Derivatives Exchange (Turkdex) – which no longer exist.

Borsa Istanbul primarily encompasses four markets:

• the Equity Market;
• the Debt Securities Market;
• the Derivatives Market; and
• the Precious Metals and Diamonds Market.

Publicly traded companies from a variety of industries are listed on the Equity Market, which operates through various sub-markets. BIST Star is the largest of these sub-markets, followed by BIST Main and BIST Sub-market. Other sub-markets include:

• the Structured Products and Fund Market;
• the Commodity Market; and
• the recently established Venture Capital Market.

Listing requirements vary depending on the specific market. The main differences between markets relate to:

• their trading hours;
• the products that can be traded on them; and
• their exchange fees.

2.3 What kinds of securities does your jurisdiction provide for (eg, electronic securities)?

The financial instruments traded and listed on the respective markets of Borsa Istanbul are as follows:

• equities;
• exchange-traded funds;
• government bonds and bills;
• corporate bonds and bills;
• lease certificates (sukuks);
• covered warrants;
• money market instruments (repo/reverse repo, swaps);
• asset-backed securities;
• Turkish sovereign Eurobonds;
• futures and options;
• precious metals and diamond;
• real estate investment funds; and
• venture capital investment funds.

The securities with all the rights attached to them are held in dematerialised electronic form on the system of the MKK, which also operates as the local CSD in Türkiye.

2.4 Is it mandatory to deposit securities with a (local) CSD (eg, for listing)?

Capital markets instruments including securities are held in dematerialised form with the local CSD, as per Communiqué on the Procedures and Principles for the Book-Keeping of Dematerialised Capital Markets Instruments No. II-13.1. According to Article 14 of afore-mentioned Communiqué, "it is essential that capital market instruments are issued in a dematerialised form via electronic media, not linked to any promissory note". For instance:

• debt instruments issued domestically must be held in dematerialised electronic form with the MKK; and
• the rights attached thereto must be monitored on a beneficial owner basis.

Following recent amendments to Law on the Prevention of Financing the Proliferation of Weapons of Mass Destruction No. 7262 and the Turkish Commercial Code, private companies must also notify the MKK of their bearer share certificates before offering them to shareholders.

2.5 Are there rules in place governing crypto-assets and crypto-infrastructure (eg, crypto-exchanges, local crypto-money)?

Crypto-asset services are not classified as an organised market but rather fall under the category of an over-the-counter market in Türkiye. The following bodies have published various regulations concerning crypto-assets:

• the Banking Regulation and Supervision Agency ("BRSA");
• the Capital Markets Board ;
• the Financial Crime Investigation Board ("FCIB"); and
• the Central Bank of Türkiye.

In an announcement issued on 25 November 2013, the BRSA declared that crypto-assets were not regarded as e-money; while in an announcement issued on 27 September 2019, the Capital Markets Board defined an ‘initial coin offering' (ICO) as a digital asset offering and expressed that ICOs lie outside the scope of regulation and oversight of the Capital Markets Board.

In 2019, a ‘suspicious transaction' was defined in guidelines issued by the FCIB as:

the transfer of funds from customer accounts to both domestic and international cryptocurrency exchanges or accounts held by individuals or legal entities if it occurs with a frequency and in an amount that does not align with the typical customer behaviour and profile.

In accordance with the Regulation Amending the Regulation on Measures to Prevent Money Laundering and Terrorist Financing of 1 May 2021, a crypto-asset service provider ("CASP") is officially designated as an obligated entity. CASPs must comply with the FCIB's principles. The FCIB released guidelines which set out the obligations of CASPs. In 2021, however, the Central Bank of Türkiye issued a regulation stating that "crypto assets cannot be used directly or indirectly for payments" and prohibited the use of cryptocurrencies for payments in Türkiye.

A regulation containing changes to the Capital Markets Law to regulate the crypto assets is expected to be passed by the Grand National Assembly of Türkiye in the first quarter of 2024.

2.6 Are special rules in place for crowdfunding products?

Crowdfunding is a regulated practice governed by the Capital Markets Law under Communiqué on Crowdfunding No. III-35/A.2 ("Communiqué on Crowdfunding"), which took effect on 27 October 2021. In this regard, duly authorised crowdfunding platforms in Türkiye are entitled to conduct:

• equity-based crowdfunding; and
• debt-based crowdfunding.

These platforms serve as intermediaries connecting investors with start-up businesses operating in technology and production and seeking funding through electronic means (eg, websites or mobile applications). As per Communiqué on Crowdfunding, special rules and investment limitations apply to both equity-based and debt-based crowdfunding.

Crowdfunding platforms are also subject to certain limitations. For both equity-based and debt- based crowdfunding, platforms can finance projects up to 50% of their total equity, capped at 20% of the targeted funding amount for each campaign. For equity-based crowdfunding, non-qualified individual investors may contribute a maximum of TRY 250 thousand in equity-based crowdfunding annually, with the option to adjust this limit to 10% of their declared annual net income, not exceeding TRY 1 million. In contrast, non-qualified investors can invest up to TRY 100 thousand in a project through debt-based crowdfunding.

As per Communiqué on Crowdfunding, venture capital firms:

• must not be in the form of a public company;
• will not be deemed publicly offered due to the number of their shareholders; and
• are exempt from the requirement to prepare a prospectus or issue document.

2.7 What kinds of databases are available on instruments issued and traded in your jurisdiction, and how can they be accessed?

The MKK offers members depository, trading repository, reporting, corporate governance and investor services in the Turkish capital markets. In this respect, it has a central depository system in which:

• all securities are issued in dematerialised form, held in beneficial owner accounts, transferred and traded; and
• the respective rights attached thereto are also recorded.

The MKK database may only be accessed by authorised members. Therefore, the rights and liabilities attached to the securities can be followed up by authorised MKK members through the system.

The Public Disclosure Platform is an electronic platform that allows for the public disclosure of electronically signed disclosures that are necessary to comply with Borsa Istanbul and capital markets rules. The MKK has issued Communiqué on Public Disclosure Platform No.VII-128.6 , which sets out the principles regulating the Public Disclosure Platform. Users can access the platform at www.kap.org.tr and can obtain complete information about the companies listed on Borsa Istanbul and their electronics archive free of charge.

3 Trading and post-trading infrastructure

3.1 What kind of market infrastructure does your jurisdiction provide for?

Türkiye has comprehensive infrastructure to facilitate various financial and capital markets activities, as follows:

• Borsa Istanbul is the single stock exchange in Türkiye. It is mainly comprised of the following markets:
• • Equity Market: This facilitates the issuance and trading of shares in public companies. Borsa Istanbul is the sole exchange for equity trading, with various sub-markets catering to different types of companies and investment preferences.
  • Debt Securities Market: This facilitates the issuance and trading of various fixed-income securities, including government bonds, corporate bonds and other debt instruments. These securities provide investment opportunities for both institutional and individual investors.
  • Derivatives Market: This facilitates the trading of financial derivatives such as futures and options contracts. This market allows participants to hedge risk, speculate on price movements and diversify their portfolios.
  • Precious Metals and Diamond Market: This specialised market facilitates the trading of precious metals such as gold and silver, as well as diamonds. It caters to investors looking for alternative assets and safe-haven investments.
  • Foreign Securities Market: This market facilitates the trading of foreign securities, enabling investors to access international investment opportunities without the need to open accounts in foreign markets.
• The MKK operates as a CSD and is a post-trade institution in the Turkish capital markets. It is responsible for:
• • the safekeeping and management of securities in electronic form;
  • the issue of capital market instruments in dematerialised form;
  • the registration of such instruments in accounts opened at the beneficial owner level; and
  • the supervision of compliance with their respective rights.
• Takasbank is a settlement and custody bank authorised to provide cash and securities settlement transactions as the central clearing and settlement institution to the Borsa Istanbul markets. Securities delivery/receipt and cash obligations of Borsa Istanbul members arising from transactions in the related markets are executed via Takasbank within the framework of the capital markets and related exchange regulations.
• The Turkish Capital Markets Association, among other industry associations, plays a role in promoting professional standards and regulations within the capital markets.

3.2 What are the rules governing liquidity flows across execution venues (eg, use of systematic internalisers, trading obligations)?

Borsa Istanbul is the only regulated execution venue in Türkiye. A comprehensive set of regulations, directives and procedures governs various aspects of exchange activities and liquidity flows across Borsa Istanbul.

The Borsa Istanbul Regulation on Principles Relating to Exchange Activities sets out a wide range of procedures and principles relating to exchange operations, including:

• listing and delisting;
• trading on the stock exchange;
• suspension of trading;
• transmission and matching of orders;
• timely fulfilment of obligations;
• authorisation to trade;
• execution of disciplinary regulations;
• exchange revenues;
• resolution of disputes;
• conflict of interest prevention;
• operating, audit and surveillance systems; and
• market creation, operation and management.

Another significant regulation of Borsa Istanbul is the Listing Directive. Companies, issuers and fund founders whose capital markets instruments are listed on Borsa Istanbul or which have filed an application with Borsa Istanbul for the listing of their capital markets instruments or for trading them without listing are subject to the Listing Directive. There are also:

• specific directives and procedures applicable to each Borsa Istanbul market; and
• specific rules for transactions in such markets.

3.3 Are there rules on light and dark markets and how do these apply?

There are no rules on light and dark markets in Türkiye.

3.4 Are market participants subject to best execution requirements?

Market participants are subject to a ‘best execution' policy in the Turkish capital markets. According to Article 30 of Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services No. III-37.1 ("Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services"), investment firms must execute orders in a manner that provides the best outcome for customers by taking into account their preferences on price, cost, speed, clearing, custody, counterparties and any other factors, while adhering to its order execution policy.

3.5 Does your jurisdiction apply a target market concept?

Türkiye does not apply a target market concept.

3.6 How does securities settlement work in your jurisdiction?

Takasbank regulates the central clearing and settlement system in accordance with the principles set forth in the Regulation on the Establishment and Operating Principles of Central Clearing and Settlement Institutions.

Investment firms must become Takasbank members and open accounts with Takasbank in order to fulfil their clearing and settlement obligations arising from transactions in the respective market within the deadlines specified for each particular market. The rights and obligations of members arising from clearing and settlement operations are finalised on a book entry basis, on the accounts of members. Clearing and settlement are effected based on a delivery versus payment principle, whereby no receivable is paid to a Takasbank member if it has failed to fulfil its obligations.

Multilateral netting is the general principle for the clearing and settlement of transactions with the same value date. The clearing and settlement of receivables arising from transactions in the market will be effected by Takasbank by transferring the relevant amounts to the accounts of the relevant Takasbank member. Since the systems of Takasbank and the MKK are integrated, securities transfers are reflected in the system of the MKK at the same time.

Each member is entitled to receive its clearing and settlement receivables only if:

• it has fulfilled its clearing and settlement obligations; and
• there is sufficient balance in the clearing and settlement pool maintained by Takasbank for the purpose of fulfilling obligations relating to cash and/or securities.

4 Listing and delisting of shares and bonds

4.1 What key requirements must be met to obtain a primary listing in your jurisdiction? What restrictions apply in this regard? Do any exemptions apply?

Financial instruments issued by way of public offering or sales to qualified investors can be listed on Borsa Istanbul only if they meet the criteria set out in the Listing Directive. Different listing requirements apply to different capital markets instruments – such as equities, debt securities, lease certificates and structured products – as per the directive.

To list shares issued via public offering, Borsa Istanbul requires the following criteria to be satisfied:

	BIST Star Market	BIST Main Market	BIST Sub Market
Minimum free-float market value	At least TRY 1 billion	At least TRY 250 million	At least TRY 100 million
Minimum free-float percentage	10%	20%	25%
Minimum presence of net income	Last 2 years	Last 2 years	Last 2 years
Minimum equity/capital ratio	Larger than 1	Larger than 1	Larger than 1.25

Further to the above, the following criteria must also be satisfied by a public company in order for its shares to be listed via public offering:

• It must have been incorporated at least two calendar years ago;
• Its financial situation must be sufficient to carry on its business operations;
• Its shares must not be restricted by any encumbrances that preclude shareholders from exercising their shareholding rights;
• It must not have suspended its activities for more than three months or been involved in any liquidation, bankruptcy or similar cases during the past year, other than for reasons acceptable to Borsa Istanbul;
• It must not be involved in any significant legal disputes; and
• It must provide audited consolidated accounts that comply with Turkish accounting standards and the requirements of the Capital Markets Board.

If debt securities or shares are offered to public, the issuer must prepare a prospectus and seek approval from the Capital Markets Board for both the shares and debt securities to be offered. However, if debt securities are exclusively offered to qualified investors, the issuer is exempt from the requirement to prepare a prospectus; instead, it need only prepare an issue document subject to the Capital Markets Board 's approval and can be listed by Borsa Istanbul once the Capital Markets Board has approved the issue document. There are no other Borsa Istanbul requirements for the listing of securities issued solely to qualified investors.

Detailed listing criteria for each financial instrument are outlined separately in the Listing Directive. The listing requirements applicable to debt securities to be issued through public offering are similar to those applicable to shares. The listing requirements for debt securities, however, do not apply in the following circumstances:

• The issuer's shares are traded on BIST Star Market, BIST Main Market or BIST Sub Market;
• The issuer is a bank licensed by the BRSA and the BRSA has granted its prior consent to the issue of debt securities; or
• The issuer is an investment institution subject to the Capital Markets Law.

4.2 What key requirements must be met to obtain a secondary listing in your jurisdiction? What restrictions apply in this regard? Do any exemptions apply?

Communiqué on Shares No. VII-128.1 ("Communiqué on Shares") states that if a public company's shares which are not traded on an exchange or newly issued shares as a result of a capital increase by way of limiting the pre-emptive right of shareholders are intended to be offered to the public, a secondary offering application accompanied by a list of documents must be submitted to the Capital Markets Board within 30 days as of the date of the resolution approving the secondary offering. Secondary public offerings are still subject to the prospectus requirement. The prospectus and other documentation indicated in Communiqué on Shares must be submitted to the Capital Markets Board for approval. A listing application must be submitted to Borsa Istanbul before trading in addition to the Capital Markets Board application. There are no restrictions or exemptions to be noted on this matter as set out under Communiqué on Shares.

4.3 What are the most common listing structures? What are the advantages and disadvantages of these different types of structures? What other factors should companies consider when deciding on a listing structure?

Listing structures are not explicitly defined under the Listing Directive. However, listing conditions vary depending on the market and the offering method:

• Debt securities and lease certificates issued for sale to qualified investors are listed following approval of the prospectus by the Capital Markets Board and after completion of sales without any further assessment by Borsa Istanbul.
• Capital markets instruments issued by the Central Bank of Türkiye or the Ministry of Treasury and Finance are traded without being listed on the exchange without any further decision or transaction.
• As a fast-track listing, capital markets instruments traded on the main markets of foreign exchanges may be unconditionally listed and traded, provided that the prospectus or issue document is approved by the Capital Markets Board.

4.4 How does the listing of bonds differ from the listing of shares?

Borsa Istanbul has separate requirements for each type of security mentioned in the Listing Directive. However, the listing requirements for bonds issued through public offerings do not differ significantly from those for shares.

There are two different methods for listing bonds:

• The issuer can file an application to the Capital Markets Board for a one-off issue covering a pre-determined amount of debt securities in full; or
• The issuer can file an application to the Capital Markets Board covering all issues to be made in ranks up to a certain ceiling to be approved within a certain period of time. In such cases, the issuer must file an application with Borsa Istanbul for trading on the Debt Securities Market.

Debt securities such as bonds issued for sale to qualified investors are listed following approval of the prospectus by the Capital Markets Board and after completion of sales without any further assessment by Borsa Istanbul.

4.5 What advisers are typically involved in the listing process? What claims (if any) can be brought against advisers with regard to their role in the listing process? Is there any way to mitigate such liability?

Typically, legal advisers, auditors and intermediary institutions are involved in the listing process. They are involved in:

• filing to the Capital Markets Board, Borsa Istanbul and MKK;
• drafting and reviewing the issue documents; and
• communicating with the relevant authorities.

These advisers are responsible for any incorrect, misleading or incomplete information in the reports they prepare. Additionally, intermediary institutions which have acted without due diligence can be held responsible for their part in any loss caused that cannot be indemnified by the issuer. Their liability is secondary and flows directly from any negligence on their part.

4.6 What other factors should companies consider when deciding on a listing strategy?

The conditions imposed by Borsa Istanbul for the listing of each financial instrument are well written and clear. Apart from these, there are no legal factors that must be considered when deciding on a listing strategy.

With regard to market trends, the equity markets continue to grow as there is strong demand for initial public offerings ("IPOs") in Türkiye. As more companies apply for IPOs, investor demand for the equity markets is expected to increase. This should be considered when deciding on a listing strategy.

4.7 What are the typical reasons for voluntary delisting? What are the grounds for compulsory delisting? What is the process for delisting?

Delisting is regulated by:

• the Capital Markets Law;
• the Borsa Istanbul Listing Directive; and
• the Borsa Istanbul Regulation on Principles Regarding Stock Exchange Activities.

Companies, issuers and fund founders may voluntarily apply to Borsa Istanbul and request delisting of their capital market instruments as per the relevant Capital Markets Board legislation. Following this request, such instruments may be delisted subject to the decision of the Borsa Istanbul board. Capital markets instruments that expire or are redeemed will be deemed to have been delisted from Borsa Istanbul on the date of expiry or redemption, without the need for any action to be taken.

Borsa Istanbul may delist the securities of a company on a permanent basis if it breaches its ongoing obligations or the listing requirements, subject to the decision of the Borsa Istanbul board. Situations that require compulsory delisting are outlined in detail in Borsa Istanbul's Listing Directive.

The Capital Markets Board is authorised to delist a company if it is in violation of its obligations under the capital markets legislation.

4.8 What tax considerations should be borne in mind from the issuer's perspective?

In Türkiye, securities are subject to both the declaration regime and the provisional tax regime.

Under the declaration regime, corporate tax is collected at a rate of 25% on corporate profits. However, corporate tax is collected at a rate of 30% on the corporate earnings of:

• banks;
• companies that fall under the scope of the Law on Financial Leasing, Factoring and Financing Companies No.6361;
• electronic payment and money institutions;
• authorised foreign exchange institutions;
• asset management companies;
• capital markets institutions;
• insurance and reinsurance companies; and
• pension companies.

For companies (except financial institutions) that offer their shares to the public for the first time at a minimum of 20%, the corporate tax rate is applied with a two-point discount for five accounting periods starting from the public offering.

Under the provisional regime, a withholding tax is applied – mainly by brokerage firms, banks and custody banks. The corporate profits derived from a listing of shares on the stock exchange fall under the provisional regime and are subject to withholding tax at a rate of 0% under current Turkish tax law.

While non-resident legal persons are solely subject to Turkish tax on trade income made through a permanent establishment or income sourced in Türkiye, resident legal persons are subject to Turkish tax on their worldwide income. Resident natural persons must declare any income generated through interest payments of debt securities issued outside of Türkiye if such income exceeds the relevant rate, which is publicly announced each year according to the revaluation rate.

5 Prospectus rules and marketing

5.1 What kinds of instruments are subject to prospectus requirements?

Each issuer must prepare a prospectus for all securities to be publicly offered and submit the prospectus to the Capital Markets Board for its approval. In the case of securities that are issued for sale to qualified investors or through private placement without a public offering, the issuer must prepare an issue document (which is similar to a prospectus) and submit the issue document for the approval of the Capital Markets Board.

5.2 What are the key exemptions from the prospectus requirements and what kinds of selling restrictions might apply?

Exemptions from the prospectus requirements are listed under Article 6 of Communiqué on Prospectus and Issuance Certificates No II-5.1 ("Communiqué on Prospectus and Issuance Certificates") . Issuers are exempt from the requirement to prepare a prospectus in the following cases:

• for public offerings aimed at investors that purchase capital markets instruments amounting to at least TRY 5 million per investor (separately for each public offering);
• for the public offering of capital markets instruments with a unit nominal value of at least TRY 5 million;
• where capital markets instruments issued for sale to qualified investors are traded among qualified investors on the stock exchange; and
• where capital markets instruments issued due to merger, transfer, demerger or capitalisation of part of the assets as capital in kind or through share exchange are traded on the stock exchange (provided that a disclosure in accordance with the sample published by the Capital Markets Board is announced).

Moreover, a prospectus need not be prepared in case of:

• the private placement of capital markets instruments;
• a sale to qualified investors;
• the issuance of bonus shares;
• the provision of a capital markets instrument as a substitute for payment in a share purchase offer; or
• the issuance of shares realised through:
• • the conversion or modification of previously issued capital markets instruments; or
  • the exercise of the rights granted by these capital markets instruments.

5.3 What key information must be included in a prospectus? What other requirements and restrictions apply with regard to the content of the prospectus?

The prospectus must contain the following key information in accordance with Communiqué on Prospectus and Issuance Certificates :

• information relating to the issuer (eg, legal status, field of business, group companies, financial information);
• terms and conditions of the securities;
• risk factors relating to the issuer and securities;
• information relating to the offering;
• independent auditors;
• related-party information;
• material contracts;
• information regarding third-party guarantors and guarantee documents;
• audited financial statements;
• assets and liabilities; and
• listing.

The Capital Markets Board has also issued a Prospectus Preparation Guide to provide guidance to issuers.

Upon the issuer's request, the Capital Markets Board may agree that specific information need not be disclosed in the prospectus in the following cases:

• There is no public benefit to the disclosure of such information;
• Disclosure could cause substantial loss to the issuer, unless such information in relation to the rights associated with the capital market instrument, issuer or guarantor prevents the investor from making a conscious assessment in relation to the instrument; or
• The information to be disclosed is insignificant to the offering and listing of the respective capital markets instrument.

5.4 What is the process for preparation, approval, filing and publication of the prospectus? How long does each step take?

The overall timetable varies from four to eight weeks, depending on the completeness of the information submitted to the Capital Markets Board:

• The process begins with the submission of an application to the Capital Markets Board, which will review the application within 10 business days of submission (20 business days for an initial public offering). The Capital Markets Board will assess whether the information in the prospectus or issue document is accurate, understandable and complete according to its standards. If the Capital Markets Board finds that anything is incomplete and additional information is required, it will notify the issuer within 10 business days to remedy this deficiency within the timeframe specified by the Capital Markets Board .
• An application is then submitted to Borsa Istanbul for the capital markets instrument to be listed and traded on exchange.
• Once the prospectus has been approved by the Capital Markets Board, it will be published according to the principles determined by the Capital Markets Board. The prospectus will be available for 12 months from the date of first publication and must be kept up to date. It need not be further registered with the trade registry or announced in the Trade Registry Gazette; however, the place where the prospectus has been published must be registered in the trade registry and announced in the Trade Registry Gazette.
• Once the prospectus has been approved, the issuer can start selling and trading its securities on Borsa Istanbul.

5.5 What are the rules governing prospectus summaries/key information documents (KIDs) in your jurisdiction?

The Capital Markets Law and Communiqué on Prospectus and Issuance Certificates govern prospectus summaries/KIDs in Türkiye. The format for a prospectus summary complies with European Securities and Markets Authority standards. Key principles include the following:

• If a guarantee is given by a third party to fulfil the obligations relating to a capital markets instrument to be offered to the public, information regarding the guarantor and the nature of the guarantee must be included in the prospectus.
• The names and duties of the individuals responsible for the prospectus and the titles, headquarters and contact information of legal entities must be clearly stated.
• Independently audited financial accounts and information derived from them must be presented.

5.6 Who is liable for the content of a prospectus/KID in your jurisdiction? On what grounds can such claims be brought? Is there any way to mitigate such liability?

The liability of the issuer and other respective parties is regulated under:

• Article 32 of the Capital Markets Law ; and
• Articles 25 and 26 of Communiqué on Prospectus and Issuance Certificates.

Issuers are mainly liable for the content of a prospectus/KID in Türkiye. They are responsible for any loss or damages arising from incorrect, misleading or incomplete information contained in the prospectus. In the case of loss or damages that cannot be compensated by the issuer, intermediary institutions, the guarantor (if any) and directors of the issuer can be held responsible in proportion to their fault where they have acted negligently.

The Capital Markets Board explicitly holds responsible persons and institutions such as independent auditors, rating and appraisal firms that prepare reports to be used as the basis for the public disclosure requirement under Article 32 of the Capital Markets Law. In order to mitigate this liability, such persons must prove that:

• they were unaware of the incorrect, misleading and incomplete information; and
• this unawareness was not caused by their gross negligence or intention.

Also, Article 26 of Communiqué on Prospectus and Issuance Certificates states that individuals and institutions such as independent auditors and rating and valuation institutions that prepare reports for inclusion in the prospectus are responsible for any incorrect, misleading or incomplete information in those reports.

If a loss to the assets of investors arises on the sale or purchase of capital markets instruments due to inaccurate, misleading or incomplete information contained in a prospectus, the investors will be entitled to claim compensation. The Capital Markets Board has enumerated certain situations in which such claims can be rejected.

6 Financial services (marketing and distribution)

6.1 What kinds of services in financial instruments are subject to authorisation requirements? Is proprietary trading allowed per se?

In Türkiye, financial institutions need authorisation from the Capital Markets Board to provide certain financial services and activities relating to financial instruments. These services include:

• brokerage;
• portfolio management;
• investment advice;
• custody and safekeeping;
• underwriting and placement;
• fund management; and
• proprietary trading.

The specific authorisation requirements and regulatory obligations may vary depending on the type of financial institution and the nature of its activities. Financial institutions seeking to provide these services must typically apply to the Capital Markets Board and meet certain criteria to obtain the necessary authorisation.

Proprietary trading is allowed in Türkiye as per the applicable legislation. The Capital Markets Board and other relevant regulatory authorities oversee and regulate proprietary trading activities to maintain market stability and protect investors.

6.2 Do special authorisation requirements apply to members of trading venues and/or issuers?

Borsa Istanbul is the only exchange in Türkiye on which financial instruments are traded. The Capital Markets Board requires trading venues to be licensed in order to engage in such activity; however, as yet no other trading venues operated by market operators such as multilateral trading facilities or organised trading facilities have been registered.

The Capital Markets Board approval is required before a capital markets instrument can be:

• offered to the public;
• sold via private placement; or
• sold solely to qualified investors.

Simultaneously, an issuer must apply to Borsa Istanbul before its shares can be traded on an exchange.

Financial institutions such as brokerage firms must obtain authorisation from the Capital Markets Board to carry out their financial activities, such as:

• the receipt and transmission of orders;
• the execution of orders in the name and account of a customer or in their own name and on the account of the customer;
• dealing on their own account; and
• underwriting capital markets instruments on a firm commitment basis.

6.3 How are financial instruments typically marketed in your jurisdiction? Are there special rules for initial public offerings?

Financial instruments are typically marketed through all means of communication, including the following:

• the press;
• the Internet;
• telephone;
• radio;
• television;
• cinema;
• outdoor ads;
• printed materials; and
• all other kinds of written, visual and electronic means of communication.

As per Article 41 of Communiqué on Principles of Establishment and Activities of Investment Firms No. III-39.1, investment firms:

• must be objective in all publications, ads, announcements and notices made in relation to their investment services and activities; and
• must not:
• • issue publications, ads, announcements, notices or other written or verbal explanations based on false, wrong or misleading information; or
  • abuse the lack of knowledge or experience of customers.

The principles for announcements of prospectuses and issue documents are governed by Articles 7 of the Capital Markets Law and Article 27 of Communiqué on Prospectus and Issuance Certificates . Accordingly, statements in ads and promotions for financial instruments:

• must not be false, misleading, exaggerated or incomplete;
• must fully comply with the prospectus;
• must not cause investors to have a false impression regarding the situation of the issuer and/or relevant capital market instrument or the guarantor (if any);
• must contain statements which are consistent with the information included in the prospectus;
• where the public offering price is included, must clearly emphasise that the Capital Markets Board or Borsa Istanbul has no discretion or approval in determining the price; and
• must include a warning that investment decisions should be made after examining the prospectus.

6.4 Is book building commonly used in your jurisdiction? If so, what does this process typically involve and do the regulatory requirements apply to book building? What are the advantages and disadvantages of book building?

According to Communiqué on Shares, sales via book-building can be executed through:

• book-building with a fixed price;
• book-building with a price bid; and
• book-building within a price range.

However, in a decision dated 30 March 2023, the Capital Markets Board stated that the method of book-building through sales on the stock exchange is permitted only if the market value of shares offered to public is below TRY 750 million. According to this decision, the method of sales via book-building outside the stock exchange is applicable only where the market value of shares offered to the public exceeds TRY 750 million, subject to the following restrictions:

• Investors in an individual investor group will only be allowed to receive equal distributions, and not proportionate distributions, in public offerings using book- building with a fixed price or price range.
• The share amount that can be requested by an individual investor cannot exceed one-quarter of the total number of shares allotted to the relevant investor group.
• For domestic institutional investors, if there is sufficient demand, it will be necessary to calculate the number of shares to be divided among each investor within a cap of 1% of the total number of shares offered to the public. This limit will apply at a rate of 3% to the funds of which a portfolio management company is the founder and/or manager.
• At the end of the book-building period, if there is a sufficient number of bids received for a specific investor group, the shares allocated to the relevant group will not be reallocated to another investor group. If there is an investor group with insufficient demand, the remaining portion of the allocation for that group will first be transferred to meet the bids of domestic individual investors, if any; if there is no such demand, the remaining shares can be freely transferred to other groups.

The following distribution rules are also applied by the Capital Markets Board:

• Institutional investors are prohibited from transferring the shares they have purchased for their own portfolios to individual investor accounts.
• Investors cannot sell shares outside the stock exchange, transfer them to other investor accounts or subject them to special orders and/or wholesale transactions on the stock exchange for 90 days from the date on which the shares are transferred to their accounts. This restriction applies for 180 days from the approval date of the prospectus for the shares of existing shareholders of the company and also includes sales on the stock exchange.

According to Article 20 of Communiqué on Shares , an application for approval of a prospectus must be submitted to the Capital Markets Board for book-building, which cannot start without the Capital Markets Board's approval. The book-building start and end dates must be communicated by the authorised institution to the Capital Markets Board at least one business day prior to the starting date of book-building. The book-building period cannot be more than 10 business days. The articles of association of the company, the financial statements that must be attached to the prospectus, the associated independent audit reports and the annual reports for the same periods must be delivered free of charge to where the book-building is taking place. The results of the book-building:

• cannot be disclosed to the public or used for advertising purposes; and
• must be sent by the authorised institution to the Capital Markets Board within two business days of the end of the book-building period.

6.5 What requirements and restrictions apply with regard to price stabilisation in your jurisdiction?

Price stabilisation in Türkiye is governed by Communiqué on Shares and applies to various scenarios such as initial public offerings and secondary public offerings. The intermediary institution or consortium leader underwriting the sales in public offering can purchase shares for stabilisation purposes once they start trading on the exchange. The funding source for stabilisation in the company's account may come from the gross public offering income, limited to:

• 20% of the gross public offering income; and
• 20% of the total nominal share value offered to the public.

There are no specific limits for funds from entities other than the company. The prospectus must disclose details about stabilisation measures, including:

• their nature;
• their potential termination;
• the intermediary institution in charge; and
• their duration.

Initially, funds come from existing shareholder sales. Price stabilisation measures can last for up to 30 days after share trading begins and buy orders above the public offering price are not allowed. Shares acquired for stabilisation purposes cannot be sold below the public offering price. After the stabilisation concludes or is terminated, the intermediary institution must provide specific information through the Public Disclosure Platform. These regulations aim to ensure transparency and fairness during stabilisation in Türkiye.

7 Derivatives

7.1 What trading and clearing obligations apply to derivatives?

The trading and clearing obligations that apply to securities also apply to derivatives. Derivatives can be traded either on exchange or on the over-the-counter ("OTC") market. OTC derivatives also fall within the legal scope of the Capital Markets Law and under the regulatory authority of the Capital Markets Board .

Derivatives are registered electronically with MKK on a beneficial owner basis and are cleared through MKK acting as the CSD. Customer collateral kept by brokerage firms must be:

• monitored and notified on the basis of customers; and
• kept at Takasbank.

Further, Takasbank provides central counterparty services as well as margining and risk management for OTC derivative transactions. Takasbank defines risk limits for members in relation to OTC derivatives transactions.

7.2 Do mandatory risk mitigation techniques (eg, provision of collateral) apply?

Risk mitigation techniques apply to OTC derivatives transactions. A collateralisation policy is required for OTC derivatives transactions under Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services. The Capital Markets Board requires brokerage firms to determine a collateralisation policy in relation to OTC derivatives and assets underlying these derivatives by decision of the directors. There are two collateral types designated by the afore-mentioned Communiqué:

• ‘Initial collateral' refers to the minimum amount of collateral required to be deposited by the customer to initiate transactions and take positions; and
• ‘Maintenance collateral" refers to the minimum amount of collateral required to be held by the customer throughout the term of the OTC derivatives transactions.

OTC derivatives transactions may not start before collateralisation. If a customer fails to fulfil its obligation to supplement collateral in a timely manner after receipt of margin call, the customer will be deemed to be in default without any further notice.

As part of the collateralisation policy, a limit can be applied by the brokerage firm relating to the size of the positions that may be taken by each customer. In determining these limits, customers may be grouped on the basis of the delivery month or whether the transaction is for hedging purposes.

7.3 Is a mandatory reporting system for derivatives transactions in place?

A mandatory reporting system applies to derivatives transactions in Türkiye. The Capital Markets Board requires all derivatives traded on exchange or on the OTC market to be reported to data storage organisations as per Article 5 of Communiqué on Reporting Principles to Data Storage Organisations No. IV-87.1. The Capital Markets Board may exempt certain derivatives instruments from the requirement to report. The afore-mentioned Communiqué clarifies issues such as:

• the party that is responsible for reporting;
• the content of the data;
• reconciliation;
• collateral; and
• the data retention period.

7.4 What are the commonly used framework agreements in your jurisdictions for non-cleared and cleared derivatives?

There is no framework agreement applicable to derivatives in Türkiye. The Capital Markets Board has published a set of minimum requirements that must be met by the bilateral agreements signed between the parties for the trading of derivatives.

8 Corporate governance/continuing obligations

8.1 What corporate governance requirements apply to listed companies?

Communiqué on Corporate Governance No. II-17.1 ("Communiqué on Corporate Governance") is the main statute regulating corporate governance requirements and related-party transactions applicable to listed companies.

Communiqué on Corporate Governance sets out mandatory requirements concerning:

• shareholder rights;
• corporate policy on stakeholders;
• general assembly meetings;
• public disclosure requirements;
• the board of directors; and
• committees such as the audit committee, corporate governance committee, nomination committee, risk detection committee and compensation committee established under the board of directors, which play pivotal roles in overseeing various aspects of corporate governance.

All of the corporate governance principles and policies set out under Communiqué on Corporate Governance contribute to corporate transparency and accountability.

8.2 Is there a mandatory or voluntary corporate governance index? If so, what does it contain?

Both mandatory and voluntary principles apply to corporate governance regulation.

Mandatory corporate governance principles to be implemented by listed companies are set out in Communiqué on Corporate Governance. The implementation of these principles differs depending on the systemic significance and market value of the company. Under the Communiqué on Corporate Governance, companies are divided into three groups to determine the implementation of such principles:

• Companies whose average market value is above TRY 3 billion and whose average market value in actual circulation is above TRY 750 million;
• Companies which do not fall within the first group whose average market value is above TRY 1 billion and whose average market value in actual circulation is above TRY 250 million; and
• Companies which do not fall within the first and second groups whose shares are traded on the National Market, the Second National Market or the Collective Products Market.

If a company fails to comply with these principles as set forth in the Communiqué on Corporate Governance or within the term granted by the Capital Markets Board, the Capital Markets Board is authorised to take decisions to ensure compliance and conduct the relevant transactions ex officio. Further to this, the Capital Markets Board is authorised to:

• request a cautionary injunction, exempt from all kinds of guarantee; and
• file a lawsuit to determine the illegality of the compliance breach and the cessation of the breach, including by requesting a court decision to order compliance.

The Capital Markets Board adopts a ‘comply or explain' approach in relation to the implementation of voluntary principles. Companies need not comply with the voluntary principles set forth under Communiqué on Corporate Governance, but they must provide a reasoned explanation of any non-compliance. For instance, the sustainability principles announced by the Capital Markets Board are voluntary.

8.3 What reporting obligations apply to listed companies? Do these vary if the issuer is a foreign company or between trading venues/segments?

Listed companies must issue the following reports:

• Corporate governance compliance report: Issued on an annual basis, this report:
• • indicates whether the corporate governance principles have been complied with and provides reasoned explanations for any non-compliance;
  • addresses any conflicts of interest due to non-compliance and whether any changes to management practices are expected in the near future; and
  • provide details of whether sustainability principles have been complied with, along with reasoned explanations for any non-compliance and the attendant environmental and social risk management impacts.
• Significant changes throughout the year should be disclosed in interim activity reports.
• Investor relations report: The investor relations department, which is in charge of communications between the company and investors, must prepare a report on its activities at least once a year and submit this to the board of directors.
• Annual report: The board of directors must publish the annual report to ensure that the public can access complete and true information with respect to the activities of the listed company.
• Sustainability report: Public companies must prepare and disclose a sustainability report with regard to their sustainability performance, targets and actions taken in compliance with the format published by the Capital Markets Board for sustainability reporting at least once a year.
• Financial reports: Listed companies must issue:
• • independently audited financial statements prepared according to Turkish accounting standards on a yearly basis; and
  • interim financial reports every three, six and nine months.
• These financials must be tailored to the relevant market and independently audited by a Capital Markets Board-approved independent audit firm. Companies must also publish their six-month and 12-month financial statements in line with market requirements.
• Common and continuous transactions report: If common and continuous transactions between listed companies and subsidiaries and related parties exceed 10% of the revenues or cost of sales as per the latest annual financial statements, the board of directors must issue a report and disclose this to the public through the Public Disclosure Platform.

There are no exemptions or variations for foreign companies or trading venues.

8.4 What other continuing obligations apply to listed companies?

Related parties and related-party transactions are defined under Accounting Standard Communiqué on Related Parties. According to the said Communiqué, in principle, prior to a transaction between a company and any related party, the company's board of directors must pass a resolution to approve the principles of the transaction. The Turkish courts have held that this is compulsory not only for listed companies, but also for their affiliates.

If a related-party transaction exceeds certain revenue thresholds, certain regulatory steps must be taken, as follows:

• If a transaction exceeds 5% of the total equity or the total gross sale revenues of the company, the company must obtain a valuation report for the transaction from an authorised valuation company. Any transaction that is not on an arm's-length basis and that reduces the profit or assets of a public company can trigger criminal liability under Turkish law. The company's board of directors must pass a resolution to conclude such related-party transactions.
• If the transaction exceeds 10% of the total equity or the total gross sale revenues of the company:
• • the company must obtain a valuation report; and
  • the transaction must be approved by a majority of the independent directors.
• If a majority of the independent directors do not approve the related-party transaction, the company must:
• • disclose the reason for the dissenting votes to the public through the Public Disclosure Platform ; and
  • obtain the general assembly's approval.
• There is no meeting quorum for meetings of the general assembly. Shareholders that are parties to the transaction or that are related to the parties to the transaction will have no right to vote in the general assembly meeting. The resolution must be adopted by a majority of the shareholders present with a right to vote.

If it is decided to execute the related-party transaction, the following information must be disclosed through the Public Disclosure Platform:

• the direct or indirect relations between the parties to the transaction;
• the features of the transaction;
• a summary of the valuation report, including the assumptions used in the valuation and the valuation results; and
• if transaction has not been conducted in accordance with the results of the valuation report, the reason for this.

8.5 What are the consequences of breach of any of these obligations?

The consequences of a breach of the corporate governance obligations are set forth in Article 7 of Communiqué on Corporate Governance. The Capital Markets Board is authorised to:

• take decisions to ensure compliance;
• conduct the relevant transactions ex officio if the company is still in breach;
• request a cautionary injunction, exempt from all kinds of guarantees; and
• file a lawsuit to determine the illegality of the compliance breach and ensure the cessation of the breach, including by requesting a court decision to order compliance.

8.6 Do mandatory auditing rules apply and is there a special review/enforcement process?

Listed companies must regularly disclose their annual and quarterly financial statements and independent audit reports and other similar reports to the public as required under the applicable legislation.

9 Inside information and market manipulation

9.1 What qualifies as inside information?

The disclosure of material events by public companies is primarily regulated by Communiqué on Material Events No. II-15.1 ("Communiqué on Material Events"). This defines ‘inside information' as information, events and developments which might affect the value and price of capital market instruments or investors' investment decisions, such as:

• mergers, share transfers and takeover bids;
• changes in the issuer's activity, management or financial situation; and
• administrative or judicial investigations against the issuer.

Inside information must be publicly disclosed if its confidentiality cannot be preserved.

The Capital Markets Board distinguishes between ‘inside information' and ‘continuous information'. Rather than identifying each material event that requires disclosure, the Capital Markets Board leaves specific disclosure decisions regarding inside information to the company's individual discretion on a case-by-case basis. However, the Capital Markets Board 's Disclosure Guidelines clarify the events that trigger a disclosure requirement by providing illustrative examples.

If any inside information comes to the attention of a company/issuer, it must make the necessary public disclosures. Similarly, if any inside information comes to the attention of the any of the following persons (and not the issuer/company), they must also make a public disclosure regarding that inside information:

• persons that hold (directly or indirectly) 10% or more of the share capital or voting rights of the issuer; and
• persons that hold any privileged shares that give them the right to nominate or elect members to the board of directors of such issuer

9.2 What prohibitions apply to inside information? Is there a legitimate behaviour exemption?

If inside information could potentially harm the interests of a listed company or mislead the public, the board of directors may decide to postpone the disclosure of such information in order to protect its confidentiality in line with the applicable rules on postponing disclosure. This generally happens immediately after signing a term sheet, memorandum of understanding or letter of intent with a bidder. If a listed company decides to postpone the disclosure of such information, it must take all necessary measures to protect the confidentiality of the information during the postponement period. The target must make a public disclosure about the information as soon as the reason for the postponement no longer exists. The disclosure should also include an explanation as to why the board of directors of the target decided to postpone the disclosure.

9.3 What are the rules on mandatory disclosure of inside information?

Issuers must notify all market participants rapidly and comprehensively of any inside information so that investors can make well-founded decisions and are not put at a disadvantage compared to insiders. For this reason, issuers are legally obliged to disclose to the public immediately any facts that could potentially influence the price of their financial instruments and that directly concern them.

9.4 Are there special provisions on the operation of insider lists and Chinese walls?

Public companies must provide the MKK with a list of individuals who have regular access to inside information. These individuals are defined under Communiqué on Material Events as individuals who:

• are employed by the listed company under an employment contract or in another capacity; and
• have administrative responsibilities towards the company (eg, members of the board of directors or individuals who have direct or indirect access to the company's inside information and have decision-making authority).

The aim is to ensure that the capital markets operate in a reliable manner by tracking and recording who has access to inside information.

Companies also establish internal policies to prevent insider trading and regularly educate employees on the importance of this matter.

9.5 Do special rules apply to personal transactions?

The following transactions must be disclosed to the public by the relevant party executing the transaction:

• transactions involving individuals with administrative responsibilities (eg, board members, individuals with direct or indirect access to insider information and decision-making authority);
• transactions involving persons who are closely related to these individuals (eg, spouses, children);
• transactions involving a parent company; and
• transactions relating to the shares or share-backed capital market instruments of the company.

9.6 What kinds of activities may amount to market manipulation?

The activities that amount to market manipulation are defined under Article 107 of the Capital Markets Law as follows:

• Transaction-based manipulation: Trading or giving trading orders, cancelling or changing orders, or realising account movements with the intention of creating untrue or misleading impressions about prices, variations in prices, supply or demand of capital markets instruments.
• Information-based manipulation: Providing false, untrue or misleading information, spreading rumours, making comments, preparing reports or broadcasting untrue or misleading information, and benefiting therefrom, with the intention of affecting the price or value of capital markets instruments or decisions of investors.

9.7 What are the consequences of breach of these requirements and restrictions, both for issuers and for their directors and officers?

Insider dealing is a crime under the Capital Markets Law. If a person listed under Article 106 of the Capital Markets Law (eg, a manager, director, officer, adviser) issues purchase or sale orders or changes or cancels orders with regard to capital markets instruments in reliance on information that is directly or indirectly about capital markets instruments or issuers, and that may affect the price or value of the relevant capital markets instruments or the decisions of investors, in order to obtain a benefit for themselves or for others based on information that has not yet been publicly disclosed, such person will:

• be sentenced to imprisonment for between two and five years; and/or
• be punished with a judicial fine of at least twice the benefit obtained.

Market abuse/manipulation is also a crime under the Capital Markets Law. According to Article 107:

• anyone found guilty of transaction-based manipulation will be sentenced to imprisonment for between two and five years and a judicial fine of between 5,000 and 10,000 days; and
• anyone found guilty of information-based manipulation will be sentenced to imprisonment for between two and five years and a judicial fine of up to 5,000 days.

The Capital Markets Board may undertake insider trading and manipulation investigations as per Communiqué on Measures to be Taken for Insider Trading and Manipulation Investigations No. V.101.1. In case of a trading ban, natural or legal persons and officials of legal persons that are subject to a trading ban imposed by the Capital Markets Board cannot buy, sell or issue orders for capital markets instruments traded on exchanges for the duration of the ban.

The Capital Markets Board may impose a five-year trading ban on:

• individuals or officials of legal entities against whom a criminal complaint is filed with the Public Prosecutor's Office for the criminal offences specified in Articles 106 and 107 of the Capital Markets Law; or
• legal persons whose accounts are used to commit such offences.

In case of reasonable doubt, the Capital Markets Board may decide to impose trading ban for up to six months and can extend this for a further six months.

10 Short selling

10.1 What kinds of restrictions apply to short selling?

Communiqué on Margin Trading, Short Selling and Borrowing and Lending Transactions of Capital Markets Instruments No. V-65 governs short selling.

Borsa Istanbul may apply price limits to short selling depending on the intermediary institution, market or financial instrument. Also, directors, executives and shareholders that hold 10% or more of the shares of the issuer, as well as their spouses and those under their custody, are prohibited from engaging in short-selling transactions with the financial instruments of the issuer.

10.2 Is a mandatory disclosure requirement in place regarding short selling?

Article 15-B of Communiqué on Principles Regarding Reporting to Data Storage Organisations sets out the following disclosure requirements in relation to short selling:

• Brokerage firms must report data regarding the nominal and current values of net short positions (ie, the excess of short positions over long positions in the relevant security and customer) to the data storage organisations on a daily basis.
• Investment institutions must report data regarding customers that conduct short sale transactions (eg, the allotted limit, available limit, available sum and valued collateral sum), as well as information on customers that do not fulfil their default, equity completion and/or clearing obligations in relation to a short sale transaction, to the data storage organisations on a daily basis.
• Borsa Istanbul must report data on short-selling transactions carried out on the Borsa Istanbul Equity Market to the data storage organisations on a daily basis.

10.3 Is it permitted to write research reports while holding short positions?

Attempting to artificially reduce the price of a share at its real value through short selling by spreading false information to the markets constitutes market manipulation. Information-based market fraud is not permitted and is considered a crime under Article 107 of the Capital Markets Law.

11 Sustainability

11.1 Is the term ‘sustainability' defined in your jurisdiction and, if so, how? Does it cover environmental as well as social objectives? How is compliance with sustainability assessed (eg, quantitatively or qualitatively)? Are there certain minimum requirements?

The Capital Markets Board defines ‘sustainability' in its Communiqué on Corporate Governance. Public companies which are not subject to the mandatory sustainability obligations must report whether they comply with the sustainability principles set out in the Communiqué on Corporate Governance; if not, a detailed explanation is needed, including an explanation of the potential impact on social and economic risk management. Implementation of the sustainability principles was voluntary. In 2020, the Capital Markets Board also announced environmental, social and governance ("ESG") activities for public companies within the scope of its Sustainability Principles Compliance Framework, which sets out fundamental principles that must be observed by public companies in conducting ESG activities. Although implementation of these principles was not mandatory, companies must report on their implementation in accordance with the ‘comply or explain' principle.

On December 29, 2023, Board of the Public Oversight's Accounting and Auditing Standards Authority's Decision regarding the implementation of the Turkish Sustainability Reporting Standards was published in the Official Gazette and entered into force as of January 1, 2024. According to this Decision, the below financial institutions and capital markets institutions became obliged to report on sustainability principles.

• Turkish banks (except the ones which are managed by the Savings Deposit Insurance Fund)
• The below financial institutions and capital markets institutions which exceed at least two of the following thresholds:
• 1. Total assets of bigger than TRY 500 million.
  2. Annual net sales revenue of higher than TRY 1 billion.
  3. At least 250 employees
• 
  
  • Investment institutions
  • Collective investment institutions
  • Portfolio management companies
  • Mortgage finance companies
  • Central clearing organizations
  • Central securities depositories
  • Trade repositories
  • Joint stock companies whose capital market instruments are traded on a stock exchange or other structured markets or which have a prospectus or issuance certificate that has not expired
  • Joint stock companies issuing non-share capital market instruments through private placement and not to be publicly traded (only until the end of the accounting period in which these capital market instruments are redeemed) and joint stock companies having an issuance certificate for this purpose which has not expired
  • Rating agencies
  • Financial holding companies
  • Financial leasing companies
  • Factoring companies
  • Asset management companies
  • Companies having qualified shares in financial holding companies
  • Savings finance companies
  • Insurance, reinsurance and pension companies
  • Precious metals intermediary institutions, and companies engaged in the production or trade of precious metals and other institutions that are permitted to operate in the Borsa Istanbul markets

The Capital Markets Board has also published guidelines for green/sustainable bonds and green/sustainable lease certificates based on the International Capital Market Association Green Bond Guidelines. The guidelines provide clear definitions of green/sustainable bonds and green/sustainable lease certificates and set out the principles governing each type of instrument. Compliance with sustainability is assessed quantitatively.

11.2 Are there special rules in place in your jurisdiction on the identification, management and disclosure of sustainability issues?

The Capital Markets Board requires listed companies which are not required to satisfy mandatory sustainability obligations, to explain whether they are compliant with the sustainability principles in their annual activity report and if not, to explain why. The Capital Markets Board's template sustainability report must be used for this purpose.

11.3 Do applicable sustainability rules distinguish between sustainability risks (ie, financial risks resulting from sustainability issues) and the actual impact of corporate actions on, for example, the environment?

Public companies which are not required to satisfy mandatory sustainability obligations must report their compliance with sustainability principles in their annual reports. If they have not complied with any of these principles, they must explain their risk management in relation to the social and environmental impacts of non-compliance. To this end, both financial risks and environmental and social risks arising from non-compliance must be reported.

11.4 Does your jurisdiction provide for a special green bond regime?

The Green Deal Action Plan was published with the aim of combating climate change and supporting the green transformation in alignment with the European Green Deal. The Capital Markets Board has also published the Green Debt Instrument, Sustainable Debt Instrument, Green Lease Certificate and Sustainable Lease Certificate Guide, which aims to:

• promote the issuance of green/sustainable debt instruments and green/sustainable lease certificates in accordance with best practices and standards in the international financial markets; and
• increase transparency, consistency and comparability in the financing of sustainability projects and green projects.

The Banking Regulation and Supervision Agency recently published the Draft Communiqué on Green Asset Ratios, setting out the principles and procedures regarding the calculation and reporting of green asset ratios within the specified timeframes.

11.5 Are there restrictions on the sale or distribution of instruments not considered sustainable?

There are no rules or restrictions on the sale and distribution of instruments that are not considered sustainable.

11.6 Is it necessary to comply with certain minimum standards (eg, on human rights) to qualify as a ‘green' issuer?

Issuers must ensure that any issuances made within the scope of the Capital Markets Board's framework document comply with the principles specified in the Green Debt Instrument, Sustainable Debt Instrument, Green Lease Certificate and Sustainable Lease Certificate Guide. Funds obtained from the issuance must be used exclusively for the financing or refinancing of new and/or existing green projects. The green debt instrument framework document should be examined and evaluated by an external third party to confirm its compatibility with the guide.

11.7 How will sustainability rules affect the capital markets in your jurisdiction?

Prioritising sustainability will benefit both investors and companies. Thus, companies that prioritise ESG considerations in their operations should reap the benefits in the long term, as investors are increasingly factoring these into their investment decisions.

12 Product bans

12.1 What products are currently banned from sale or marketing to (certain kinds of) investors in your jurisdiction?

Pursuant to Capital Markets Board Decision 4/174 of 19 February 2015, binary options do not qualify as derivatives and trading in binary options is not a capital markets activity. Through this decision, the Capital Markets Board prohibited the trading of binary options.

12.2 What is the process for imposing product bans and which regulators are in charge of this?

There is no specific procedure for imposing product bans. The Capital Markets Board is the regulatory authority in charge of regulating capital markets institutions and capital markets instruments under the Capital Markets Law.

13 Trends and predictions

13.1 How would you describe the current capital markets landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Since 2020, there has been a notable increase in the number of initial public offerings on the market. This trend is apparent in various sectors, including food, construction, mining and technology. It is expected that this trend will continue for the foreseeable future, as numerous companies are waiting in line at the Capital Markets Board to go public.

Asset management companies are also focused on:

• venture capital investment funds and companies; and
• real estate investment funds and companies.

Start-ups in the technology, gaming and digital products sectors in particular are attracting the attention of venture capital funders.

Islamic finance products – in particular sukuk issuances denominated in both domestic and foreign currency – are increasingly on the radar of private companies. As it is becoming more challenging in Türkiye to procure financing through banks, private companies other than financial institutions are opting to issue sukuk in both local and international markets, in addition to the well-established Turkish lira-denominated bond market.

In 2023, the Turkish Treasury's first environmental, social and governance (ESG) bond was issued on the international markets, raising USD 7,5 billion. ESG bonds are an important tool for Turkish banks to expand their investor base and diversify their foreign borrowing product portfolios.

14 Tips and traps

14.1 What are your top tips for the smooth conclusion of offerings in your jurisdiction and what potential sticking points would you highlight?

A professional project management team with deep legal, financial and tax expertise is crucial for the smooth conclusion of offerings in Türkiye. The focus should be on ensuring effective communication between the regulatory bodies and the project management team.

To avoid potential sticking points, the issuer and the project management team should diligently monitor all news and developments about the issuer which could potentially mislead investors or have a negative impact on the offering phase before it is completed.

Co-Authored by Seda Köprülü.

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.