Capital markets board of turkey by Business Turkey

Capital Markets Board of Turkey

2014 Annual Report

Capital Markets Board of Turkey 2014 Annual Report

CONTENTS INDEX OF TABLES

INDEX OF GRAPHS

VII

ABBREVIATIONS

VIII

MESSAGE FROM THE CHAIRMAN

1. CAPITAL MARKETS BOARD OF TURKEY

1.1. MISSION, VISION, DUTIES AND AUTHORITIES

1.2. EXECUTIVE BOARD AND ORGANIZATION

1.2.1. Executive Board

1.2.2. Organization

1.3. BUDGET

1.4. STAFF

2. OVERVIEW OF TURKISH ECONOMY IN 2014

3. SECONDARY REGULATIONS PUBLISHED IN 2014 AND IMPACT ASSESSMENT

3.1. SECONDARY REGULATIONS ON CAPITAL MARKET INSTRUMENTS, THEIR ISSUES AND IMPACT ASSESSMENT

3.1.1. Regulation on Revision of the Communiqué on Shares

3.1.2. Regulations on Asset Backed and Mortgage Backed Securities

3.1.3. Regulations on Covered Securities

3.1.4. Regulations on Foreign Capital Market Instruments, Depositary Receipts and Foreign Investment Funds

3.2. SECONDARY REGULATIONS ON PUBLICLY-HELD CORPORATIONS AND IMPACT ASSESSMENT

3.2.1. Corporate Governance Communiqué and its Principles

3.2.2. Communiqué on Squeeze-Out and Sell-Out Rights

3.2.3. Communiqué on Buy-Backed Shares

3.2.4. Communiqué on Takeover Bids

3.2.5. Regulation on Dividend Distribution

3.2.6. Revision in the Communiqué on Common Principles Regarding Significant Transactions and Retirement Right

3.2.7. Revision in the Communiqué on Merger and Demerger 3.3. SECONDARY REGULATIONS ON PUBLIC DISCLOSURES AND IMPACT ASSESSMENT

17 17

3.3.1. Communiqué on Material Events Disclosure

3.3.2. Communiqué on Material Events Disclosure Regarding Non-Publicly Traded Corporations

3.3.3. Innovations Relating to PDP

3.4. SECONDARY REGULATIONS ON INVESTMENT SERVICES, ACTIVITIES AND INVESTMENT FIRMS AND IMPACT ASSESSMENT

3.4.1. Effectiveness of Investment Services Communiqué and Investment Firms Communiqué

3.4.2. Information and Documents Required To Be Submitted in Applications of Intermediary Institutions and Banks to CMB Pursuant to Communiqués no. III-37.1 and III-39.1

3.5. SECONDARY REGULATIONS ON CLEARING AND CUSTODY SERVICES LEGISLATION, OPERATIONS, CENTRAL COUNTERPARTIES, AND IMPACT ASSESSMENT

Capital Markets Board of Turkey 2014 Annual Report

3.5.1. Regulation on Establishment, Operations, Working and Audit Principles of Central Registry Agency

3.5.2. Communiqué on Procedures and Principles for Book-Keeping of Dematerialized Capital Market Instruments

3.6. SECONDARY REGULATIONS ON EXCHANGE LEGISLATION AND OPERATIONS, AND IMPACT ASSESSMENT

3.6.1. Regulation on the Principles Regarding Exchange Business of Borsa Istanbul Inc. and Regulation on the Principles Regarding Precious Metals and Precious Stones Exchange Business of Borsa Istanbul Inc. 3.7. SECONDARY REGULATIONS ON COLLECTIVE INVESTMENT SCHEMES AND IMPACT ASSESSMENT

19 19

3.7.1. Communiqué on Venture Capital Investment Funds

3.7.2. Communiqué on Real Estate Investment Companies

3.7.3. Regulations on Housing and Asset Finance

3.7.4. Turkish Electronic Fund Distribution Platform (TEFAS) Works

3.8. REGULATIONS ON LICENSING OF CAPITAL MARKET PROFESSIONALS AND IMPACT ASSESSMENT

3.9. ASSESSMENTS ON CMB’S PERFORMANCE OBJECTIVES AND THEIR IMPLEMENTATION RESULTS

3.9.1. Assessments on Performance Objectives According to 2014-2016 Strategic Plan and Their Implementation Results

3.9.2. 2014 Annual Enforcement Performance Objectives and Implementation Results

3.10. EXECUTIVE BOARD’S RESOLUTIONS IN 2014

3.11. ONGOING SECONDARY REGULATION WORKS

3.11.1. Ongoing Regulation Works on Investment Firms

3.11.2. Ongoing Regulation Works on Collective Investment Schemes

4. ACTIVITIES OF THE CMB IN 2014

4.1. APPLICATIONS FOR SECURITIES ISSUES

4.2. AUTHORIZATIONS AND APPROVALS

4.2.1. Authorizations Regarding Investment Firms

4.2.2. Authorizations Regarding Collective Investment Schemes

4.2.3. Authorizations and Approvals Regarding Publicly-held Corporations

4.2.4. Authorizations Regarding Independent Audit Firms

4.2.5. Authorizations Regarding Rating Agencies

4.2.6. Authorizations Regarding Appraisal Firms

4.2.7. Authorizations Regarding Establishment of Asset Lease Companies / Asset Finance Fund

4.3. SUPERVISION

4.3.1. Supervision of Publicly-Held Corporations

4.3.2. Supervision of Collective Investment Schemes

4.3.3. Supervision, Surveillance and Inspection of Investment Firms

4.3.4. Supervision of Independent Audit Firms

4.3.5. Supervision of Rating Agencies

4.3.6. Supervision of Appraisal Firms

4.3.7. Market Supervision

4.4. ENFORCEMENT

4.5. LAWSUITS, WRITTEN APPLICATIONS TO THE PUBLIC PROSECUTORS AND ADMINISTRATIVE MEASURES

4.5.1. Lawsuits Commenced Against the Acts of CMB

III

Capital Markets Board of Turkey 2014 Annual Report

4.5.2. Lawsuits Commenced by the CMB

4.6. WORKS CONDUCTED WITH OTHER INSTITUTIONS JOINTLY

4.6.1. Financial Stability Committee

4.6.2. 10th Development Plan and Priority Transformation Programs

4.6.3. Systemic Risk Assessment Group

4.6.4. Financial Sector Commission

4.6.5. Financial Stability Board

4.7. EUROPEAN UNION (EU) HARMONIZATION WORKS

4.7.1. Legislative Harmonization Works and Coordination With Other Institutions

4.7.2. Activities to Benefit from EU Funds

4.8. INTERNATIONAL RELATIONS

4.8.1. International Organization of Securities Commissions (IOSCO)

4.8.2. Organization for Economic Cooperation and Development (OECD)

4.8.3. World Trade Organization (WTO) and General Agreement on Trade in Services (GATS) and Other Trade Agreements

4.8.4. Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC)

4.8.5. Islamic Financial Services Board (IFSB)

4.8.6. European Bank for Reconstruction and Development (EBRD)

4.8.7. Mediterranean Partnership of Securities Regulators

4.8.8. International Forum of Independent Audit Regulators (IFIAR)

4.8.9. International Accounting Standards Board (IASB) Advisory Council Membership

4.8.10. Bilateral Relations and Signed Memorandum of Understanding (MoU)

4.8.11. International Programs Organized by CMB

4.9. LICENSING OF MARKET PROFESSIONALS

4.10. INVESTOR APPLICATIONS

4.11. INFORMATION SOURCES

Capital Markets Board of Turkey 2014 Annual Report

4.12. FINANCIAL EDUCATION AND PROMOTION

4.13. INFORMATION SYSTEMS AND TECHNOLOGICAL INFRASTRUCTURE WORKS

4.13.1. Information Systems Review

4.13.2. System and Network Works

4.13.3. Application Development Works

5. TURKISH CAPITAL MARKETS IN 2014

5.1. CAPITAL MARKET INDICATORS IN 2014

5.2. OUTSTANDING SECURITIES

5.3. CAPITAL MARKET INSTRUMENTS WITH APPROVED PROSPECTUSES / ISSUE DOCUMENTS

5.4. INVESTMENT FIRMS

5.5. COLLECTIVE INVESTMENT SCHEMES

5.5.1. Investment Funds

5.5.2. Investment Companies

5.6. PORTFOLIO MANAGEMENT COMPANIES

5.7. DEVELOPMENTS IN THE EQUITY MARKET

5.7.1. Equity Market and BIST 100 Index

5.7.2. Emerging Companies Market

5.8. DEVELOPMENTS REGARDING DEBT SECURITIES MARKET AND MARKET VOLUMES

5.9. DEVELOPMENTS REGARDING DERIVATIVES MARKET

5.10. DEVELOPMENTS REGARDING PRECIOUS METALS AND DIAMONDS MARKETS

5.11. DEVELOPMENTS REGARDING LEVERAGED PURCHASE AND SALE (FOREX) TRANSACTIONS

6. EXCHANGES, CENTRAL CLEARING AND CENTRAL DEPOSITORY INSTITUTIONS, ASSOCIATIONS AND INVESTOR COMPENSATION CENTER

6.1. BORSA İSTANBUL INC.

6.2. CENTRAL REGISTRY AGENCY INC.

6.3. CAPITAL MARKETS ASSOCIATION OF TURKEY

6.4. ASSOCIATION OF APPRAISAL EXPERTS OF TURKEY

6.5. INVESTOR COMPENSATION CENTER

Capital Markets Board of Turkey 2014 Annual Report

INDEX OF TABLES TABLE 1.1. REVENUES AND EXPENDITURES OF THE CMB IN 2014

TABLE 1.2. CMB 2014 STAFF STATISTICS

TABLE 3.1. 2014 ANNUAL ENFORCEMENT PERFORMANCE OBJECTIVES AND IMPLEMENTATION RESULTS

TABLE 4.1. APPLICATIONS FOR SECURITIES ISSUES AND RESULTS

TABLE 4.2. ACTIVITIES SUBJECT TO THE PERMISSION OF CMB AND INSTITUTIONS AUTHORIZED

TABLE 4.3. APPLICATIONS FILED BY INVESTMENT FIRMS TO THE CMB IN 2014

TABLE 4.4. APPLICATIONS OF COLLECTIVE INVESTMENT SCHEMES

TABLE 4.5. APPLICATIONS OF PUBLICLY-HELD CORPORATIONS IN 2014

TABLE 4.6. TYPES OF ON-SITE INSPECTIONS OF INTERMEDIARY INSTITUTIONS BY YEARS

TABLE 4.7. DISTRIBUTION OF ENFORCEMENT ACTIVITIES BY SUBJECT MATTERS

TABLE 4.8. SANCTIONS IMPOSED AS A RESULT OF ENFORCEMENT ACTIVITIES

TABLE 4.9. LEGAL GROUNDS AND AMOUNTS OF ADMINISTRATIVE FINES

TABLE 4.10. ADMINISTRATIVE LAWSUITS COMMENCED AGAINST THE ACTS OF CMB

TABLE 4.11. ADJUDICATED ADMINISTRATIVE LAWSUITS

TABLE 4.12. CIVIL LAWSUITS COMMENCED AGAINST THE CMB

TABLE 4.13. CIVIL LAWSUITS COMMENCED AND ADJUDICATED AGAINST THE CMB

TABLE 4.14. WRITTEN APPLICATIONS TO THE PUBLIC PROSECUTOR BY THE CMB AND LAWSUITS COMMENCED

TABLE 4.15. ADJUDICATED CRIMINAL LAWSUITS COMMENCED UPON WRITTEN APPLICATION TO THE PUBLIC PROSECUTOR BY THE CMB

TABLE 4.16. CIVIL LAWSUITS COMMENCED BY THE CMB

TABLE 4.17. ADJUDICATED CIVIL LAWSUITS COMMENCED BY THE CMB

TABLE 4.18. NUMBER OF LICENSES DESERVED (2002-2014)

TABLE 4.19. INFORMATION REQUESTS TO CMB

TABLE 4.20. APPLICATIONS FOR TRAINING SEMINARS FOR UNIVERSITY STUDENTS

TABLE 5.1. CAPITAL MARKET INDICATORS IN 2014

TABLE 5.2. INFORMATION ON SECURITIES UNDER THE CENTRAL DEMATERIALIZED SYSTEM

TABLE 5.3. OUTSTANDING SECURITIES

TABLE 5.4. CAPITAL MARKET INSTRUMENTS SOLD IN 2014 (THOUSAND TL)

TABLE 5.5. CAPITAL MARKET INSTRUMENTS SOLD IN 2014 (THOUSAND USD)

TABLE 5.6. OPERATING LICENSES OF INVESTMENT FIRMS

TABLE 5.7. LICENSES FOR INVESTMENT SERVICES AND ACTIVITIES ISSUED UNDER THE NEW CML NO.6362

TABLE 5.8. TOTAL PORTFOLIO COMPOSITION OF INVESTMENT FUNDS (%)

TABLE 5.9. NUMBER OF BIST TRADED CORPORATIONS (31 DECEMBER 2014)

TABLE 5.10. MAIN INDICATORS REGARDING BIST TRADED CORPORATIONS

TABLE 5.11. DATA ON BORSA ISTANBUL EMERGING COMPANIES MARKET

TABLE 5.12. BIST DEBT SECURITIES MARKET TRADING VOLUMES

TABLE 5.13. BIST DERIVATIVES MARKET TRADING VOLUME (2014)

TABLE 5.14. BIST PRECIOUS METALS MARKET TRADING AMOUNT AND VOLUME

TABLE 5.15. BIST DIAMONDS AND PRECIOUS STONES MARKET TRADING AMOUNT AND VOLUME

TABLE 5.16. NUMBER OF INTERMEDIARY INSTITUTIONS HAVING LEVERAGED PURCHASE AND SALE (FOREX) TRADING LICENSE

TABLE 5.17. ANNUAL DATA REGARDING LEVERAGED (FOREX) TRANSACTIONS VI

Capital Markets Board of Turkey 2014 Annual Report

INDEX OF GRAPHS GRAPH 5.1. DISTRIBUTION OF TYPES OF INVESTMENT FUNDS BY PORTFOLIO SIZE

GRAPH 5.2. DISTRIBUTION OF FUND TOTAL VALUE OF TYPES OF PENSION INVESTMENT FUNDS

GRAPH 5.3. BIST 100 INDEX AND TRADING VOLUME (2007-2014)

GRAPH 5.4. BIST 100 INDEX AND TRADING VOLUME (2014 QUARTERLY BASIS)

GRAPH 5.5. BIST MARKET CAPITALIZATION

GRAPH 5.6. CUSTODY BALANCES OF FOREIGN INVESTORS

GRAPH 5.7. TRADING VOLUME OF FOREIGN INVESTORS IN BIST EQUITY MARKET

GRAPH 5.8. DAILY AVERAGE TRADING VOLUME OF DEBT SECURITIES IN BIST AND OFF-THE-EXCHANGE

VII

Capital Markets Board of Turkey 2014 Annual Report

ABBREVIATIONS AAET

: Association of Appraisal Experts of Turkey

ABS

: Asset-Backed Securities

ACS

: Asset-Covered Securities

ALC

: Asset Lease Company

BIST

: Borsa Istanbul Inc.

Board

: Capital Markets Board of Turkey

CBRT

: Central Bank of the Republic of Turkey

CDS

: Central Dematerialized System

CMAT

: Capital Markets Association of Turkey

CMB

: Capital Markets Board of Turkey

CML

: Capital Market Law no. 6362

COMCEC

: Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation

CRA

: Central Registry Agency Inc.

EBRD

: European Bank for Reconstruction and Development

ECM

: Borsa Istanbul Emerging Companies Market

ESMA

: European Securities and Markets Authority

: European Union

VIII

Capital Markets Board of Turkey 2014 Annual Report

Executive Board

: Capital Markets Board of Turkeyâ&#x20AC;&#x2122;s Executive Board

FDP

: Borsa Istanbul Free Trading Platform

FSB

: Financial Stability Board

GDP

: Gross Domestic Product

GDS

: Government Debt Securities

IOSCO

: International Organization of Securities Commissions

KGK

: Public Oversight, Accounting and Auditing Standards Authority

MASAK

: Financial Crimes Investigation Board of Turkey

MBS

: Mortgage-Backed Securities

MFI

: Mortgage Finance Institutions

OECD

: Organization of Economic Cooperation and Development

PDP

: Public Disclosure Platform

TAIEX

: EU Commission Technical Assistance and Information Exchange Instrument

Takasbank

: Istanbul Settlement and Custody Bank Inc.

: Turkish Lira

USD

: United States Dollars

: Undersecretariat of Treasury of Turkey

Capital Markets Board of Turkey 2014 Annual Report

MESSAGE FROM THE CHAIRMAN “Capital Markets Board has the VISION of being a leading, respected and dynamic institution in both the national and international arenas. To achieve this, our MISSION is to perform objective and accountable regulation and supervision in the capital markets, with easily understandable rules, in line with international standards and developments and responding to changing market needs, to ensure fairness, transparency and efficiency.” 2014 was a year when the legal and structural transformation of the Turkish capital markets which has been initiated in the previous year has been completed, and its initial results have been observed and assessed. Our projects aiming to implement Istanbul Financial Center Project, to ensure compliance with all international norms and especially EU directives, to protect investor rights, to offer alternative financial resources to our corporations, and to reinforce infrastructure of capital market institutions, thereby assuring international competition advantages have been completed in 2014. Thus, a new era has been opened for our capital markets. In addition, translation of the new capital market regulations and communiqués into English has been started in 2014, and up to now, 38 regulations and communiqués have been translated and published on CMB’s website.

the new regulation, types of license have been re-specified, and licensing terms and conditions have been re-determined, and exam topics have been revised according to the types of license. Furthermore, modular system has been initiated in exams, and written and video material has been prepared for each course. In the coming periods, we are intending to launch computer-based exams. In addition, last year, by determining the position and functions of Capital Markets Licensing Registry and Training Institution Inc. in the licensing system, we have prepared and submitted to International Organization of Securities Commissions (IOSCO) Board of Directors a proposal for making our licensing company a regional training center of IOSCO. In 2014, we have attached great importance to steps for financial education which aims to increase the awareness and competences towards financial products, concepts and risks particularly by informing the consumers and investors thereabout. In this context, “Financial Access, Financial Education and Financial Consumer Protection Strategies and Action Plans” have been drafted and have become effective upon publishing under the Prime Ministry Circular no. 2014/10 in the Official Gazette on 5 June 2014 no. 29021. Steps required for implementation of the actions assigned to the CMB in the aforementioned action plans have already been taken, and the process is continuing at full speed. Within this framework, our National Financial Education Strategy has been shared with OECD/INFE members in the symposium organized by International Network on Financial Education (INFE) established as a part of OECD. Furthermore, with a view to ensuring that financial education is to be extended to all segments of the society, and financial literacy capacity is further enhanced, and sound financial decisions are taken by the individuals, thereby contributing to development and deepening of financial markets in the coming periods, a cooperation protocol has been signed between the CMB and the Ministry of National Education. Besides, financial education website which is currently under construction is scheduled to be launched in the coming days.

Our capital markets have continued their development in 2014 without slowing down, as well. Market value of publicly-traded corporations has increased from USD 239 billion as of the end of 2013 to USD 274 billion as of the end of 2014, and total value of investment funds has risen by 20% from TL 30.1 billion to TL 36 billion in 2014 as regards the previous year, and total sum of portfolios managed by our portfolio management companies has come up from TL 64.9 billion as of the end of 2013 to TL 81.9 billion as of the end of 2014. Total value of securities under the central dematerialized system was USD 358.2 billion as of the end of 2013, which rose to USD 401.2 billion as of the end of 2014. In 2014, total value of capital market instruments, which prospectuses/issue documents were approved by the CMB, has also demonstrated a great boost, this figure has climbed up to TL 127 billion from previous year’s TL 86.1 billion. One of the most important innovations introduced to Turkish capital markets in 2014 has been the Turkish Electronic Fund Distribution Platform (TEFAS). Establishment of TEFAS, being an electronic platform enabling access through a single investment account to all investment funds, solely except for investment funds subject to special conditions, has been completed in 2014, and TEFAS has started to operate at the beginning of 2015. Thus, in the coming periods, parallel to the increase of competition in fund portfolio management, fund performances are also expected to rise.

In 2014, CMB’s international activities have also been speeded up, and within this framework, CMB has participated in numerous international meetings, and have hosted some of them. Through such organizations hosted or participated by the CMB, we have had the chance to mutually exchange information and experiences with many authorities specialized on capital markets field. Such relations have immediately yielded their results, and after

Another important innovation of the previous year has concerned licensing and registry system for market professionals. Through

Capital Markets Board of Turkey 2014 Annual Report

becoming a member of IOSCO in 1998, the CMB has been elected to IOSCO Board of Directors as a representative of IOSCO Growing and Developing Markets Committee in 2014 for the term of 2014-2016. Furthermore, the CMB has also been elected to International Financial Reporting Standards Advisory Council, being the official advisory body of the International Accounting Standards Board. Thus, the CMB has had the chance of direct participation in and contribution to international decision making mechanisms and discussions in capital markets field. In addition, CMB has become a member of Mediterranean Partnership of Securities Regulators, being an organization of Mediterranean countries, in its annual meeting of chairmen (COSOB) held in Algeria in February 2014. Besides, with a view to contributing to create awareness about financing of major infrastructure investment projects through capital markets, and to increase the dialogue among market participants and regulatory organizations, the CMB has hosted an international conference focused on “Development of Infrastructure Financial Instruments for Investors” in cooperation with the European Bank for Reconstruction and Development in June 2014. Furthermore, the CMB is being represented in Islamic Financial Services Board (FISB) Technical Committee, and the “3rd COMCEC Capital Markets Regulators Forum” has been hosted by the CMB in Istanbul in November 2014. 2014 has been a hectic year for the CMB not only in terms of regulation works, but also in terms of supervision and audit activities. As a part of audit activities, the total number of written applications to the Public Prosecutor’s Office regarding capital market crimes and trading ban sanctions imposed by the CMB has increased from 97 in 2013 to 247 in 2014. Furthermore, while administrative fines of TL 6.1 million have been imposed on 95 persons and entities in 2013, these fines have risen to TL 24.3 million in total imposed on 146 persons and entities in 2014. As known, our country has an important objective of making Istanbul one of the top 10 global financial centers as of 2023. An important cornerstone to achieve this objective is Istanbul Arbitration Center Law published in the Official Gazette and entered into force on 29 November 2014. By virtue of this Law, a separate private law legal entity named Istanbul Arbitration Center will be established in Istanbul. A representative of the CMB will also be included in the General Assembly of Arbitration Center which will contribute to effective and rapid resolution of disputes, and to new entrances of global investors to the Turkish markets, and will reduce the work load of courts and the CMB.

Dr. Vahdettin ERTAŞ Chairman Capital Markets Board

Major changes started in capital markets in 2013 have continued in 2014 as well, and also in the coming year, we shall continue to work and do our utmost for further development of capital markets just like the recent years. The CMB shall continue to endeavor together with all stakeholders of capital markets in order to make the Turkish capital markets one of leading markets on global level within our 2023 Istanbul Financial Center goal. I wish that our 2014 annual report would be beneficial to all stakeholders of capital markets.

Capital Markets Board of Turkey 2014 Annual Report

1. CAPITAL MARKETS BOARD OF TURKEY The CMB has been established for carrying out the tasks and exercising authorities granted with the Capital Markets Law (CML) and the related regulations, to maintain secure, transparent, efficient, fair, and competitive capital markets, and to protect rights and interests of investors. The CMB is a statutory public legal entity with administrative and financial autonomy and exercises its authorities independently under its own responsibility. The CMB is related with the Minister assigned by the Prime Minister. The headquarters of the CMB is in Ä°stanbul. However, the headquarters of the CMB shall remain in Ankara until the processing and operations for moving of the CMBâ&#x20AC;&#x2122;s headquarters to Istanbul have been completed.

1.1. MISSION, VISION, DUTIES AND AUTHORITIES To ensure the development of the capital market, regulating the principles and procedures concerning new capital market institutions and instruments and supervising them;

The MISSION of CMB is to regulate and supervise the capital markets for the secure, fair, transparent and efficient functioning of the capital markets within the framework of objectivity and accountability, conducting supervision and making clear and comprehensible approach that is in conformity with international norms and developments which meets varying market needs. The VISION of the CMB is to be a leading dynamic and respected institution in national and international arena. The main duties and authorities of the CMB as specified in the CML are as follows;

Determining the principles regarding those who would be employed in publicly held corporations, the professional education of managers and other employees of capital market institutions, awarding of certificates which certify their professional competence and professional license, establishing headquarters or companies for these purposes and determining the principles and procedures of their activities;

Carrying out the tasks and activities for fulfilling the duties and implementations imposed by the CML and ensuring the foreseen results;

Determining the principles and procedures which are to be abided by those who provide investment advisory to capital market investors and savers;

Taking general and special decisions in order to ensure timely, adequate and accurate public disclosure;

Determining the operation and working principles of the Public Disclosure Platform as well as the principles and procedures concerning the notifications and applications to be made to the CMB in the scope of the CML;

Determining the conditions and operating principles concerning independent auditing, rating, appraisal and information systems auditing activities of institutions and corporations within the scope of the CML and declaring those who meet these conditions in the form of lists;

Determining the principles and procedures concerning the operation of information systems belonging to capital market institutions, publicly-held corporations, exchanges and self-regulatory organizations and their supervision in the framework of the CML;

Exchanging information and cooperating in any manner with other financial regulatory and supervisory institutions in order to ensure financial stability and fulfil the requirements of national or international legislation;

Assigning that national or international scientific researches on capital markets be made by persons or by working groups consisting of national or foreign academicians or practitioners, for the purpose of forming a basis for the existing and future regulation preferences;

Cooperating in any manner in relation to capital markets and signing bilateral or multilateral memoranda of understanding in accordance with the principles of reciprocity and the protection of professional confidentiality, with corresponding foreign institutions that are authorized to regulate and supervise capital markets, in order to exchange information, meet requests for document, inspecting the headquarters, branch offices or subsidiaries or affiliates located in Turkey of institutions performing activities in the capital markets of foreign countries as well as in the bodies from which they outsource within the framework of a written contract and to take the necessary administrative measures, share the expenditures related to the activities to be carried out in this context;

Participating to the works conducted by international institutions, financial, economic and professional organizations where the CMB is a member as well as the works carried out by international institutions where Turkey is directly a member, developing common projects with those institutions and contributing to their projects; and Becoming a member of international institutions, financial, economic and professional organizations concerning the field of activity of the CMB.

Capital Markets Board of Turkey 2014 Annual Report

1.2. EXECUTIVE BOARD AND ORGANIZATION 1.2.1. Executive Board

those mentioned in the CML and other legislation. The Executive Board has seven members.

The Executive Board is the CMB’s decision-making-body and consists of the Chairman and 6 other members, and is empowered to discuss and finalize the draft by-laws and communiqués concerning the CMB and the field that the CMB is tasked with regulating and supervising as well as the files of application and the examination and audit reports prepared by the CMB staff, and also has administrative duties and authorities, apart from

Commissioners appointed by the Council of Ministers. The Council appoints one of the Members as Chairman. The Executive Board shall appoint one of the members as Acting Chairman and one of them as Deputy Chairman upon the proposal of the Chairman.

CMB’S EXECUTIVE BOARD

From left to right: Himmet KARADAĞ, Birol KÜLE, Nurullah GENÇ, Vahdettin ERTAŞ, Bekir Sıtkı ŞAFAK, Bülent GÖKREM, Murat KOÇ

Capital Markets Board of Turkey 2014 Annual Report

CMB’S EXECUTIVE BOARD

Dr. Vahdettin ERTAŞ Chairman

Bekir Sıtkı ŞAFAK Acting Chairman

Prof.Dr. Nurullah GENÇ Deputy Chairman

Bülent GÖKREM Board Member

Birol KÜLE Board Member

Himmet KARADAĞ Board Member

Murat KOÇ Board Member

Capital Markets Board of Turkey 2014 Annual Report

1.2.2. Organization The CMB consists of the Chairman and the Board Members (Executive Board) and service units organized as Departments which are responsible to the Chairman.

The Departments are; Department of Enforcement, Department of Corporate Finance, Department of Intermediary Activities, Department of Institutional Investors, Department of Market Oversight and Enforcement, Department of Research, Department of Accounting Standards, Department of Data Processing, Statistics and Information, Department of Legal Consultancy, Department of Institutional Communication, Department of Strategy Development, Department of Administrative and Financial Affairs.

The Chairman is the Chief Executive Officer of the organization and the Executive Board. The Executive Vice Presidents are authorized and responsible for cooperation and coordination among the Departments.

Capital Markets Board of Turkey 2014 Annual Report

CAPITAL MARKETS BOARD ORGANIZATION CHART

Bülent GÖKREM Board Member

Birol KÜLE Board Member

Prof.Dr. Nurullah GENÇ Deputy Chairman

Secretarial Bureau for the Chairman

Department of Enforcement

Department of Intermediary Activities

Department of Corporate Finance

Department of Market Oversight and Enforcement

Department of Institutional Investors

Department of Research

Capital Markets Board of Turkey 2014 Annual Report

Dr. Vahdettin ERTAŞ Chairman

Bekir Sıtkı ŞAFAK Acting Chairman

Himmet KARADAĞ Board Member

Murat KOÇ Board Member

Department of Institutional Communications

Istanbul Representative

Secretarial Bureau for the Board

EXECUTIVE VICE PRESIDENTS

Department of Accounting Standards

Department of Legal Consultancy

Department of Data Processing, Statistics and Information

Department of Administrative and Financial Affairs

Department of Strategy Development

Capital Markets Board of Turkey 2014 Annual Report

1.3. BUDGET formation regarding 2014 revenue and expense predictions and realizations is shown in the below table:

With respect to 2014 Fiscal Year Budget of our Board, approved as TL 103,217,000, total expenses were recorded as TL 86,962,868 and total income as TL 226,073,401 during the year. Detailed inTable 1.1. Revenues and Expenditures of the CMB in 2014 1- REVENUES Type of Revenues

Prediction (TL)

Fees from Capital Market Instrument Issues

Realization (TL)

88,101,000

129,326,717

Rental Income from Lodgment

400,000

398,594

Other Real Estate Rental Income

650,000

674,463

10,000,000

77,950,787

Interest Income

3,001,000

16,500,368

Other Miscellaneous Income

1,065,000

1,222,472

103,217,000

226,073,401

Budget Allocation

Realization

Income From Regulatory and Supervisory Authorities

TOTAL 2- EXPENDITURES Type of Expenditures Staff Expenses

66,317,000

58,463,815

4,495,000

4,132,955

20,655,000

14,983,426

Current Transfers

3,600,000

3,205,837

Capital Expenditures

8,150,000

6,176,835

103,217,000

86,962,868

Social Security Contributions Procurement Cost of Goods and Services

TOTAL 3- TRAVEL ALLOWANCE AND EXPENSES

Budget Allocation

Domestic Travel Allowances and Expenses

1,450,000

819,113.33

International Travel Allowances and Expenses

1,580,000

1,051,600.86

3,030,000

1,870,714.19

TOTAL

Source: CMB The CMB can be considered as a self-financing entity since all the expenditures accrued were paid by a particular fund which has been established for this purpose. Issuers or public offerers will transfer 0.3% of issue value of capital market instrument to this account; 0.005% of net asset values of investment funds will be deposited to this account at the last working day of the quarterly periods. Maximum 10% of all incomes -excluding interest incomes- of stock markets organized and supervised by CMB, other

organized markets, central clearing institutions, central securities depositories, and Central Registry Agency Inc. (CRA) is recorded as revenue in the budget of CMB. Although, CML states that in case when the CMB fails to cover its expenses with its revenues, the budget deficit can be covered from Undersecretatiat of Treasury (UT) grants however, the CMB did not receive any grant from UT since 1992.

Rights and obligations of CMBâ&#x20AC;&#x2122;s staff having permanent positions in the CMB on 15 January 2012 are determined by the Regulation on the Personnel of Capital Markets Board of Turkey which was published Official Gazette on 24 August 1982, no. 17792. Pursuant to the CML No. 6362, staff who started working at the CMB after 15 January 2012 are subject to the Public Servants Law No. 657.

In 2014; 16 personnel left the service due to reasons such as retirement, transfer, resignation and expiration of term of office, 32 professional staff are appointed and 4 professional staff are transferred while 7 administrative staff are appointed and 2 administrative staff is transferred to the CMB during the same period. By the end of 2014, total of 613 staff; which consist of 7 executive board members, 51 top management, 318 professional staff and junior professional staff, 53 IT staff and 184 administrative staff, have been working in CMB.

1.4. STAFF

The CMBâ&#x20AC;&#x2122;s services are carried out by the professional staff, who join the CMB by passing a special entrance examination and become expert after passing proficiency examination, and administrative staff.

Capital Markets Board of Turkey 2014 Annual Report

Table 1.2. CMB 2014 Staff Statistics Number and Distribution of Staff Chairman and Board Members

Top Management

Chairman’s Consultants

Executive Vice Presidents

Heads of Departments

Deputy Heads of Departments

Chairman’s Advisors

Professional Staff

318

Chief Experts

Experts

118

Chief Legal Experts

Legal Experts

Assistant Experts

Assistant Legal Experts

Assistant IT Experts

Information Technologies (IT) Staff

Administrative Staff

184

TOTAL

613

Elementary and Secondary Schools

Graduates Degree

219

Master’s Degrees

269

Doctorate Degrees

Demographic Information Number of Female Staff

239

Number of Male Staff

374

Number of Staff Speaking Foreign Languages

397

Average Seniority of Staff (in years)

Average Age of Staff

Number of Staff in Ankara

494

Number of Staff in Istanbul

119

both English and Spanish, and 1 personnel speaks both English and Italian.

In 2014, 10 professional staff have been sent abroad for training. The total number of professional staff who received training from abroad reached 20 together with the staff sent abroad for training in previous years.

3 personnel have been serving as secondee at the international organizations that CMB has a membership and 7 personnel are on temporary duty at the various public institutions, and 9 personnel are assigned temporarily to Investor Compensation Center.

In total, 397 of CMB’s staff speak foreign languages: 390 personnel speak English, 12 personnel speak both English and German, 8 personnel speak both English and French, 2 personnel speak

Capital Markets Board of Turkey 2014 Annual Report

2. OVERVIEW OF TURKISH ECONOMY IN 2014 As a result of macro prudential measures taken and implemented in order to control the private consumption and to reduce the current deficit since 2013, the domestic demand has narrowed in 2014. According to the Mid-Term Plan (OVP-2015-2017), with this narrowing demand, in 2014, the growth rate is expected to decrease as regards the previous year to 3.3%. The current deficit has reduced from USD 64,658 million, representing 7.9% of gross domestic product, as at the end of 2013 to USD 45,836 million in 2014 indicating a 29.1% decline compared to previous yearâ&#x20AC;&#x2122;s figure. Consumer prices have risen by 0.8 points to 8.17% in 2014 as compared to 2013, and have exceeded the uncertainty band set around the inflation target. The rate of unemployment free from seasonal effects has increased by 1.6 points to 10.9% as of December 2014 as regards the same period of the previous year.

non-interest surplus is expected to come out as 0.6%. As a result of these developments, the ratio of public sector borrowing requirement to GDP is expected to rise from 0.5% in 2013 to 1% in 2014, and the program-defined public sector non-interest surplus is expected to fall from 1% to 0.4% in the same period. Furthermore, the EU-defined d overall public debt stock is expected to decline from 36.2% of GDP in 2013 to 33.1% of GDP in 2014. According to 2015-2017 Mid-Term Plan, the private sector savings ratio which fell down to 9.9% in 2013 is expected to rise by 1.8 points in 2014 due to the slowdown in private consumption, while the public sector savings ratio is foreseen to decline by 0.2 points since the real increase in the public disposable income remained below the rate of growth in 2014. Thus, overall domestic savings ratio is forecasted to increase by 1.5 points over the previous year to 14.9% in 2014.

After growing 4.2% in 2013, the economy remarkably slowed to 2.9% in 2014, thus, the revival in the economy starting from the second half of 2013 has been followed by a slowdown in 2014. Rate of growth in the gross domestic product (GDP) free from calendar and seasonal effects has been recorded as 2.4%.

Current accounts deficit has declined by 29.1% to USD 45.8 billion in 2014 over the previous year. This decline has been affected from the decrease of foreign trade deficit by 20.4% to USD 63.6 billion, and the increase of net services income by 10% to USD 25.4 billion, and the decrease of primary income deficit by 2.9% to USD 8.7 billion. In 2014, net inflow arising out of secondary income balance has declined by 19.6% to USD 1.12 billion.

According to the production method, in 2014 compared to the previous year, and in fixed prices, the contribution of industrial sector to GDP has been 3.5% and the contribution of service sector to GDP has been 4%, while a decline of 1.9% has been recorded in the added value from agricultural sector activities. According to the expenditures method, in GDP calculation, final consumption expenditures of households and final consumption expenditures of the government have increased respectively by 1.3% and 4.6%, and a decline of 1.3% has been recorded in gross fixed capital formation.

A review of the Finance account of balance of payments reveals that net assets arising out of direct investments increased by 94% to USD 7 billion in 2014 over 2013, and net liabilities arising out of direct investments increased by 1% to USD 12.5 billion in 2014 over 2013. With respect to net liability formation in the portfolio investments item, persons resident abroad have realized a net purchase of USD 2.6 billion in the equity market, consisting of USD 1.6 billion purchase of non-banking sector stocks, and USD 1 billion purchase of bank stocks. In government debt securities, persons resident abroad have realized a net purchase of USD 370 million in January-December period. Through bond issues abroad, banks have assumed net debts of USD 10.2 billion, while other sectors have assumed net debts of USD 3.2 billion.

In 2014 compared to the previous year, the central government budget income and budget expenditures increased by 9.3% and 9.8% respectively. The 2014 annual budget deficit of TL 22.7 billion representing an annual expansion of 22.2% has remained below the year-end target. The non-interest budget surplus has decreased from TL 31.4 billion TL in 2013 to TL 27.2 billion in 2014. The central government debt stock has been TL 612 billion in 2014. Average maturity of domestic borrowing has declined from 74.3 months in 2013 to 12.1 months as at December 2014. Weighted average cost of fixed interest domestic borrowing in TL currency has risen from 7.9% in 2013 to 8.8% as of the end of 2014.

Net credit usage of banking sector has declined by USD 9.3 billion to USD 12.2 billion in 2014 with regard to 2013. Short-term net credit usage has sharply decreased from USD 12.9 billion to USD 3.9 billion over the previous year in 2014.

According to 2015-2017 Mid-Term Plan, the 2014 overall public deficit forecasted as 1.1% of GDP is expected to realize as 0.8% as at the year-end, and the 2014 non-interest budget surplus forecasted as 2% is expected to realize as 2.2% as at the year-end. The ratio of overall public surplus, except for interest expenditures and privatization income, to GDP is expected to decline from 1.7% in 2013 to 1.6% in 2014, and the 2014 program-defined overall public

Net credit usage of other sectors has risen by USD 4.7 billion to USD 5.8 billion in 2014 with regard to 2013. In long-term credits, against a net repayment of USD 137 million in 2013, a net credit usage of USD 5.4 billion has been recorded in 2014. Official reserves, after an increase of USD 9.9 billion in 2013, have decreased by USD 468 million in 2014.

Capital Markets Board of Turkey 2014 Annual Report

The item with the highest share among investment portfolios of persons resident in Turkey continued to be TL deposits at a rate of 41.1% in 2014, followed by government debt securities at a rate of 22.7% and foreign exchange deposits at a rate of 21.3%. Portfolio

preferences of persons resident abroad were mainly equities at a rate of 39.9%, government debt securities at a rate of 33.1% and foreign exchange deposits at a rate of 13.1%.

Capital Markets Board of Turkey 2014 Annual Report

3. SECONDARY REGULATIONS PUBLISHED IN 2014 AND IMPACT ASSESSMENT

3.1. SECONDARY REGULATIONS ON CAPITAL MARKET INSTRUMENTS, THEIR ISSUES AND IMPACT ASSESSMENT 3.1.1. Regulation on Revision of the Communiqué on Shares By the revision of Communiqué on Shares no. VII-128.1, some financial size and capital loss criteria have been imposed for the corporations intending to go public or whose shares will be listed, and it is stipulated that the cash capital injection obligations

arising in the capital increases of publicly-held corporations cannot be fulfilled by offset of debts arising out of non-cash asset transfers to the corporation.

3.1.2. Regulations on Asset Backed and Mortgage Backed Securities In order to comply with the provisions of the CML and simplification of legislation, Asset Backed Securities (ABS) and Mortgage Backed Securities (MBS), being structurally similar instruments, and Asset Finance Funds (AFF) and Housing Finance Funds (HFF), being structurally similar funds, have been regulated in a single secondary regulation.

the prospectus being prepared as a single document have been determined. As for ABS and MBS to be issued without public offering, it is regulated that CMB will determine an issue ceiling, and that more than one fund may be established for securities issues within the issue ceiling, thus aiming to speed up the issue process.

Principles as to listing and trading on the exchange of ABS and MBS to be offered to public, issuing such securities at once, and

3.1.3. Regulations on Covered Securities Pursuant to articles 59 and 60 of the CML pertaining to mortgage and asset-backed securities, the CML has, upon becoming effective, made it necessary to review and revise the existing regulations. With the new communiqué, two separate regulations relating to Asset Covered Securities (ACS) and Mortgage Covered Securities (MCS) have been united in a single regulation.

b) in stress test scenarios to be implemented in the issue of MCSs, only the mandatory portion of the rate of surplus guarantees is allowed to be comprised of substitute assets; and c) the cash funds collected from the guarantee assets are permitted to be freely used as long as the guarantee compliance principles are not breached, and the issuer performs its obligations; and

After the new Communiqué became effective, in the light of the opinions reported to CMB with respect to difficulties encountered by issuers, in order to direct the practice in a healthy manner and to increase the efficiency of issue of backed securities, some amendments were made effective as of 5 September 2014:

d) the provisions aimed to create a sound cover register are reinforced, and a report on reliability of data processing systems created by the issuer is required in connection therewith, and exceptions applicable in submission of the cover register to Central Registry Agency Inc. (CRA) on daily basis are regulated.

a) the reserve service provider system has been entirely removed considering that CMB is authorized to appoint administrators; and

Capital Markets Board of Turkey 2014 Annual Report

3.1.4. Regulations on Foreign Capital Market Instruments, Depositary Receipts and Foreign Investment Funds By the Communiqué on Foreign Capital Market Instruments and Depositary Receipts and Foreign Investment Fund Units, no. VII128.4, entered into force in 2013, the contents of the prospectus to be prepared for sales of foreign capital market instruments and depositary receipts through public offering have been revised, and the statements required to be made public as annex to the prospectus have been determined. The principles of liability arising out of prospectuses and other public disclosure documents used in sales of foreign capital market instruments and depositary receipts through public offering have been regulated in compliance with the CML.

a view to contributing to the initiatives conducted as a part of Istanbul Financial Center Project, and to the intention of diversifying the capital market instruments, the principles of sales by foreign corporations, in the form of international organizations where such institutions as the Undersecretariat of Treasury (UT) and the Central Bank of Turkey (CBRT) are a member or a partner, of non-equity capital market instruments by or without offering to public in Turkey, and the principles of starting of listing and trading in the exchange of non-equity capital market instruments previously issued by them abroad have been regulated in details, and some certain facilities and incentives have been provided to issues in connection therewith.

Thereafter, with the revised communiqué put into force through publishing in the Official Gazette 22 January 2015 no.29244, with

3.2. SECONDARY REGULATIONS ON PUBLICLY-HELD CORPORATIONS AND IMPACT ASSESSMENT 3.2.1. Corporate Governance Communiqué and its Principles Article 17 entitled “Corporate Governance Principles” of the CML has authorized the CMB to regulate the procedures and principles on corporate governance principles in publicly-held corporations, content and publishing of corporate governance compliance reports, rating of compliance of corporations with corporate governance principles, and independent members of board of

directors. In order to provide the compliance with the provisions of the CML and the new Turkish Commercial Code, a new communiqué named “Corporate Governance Communiqué” dealing with corporate governance principles has been issued and published.

3.2.2. Communiqué on Squeeze-Out and Sell-Out Rights The threshold required to trigger the use of squeeze-out and sell-out rights has initially been determined as 95% of total voting rights in the corporation, and this threshold has later been increased to 98% by the Communiqué no. II-27.2. This threshold will be considered as 97% in the case of use of the rights which will arise until 31 December 2017.

Based upon Article 27 entitled “Rights of Squeeze-out and Sellout” of the CML, the procedures and principles relating to the use of the right of the controlling shareholder to squeeze out other shareholders, and the right of other shareholders to sell their shares out to the controlling shareholder in publicly-held corporations have been regulated for the first time in Turkish capital markets.

Furthermore, for determination of the fair price relating to the right of sale in corporations whose shares are listed and traded on the exchange, it is stipulated that, as the price determined in the appraisal report prepared for determination of price of each share group, the highest price to be found by comparison of the price of the mandatory bid, if any, made within the frame of Article 26 of the CML within one year prior to the date of public disclosure that a shareholder has gained the status of controlling shareholder or is already a controlling shareholder and has purchased additional shares, to the average of weighted average prices which have occurred on the exchange within the last six months, one year and five years prior to the date of public disclosure that a shareholder has gained the status of controlling shareholder or is already a controlling shareholder and has purchased additional shares, will be taken into consideration.

After the Squeeze-out and Sell-out Rights Communiqué, no. II27.1 (Communiqué no. II-27.1), which has become effective upon publishing in the Official Gazette on 2 January 2014 no.28870, and as a result of applications filed to CMB for use of the right of squeeze-out, some amendment were made by the Squeeze-out and Sell-out Rights Communiqué, no. II-27.2 (Communiqué no. II-27.2) published in the Official Gazette dated 12 November 2014 no.29173. The regulation is amended with the aim of eliminating the information asymmetry between minority shareholders and controlling shareholder in determination of the process of use of the right of squeeze-out, and setting up a mechanism whereby the minority shareholders may raise an objection to the price determined therein.

Capital Markets Board of Turkey 2014 Annual Report

3.2.3. Communiqué on Buy-Backed Shares Article 22 entitled “Acquisition of a Corporation’s own shares and taking its own shares in pledge” of the CML has authorized the CMB to establish the principles and procedures regarding conditions on the acquisition and taking in pledge of the shares of publicly-held corporations by themselves, the limits of transactions, the disposal and amortization of shares which have been acquired and the disclosure of these issues to the public and accordingly, a Communiqué has been issued and published thereon.

lation has been re-determined as maximum three years for corporations whose shares of which are listed and traded on the exchange, and as maximum one year for corporations whose shares are not listed and traded on the exchange, by also considering the maximum periods specified in the Turkish Commercial Code and in EU directives. It is stipulated that the price of shares subject to buy-back as above cannot exceed total sum of resources that may be used in profit distribution as shown in the recent yearly financial statements within the scope of CMB regulations pertaining thereto.

By this regulation, the principles of acquisition by publicly-held corporations of their own shares and the principles of taking in pledge of their own shares have been regulated.

Differently from the relevant provisions of the Turkish Commercial Code, it is stated that the buy-backed shares of corporations will not give any shareholding right other than the rights on gratis shares, dividends and newly issued shares.

The duration of program relating to buy-back of shares which was determined as maximum 18 months in the existing regu-

3.2.4. Communiqué on Takeover Bids Article 25 entitled “Takeover Bids” and article 26 entitled “Obligation regarding Takeover Bid” of the CML necessitates the revision and amendment of the relevant regulations.

do not perform their takeover bid obligation will be subject to an administrative fine equal to total price of shares being the subject matter of takeover bid within the frame of provisions of article 103(3) of the CML.

In case of the information given in a CMB approved information form is misleading, wrong or incomplete, or a takeover bid is launched without an information form, CMB is authorized to suspend or prohibit the takeover bid.

It is stated that if the periods of time relating to takeover bid obligation are not abided by, all voting rights held by real persons or legal entities, who are obliged to make an takeover bid, and by persons acting in concert, will automatically freeze as of the date of the aforementioned violation of regulation without any further action or resolution of the Board.

While the former regulation defines the term “management control” as direct or indirect holding of 50% or more of capital shares or voting rights of a corporation alone or together with other persons acting in concert, this threshold has been revised as more than 50% in the new regulation. The regulation stipulates that real persons or legal entities who

3.2.5. Regulation on Dividend Distribution In order to provide compliance with article 19 entitled “Distribution of Dividend and Gratis Share and Donations” and article 20 entitled “Dividend Advance” of the CML, and with a view to resolving the practical issues and problems, the regulations and the dividend distribution guideline have been updated.

The updated regulation stipulates that in corporations, dividends shall be distributed equally to all existing shares as of the date of distribution without taking into account the issue or acquisition dates of such shares and that the differentiation between existing and newly issued shares has been eliminated.

3.2.6. Revision in the Communiqué on Common Principles Regarding Significant Transactions and Retirement Right By the amendments to the Communiqué on Common Principles Regarding Significant Transactions and Retirement Right, no. II-23.1, it has been regulated that capital increases through offset of debts arising out of non-cash asset transfers will not be considered and treated as significant transactions, and that in

merger transactions, in the case of acquisition of a publicly-held corporation by a non-publicly held corporation, for protection of rights and interests of investors, the controlling shareholders of non-publicly held corporation and the persons acting in concert with them will make a takeover bid.

Capital Markets Board of Turkey 2014 Annual Report

3.2.7. Revision in the Communiqué on Merger and Demerger By the amendments to the Communiqué on Merger and Demerger, no. II-23.2, it has been stipulated that in merger transactions wherein a non-exchange traded corporation is the acquiring party, and an exchange traded corporation is the acquired party, by considering that the non-publicly held corporation is becoming a publicly-held corporation through this merger, the

conditions for exclusion from the scope of the CML are not required to meet, as listed in second paragraph of article 5 of the Communiqué on Shares, no. VII-128.1, except for the case that total sum of capital and legal reserve funds remaining entirely uncovered.

3.3. SECONDARY REGULATIONS ON PUBLIC DISCLOSURES AND IMPACT ASSESSMENT 3.3.1. Communiqué on Material Events Disclosure In order to resolve the problems encountered in practice, and to ensure that markets operate in a transparent, effective, stabilized, fair and competitive atmosphere, and to comply with the terminology and provisions of the CML together with article 15 entitled “Material Events in Public Disclosures” of the new CML, new regulations were required with respect to public disclosures of material events. Accordingly, the material events guideline has also been revised and updated.

The thresholds of total voting rights or capital shares leading to an obligation of public disclosure with regard to share purchases or sales have been re-determined. It has been stated that the table showing real persons or legal entities directly holding 5% or more of shares or voting rights in the capital of issuers whose shares are traded on the exchange, as given in the company information screen in the Public Disclosure Platform (PDP), will, if changed, be revised and updated by CRA.

The public disclosure obligations arising when inside information is acquired by related persons, beyond the knowledge of issuers, and in the case of a change in activities of parent company and affiliated companies of issuer have been determined.

3.3.2. Communiqué on Material Events Disclosure Regarding Non-Publicly Traded Corporations By the published Communiqué on Material Events Disclosure Regarding Non-publicly Traded Corporations no. II-15.2, within the framework of Article 15 of the CML, in case of material information, events and developments relating to non-publicly traded

corporations, the material events required to be disclosed to public by corporations and/or relevant parties and the procedures and principles of disclosure of them have been updated.

3.3.3. Innovations Relating to PDP Corporations and entities, who are obliged to make disclosures through PDP, have been clearly defined. Accordingly, corporations and entities under such obligation to make disclosures have been enumerated as corporations, investment firms, fund founders and other institutions and entities designated by CMB.

PDP operator concept has been defined, and CMB has been authorized to determine it, and by the Executive Board resolution dated 14 January 2014, CRA has been designated as PDP operator.

For the security of information submitted to PDP by those who do not have an electronic certificate, an electronic information system has been established. In that regard, CRA has put into operation the E-Governance system.

Capital Markets Board of Turkey 2014 Annual Report

3.4. SECONDARY REGULATIONS ON INVESTMENT SERVICES, ACTIVITIES AND INVESTMENT FIRMS AND IMPACT ASSESSMENT 3.4.1. Effectiveness of Investment Services Communiqué and Investment Firms Communiqué As a part of the secondary regulations issued within the frame of the CML, the Communiqué on Principles Regarding Investment Services, Activities and Ancillary Services no. III-37.1 (Investment Services Communiqué), introducing important changes regarding capital market activities of intermediary institutions and banks, has been published in the Official Gazette on 11 July 2013 no.28704.

investment firms, has been published in the Official Gazette on 17 December 2013 no.28854. Aforementioned Communiqués became effective as of 1 July 2014, without prejudice to their transition provisions, and the existing investment firms were required to apply to CMB until 1 July 2015 in order to renew their existing operating license in accordance with these new Communiqués. Therefore, the operating licenses of existing investment firms granted upon the CML no. 2499 are being withdrawn and new applications are being filed for an operating license based upon the new Communiqués.

As a complement to the Investment Services Communiqué, the Communiqué on Principles of Establishment and Operations of Investment Firms, no. III-39.1 (Investment Firms Communiqué), specifying the conditions of establishment of intermediary institutions and the general operating conditions and obligations of

3.4.2. Information and Documents Required To Be Submitted in Applications of Intermediary Institutions and Banks to CMB Pursuant to Communiqués no. III-37.1 and III-39.1 Standard application form and other relevant documents to be submitted by investment firms, intermediary institutions and banks, while applying for renewal of existing operating licenses or for a new investment service or operating license, pursuant to

the Investment Services Communiqué Investment Firms Communiqué have been disclosed to public. Accordingly, investment firms were required to apply to CMB by no later than 30 June 2015.

3.5. SECONDARY REGULATIONS ON CLEARING AND CUSTODY SERVICES LEGISLATION, OPERATIONS, CENTRAL COUNTERPARTIES, AND IMPACT ASSESSMENT 3.5.1. Regulation on Establishment, Operations, Working and Audit Principles of Central Registry Agency In the regulation issued based on article 81 entitled “Central Registry Agency” of the CML and became effective upon publishing in the Official Gazette on 7 August 2014 no.29081, detailed provisions have been formulated about establishment, operations, membership working and audit principles, revenues and divi-

dend distribution principles of CRA. In the preparation stage, the existing operations and needs of CRA have been taken into consideration within the framework of its duties and authorities specified in the CML.

Capital Markets Board of Turkey 2014 Annual Report

3.5.2. Communiqué on Procedures and Principles for Book-Keeping of Dematerialized Capital Market Instruments This Communiqué issued pursuant to and based on first paragraph of article 13 “Dematerialization of Capital Market Instruments” of the CML aims to regulate the details of matters specified in article 13 of the CML. The Communiqué on Procedures and Principles for Book-Keeping of Dematerialized Capital Market Instruments, which became effective upon publishing in the Official Gazette on 7 August 2014 no.29081, contains general pro-

visions, accounts to be kept at CRA, dematerialization of capital market instruments, delivery and destruction of capital market instruments, transactions to be performed on capital market instruments other than government debt securities, and principles of transactions on government debt securities. This regulation intends to ensure that capital market transactions are carried out safely, quickly and effectively.

3.6. SECONDARY REGULATIONS ON EXCHANGE LEGISLATION AND OPERATIONS, AND IMPACT ASSESSMENT 3.6.1. Regulation on the Principles Regarding Exchange Business Activities of Borsa Istanbul Inc. and Regulation on the Principles Regarding Precious Metals and Precious Stones Exchange Business Activities of Borsa Istanbul Inc. It is stipulated that procedures and principles relating to the subject matters listed in article 67 of the CML will be regulated by regulations to be issued by the relevant exchange market and approved by CMB.

tions, namely General Provisions; Authorization for Trading in the Exchange; Listing; Trading on the Exchange and Suspension or Termination of Trading; Transmission and Matching of Orders; Obligations on Executed Transactions; Creation, Operation and Management of Markets, Market Segments, Platforms and Systems; Audit and Supervision; Disputes and Discipline; and Miscellaneous Provisions.

Various articles of the General Regulation make reference to the Exchange Regulation to be prepared by the Exchange and to be approved by CMB; and it is stipulated that such issues as membership principles, principles of transactions, listing and trading principles, membership and transaction collaterals, collateralization mechanism, guarantee fund, data processing systems and technologic infrastructures will be regulated by the Exchange Regulation, and in that regard, the “Regulation on the Principles Regarding Exchange Business Activities of Borsa Istanbul Inc.” has been put into force upon publishing in the Official Gazette on 19 October 2014 no.29150. The regulation consists of 10 sec-

The “Regulation on the Principles Regarding Precious Metals and Precious Stones Exchange Business Activities of Borsa Istanbul Inc.”, consisting of 4 sections, became effective upon publishing in the Official Gazette on 19 October 2014 no.29150, deals with procedures and principles relating to markets, market segments, platforms and systems to be set up for trading of precious metals and precious stones.

3.7. SECONDARY REGULATIONS ON COLLECTIVE INVESTMENT SCHEMES AND IMPACT ASSESSMENT 3.7.1. Communiqué on Venture Capital Investment Funds By the Communiqué on Venture Capital Investment Funds, no. III-52.4, became effective upon publishing in the Official Gazette on 2 January 2014 no.28870, based on the authorization granted by the CML to CMB, the principles regarding establishment and activities of these funds and their sales to qualified investors

have been regulated in details. By this Communiqué, a structure in line with successful international practices as Luxembourg, the Netherlands and Guernsey has been included in the Turkish capital markets legislation, and establishment of such structures as super funds has also been permitted.

Capital Markets Board of Turkey 2014 Annual Report

3.7.2. Communiqué on Real Estate Investment Companies By the Communiqué on Real Estate Investment Companies became effective upon publishing in the Official Gazette on 3 January 2014 no.28871, based on the authorization granted by the CML to the CMB, the principles regarding establishment and activities of these companies and their sales to qualified investors have been regulated in details. Such types of funds which

are frequently seen in other capital markets and are mostly intended for local and global corporate investors are capital market institutions which enables securitization of real estates, provide liquidity to large scale real estates, and bring together investors and real estate owners.

3.7.3. Regulations on Housing and Asset Finance 3.7.3.1. Communiqué on Asset and Mortgage Based Securities

Finance Funds and Mortgage Based Securities”, Serial III, No. 34, has been regulated under a single regulation in the “Communiqué on Asset or Mortgage Based Securities”, no. III-58.1, has been put into force upon publishing in the Official Gazette on 9 January 2014 no.28877. By the new Communiqué, it is stipulated that banks, financial leasing and finance companies, mortgage finance institutions (MFIs) and broadly authorized intermediary institutions may become fund founders, and the legal entities, institutions and organizations which transfer their assets to fund portfolio or MFI are defined as source institutions.

Issued for compliance with the provisions of the CML and for the purpose of simplification of legislation by combining in a single communiqué the regulation regarding Asset Backed Securities (ABS) and Mortgage Backed Securities (MBS), being structurally similar instruments, and regarding asset finance funds and housing finance funds, being structurally similar funds, which were previously regulated by CMB’s “Communiqué on Principles Regarding Asset Finance Funds and Asset Based Securities”, Serial III, No. 35, and “Communiqué on Principles Regarding Housing

3.7.3.2. Communiqué on Covered Securities

no.28889. By the new Communiqué, in addition to banks and mortgage finance institutions, financial leasing companies and finance companies are also permitted to be an issuer of Mortgage Covered Securities. Furthermore, it is stipulated that receivables which arise out of credits that are related to housing finance defined in first paragraph of article 57 of the CML, but are not collateralized by mortgage, may also be the subject of issue of Mortgage Covered Securities, providing that they are otherwise covered by another guarantee deemed appropriate by the CMB.

Issued for compliance with the provisions of the CML and for the purpose of simplification of legislation by combining in a single communiqué the regulation regarding Asset Covered Securities (ACS) and Mortgage Covered Securities (MCS), being structurally similar instruments, which were previously regulated by separate regulations as “Communiqué on Principles Regarding Mortgage Covered Securities”, Serial III, No. 33, and “Communiqué on Principles Regarding Asset Covered Securities”, Serial III, No. 38, has been regulated under a single regulation in the “Communiqué on Covered Securities”, no. III-59.1, has been put into force upon publishing in the Official Gazette on 21 January 2014

3.7.3.3. Communiqué on Principles Regarding Mortgage Finance Institutions

collateral. Thus, MFIs provides liquidity to the housing finance institutions. MFIs create the funds required for those sources from the issue of various capital market instruments, particularly debt instruments. In the liquidity providing, the housing credits put up as collateral in MFIs remain in the balance sheet of the housing finance institutions.

Based on the authorization granted by the CML to the CMB, by the Communiqué on Principles Regarding Mortgage Finance Institutions, no. II-60.1, effective upon publishing in the Official Gazette on 17 July 2014 no.29063, mortgage finance institutions (MFIs) have for the first time been regulated in Turkey.

Other main branch is the securitization. Securitization is a non-balance sheet financing method, by which the MFIs, backed by the housing credits taken over, issue mortgage backed securities by or without establishing a housing finance fund.

With a view to establishing a contemporary housing finance (mortgage) system in Turkey, a new legal infrastructure has been created for MFIs by the CML. Like the international common practice, MFIs are expected to operate in two main branches. One of these main branches is a liquidity providing named as “Liquidity Facility” in finance. Through this, housing finance institutions put up the housing credits included in their balance sheet collateral in the MFIs and procure sources of MFIs against such

Capital Markets Board of Turkey 2014 Annual Report

3.7.4. Turkish Electronic Fund Distribution Platform (TEFAS) Works By the Communiqué on Principles Regarding Investment Funds no. III-52.1 (Article 15/7), in order to ensure that units of investment funds may be traded also through a central fund distribution platform approved by the CMB and founded under exchange and/or clearing institutions, CMB has been authorized to issue regulations allowing inclusion of all funds approved by the CMB into this platform, and intermediation by investment firms and portfolio management companies to trading of investment fund units listed and traded on this platform. Accordingly, TEFAS works have been completed in 2014. TEFAS is an electronic platform providing access through a single investment account to all investment funds founded with a prior permission of the CMB and operating in Turkish capital markets, except for investment funds subject to special conditions. TEFAS is a fund supermarket facilitating the access of investors to any funds they desire. Through TEFAS, it will be possible to have access via a

single screen to all of the investment funds authorized by the CMB to be established and traded at this platform. TEFAS will enable the investors to buy and sell investment funds according to their preferences and to make comparison among the funds. In the coming periods after the commencement of TEFAS and its utilization by the investors, the competition in fund portfolio management and therefore the performance of funds are expected to increase. TEFAS will facilitate the access of wide range of investors to all investment funds operating in Turkey, contribute to investment of savings in investment funds and help investors to access all information that may be needed in taking their investment decisions, thus, TEFAS will contribute to making conscious choices, and hence, efficient use and growth of savings. TEFAS, to be operated by the Istanbul Settlement and Custody Bank Inc. (Takasbank) started its operations as of 9 January 2015.

3.8. REGULATIONS ON LICENSING OF CAPITAL MARKET PROFESSIONALS AND IMPACT ASSESSMENT The Communiqué on Principles Regarding Licensing and Registry of Professionals in Capital Markets (VII-128.7) became effective upon publishing in the Official Gazette on 14 August 2014 no.29088. With this new Communiqué, types of licenses and subjects of exams required to be taken separately for each license

have been updated, subjects of exams have been determined by taking into consideration the probable fields of activity of each licensee, and a modular infrastructure allowing step-by-step licensing has been set up.

3.9. ASSESSMENTS ON CMB’S PERFORMANCE OBJECTIVES AND THEIR IMPLEMENTATION RESULTS 3.9.1. Assessments on Performance Objectives According to 2014-2016 Strategic Plan and Their Implementation Results OBJECTIVE 1: SUPPLY AND DEMAND SIDES OF CAPITAL MARKETS WILL BE REINFORCED

to asset finance funds and housing finance funds, being structurally similar funds.

Goal 1: Diversity of Financial Products Will Be Increased

With the intention of diversifying the financial products, as a part of the initiatives for investors with sensitivity for interest-bearing instruments, TEFAS has provided some facilities to participation banks by considering the customer profiles of participation banks. Furthermore, participation and alternative pension investment funds and participation umbrella funds with an investment strategy formulated by considering the investors with interest sensitivity have been defined, and it has been allowed that the money collected by these aforementined funds from investors giving a buy order will not be invested in interest-bearing accounts until they are invested in a financial instrument.

As a result of examination of market conditions relating to derivative products, and with a view to developing new products, by the Communiqué on Principles Regarding Exchange Traded Funds, no. III-52.2, “Swap Contract” has been defined for the first time in Turkish capital market legislation, and parallel to the European Union UCITS regulations, as of 1 July 2014, a new regulation (Synthetic Exchange Traded Funds) allowing the inclusion of swap contracts into portfolio of exchange traded funds has been issued, and the legislation has been simplified by combining in a single communiqué the regulations regarding ABS and MBSs, being structurally similar instruments, and

Capital Markets Board of Turkey 2014 Annual Report

Following the global practices, CMB is taking steps for adoption of modern financial methods and their applicability in Turkey, and accordingly, just like its examples on the world, a webbased and membership-based platform named Private Market bringing together companies and investors for the purpose of trading of stocks without going public is established under the roof of BIST.

their advantages, an information meeting has been held on “going public” for companies in the Organized Industrial Zone in Denizli. In addition, in order to increase awareness and understandability of the legislation, Guidelines on Dividend Distribution, Material Events, Investment Services and Activities, Investment Firms and Investment Funds have been prepared and issued.

Goal 2: Actions Will Be Taken For Increasing Financial Awareness and For Extending the Financial Education

OBJECTIVE 2: RELIABILITY AND EFFICIENCY WILL BE INCREASED IN CAPITAL MARKETS

In 2014, CMB has cooperated with other relevant institutions for the purpose of realization of Financial Access, Training, and Consumer Protection National Strategy. Accordingly, by a Prime Ministry circular no. 2014/10, “Financial Access, Financial Training and Financial Consumer Protection Strategy and Action Plans” have entered into force, and CMB has been assigned for follow-up and coordination of Financial Education Action Plan. 44 entities and institutions are expected to make contributions to 36 actions. In the Strategy and Action Plan, “Create a Joint Website For Documents and Studies Regarding Financial Education and Publicize Education Acitivities via Social Media” has been identified as the action no. 8. Accordingly, the works initiated immediately after the effective date of the Circular have been almost completed, and the financial education website which is currently under construction is planned to start broadcasting in 2015.

Goal 1: Regulations Will Be Continously Reinforced by Considering International Practices and Market Conditions CMB is closely following up the international financial regulations, and is taking steps in order to transpose those regulations relating to capital markets onto the national legislation. To this end, CMB’s departments are actively participating in various different committees of the International Organization of Securities Commissions (IOSCO) determining and issuing international standards in capital markets field. On the other hand, international developments are followed up through active participation in the works of OECD Corporate Governance Committee and Islamic Financial Services Board (IFSB). Within the scope of the same goal, the drafts of secondary regulations have been prepared for the purpose of compatibility with EU directives and regulations in 2014. Risks of investment services and activities have been revised according to BASEL regulations and the Financial Stability Board (FSB) priorities, and as a part of the revision, the minimum amounts of shareholders’ equity required to be held by intermediary institutions have been updated.

On the other hand, with a view to increasing financial awareness among youth, the 4th of the “Essay Contest Among Secondary and High School Students” has been organized under the leadership of CMB. Furthermore, in order to inform the trainers/teachers in connection therewith, education materials have been prepared for inclusion in the Education Network of the Ministry of National Education, and the Ministry of National Education has approved and accepted the inclusion of such materials in the network and the education materials will be broadcasted in the network in a short time.

In 2014, further steps have been taken for development of legal infrastructure relating to investor disputes. CMB has participated in the process of negotiations of Istanbul Arbitration Center Bill (Draft Law) in the Justice Commission of the Turkish Grand National Assembly, and the process of enactment of the said Parliamentary Bill has been followed up together with relevant institutions. As a result, Istanbul Arbitration Center Law, no. 6570 dated 20 November 2014, has entered into force upon publisihing in the Official Gazette on 29 November 2014 no.29190. CMB will also take some steps required for establishment of Istanbul Arbitration Center in accordance with provisions of the Law.

Goal 3: Regulatory Framework Will Be Reinforced For Development of Collective Investment Schemes Legal and operational infrastructural processes have been completed and made operable with regard to the Turkish Electronic Fund Distribution Platform (TEFAS), being a platform which provides sales and repurchase of investment fund units by fund founders through distributor firms on a central electronic platform, and which enables clearing and custody on the basis of full automation integrated with the Takasbank and CRA system.

Goal 2: Efficiency of Supervisions and Enforcement Will Be Increased

Furthermore, the Communiqué on Principles Regarding Real Estate Investment Companies, no. III-52.3, and the Communiqué on Principles Regarding Venture Capital Investment Funds, no. III-52.4, have become effective upon publishing. Goal 4: Awareness on Capital Markets and Their Advantages Will Be Increased

It is believed that it is important for an effective and efficient supervision and enforcement to establish a continuous cooperation with capital market authorities abroad, and therefore, CMB’s initiatives aiming to sign a memorandum of understanding on cooperation and exchange of information with the relevant authorities of other countries have been continued also in 2014.

In order to inform the private sector on the capital markets and

In addition, for effective use of enforcement resources by di-

Capital Markets Board of Turkey 2014 Annual Report

recting the resources to more risky areas, CMB is continuing its works pursuant to and under the annual enforcement program covering 1 April 2014-30 April 2015 period which is prepared within the framework of CMB’s Procedures and Principles Regarding Risk Based Enforcement.

Financial Instruments For Investors”, hosted by CMB, has been organized and held in Istanbul on 19 June 2014 in cooperation with EBRD. Furthermore, as a part of COMCEC Capital Markets Forum, the 3rd “COMCEC Capital Markets Regulators Forum”, hosted by the CMB, has been organized and held in Istanbul on 11 November 2014. Since the establishment of this Forum, the Forum secretariat and chairmanship duties are assumed and handled by the CMB.

For efficiency in management and audit of information systems, the drafting works of a regulation on “Information Systems Management Principles and Information Systems Audit Principles” are ongoing.

On the other hand, parallel to assumption of G-20 Term Chairmanship by Turkey in 2015, CMB is taking steps in order to serve as a bridge for the duties and works assumed in such international organizations as IOSCO and OECD. In 2014, CMB has been elected to IOSCO Board of Directors as a representative of IOSCO Growing and Emerging Markets Committee (GEM), and to International Financial Reporting Standards (IFRS) Advisory Council, being the official advisory board of the International Accounting Standards Board (IASB).

In order to increase efficiency and productivity of supervision, steps have been taken jointly with BIST, and improvements increasing efficiency in sharing and exchange of information have been provided, and particularly, works are ongoing for more effective operation of systems relating to supervision of market data, institutional investor information and public disclosure obligations, and for keeping them updated, and for adaptation of them to the changes in market systems.

Goal 4: Corporate Governance Practices Will Be Improved

Goal 3: Initiatives of Cooperation With International Organizations Will Be Reinforced

CMB is taking actions for more effective monitoring of implementation of corporate governance principles by the market participants, and for updating the principles in line with global developments and market conditions. Not only our membership in OECD Corporate Governance Committee, but also the project to be carried out together with EBRD for implementation of corporate governance rules and for increasing the efficiency in supervision of implementation are expected to make contributions to corporate governance practices in Turkey.

CMB is cooperating with European Securities and Markets Authority (ESMA) for equivalency of CMB’s regulations and communiqués with EU Standards. Accordingly, prospectus formats have been prepared in accordance with EU Standards and a report indicating the compliance of prospectus formats with EU regulations has been presented to ESMA. CMB is developing various activities for cooperation with international organizations particularly on issues with strategic importance. Accordingly, CMB will serve as a co-chairman together with the Netherlands in the Specialized Sub-committee of Financial Educaiton of SMEs which will initiate its activities as a part of OECD/INFE as of December 2014. Furthermore, CMB has been appointed as a co-chairman to the committee no. 5 of IOSCO in order to work on pricing of investment funds.

Goal 5: Works for Reinforcement of Financial Market Infrastructure Will Be Continued Within the scope of provisions of Istanbul Settlement and Custody Bank Inc. (Takasbank) Central Counterparty Regulation, with regard to the transactions in Borsa Istanbul Inc. Derivatives Market, Takasbank has iniated its operations as “central counterparty” as of 3 March 2014.

With regard to corporate governance, CMB is actively participating in works of OECD Corporate Governance Committee and are serving as vice chairman of the Committee. Besides, CMB is getting prepared for starting a new project with European Bank For Reconstruction and Development (EBRD) for implementation of corporate governance principles and for supervision of implementation.

OBJECTIVE 3: INSTITUTIONAL STRENGTHENED

CAPACITY

WILL

Goal 1: Human Resources Will Be Strengthened and Working Conditions Will Be Improved CMB recruits personnel in line with the needs of its service units and departments. Accordingly, a total of 45 new personnel, 36 of them being assistant professionals, have been appointed in 2014.

As a requirement of the proposed project on “Increasing the Capacity of Capital Markets Board” for which CMB is getting prepared to make use of EU’s Pre-accession Financial Assistance, in addition to training focused on accounting and audit issues, it is stipulated that the harmonization of the new CML and the secondary regulations issued by CMB subsequent thereto with the continuously changing EU legislation will be reviewed and when required, draft changes will be prepared, and the CMB personnel will be trained on the relevant EU legislation.

In order to improve the service quality, on-the-job training focused on legislation and practices is given to the recruited CMB’s staff in line with the changes and developments in the national and international financial markets, and domestic and foreign training opportunities are provided to the expert staff. In addition, steps are taken for temporary assignment of personnel to international organizations.

An international conference on “Development of Infrastructural

Capital Markets Board of Turkey 2014 Annual Report

continued. Besides, CMB is organizing activities like seminars, meetings and workshops in order to develop national and international cooperation and to further increase the dialogue with the sector and stakeholders.

Accordingly, for the personnel newly recruited in CMB, in-service training has been provided to 22 assistant experts between 25 November 2013 and 26 February 2014, and to 38 personnel between 19 November 2014 and 27 February 2015. (Out of these personnel, 2 statisticians have received only an orientation training of 3 weeks.) In addition to this, for in-service training of personnel, a training has been organized for CMB staff on the new CMB Regulations between 28 January and 2 June 2014.

Goal 3: Technological Opportunities Will Be Developed for Strengthening the Institutional Capacity CMB is showing great care to keep CMB’s website current and updated for informing the public effectively. Accordingly, CMB’s official website is being effectively used not only to keep the public informed about our legislative works and initiatives, but also for invitation, acceptance/participation and reporting of results of national and international organizations organized by the CMB. CMB’s Weekly Bulletin issued in order to keep the public informed about the decisions taken by CMB is being continued to be published in our website, and if and when required, public is informed also through press bulletins published in a timely manner. Furthermore, trading prohibitions or other precautionary measures taken and administrative fines imposed by the CMB as a result of the investigations are being published in the form of a list in CMB’s website as well.

In 2014, four Board personnel (secondees) have been temporarily assigned to US Securities and Exchange Commission (SEC), World Bank Istanbul Global Islamic Finance Development Center, EBRD and OECD / INFE, and following the required approvals, 10 personnel have been sent to abroad for postgraduate studies. Besides, for training of CMB personnel and for follow-up of international practices, CMB is contuniously and regularly participating in seminars and workshops organized abroad. Works are continued for completion of the construction of a new building in Istanbul for the purpose of moving CMB headquarters to Istanbul as a part of Istanbul Financial Center Project. TOKI (Housing Development Administration), in charge of the constrution of Istanbul Financial Center Project, has awarded the contract for construction of the new building.

In addition, software and application development activities (improving existing applications and developing new applications and softwares) are being continued in line with our the institutional needs and requirements, and CMB is continuing to procure new hardware when required and accordingly, in 2014, the server hardware infrastructure has been reinforced, and the existing applications have been improved. Besides, data has been received from other organizations (MERSIS, Takasbank, CRA) to ensure the accuracy of data used, which generated outside CMB, in applications and sofwares.

Goal 2: Financial Markets Will Be Monitored More Effectively It is believed that it is important to follow up the international agenda for more effective monitoring of financial markets, and therefore, CMB’s activities in committees, forums and working groups organized by international organizations are being

3.9.2. 2014 Annual Enforcement Performance Objectives and Implementation Results Table 3.1. 2014 Annual Enforcement Performance Objectives and Implementation Results (*) Performance Objectives

Implementation Results

Inspection of 15 capital markets institutions

37 capital markets institutions have been inspected

Inspection of 60 publicly-held corporations

50 publicly-held corporations have been inspected

Inspection of 15 unauthorized capital markets activities

24 unauthorized capital markets activities have been inspected.

10 inspections requested by the Public Prosecutor’s Office

1 inspection requested by the Public Prosecutor’s Office has been completed, and 8 inspections requested by the Public Prosecutor’s Office are ongoing.

10 inspections requested by Financial Crimes Investigation Board

8 inspections requested by Financial Crimes Investigation Board have been completed.

Inspection of 2 Associations

Capital Markets Association of Turkey and Association of Appraisal Experts of Turkey have been inspected

(*) Does not cover inspections conducted pursuant to articles 106, 107/1 and 107/2 of the CML, and information relating to all enforcement data are given in Table 4.7 in section 4.

Capital Markets Board of Turkey 2014 Annual Report

3.10. EXECUTIVE BOARD’S RESOLUTIONS IN 2014 Resolution Regarding Share Sales Information Form

qué and Investment Firms Communiqué has been issued as Executive Board’s resolution no. i-SPK.37.1 (resolution no. 20/661 dated 27 June 2014). Thereafter, revisions to the mentioned Guideline has been issued as Executive Board’s resolution no. i-SPK.37.2 (resolution no. 28/953 dated 23 June 2014), and the Guideline has been updated accordingly.

By Executive Board’s resolution no. i-SPK.128-6.a (resolution no. 19/610 dated 20 June 2014), in responding to the applications filed to CMB for approval of information form (share sales information form) prepared pursuant to article 27 of the Communiqué on Shares no. VII-128.1, for the corporations whose shares are listed and traded on the exchange market, except for the publicly-held corporations included in 1st and 2nd Groups and for the publicly-held corporations where the government owns shares as determined pursuant to CMB’s regulations on corporate governance principles, it has been decided that the phrase “publicly-held corporations where the government owns shares” included in CMB’s Resolution no. 40/1331 dated 6 December 2013 (i-SPK.128-6) where items in addition to provisions of article 27 of the Communiqué on Shares no. VII-128.1 are determined, be revised and amended in such manner not to cover the share sales to be made by shareholders other than the relevant public entities and administrations in the capital of publicly-held corporations where the government owns shares.

Contents of the Guideline have been mainly enumerated under the headings of Investment Advice Exception Relating to Investment Funds; Compliance and Conformability Tests; Other Services Relating to Investment Funds Which Can Be Provided by Investment Firms Not Holding an Investment Advice License; Investment Advice and General Investment Suggestions; Portfolio Brokerage Activities; Organization in Bank Branches; Derivative Instrument Transactions of Banks; Internal Systems of Banks; Data Processing Infrastructure of Investment Firms; Custody Services; Outsourcing of Services; Personnel of Investment Firms; Internal Audit System; Intermediation for Purchase and Sale of Capital Market Instruments, Monitoring of Risks of Transactions and Portfolio Intermediation on Customer Basis; Transition Period and Other Provisions.

Resolution Regarding Buy-Backed Shares

Guideline on Investment Funds

By Executive Board’s resolution no. i-SPK.22-1 (resolution no. 23/759 dated 24 July 2014), in capital decrease to be made in reliance upon the provision “buy-backed shares are redeemed according to CMB’s procedures of capital reduction not requiring fund outflows.” included in ninth paragraph of article 19 of the “Communiqué on BuyBacked Shares” no, II-22.1, it has been decided that only the provisions of paragraphs 6, 9, 10 and 11 of article 19 of the “Communiqué on Shares” no. VII-128.1 of CMB will be applicable.

In order to clarify the principles of implementation of the “Communiqué on Principles Regarding Investment Funds” no. III-52.1, a “Guideline on Investment Funds” has been prepared and issued. The Guideline adopted by the Executive Board’s resolution no. i-SPK.52.4 (resolution no. 19/614 dated 20 June 2014) contains principles relating to: Fund types and determination of name of fund; and

Resolutions Regarding Applications for Capital Decrease Not Requiring Fund Outflows

Assets and transactions constituting the fund portfolio; and Trading of fund participation units; and

By Executive Board’s resolution no. i-SPK.128-8 (resolution no. 26/856 dated 29 August 2014), on the corporation shares are traded below their nominal value in stock exchange or not pursuant to first sentence of first paragraph of article 19 entitled “Capital Decrease Not Requiring Fund Outflows” of the “Communiqué on Shares” no. VII-128.1, it has been decided to take into consideration the average of weighted average prices recorded in the stock exchange within 30 days prior to the date the capital decrease decision is disclosed to public.

Risk management system for funds; and Operational transactions of funds; and Public disclosure principles; and Decisions required to be taken by the board of directors of the fund founder; and The principles of implementation and transitory process of temporary articles of the Communiqué; and

By Executive Board’s resolution no. i-SPK.128-10 (resolution no. 34/1185 dated 3 December 2014), on reviewing the filings for capital decrease not requiring fund outflows, within the scope of provisions of third sentence of article 10 of the “Communiqué on Shares” no. VII-128.1, it has been decided to calculate the corrected exchange price of shares on the basis of the average of weighted average prices recorded in the exchange within 30 days prior to the date the capital reduction decision is made public.

other issues pertaining thereto. Resolutions Regarding Communiqué on Market Abuse and Communiqué on Payment of Net Trading Profits by Managers to Issuers By Executive Board’s resolution no. i-SPK.104-1 (resolution no. 16/514 dated 28 May 2014), the term “accounting period” in third paragraph of article 4 “Market Abuse Actions Regarding the Inside Information and Periodic Information” of the Communiqué on Market Abuse no. VI-104.1 has been defined as “6 months and 12 months”. Thus, persons having access to insider or continuous information are enabled to trade in a longer period in the relevant stock market.

Guideline on Investment Services and Activities and Investment Firms The “Guideline on Investment Services, Activities and Investment Firms” for implementation of the Investment Services Communi-

Capital Markets Board of Turkey 2014 Annual Report

Resolution on Capital Increase Applications of Intermediary Institutions

By Executive Board’s resolution no. i-SPK.104-2 (resolution no. 17/563 dated 5 June 2014) and resolution no. i-SPK.103-1 (resolution no. 17/564 dated 5 June 2014), it has been decided that in the Communiqué on Market Abuse no. VI-104.1 and in the Communiqué on Payment of Net Trading Profits by Managers to Issuers no. VI-103.1, the term “issuer” will be defined “Legal entities whose shares are listed and traded on the exchanges and other regulated markets or which have filed an application for listing of their shares”, and the term “capital market instrument / instruments” and the term “relevant capital market instruments” will be defined as “Shares, depositary receipts representing shares or share based depositary receipts, warrants, investment firm certificates, options and futures contracts which are listed and traded on the exchanges and other regulated markets or which are registered in CRA on dematerialized basis”.

By Executive Board’s resolution no. i-SPK.45-2 (resolution no. 22/711 dated 17.07.2014), it has been decided that the provisions of article 376 of the Turkish Commercial Code no. 6102 will be applied in capital increase filings of intermediary institutions, and the implementation principles have been determined. Resolution on Compliance and Conformability Tests for Investment Firms Minimum content, as prepared by the CMAT, of the compliance test required to be conducted on customers pursuant to article 33 of the Communiqué on Investment Firms, and of the conformability test required to be conducted on customers before offering individual portfolio management and investment advisory services pursuant to article 40 of the Communiqué on Investment Services have been approved in the Executive Board meeting of CMB on 15 May 2014. Accordingly, providing that minimum contents of tests are abided by, and tests constitute an integrity in itself, and reasonable grounds are found therein for, authorized bodies are enabled to shape the tests in line with their own corporate practices, also including “risk and return preferences” and “information and experience” classifications, and to evaluate and assess the information received from customers according to a method to be determined by themselves, and it has been decided to include in the relevant communiqués an amendment allowing the compliance and conformability tests for existing and new customers and the warnings and notices relating to such tests to be made both in writing, and if required, by electronic means, providing that the substantiating information and documents are submitted therein for.

Resolution Regarding Communiqué on Obligation of Notification Regarding Insider Trading or Manipulation Crimes By Executive Board’s resolution no. i-SPK.102-1 (resolution no. 21/681 dated 8 July 2014), new rules have been specified for determination of person/unit liable for fulfillment of the obligations of notification of investment firms under the relevant Communiqué, and on their limits of liability. ABC Regulation By Executive Board’s resolution no. i-SPK.101-1 (resolution no. 31/1080 dated 30 October 2014), the regulation known commonly as ‘ABC Regulation’ has been revised in the light of the CML and the relevant applicable laws and regulations, and in addition to the existing classification of shares in groups A , B and C, the shares remaining outside the share market have been regulated under group D, and different transaction principles have been imposed for each of such groups.

3.11. ONGOING SECONDARY REGULATION WORKS 3.11.1. Ongoing Regulation Works on Investment Firms

Works on secondary regulations regarding principles of internal audit applicable in investment firms, and principles of public disclosure of investment firms; and

Works for updating the communiqué on documentation and record keeping system of intermediary institutions in accordance with the investment services and activities determined under the CML; and

Works on the Regulation on Activities, Working and Auditing Principles of Trade Repositories to be issued based on second paragraph of article 87 of the CML, and on the Communiqué on Principles Regarding Reporting to Trade Repositories to be issued based on first paragraph of article 87 of the CML; and

Works for preparing and issuing secondary regulations on Central Counterparty System regulated in the CML; and Works for updating the Communiqué on margin trading, short selling, borrowing and lending of capital market instruments; and

Works on revision of the Guideline on Investment Services and Activities for implementation purposes according to the opinions and comments received from market practitioners and demands and needs arising out of implementation; and

Works for implementation of the “Communiqué Revising the Communiqué on Principles Regarding Capital and Capital Adequacy of Intermediary Institutions” adopted in the meeting no. 3 of CMB dated 3 February 2015; and

Works on addition of new provisions on particularly protection of investors with respect to the leveraged (forex) transactions

Works for revision of the Communiqué on Principles Regarding Capital and Capital Adequacy of Intermediary Institutions parallel to BASEL applications and banking regulations pertaining to over-the-counter derivative transactions that may be affected by intermediary institutions under the CML; and

are ongoing.

Capital Markets Board of Turkey 2014 Annual Report

3.11.2. Ongoing Regulation Works on Collective Investment Schemes 3.11.2.1. Open-Ended Investment Partnerships

ment partnership model having an open-ended capital structure known as SICAV (Société d’investissement à Capital Variable) or ICVC (Investment Company with Variable Capital) on international level. This type of partnership provides the flexibilities of an investment fund under a company structure having a separate legal entity.

Works on secondary regulations on Open-Ended Investment Partnerships (OEIP) have reached their final stage in 2014. Accordingly, the regulation on Open-Ended Investment Partnerships (OEIP) is expected to become effective in the first quarter of 2015. Open-Ended Investment Partnership refers to an invest-

3.11.2.2. Guideline on Pension Investment Funds

Assets and Transactions Constituting the Fund Portfolio; and Assessment of Assets in Fund Portfolio; and

The draft “Guideline on Pension Investment Funds” prepared in order to clarify the principles of implementation of the “Regulation on Principles Regarding Establishment and Activities of Pension Investment Funds” and to provide the unity of implementation has been published in CMB’s website on 17 December 2014 for public opinion.

Trading of Fund Shares (Units); and Risk Management System; and Operational Transactions on Funds; and Public Disclosure Principles; and

The draft Guideline contains provisions on:

Board’s Fee;

Types of Funds; and

and other relevant issues.

Control of Types of Fund; and

Capital Markets Board of Turkey 2014 Annual Report

4. ACTIVITIES OF THE CMB IN 2014 During 2014, CMB’s Executive Board has convened for 36 times and adopted 1,340 resolutions on various subjects.

4.1. APPLICATIONS FOR SECURITIES ISSUES Pursuant to CML, the prospectus should be prepared by the issuers and approved by the CMB for public offering of capital market instruments or their listing to and trading on the exchange, on the other hand, in order to issue capital market instruments without public offering, the issue document containing informa-

tion about the nature and sale conditions regarding these instruments should be prepared by the issuers and approved by the CMB. As of the end of 2014, information on capital market instruments issuance applications and the results thereof is given below:

Table 4.1. Applications For Securities Issues and Results Type of Application

Number of Applications

Number of Finalized Applications (*)

Shares Publicly-held Corporations (**)

Real Estate Investment Companies (***)

Venture Capital Investment Companies (***)

Securities Investment Companies (***)

Investment Fund Units

Pension Fund Units

148

149

Investment Firm Warrants/Certificates/Notes

Asset Covered Securities-Asset Backed Securities

281

296

Debt Securities Lease Certificates

Total

(*) The difference between the number of applications and the number of finalized applications is because of the applications filed in the previous year. (**) Also covers the applications for going public. Does not cover the applications for issue of shares as a result of merger and the exercise of squeeze-out rights. (***) Covers the applications for going public and for capital increase through rights issue.

Source: CMB

4.2. AUTHORIZATIONS AND APPROVALS 4.2.1. Authorizations Regarding Investment Firms

no. III-37.1, and the Communiqué on Principles Regarding Establishment and Operations of Investment Firms, no. III-39.1, have become effective on 1 July 2014, and as per these new Communiqués, investment firms are required to apply to CMB until 1 July 2015 for renewal of their operating licenses, and are required to be authorized for the investment services and activities listed in the CML. However, as the applications filed by investment firms for transformation have not been completed in 2014, information about the activities subject to prior permission of the CMB with respect to investment services and activities defined in the repealed CML no. 2499 and the new CML no. 6362, and about the institutions which may perform these activities are included in the following table:

In order to ensure secure, transparent, effective, fair and competitive functioning and development of capital markets, and to protect rights and interests of investors, the necessary conditions regarding intermediary institutions and banks to be engaged in capital market activities are determined by the CMB. In this context, engagement of intermediary institutions and banks in capital market activities, establishment of field offices, changing the ownership structure, amendments to the articles of association of intermediary institutions are subject to the permission of the CMB. Pursuant to the CML, the Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services,

Capital Markets Board of Turkey 2014 Annual Report

Table 4.2. Activities Subject to the Permission of CMB and Institutions Authorized Intermediary Institutions

Non-deposit Banks (Investment Banks)

Commercial Banks

Intermediation for Trading Securities

√

√ Off-the Exchange

Intermediation for Public Offering

√

Repurchase or Reverse Repurchase of Securities (Repo - Reverse Repo)

√

Portfolio Management

√

Investment Advice

√

Margin Trading, Short Selling, Securities Borrowing and Lending Operations

√

Intermediation for Purchase and Sale of Derivative Instruments

√

Leveraged Purchase and Sale (Forex) Transactions

√

Types of Activity

√

Source: CMB The following table indicates information about license applications filed by investment firms to the CMB during 2014: Table 4.3. Applications Filed by Investment Firms to the CMB in 2014 Number of Applications

Type of Application Permission for Operation

Number of Finalized

61(*)

- Establishing Field Offices/Change of Address

- Closing of Field Offices

Change in the Ownership Structure

Amendment of Articles of Association of Intermediary Institutions

178

Suspension of Operations

Establishing New Intermediary Institution by License Transfer

446

393

Establishing Field Offices

Withdrawal of Licenses

Capital Increase / Decrease TOTAL

(*) 40 applications for operating license have been filed by intermediary institutions as a requirement of transformation at the year-end in 2014 and have been completed on 2 January 2015. Source: CMB On the other hand, a review of operations of intermediary institutions during 2014 reveals that 178 licenses have been withdrawn, and 20 new licenses, 11 permissions to establish branch offices, 12 permissions to close branch offices, 15 permissions to

establish contact offices, 21 permissions to close contact offices have been granted, and as of the end of 2014, 13 intermediary institutions are in temporarily suspended from operation, 6 of which have been suspended in 2014.

Capital Markets Board of Turkey 2014 Annual Report

4.2.2. Authorizations Regarding Collective Investment Schemes To provide more effective public disclosure and more transparent operation of the collective investment schemes, CMBâ&#x20AC;&#x2122;s prior permission is required for the following processes:

Furthermore, during 2014, the applications of portfolio management firms for compliance with the CommuniquĂŠ on Principles Regarding Portfolio Management Firms and Their Activities no. III-55.1 have also been evaluated by the CMB.

Establishment, amendment to the internal bylaws, prospectus/issue documents, changes of founder and type, merger and liquidation of investment funds and pension, venture capital and real estate investment companies; and

Accordingly, the distribution of applications made by the aforementioned institutions to the CMB in 2014 is presented in the table below:

Establishment/transformation, amendment to the articles of association, raising the upper limit of authorized capital as well as obtaining portfolio management licenses of securities/real estate/venture capital investment companies. Establishment, obtaining portfolio management license and investment advice license of portfolio management companies as well as their establishing agencies for various institutions.

Increase of Upper Limit of Authorized Capital System

Applications for Compliance With CommuniquĂŠ on Portfolio Management Companies no. III-55.1

Others (*)

TOTAL

No. of Finalized Applications

No. of Applications

Source: CMB

No. of Finalized Applications

VENTURE CAPITAL INVESTMENT COMPANIES

(*) Covers applications for additional time requests, opinion requests etc.

Amendment of Internal Bylaws / Prospectus

Capital Increase (through rights issues and from internal sources)

Amendment of Articles of Association

Liquidation

Public Offering / Increase of Fund Amount

Merger

Tender Offer / Exemption / Share Transfer

Initial Public Offering

No. of Applications

Establishment / Transformation / Fund Registration

Type of Application

INVESTMENT COMPANIES

Table 4.4. Applications of Collective Investment Schemes

No. of Applications

No. of Finalized Applications

REAL ESTATE INVESTMENT COMPANIES

125

No. of Applications

102

No. of Finalized Applications

PORTFOLIO MANAGEMENT COMPANIES

120

No. of Applications

112

No. of Finalized Applications

INVESTMENT FUNDS

No. of Applications

No. of Finalized Applications

PENSION INVESTMENT FUNDS

No. of Applications

No. of Finalized Applications

VENTURE CAPITAL INVESTMENT FUNDS AND REAL ESTATE INVESTMENT FUNDS

Capital Markets Board of Turkey 2014 Annual Report

4.2.3. Authorizations and Approvals Regarding Publicly-held Corporations For the purpose of facilitating the capital increase procedure for publicly-held corporations and to protect the shareholders in various transactions, publicly-held corporations whose shares are traded or not traded on the exchange are subject to the permission of the CMB for the following processes:

Proxy solicitation or takeover bids, requests for exemptions from takeover bids, Exclusion of corporations from the scope of CML. On the other hand, pursuant to article 16 of the CML, the corporations which become subject to the provisions for publicly- held corporations, application to the CMB for inclusion to the scope of CML no.6362 is mandatory.

Adoption of the authorized capital system and increasing the upper limit of authorized capital, Mergers, acquisitions and demerger,

In that respect, the figures regarding such applications to the CMB for 2014 are presented in the table below:

Amendments to the articles of association Table 4.5. Applications of Publicly-held Corporations in 2014

Number of Applications

Number of Finalized Applications (*)

Adoption of Authorized Capital System, and increase of upper limit of authorized capital

Mergers and Divisions

Takeover Bids and/or Exemption From Takeover Bids

106

105

Squeeze-out and Sell-out Rights

Admitted to Trading on the Stock Exchange

Capital Decrease

319

296

Type of Application

Amendments to Articles of Association Inclusion of Corporations in the scope of the CML Exclusion of Corporations from the scope of the CML

Total

(*) The difference between the number of applications and the number of finalized applications is because of the applications filed in the previous year. Source: CMB

4.2.4. Authorizations Regarding Independent Audit Firms carry out independent audit activities in capital market by meeting additional conditions determined by the CMB.

Regarding the independent auditing activities and those who render these services within the scope of provisions of Turkish Commercial Code no. 6102, the Public Oversight, Accounting and Auditing Standards Authority (KGK) has been authorized under Decree Law No.660 on the Organization and Duties of the Public Oversight, Accounting and Auditing Standards Authority, which was published in the Official Gazette on 2 November 2011, no.28103. On the other hand, in accordance with the CML, independent audit firms already authorized by the KGK would

In this framework, the independent audit firms which will render auditing services in capital markets shall apply to the CMB in order to be authorized by the CMB. In 2014, the applications for authorization of 4 independent audit firms were approved.

4.2.5. Authorizations Regarding Rating Agencies According to the capital market legislation, the CMB is empowered to determine the principles and procedures regarding rating activities and rating agencies in capital markets. In this context,

rating agencies seeking to receive authorization to conduct rating activities in capital markets are required to apply to the CMB. In 2014, no application has been filed to the CMB for authorization.

Capital Markets Board of Turkey 2014 Annual Report

4.2.6. Authorizations Regarding Appraisal Firms CML is empowered the CMB to determine the principles and rules for appraisal activities and appraisal firms in capital markets. In this context, in order to render appraisal services in capital markets, appraisal firms shall apply the CMB for authorization. Applications of appraisal firms, which demand for operating in appraisal business

in capital markets, are examined by the CMB and firms having certain qualifications are authorized to render appraisal services. In 2014, 3 real estate appraisal firms have been authorized by the CMB.

4.2.7. Authorizations Regarding Establishment of Asset Lease Companies / Asset Finance Fund Asset lease companies (ALC) are joint stock companies which are solely established to issue lease certificates. It is mandatory to get the prior consent of the CMB to establish and to constitute the articles of association of asset leasing companies.

ciples in the account of owners of ABS and does not have a separate legal personality. ABSs are capital market instruments issued backed by the assets in the relevant fundsâ&#x20AC;&#x2122; portfolio. AFF is required to be established for issue of ABSs. An application is required to be filed to the CMB for approval of fund internal bylaws for establishment of an AFF.

In 2014, articles of association for establishment of 5 asset leasing companies were approved.

In 2014, internal bylaws for establishment of 4 asset finance funds were approved.

Asset Finance Fund (AFF) is a property which is established by fund internal bylaws by moneys collected against Asset Backed Securities (ABS) in accordance with fiduciary ownership prin-

4.3. SUPERVISION In order to ensure protection of investors, and fair, effective and transparent operation of markets as well as to decrease systematic risk, supervision of capital markets is performed;

By updating the regulations within the frame of the findings detected during supervision activities and practical matters. In this context, information regarding supervision and surveillance activities carried on by the CMB is provided in the following sections.

By taking prompt action to correct violations of laws and regulations detected via closely monitoring the publicly-held corporations, capital market institutions, risks and transactions,

4.3.1. Supervision of Publicly-Held Corporations Review and Revision of Financial Statements trative actions are taken in relation therewith when required. On the other hand, public disclosures of material events of non-exchange-traded publicly held corporations are disclosed to public directly via the website of the CMB.

Review and Revision of Financial Statements Within the frame of principles of the risk-based supervision system which is created for supervision of financial reports of publicly-traded corporations and takes into consideration other relevant criteria as well and is in line with the EU regulations, the activities of supervision of financial statements and reports have been continued during 2014. If and when supervision of financial statements results in an adjustment or a correction in financial statements or an administrative fine, the relevant sanctions are disclosed to public by a CMBâ&#x20AC;&#x2122;s Weekly Bulletin.

General Assembly Meetings Attendance As part of supervision activities, in accordance with article 95 of the CML, experts of CMB attended as observer ordinary/extraordinary general assembly meetings of 3 publicly-held corporations in 2014 to detect the potential problems and wrongful acts, and drew up information forms on each general assembly meeting attended.

Surveillance of Material Events Within the framework of the regulations of CMB regarding public disclosure, in order to ensure public disclosure of material events and developments which may affect the value of capital market instruments, to prevent existence of asymmetric information, and to ensure open and fair functioning of the market by informing investors and other related parties in a timely, complete and accurate manner, material events disclosures made in the PDP by the corporations whose shares are traded on Borsa Istanbul are monitored, also news published in press and media about the corporations are followed up, and adminis-

Capital Markets Board of Turkey 2014 Annual Report

4.3.2. Supervision of Collective Investment Schemes Periodical statements and reports of collective investment schemes and portfolio management companies are monitored continuously and in case of non-compliance with the regulations, necessary measures are taken and the required sanctions are imposed.

developed. In 2001, the necessary technical adjustments were made to receive the information at the date of transaction (T) which was previously received at the date of clearing (T+2). In that regard, the information submitted to the CMB was also analyzed and necessary measures were taken in case of non-compliance with the regulations in 2014, as well.

A system which enables the CMB to monitor and supervise electronically the portfolio structures of all investment funds, pension funds and investment companies electronically has been

4.3.3. Supervision, Surveillance and Inspection of Investment Firms Supervision of investment firms is mainly comprised of monitoring of capital adequacy statements, various surveillance activities, on and off-site inspections.

es in the employees of the intermediary institutions are submitted to the Capital Markets Association of Turkey (CMAT), the CMB works in close coordination with the CMAT.

Monitoring of Capital Adequacy Statements

Changes in main and field offices, organization, location, technical equipment, accounting, documentation and record-keeping system of the intermediary institutions are reviewed through the notifications made to the CMB.

Pursuant to the Communiqué on Principles Regarding the Capital and Capital Adequacy of Intermediary Institutions, intermediary institutions are required to submit the capital adequacy statements and the data of their activities weekly at the 7th, 15th, 23rd and 30th days of each month.

CMB monitors regularly and continuously whether the intermediary institutions and banks fulfil their registration obligations regarding their licenses for capital market activities according to the current legislation or not.

In order to maintain sound financial structure of intermediary institutions, the aforementioned statements were examined throughout the year 2014 and the necessary warnings have been made and actions have been taken for the purpose of providing that all intermediary institutions comply with capital adequacy requirements. Through these surveillance activities, intermediary institutions have been ensured to have a strong capital structure by arranging their asset structures.

On and Off-Site Inspections Throughout 2014, CMB experts conducted on-site inspections at 63 intermediary institutions within the scope of supervision and surveillance activities. In 2014, CMB has been requested by the Financial Crimes Investigation Board (MASAK) to inspect and audit 8 intermediary institutions and those inspections have been completed within the year.

Surveillance Activities Within the scope of surveillance of intermediary institutions, whether shareholders and employees of intermediary institutions fulfill the necessary qualifications specified in the relevant Communiqués is monitored, as well. Considering that the chang-

Operations of a total of 6 intermediary institutions have been temporarily suspended, 5 of them being upon their own application, and 1 of them being as a result of CMB’s inspection in 2014.

Table 4.6. Types of On-Site Inspections of Intermediary Institutions by Years Type of Inspection

2014

2013

2012

Financial Inspection

Inspection on Complaint

Inspection of Licenses

Inspection on MASAK’s Request

Legislative Inspection

Total Source: CMB

Capital Markets Board of Turkey 2014 Annual Report

4.3.4. Supervision of Independent Audit Firms Independent audit activity in capital markets are supervised by the CMB with regard to conditions of establishment, principles of operations, necessary qualifications for auditors and audit contracts signed with the client corporations. In order to enhance the efficiency in operations of independent auditing sector, notifications and requests received from the departments of the CMB are also taken into account, and as a result thereof, quality control inspections are conducted in independent audit firms. The project called the Remote Data Transfer System, which was

initiated to improve the efficiency of supervision of auditing activities has been completed, therefore various reports can be received electronically. Within the scope of supervision and surveillance activities, quality control inspections were completed in 3 independent audit firms in 2014.

4.3.5. Supervision of Rating Agencies Within the new regulatory framework with respect to rating activities and rating agencies in capital markets, the conditions of establishment and principles of operations of rating agencies, and changes in their organization, offices, technical equipment, documentation and record keeping systems, and contracts signed with the clients are monitored and supervised.

Within the scope of supervision and surveillance activities in 2014, 4 rating agencies were subject to quality control inspections.

4.3.6. Supervision of Appraisal Firms Regarding the real estate appraisal activity in capital markets, the conditions of establishment and principles of operations, qualification requirements for real estate appraisal experts and appraisal service contracts signed with the clients are supervised and monitored by the CMB. In order to enhance efficiency in appraisal sector, notifications and requests from other departments of CMB are also taken into account and as a result thereof quality

control inspections are conducted in appraisal firms. Through the Remote Data Transfer System, which was started to improve the efficiency of supervision of appraisal activities, various reports can be generated electronically. As a part of supervision and monitoring activities, in 2014, quality control inspections of 12 appraisal firms were completed.

4.3.7. Market Supervision The adequacy of surveillance systems of exchanges and organized markets as well as the efficiency of their surveillance activities shall be checked by the CMB, while exchanges and other organized markets shall submit semi-annual reports regarding their surveillance systems and activities within one month following the relevant period;

Market supervision activities have been carrying out pursuant to the Executive Board resolution of 4 April 2008. According to the mentioned resolution, the following decisions were made: For the exchanges and other organized markets under the jurisdiction of the CMB, it is essential that the exchanges ensure the transactions are executed in an open, regular and fair environment, and provide market surveillance activities which include monitoring price and volume movements as well as transactions and orders, and determine violations of their internal regulations and (repealed) CML no.2499 articles 47/ A-1, 47/A-2 and 47/A-3 (and the provisions of article 106, 107/1 and 107/2 of the CML no.6362, which corresponds to the aforementioned articles);

The notifications, complaints and applications communicated within the scope of market surveillance activities to the CMB as well as notifications made from other departments of CMB, shall be delivered to the relevant exchanges and organized markets, and the CMB shall be informed about the results of the actions taken. In order to increase efficiency and improve market supervision activities, Department of Market Oversight and Enforcement was established on 30 December 2009. In this regard, unusual price and volume movements regarding the capital market instruments traded on the exchanges or other organized markets, and also the actions distorting the market are monitored, supervised and inspected according to the CML and other related regulations and communiquĂŠs.

In this respect, it has been decided that the preliminary detections of the violations of the articles 47/A-1, 47/A-2 and 47/A-3 of CML No. 2499 (and the provisions of article 106, 107/1 and 107/2 which corresponds to the abovementioned articles) shall be done by exchanges, and in the event that findings indicating that market abuses may exist in the transactions are drawn therefrom, the case shall be submitted to CMB

Capital Markets Board of Turkey 2014 Annual Report

4.4. ENFORCEMENT The objectives of the CMB’s enforcement activities are to prevent negligence, violations, corruptions and other unlawful practices causing disadvantages for the protection of rights and interests of market participants and for the efficiency, integrity and reliability of capital markets. With these objectives, operations of publicly-held corporations, investment firms, collective investment schemes, independent audit firms, rating agencies, exchanges and other organized markets and other institutions operate in capital markets (such as CRA, Takasbank, CMAT) are supervised according to the CML, communiqués and other regulations. Investigations based on all unlawful activities and transactions causing inefficient, unfair and insecure functioning of the capital markets are primarily conducted by Department of Enforcement and Department of Market Oversight and Enforcement. Other departments are also conducting investigations and examinations within their respective scope of duty.

backs and notifications from others departments of the CMB and other governmental institutions.

Subjects of supervision activities are determined by annual enforcement programs, complaints received from investors, feed-

Distribution of enforcement activities by subject matters is summarized in the following table.

In 2014, in order to assure effective, fair and reliable operation of markets, several investigations, surveillance and supervision activities were done in accordance with major principles of the CMB. A constructive, guiding and corrective approach has been adopted in carrying out enforcement activities; on the other hand the cases that require criminal sanctions have been notified to the related authorities immediately. As a result of the investigations which have been started in previous years or in 2014, 187 reports in total have been finalized. As for the distribution of enforcement activities by subject, manipulation investigations take the first place with 57 enforcement cases and examinations of publicly-held corporations the second place with 50 enforcement cases.

Table 4.7. Distribution of Enforcement Activities by Subject Matters 2014

2013

NO.

(%)

NO.

(%)

2.67

4.46

Unlicensed / Unauthorized Capital Market Activities Inspections

12.83

13.86

Publicly-held Corporations Inspections

26.74

25.25

0.54

0.99

Insider Trading

8.56

6.44

Manipulation (*)

30.48

28.21

Collective Investment Schemes Inspections

16.04

15.84

2.14

4.95

187

100.00

202

100.00

Investment Firms (Intermediary Institutions) Inspections

Inspection on Public Offerings Without CMB’s Approval

Affiliated Institutions / Companies TOTAL

(*) In manipulation or other criminal offenses, the criminal act may be in a different period than the legal prosecution. Source: CMB As a result of supervisions and inspections conducted by the CMB, warning or administrative fine sanctions may be imposed by the CMB’s Executive Board, and sanctions such as judicial fine and imprisonment may be imposed by competent courts. Upon detection of crimes defined or referred to in the CML, the CMB files a written application to the Public Prosecutor’s Office.

the violations in the case of unlawful acts and transactions reducing the capital or properties; to remove the authorization of sign of persons held liable therein; to discharge; to appoint new members in place of those discharged directors; in the case of illegal transfer pricing, to request the disclosure of audit reports and results; to commence a lawsuit for refund of the determined amount of illegal transfer pricing to the company; in the case of unlawful activities or operations of capital market institutions or in the case of deterioration of financial structure, to temporarily suspend the activities of capital market institutions; to withdraw their authorization fully or partially; to withdraw the license certificates of the persons proven to be responsible therein; to

However, the CMB’s Executive Board may also take precautionary measures, without prejudice to legal and criminal sanctions. Included among these precautionary measures are to claim cautionary injunction and cautionary attachments in the case of illegal securities issues; to request the relevant persons to remedy

Capital Markets Board of Turkey 2014 Annual Report

discharge and replace the directors proven to be responsible therein; in the case of deterioration of financial structure, to take a gradual liquidation decision; to apply the court directly for insolvency and bankruptcy; in the case of unlicensed/unauthorized capital market activities conducted via internet, to apply the court for a decision of prevention of access; in the case of insider trading and market manipulation crimes, to impose temporary or permanent trading prohibition sanctions; to change the method of clearing and settlement; to impose restrictions and limitations on margin trading, short selling, lending and borrowing transactions; to impose an obligation of collateralization or to change such obligation; to require trading in different markets or exchanges and to determine different trading principles; to limit the scope of distribution of market data; and to impose transaction or position limits.

volume movements have been subject to such various different measures as ban on order transmission via internet, gross settlement, imposition of depositing in advance condition, ban on margin trading or ban on short selling. Furthermore, likewise, 32 real persons and 2 legal entities have been subject to such measures as temporary ban on trading, imposition of depositing in advance condition, and non-acceptance by investment firms of orders given by these persons via internet. During 2014, with regard to insider trading and manipulation crimes, 136 different persons have been subject to a total of 341 separate bans on trading with respect to transactions executed in 14 different stocks. Moreover, a precautionary measure, temporary ban on trading is imposed on 5 persons upon detection of reasonable doubts relating to manipulation crime. The following table shows information about sanctions imposed as a result of the CMBâ&#x20AC;&#x2122;s enforcement activities conducted in 2014:

Accordingly, during 2014, with regard to manipulation crimes, 21 different stocks observed to be traded with unusual price and

Table 4.8. Sanctions Imposed As a Result of Enforcement Activities 2014

2013

123

121

Publicly-held Corporations

Independent Audit Firms

Rating Agencies

Appraisal Firms

247

Legal Prosecution

145

Legal Prosecution and Trading Prohibition

102

146

Real Persons

Investment Firms

Publicly-held Corporations

Independent Audit Firms

516

313

Legal Warning Real Persons Investment Firms

Collective Investment Schemes

Legal Prosecution and Trading Prohibition (*)

Administrative Fines

Collective Investment Schemes Appraisal Firms TOTAL (*) One person may be involved in more than one case. Source: CMB

Capital Markets Board of Turkey 2014 Annual Report

After investigations, it was decided to write legal warning to 123 real persons or legal entities for non-compliance capital market legislation, to file 145 legal prosecution applications to Public Prosecutor’s Office, and to apply for legal prosecution and impose trading prohibition on 102 real persons.

All departments of the CMB have imposed a total administrative fine of TL 24,316,893 on 146 real persons or legal entities in 2014. Information about the reasons and amounts of administrative fines is given in the following table:

Table 4.9. Legal Grounds and Amounts of Administrative Fines 2014

2013

NO.

AMOUNT (TL)

NO.

AMOUNT (TL)

15,690,237

1,340,668

Communiqué Serial: I, No:31 on Principles Regarding Merger Transactions

801,248

Communiqué Serial: V, No: 68 on Principles Regarding Internal Auditing System of Intermediary Institutions

21,560

17,170

Communiqué Serial: VIII, No: 54 on Material Events Disclosure

164,732

75,476

Communiqué no. II-15.1 on Material Events Disclosure

280,091

910,466

Communiqué Serial: X, No:22 on Principles Regarding Independent Audit Standards in Capital Markets

80,052

Communiqué Serial: IV, No:44 on Principles Regarding the Takeover Bids

12,275,899

Communiqué Serial: XI, No:1 on Principles and Rules Regarding Financial Statements and Reports in Capital Markets

64,680

Communiqué no. VII-128.1 on Shares,

606,221

Communiqué Serial: VIII, No:35 on Appraisal Firms

97,222

Communiqué Serial: XI, No:29 on Financial Reporting in Capital Markets

55,476

Violation of provisions of Private Pension System Law and Pension Funds Regulation

10,884

Non-execution of Executive Board Resolutions

1,300,228

269,500

1,624,400

1,683,858

Communiqué Serial: V, No: 6 on Principles Regarding Record Keeping and Documentation in Intermediation Activities

73,968

Communiqué on Intermediation Activities, Serial: V, No: 46

159,763

643,174

Communiqué Serial: VIII, on No:54 Material Events Disclosure

291,060

520,454

Communiqué Serial: V, No: 60 on Presentation of Performance of Portfolios and Ranking Activities

20,389

Communiqué Serial: V, No: 65 on Margin Trading and Short Selling

151,730

Communiqué Serial: V, No: 68 on Principles Regarding Internal Auditing System of Intermediary Institutions

348,230

154,516

Communiqué Serial: V, No: 125 on Leveraged (Forex) Transactions

150,920

Communiqué Serial: VIII, No: 45 on International Appraisal Standards in Capital Markets

123,278

Communiqué Serial: VII, No:10 on Principles Regarding Investment Funds

43,967

Communiqué Serial: VI No:15 on Principles Regarding Venture Capital Investment Companies

40,000

Communiqué Serial: V No:59 on Principles Regarding Portfolio Management Activity and Portfolio Management Companies

41,949

Communiqué no. III-48.1 on Real Estate Investment Companies

269,500

LEGAL GROUNDS AND PERSONS CONCERNED Real Persons

Communiqué no. VI-104.1 on Market Abuse

Investment Firms / Collective Investment Schemes

Capital Markets Board of Turkey 2014 Annual Report

Table 4.9. Legal Grounds and Amounts of Administrative Fines (Continued) 2014 LEGAL GROUNDS AND PERSONS CONCERNED

NO.

2013 AMOUNT (TL)

NO.

AMOUNT (TL)

Communiqué Serial: IV, No:41 on Principles Applicable on Joint Stock Companies Subject to CML

20,000

Non-execution of Executive Board Resolutions

129,559

81,560

Violation of provisions of Private Pension System Law and Pension Funds Regulation

25,785

18,456

6,645,641

2,784,360

Communiqué Serial: IV, No:27 on Dividends and Dividend Advances

20,000

Communiqué Serial: VIII, No:39 on Material Events Disclosure

343,392

Communiqué Serial: VIII, No:54 on Material Events Disclosure

2,265,497

826,828

Communiqué no. II-15.1 on Material Events Disclosure

429,685

Communiqué Serial: XI No:29 on Financial Reporting in Capital Markets

73,968

812,130

Communiqué no. VI-104.1 on Market Abuse

1,121,404

Communiqué no. VII-128.1 on Shares

953,480

470,547

Communiqué Serial: IV, No:44 on Principles Regarding the Takeover Bids

135,926

Communiqué Serial: II, No:22 on Principles Regarding the Registration of Debt Instruments with the Board

64,680

Non-execution of Executive Board Resolutions

1,331,060

581,404

Independent Audit Firms

313,405

192,480

Communiqué Serial: X, No:22 on Independent Audit

55,530

192,480

Communiqué Serial: VIII, No:45 on International Appraisal Standards in Capital Markets

257,875

Appraisal Firms

43,210

134,206

Communiqué Serial: VIII, No: 35 on Appraisal Firms

43,210

134,206

Publicly-held Corporations

Communiqué no. II.14.2 on Financial Reporting

TOTAL

24.316.893

6.135.572

On the other hand, as per the “Communiqué no. V-102.1 on Notification Obligation About Insider Trading or Manipulation” entered into force on 1 July 2014, investment firms have assigned and appointed a sufficient number of personnel for notification

of suspicious transactions. Accordingly, in the second half of 2014, a total of 81 suspicious transaction have been notified to CMB.

It is specified in article 115 of the CML that the crimes defined or referred to in the Law may be investigated and prosecuted upon a written application of the Board to the relevant Public Prosecutor’s Office.

CMB assesses the findings of its examinations and inspections in terms of integrity of the case, balance of interests, general spirit of the Law and public interests, and if a legal prosecution is deemed to be in interests of public, an application is filed to

4.5. LAWSUITS, WRITTEN APPLICATIONS TO THE PUBLIC PROSECUTORS AND ADMINISTRATIVE MEASURES

Capital Markets Board of Turkey 2014 Annual Report

the Public Prosecutor’s Office. Even if Public Prosecutors become aware of any breach of the Law through a source other than CMB, they report the event to the CMB for an investigation.

In addition, with the purpose of ensuring security and stability in capital markets, CMB imposes administrative fines on real persons or legal entities in case of violation of the regulations or violation or non-execution of specific resolutions of the Executive Board.

Crimes committed in financial markets are generally comprised of more than one interrelated crimes. Crimes defined or referred to in the CML are prosecuted as described above, and crimes of violation of the Turkish Criminal Code or other laws committed together with such acts are entirely prosecuted according to general law provisions or provisions of the relevant special laws.

The past year data given comparatively in the following tables may differ from the data and information given in annual reports of previous years due to various reasons. One reason of these differences is that some lawsuits which are commenced in the previous years and are pending are adjudicated in 2014, and the decisions taken therein are notified to the CMB, and naturally the 2014 Annual Report is prepared by taking such final data into consideration. Another reason of the differences is that some lawsuits which seem as adjudicated in annual reports of previous years are appealed by the other party, and are reversed by the supreme court, and the lawsuit is returned to the relevant first instance court, and the hearings are still pending. Differentiation in data of past years by years may further be caused by delays in the service of process of courts; for instance, the summons of a lawsuit commenced in December may be received by the CMB in the following year after the date the annual report of the past year is issued.

On the other hand, actions for annulment are brought forward against CMB’s administrative acts and full remedy actions are commenced for compensation of damages alleged to be caused by such acts. Furthermore, a limited number of lawsuits on compensation for damages are individually commenced in civil courts against the CMB. CMB is also commencing lawsuits in civil courts for injunctions for protection of rights of investors, and is implementing such injunctions ordered by courts. Pursuant to article 101 of the CML, CMB takes required measures in order to preclude real persons or legal entities detected by CMB to have directly or indirectly participated in or contributed to commission of acts enumerated in articles 106 and 107 of the CML from temporarily or permanently suspension of trading in stock exchanges and other regulated markets.

4.5.1. Lawsuits Commenced Against the Acts of CMB Administrative Lawsuits

cisions and administrative acts of the CMB or for compensation of damages alleged to have been caused by such resolutions or acts (full remedy actions) is given in the following tables:

Information of the last 3 years with respect to lawsuits commenced for stay of execution and/or annulment of various de-

Table 4.10. Administrative Lawsuits Commenced Against the Acts of CMB Years

No. of Lawsuits

2012

2013 2014

Administrative Fines

Action of Nullity

Full Remedy Actions

Others

Adjudicated

121

Source: CMB Explanations: 2 lawsuits have been commenced both for cancellation of administrative fines and for nullity of CMB’s resolutions and acts, and therefore, those lawsuits have been considered as suits of nullity for prevention of double counting.

case files have been considered as action of nullity for prevention of double counting. Finally, 2 lawsuits have been commenced both for nullity of CMB’s resolutions and acts and for other claims, and therefore, those lawsuits have been considered among other lawsuits for prevention of double counting.

2 lawsuits have been commenced both as full remedy actions and for nullity of CMB’s resolutions and acts, and therefore, said Table 4.11. Adjudicated Administrative Lawsuits Adjudicated

Against the CMB (definite)

2012

2013

2014

Years

Against the In Favor of the In Favor of the CMB (indefinite) CMB (definite) CMB (indefinite)

Source: CMB

Lack of Competence

Capital Markets Board of Turkey 2014 Annual Report

Civil Lawsuits As of the end of 2014, information about lawsuits commenced in the civil and commercial courts against the non-administrative

resolutions and acts of the CMB in the last 3 years is given in the following tables:

Table 4.12. Civil Lawsuits Commenced Against the CMB Years

No. of Civil Lawsuits

Pending

Adjudicated

2012

2013

2014

Source: CMB Table 4.13. Civil Lawsuits Commenced and Adjudicated Against the CMB Years

Adjudicated

Against the CMB (definite)

Against the CMB (indefinite)

In Favor of the CMB (Final)

In Favor of the CMB (Not final)

2012

2013

2014

Source: CMB

4.5.2. Lawsuits Commenced by the CMB Criminal Lawsuits/Written Applications to the Public Prosecutor

As of the end of 2014, information about the written applications to the Public Prosecutors and the lawsuits cases commenced upon CMB’s written applications in which the CMB has participated in as “intervening party” in the last 3 years are given in the table below:

Following the examination and inspection of the relevant departments of the CMB, the number of official/criminal complaints filed to the Public Prosecutor’s Office against the natural and legal persons determined to have acted in violation of the regulations is 67 in total in 2014.

Table 4.14. Written Applications to the Public Prosecutor by the CMB and Lawsuits Commenced Distribution by Subject Matters Years

No. of Written Applications

Insider Trading

2012

2013 2014

Distribution by Stage of Trials

Manipulation

Unlicensed/ Unauthorized Capital Market Activities

Others

Prosecution by Public Prosecutor

Pending

Adjudicated

Source: CMB Information of the last 3 years with respect to adjudicated criminal cases which have been commenced upon the written application to the Public Prosecutor’s Office by the CMB are given in

the following table. However, the judgments are rendered by the first instance courts, and are final court orders.

Capital Markets Board of Turkey 2014 Annual Report

Table 4.15. Adjudicated Criminal Lawsuits Commenced Upon Written Application to the Public Prosecutor by the CMB

Year

Adjudicated

Conviction

Pre-Payment

Dismissal for Prosecution (Nolle Prosequi)

2012

2013

2014

Acquittal (*)

Lack of Jurisdiction

Consolidation of Lawsuits

Lack of Subject Matter Jurisdiction

(*)CMB has appealed to the Supreme Court against acquittal decisions. Source: CMB Civil Lawsuits As of the end of 2014, information on actions of debt, declaratory actions etc. commenced by the CMB against other persons

and entities in the civil and commercial courts are given in the following tables.

Table 4.16. Civil Lawsuits Commenced by the CMB Years

No. of Legal Actions

Pending

Finalized

2012

2013

2014

Source: CMB Table 4.17. Adjudicated Civil Lawsuits Commenced by the CMB Years

Adjudicated

Against the CMB (definite)

Against the CMB (indefinite)

In Favor of the CMB (definite)

In Favor of the CMB (indefinite)

2012

2013

2014

Source: CMB Bankruptcy Cases Although it has a character of civil lawsuits, as it shows procedural differences, the cases that have been commenced with the request of insolvency/bankruptcy of corporations or intermediary institutions, or of personal bankruptcy of managers

of corporations or intermediary institutions are given under a separate section. In the last 3 years there are 4 insolvency/ bankruptcy lawsuits commenced by the CMB, 2 of which are adjudicated in 2014.

4.6. WORKS CONDUCTED WITH OTHER INSTITUTIONS JOINTLY 4.6.1. Financial Stability Committee

Financial Stability Committee is regulated by additional provision 4 of the â&#x20AC;&#x153;Law on Organization and Functions of Undersecretariat of Treasury, no. 4059â&#x20AC;? and by the Decree Law no. 637 published in the repeated edition 27958 of Official Gazette on 8 June 2011. Main duties of the Financial Stability Committee are to ensure coordination regarding monitoring and preven-

tion of systemic risk and management of systemic risk, and the CMB has participated in the 20th meeting of the Committee on 20.12.2014. The CMB participates in the activities of the Financial Stability Committee and contributes to the activities within the aforementioned duties.

Capital Markets Board of Turkey 2014 Annual Report

4.6.2. 10th Development Plan and Priority Transformation Programs 10th Development Plan covering the 2014-2018 period has become effective upon publishing in the repeated edition 28699 of Official Gazette on 6 July 2013, and has been prepared in line with 2023 goals of Turkey. A total of 25 “Priority Transformation Programs” have been designed for achievement of 2023 goals and objectives of the 10th Development Plan.

ty transformation programs included in the 10th Development Plan, and for the first subcomponent “Stimulation of Savings by Financial Market Instruments” of “Increasing Domestic Savings and Prevention of Prodigality Program” being another priority transformation program included in the 10th Development Plan. Priority Transformation Programs have been to the presented to the High Planning Council for the approval and are at the stage of publishing in the Official Gazette.

CMB has been assigned as chairman for the 2nd subcomponent “Increase of Financial Product and Service Diversity” of Istanbul International Financial Center Program being one of the priori-

4.6.2.1. Istanbul Financial Center Project

Ensuring an effectively operating structure in financial intermediation sector

Istanbul International Financial Center (IFM) Project is included in the 9th Development Plan covering 2007-2013 period, and pursuant to the Mid-Term Program covering 2010-2012 period, said project has been approved by a Decision of the High Planning Council no. 2009/31 dated 29 September 2009, and has been made effective upon publishing in the Official Gazette on 2 November 2009 edition 27364. As a part of IFM Strategy and Action Plan prepared in connection therewith, the CMB has acted as chairman of the Markets and Instruments Committee, and out of 22 actions and 43 sub-actions associated thereto, 11 actions and 23 sub-actions have already been completed.

Development of new markets and financial products Enlargement of institutional base Extension of alternative distribution channels such as internet banking, mobile and branchless banking Development of non-interest bearing financial instruments Enhancement of payment systems 3 policies and 25 actions have been determined and listed under the subcomponent “Increase of Financial Product and Service Diversity”.

Accordingly, actions required to be taken under the subcomponent “Increase of Financial Product and Service Diversity”, to be chaired by the CMB, of Istanbul International Financial Center Priority Transformation Program, covering 2014-2018 period, included among 25 “Priority Transformation Programs” determined in the Tenth Development Plan which is made effective upon publishing in the repeated edition 28699 of Official Gazette on 6 July 2013 are as listed below:

Policy 1: Increase of Financial Product Diversity Policy 2: Development of Markets and Financial Infrastructure Policy 3: Improvement of Tax Arrangements in Financial Instruments This component aims to ensure that Istanbul will be placed in the top 25 of the Global Financial Centers Index, and Turkey will be placed in the top 30 of the Financial Development Index.

Increasing the level of financial awareness and extending the financial education

4.6.2.2. Increasing Domestic Savings and Prevention of Prodigality Program

Policy 1: Increase of financial awareness and extension of financial education Policy 2: Integration of off-the-financial system (under the mattress) savings into the system

In the works carried out under coordination of the Ministry of Development within the framework of the 10th Development Plan Priority Transformation Programs, CMB, as the responsible for the component “Encouragement of Savings by Financial Market Instruments” in the “Increasing Domestic Savings and Prevention of Prodigality Program”, is continuing its collaborative works for preparation of an action plan together with the Ministry of Development and other relevant institutions and administrations. Within the framework of this program, to provide high and stable growth dynamics, it is intended to increase domestic savings as the most reliable and permanent source of finance, and to direct the increased domestic savings to productive investments, and to reduce prodigality, and to raise the domestic savings ratio to 19%.

Policy 3: Stimulation and protection of small savings Policy 4: Increase of financial product diversity Policy 5: Shifting of savings towards long-term instruments Policy 6: Encouraging the use of capital markets in financing of private sector Policy 7: Development of Gold Banking

7 policies and 27 actions have been determined under the component “Stimulation of Savings by Financial Market Instruments”

Capital Markets Board of Turkey 2014 Annual Report

4.6.3. Systemic Risk Assessment Group Systemic Risk Coordination Committee (SRCC) has been established according to provisions of Banking Law no. 5411. under “Financial System-Related Systemic Risk Cooperation Protocol” signed on 14 April 2009 by and between the CMB, UT, Banking Regulation and Supervision Agency (BRSA) , Saving Deposits Insurance Fund (SDIF) and CBRT.

SRCC has been established to foresee probable developments that may cause systemic risk and may endanger the stability of financial system and to take measures deemed necessary. SRAG continues its works within the framework of cooperation and coordination with the CMB, UT, CBRT and SDIF under the responsibility of BRSA. Third and last meeting of SRCC in 2014 was held on 17 October 2014.

On the other hand, the Financial Stability Committee Systemic Risk Assessment Group Protocol has entered into force on 30 October 2012, and SRCC has continued its activities as Systemic Risk Assessment Group (SRAG) under the Protocol in 2012. In line with the purposes of Systemic Risk Coordination Committee,

4.6.4. Financial Sector Commission Financial Sector Commission is authorized to ensure the communication, cooperation and coordination among institutions in order to provide stable and secure development of financial markets and to develop common policy recommendations and opinions on the future of the financial sector. CMB, BRSA, Ministry of Finance, UT, CBRT, SDIF, Ministry of Development, Borsa Istanbul, The Banks Association of Turkey and The Participation

Banks Association of Turkey are the members of Financial Sector Commission which convenes twice a year. CMB has effectively participated in the meetings of Financial Sector Commission which convened in May and November in 2014 and of which first meeting was held in 2006.

4.6.5. Financial Stability Board Financial Stability Board (FSB) has been established in April 2009 to replace Financial Stability Forum in order to determine and regulate the policies and principles required for more effective regulation and supervision of financial markets by national regulatory authorities and coordination of these regulation and supervision activities on international level. FSB members are the institutions representing G20 countries.

FSB General Assembly, and the activities of FSB are supported by Turkish financial sector regulatory authorities, including the CMB as well, under coordination of CBRT since 2009. Accordingly, works related to FSB standards are carried out about the issues included within the fields of duty of the CMB.

Within the frame of basic purpose of protection of financial stability, FSB is also following up the national compliance in implementation of international financial regulation reforms particularly in G20 countries. Turkey is represented by CBRT in

4.7. EUROPEAN UNION (EU) HARMONIZATION WORKS Through the screening meetings held as pre-negotiation preparations, which took place after 3 October 2005 when the EU has initiated the accession negotiations with Turkey, the main framework has been determined about the actions to be taken with regard to harmonization of EU legislation and the Turkish legislation. Within this framework, the CMB is mainly responsible for the issues falls under the negotiation chapters of Free Movement of Capital, Financial Services, Company Law, and Economic and Monetary Policy with regard to legislative harmonization.

ital markets, make it necessary for the CMB to regularly follow up these developments and to complete the required works at appropriate time and by appropriate methods. Accordingly, with respect to EU, as a part of relations with the EU and providing the harmonization of Turkish legislation with EU Directives, CMB’s Strategy Development Department is conducting its works and operations to strengthen the institutional capacity through supports from EU funds and cooperation with EU Institutions and member states.

Works relating to the aforementioned chapters have been actively continued also in 2014. Rapid change in financial markets, and continuous renewal of regulations of EU pertaining to cap-

Capital Markets Board of Turkey 2014 Annual Report

4.7.1. Legislative Harmonization Works and Coordination with Other Institutions The CMB is carrying out its EU legislative harmonization works in coordination with other relevant institutions. In this context, CMB’s works were continued in 2014 in coordination with other institutions, particularly the Ministry for EU Affairs, as well.

tor institution CMB’s contributions on areas of responsibility of the CMB to 2015-2017 Pre-accession Economic Program. Furthermore, within its field of duties, CMB has supported the works under Positive Agenda conducted by the Ministry for EU Affairs with a view to speeding up the EU negotiations on Company Law chapter. In addition, considering the determining role of ESMA on implementation of regulations on securities and markets in Europe, CMB has initiated a cooperation with ESMA. Within this scope, the efforts started in 2011 by ESMA and CMB have been continued also in 2014 so as to ensure that the equities prospectus regime adopted and applied by the Turkish capital markets legislation is deemed equivalent to the relevant EU legislation.

In order to provide coordination among relevant institutions with respect to legislative harmonization, CMB has made regular contributions for monitoring of current developments relating to legislative harmonization under the National Program Database, and for coordination of harmonization calendar. CMB has made contributions to the chapters within its areas of responsibility in the process of preparation of National Action Plan For Accession to EU, published in 2014. CMB has taken part in preparation of Turkey’s Contribution to the 2014 Regular Progress Report, and have evaluated the issues within CMB’s scope of duties in the Progress Report, and have transmitted to the relevant coordina-

4.7.2. Activities to Benefit from EU Funds CMB is taking steps towards use of EU funds and other EU member states’ funds in the course of harmonization with EU legislation and practices. In this context, following completion of the Twinning Project named “Assisting Capital Markets Board of Turkey to Comply Fully with EU Capital Markets Standards” conducted in cooperation with the Ministry of Finance of Federal Republic of Germany in 2006-2007 period, the proposed project on “Strengthen the Capacity of Capital Markets Board” prepared for use of EU Pre-accession Financial Assistance has been approved by EU Commission. Within the framework of the final version of the project proposal accepted by EU Commission, supporting efforts towards contracting process have been carried out jointly by EU Turkey delegation and the Department for Contracting and Financing of EU Funded Programmes (CFCU). Under this project, in addition to training on accounting and audit, it is foreseen that the level of compliance of the new CML and the secondary regulations subsequently issued by the CMB with the

continuously changing EU legislation is to be revised, and if and when required, draft amendments will be prepared, and CMB personnel is to be trained on the relevant EU legislation. As for the short-term technical assistances, also in 2014, CMB has continued to cooperate with Technical Assistance Information Exchange Office (TAIEX) operating under the Directorate General For Neighborhood and Enlargement Negotiations of EU Commission providing technical assistance to candidate countries for harmonization with EU legislation and for establishment of the required administrative infrastructure. Within the frame of such activities as seminars / business meetings, business visits and expert requests and fulfillment of the accepted requests in the areas of need, an expert visit focused on “International Audit Standards” has been organized in 2014.

4.8. INTERNATIONAL RELATIONS CMB attaches great importance to international cooperation and to compliance with the international principles and standards in the development of Turkish capital markets. CMB is closely pursuing providing contributions to the works and initiatives of international organizations. In this sense, during 2014, cooperation with international organizations as International Organization of Securities Commissions (IOSCO), Organization for Economic Cooperation and Development (OECD), Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC) Capital Market Regulators Forum, Islamic Financial Services Board (IFSB), World Bank (WB)

and European Bank for Reconstruction and Development (EBRD), important activities have been continued to develop regional and bilateral relations. Various different forms of cooperation including assumption of active duties on various levels, carrying out joint projects, follow-up of periodic developments, sharing of good practices, and exchange of information are being continued increasingly. All these works are seen as important in the process of renewal of regulatory and supervisory framework relating to financial markets both in Turkey and in the developing countries due to the changing conditions.

Capital Markets Board of Turkey 2014 Annual Report

4.8.1. International Organization of Securities Commissions (IOSCO) IOSCO is an organization constituted by the regulatory/ supervisory authorities in securities markets to ensure coordination and cooperation in the related areas, to promote common international standards on legal and institutional structures of securities markets, and to facilitate international cooperation and information sharing among its members. IOSCO works in coordination with other international organizations dealing with financial markets and is the most effective international organization within its field of activity.

ber of GEM Steering Committee for 2014-2016 period. 2014 meetings of GEM Committee have been held in Mauritius in April 2014, and in Rio de Janeiro in September 2014. During these meetings, risks faced in the emerging securities markets, obstacles to development of markets, and capacity increase efforts also covering the training needs and needs of emerging markets are discussed, and developments relating to such technical works as investment (mutual) funds and finance of SMEs through capital markets, handled in the Committee, are shared, and various different panels and workshops are organized on current issues and problems.

CMB has been participating in IOSCO activities, since it became a member in 1988. In this context, CMB has been actively participating in the work of main committees and working groups listed below within the organization, thereby contributing to the constitution of policies in line with the realization of IOSCO’s goals and objectives.

Policy Committees

Following 2012 annual conference of IOSCO, the working groups of IOSCO have been reorganized under a single roof with the name of “IOSCO Policy Committees” and currently there are 8 IOSCO Policy Committees. Among them, CMB’s representatives are serving as a member in the Committee on Issuer Accounting, Audit and Disclosure, Committee on Secondary Markets, Committee on Market Intermediaries, Committee on Enforcement and Information Sharing, Committee on Investment Management, Committee on Credit Rating Agencies and Committee on Retail Investors. Accordingly, during 2014, we have actively participated in works and meetings of these Committees, and have hosted the workshops of the Committee no.3 in September 2014 and of the Committee no.5 in October 2014 in Istanbul.

Assessment Committee / Implementation Task Force

Other IOSCO Works

Screening Group

IOSCO Presidents’ Committee, which acts as the General Assembly of IOSCO, meets during IOSCO annual conferences, and CMB has also participated in the meeting held in Brazil in October 2014. As a member of the European Regional Committee, being one of the 4 regional committees currently existing in IOSCO, CMB has participated in meetings of this Committee held in Jerusalem in May, Rio de Janeiro in September and Brussels in December. During these meetings, recent trends in the European financial markets, risks expected to be faced in the coming periods, last changes in the policy measures and arrangements in the agenda, and position of the European region against IOSCO MMoU have been discussed, and particularly, works conducted on IOSCO capacity building and IOSCO 2020 goals and targets have been shared with members, and some elections have been made.

Presidents’ Committee IOSCO Board Management Team EMC-Emerging Markets Committee/GEM-Growth & Emerging Markets Committee ERC-European Regional Committee

Monitoring Group Steering Committee Committee on Emerging Risks The activities conducted by CMB in relation with the activities of IOSCO in 2014 are summarized below: IOSCO Board and Management Team IOSCO Board is the top level decision making and executive organ of IOSCO. During the 39th Annual Conference of IOSCO held in Brazil between 28 September and 2 October 2014, CMB has been elected to IOSCO Board of Directors for 2014-2016 period as a representative of the Growth & Emerging Markets Committee (GEM). Having a seat in IOSCO Board, CMB has had the chance to directly participate in and contribute to international decision making mechanisms and discussions in the capital markets field.

Being a member of the Assessment Committee in charge of implementation and assessment of IOSCO principles and objectives regarding securities regulations, CMB has participated in the works of the Assessment Committee in 2014 as well. Accordingly, CMB has been assigned in thematic reviews and country reviews for implementation of IOSCO principles, and have provided exchange of information. Being also a member of IOSCO Multilateral Agreement Screening Group in charge of reviewing the applications of regulatory authorities and bodies filed for signing IOSCO Multilateral Agreement, which has the objectives of increasing cooperation and exchange of information among member states, CMB has taken part in the works of the relevant committee and in reviews of countries demanding to be a member of the agreement, and have contributed to technical works of the committee. The Committee on Emerging Risks aims to develop data and tools needed for identification, monitoring and reduction of risks emerging in

Growth and Emerging Markets Committee (GEM Committee) This Committee, named as Emerging Markets Committee until 2013, aims to create principles for increasing the efficiency of emerging markets and to ensure information exchange and flow. Currently GEM Committee has 93 members. CMB is further a member of the Steering Committee formed through elections among GEM Committee members as a smaller management team to provide more efficient operation and management of the comprehensive Committee. CMB actively participates in the works of the Committee as a head in 2002-2006 and 2010-May 2013 periods, and is currently a mem-

Capital Markets Board of Turkey 2014 Annual Report

markets, and being a member of this Committee as well, CMB has actively participated in works of this Committee in 2014. Besides these Committees, CMB is making continuous contributions also to some task forces formed under IOSCO.

Works Regarding Financial Stability Board (FSB) In addition to FSB works participated by the CMB as a part of IOSCO works in 2014, the CMB has continued to contribute to FSB works in coordination with CBRT as well.

4.8.2. Organization for Economic Cooperation and Development (OECD) OECD Corporate Governance Committee

report titled “Corporate Bonds, Bondholders and Corporate Governance” has been issued.

CMB is actively participating in the works of OECD Corporate Governance Committee which is developing Corporate Governance Principles and best practices of good governance, and is continuing its function as a National Coordination Unit in corporate governance field. CMB has attended the meetings of this Committee held in Paris in 2014. Accordingly, as a part of the “Corporate Governance, Value Creation and Innovation” project managed together with OECD Corporate Governance Committee, a round table meeting on “Development of Equity Market and Corporate Governance in Emerging Markets” has been held in Istanbul in January 2014, and as a result of those works, a

CMB’s Acting President has been elected as Vice Chairman of OECD Corporate Governance Committee, and is giving strategic support in the Committee works and in determination of work program. Accordingly, CMB is actively participating in office works of the Committee management. In addition, CMB is being represented also in works of Financial Markets Committee, Investment Committee, and Insurance and Private Pension Committee of OECD.

4.8.3. World Trade Organization (WTO) and General Agreement on Trade in Services (GATS) and Other Trade Agreements CMB is also participating in WTO Financial Services Committee works, and has continued these works in 2014 as well.

and in negotiations for bilateral Free Trade Agreements planned to be signed between Turkey on one side and Ukraine, South Korea and Singapore on the other side and handled under coordination of the Ministry of Economy.

Furthermore, within its own scope of duties, CMB has made contributions to negotiations for multilateral Trade in Services Agreement (TISA) being conducted among 22 WTO members following the blockage in Doha tour of negotiations of the WTO

4.8.4. Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC) Forum” has been held in Istanbul in November 2014 and has been hosted by the CMB. In the Forum meeting, presentations have been made on the works of 4 task forces in “Market Development”, “Islamic Finance”, “Capacity Building” and “Financial Literacy” fields, and the opportunities of cooperation among the relevant capital markets regulators have been discussed.

In 2011, COMCEC Capital Markets Regulators Forum has been set up for COMCEC members, and CMB has assumed the Presidency and Secretariat of the Forum. Under the Forum, cooperation among the members is provided on reinforcement of infrastructure of financial markets, financial education and training, Islamic finance and strengthening the administrative capacity of capital markets regulatory authorities of member states. Within this context, the “3rd COMCEC Capital Markets Regulators

4.8.5. Islamic Financial Services Board (IFSB) CMB has first been enrolled as an Associate Member in August 2010 in the IFSB, headquartered in Kuala Lumpur, promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors and also conducts research and coordinates initiatives on industry related issues and organizes roundtables, seminars and conferences for regulators and

industry stakeholders. As of April 2013, CMB has become a full member. Therefore, CMB is participating in the meetings and seminars organized by IFSB. Furthermore, as of 2014, CMB is being represented in IFSB Technical Committee, and is taking part in the Committee initiatives aimed at determining a new international standard on “Basic Principles of Islamic Finance” of IFSB.

Capital Markets Board of Turkey 2014 Annual Report

4.8.6. European Bank for Reconstruction and Development (EBRD) CMB conducts works also for cooperation with European Bank for Reconstruction and Development (EBRD). Within this scope, in January 2014, one-day international workshops have been organized and held in Ankara and Istanbul in cooperation with EBRD particularly with regard to use of central counterparty in over-the-counter derivative instrument transactions which is in the focal point of global financial regulations reform after the financial crisis. In addition, with a view to contributing to creation of awareness on financing of projects relating to major infrastructural investments through capital markets and increase of dialogue between market participants and regulatory authorities in connection, an international conference named â&#x20AC;&#x153;Development of Infrastructural Financial Instruments for Investorsâ&#x20AC;? has been hosted by CMB in cooperation with EBRD in June 2014. In that

conference, capital market instruments based on alternative approaches that can be used for financing of infrastructural projects in order to ensure the highest efficiency in this sector depending upon infrastructural investment requirements in both developed and developing economies have been discussed. On the other hand, preparations have been continued in 2014 in cooperation with EBRD with regard to the projects regarding application of corporate governance rules by exchange traded corporations, increase of efficiency in the relevant supervision activities, and the relevant project activities are expected to be started in 2015.

4.8.7. Mediterranean Partnership of Securities Regulators CMB has become a member of Mediterranean Partnership of Securities Regulators, comprising of countries having a coastline

on the Mediterranean Sea, in its annual presidents meeting organized in Algeria in February 2014.

4.8.8. International Forum of Independent Audit Regulators (IFIAR) International Forum of Independent Audit Regulators (IFIAR) is a comprehensive international organization, which is established in 2006 basically in order to realize the joint goal of protection of investors and public interests by increasing quality of independent audit in global platform also including the quality control supervision of independent auditors and independent audit firms, and of which meetings are attended also by EU Commission, World Bank, Basel Committee and IOSCO as observers.

Upon an invitation in 2009, CMB has filed an application for membership therein and has been accepted to membership in the same year, and has made contributions to meetings and various activities of IFIAR conducted in 2014.

4.8.9. International Accounting Standards Board (IASB) Advisory Council Membership ish Financial Reporting and Turkish Accounting Standards. IFRS Advisory Council is the official organ to which IASB decision making body consults before taking decisions on standards, and thus plays an important role in the processes of determination and revision of standards.

On 26 November 2014, CMB has been elected as a member to the International Financial Reporting Standards (IFRS) Advisory Council, being the official advisory organ of IASB. IASB is an international organization which determines and publishes International Financial Reporting Standards applied in 130 countries over the world and adopted and accepted also in Turkey as Turk-

4.8.10. Bilateral Relations and Signed Memorandum of Understanding (MoU) Within the framework of cooperation with regulatory and supervisory authorities and bodies in capital markets of other countries, initiatives to sign a MoU have been continued in 2014, as well. Accordingly, an MoU has been signed with Qatar capital markets regulatory authority. Thus, CMB has so far signed bilateral memoranda of understanding with regulatory and supervisory authorities of a total of 33 countries, 12 of them being EU member states. In addition, a terms of reference (regulatory dialogue) has been signed with two countries (U.S.A. and Maldives).

On the other hand, pursuant to the EU Directive on Alternative Investment Fund Managers, no. 2011/61/EU, dated 8 June 2011, the memorandum of understanding signed with Slovakia has also been added in 2014 among the memorandum of understanding on cooperation and exchange of information in supervision of alternative investment funds signed in 2013 between CMB and the relevant regulatory authorities of 14 EU Member States and 3 European Economic Area countries.

Capital Markets Board of Turkey 2014 Annual Report

4.8.11. International Programs Organized by CMB Expert visit on “International Audit Standards” in cooperation with TAIEX and CMB (June 2014)

CMB has continued also in 2014 to organize training seminars, meetings and conferences as member of organizations, in cooperation with various organizations or with various countries:

International conference on “Development of Infrastructural Financial Instruments for Investors” in cooperation with EBRD and CMB (June 2014)

A roundtable meeting on Development of Equity Markets and Corporate Governance in Emerging Markets in cooperation with OECD (January 2014)

Workshop on “Development of Local Public Sukuk Market” in cooperation with the World Bank Global Islamic Finance Development Center (June 2014)

One-day workshops in Ankara and Istanbul in cooperation with EBRD on the use of central counterparty in over-thecounter derivative instrument transactions (January 2014)

IOSCO Committee no.3 meeting (September 2014)

OECD/INFE 2014 year 1st Semester meetings, and an international conference on “Global and European Trends in Financial Education: New Challenges, Innovations and Measures of Success” co-organized by the CMB and the OECD with contributions of the UT and the CBRT) (May 2014)

IOSCO Committee no.5 meeting (October 2014) COMCEC Capital Markets Regulators Forum annual meeting (November 2014).

4.9. LICENSING OF MARKET PROFESSIONALS The Communiqué on Principles Regarding Licensing and Registry of Professionals in Capital Markets (No. VII-128.7), prepared based upon article 128(1)(f) of the CML and come into force upon its publication in the Official Gazette on 14 August 2014, no. 29088 regulates the licensing exams to be held in order to determine professional qualifications, knowledge and skills of professionals of capital market institutions and publicly-held corporations, and licenses to be granted as a result of such exams, and training programs to be organized for licenses, and keeping of records and registry of licensed personnel.

Activities Level 3 License, Derivative Instruments License, Corporate Governance Rating License, Credit Rating License, Residential Estate Appraisal License and Real Estate Appraisal License depending on the type of exams taken. For being successful in licensing exams, one must get at least 50 over 100 in each of the exam subjects, and arithmetical average of grades of all exam subjects must be at least 60. In order to conduct the licensing and training of capital market professionals a private legal entity, Capital Markets Licensing Registry and Training Institution Inc., established as a joint stock corporation by the shareholders Borsa Istanbul, CRA, Takasbank, CMAT and AAET. The works and operations relating to licensing exams are continued to be carried out with the contributions of CMB in cooperation with Anadolu University.

In 2014, licensing exams have been held in 12 provinces, namely Ankara, Adana, Antalya, Bursa, Diyarbakır, Erzurum, Gaziantep, Istanbul, Izmir, Kayseri, Konya and Samsun on 31 May & 1 June and 20 & 21 December. Candidates who were successful in the licensing exams have been granted 8 different licenses, namely Capital Markets Activities Level 1 License, Capital Markets Activities Level 2 License, Capital Markets

The following table indicates information on number of licenses deserved in the licensing exams held between 2002 and 2014:

Table 4.18. Number of Licenses Deserved (2002-2014) Number of Licenses Entitled

Types of License

2002-2014

Capital Market Activities Level 2 License

18,406

Capital Market Activities Level 1 License

12,311

Capital Market Activities Level 3 License

11,060

Derivative Instruments License

7,467

Real Estate Appraisal License

5,082

Credit Rating License

2,702

Corporate Governance Rating License

2,464

Residential Estate Appraisal License

559

TOTAL

60.051

Source: Capital Markets Licensing Registry and Training Institution Inc.

Capital Markets Board of Turkey 2014 Annual Report

4.10. INVESTOR APPLICATIONS Applications received by the Group of Information Request operating under the Institutional Communications Department.

no.4982”. The requests directed to Prime Ministry Communications Center (BIMER) are coordinated by the Group of Information Request.

Requests are classified and evaluated in two groups: “complaints and proposals” and “information requests” are replied within 15 workdays within the scope of “Law on Information Rights

Summary information is given below about applications received by CMB during the recent 3 years:

Table 4.19. Information Requests to CMB Applications Received

2014

Complaints, Comments and Suggestions

3,310

2,209

5,909

Information Requests

1,355

5,124

1,988

4,665

7,333

7,897

Total

2012

Source: CMB Figures in the line “complaints, comments and suggestions” include electronic applications filed to CMB, while figures in the

line “information requests” include both written and electronic applications filed to CMB.

The CMB’s specialized library has been set up to collect and develop materials; Turkish and foreign, in both print and electronic formats, on social, economic and financial matters concerning the capital markets. The library kept offering services for all CMB experts as well as external researchers who are mainly composed of members of academic community and students, officers from the government agencies related to economic activities, and also investors.

As of the end of 2014, there are 312 printed magazine/journal collections. In addition, there are “EBSCO Business Source Corporate, “EBSCO EconLit with Full Text”, PwC INFORM (2 person access) and “Lebib Yalkın Mevbank” electronic databases.

4.11. INFORMATION SOURCES

During 2014, 235 book reading transactions and 18,185 uses of electronic databases have been recorded. Furthermore, throughout the year, trial databases have been opened for and efficiently used by the staff of CMB.

With the purpose of acting as a modern information center, the library services have been improving due to technological advances that allow users quick and easy access to information. Computerized library system and CMB’s internal network enable the users to scan the library collection from their own computers and to have access to electronic publications.

It is aimed to enrich the print/electronic periodicals collection as far as possible, to offer more efficient and modern user services, and to support the whole collection with electronic databases. On the other hand, total number of the CMB’s publications reached 213 by the end of 2014. These publications are sent free of charge to the libraries of relevant public agencies as well as public and foundation universities.

The CMB library held 10,341 books in 2014, while the number of books available was only 274 in 1982 when the CMB Library was established.

4.12. FINANCIAL EDUCATION AND PROMOTION ings and investment consciousness starting from the children of education age, 4th of an essay contest approved by the Ministry of National Education has been organized for secondary and high school students all over Turkey, and various prizes are awarded to the authors of works ranking in the winning degrees.

Prime Ministry Circular no. 2014/10 on “Financial Access, Financial Education and Financial Consumer Protection Strategies and Action Plans” have become effective upon its publication in the Official Gazette on 5 June 2014 no.29021, and the CMB is tasked to follow-up and coordination of Financial Education Action Plan. According to the Financial Education Plan, 44 entities and institutions are expected to make contributions to 36 actions. In the Strategy and Action Plan, “Create a Joint Website For Documents and Studies Regarding Financial Education and Publicize Education Acitivities via Social Media” has been identified as the action no. 8. Accordingly, the works initiated immediately after the effective date of the Circular have been almost completed, and the financial education website which is currently under construction is planned to start broadcasting in 2015.

4th of the “7 Regions 7 Universities Training Seminars”, addressed to students of economic and administrative sciences faculties of universities and aiming to increase the knowledge and awareness on capital markets, is organized in Hatay Mustafa Kemal University, Elazığ Fırat University, Muğla Sıtkı Koçman University, Kilis 7 Aralık University, Konya Selçuk University, Çorum Hitit University and Kocaeli University with participation of trainers from Borsa İstanbul, CMAT and Takasbank in 2014-2015 Academic Year.

In 2014, in order to introduce capital markets and to create a sav-

In International Network on Financial Education (INFE) which is

Capital Markets Board of Turkey 2014 Annual Report

established by OECD for the purpose of satisfying the needs and demands identified on financial education by important international stakeholders, where the CMB is country coordinator, meetings are organized in various different countries twice annually and hosted by member states, and the first meeting of 2014 has been held in Istanbul on 20-23 May 2014 and has been hosted by CMB. During the meeting, INFE Advisory Council and sub-group working meetings have been held in the first day, and INFE technical committee group members meeting has been held in the second day, and in the last two days of meeting, an international conference has been organized for all participants on financial

education issues, and this conference has been attended by a total of 255 participants, 122 of them being foreigners from 57 different countries. As a part of the Mid-Term Transformation Programs conducted under coordination of the Ministry of Development, CMB has contributed in preparation of “Increasing Domestic Savings and Prevention of Prodigality Program and Action Plan”. Furthermore, training seminars of 5 days each have been organized for university students in head offices and representation offices of the CMB in Ankara and Istanbul in February and June.

Table 4.20. Applications for Training Seminars for University Students Applications Received

2014

2013

2012

2010

Number of Applications

7,871

5,549

5,803

1,240

3,889

Number of Certificates Issued

1,242

1,315

1,152

481

1,125

Source: CMB

4.13. INFORMATION SYSTEMS AND TECHNOLOGICAL INFRASTRUCTURE WORKS 4.13.1. Information Systems Review

Internal control works have been carried out under the Information Security Management System (ISMS) which has been certificated by TSE (Turkish Standards Institute) and has been established in accordance with ISO/IEC 27001 standards. Furthermore, within the scope of review of information processing system infrastructure adequacy of intermediary institutions filing an purchase and sale of capital markets instruments operating license,

on-site reviews have been conducted in 5 intermediary institutions, and as per CMB’s Executive Board resolution dated 8 May 2013, requiring an active/active architectural trading platform, in the first quarter of 2014 on-site reviews and examinations have been conducted in 31 intermediary institutions having leveraged (forex) license.

4.13.2. System and Network Works Within the scope of necessities of CMB, keeping the existing technical infrastructure continuously in good operating order and current, efficient, effective and reliable is a necessity for operational continuity of CMB. Accordingly, through regular initiatives, CMB’s technical infrastructure is being monitored, and the required improvement works ae carried out both in terms

of hardware and software, and the resulting problems are intervened. Within this context, during 2014, all active devices and fiber cables included in CMB’s local area network infrastructure, and all server and storage hardware items, being important elements of our system infrastructure, have been renewed for operability of current technologies.

4.13.3. Application Development Works During 2014, in line with the CMB’s requirements, maintenance and improvement works of existing applications have been continued, and new applications deemed necessary have been developed. Important works carried out thereunder are as follows:

Expansion of scope of the CMB’s supervision application by adding new analyses Initiating new works on submission of data and documents to CMB via electronic means

Standardization and legislative harmonization works required in the CMB’s on-line Document and Work Tracking System

Receiving and collecting information from other public entities

Capital Markets Board of Turkey 2014 Annual Report

5. TURKISH CAPITAL MARKETS IN 2014 5.1. CAPITAL MARKET INDICATORS IN 2014 The following table indicates some indicators regarding capital markets as of the end of 2014: Table 5.1. Capital Market Indicators in 2014 2014

2013

PUBLICLY-HELD CORPORATIONS SUBJECT TO THE CML

579

605

CORPORATIONS LISTED IN BORSA ISTANBUL (*)

422

421

386

388

217

228

Second National Market

Collective Products Market

Securities Investment Companies

Real Estate Investment Companies

Free Trading Platform

Emerging Companies Market

157

184

(Billion TL)

624,4

503,7

(Billion USD)

268,5

236,6

3,999,335

4,083,969

1,081,241

1,116,537

Government Debt Securities

21,441

24,476

Private Sector Debt Securities

137,825

166,571

2,751,820

2,766,512

Exchange Traded Funds

3,393

3,956

Structured Instruments

2,997

3,306

618

2,611

Equity Market National Market

Venture Capital Investment Companies Watchlist Companies Market

CORPORATIONS NOT LISTED IN BORSA ISTANBUL BORSA ISTANBUL MARKET CAPITALIZATION (**)

Information on Investor Accounts Registered in CRA Common Stocks

Investment Funds

Other Capital Market Instruments

Capital Markets Board of Turkey 2014 Annual Report

Table 5.1. Capital Market Indicators in 2014 (Continued) 2014 INVESTMENT FIRMS

2013

140

141

Banks

Intermediary Institutions

100

INVESTMENT FUNDS (***)

524

Domestic Investment Funds

483

Portfolio Values (Billion TL)

30,1

(Billion USD)

15,2

14,14

Portfolio Values (Million TL)

(Million USD)

246

219

Portfolio Values (Billion TL)

37,8

26,4

(Billion USD)

16,2

12,4

Total Assets (Million TL)

388,2

391,3

(Million USD)

166,5

183,3

Total Assets (Billion TL)

41,6

36,8

(Billion USD)

17,9

17,3

Total Assets (Billion TL)

1,9

1,3

(Million USD)

815

609

Value of Portfolios Under Management (Billion TL)

81,8

(Billion USD)

130

COLLECTIVE INVESTMENT SCHEMES

Foreign Investment Funds

PENSION INVESTMENT FUNDS

INVESTMENT COMPANIES

REAL ESTATE INVESTMENT COMPANIES (****)

VENTURE CAPITAL INVESTMENT COMPANIES (****)

PORTFOLIO MANAGEMENT COMPANIES

INDEPENDENT AUDIT FIRMS REAL ESTATE APPRAISAL FIRMS RATING AGENCIES

(*) Total of companies listed in National Market, Second National Market, Emerging Companies Market, Watchlist Companies Market and Free Trading Platform. (**) Companies listed in Emerging Companies Market and Free Trading Platform are not included. (***) Exchange traded funds are included. (****) Information on publicly-held investment companies. Source: CMB, CRA, Takasbank

Capital Markets Board of Turkey 2014 Annual Report

5.2. OUTSTANDING SECURITIES Information about the types and market values of outstanding securities monitored in Central Dematerialized System (CDS) as of the end of 2014 is given in the following tables: Table 5.2. Information on Securities Under the Central Dematerialized System Market Value 2014

Securities in CDS

2013

2012

(Million TL)

(Million USD) (*)

(Million TL)

(Million USD) (*)

(Million TL)

(Million USD) (*)

640,643

274,824

511,098

239,469

557,431

312,076

Exchange Traded

248,965

106,802

195,319

91,514

213,298

119,414

Non-exchange Traded

391,678

168,022

315,779

147,955

344,133

192,662

Private Sector Debt Securities

45,288

19,428

36,109

16,918

28,056

15,707

Investment Fund Units

36,093

15,483

30,872

14,465

30,250

16,935

Asset Backed Securities

1,672

717

1,455

682

977

547

Lease Certificates (Public and Private)

946

406

768

360

Exchange Traded Funds

192

183

378

212

210,063

90,114

183,493

85,973

173,599

97,189

478

205

641

300

599

335

935,375

401,259

764,619

358,253

791,306

443,010

Common Stocks

Government Debt Securities (GDS) Other Securities Total

(*) Based on forex selling rates of the CBRT as of year-end 2012, 2013 and 32014. Source: CRA Table 5.3. Outstanding Securities Market Value 2014

Securities in CDS

(Million TL)

2013 (Million USD) (*)

(Million TL)

2012 (Million USD) (*)

(Million TL)

(Million USD) (*)

Securities

935,375

401,259

764,619

358,253

791,306

443,011

GDS Not Monitored in CDS

234,976

100,800

223,924

104.917

212,941

119,215

Total Outstanding Securities (1+2)

1,170,351

502,060

988,543

463,170

1,004,247

562,225

GDS Monitored in CDS

210,063

90,113

183,493

85,973

173,599

97,189

Private Sector Securities [3-(2+4)]

725,312

311,146

581,126

272,279

617,707

345,822

Non-exchange Traded Shares Monitored in CDS

391,678

168,023

315,779

147,954

344,133

192,662

Net Total of Private Sector Securities (5-6)

333,634

143,123

265,347

124,325

273,574

153,160

Net Value of Total Outstanding Securities (3-6)

778,673

334,036

672,764

315,216

660,114

369,564

(*) Based on forex selling rates of the CBRT as of year-end 2012, 2013 and 2014. Source: CRA

Capital Markets Board of Turkey 2014 Annual Report

According to the date given above, as of the end of 2014:

Net value of total outstanding securities is TL 778,673 million.

Market value of total outstanding securities in Turkey is TL 1,170,351 million, and

Net share of private sector securities in net value of total outstanding securities has increased by approximately 3.5 points in 2014 from 39.44% to 42.85%.

Net market value of private sector securities is TL 333,634 million, and

5.3. CAPITAL MARKET INSTRUMENTS WITH APPROVED PROSPECTUSES / ISSUE DOCUMENTS In 2014, out of 14 corporations whose prospectuses are approved for initial public offering, shares of 3 corporations were started to be traded in the National Market, and shares of 5 corporations were started to be traded in the Second National Market, and shares of 2 corporations were started to be traded in Collective Products Market. Shares of 3 corporations, in turn, were started to be traded in Borsa Istanbul Inc. Emerging Companies Market. One initial public offering was not realized due to lack of sufficient demand.

In 2014, under the capital increases by publicly-held corporations through rights issues, the prospectuses/issue documents of shares with a total nominal value of TL 2,243,119,269.18 were approved, which generated a resource of TL 2,614,632,910.15 (USD 1,121,630,522.14) for the corporations. In 2014, the approved upper limit of prospectuses / issue documents for debt securities was TL 216,411,385,400. During 2014, total amount of debt securities sold was TL 117,679,730,798.16, comprising of TL 80,512,887,676.36 within the upper limits of approval granted by the CMB in 2014, and of TL 37,166,843,121.80 within the upper limits of approval granted by the CMB in 2013.

Within the context of the abovementioned public offerings, prospectuses regarding shares with a nominal value of TL 106,317,348 were approved, of which TL 57,930,000 were offered to public through capital increase, and TL 48,387,348 were offered through sales to shareholders. The resources provided to the corporations through sales of shares in the framework of public offerings amounted to TL 732,687,856 (USD 314,309,920.64).

As of 31 December 2014, portfolio value of the registered debt securities denominated in TL which are issued domestically increased to app. TL 44.8 billion as it was TL 36.1 billion as of 31 December 2013.

Table 5.4. Capital Market Instruments Sold in 2014 (Thousand TL)

Years

Shares (*)

Asset Backed Securi-ties

Asset Covered Securi-ties

Debt Securities

Lease Certificates

Investment Firm Warrants / Certificates / Bills

Total

2013

6,009,004

516,600

710,895

78,155,707

734,699

71,475

86,198,380

2014

3,347,321

451,650

361,846

117,679,731

4,836,365

68,830

126,745,743

(*) Indicates the total amount of funds through rights issues (except for gratis issues and issues through merger or division operations) under the prospectuses / issue documents approved in 2013 and 2014 (sales of shares of publicly-held corporations to their own shareholders are excluded). Source: CMB Table 5.5. Capital Market Instruments Sold in 2014 (Thousand USD)

Years

Shares (*)

Asset Backed Securi-ties

Asset Covered Securi-ties

Debt Securities

2013

2,815,445

242,047

333,081

36,618,895

2014

1,435,940

193,750

155,225

50,482,489

Investment Firm Warrants / Certificates / Bills

Total (**)

344,234

33,489

40,387,191

2,074,714

29,527

54,371,645

Lease Certificates

(*) Indicates the total amount of funds through rights issues (except for gratis issues and issues through merger or division operations) under the prospectuses / issue documents approved in 2013 and 2014 (sales of shares of publicly-held corporations to their own shareholders are excluded). (**) Based on forex selling rates of the CBRT as of year-end 2013 and 2014. Source: CMB

Capital Markets Board of Turkey 2014 Annual Report

5.4. INVESTMENT FIRMS As of the end of 2014, there are a total of 140 investment firms operating in Turkish capital markets, comprising of 97 intermediary institutions (operations of 13 of them are temporarily suspended) and 43 banks.

Information about the licenses of intermediary institutions, investment banks and commercial banks, with regard to their operations subject to a permission of the CMB, as of the end of 2014, is given below:

Table 5.6. Operating Licenses of Investment Firms Intermediary Institutions

Investment, Development and Participation Banks

Commercial Banks

Intermediation of Sale and Purchase of Capital Market Instruments

16 (off-the Exchange)

27 (off-the Exchange)

Intermediation of Public Offering

Portfolio Management

Investment Advisory

Type of License

Repurchase and Reverse Repurchase Transactions

Margin Trading, Short Selling, and Lending and Borrowing of Securities

Intermediation of Purchase and Sale of Derivatives

Leveraged Purchase and Sale Transactions

Source: CMB The intermediary institutions are operating countrywide by 152 branches, 72 liaison offices and 40 agencies established with banks as of the end of 2014.

sale of derivative instruments, and 6 licenses for leveraged purchase and sale transactions of 9 intermediary institutions have been withdrawn in this transformation period on 30 December 2014. On the other hand, as repurchase and reverse repurchase activities, which are defined as a capital market activity by the repealed CML no. 2499, are not considered among investment services and activities by the new CML no. 6362, the mentioned licenses for 85 investment firms, composed of 46 intermediary institutions and 39 banks, have been withdrawn. Those intermediary institutions have been granted new licenses for investment services and activities as at 2 January 2015, and the following table gives information about the licenses of the subject intermediary institutions, with regard to their operations as a result of their operating license applications:

The “Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services” no. III-37.1, prepared based upon the CML no. 6362 and published in the Official Gazette on 11 July 2013 no.28704, has become effective as at 1 July 2014, and the investment firms are required to apply to CMB until 1 July 2015 in order to renew their existing operating licenses in accordance with the new Communiqués. Accordingly, 9 licenses for intermediation of sale and purchase of capital market instruments, 6 licenses for intermediation of public offering, 6 licenses for portfolio management, 4 licenses for investment advice, 9 licenses for intermediation of purchase and

Table 5.7. Licenses For Investment Services and Activities Issued Under the New CML no.6362 Intermediary Institutions

Investment, Development and Participation Banks

Commercial Banks

Intermediation of Order Transmission

Intermediation for Trading of Securities

Intermediation for Portfolio Activities

Individual Portfolio Management

Investment Advisory

Intermediation for Public Offering

Underwriting

Best Effort

General Custody

Limited Custody

Type of License

Custody Services

Source: CMB 60

Capital Markets Board of Turkey 2014 Annual Report

5.5. COLLECTIVE INVESTMENT SCHEMES 5.5.1. Investment Funds

Pursuant to the CommuniquĂŠ on Principles Regarding Investment Funds, no. III-52.1, which entered into force as of 1 July 2014, investment funds are required to be established as an umbrella fund, and funds are required to be organized as sub-funds affiliated to umbrella fund. Within this context, existing investment funds meeting certain conditions have been granted time until 1 July 2015 for compliance with the relevant regulations. As of the end of 2014, the existing types of investment funds are Notes and Bonds Fund, Short-Term Notes and Bonds Fund, Equity Fund, Equity Intensive Fund, Sector Fund, Affiliated Companies Fund, Group Fund, Foreign Securities Fund, Precious Metals Fund, Gold Fund, Mixed Fund, Liquid Fund, Variable Fund, Index Fund, Fund of Funds Fund, Capital Guaranteed Fund, Capital Pro-

tected Fund, Private Fund and Hedge Fund. As of the end of 2014, there are a total of 483 funds in Turkey. Included among them are 131 Variable Funds, 58 Notes and Bonds Funds, 40 Liquid Funds and 37 Hedge Funds as the most pervasive ones, and these four groups of funds account for 55% of total number of funds. When listed according to the fund total value, top three types of investment funds are Short-Term Notes and Bonds Funds, Liquid Funds and Variable Funds. A review of investment funds according to portfolio size reveals that Short-Term Notes and Bonds Funds account for 36%, Liquid Funds account for 35% and Variable Funds account for 11% thereof.

Graph 5.1. Distribution of Types of Investment Funds by Portfolio Size Others 3% Gold 1%

Short-Term Notes and Bonds Funds 36%

Mixed Fund 1% Private 2% Hedge Fund 3% Notes and Bonds Funds 8%

Variable Funds 11%

Short-Term Notes and Bonds Funds Liquid Fund Variable Funds Notes and Bonds Funds Hedge Fund Private Mixed Fund Gold Other

Liquid Fund 35%

Kaynak: SPK In 2014, total portfolio value of investment funds, the first of which was established in 1987, increased by 19.6% over the past year from 30.1 billion TL to 36 billion TL, and on USD basis, increased by 25.2% over the past year from USD 12.3 billion to USD 15.4 billion. Besides, there are 41 foreign investment funds whose total value of fund units in circulation in Turkey is USD 14 million

as of the end of 2014. As of the end of 2014, 49.8% of the portfolios of investment funds is composed of private sector debt securities, while reverse repo, public debt securities and shares take 20.3%, 11.1% and 5.4% respectively:

Capital Markets Board of Turkey 2014 Annual Report

Table 5.8. Total Portfolio Composition of Investment Funds (%) (*)

Years

Public Debt Securities

Foreign Securities

Reverse Repo

Private Sector Debt Securities

Equities (Shares)

Exchange Money Market

Total Value (Million TL)

(Million $)

2010

28.74

0.37

53.59

5.49

3.80

7.99

30,897

20,109

2011

23.38

0.37

46.69

16.83

3.59

9.14

30,219

16,009

2012

20.03

0.45

38.38

28.45

4.94

7.75

29,746

16,745

2013

16.97

0.69

29.19

36.50

5.38

11.27

30,082

14,130

2014

11.10

1.34

20.26

49.79

5.37

12.14

36,003

15,444

(*) Exchange traded funds are included. Source: CMB Pension Investment Funds As of the end of 2014, the number of pension funds offered to public was 246. Total value of these funds was TL 37.8 billion. Regarding quantitative distribution, among the pension funds, the most pervasive one was Public Debt Securities Investment Funds denominated in TL with a share of 33.45%, followed by Flexible Pension Investment Funds.

Private pension system was established in 2003. With the change in the system as of 1 January 2013 whereby a 25% state contribution of premiums is granted to participants of private pension system, the number of pension fund investors increased by 1.9 million during 1 January 2013 â&#x20AC;&#x201C; 31 December 2014 period to exceed 5 million as of the end of 2014.

Graph 5.2. Distribution of Fund Total Value of Types of Pension Investment Funds Other 9.00% Standard Fund 5.78% Equity Intensive 6.58%

Public Debt Securities Fund 33.45%

State Contribution Fund 7.57% Liquid Fund-Flexible 8.02%

Public Debt Securities Fund Flexible Fund Liqid Fund â&#x20AC;&#x201C; Flexible State Contribution Fund Equity Intensive Standart Fund Other

Flexible Fund 29.75%

Source: CMB

Capital Markets Board of Turkey 2014 Annual Report

Exchange Traded Funds

an appropriate investment strategy and a guarantee given by the guarantor that the whole or a certain part of the initial investment amount or a certain return above the initial investment amount will be returned to the investor at certain maturity date or dates within the frame of principles set forth in the prospectus.

The regulation regarding Exchange Traded Funds dates to 2004, and according to the regulation, an exchange traded fund is an asset established for managing a portfolio with principles of risk diversification and fiduciary ownership, whose shares are traded in the stock exchange, whereby authorized participants directly participate in the launch and redemption process in line with the composition of fund portfolio of investors and also the mentioned institutions can get the section which is equal to the assets in the fund after the return of fund shares to depository institutions which is at least the minimum transaction unit.

As of the end of 2014, there are 20 (2013: 5) guaranteed funds with a total value of TL 22 million (2013: TL 55.2 million). Capital Protected Funds Protected funds are funds which aims according to best effort principle and based on an appropriate investment strategy to ensure that the whole or a certain part of the initial investment amount or a certain return above the initial investment amount will be returned to the investor at a certain maturity date or dates within the principles set forth in the prospectus.

As of the end of 2014, 15 (2013: 17) exchange traded funds offered to public and traded on Borsa Istanbul Collective Products Market. Total value of these funds was approximately TL 192 million (2013: TL 189 million), and 9 of them were based on various stock exchange indexes, 4 of them were based on gold and other precious metals indexes, and 2 of them were based on notes and bonds indexes.

As of the end of 2014, there are 33 (2013: 48) protected funds with a total value of TL 161 million (2013: TL 489.2 million).

Funds of Funds

Hedge Funds

Funds of Funds are investment funds that use an investment strategy of holding a portfolio of other investment funds in order to benefit from benefits of various management strategies of funds.

Hedge funds are launched for sale of their units only to qualified investors. As of the end of 2014, there are 37 (2013: 30) hedge funds with a total value of TL 922 million (2013: TL 524.5 million).

As of the end of 2014, there are 7 (2013: 4) funds of funds, and their total value amounting to TL 51 million (2013: TL 6.3 million).

Foreign Investment Funds As of the end of 2014, the number of foreign investment funds the units of which are registered with the CMB was 41 (2013: 41), and the total value of fund units in circulation in Turkey was approximately USD 14 million (2013: USD 22 million).

Capital Guaranteed Funds Guaranteed funds are funds whereby it is guaranteed based on

5.5.2. Investment Companies There are 3 types of investment companies in Turkey, namely securities investment companies, real estate investment companies

and venture capital investment companies.

5.5.2.1. Securities Investment Companies (21.2%), government bonds and T-Bills (29.5%), reverse repos (5.5%), private sector debt securities and precious metals (39.2%, predominantly private sector debt securities), and the rest are exchange money market transactions, foreign securities and some other financial instruments.

There are 9 securities investment companies operating in Turkish capital markets as of the end of 2014. Total market value of these companies is TL 282 million (USD 121 million). Portfolio of these investment companies is composed of shares

5.5.2.2. Real Estate Investment Companies

In Turkey, there were 31 real estate investment companies which had a market capitalization of TL 21.6 billion (USD 9.3 billion) as of the end of 2014.

Real estate investment companies whose shares are traded on Borsa Istanbul may invest in real estates, real estate based capital market instruments, real estate projects, and real estate based rights and capital market instruments.

Capital Markets Board of Turkey 2014 Annual Report

5.5.2.3. Venture Capital Investment Companies As of the end of 2014, there were 12 publicly-held venture capital investment companies in Turkey, whose total market capitalization was TL 1.5 billion (USD 640 million).

Venture capital investment companies the shares of which are traded on Borsa Istanbul are investing to the venture capital investments.

5.6. PORTFOLIO MANAGEMENT COMPANIES As of the end of 2014, there were 40 (2013: 40) portfolio management companies operating in Turkey. Total value of portfolios managed by these companies was TL 81.8 billion, representing an increase of 26% over 2013 (2013: TL 64.9 billion).

In terms of portfolios managed; 2.5% (2013: 2.9%) owned by individuals, 90.5% (2013: 89.3%) owned by institutional investors, and 7% (2013: 7.8%) owned by corporations as of the end of 2014.

5.7. DEVELOPMENTS IN THE EQUITY MARKET 5.7.1. Equity Market and BIST 100 Index After closing the year 2013 with 67,802 points, BIST 100 Index has, in spite of a slightly volatile trend at the beginning of 2014, entered into a substantial increasing trend and closed the year 2014 with 85,721 points representing an annual increase by 26.4%. Likewise, trading volume of BIST Equity Market has increased

from TL 816.9 billion to TL 871 billion in terms of Turkish Liras however on USD basis, has declined from USD 431.3 billion to USD 398.3 billion due to sharp rise in USD/TL exchange rate. BIST trading volume represents an increase of 6.7% on TL basis, but a decline of 8.3% on USD basis as regards the previous year.

Graph 5.3. BIST 100 Index and Trading Volume (2007-2014) 100,000

900,000

90,000

800,000

80,000

700,000

70,000

600,000

60,000

500,000

50,000

400,000

40,000

300,000

30,000

200,000

20,000

100,000

10,000

0 2007

2008

2009

2010

2011

387,777

332,605

482,534

635,664

694,876

55,538 BIST 100 Source: BIST

26,864

52,825

66,004

51,267

Trading Volume

2012

2013

2014

621,979

816,858

870,962

78,208

67,802

85,721

Index

Trading Volume (Million TL)

1,000,000

Capital Markets Board of Turkey 2014 Annual Report

Graph 5.4. BIST-100 Index and Trading Volume (2014 Quarterly Basis) 100,000

300,000

90,000 80,000 70,000

200,000

60,000 150,000

50,000 40,000

100,000

30,000

50,000

20,000

10,000 0

Trading Volume BIST 100

Index

Trading Volume (Million TL)

250,000

2014-1

2014-2

194,636 69,736

213,843 78,489

2014-3

209,748 74,937

2014-4

252,734 85,721

Source: BIST In 2014, BIST 100 Index has declined to its lowest level with 61,858 points in the first quarter of the year, but has picked itself up by increasing to 86,168 points in the last quarter of the year, particularly in November. In 2014 as a whole, monthly average

trading volume was TL 72,580.2 million, and the highest trading volume of TL 96,324.8 million was observed in December, whereas the lowest trading volume of TL 57,405 million was observed in February.

Main Indicators Regarding Corporations Traded on Borsa İstanbul The following table indicates the data about corporations traded on Borsa Istanbul: Table 5.9. Number of BIST Traded Corporations (31 December 2014) Number of Corporations Traded on Borsa Istanbul National Market

217

Second National Market

Collective Products Market

Securities Investment Companies

Real Estate Investment Companies

Venture Capital Investment Companies

Watchlist Companies Market

EQUITY MARKET TOTAL

386

Free Trading Platform (FTP)

Emerging Companies Market (ECM)

TOTAL

422

Source: BIST

Capital Markets Board of Turkey 2014 Annual Report

Table 5.10. Main Indicators Regarding BIST Traded Corporations Corporations Traded on Borsa Istanbul Number of Traded Corporations (*)

Total Nominal Capital (Million TL)

2007

327

2008

Years

Total Market Capitalization(*)

Price / Earnings Ratio (%)

Turnover Ratio (%)(***)

(Million TL)

(Million $)

51.685

335.948

289.986

11,9

129,7

326

63.300

182.025

119.698

5,8

135,1

2009

325

70.061

350.761

235.996

16,8

178,7

2010

350

80.806

472.553

307.551

13,3

150,6

2011

373

89.274

381.152

201.924

11,9

115,8

2012

395

96.634

550.051

309.644

12,5

113,1

2013

405

103.179

503.668

236.586

10,2

161,8

2014

401

104.540

624.369

268.511

14,4

139,5

(*) Total number of companies and exchange traded funds traded in National, Second National, Watchlist Companies and Collective Products Markets. The companies traded in Emerging Companies Market and Free Trading Platform are excluded. (**) Total nominal capital includes the most recent capital increases for which the additional listing procedures are not completed yet. (***) Monthly moving average (Trading Volume / Market Capitalization). Source: BIST, WFE Though not included in the table hereinabove, as of the end of 2014, market capitalization of corporations traded in the Free Trading Platform is TL 2,061 million, while market capitalization of corporations traded in the Emerging Companies Market is TL 937 million.

236,586 million) as of the end of 2013, and it has increased to TL 624,369 million (USD 268,511 million) as of the end of 2014. Price / earnings ratio of these corporations is 14.4%, and turnover ratio thereof is 139.5%. In 2014 market capitalization of Borsa Istanbul, in terms of Turkish Lira an increase of 23.9% and in terms of USD an increase of 13.5% has been observed as regards to 2013.

Total market value of corporations traded on Borsa Istanbul (except for the corporations traded in Free Trading Platform and Emerging Companies Market) was TL 503,668 million (USD Graph 5.5. BIST Market Capitalization 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

TL USD

2007

2008

2009

2010

2011

2012

2013

2014-1

2014-2

2014-3

2014-4

335,448 289,986

182,025 119,698

350,761 235,996

472,553 307,551

381,152 201,924

550,051 309,644

503,668 236,586

506,683 235,207

569,683 268,579

543,952 239,037

624,369 268,511

Corporations traded in Emerging Companies Market and in Free Trading Platform are excluded.

Source: BIST

Capital Markets Board of Turkey 2014 Annual Report

5.7.2. Emerging Companies Market In order to create a transparent and regular securities trading platform where the securities to be issued by corporations, having the growth and development potential, with the purpose of providing funding in capital markets, a separate market named Emerging Companies Market (ECM) has been established under Borsa Istanbul.

A review of Borsa Istanbul ECM data reveals that the trading volume has increased by 65.2% from TL 1,306.05 million in 2012 to TL 2,157.79 million in 2013, but has decreased by 9.7% to TL 1,947.88 million in 2014. On the other hand, the number of corporations traded in ECM increased from 11 in 2012 to 20 in 2013 and to 22 in 2014.

Table 5.11. Data on Borsa Istanbul Emerging Companies Market Years

Trading Volume (Million TL)

Market Value (Million TL)

Number of Companies

2011

461.39

110.3

2012

1,306.05

387.1

2013

2,157.79

583.2

2014

1,947.88

936.97

Source: BIST Equities Traded by Foreign Investors During the period between 2007 and 2014, the ratio of equities owned by foreign investors to total equities in custody was 62% and more of the free floating shares of the corporations traded

on Borsa Istanbul. This ratio has increased by 2.5% in 2014 as regards the previous year and climbed up to 63.83%1

Graph 5.6. Custody Balances of Foreign Investors % 74 72 70 68 66 64 62 60 58 56 2007

2008

2009

2010

2011

2012

2013

2014

2014-1

2014-2

2014-3

2014-4

72.30

67.50

67.30

66.80

62.20

65.80

62.30

63.83

63.02

63.67

63.28

63.83

Custody Accounts Source: CRA The ratio of volume traded by foreign investors to total trading volume in Borsa Istanbul was 20.3% in average, and was 21.25% in the first quarter of the year which was higher than other quarters of the year. Total volume traded by foreign investors (1)

showed its highest level of 22.55% of the total trading volume in March, and its lowest level of 19.46% of the total trading volume in April.

This data is calculated over BIST 2nd session weighted average price provided by CRA to data providing companies on daily basis.

Capital Markets Board of Turkey 2014 Annual Report

Graph 5.7. Trading Volume of Foreign Investors in BIST Equity Market 90,000

25%

80,000 20%

70,000 60,000

15%

50,000 40,000

10%

30,000 20,000

10,000 0

0% 2014-1

2014-2

2014-3

Total Trading Volume

2014-4

2014-5

2014-6

2014-7

2014-8

2014-9

2014-10

2014-11

2014-12

The rate of foreign volume (Right Column)

Foreign Trading Volume

Source: BIST Both purchase and sale data are included in Foreign Trading Volume. However, as not both sides of transactions, but only one side of the transactions are included in calculation of total trad-

ing volume, the “Rate of Foreign Trading Volume” is calculated by dividing the foreign trading volume to the value calculated by multiplication of total trading volume by two.

5.8. DEVELOPMENTS REGARDING DEBT SECURITIES MARKET AND MARKET VOLUMES Debt securities, securitized asset and income backed securities, lease certificates, liquidity bills issued by the Central Bank of Turkey and other securities approved by BIST Executive Board, which are denominated in TL and foreign currency can be traded on BIST Debt Securities Market.

The Debt Securities Market is comprised of Outright Purchases and Sales Market, Repo – Reverse Repo Market, Repo Market For Specified Securities, Interbank Repo – Reverse Repo Market, Equity Repo Market, Offering Market For Qualified Investors and International Bonds Market.

Table 5.12. BIST Debt Securities Market Trading Volumes 2007

2008

2009

2010

2011

2012

2013

2014

Outright Purchases and Sales Market Billion TL

364

301

417

446

478

357

404

320

Billion USD

279

239

270

298

291

200

215

147

Repo - Reverse Repo Market Billion TL

2,571

2,935

2,983

3,012

2,903

3,718

3,129

2,795

Billion USD

1,993

2,274

1,929

2,010

1,744

2,077

1,655

1,280

0.279

1.184

1.49

1.74

0.151

0.663

0.78

0.79

Offering Market For Qualified Investors Billion TL

Billion USD

Interbank Repo - Reverse Repo Market Billion TL

732

2,742

3,344

4,509

Billion USD

408

1,531

1,742

2,057

Capital Markets Board of Turkey 2014 Annual Report

Table 5.12. BIST Debt Securities Market Trading Volumes (Continued) 2008

2009

2010

2011

2012

Public and Private Lease Certificates Market (*) Billion TL

0.030

0.670

1.130

Billion USD

0.020

0.35

0.520

Repo Market For Specified Securities Billion TL

Billion USD

Billion TL

2.935

3.236

3.400

3.459

4.121

6.828

6.898

7.645

Billion USD

2.272

2.513

2.199

2.308

2.448

3.814

3.624

3.493

Total

DAILY AVERAGE Billion TL Billion USD

11.7

12.9

13.0

13.8

16.3

26.9

27.6

30.5

9.0

10.0

8.7

9.2

9.7

15.1

14.4

13.9

(*) There is no specific market for public and private sector lease certificates, which are traded in the Outright Purchases and Sales Market in BIST. Source: BIST In Debt Securities Market, trading volume reached to TL 7,645 billion (USD 3,493 billion) in 2014, which represents an increase of 10.83% on Turkish Lira basis and a decrease of 3.61% on USD basis in 2014 as regards the previous year.

verse Repo transactions accounted for 58.9% of the total trading volume. In 2014, the volume of trades executed off-the-exchange and registered on the exchange was TL 1.9 billion. The highest BIST daily average trading volume was recorded as TL 14.9 billion in the first quarter of 2014. On the other hand, both off-the-exchange and BIST daily average trading volumes declined in the third quarter of 2014.

In 2014, daily average trading volume has increased by 10.51% in terms of Turkish Lira to 30.5 billion, and has decreased by 3.47% in terms of USD to 13.9 billion. A review of distribution of trades reveals that most of the trading is in Interbank Repo-Re-

Billion USD

Graph 5.8. Daily Average Trading Volume of Debt Securities in BIST and off-the-Exchange

2010

2011

2012

2013

2014

2014-1 Q.

1.90 9.23

2.17 9.68

2.43 15.07

2.46 14.50

1.91 13.92

2.14 14.88

Borsa Istanbul Daily Average Trading Volume Off-the-exchange Daily Average Trading Volume Source: BIST

2014-2 Q. 2.23 14.57

2014-3 Q. 1.67 11.82

2014-4 Q. 1.62 14.40

Capital Markets Board of Turkey 2014 Annual Report

5.9. DEVELOPMENTS REGARDING DERIVATIVES MARKET The following table indicates the data on capital market instruments traded in the Borsa Istanbul Derivatives Market: Table 5.13. BIST Derivatives Market Trading Volume (2014) (*) Number of Contracts Traded

Volume (TL)

Average Open Interest

Index Futures

43,368,269

400,623,922,570

248,258

Index Options

107,344

984,914,140

6,255

Share Futures

194,377

134,940,357

2,594

Share Options

88,919

63,870,150

6,717

Foreign Currency Futures

14,068,406

31,986,126,488

180,621

Foreign Currency Option

26,801

60,005,550

971

1,597,961

1,867,597,277

24,793

448,116

1,400

59,452,114

435,721,826,048

Contracts

Gold Futures (**) Energy and Commodity Futures Foreign Index Futures TOTAL

(*) Open interest closings are included. (**) Contract size of gold futures contracts has been reduced to 1 g as of 16 June 2014. Source: BIST In 2014, total number of contracts was 59,452,114 with a total trading volume of TL 435.7 billion (USD 186.9 billion), which represents an increase of 11.8% in the number of contracts and an increase of 4.6% in trading volume on TL basis, compared to 2013 figures.

Furthermore, on 27 August 2014, an all-time record of TL 4.3 billion has been reached in trading volume of futures and options contracts.

5.10. DEVELOPMENTS REGARDING PRECIOUS METALS AND DIAMONDS MARKETS

The following table indicates the data relating to BIST Precious Metals and Diamonds Markets in 2014: Table 5.14. BIST Precious Metals Market Trading Amount and Volume (*) Trading Amount (Kg) Years

TL/Kg

$/Ounce

2007

236.101

414.999

2008

292.357

2009

Trading Volume

â&#x201A;Ź/Ounce

(Million â&#x201A;Ź)

Total

(Million TL)

(Million $)

651.100

1.130

6.594

428.894

721.251

336

9.345

360.759

248.509

609.302

516

6.827

2010

368.529

134.250

490

503.269

609

4.396

2011

277.871

356.964

295

635.131

2.999

10.606

2012

195.862

550.737

2.664

749.263

2.034

15.729

110

2013

207.779

693.682

2.080

903.541

2.585

18.554

2014

191.687

478.761

507

670.955

1.933

8.915

(*) Gold, silver, platinum, palladium transactions and 3 different currencies are taken into consideration. Source: BIST

Capital Markets Board of Turkey 2014 Annual Report

In 2014, in Borsa Istanbul Precious Metals and Diamonds Markets, trading amount was 191,687 TL/Kg, which represents a decline of 7.8% compared to 2013, with a decrease of 30.9% in USD/ Ounce trades, and a decrease of 75.6% in Euro/Ounce trades.

Trading volume in TL/Kg showed a decrease of 25.22% as regards the previous year, while trading volume in USD/Ounce recorded a decrease of 51.95%, and trading volume in Euro/Ounce showed a decrease of 79.45% with respect to the previous year.

Table 5.15. BIST Diamonds and Precious Stones Market Trading Amount and Volume Trading Amount (Carat)

Trading Volume

Year

â&#x201A;Ź

Total

â&#x201A;Ź

2014

1.004

207.104

0.62

208.108

1.092.914

16.626.015

1.600

1 carat = 0.2 gram Source: BIST Trading is started in the Borsa Istanbul Diamonds and Precious Stones Market for the first time in 2014, and trading amount in

TL/Kg was 191,687 TL/Kg; and trading volume in TL was 1,933 million.

The following table indicates information about intermediary institutions authorized by the CMB as of the end of 2014 with respect to leveraged purchase and sale transactions, which are known as forex transactions in common use. Forex transactions

were classified as a separate capital market activity under the repealed CML no. 2499, but are re-classified as a derivative instrument under the new CML no. 6362.

5.11. DEVELOPMENTS REGARDING LEVERAGED PURCHASE AND SALE (FOREX) TRANSACTIONS

Table 5.16. Number of Intermediary Institutions Having Leveraged Purchase And Sale (Forex) Trading License FOREX License Type

2012

2013

2014

Intermediation for Trading

Intermediation for Promotion

Market Making

Total Source: CMB

As of the end of 2014, due to and as a result of the applications of intermediary institutions made in the transition period until 1 July 2015 granted in the regulations of the CMB regarding investment services and activities, 5 market making licenses for leveraged (forex) transactions and 1 license of intermediation for trading for leveraged (forex) transactions have been withdrawn. In addition, the mentioned intermediary institutions have been granted licenses on 2 January 2015 within the new regulato-

ry framework on investment services and activities, and as of March 2015, there are 37 intermediary institutions conducting market making, 3 intermediary institutions conducting intermediation for trading, and 1 intermediary institution conducting intermediation for promotion for leveraged (forex) transactions. 2014 annual data on leveraged (forex) transactions are given in the following table:

Table 5.17. Annual Data Regarding Leveraged (Forex) Transactions 2012 Number of Accounts as of 31 December Amount of Collaterals as of 31 December (Million TL) Value of Open Positions as of 31 December (Million TL) Total Annual Trading Volume (Million TL) Average Daily Trading Volume (Million TL)

2013

2014

16,670

43,194

78,755

139

280.5

449.1

2,851.1

5,151.4

8,456.3

1,102,364.1

2,952,793.2

4,569,463.6

4,223.6

11,313.4

18,205

Source: Takasbank Total annual trading volume of leveraged (forex) transactions has shown a remarkable increase by 54.73% from TL 2,953 billion in 2013 to TL 4,569 billion in 2014.

Capital Markets Board of Turkey 2014 Annual Report

6. EXCHANGES, CENTRAL CLEARING AND CENTRAL DEPOSITORY INSTITUTIONS, ASSOCIATIONS AND INVESTOR COMPENSATION CENTER 6.1. BORSA İSTANBUL INC. Pursuant to the Executive Board resolution dated 7 February 2014, minimum terms and conditions of foreign currency option contracts have been approved, and those contracts have been made ready for trading in the Borsa Istanbul.

29175. Scope of providing liquidity in Equity Market has been extended, and it has become applicable on all shares remaining outside the scope of BIST 30 Index in National Market, Second National Market and Collective Products Market as of 5 December 2014.

Takasbank has started to serve as a central counterparty in Borsa Istanbul Derivatives Market (VIOP) as of 3 March 2014, and detailed principles in connection therewith have been approved, as a result of these developments the regulatory infrastructure has been completed.

A Memorandum of Understanding (MoU) providing that futures and options products based on BIST 30 index and share certificates will be offered to investors in London Stock Exchange, and that “London Clearing House” (LCH.Clearnet), a clearing institution affiliate of London Stock Exchange, will act as central counterparty in trading of such products, has been signed between Borsa Istanbul and London Stock Exchange on 25 December 2014.

Pursuant to the Executive Board resolution dated 13 June 2014, the trading in VIOP of futures contracts based on SASX-10 index, being the basic share index of Sarajevo Stock Exchange of Bosnia-Herzegovina, has been approved, and those contracts have started to be traded on 15 December 2014.

Pursuant to the Executive Board resolution dated 30 December 2014, legal entities residing in Turkey will be permitted to directly execute transactions in VIOP limited to the markets related to their own fields of business, and this will be started following completion of the amendments in relevant laws and regulations.

The Decree of the Council of Ministers, no. 2014/6747, regarding public offering of Group (B) shares of Borsa Istanbul Inc. owned by the UT, up to 42.75% of its capital, until 31 December 2015 has been published in the Official Gazette on 14 November 2014 no.

6.2. CENTRAL REGISTRY AGENCY INC. A preliminary agreement has been signed between Central Registry Agency (CRA) and NASDAX OMX for sales and marketing of Electronic General Assembly System to 18 developed and developing countries.

The “Regulation on Principles of Establishment, Operations, Works and Audit of Central Registry Agency” based on article 81 of the CML has come into force on the date of its publication in the Official Gazette on 7 August 2014 no.29081.

According to Executive Board resolution dated 14 January 2014, PDP operated by Borsa Istanbul will be transferred to CRA, and accordingly, PDP is being operated by CRA since 17 March 2014.

The contract for distribution of CRA and Takasbank data through Borsa Istanbul has been signed between Borsa Istanbul, CRA and Takasbank on 25 December 2014.

6.3. CAPITAL MARKETS ASSOCIATION OF TURKEY investment companies traded on the exchange, in addition to intermediary institutions and banks. Furthermore, CMAT board of directors includes not only representatives of intermediary institutions and banks, but also representatives of portfolio management companies and investment companies traded on the exchange, and representatives of the Association of Appraisal Experts of Turkey, as well as two independent members. The general assembly meeting where board members are appointed pursuant to the new Statute of CMAT has been held on 8 July 2014.

Name of the Association of Capital Market Intermediaries of Turkey (ACMIT) has been changed as the “Capital Markets Association of Turkey” (CMAT) by article 74 of the CML, and the “Statute of Capital Markets Association of Turkey” has come into force on date of its publication in the Official Gazette on 2 April 2014. Membership and management structures of the CMAT have been changed by the new Statute. New membership structure of CMAT has been expanded in such manner to include portfolio management companies and

Capital Markets Board of Turkey 2014 Annual Report

6.4. ASSOCIATION OF APPRAISAL EXPERTS OF TURKEY on 27 December 2014. In that meeting, membership entrance fees and annual membership fees have been determined, and as a result of negotiations, 2015 annual budget, and changes proposed in Discipline Regulation, Regulation on Principles of Operation of Committees, and Regulation on Personnel and Organization have been adopted and accepted.

Members of board of directors, board of auditors and disciplinary committee have been elected in the 5th Ordinary General Assembly Meeting of Association of Appraisal Experts of Turkey (AAET) held on 26 September 2014. AAET has held its 3rd Extraordinary General Assembly Meeting

6.5. INVESTOR COMPENSATION CENTER in ICC budget.

Pursuant to article 83 of the CML, an Investor Compensation Center (ICC), a public legal entity, has been established for compensation of investors under the specified terms and conditions.

On the other hand, transactions relating to payments to creditors from Special Fund are being handled by ICC, and transactions relating to liquidation of investment firms the gradual liquidation of which has been started prior to the effective date of the CML are being handled by CRA.

Based on the authorization granted by the CML to the CMB, the repealed Regulation on Investor Compensation Center (repealed Regulation) dealing with representation and management of ICC, contribution fees payable by investment firms to ICC, recognition of revenues arising from the sale of securities due to limitation provisions stated in article 83/4 of CML, and other matters relating to operation principles of ICC, has become effective upon publishing in the Official Gazette on 6 June 2013 no. 28669.

However, as a result of actions taken for the sake of resolution of the practical problems, and in line with demands of market actors, and for the purpose of compliance with the developing and changing market conditions, the repealed Regulation has been fully revised, and replaced by a new â&#x20AC;&#x153;Regulation on Investor Compensation Centerâ&#x20AC;? which has been made effective upon publishing in the Official Gazette on 27 February 2015.

Pursuant to the repealed Regulation, the annual contribution fees payable by investment firms to ICC in 2014 have been calculated and collected. In addition, according to article 13(4) of the CML, the ownership of the capital market instruments are transferred to ICC which are not transferred to customer accounts in seven years following the dematerialization of those securities, and according to article 83/4 of CML the deposits and receivables which are subject to limitation provisions are transferred to ICC as of 31 December 2013. The aforementioned securities and assets have been sold in Borsa Istanbul and recorded as revenue

By the new Regulation, the entrance fee has been reduced from TL 250,000 to TL 50,000, and a simpler and risk-based calculation method is developed for annual contribution fees, and events suspending and stopping the period of limitation running, and investor notification and announcement process, and transfer of statute-barred assets to ICC have been re-regulated in further details.

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