Disclosure Requirements - Turkey
Disclosure Category: 2
Background and Legal Basis
The disclosure requirement for shareholding in Turkey is primarily derived from the Capital Markets Law dated 30 July 1981, No. 2499 (Articles 1 and 16/A). In addition, the Capital Markets Board (CMB), the local securities market regulator, has issued Communiqué Serial: VIII, No: 54 “Communiqué on Principles Regarding Public Disclosure of Material Events” (the “communiqué”), which outlines the circumstances and method for disclosure. This communiqué has been effective from 6 February 2009 and replaced former communiqué No: 39.
In order to comply with the legislation as mentioned above, customers entering into transactions in the Turkish market consent and are hereby deemed to consent to disclosure and to the appointment of CBL and/or its local custodian as their attorney-in-fact, under power of attorney to collect from CBL such information to be disclosed as is required by the issuer, regulator or other requesting party. Customers not willing to give this consent cannot hold such securities and/or financial instruments in their account with CBL.
1. Disclosure related to tax:
In the Turkish market, local brokers and other custodians must be aware of who has been appointed as the tax agent and permanent tax representative, when applicable.
CBL, through its local custodian, shall perform such disclosure of this status to local counterparties or other parties upon request from such parties, including:
- The tax ID of the beneficial owner; and
- Confirmation that, in the case of beneficial owners with NRIF status (that is, Non-Resident Investment Funds holding securities purchased before 1 January 2006), CBL’s local custodian acts as the permanent tax representative of the beneficial owner; and
- Confirmation that CBL’s local custodian is the subcustodian bank and acts as tax agent in relation to CBL account(s) opened with the local custodian.
As long as CBL’s local custodian is appointed by the beneficial owner as permanent tax representative, such custodian is deemed responsible for the book-keeping of any investment fund’s portfolio, tax accounting responsibilities and the preparation of the legal tax declaration, as required under Turkish law. In addition, CBL’s local custodian would be entitled to contact any previous custodian to get full details of the transactions linked to the beneficial owner under the regime applicable to securities purchased before 1 January 2006, including, among other things, tax return papers already submitted to the tax office (as relevant).
2. Disclosure to companies listed on the Istanbul Stock Exchange
Pursuant to the communiqué, for shares of (Turkish or foreign) companies trading on the Istanbul Stock Exchange (ISE), details of beneficial owners are required to be disclosed to the issuers in the systems of the Central Registry Agency (the local Turkish Central Securities Depository). Non-disclosure of details entails that non-disclosing beneficial owners cannot participate in general meetings of companies listed on the ISE. Unless otherwise specifically instructed by its customers (on a temporary or permanent basis), CBL and/or its local custodian shall not disclose any detail to companies listed on the ISE.
3. Disclosure in the case of repetitive trade failures
According to ISE Circular 193, dated 14 January 2004, local brokers provide additional reporting to the ISE when their customers cause more than two trade failures within three consecutive months. Disclosure is made when the default amount exceeds TRY 10,000 or 5% of the investor’s net assets held with the local broker.
Obligation to report threshold crossings
Any acquisition or sale of equities that causes a holding to reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95% of the total voting rights or share capital of a (Turkish or foreign) company incurs an obligation for the beneficial owner or the people acting together with the beneficial owner, as follows:
- If the company is listed on the ISE, disclosure must be made to the ISE.
- If the company is not listed on the ISE, disclosure must be made to the CMB.
In either case, a copy of the disclosure documents must at the same time be provided to the issuing company.
Any acquisition or sale by mutual funds, founded and owned directly or indirectly by the same person, that causes a holding to reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95% of the total voting rights or share capital of a company must be disclosed. The founder of the mutual fund must notify the ISE and, in parallel, provide a copy of the disclosure documents to the issuing company.
Members of the board of directors of a company or high-ranking executive officers who are also shareholders of such company must, irrespective of the voting rights held, disclose all their transactions relating to the shares of such company to the ISE (if listed) or to the CMB (if not listed).
Method of reporting disclosures
For any change of holdings or transaction where disclosure is required, the investor must file a disclosure form with the ISE or the CMB (as applicable) by 09:00 local time on the day following that on which the change of holdings or the transaction took place. Only the Turkish language version of the disclosure form (available on the CMB website) is accepted.
Although the beneficial owner is responsible for filing the disclosure form with the ISE or the CMB, it is common market practice for the beneficial owner to nominate a third party to file on its behalf. In this respect, forms can be submitted by fax but an original version must also be sent by mail and a copy of the form must also be sent to the issuing company.
Any intermediary involved in the transaction (a legal representative, custodian or duly authorised investor etc.) may execute the disclosure.
Failure to execute required disclosure will incur a fine of between TRY 5,000 and TRY 15,000 imposed by the CMB.