The key facts

  • Şimşek: the capital market will emerge from the crisis 'much healthier and stronger'; penalties for manipulation and insider trading will be significantly increased
  • 131 funds under seven management companies sent to liquidation: 66 funds and three companies fully liquidated, 40.8 billion liras ($822.9 million) paid to 45,747 accounts
  • Money market fund investors suffered no losses and received an average of +1.43% as of September 17; holders of funds with a high share of equities recovered an average of 58% of their portfolio value

Strengthened oversight and structural reforms

Türkiye's Treasury and Finance Minister Mehmet Şimşek said in a joint broadcast on Bloomberg HT and HaberTurk on Tuesday that authorities will strengthen the oversight and control capabilities of the capital markets regulator. According to him, the ministry has prepared a draft of permanent structural regulations, while the temporary regulation on liquidation has already been sent to parliament. Şimşek explained that liquidation was prioritized while permanent structural measures were postponed because the capital market is of great importance to Türkiye. He emphasized that the authorities will not take measures that hinder the development of the capital market, and that the market will emerge from this process 'much healthier and stronger.'

Combating manipulation and new technologies

The minister said the authorities will take a comprehensive approach to significantly increasing penalties for market distortion, coordinated trading actions and insider trading. According to him, regulators must use advanced technologies, since highly sophisticated algorithms and coordinated actions are at play in the market.

Progress of the fund liquidation

Şimşek noted that the fund liquidation process is proceeding at the expected pace and within the expected framework. The process is divided into two categories — ordinary and extraordinary. Ordinary liquidation was applied to management companies with a relatively manageable financial structure. 131 funds under seven management companies have been placed into liquidation; 66 of the 131 funds have been fully liquidated, and full liquidation has been completed at three of the seven companies. After parliament passes the law, the authorities will quickly make payouts of up to 1 million liras (about $20,200) based on the funds' resources.

Payout results and investor losses

According to the minister, under the completed ordinary liquidation, 40.8 billion liras ($822.9 million) was paid out to 45,747 accounts. Investors in the money market funds of the three fully liquidated companies suffered no losses and additionally received an average return of 1.43% compared with September 17. Investors in funds with a high share of equities recovered an average of 58% of their portfolio value as of September 17, because share prices had been artificially inflated relative to the companies' fundamentals. Şimşek attributed the missing 42% of the portfolio value as of September 17 entirely to the decline in share prices and added that funds without inflated share prices delivered higher returns to investors.