The key facts

  • The law covers funds whose liquidation, ordered by the CMB decision of September 17, was not completed by the date of the law's publication.
  • Interim payments to investors — up to 1 million lira (~$20,150); for smaller amounts — in the amount of the investment.
  • Persons found involved in abuses, insider trading, or manipulation are excluded from payments; the SDIF will handle recovery of losses.

Parliament passes law on liquidation of investment funds

Turkey's Parliament on Thursday passed a law establishing procedures for the liquidation of certain investment funds and the return of assets illegally removed from their portfolios. The law applies to funds that, on September 17, were ordered to be liquidated by a decision of the Capital Markets Board (CMB), but whose liquidation had not been completed by the date of the law's publication.

Liquidation procedure and payments to investors

The liquidation will be carried out by appointed institutions under CMB supervision; proceeds after deduction of necessary expenses are credited to the funds' liquidation assets. The law provides for interim payments of up to 1 million Turkish lira (about $20,150) to eligible investors of funds designated by the CMB, depending on net investment amounts and other conditions. Investors with net investments below 1 million lira may receive payments in the amount of those sums, while payments to those with higher balances are capped at 1 million lira.

Liability and return of assets

Individuals and organizations that the CMB finds involved in market abuses, insider trading, or manipulation involving the affected funds lose the right to payments from liquidation assets and return accounts. Portfolio management companies that established or managed the funds bear primary liability for losses; other parties are liable under certain conditions if losses cannot be recovered from these companies. The Savings Deposit Insurance Fund (SDIF) will be empowered to recover losses from responsible parties identified by the regulator and may be appointed as trustee of certain assets. Seized or confiscated assets may be returned to the funds or transferred to return accounts. Returned funds will be distributed among investors through the appointed liquidation institutions or, if liquidation is completed, through the Investor Compensation Center (ICC) in proportion to their shares in the funds.