The Capital Markets Board of Turkey (the "CMB") has amended the legislation on portfolio management business in an attempt to diversify the business line of PMCs, create an alternative distribution and marketing channel for the founders of investment funds (i.e. banks, brokerage firms and insurance companies) and increase the competition in the investment fund market. As per the Amendment, PMCs can act as fund supermarkets and provide investors a wide-array of investment funds either by establishing branches or utilizing the internet. This new cost efficient approach is expected to enlarge the investor base focused on investment funds and trigger the formation of a new breed of PMCs specialized on funds distribution.

Below is a brief highlight of the key aspects of the Amendment:

  • PMCs, intending to provide intermediary services for the distribution of fund units, shall obtain a license from the CMB. In addition, articles of association of PMCs shall be revised to cover intermediary services regarding sale and purchase of fund units
  • PMCs, having the fund distributor status, shall have a minimum capital and equity amount of TL 1,250,000.
  • PMCs, in order to conduct the fund distribution business, shall secure the necessary physical and technical infrastructure and employ sufficient number of personnel.
  • In parallel to the fundamental portfolio management principle envisaging the separation of client assets from the assets of PMCs, client monies and fund units shall be kept in a custodian. For conducting the cash operations, PMCs are entitled to use pool accounts opened in custody institutions. 
  • PMCs, authorized to provide intermediary services for distribution of fund units, are deemed as intermediary institutions limited to such activity and, upon securing the authorization, shall make a membership filing with the Association of Capital Market Intermediary Institutions of Turkey within a three month period. As PMCs are deemed as intermediary institutions, they are required to comply with certain principles of traditional intermediary services (e.g. signing a framework agreement with the client, complying with the principles governing sales/purchases via internet etc.)

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