Turkey: Major Changes in Capital Markets Regulations in the Last Quarter of 2017

In the last quarter of 2017, the Capital Markets Board ("CMB") has adopted certain communiqués amending the Communiqué on the Sale of Capital Market Instruments, the Communiqué on the Procedure of Keeping Records as to Dematerialized Capital Market Instruments, and the Communiqué on Real Estate Certificates. We will summarize some of these changes below.

1. Simplification of the Issuance Procedure of Capital Market Instruments

In accordance with the recent amendment made to the Communiqué on the Sale of Capital Market Instruments (II-5.2), companies are now allowed to revise their public offering price, price range, discount or interest rates in order to have lower figures just before launching their sale and/or book building, without being required to revise the accompanying offering circular ("izahname"). In such a case, a simple public disclosure will be sufficient, instead of the previous rule requiring the revision of the offering circular. As per the amendment, the launching of the public offering is also allowed on the second day as of the public disclosure at the earliest. However, if the public offering price, price range, discount or interest rates are revised lower during the sale and/or book building process, then the public offering date will be delayed by at least 2 (two) days.

2. Changes on the Allocation Limits of Capital Market Instruments

As per the recent amendment made to the Communiqué on the Sale of Capital Market Instruments (II-5.2), the allocation limits of capital market instruments have been changed. While companies were previously required to allocate 20% of the nominal value of capital market instruments to local institutional investors, this amount has now been decreased to 10%. Additionally, the CMB has been granted the authority to decrease minimum allocation limits to 0 or to increase these limits up to onefold by taking into consideration the value of the capital market instruments, market conditions, the request of issuers, and/or other applicable reasons, according to the circumstances.

For public offerings that involve foreign institutional investors who are subject to Regulation S or Rule 144A, this amendment is of vital importance. With this change, the allocation ratio may be increased significantly in favor of the foreign institutional investors.

3. Data Protection Rules for Right Owners

In the Communiqué on the Procedure of Keeping Records as to Dematerialized Capital Market Instruments (II-13.1), it has been regulated that data relating to right owners may be obtained in accordance with the procedures to be determined and set forth by the Central Registry Agency ("Merkezi Kayıt Kuruluşu"). In this respect, the issuers have become responsible and liable for keeping said information confidential. In addition to the foregoing, it has also been regulated that right owners' information shall not be disclosed to any party other than the officers of the issuer who have administrative responsibility and shall only be used for its stated and lawful purposes. In accordance with the foregoing developments, it is aimed that the right owners' positions will be strengthened and that their information will be kept confidential to the greatest extent possible.

4. Recent Amendments Made to the Communiqué on Real Estate Certificates (VII - 128.2)

Some of the recent amendments made to the Communiqué on Real Estate Certificates (VII - 128.2) are as follows:

As a new requirement, independent sections of real estate projects that are subject to real estate certificates shall meet the same quality standards as other independent sections of the real estate project that are not subject to real estate certificates.

The cancellation of real estate certificates and the performance of primary obligations shall be conducted in accordance with the procedures to be determined by the Central Registry Agency and approved by the CMB. In accordance with the foregoing amendment, it is expected that further secondary legislation will be published on this matter.

During the public offerings, price stabilizing transactions may be executed if they have been put forth in the offering circular. It should be noted that this opportunity did not previously exist.

Special procedures that are deemed appropriate and suitable by the CMB in terms of the rights and benefits of the investors may be implemented, if they have been declared in the offering circular. The CMB did not previously possess such an authority.

As a new exemption, the CMB has been granted the power to exempt companies—which are at least 51% owned, directly or indirectly, by public institutions—from the requirements concerning the issuance of real estate certificates.

The issuer has obtained the right to receive the entire amount of the funds raised from the issuance of real estate certificates, provided that the redemption amount and the potential penalty amount have been either guaranteed by a bank or duly insured. Previously, the fund would be allocated to investors by partly taking the progress of the construction project into account.

This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in March 2018. A link to the full Legal Insight Quarterly may be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.