Fund regulation was accepted in the commission

The Grand National Assembly of Turkey Planning and Budget Commission convened under the chairmanship of AK Party Samsun Deputy Mehmet Muş. The 'Proposal Law on Certain Investment Funds Decided to be Liquidated', which aims to protect the rights of investors of some investment funds that have been decided to be liquidated and to regulate the recovery process of the assets in the funds, was discussed in the commission. The bidder, AK Party Samsun Deputy Ersan Aksu, made a presentation on the scope of the regulation. In the voting held after the presentation, the articles of the bill were accepted together with 3 accepted motions.

Reconciliation of the records of MKK and the institutions responsible for liquidation transactions will be taken as basis.

The proposal envisages making arrangements for converting the assets of investment funds in the liquidation process into cash, protecting the rights of fund shareholders, collecting investors' losses from those responsible, and paying the resulting amounts to the beneficiaries. With the accepted proposals, provisions regarding the determination of fund shareholding in agreement with the Central Registry Agency (MKK) records and the optional return of the part of the returns obtained from certain funds that exceed the inflation criterion were also regulated.

In line with the accepted proposals, the determination of fund shareholding will be based on the reconciliation of the records of MKK and the institutions responsible for liquidation transactions. Fund shareholders will be the persons identified as a result of the comparison of these records who have the right to receive payment from the liquidation balance of the relevant fund. Thus, it was aimed to determine entitlement on a fund and account basis, to ensure uniformity of application in payments and to eliminate hesitations between records.

Interim payments of up to 1 million lira can be made to investors.

The proposal envisages the implementation of an interim payment mechanism if the amount obtained from the funds' assets converted into cash is not sufficient to cover the receivables of investors. Accordingly, if the relevant conditions are met, payments can be made to investors whose net investment amount is below 1 million lira, provided that it does not exceed this amount. For investors with a net investment amount of 1 million lira and above, it is envisaged that a maximum interim payment of 1 million lira can be made.

It is regulated that interim payments will be covered from the liquidation balance of the fund, and in calculating the payment amounts, the net investment amounts of the investors and the current cash possibilities of the relevant fund will be taken into account. It is aimed to carry out the final payment process separately according to the amounts obtained as a result of the liquidation and recovery of fund assets.

The part of certain returns that exceeds inflation can be refunded optionally.

An amendment was made to the fourth paragraph of Article 4 of the proposal with one of the accepted proposals. Accordingly, in certain funds, individuals who have received payment by returning their participation shares to the fund until the date of liquidation are allowed to optionally return the part of their return that exceeds the amount to be calculated based on the arithmetic average of the change rates in the consumer price index (CPI) and the domestic producer price index (D-PPI) announced by the Turkish Statistical Institute, to the accounts announced by the Board.

The regulation also includes provisions regarding the calculation of the returns obtained from the shares in question by persons who earn profits within the scope of the acts specified in Articles 104, 106 and 107 of the Capital Markets Law. In this context, it is envisaged that the return exceeding the amount found as a result of updating the purchase cost with the arithmetic average of the CPI and D-PPI change rates until the liquidation date can be optionally transferred to the general share return account within the specified conditions. CMB will be authorized to determine the calculation period, the amount to be refunded and the procedures and principles regarding the application.

Values ​​removed from fund assets will be recovered

The proposal also regulates provisions regarding the recovery of values ​​illegally removed from the fund's assets and the collection of losses from those responsible. If collection cannot be obtained from the fund founder or manager portfolio management company, or if it is clear that collection is not possible, it is envisaged that other natural and legal persons who are determined to be responsible for the occurrence of the damage may be approached. It is also among the provisions of the proposal that, if the assets seized or confiscated within the scope of criminal investigation and prosecution have a legal and economic connection with the fund, they will be included in the recovery system within the framework of the relevant legal conditions. It is envisaged that SDIF may be appointed as trustee for some assets that cannot be transferred directly to the fund and these assets will be sold or liquidated.

Recovered amounts will be monitored in separate accounts on a fund basis.

The regulation envisages that the collected or refunded amounts will be monitored in separate sub-accounts for each fund at the Savings Deposit Insurance Fund (TMSF). The aim is to keep these amounts separate from SDIF's own assets and to be used only for the liquidation of the relevant fund and payments to fund shareholders. It is regulated that the remaining amounts after deducting the mandatory expenses during the liquidation process will be distributed to the beneficiaries, and the money collected after the liquidation is completed will be transferred to the relevant recovery accounts in a way that will not lead to repeated payments.

The proposed law aims to carry out liquidation procedures in a transparent and effective manner, to determine the correct ownership of investors, to protect the economic value of fund assets and to recover losses incurred due to unlawful transactions.

The commission phase was completed with the acceptance of the proposal's articles in the Planning and Budget Commission. The regulation will be discussed in the General Assembly of the Turkish Grand National Assembly to become law.