Amendments in January

• Amendment to the Turkish Lira Overnight Participation Reference Rate (TLREFK) Rule Set

Borsa İstanbul A.Ş. ("BIST" or "Borsa İstanbul"), amended the TLREFK Rule Set, in parallel with its previous amendments to the Turkish Lira Overnight Reference Rate (TLREF) Rule Set dated 16 December 2022, to meet the needs in practice. These amendments were announced on the BIST website.

• Amendments to the Mandatory Reserves Communiqué

As per the amendments to the Communiqué on Mandatory Reserves Communiqué, (i) in relation to deposits/participation funds, the ratio of mandatory reserves to be kept for Turkish Lira obligations with maturities longer than six months was reduced to 0 percent and (ii) the ratio of mandatory reserves in relation to securities issued by development and investment banks with maturities longer than one year was set as 0 percent. In addition, pursuant to the provisional article 14 added to the Communiqué, the ratio of mandatory reserves to be kept for foreign currency liabilities with maturities longer than six months will be applied as 0 percent until the calculation date of 22 December 2023 (including this date).

• Launch of Futures Contracts Based on BIST Sustainability 25 Index 

Borsa Istanbul launched futures contracts based on the BIST Sustainability 25 Index for trading in the Derivatives Market on 13 January 2023.

• Changes in the Shares to be included in BIST Dividend and BIST Dividend 25 Indices

BIST amended the shares to be included in the BIST Dividend and BIST Dividend 25 indices for the period 1 February 2023 - 31 January 2024 and announced these changes on its website. 

• Precedent on the Crowdfunding Communiqué (i-SPK.35/A.2.2)

Pursuant to the precedent of the Capital Markets Board ("Board" or "CMB") dated 12 January 2023, the Board resolved that crowdfunding platforms are obliged to meet the minimum capital and equity requirements set forth in subparagraph (b) of the first paragraph of Article 5 titled "Establishment and listing" of the Crowdfunding Communiqué No. III-35/A.2, which can be revalued every year, by the end of the sixth month of the relevant year at the latest.

• Precedent and Board Decision on the Communiqué on Corporate Governance (i-SPK.17.8) 

The Board decided that in the event the group of a company, which determines the mandatory principles to be complied by each company subject to the corporate governance principles within the scope of the Communiqué on Corporate Governance numbered II-17.1 and the Precedent numbered i-SPK.II-17.6, changes, then the relevant company will have to comply with Article 11 titled "Investor relations section" of the Communiqué until the end of June of the relevant year. The Board also announced the groups for each company subject to the corporate governance principles for the year 2023 by taking into account their market values according to their systemic importance and the market values of their shares that are being traded in its Decision dated 12 January 2023 and numbered 2/51.

Amendments in February

• Board Decision on Guideline on Investment Funds

The Board amended the Guideline on Investment Funds and regulated that the funds with "Money Market" and "Short-Term" in their trade names may be a party to reverse repurchase agreements in the BIST Equity Repo Market, up to 25% of the total fund value. In addition, the capital market instruments subject to reverse repurchase agreements to which the funds are a party to will not be considered in the calculation of the number of days to maturity and of the weighted average maturity and will not be considered within the scope of the second paragraph of Article 20 of the Communiqué on Principles Regarding Investment Funds No. III-52.1.

• BIST Repurchase Index

Borsa Istanbul announced its plans to calculate a new share index (BIST Repurchase Index) consisting of the shares of companies that implement a repurchase program to purchase their own shares. The information submitted under the “Repurchase Notification” such as the purpose of the repurchase, the date of the board of directors' resolution, the maximum duration of the repurchase program, the maximum number of shares to be repurchased, the maximum amount of funds to be paid to the shares, the number of shares repurchased until the notification date and the amount paid will be taken as basis when determining the companies to be included in the index. It was decided that the relevant companies will check the accuracy of these notifications and announce the updates, if necessary, on KAP until 17 February 2023.

• Changes in BIST KYD Indices Rule Set

Borsa İstanbul amended the BIST KYD Equity Indices Rule Set in line with the requests received from market participants and in line with the developments in the markets and changes arising from domestic and international legislation. These amendments and the current version of the rule set were announced on BIST website.

• Board Decisions following the Earthquake Affecting 10 Provinces

The Board adopted a number of decisions in order to counter the adversities arising from the earthquake that struck 10 provinces (Kahramanmaraş, Kilis, Hatay, Osmaniye, Adıyaman, Gaziantep, Şanlıurfa, Diyarbakır, Malatya, Malatya and Adana) on 6 February 2023, to ensure the functioning of capital markets in a reliable, transparent and stable environment and to protect the rights and benefits of investors, to minimize the negative impact of the earthquake on financial markets and to prevent possible investor disadvantages. These decisions set temporary rules primarily for those affected by the earthquake in relation to certain regulations including the Communiqué on Principles Regarding Financial Reporting in Capital Markets No. II-14.1, Communiqué on Margin Trading, Short Selling and Lending and Borrowing of Capital Market Instruments Serial: V, No: 65, and Communiqué on Principles of Investment Funds No: II-52.1. 

• Resolutions on Share Repurchase and Share Sale Information Form (i-SPK.22.7, i-SPK.128.19)

The Board issued new regulations in the form of principle decisions on (1) the share repurchase program process and (2) the thresholds for the share sale information form of publicly traded companies. The Board, with its principle decision numbered 9/177, reiterated that a share repurchase program of a public company may be initiated with a resolution of the board of directors of the company without requiring a general assembly resolution. This is in line with its previous announcements dated 21 July 2016 and 25 July 2016 and its resolutions numbered 34/959 (dated 23 June 2022) and 21/1023 (dated 21 August 2015). As per the relevant Board Decision, the resolution of the board of directors regarding the share repurchase program must be presented to the shareholders at the first general assembly meeting and subsidiaries of publicly traded companies may also continue their share repurchase programs without the need for a separate decision by the board of directors. 

In addition, the Board reduced the threshold for the obligation to prepare an information form for share sales by shareholders who directly hold more than twenty percent of the share capital of a public company, either alone or together with persons acting in concert, or who hold privileged shares that entitle them to elect at least one of the members of the board of directors or to nominate at least one of the members of the board of directors at the general assembly meeting, from ten percent to three percent. Moreover, as of 14 February 2023, if the sum of the sales made by shareholders within the past twelve-month period and the sales to be made by shareholders following this date exceed ten percent of the company's paid-in capital, regardless of the three percent threshold mentioned above, a share sales information form, as defined by the Board, must be prepared, and submitted to the Board for approval prior to such share sale. These regulations will remain in force until otherwise is decided by the Board. 

For more information about this subject you may refer to our detailed client alert published at: https://www.baseak.com/en/insights/articles/2023/february/20/new-rules-on-share-repurchases  

• Amendment to the Communiqué on Portfolio Management Companies

The Amending Communiqué to the Communiqué numbered III-55.1 on Principles Regarding Portfolio Management Companies and Their Activities (III-55.1.d), was published in the Official Gazette on 18 February 2023, entered into force on the same day and amended certain regulations on portfolio management companies ("PMCs"). As per the amendment, the limitations on the determination of (i) the minimum initial capital amount, (ii) the amount of shareholders' equity required based on the size of portfolio under management, and (iii) the minimum amount of paid-in capital were updated in line with the revaluation rate. In addition, it was explicitly stated that PMCs established in Turkey can manage the portfolios of PMCs residing abroad. Prior to the amendment, PMCs were allowed to outsource inspection services, internal control services, research services and risk management systems during their operations. Following the amendment, PMCs will be required to establish these service units within the company whereas it is regulated that PMCs may outsource fund service unit services and information systems services from investment institutions and other specialized institutions. In addition, the liaison offices were defined as service units tasked with the promotion of PMCs and their activities, and PMCs will be able to establish liaison offices in Turkey and abroad. The establishment of liaison offices must be registered and announced and other conditions to be met for establishing a liaison office were also regulated. Existing PMCs are now required to comply with these requirements regarding their capital and organization until 30 June 2023. However, in the event of reasonable grounds deemed appropriate by the Board, the deadline may be extended up to six months.

Amendments in March

• Communiqué on Precious Metals Standards and Refineries No: 2023/1

The Communiqué on Precious Metals Standards and Refineries (No: 2023/1) was introduced in the Official Gazette on 23 February 2023 and the previous Communiqué on Precious Metals Standards and Refineries (No: 2006/1) was abrogated. With the Communiqué, the principles regarding the establishment, operation, supervision and audit principles of precious metals standards and precious metals refineries, as well as the conditions for being included in and remaining on the BIST Refinery List were regulated.

• Updates to the Precious Metals and Precious Stones Market Procedure

Borsa Istanbul amended the Precious Metals and Precious Stones Market ("KMKTP") Procedure to reflect the recent legislative changes. The updated KMKTP Procedure was published on the BIST website.

• Amendment to the Derivatives Market Procedure

BIST amended the Derivatives Market Procedure to be effective as of 10 March 2023. The updated Derivatives Market Procedure was published on the BIST website.

• Amendments to the Regulation on Pension Investment Funds

The Board amended the Regulation on Principles of the Establishment and Operations of Pension Investment Funds in order to ease the operational burden and reduce the costs incurred by the founders of pension investment funds. As per the amendment, the obligation to register the prospectuses and any amendments thereto of pension investment funds with the trade registry and to publish the same in the Turkish Trade Registry Gazette ("TTRG") was abolished. Instead, in accordance with the amendment, the pension investment funds will have to register the place of publication of the prospectus/prospectus amendments with the trade registry and to announce it on TTRG. In addition, the Board's approval will no longer be required for the information forms of pension investment funds. These amendments were published in the Official Gazette on 10 March 2023 and entered into force on the same day. 

• Equity Market Categorization in Markets

As a conclusion of the evaluation study on the distribution of shares among markets, BIST determined the shares that will be traded on the Star Market, Main Market and Sub-Market as of 3 April 2023 and announced on its website.

• Periodic Changes to BIST Equity Indices

BIST announced on its website the changes in the BIST 100, BIST 50, BIST 30, BIST Liquid Bank, BIST Non-Bank Liquid, BIST Sustainability and BIST Sustainability 25 indices that will be valid for the second quarter of 2023.

• New Terms and Conditions for Warrants and Certificates

BIST amended the warrant and certificate trading principles in order to prevent errors in price formation and transactions in investment firm warrants and certificates. New Terms and Conditions for Warrants and Certificates were published on the BIST website.

• Periodic Changes to BIST-KYD Corporate Eurobond Indices

BIST completed the studies on the Eurobonds regarding BIST-KYD Corporate Eurobond Indices for the second quarter of 2023 and announced the new list on its website.

• Periodic Changes to BIST-KYD Fund Eurobond Indices 

BIST completed the studies on the Eurobonds regarding BIST-KYD Equity Fund Indices and BIST-KYD Debt Securities Fund Indices and announced the list of funds to be included/excluded in these indices on its website.

• Resolution on Sales Methods and Distribution Principles for the Initial Public Offering of Shares (i-SPK-128.21)

As per the Resolution dated 30 March 2023 and numbered 20/412, the Board amended the sales methods and distribution principles for the initial public offerings of the shares of private companies in order to protect the rights and interests of investors and to ensure equal practices among investors. Within the scope of the amendments, in relation to the initial public offerings, if the market value of the shares to be offered to the public is TRY 750,000,000 or less, the sale will be made by sale-on-stock exchange method. In cases where the market value of the shares to be offered to the public is TRY 750,000,000 and above and the sales method will be book building outside of the stock exchange, the following will apply: 

• Equal distribution will be applied for individual investors group and proportional distribution will not be allowed. 
• The number of shares that an investor can bid will not be more than 1/4 of the total amount of shares allocated to the group in which the investor is included.
• In case there is sufficient demand, the number of shares to be distributed for domestic institutional investors will not exceed 1% of the total amount of shares offered to the public.
• If there is sufficient demand to meet the amount allocated to an investor group at the end of the book building period, the shares allocated to the relevant group shall not be reallocated to another investor groups. In case there is insufficient demand in relation to an investor group, the remaining portion will be reallocated primarily to the domestic individual investor group. After this reallocation or if there is not sufficient demand to meet the amount allocated to the domestic individual investors group, the remaining portion can be freely reallocated to other groups.

Moreover, the shares purchased by institutional investors for their own portfolios cannot be transferred to individual investor accounts under any circumstances. Investors purchasing shares will not be able to sell the shares outside the stock exchange, transfer them to other investor accounts, or subject them to special order and/or wholesale transactions on the stock exchange for 90 days from the date the shares are transferred to their accounts. For the shares held by the existing shareholders of the company whose shares are offered to the public (except the shares offered to the public, if any), this restriction will be applied for 180 days from the date of approval of the prospectus and will also cover the sale on the stock exchange. These rules will continue to apply until otherwise is decided by the Board.