Debt securities in Turkey 2

In the first part of this series of articles I tried to shed some light on recent changes to Turkish legislation regarding corporate debt securities. The first communiqué, which dealt with the issuance of debt securities and was published by the Capital Markets Board (SPK), stipulated that the opinion of the stock exchange only be sought when the debt securities are planned to be listed on the stock exchange. This provision has been amended to read that the opinion of the stock exchange shall always be sought.

The first communiqué included the term “planned,” which was pretty ambiguous, so it is understandable that the lawmakers tried to get rid of this ambiguity. However, regarding debt securities that are not listed, it may be claimed that the new version of the provision has brought with it some unnecessary burdens.

I do believe the detailed and concrete explanation of the financial reports that must be included in the prospectus is correct and has brought the communiqué closer to the related EU regulations, i.e., the Prospectus Directive (2003/71/EC) and the Commission Regulation (EC) No 809/2004, commonly known as the Prospectus Regulation, implementing the said directive.

In relation to qualified investors, the communiqué stipulates that these investors must sign various documents, the elements of which shall be determined by the Capital Markets Board (SPK). This may be taken as a good effort aimed at preventing future conflict.

The last communiqué has also brought up the concept of “offering securities to qualified investors by calling on them to participate,” which was not included in the first one.

Reserved sale offers enjoy many exceptions, but when these offers are rearranged in an ordinary offering procedure, the amendment stipulates that the prospectus and the liability shall also apply, which constitutes another correct attempt aiming to protect investors.

I strongly believe that one of the most interesting amendments is about the provision regarding the liability of parties other than the offeror, such as financial intermediaries. According to the first communiqué, the brokerage house and the consortium partners (if there were any) had to sign the prospectus and the circular. Independent auditing firms were also held liable for their faults regarding the aforementioned documents. The new communiqué, however, only asks the brokerage house or consortium leader or leaders to sign the said documents.

By doing so, it considerably decreases the number of responsible parties in the case of misleading activities by the offeror and the others. Furthermore, the provision regarding the liability of the independent auditing firms has been fully removed from the text. While there are multi-billion dollar lawsuits going on, especially in the US, regarding the misleading activities of the aforementioned parties, it is difficult to explain why such a move from the former position of the provision has been created.

An issue that we believe is a technical mistake is that the term “Stock Exchange” has been put in the communiqué instead of ?stanbul Stock Exchange (?MKB) without defining the term. It would have been better to have the definition of this term in Article 3 titled Definitions and Abbreviations.

The two amending communiqués include some other amendments, most of which are only formal, and we have only mentioned those that are deemed to have some possible effects in practice.

One may find it odd to amend a relatively new communiqué twice in such a short period of time, but it should be taken into consideration that Turkish capital markets law is just on the way to creating a market, while US and EU capital markets laws have been formed by the market itself, i.e., they are market driven. We believe that several other amendments will be inevitable in the meantime as the current regulations will probably not fit the needs of the market then. Nonetheless, especially after the two amending communiqués, it is possible to claim that the current legal regulations of Turkey regarding issuing debt securities have come quite close to the related EU regulations.

Berk Cektir http://www.berkcektir.av.tr/ The information provided here is intended to give basic legal information. You should get legal assistance from a licensed attorney at law while conducting legal transactions and not just rely on the information in this corner. http://www.todayszaman.com info@berkcektirlaw. Photo by photoexpress.com.

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