Latest Legislative Amendments (2)
Amendment to the Communiqué on Principles of Investment Services and Ancillary Services (III.37.1)
The Communiqué on Investment Services and Activities and Principles Relating to Ancillary Services (III-37.1) has been amended with an amending communiqué published in the Official Gazette numbered 30216 and dated 20 October 2017 (the “Communiqué”). Overall, the purpose of the amendment is to clarify margining and reporting processes in leveraged transactions and the role of intermediary institutions in this regard, under Article 27/A of the Communiqué.
In this respect, it is clearly set forth that intermediary institutions shall keep and report clients’ margins on the basis of each client at Istanbul Clearing, Settlement, and Custody Bank Inc. (“Takasbank”) by opening client specific accounts at the central securities depository.
As for the timing aspect, intermediary institutions shall report and deposit client margins to Takasbank within the business day following the collection at latest. Importantly, intermediary institutions shall be liable for the accuracy of such transaction information reported to Takasbank.
Under the Communiqué, intermediary institutions’ reporting obligations have been expanded to updating client positions, i.e. profits or losses in client accounts, at Takasbank. It is also provided that clients shall be able to follow their own accounts as d in the system of Takasbank by intermediary institutions.
As for the characteristics of client accounts, Article 27/A of the Communiqué sets forth that clients’ net worth assets shall be transferred to and kept in sub-accounts opened at Takasbank, while the portion of gross worth client assets that is in excess of net worth client assets shall be transferred to and kept in additional margin accounts opened in the name of intermediary institutions at Takasbank. Importantly, such amount kept in additional margin accounts cannot be lower than the half of the difference between all clients’ gross worth assets and net worth assets. Otherwise, intermediary institutions shall top client margins up to the required minimum level.
Article 27/A of the Communiqué also applies to the margining process for clients residing abroad.
The amendment to the Communiqué shall enter into force on December 25, 2017. However, reporting obligations and the provision on transfer of funds into additional margin accounts shall become operational on January 2, 2018, subject to delay by Takasbank until January 8, 2018 in case of operational issues.
Amendment to the Regulation on the Establishment and Principles of Activities of Financial Leasing, Factoring and Financing Companies
The Regulation on the Establishment and Principles of Activities of Financial Leasing, Factoring, and Financing Companies has been amended with an amending regulation published in the Official Gazette numbered 30217 and dated October 21, 2017 (the “Regulation”).
Overall, the Regulation clarifies the application of existing rules to financial leasing, factoring and financing companies operating on interest-free basis, an aspect not previously regulated therein.
In this respect, articles of association of such companies (a document required by the Banking Regulation and Supervision Agency (the “BRSA”) in company establishment applications pursuant to Article 4 of the Regulation) shall clearly indicate the nature of business being on interest-free basis. Companies to be established accordingly shall also keep their operations on interest-free basis.
Moreover, Article 11 of the Regulation, which determines the conditions pursuant to which loans can be classified as subordinated debt and included in equity calculation as such, provides that loans concluded by companies operating on interest-free basis shall also be in line with general principles of interest-free loans for a subordinated debt treatment thereunder.
Another amendment under Article 11, which concerns all types of financial leasing, factoring, and financing companies (i.e. regardless of whether they run on interest-free basis or not), is that the BRSA might not allow the inclusion of loans into equity calculation in case where interest rates or dividend payments provided under such loans are not clearly indicated, or, they are excessively higher than rates or dividend payments under similar loans.
On the other hand, the BRSA might allow that assets irrevocably pledged in writing to a company by its shareholders for capital increase purposes, are included in equity calculation as subordinated debt, provided that (i) they do not generate interest nor dividend, (ii) in liquidation, they are subordinated to all other creditors but shareholders, and (iii) they are not linked to any kind of derivatives and other contracts.
The Central Bank’s Decision numbered 10507/20106
On October 5, 2017, the Central Bank of the Republic of Turkey adopted a decision numbered 10507/20106, which has been published in the Official Gazette dated October 18, 2017 and numbered 30214 (the “Decision”). The Decision allows Takasbank to act as settlement service provider between sellers and buyers of real estate in Turkey.
By way of background, in December 2014, Takasbank and the General Directorate of Land Registers signed a protocol providing the former with a new assignment to interact as intermediary between sellers and buyers of real estates. The main purpose was to create a risk free settlement process by simplifying cash and title transfer for real estate sales, and to prevent any kind of fraud, falsified money, and other crime related risks by using a secure online platform.
The Decision, which has now granted a license to Takasbank for title deed and cash settlement services, follows another decision of the Central Bank of Turkey adopted in June 2015, which provided Takasbank with licenses to act as “system operator” for equity and debt markets clearing services. It also granted authorizations for services ancillary to system operating in the context of securities borrowing transactions, trading of investment fund participation certificates, valuation and reporting of collective investment institutions’ assets, opening and supervising custody accounts before foreign correspondents for Takasbank members’ assets held abroad, cash transfer services, derivatives margining, among others.
In this respect, the legal basis of licensing a system operator for ancillary services is Article 17 of the Regulation on Activities of Payment and Securities Settlement Systems, which foresees that system operators might engage in services indirectly related to the operation of a system, upon authorization issued by the Central Bank, for improving, securing and simplifying the activities of system participants.
Against this background, the Decision has now expanded the existing scope of activities by allowing Takasbank to settle real estate sales and purchases.
The Law on Labour Courts
The Law on Labor Courts has been published in the Official Gazette dated October 25, 2017 and numbered 30221 (the “Law”).
Pursuant to Article 1, the purpose of the Law is to determine the constitution, territorial and organizational jurisdiction of labor courts as well as judicial procedures applied by such.
As for the constitution of labor courts, firstly, labor courts shall consist of one judge only and be established in regions where the need is determined by the Ministry of Justice.
Importantly, the Law introduces a mandatory mediation concept for the first time, an attempt to reduce the current overwhelming workload in labor courts. Pursuant to Article 3 of the Law which sets forth the details of the mandatory mediation process, employees and employers shall apply to a mediator before filing lawsuits for claims of compensation, claims arising individual or collective employment contracts, reinstatements. Since it is mandatory, in the case where parties fail to apply to a mediator initially, the lawsuit will be rejected due to non-satisfaction of lawsuit conditions in the preliminary examination phase. However, it should be underlined that the mandatory mediation requirement does not apply to lawsuits for pecuniary and non-pecuniary damages arising occupational accidents or diseases and lawsuits related thereto.
The mediator shall complete the mediation process within three weeks as of his/her appointment, subject to one week of extension in exceptional cases.
Similarly, pursuant to Article 4 of the Law, claimants shall first have recourse to the Social Security Institution for disputes related to social security legislation before filing lawsuits in courts.
The mandatory mediation process will apply as of January 1, 2018 while other provisions of the Law have entered into force upon publication.
The Regulation on the Deletion, Destruction, or Anonymization of Personal Data
The Regulation on the Deletion, Destruction, or Anonymization of Personal Data (the “Regulation”), has been published in the Official Gazette dated 28 October 2017 and numbered 30224.
As is known, on April 7, 2016, the Law on Data Protection numbered 6698 was published in the Official Gazette, and secondary legislation in respect thereof was awaited since then.
The purpose of the Regulation is to determine the principles and procedures applying to deletion, destruction and anonymization of personal data processed through automatic or non-automatic but systemic means, an obligation encumbered with data responsible -under Article 7 of the Law- when conditions of data processing no longer exist
The Regulation shall enter into force on January 1, 2018.
The New Mining Regulation
A new mining regulation has entered into force upon its publication in the Official Gazette dated September 21, 2017 and numbered 30187 (the “Mining Regulation”), and replaced the previous regulation on the Regulation on Practices of Mining Activities dated 2010.
The Mining Regulation, being an extensive piece of legislation, sets forth detailed provisions on procedures and principles for prospecting, mine processing, mining development and production in the context of the Mining Law dated 1985 and numbered 3213.
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