Restrictions for Turkish Residents to Use Foreign Leverage Trading Forex Intermediaries and The Regulations Regarding Advertisement and Marketing Activities of These Services
Leverage trading that provides clients to access to the exchange markets online and to trade their money, which also known to the public as "forex", is a capital market activity that is under the duties and jurisdiction of the Capital Markets Board of Turkey when the "Communiqué on Leverage Trading and Principles Regarding Institutions That Can Perform These Transactions (Seri no: V; Code no: 125)” enters into force as of 31.08.2011. Within the framework of the regulations made, leverage trading transactions can only be carried out by the institutions authorized and licensed by the Capital Markets Board of Turkey. With these restrictions, it is clearly stated in the communiqué that institutions, organizations, and websites providing services to investors in any way for leverage trading transactions and mediate leverage trading apart from these permitted institutions will be faced with sanctions.
It is a violation of the Turkish Law related to capital market legislation that all kind of marketing, advertising and promotion activities of the foreign institutions that they carry out with all kinds of communication tools, including electronic media and services within the scope of leverage trading without permission under the Communiqué Serial: V, No: 125 for Capital Markets for Turkey.
With the amendment made by the “Communiqué Amending the Communiqué III-37.1 Related to the Principles Regarding Investment Services and Activities and Ancillary Services” of CMB dated 10.02.2017 some restrictions were imposed on the market. With the aforementioned regulations, leverage trading is not banned in Turkey but to open a leverage trading account became difficult for ordinary citizens. Residents of Turkey can still open a leverage trading account through the companies which are under the supervision of CMB. However, with this communiqué, the minimum margin amount was increased to 50.000 Turkish Lira to open an account in these companies, while the maximum leverage was reduced to 10: 1.
The local and foreign institutions which are intermediary in leverage trading from Turkey must be licensed by CMB according to regulations. The investor can check the licensed institutions on the website of the CMB. However, leverage trading transactions of intermediary institutions operating abroad or institutions without the presence in Turkey are subject to the legal regulations of the country in which they operate. It is out of the scope of the capital market legislation for investors to open accounts and make leverage trading transactions in line with their initiatives in the presence of institutions located abroad without prejudice to the provisions of Decision No. 32 on the Protection of the Value of the Turkish Currency
It is legitimate for Turkish residents to make investments through foreign-based leverage trading companies and it seems like it will be legal for a long time. With the “Protection of the Value Of the Turkish Currency” decision of Council of Ministers of Turkey issued on July 3, 2017, a step was taken formally, but it is not seen any restrictions in practice so far. According to the decision, residents of Turkey can only be made their investments with foreign currency through the organizations authorized by the Capital Markets Board if they are going to make their investments through leverage trading or by the other derivative financial instruments determined to be subject to the same provisions as leverage trading. If any Turkish citizen conducts leverage transactions by these websites originating from abroad and it is determined, the one will be fined under relevant law article. Despite the legal regulations, the legal infrastructure of the prohibition of the opening a leverage trading account abroad is not established, and it is a very contentious issue.
According to Article 11 and 16 of the CMB's Communiqué (Communiqué Related to the Principles Regarding Investment Services and Activities and Ancillary Services” code no: III-37.1) investment firms are not able to carry out brokerage and transaction mediation activities on behalf of organizations located abroad in leverage trading. Therefore, it is not possible within the framework of the legal legislation for mediator institutions residing in Turkey to operate activities such as promoting and marketing the services of intermediary leverage trading institutions residing abroad to investors.
However, as it is mentioned earlier that according to paragraph 1 of the article 9 of the Communiqué code numbered III-37.1, provided that foreign leverage trading intermediaries do not operate such activities that advertising, marketing or promoting of foreign leverage trading institutions for residents in Turkey, it is outside the scope of the said Communique that Turkish citizens invest in these foreign leverage trading intermediaries with their initiative.
This flexibility in the CMB Communiqué is in line with the related provisions of the "Decision No. 32 on the Protection of the Value of Turkish Currency”.
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Tuba Kızılkaya / Lawyer
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