Vardar Sanli

1.           Scope of the Law The Law on Certain Investment Funds Subject to Liquidation (the “Law”), published in the Official Gazette dated October 27, 2026 and numbered 33413, sets out the procedures and principles governing the liquidation of investment funds placed into liquidation pursuant to the decision of the Capital Markets Board of Türkiye (the “Board”) dated September 17, 2026, the recovery of assets unlawfully transferred out of such funds, the recovery of losses from the responsible parties and the payment of the amounts recovered to fund unit holders. Accordingly, the Law does not establish a general and permanent liquidation regime for investment funds. Instead, it provides for a special liquidation regime applicable exclusively to funds whose liquidation was ordered by the Board on September 17, 2026, but had not yet been completed as of October 27, 2026, the date on which the Law was published. 2.      Conduct of the Liquidation Process and Determination of Fund Unit Ownership 2.1.       Liquidation Process The Law aims to convert the assets of funds subject to liquidation into cash at the highest possible economic value, taking into account the common interests of fund unit holders. In this context, the Law allows fund assets to be sold through alternative methods other than ordinary stock exchange transactions. Where the Board determines that the price formed on the stock exchange does not reflect the actual value of the relevant asset or would delay the liquidation process, it may authorize the use of methods such as repurchases, sell-out rights against controlling shareholders, block sales, pre-agreed transactions reported to the exchange and the temporary application of different price margins. Sales outside the stock exchange may also be carried out at the request of the institution responsible for conducting the liquidation, subject to the Board’s approval. Such sales will not be subject to the restrictions set out in the Board’s regulations governing investment funds. The Board may also restrict purchasers of assets acquired through these methods from selling such assets on the stock exchange for a specified period or engaging in transactions producing an equivalent result. These provisions are intended, in particular, to reduce downward pressure on prices that may arise from the rapid sale of assets with low liquidity or the resale of purchased assets on the stock exchange and to increase liquidation proceeds. Amounts recovered during the liquidation process will be added to the fund assets after deduction of mandatory management and liquidation expenses, while amounts recovered after completion of the liquidation process will be transferred to a recovery account in a manner that prevents duplicate payments. The recovery account is a dedicated account maintained with the Savings Deposit Insurance Fund (the “SDIF”) for the purpose of monitoring amounts recovered under the Law. 2.2.       Fund Unit Ownership and the Treatment of Instructions Recorded in the PBLK Subaccount Pursuant to Article 3(5) of the Law, fund unit holders entitled to receive payments within the scope of the liquidation will be identified on a fund-by-fund and account-by-account basis through reconciliation carried out by the institutions responsible for conducting the liquidation, based on the records of the Central Securities Depository of Türkiye (the “CSDT”). In addition, fund unit holders whose participation units were blocked in connection with redemption instructions submitted to the Electronic Fund Trading Platform (the “EFTP”) on or before September 17, 2026, but which could not be executed due to the fund’s default or failure to announce the participation unit price, will also be subject to the liquidation provisions as fund unit holders. In its press release dated October 22, 2026, titled “Settlement Finality and PBLK Matters,” the Board also stated, in line with the relevant provision of the Law, that the submission of a redemption instruction for participation units to the EFTP does not, in itself, mean that settlement has been completed and that such investors will be subject to the same liquidation process as other fund unit holders. In this context, the provision set out in the Board’s decision published in Bulletin No. 2026/61 dated September 17, 2026, which required amounts corresponding to unexecuted redemption instructions to be recorded as liabilities of the fund and paid with priority from the cash generated during the liquidation process, is no longer applicable. Accordingly, investors whose participation units are blocked in the PBLK subaccount in the CSDT records will not be entitled to priority payment in respect of such instructions and will receive liquidation payments under the same principles as other fund unit holders. Article 3(6) of the Law further restricts the entitlement to receive payments of persons found to have been involved in certain violations of capital markets legislation. Accordingly, no payments will be made from the fund assets subject to liquidation or the recovery account to persons or entities identified by the Board as having committed the acts specified in Articles 104, 106 and 107 of the Capital Markets Law (Law No. 6362), where such acts were carried out by the funds subject to liquidation, jointly with such funds or with their participation, or as having acted in concert with those who committed such acts. 3.           Determination of Payment Amounts Pursuant to Article 4 of the Law, where the distributable cash generated from the conversion of fund assets into cash is insufficient to cover the total amount calculated based on the fund unit price applicable as of September 16, 2026, the day preceding the liquidation decision, payments to investors will be based on their net investment amounts. However, where the distributable cash generated during the liquidation process is sufficient to cover the total amount calculated by multiplying the applicable unit price as of September 16, 2026 by the number of participation units eligible for payment, payments to fund participants will be based on that unit price rather than their net investment amounts. The net investment amount will be calculated by the CSDT by adjusting the investor’s cash inflows into and cash outflows from the fund on a daily basis up to the liquidation date using the arithmetic average of the rates of change in the Consumer Price Index (the “CPI”) and the Domestic Producer Price Index (the “D-PPI”), and deducting cash outflows in accordance with the first-in, first-out (FIFO) method. In other words, amounts invested in and withdrawn from the fund on different dates will be adjusted to reflect their values as of the liquidation date, taking into account the effects of inflation, and withdrawals will be deducted starting from the earliest investments. As the net investment amount is calculated based on the date of each investor’s investment in the fund and their historical cash transactions, investors holding the same number of participation units in the same fund may have different net investment amounts and receive different payment amounts. Furthermore, holders of participation units who have generated a positive net return from the relevant fund and continue to hold fund units as of the liquidation decision may not receive any payment upon completion of the liquidation process. 4.           Interim Payments to Investors Pursuant to Article 4(2) of the Law, interim payments may be made to investors in funds designated by the Board, on account of the final amount to which they will be entitled upon completion of the liquidation process. In this context, investors whose net investment amounts in the funds designated by the Board are below TRY 1,000,000 may receive an interim payment equal to their net investment amount, while investors whose net investment amounts are TRY 1,000,000 or more may receive an interim payment of up to TRY 1,000,000. Interim payments may not exceed the investor’s net investment amount without indexation. For funds other than money market funds, the interim payment amount will also be limited to the total value of the participation units held in the investor’s account as of the end of the day preceding the payment calculation date. This value will be calculated by Takasbank based on information provided by the institutions responsible for conducting the liquidation. Example of Interim Payment Calculation: Assuming that the Board has authorized interim payments for the relevant fund, that the fund has sufficient distributable cash and that the investor is not subject to any statutory restrictions, an investor with an unindexed net investment amount of TRY 250,000 may receive an interim payment of TRY 250,000, while an investor with an unindexed net investment amount of TRY 750,000 may receive an interim payment of TRY 750,000. By contrast, interim payments to investors with unindexed net investment amounts of TRY 1,500,000 or TRY 3,000,000 may not exceed the upper limit of TRY 1,000,000. However, for funds other than money market funds, the interim payment amount is also limited to the total value of the participation units held by the investor as of the end of the day preceding the calculation date. For example, if an investor has an unindexed net investment amount of TRY 1,500,000 but the total value of their participation units as of the end of the preceding day is TRY 600,000, the maximum interim payment will be TRY 600,000. If the fund’s distributable cash is insufficient to cover all net investment amounts or interim payments in full, the Board may authorize payments to be made starting with investors whose net investment amounts are the lowest and/or determine a minimum interim payment amount applicable to all investors in order to ensure that the largest possible number of investors benefit from the payments. Participation units will not be redeemed when interim payments are made; redemption of such units will take place at the final liquidation payment stage. 5.           Voluntary Repayment Mechanisms Article 4(4) of the Law provides for two separate voluntary repayment mechanisms: a. Persons who redeemed their participation units and received payments before the liquidation date may voluntarily repay to the account designated by the Board the portion of their returns exceeding the inflation-adjusted value of their invested amounts as of the liquidation date, calculated using the arithmetic average of the rates of change in the CPI and D-PPI. b. Persons who derived gains from shares held in the portfolios of funds subject to liquidation that the Board has assessed as being subject to market abuse, insider trading or market manipulation may also transfer to the general share repayment account the portion of their returns exceeding the inflation-adjusted acquisition cost of the relevant shares, calculated using the same indexation method over the period during which the shares were held. Both repayment mechanisms are voluntary, and the calculation periods, methods for determining repayment amounts and other principles will be determined by the Board. As these repayments are voluntary, making a repayment will not, in itself, constitute an admission of debt or acceptance of legal liability, nor will it extinguish any civil or criminal liability arising under applicable legislation. 6.           Assets Unlawfully Transferred out of Fund Assets and the Liability Regime Pursuant to Article 5 of the Law, assets transferred out of fund assets in violation of applicable legislation or in formal compliance with such legislation but without any genuine economic purpose serving the interests of the fund will be regarded as loss or damage suffered by the fund. This provision covers cash, capital market instruments, goods, rights and receivables transferred to related parties, controlling shareholders, managers, persons under their control or other third parties through transactions such as loans, borrowings, advances, collateral arrangements, assignments, transfers of ownership, purchases, sales, repurchase transactions and similar arrangements, whether made without consideration or on a sham basis, as well as any assets replacing those transferred or any proceeds generated from their use or investment. In terms of liability, the portfolio management company acting as the founder and/or manager of the fund will be primarily liable for any loss or damage suffered by the fund. Where such loss or damage cannot be recovered in full or in part from the company, or where it becomes clear that recovery will not be possible, recourse may also be sought against natural and legal persons identified by the Board as responsible, as well as those found to have acted in concert with them, in their personal capacities. The departure of such persons from their positions will not relieve them of liability arising from acts and decisions made during their terms of office or management. During the recovery process, except in cases governed by special provisions concerning seized or confiscated assets, the Board will determine the amount of loss or damage suffered by each fund, identify the responsible persons and determine the amounts for which they are liable, and notify the SDIF accordingly. 7.           Recovery of Seized and Confiscated Assets Pursuant to Article 6 of the Law, cash and capital market instruments seized in investigations concerning offenses related to funds subject to liquidation may, where legally permissible, be returned to the relevant fund or transferred to the recovery account. As regards assets that cannot be directly returned, the SDIF may be appointed as trustee and may sell or liquidate such assets without awaiting the outcome of the proceedings, with the proceeds held in the recovery account. Assets ordered to be confiscated upon conclusion of the proceedings and determined by the court to have been transferred out of the fund assets or to correspond to losses suffered by the fund will, without being recorded as revenue to the Treasury, be transferred to the relevant fund or, if the liquidation has been completed, to the recovery account. Amounts held in the recovery account may be used exclusively for the liquidation of the relevant fund and payments to its fund unit holders, and may not be subject to attachment, provisional attachment or interim injunctions. After deduction of mandatory expenses, the recovered amounts will be transferred by the SDIF to the institution responsible for conducting the liquidation or, where the liquidation has been completed, to the Investor Compensation Center (the “ICC”) for distribution to fund unit holders in proportion to their participation unit holdings. The Law also provides that payments falling below the minimum payment threshold will be accumulated on behalf of the relevant investors and that the Board will determine the principles governing the distribution of amounts relating to more than one fund. 8.           Assessment and Conclusion The Law establishes a special liquidation and recovery mechanism aimed at converting the assets of investment funds subject to liquidation into cash, recovering assets unlawfully transferred out of such funds, recovering fund losses from the responsible parties and distributing the amounts recovered to investors. However, the Law does not guarantee that investors will be fully compensated for their losses. Payments to investors will be limited to the amounts generated from the conversion of fund assets into cash and the recovery processes. From an investor’s perspective, the possibility of receiving interim payments before completion of the liquidation process will allow investors to access a portion of the amounts to which they are entitled at an earlier stage. However, the TRY 1,000,000 upper limit on interim payments does not constitute a payment guarantee and actual payments will depend on the fund’s available distributable cash and the investor’s unindexed net investment amount. Furthermore, where distributable cash is insufficient, interim payments may be made in amounts lower than the net investment amount or no interim payments may be made at all. As the calculation of the net investment amount takes into account the effects of inflation, investors holding the same number of participation units in the same fund may receive different payment amounts depending on their investment dates and historical cash transactions. The amounts ultimately received by investors as a result of the liquidation and recovery processes will depend on the conversion of fund assets into cash while preserving their economic value and the recovery of losses arising from unlawful transactions from the responsible parties. The fact that no public funds will be used for payments to investors under the Law further demonstrates that such payments will depend on the resources available from the fund assets and the recovery processes. Furthermore, the SDIF’s authority to exercise its powers under the Law on the Procedure for the Collection of Public Receivables (Law No. 6183) and the Banking Law (Law No. 5411) in pursuing and recovering claims provides a strong legal mechanism for recovering fund losses from the responsible parties. In conclusion, the extent of protection afforded to investors under the Law will depend on how effectively the prescribed liquidation and recovery mechanisms are implemented in practice. In particular, the prices at which fund assets are converted into cash and the extent to which assets unlawfully transferred out of the fund assets can be recovered will determine the ultimate outcome of investors’ claims.