Parliament approved legislation on Oct. 22 allowing interim payments of up to 1 million Turkish Liras to eligible investors in troubled funds and setting rules for recovering assets to cover losses.
The measure will take effect after presidential approval and publication in the Official Gazette.
It covers funds ordered into liquidation by the Capital Markets Board (SPK) on Sept. 17 whose liquidation remains unfinished.
An amendment adopted during the parliamentary debate also includes investors whose redemption orders were submitted on or before Sept. 17 but could not be completed because the funds defaulted or stopped publishing unit prices.
Interim payments will be based on investors’ actual cash deposits and withdrawals, without inflation adjustment, and deducted from their final settlement.
Investors with net investments below 1 million liras may receive that amount, while those above the threshold will be eligible for a maximum of 1 million liras.
If available cash is insufficient, the SPK may prioritize investors with the smallest net investments or set a common minimum interim payment.
Except for money market funds, payments also cannot exceed the value of investors’ holdings calculated for the payment date.
Where fund assets fall short of pre-liquidation valuations, net investment calculations for final settlement will include an inflation adjustment based on the average change in consumer and domestic producer price indices.
The legislation places primary responsibility for losses on the portfolio management companies that founded or managed the funds.
If recovery from those companies is insufficient or impossible, individuals and companies identified by the SPK as responsible, including those acting jointly with them, will be personally liable.
The Savings Deposit Insurance Fund (TMSF) will pursue recovery from their assets, with proceeds held in separate accounts for each fund.
Where appointed as trustee, it will be able to sell assets before court proceedings conclude.
The law also allows voluntary returns of gains exceeding an inflation-adjusted benchmark.
Those found by the SPK to have participated in market abuse, insider trading or manipulation will be excluded from payments.
The SPK may authorize alternative asset sales, including off-exchange transactions, to protect investors’ recovery values.
Meanwhile, cash payments and asset transfers have reached 49.7 billion liras across 55,755 accounts, the Communications Directorate said following an Oct. 22 meeting of the Fund Coordination Board chaired by Vice President Cevdet Yılmaz.
The number of funds still undergoing liquidation has fallen from 131 to 47. Liquidation of 18 of Hedef Portföy’s 31 funds was completed by Oct. 21, with 8.9 billion liras paid to 10,008 accounts.
Work continues on its remaining 13 funds.
In the related criminal investigation, five more suspects, including former ruling Justice and Development Party (AKP) lawmaker Ertan Aydın, were detained, bringing the number taken into custody in the latest operation to 31.
A court also ordered 11 suspects remanded in custody.
