On August 1, the Turkish Capital Markets Board (the "CMB") introduced stricter rules for bank and brokerage firm record retention for investment activities and related ancillary services, bringing the rules into alignment with Turkish consumer protection rules.
What the CMB did
Through its new Communiqué on Documentation and
Record Retention for Investment Services and Related Ancillary
Services No. III-45.1, the CMB has harmonized the rules for
banks and brokerage firm customer agreements with Turkey's
rapidly-developing rules on distance selling and customer
protection. The communiqué also permits all documents to be
in electronic form, eliminating limitations on the medium through
which agreements can be concluded, provided record retention
requirements are satisfied.
To comply with these enhanced requirements, banks and brokerage
firms must:
- Enter into framework agreements with their customers prior to providing any investment services under "know-your-customer" rules. Amendments to the framework agreement require prior customer consent.
- Furnish pre-contractual information to customers in writing on the (i) the services to be provided by the bank or brokerage firm, (ii) the costs, charges and taxes associated with the services, (iii) customer cancellation rights and charges, and (iv) the conditions for unilateral termination and penalties in line with Turkish distance selling and customer protection rules.
- Furnish information to customers, either in person or electronically, regarding (i) general customer risks, such as price fluctuations, market risks and regulatory changes, (ii) customer-specific risks based on the capital market instruments traded, such as counterparty risks, liquidity risks, and market risks for leveraged transactions or risks associated with taking short or long positions for derivatives and options, (iii) the customer's classification (i.e., general or professional client), and (iv) their respective rights under the CMB's rules on providing investment services.
- Transparently process orders and provide documentation for transactions under the previous rules and inform customers of the transaction date, and provide monthly invoices.
- Maintain a record of customer complaints by recording the (i) name of the complainant; (ii) date of the complaint; (iii) summary of the complaint; (iv) the alleged violation of capital markets rules; (v) personnel subject to the complaint; and (vi) actions undertaken by the bank or brokerage firm.
- Maintain physical and electronic records of all transactions for at least 10 years (up from five years under the previous rules); maintain audio records for at least three years (up from two years). These retention requirements apply to bank and brokerage firm records of (i) customer orders; (ii) transaction documentation; (iii) investment advisory services; (iv) custody services; (v) reconciliations with Takasbank (i.e., the settlement institution); (vi) leveraged transactions; (vii) general investment advisory services; (viii) analyst reports; (ix) customer complaints; and (x) advertising and marketing activities.
- Have secure information technology systems in place to maintain instantaneous records of transactions and to protect customer privacy.
Framework agreements entered into before the communiqué's enactment must be renewed within one year after the CMB sets the mandatory content for framework agreements. The CMB is expected to issue guidance on the mandatory content for framework agreements in the near term.
Conclusion
Banks and brokerage firm document retention obligations have now been expanded in line with increasing consumer protection under Turkish law. Banks and brokerage institutions providing investment and related ancillary services must comply with the new rules by implementing new internal policies under the communiqué.
Please contact us if you have questions about how these changes might affect your company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.