Crime of manipulation, regulated in the Capital Market Law No. 6362, is among the financial crimes. The legislator has sentenced the crime of manipulation to protect individual and institutional investors from market manipulations. Thus, deterrent and effective enforcement mechanisms were envisaged to ensure transparency and trust in the capital markets.
The capital market is a system in which financial intermediaries transfer the savers' funds to those who request funds. Fund demanders and fund suppliers establish relations through capital market institutions. The crime of manipulation regulated in Article 107 of Law No. 6362 primarily regulates the abuse of capital market instruments. A general definition of capital market instruments is regulated in Article 3 of the Capital Market Law as; "other capital market instruments determined by the Board to be within this scope, including securities and derivative instruments and investment contracts."
The capital market should have a transparent, stable, fair, and secure structure for a country to develop. Since the capital market is one of the cornerstones of the economic order, capital market crimes are stipulated in the Capital Market Law to ensure the healthy functioning and stability of the market, and penal sanctions are envisaged for these crimes.
Crime of Manipulation
This crime can be committed in two ways, based on transaction or information. In the transaction-based market fraud; regarding the prices, price changes, supply, and demand of capital market instruments;
- Those who buy or sell to create a false or misleading impression,
- Those who give orders,
- Those who cancel the order,
- Those who change the order,
- Those who perform account activities,
They are punished with imprisonment from three to five years and a judicial fine from five thousand days to ten thousand.
Legal and Material Subject of Crime of Manipulation
The first legal interest protected in the crime of manipulation is the national economy. The artificial manipulation of securities affects the prices of goods and services, bank interests in the short term, and the national economy directly suffers from that. In addition, with the regulation of this crime, the proper functioning of the capital market was also sought to be protected. If these values are violated, the market will lack fairness, transparency, reliability, stable and competitiveness. Manipulating capital market instruments in this way will adversely affect the economic interests of investors who offer and purchase securities. In the crime of transaction-based and information-based market fraud, the material subject is capital market instruments.
As the perpetrator does not show any characteristics in terms of transaction-based manipulation, it is not a specific crime. Therefore, in the legal definition of the crime, "those who make purchases or sell, give orders, cancel orders, change orders or make account activities" are defined as perpetrators. Since legal persons cannot be qualified as perpetrators, legal persons will be judged, and security measures specific to legal persons will be in question.
There are debates about who the victim is in the crime of manipulation. According to a view, the victim in the broad sense is the state, and the victim in the narrow sense is the investors. Since the legal interest intended to be protected by the crime of manipulation covers society in general, the victim can also be described as each individual that is a part of the society.
Transaction-based market fraud crime can be committed as commissive. It has been regulated as a crime that can be committed with an optional act because it is regulated as "... those who buy or sell, give orders, cancel orders, change orders or perform account movements to create a false or misleading impression."
In this context, a framework agreement between the investor and the intermediary institution should be made for capital market instruments to be subject to purchase or sale. The investor gives an order to the stock exchange member institution regarding the purchase or sale of the security. This order is transferred to the stock exchange system, and a buy-sell transaction takes place by overlapping with another party's buy or sell order. In transaction-based market fraud, the important thing is to match the buying-selling transaction or transmit the orders of the person who wants to invest and the person who wants to sell to the stock market. The crime in question is realised by the formation of prices in the stock market and, in the meantime, the prices to be affected by manipulation.
When placing an order, the investor instructs the intermediary institution to purchase or sell capital market instruments. The result is realised when the instruction is transmitted to the stock market through the intermediary institution. If the orders transmitted to the system do not match with counter orders in the market, the order can be cancelled. In return for a certain fee, the order can be cancelled completely, or the amount of the order can be reduced. In case of cancellation of the order, there is no need for the initial order to be unlawful; its cancellation with a manipulative purpose is penalised.
Transactions transmitted to the exchange can be changed before they are transacted on the exchange. This order change is carried out by intermediary institutions per the principles specified by the Borsa İstanbul A.Ş. Board of Directors. Performing account activities; making a transfer between accounts means a transfer. By regulating account movements as one of the optional forms of action within the scope of article 107, it is aimed to prevent manipulation from being committed by using the perpetrator's accounts or the accounts of others.
It is a crime that can be committed intentionally in terms of the moral element of the crime. A specific motive is sought since the legal definition of the crime includes the phrase "with purpose." There is special intent. Therefore, the perpetrator must act with a specific intent to "create a false or misleading impression." For both forms of the crime regulated under Capital Market Law article 107, indirect intent or negligence will not be possible.
The reasons for justification are regulated in article 108 of the Capital Market Law. In this context:
Applying policies of money, foreign exchange rate, public debt management, or realising transactions aimed at providing the financial stability by the Central Bank of the Republic of Turkey or another authorised official institution or persons acting on behalf of them,
Repurchase programs applied according to the Board regulations, share acquisition programs directed to workers or allocation of other shares directed to the workers of the issuer or their subsidiary,
Making the purchase and sale of capital market instruments or giving or cancelling orders to support exclusively the market price of these instruments for a pre-determined period, provided that these operations are performed in conformity with the regulations of the Board in the context of this Law regarding the price stabilising operations and market maker, are not considered as manipulation. These reasons are accepted as justification in the case of the transaction-based market.
Manipulative Transaction Types Determined By The Capital Markets Board
The most common form of transactional manipulation is wash sales; It is an apparent purchase and sale transaction, but the owner does not change because the buyer and seller are the same people. If the parties agree in advance and ensure that the orders are matched (matched order), it is the situation where another investor knows that the time-quantity-price will meet the requested orders. In addition, the methods of concentration (runs) and impossible orders (spoofing), limiting supply (corner), and opening-closing market manipulation are also considered manipulative transactions.
The crime of information-based manipulation is regulated under paragraph 2 of Article 107 of the Capital Market Law as a crime that anyone can commit so that it is not a specific crime. The victim is defined as every individual since the value protected in both crime types is the same.
Information-based manipulation crime is also a crime with an optional act. In this context, "giving false or misleading information, making rumours, giving news, making comments or preparing reports or spreading them" is counted as an optional act. If only one of these acts has happened, the crime is accepted to be committed. Giving information about the values of capital market instruments; occurs in the form of giving false information about a company's financial situation by deliberately increasing or decreasing some items related to its financial statements.
Making rumours is seen as creating a negative opinion in the form of revealing false information about capital market instruments and saying that it is bankrupt. Making news that will affect a company's reputation in the stock market is one of the elective acts within the scope of the crime. Because the news spreads so fast, it creates a difficult situation for investors; their reputation is damaged.
It is also considered an optional move to comment on the results of a certain event on the capital market and its instruments and prepare a report reflecting the financial situation in a way that arouses a wrong opinion.
Contrary to transaction-based manipulation, the crime of information-based manipulation, which is regulated in the second paragraph of Article 107, is not a mere act crime. In the legal definition of the crime, it is stipulated to provide benefits in addition to the optional actions. For this reason, even if one of the elective acts takes place, a crime will not occur without obtaining benefits.
Both transaction-based and information-based manipulation crimes are crimes that are suitable for an attempt. Since transactional manipulation constitutes a purely act crime, an attempt is possible if the transaction is divisible. In the case of information-based processing, the crime remained in the attempt stage if the benefit could not be obtained because the benefit was sought in terms of the result.
In the case of transaction-based manipulation, if more than one act is committed on different days within a certain time (one month, three months, two years, etc.), successive offence provisions will be applied. In the same way, a chain crime will also be in question if multiple selective actions are carried out at different times within the scope of a single information-based decision to commit the crime of manipulation.
If more than legal provision is violated due to an act committed, the penalty will be given according to the most severe one. For example, in the case of information-based manipulation (the company's official active in the capital market gives false information to influence the investors' decision), the crime of false information about companies or co-operatives is regulated in Article 164 of the TCC is also committed. Since the penalty for the crime of information-based manipulation is higher than the other, a ruling will be made in Article 107 of the Capital Market Law.
It is possible to commit the crime of manipulation in co-perpetration, indirect perpetration, partner (incitement and helping). In this context, the provision of Article 107 does not have any feature in terms of complicity.
Both imprisonment and judicial fines are envisaged for transaction-based and information-based manipulation offences. These two penalties are not optional; they are arranged together. It is regulated that the judicial fine to be imposed in terms of transaction-based manipulation should not be less than the benefit obtained from the crime.
It is regulated that in case of transaction-based manipulation, it will be punished with "three to five years imprisonment and a judicial fine from five thousand days to ten thousand days", and in case of information-based manipulation, it will be punished with "three years to five years imprisonment and a judicial fine of up to five thousand days".
Effective remorse provision is included in terms of transaction-based manipulation regulated in Article 107/1. According to this, transaction-based manipulation, "the person who committed the crime shows remorse and transfers money, not less than five hundred thousand Turkish Liras, twice the amount of the benefit they have obtained or caused to be obtained, to the treasury."
a) If he pays before the investigation starts, no penalty
will be imposed.
b) If paid during the investigation phase, the penalty to be imposed is reduced by half.
c) The penalty to be imposed reduced by one-third if paid until the verdict is rendered during the prosecution phase.
Adequate remorse has not been foreseen for the crime of information-based manipulation.
According to the decision of the First Chamber of the Council of Judges and Prosecutors dated 09/05/2013 and numbered 864, the Criminal Court of First Instance was appointed for the crimes within the scope of the Capital Market Law.
In terms of manipulation, the crime was committed in Istanbul, where Borsa Istanbul is located. Therefore, the Istanbul Criminal Courts of First Instance was authorised.
Related Article: Buying a Shelf Company in Turkey.
- Coşkun, Seçil. Manipulation Crime in the Law of Capital Market. (Ankara: Ankara University, Institute of Social Sciences, Master's Thesis, 2020).
- Duman, Buminhan. Manipulation Crime (Manipulation) in the Law of Capital Market (Ankara: Adalet Press, 2020).
- Paşaoğlu Köroğlu, Duygu. Manipulation Crime in the context of Art. 107 of Capital Market Law (İstanbul: Medipol University, Institute of Social Sciences, Master's Thesis, 2019).
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.