Advertisements and Announcements Made within the Framework of Capital Markets Legislation
Introduction
Information holds paramount importance in the capital markets. Investors, whether seasoned professionals or newcomers, depend on various sources to guide their decisions amidst the complexities of the capital markets. In this dynamic environment, advertisements stand out as influential tools, capturing attention, shaping perceptions, and potentially guiding investment choices. Within the realm of capital markets, characterized by high stakes and complex dynamics, the content and dissemination of advertisements demand careful examination. The implications of these advertisements are essential for upholding market integrity, ensuring transparency, and safeguarding investors’ interests. Therefore, this newsletter examines the capital market regulations, especially those about security issuance, within the framework of capital market legislation, which need to be carefully observed.
Advertisements and Announcements in General
To ensure that securities are traded safely and stably and to protect the rights and interests of savers, the Capital Markets Board published the Communiqué on the Principles to be Followed in the Announcements and Advertisements of Joint Stock Companies whose Securities are Publicly Offered and Institutions Engaged in the Trading of Securities (Series: VIII, No: II) (Communiqué on Announcements and Advertisements) in the Official Gazette dated 27.12.1985 and numbered 18971. The Communiqué on Announcements and Advertisements applies to the announcements and advertisements of (i) offerers or issuers of securities and negotiable instruments, (ii) intermediary institutions, banks, and other auxiliary institutions, (iii) other members of stock exchanges. Under the Communiqué on Announcements and Advertisements, “All kinds of written, verbal or visual statements, advertisements, announcements and publications made to the public in all kinds of documents, press and broadcasting organs, brochures and flyers distributed to the public regarding the offering and sale of securities or the promotion of companies and organizations, except for the announcements that are subject to a special regulation by the capital markets legislation,” are considered as announcements and advertisements.
The issuance of announcements and advertisements by those within the scope of the Communiqué on Announcements and Advertisements does not require the permission or authorization of the Capital Markets Board.
However, there are certain qualifications that advertisements and commercials must bear. These qualifications are set out in Article 3 of the Communiqué on Announcements and Advertisements. Accordingly, the advertisement;
- shall be in line with the severity of the business,
- shall not lead to excessive expenses,
- shall not contain exaggerated, sensational, unrealistic, deceptive and misleading words, images and information that deceive and mislead the public, exploit their lack of knowledge and experience, and should be to enlighten the public correctly,
- shall clearly state the true nature of the securities and services offered to the public; their prices, proceeds and fees; and information on the terms of sale of the securities in a manner that leaves no room for misunderstanding,
- The activity that the advertiser wants to announce to the public shall be realizable,
- Announcements and advertisements regarding the sales to be made through a public offering of securities shall not carry information other than those in the prospectus and circulars and shall not mislead the public,
- The nominal and paid-up capital of the organization issuing the announcement and advertisement, the address and telephone numbers of the headquarters shall be included in the written announcements.
If the Capital Markets Board detects any violation of these principles, it may suspend or prohibit the announcements and advertisements. Persons who request the publication of the advertisements or announcements are criminally liable for the failure of such advertisements and announcements to meet the qualifications set forth above. The responsibilities of intermediary institutions are also regulated in the Communiqué on Announcements and Advertisements. Accordingly, intermediary institutions undertaking the public offering of securities in the primary market are responsible for the announcements and advertisements to be made about these activities.
Advertisements and Announcements of Investment Institutions
A special regulation on advertisements and announcements of investment institutions is outlined in the Capital Markets Board Communiqué on the Principles of Establishment and Activities of Investment Institutions (III-39.1). Investment institutions cannot, as a rule, guarantee absolute return and/or guarantee against loss, in their publications, announcements, notices, announcements and advertisements. If numerical data on financial status (such as the size of the portfolio under management, number of clients, trading volume, etc.) are to be included in the advertisements, reference should be made to the publications of public institutions and organizations or to the sources of professional organizations specialized in finance. There are other specific issues that intermediary institutions should pay attention to in their advertisements regarding leveraged transactions. Investment institutions are obliged to keep a copy of all publications, announcements, notices and advertisements regarding investment services and activities for ten years under the Communiqué on Documentation and Recording Order Regarding Investment Services and Activities and Ancillary Services (III-45.1).
Advertisements and Announcements of the Members of the Turkish Capital Markets Association
Article 19 of the Professional Rules to be Followed by the Members of the Capital Markets Association of Turkey in the Conduct of Capital Market Activities stipulates that the members of the Capital Markets Association of Turkey (CMA) must be honest and realistic in their announcements, advertisements, commercials and promotional campaigns, and must avoid unfair competition. In this context, the announcements and advertisements of CMA members should not contain subjective and exaggerated expressions such as “the best”, “the most reliable”, “the most robust”, “the least”, “the lowest”, “the most preferred”, “the most profitable” and similar subjective and exaggerated expressions. Advertisements, announcements and notices should not make any guarantee commitment against absolute return and/or loss, and should avoid using expressions that may mislead investors. They should not disparage other members, their products and services, and should not use expressions and images that create the impression that one member is more reliable than another. If the advertisement mentions an award given to a CMA member, information on the source of the award should be included. Numerical data on the national economy, capital markets and intermediary institutions included in advertisements must be published or approved by the competent authorities, and sources must be cited for other data.
Advertisements and Announcements in the Issuance of Capital Market Instruments
Under Article 7/3 of the Capital Markets Law, announcements, advertisements and disclosures regarding the issuance of capital market instruments shall be consistent with the prospectus and shall not contain untrue, exaggerated, and misleading information. The Communiqué on Prospectus and Issuance Document (II-5.1) sets forth more detailed regulations on advertisements to be made for the public offering of capital market instruments. Accordingly, advertisements for public offerings
- shall not cause investors to get wrong ideas about the situation of the offeror, the relevant capital market instrument, and the guarantor, if any;
- shall be consistent with the information in the prospectus;
- If the public offering price is included, shall clearly state that the Capital Markets Board or the stock exchange does not have any discretion or approval in determining the price;
- It should be clear from the text that it is an advertisement;
- shall include a warning that investment decisions should be made by reviewing the prospectus.
The Communiqué on Prospectus and Issuance Document makes a distinction between advertisements made before and after the approval by the Capital Markets Board and publication of the prospectus. In advertisements made before the approval of the prospectus, it should be stated that the prospectus has not yet been approved; if the prospectus has been approved but not yet published, the advertisement should provide information on where the prospectus will be published. In advertisements made after the approval and publication of the prospectus, the places where the prospectus can be obtained and the websites where the prospectus is announced, including the Public Disclosure Platform, should be specified. However, under Article 22 of the Communiqué on Prospectus and Issuance Document, the approval of the prospectus may not be used for advertising purposes, and expressions that explicitly state or give the impression that the approval of the prospectus means the guarantee of the Capital Markets Board cannot be used. If capital market instruments will be sold only to qualified investors, the definition of qualified investors and the fact that the sale will be made only to qualified investors who meet the necessary conditions shall be included in the advertisement.
In addition, in the public offering of shares, the results obtained from the book-building under Article 20/7 of the Communiqué on Shares (VII-128.1) may not be disclosed to the public in any way and may not be used for advertising purposes.
After the public offering of capital market instruments, issuers and offerors are obliged to send the advertisements to the Capital Markets Board. Under Article 24 of the Communiqué on Sale of Capital Market Instruments (II-5.2), within ten business days following the expiration of the sales period of the capital market instruments, the issuer or the offeror must send a copy of the relevant pages of the printed media and visual broadcasting records where the advertisements are published to the Capital Markets Board. This obligation may be fulfilled by the intermediary institutions.
Conclusion
In various sections of capital market legislation, specific regulations regarding the advertisements of entities subject to these regulations are outlined. It is observed that these regulations are similarly crafted with the aim of investor protection. Despite the existing similarities, it is imperative to consult the relevant legislation for each transaction individually.
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