Investment Services Rules in Turkey: Communiqués III-37.1 and III-39.1 on Client Classification, Best Execution, Client Assets and Broker Conduct

Every foreign institution that trades on Borsa Istanbul does so through a Turkish investment firm, usually a brokerage house or a bank. The conduct rules those firms must follow are set out in two SPK communiqués: III-37.1 on investment services and III-39.1 on investment firms. Firms must act under a written framework agreement, with the obligation of best execution and duties of care and loyalty, and as prudent merchants (III-39.1 Art. 24). They must classify every client as professional or general; professional clients, a category that includes foreign banks, fund managers, pension funds and insurers, lose some protections, and must be told in writing which ones before any service is provided (Arts. 30–31). Client orders must be executed with the best possible result for the client in light of its preferences on price, cost, speed, settlement and counterparty (III-37.1 Art. 30). Client cash and securities must be kept separate and may not be used without the client’s express written consent (Capital Markets Law Art. 46). Custody records must be reconciled daily with the central depository, and unresolved differences escalated to the board and to SPK within three business days (III-37.1 Art. 65). Firms may not encourage unnecessary or excessive trading or trade without the client’s instruction (III-39.1 Art. 56). This guide explains these rules for foreign institutional investors and their counsel. It reflects the legislation in force as at 25 October 2026.

Why broker conduct rules matter in the 2026 cases

In the course of the 2026 fund and market manipulation cases, SPK stopped the activities of several brokerages. Questions about brokers arise in several ways for foreign investors: whether client assets are intact and where they are, whether orders were executed properly, whether accounts were used by others, whether a broker’s research or advice was conflicted, and what happens to client assets when a broker stops operating. The answers depend partly on the general law of mandate and commission, and partly on SPK’s detailed conduct rules. The general civil law framework, including the forum, mediation and limitation, is explained in the guide to claims against brokers, custodians and portfolio managers. This guide concentrates on the regulatory rules that define what a Turkish investment firm must do.

The guide does not suggest that any investment firm breached these rules. Whether a particular firm did so is a question of fact for SPK, the courts and, where relevant, the criminal authorities.

The legal framework

Investment services may be carried on as a regular business only with SPK’s authorisation and only by investment firms (Capital Markets Law Art. 39(1)); persons not authorised may not provide them even if a special law authorises them (Art. 39(5)). Investment firms are brokerage houses, banks and other capital market institutions authorised by SPK to provide investment services (Art. 3(1)(v)); they must be members of the Capital Markets Association and participate in the Investor Compensation Center (III-39.1 Art. 24(2)).

Investment services and order routes

The investment services that require authorisation are: receiving and transmitting orders; executing orders on behalf of clients; dealing on own account; portfolio management; investment advice; underwriting with or without a firm commitment; operating multilateral trading systems and other organised venues outside an exchange; and safekeeping and administration of capital market instruments for clients (Capital Markets Law Art. 37(1); III-37.1 Art. 4(1)).

Three trading roles are distinguished. In order transmission, the firm passes client orders to another firm authorised to execute them. In execution, the firm executes client orders, in the client’s name or in its own name for the client’s account, by sending them to an exchange or organised venue, to a firm authorised to deal on own account, or, except for leveraged transactions, to a firm abroad licensed by its home regulator (III-37.1 Art. 16(1)). In dealing on own account (portfolio intermediation), the firm is itself the counterparty. Where several firms take part in a transaction, each is liable under the general law for the transactions it carries out, and the limits of each one’s responsibility are set in their contracts with each other and reflected in the framework agreements with clients (Art. 31).

Cross-border routes are regulated. Turkish firms transmitting orders to or executing through foreign licensed firms must notify SPK beforehand and enter written contracts; the client must sign framework agreements with both the Turkish firm and the foreign firm, and copies of all documents must be kept at the Turkish firm and shown to the client on request (Arts. 15 and 20). In the other direction, before opening accounts for foreign banks and brokers, a Turkish firm must obtain their undertaking to provide the identity of the clients for whose account they trade (III-39.1 Art. 29(5)). For a foreign institution holding Turkish shares through a global custodian, this means that its identity can be obtained by the Turkish broker when needed.

Opening the relationship

Before trading with a client, an investment firm must sign a written agreement for the services it will provide. It is a framework agreement, concluded once, that governs the relationship in general and forms the basis of individual transactions; SPK sets its minimum content (III-39.1 Art. 26(1)). The client receives a certified copy (Art. 26(3)). Framework agreements may not contain provisions contrary to capital markets legislation, provisions that seriously harm clients’ rights or give the firm extraordinary unilateral rights, or provisions that place the burden of proving orders on the client (Art. 26(5)). Matters not covered by the agreement are governed by the general law (Art. 26(6)).

Each client receives a client number, and before any order is accepted a client custody sub-account is opened at the authorised settlement and custody institution and/or the Central Registry Agency (MKK) and matched with the client number through a registry number (Art. 27(1)–(2)). A firm may not accept orders from accounts without a matched registry number (Art. 27(4)). Identity is verified under the anti-money laundering legislation before an account is opened (Art. 29(2)). Only the client, or persons authorised by the client through a power of attorney drawn up by a notary, may trade on the account, and the attorney’s identity is reported to the settlement institution or MKK (Art. 29(4)). Trading on another person’s account without such a power of attorney is also a market-disrupting act (Communiqué VI-104.1 Art. 7(2)), as explained in the guide to market-disrupting acts.

Professional and general clients

Investment firms must classify all clients as professional or general, provide services and meet their obligations according to that classification, and tell clients their class and their right to change it (III-39.1 Art. 30(1)–(2)). Professional clients are those with the experience, knowledge and expertise to make their own investment decisions and assess the risks they take. They include brokerage houses, banks, portfolio management companies, collective investment schemes, pension investment funds, insurance companies, mortgage finance institutions, asset management companies and equivalent institutions established abroad; pension and assistance funds; public institutions, the Central Bank and international organisations; institutions SPK accepts as similar; companies meeting at least two of three size thresholds set in the Communiqué; and clients treated as professional at their request (Art. 31(1)). A general client may ask to be treated as professional if it meets at least two of three criteria on trading activity, financial assets and professional experience, and SPK may change the amounts (Art. 32(1)–(2)). All other clients are general clients (Art. 31(4)).

Two safeguards apply to professional clients. Before providing any service, the firm must inform them in writing of the provisions of the legislation from which they cannot benefit (Art. 31(2)). And a client who does not wish to be treated as professional and says so in writing must be treated accordingly (Art. 31(3)).

The conduct duties described below, including best execution, loyalty, care, conflicts management, segregation and the prohibitions in Article 56, apply to professional clients as well.

General conduct principles

Investment firms must carry on their activities in accordance with the framework agreement, the obligation to execute client orders in the best way, and the duties of care and loyalty; behave as prudent merchants and exercise the professional care the business requires; use their resources efficiently; and ensure adequate information and transparency in all matters concerning the client (III-39.1 Art. 24(1)). Staff must exercise the care and diligence a careful and prudent person would show in the same circumstances; the minimum is full compliance with the framework agreement, SPK’s rules, the Association’s rules and the firm’s own standards (Art. 21). Firms and staff must act honestly and impartially and allow no interference with their honesty and impartiality (Art. 22).

These regulatory duties sit alongside the civil law. A broker executing orders for a client owes the duties of an agent: to follow instructions, to act loyally and with the care expected of a prudent agent in a similar field, and to account for what it receives (Code of Obligations Arts. 505, 506 and 508). Where an obligation is not performed or not performed properly, the debtor must compensate the loss unless it proves that it was not at fault (Art. 112).

Conflicts of interest

An investment firm must act fairly and honestly, having regard to its clients’ interests and the integrity of the market (III-39.1 Art. 11(1)). It must set up an organisation and take administrative measures to prevent conflicts between itself, its shareholders, staff and managers and persons related to them on one side and its clients on the other, and between clients (Art. 11(2)). Where a conflict cannot be prevented for reasonable reasons arising from the functioning of the market, the firm must inform the client of its nature and causes before providing the service, and the burden of proving that it did so is on the firm (Art. 11(3)). A written conflicts policy approved by the board is required (Art. 11(4)), and the conflict rules may not be used to justify unlawful transactions (Art. 11(5)).

Some conflict rules are specific. In leveraged products where the firm is the client’s counterparty and the client’s loss is the firm’s gain, the conflict must be stated in the risk disclosure form (Art. 25(4)). Where an executing firm routes orders through a firm dealing on own account, it must execute client orders before orders at the same price for its own account or for related persons (III-37.1 Art. 19(1)(c)(3)). Firms must keep client orders confidential, and client order information may not be passed to or used by a third party against the client and for the third party’s benefit without the client’s knowledge (Art. 19(1)(f)). When dealing on own account, prices must be set objectively in line with general market conditions and fair values (Art. 24(1)(b)).

Risk disclosure and the appropriateness test

Before signing the framework agreement, the firm must explain to general clients the general risks of capital market instruments and investment services, give them the prescribed general risk disclosure form and obtain a written statement that it has been read and understood (III-39.1 Art. 25(1)). Before providing brokerage services, it must also explain the risks of the instruments concerned, including all commissions, fees and taxes, whether there is a secondary market, the risk profile including counterparty, liquidity and market risk, any market maker and issuer, and how risks will be monitored, with additional information for transactions abroad (Art. 25(2)–(3)). Explanations should use numbers or concrete examples rather than general statements or references to regulations (Art. 25(3)), and the burden of proving that disclosures and updates were made is on the firm (Art. 25(6)).

The appropriateness test determines whether a general client has the knowledge and experience to understand the risks of the product or service marketed or requested. It is required only for general clients, and only for brokerage and underwriting (Art. 33(1)). The firm collects information on the client’s investment objectives and its knowledge and experience, including past transactions (Art. 33(3)). If the client gives no or incomplete information, or the product is not appropriate, the firm must warn the client in writing, and in the latter case may not give the client one-to-one recommendations for that product; whether to proceed at the client’s request is then for the firm (Art. 33(8)–(10)). The forms, supporting documents and warnings must be kept for the period required by SPK’s record rules (Art. 33(11)).

Brokerage houses must also allocate trading and position limits to clients by transaction type and instrument, taking into account their financial position, risk level and collateral, and ensure that clients’ trades stay within the law and the firm’s risk policy (Art. 30(5)).

Order execution and best execution

When carrying out brokerage, an investment firm must execute orders so as to obtain the best possible result for the client, under its order execution policy, taking into account the client’s preferences on price, cost, speed, settlement, custody, counterparty and similar matters (III-37.1 Art. 30(1)). Where the client has given an express instruction to send the order to a particular institution or market, the firm is deemed to have met the best execution obligation (Art. 30(2)). Orders are accepted and executed under the execution policy, the framework agreement, the best execution obligation and the duties of care and loyalty; orders requiring exchange trading also follow the exchange rules (Art. 19(1)(a)–(b)).

Firms accepting orders electronically must observe priority rules between electronic and other channels and disclose and prevent inequalities between them (Art. 35(2)(a)). Their systems must allow all orders to be sequenced by time of receipt, and must record in real time the date, time, quantity, price and all other elements of all transactions, including rejected, unexecuted, cancelled and modified orders, as well as account movements and the price information shown to clients (Art. 35(2)(d)). They must take security measures to prevent use of the platform by third parties without the client’s consent and review regularly whether this is happening (Art. 35(2)(f)).

What brokers may not do

Article 56 of Communiqué III-39.1 lists acts that brokerage houses may not carry out. Banks providing investment services are bound by limbs (e), (f), (g), (h), (ı), (i) and (j) (Art. 56(2)).

Several of these limbs bear directly on manipulation allegations. Fictitious accounts and off-book transactions (h), staff trading on clients’ behalf under broad powers (ı), and funding clients to trade or to join a group (j) are the mechanics through which accounts can be used in coordinated trading. The criminal and administrative consequences of such trading are explained in the guide to market manipulation.

Custody, reconciliation and client cash

Investors’ cash and capital market instruments held at investment firms, in whatever form, are kept separate from the firm’s own assets and may not be used by the firm for its own or third parties’ benefit, outside the purpose for which they were deposited, without the investor’s express written consent (Capital Markets Law Art. 46(5)). They may not be attached for the firm’s debts, even for public receivables, or pledged without the investors’ prior written consent, included in the firm’s bankruptcy estate or made subject to interim injunctions (Art. 46(6)). Since Law No. 7518 of 2024, the Law itself also requires client cash held at banks to be kept in separate accounts that cannot be given as loan collateral or blocked or pledged in the firm’s favour (Art. 46(7)).

A firm authorised for custody must keep complete, accurate and current records of the quantity, location and ownership of each client’s instruments and cash, distinguishable at any time from other clients’ assets and its own (III-37.1 Art. 63(1)–(2)). For clients resident abroad, records other than cash must be kept for each right holder (Art. 63(3)). Records must be reconciled daily with the central depositories or other custodians, for instruments client by client and for cash in aggregate or by client (Art. 65(1)). If a discrepancy cannot be resolved within three business days, the most senior internal audit officer must immediately inform the board and SPK in writing; if it may materially affect the firm’s financial position, they must be informed immediately (Art. 65(4)–(5)).

Client cash held at banks must be kept in a separate account identified as belonging to the broker’s clients, may not be used as collateral for loans, and may not be blocked or pledged in the broker’s favour; the bank must be told in writing that the money belongs to the broker’s clients and must confirm this within fifteen business days, failing which the broker must move the money to another bank (Art. 66(5)–(6)). A client’s failure to object to a statement does not mean that the client has agreed it (Art. 69(3)).

Research and investment recommendations

Firms that provide investment advice must disclose to the client all relationships and circumstances likely to affect the objectivity of their comments and recommendations, in particular significant financial interests in the instrument or significant conflicts with the issuer; this applies to everyone who takes part in preparing the recommendation (III-37.1 Art. 50(1)–(2)). Mutual shareholdings of 1 per cent or more of capital or voting rights between the firm and the issuer, management privileges, loan agreements, leases and other significant financial relationships must be disclosed (Art. 50(3)).

General investment recommendations published to the public must state when the recommendation was first prepared and the date and time of all prices used, and, where the recommendation differs from one published by the same firm on the same instrument or issuer in the previous twelve months, the change, its reasons and the date of the earlier recommendation (Art. 78(2)). The same conflict disclosures apply (Art. 78(4)), and the prescribed warning note must be displayed in the manner set out for print, online and broadcast channels (Art. 79). Where a firm’s research promoted a share that later collapsed, these disclosures, or their absence, are relevant facts. Commenting on shares in the media and then trading against the recommendation within five business days is also a market-disrupting act (Communiqué VI-104.1 Art. 6(4)).

When a broker stops operating

Where a capital market institution acts unlawfully, SPK may require the breach to be remedied, restrict or temporarily stop its activities or cancel its authorisations, and may cancel the licences of responsible staff and restrict their signing authority (Capital Markets Law Art. 96). Where its finances deteriorate, SPK may stop its activities, order the compensation of investors, remove board members and appoint replacements, and decide on gradual liquidation or apply for bankruptcy (Art. 97(1)). The role of the Investor Compensation Center in that situation is explained in the guide to insolvency and client assets.

A broker that voluntarily gives up all its authorisations must first follow a procedure designed to protect clients (III-39.1 Art. 59(2)):

1. 1. Written reconciliation with all clients.
2. 2. A prescribed notice inviting clients and creditors to come forward, published in at least two of the ten national daily newspapers with the highest circulation, on its website and for at least five business days on KAP.
3. 3. Blocking at Takasbank, in the clients’ names, of the cash and securities of clients who could not be reached or with whom no written reconciliation was achieved.
4. 4. Blocking at Takasbank of amounts in pending lawsuits and enforcement proceedings with clients, with accrued interest.
5. 5. Undertakings from its main shareholders to be liable, pro rata, for all its debts arising from capital markets activities.

Blocked assets of unreconciled clients are returned by Takasbank on the client’s direct application, together with dividends and interest (Art. 61). Assets blocked for disputes are released on presentation of a final court judgment or a final enforcement document to the party that won (Art. 62(1)). The broker and its independent auditor are jointly and severally liable for the accuracy of the lists of blocked assets (Art. 60(5)).

Claims against investment firms

The conduct rules support civil claims in several ways. They define the standard of care and loyalty owed under the framework agreement (III-39.1 Arts. 21 and 24). They place the burden of proof on the firm for key steps: disclosure of conflicts (Art. 11(3)), risk disclosures (Art. 25(6)) and the notice that no appropriateness test is required for certain products (Art. 33(2)), and the framework agreement may not shift the burden of proving orders to the client (Art. 26(5)). And they require records, such as order logs, reconciliations and statements, that are the evidence of what happened. Contractual liability follows Article 112 of the Code of Obligations: the firm must compensate loss caused by non-performance or improper performance unless it proves that it was not at fault. Claims under mandate and commission contracts are time-barred after five years (Code of Obligations Art. 147(5)).

Clauses that exclude or limit liability are subject to limits under the general law, which are discussed in the guide to claims against brokers, custodians and portfolio managers. The procedure for bringing a claim, including expert evidence, is covered in the guide to securities lawsuit procedure.

Points for foreign institutional investors

1. 1. Know your classification. Most foreign institutions are professional clients (III-39.1 Art. 31(1)(a)). Check that the written notice of the protections that do not apply was received (Art. 31(2)), and consider whether to ask in writing to be treated as a general client for particular services (Art. 31(3)).
2. 2. Map the chain. Identify which Turkish firm executes orders, which holds custody, and which foreign firm transmits orders to it; each is liable for its own part (III-37.1 Art. 31).
3. 3. Check the cash. Review what the framework agreement allows the broker to do with cash balances, and confirm that balances are held in a segregated client account (III-37.1 Art. 66).
4. 4. Keep reconciliations. Professional clients can waive monthly statements and annual reconciliations (Arts. 68(2) and 69(1)); in a period of market stress, institutions may prefer to keep them and reconcile against MKK records.
5. 5. Watch for measures. Follow SPK bulletins for measures against brokers under Capital Markets Law Arts. 96 and 97, and if a broker gives up its authorisation, respond to its reconciliation notice so that assets are not blocked (III-39.1 Art. 59(2)).
6. 6. Treat research critically. Check the conflict disclosures in Turkish broker research (III-37.1 Arts. 50 and 78).

Time limits

Other investor deadlines are collected in the guide to limitation periods for investor claims.

Frequently asked questions

Is a foreign pension fund a professional client in Turkey?

Generally yes: pension funds, banks, fund managers, insurers and equivalent institutions established abroad are professional clients (Communiqué III-39.1 Art. 31(1)(a)–(b)); they may ask in writing to be treated as general clients (Art. 31(3)).

What protections does a professional client lose?

Mainly the general risk disclosure form, unsolicited product-specific disclosures and the appropriateness test; monthly statements and annual reconciliations can be waived by agreement (III-39.1 Arts. 25 and 33; III-37.1 Arts. 68 and 69).

Must a Turkish broker obtain best execution for professional clients?

Yes. The best execution obligation applies to brokerage generally (Communiqué III-37.1 Art. 30(1)); an express client instruction to use a particular venue is deemed to satisfy it (Art. 30(2)).

Can a Turkish broker use client cash?

Only within the authority given in the framework agreement or the client’s express written consent; where the broker keeps the return, the cash must be repayable within one business day without loss of principal (III-37.1 Art. 66; Capital Markets Law Art. 46(5)).

Who may trade on a client’s account?

The client and persons authorised by a notarised power of attorney (III-39.1 Art. 29(4)); brokers’ staff may not trade for clients under broad powers of attorney or oral authority outside portfolio management (Art. 56(1)(ı)).

How often must a broker reconcile client holdings?

Daily with central depositories and other custodians, and at least once a year with each client unless a professional client waives this in writing (III-37.1 Arts. 65 and 68).

Does not objecting to a statement mean the client agrees with it?

No (III-37.1 Art. 69(3)).

Who must prove that an order was given?

The framework agreement may not place the burden of proving orders on the client (III-39.1 Art. 26(5)); brokers must keep time-stamped records of all electronic orders (III-37.1 Art. 35(2)(d)).

What happens to client assets if a broker gives up its licence?

It must reconcile with all clients; assets of clients who could not be reached or reconciled are blocked at Takasbank in their names and returned on application (III-39.1 Arts. 59–61).

How long do clients have to sue a broker under the contract?

Five years for claims under mandate and commission contracts (Code of Obligations Art. 147(5)).

Related guides

• Turkey’s 2026 Fund and Market Manipulation Crisis: Legal Guide for Foreign Institutional Investors — the entry point to this series
• Turkish Currency Law and Repatriation of Investment Proceeds
• Turkish Book-Entry Securities and the Central Registry (MKK)
• Borsa Istanbul Trading Rules: The Equity Market Directive
• Criminal Code Offences in Turkish Capital Markets Cases
• Claims against Brokers, Custodians and Portfolio Managers in Turkey
• Insolvency of Turkish Issuers and Brokers
• Turkish Investment Fund Rules: Communiqués III-52.1, III-55.1 and III-56.1
• Market-Disrupting Acts in Turkey: Article 104 and Communiqué VI-104.1
• Market Manipulation under Turkish Law: Article 107
• Obtaining and Preserving Evidence in Turkey for Securities Claims
• Securities Lawsuits in Turkey: Procedure, Stages, Costs and Appeals
• Limitation Periods for Investor Claims in Turkey