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New Communiqué on Issuance of Security Backed Capital Market Instruments





In the framework of Law No. 7222 dated 20 February 2020, Capital Markets Board of Turkey (“CMB”) introduced the “Trust Indenture, Trustee” notion to the capital markets in Turkey by way of adapting a new sub-clause, which is Article 31/B under Capital Markets Law No. 6362. With this clause, CMB intended to bring the alternative of collateralization for certain capital market instruments (“CMI”) specified by CMB so that this would make investors feel more secure in terms of their receivables by way of ensuring the performance of issuer’s obligations on the maturity date towards investors.

Following the above, CMB recently published the awaited sub-regulation on this topic; Communiqué No. II-31/B.1 on the Principles and Procedures regarding Secured Issue of Capital Market Instruments in the Official Gazette dated 26 January 2022, numbered 31731 (“New Communiqué”), which is entered into force on the same date of its publication.

Changes brought with the New Communiqué

With this New Communiqué, CMB sets forth the principles and procedures that will enable certain assets specified under the Communiqué to be collateralized for provision of the secured issue of CMIs in Turkey.

  • As per the Communiqué, the debt instruments, and other assets found eligible by the CMB may be collateralized upon the request of the issuer. CMB, however, may oblige the issuer to collateralize the CMI subject to the issuance considering certain variables such as financial status of the issuer, issue amount and type of the CMI.

  • The title of assets constituting collaterals can be transferred to the collateral manager, which is qualified as an investment firm holding the general custody license or such collateral manager can establish limited right in rem (i.e. pledge, mortgage) in favor of the collateral manager over those assets. Before the collateralization is duly completed, the issuer cannot start the sale of security backed CMI.

  • The assets eligible to constitute the collaterals are listed (such as cash, lease certificates, letter of guarantees) in the Communiqué.

  • Issuer and collateral manager are required to enter into a collateral management agreement in which collateral manager undertakes to maintain, manage and when necessary, sell the collaterals and meet the obligations of the issuer towards the investors. The collateral management agreement, accompanied with the issue ceiling application documents, is also required to be submitted to the CMB.

  • In case of default or for any grounds arising from legal or contractual provisions, collateral manager may automatically, without any need to take any legal action, sell the assets constituting collateral and distribute the sales proceeds among investors. In case the issuer meets its payments obligations, the collateral manager transfers the collaterals back to the issuer or releases the limited right in rem over those collaterals.

  • Collateral manager shall be independent and issuer and collateral manager cannot be related parties.

  • Collateral manager is required to issue a collateral report for each 6 months’ period on a regular basis as of the date of the secured issue as well as in case of a default of payment or sale of collaterals.

  • The collateralized assets are held in segregated accounts, separate from the assets of the collateral manager. These assets cannot be seized, pledged or collateralized for satisfying the debts of the collateral manager.

  • Collateral manager is required to make public disclosures about the collaterals and collateral managers in the cases listed under the Communiqué such as an amendment in the collateral management agreement, any event that would prejudice the independency of the collateral manager or foreclosure of the collateral.

In the current practice, it is possible to establish pledge over the securities as a guarantee of payment obligations, however the collateral manager mechanism enables investors to collect their receivables more practically in case of default of the issuer compared to asset pledge which is subject to a longer legal procedure.


For further information on this matter, please contact us via info@sadik-sadik.com.


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