The decision to liquidate certain investment funds in September 2026 has required the rights of unit holders during the liquidation process to be considered together with potential liabilities arising from the management of the funds prior to liquidation. From an investor’s perspective, the key issue is not only the amount to be received from the existing fund assets upon liquidation, but also whether a separate claim may be brought in respect of an unlawful transaction and, if so, against whom such claim may be asserted.

In its announcement dated 18 September 2026, the Capital Markets Board of Türkiye (“CMB”) drew attention to price movements observed during the final quarter of 2025, particularly in shares with low free-float ratios through certain hedge funds and money market funds, which could not be explained by the relevant economic data. The CMB identified the protection of investor savings, increased transparency and the reduction of risks relating to manipulation and financial stability among the objectives of the regulatory measures adopted.

Legal Structure of Investment Funds and the Position of Unit Holders

Pursuant to Article 52 of Capital Markets Law No. 6362 (“Law”), an investment fund is an asset pool without legal personality, established with cash or other assets collected from investors in exchange for units and managed on behalf of such investors on the basis of fiduciary ownership principles. The rights and obligations of unit holders should therefore be assessed by reference to this specific legal structure.

Under Article 53 of the Law and Article 5 of the Communiqué on Principles Regarding Investment Funds (III-52.1) (“Communiqué No. III-52.1”), fund assets are segregated from the assets of the founder and the portfolio custodian. The absence of legal personality does not prevent fund assets from being separately protected and used solely for the purposes of the fund. Accordingly, the legal position of a unit holder should be assessed by reference to the specific representation and asset structure applicable to investment funds rather than by directly applying principles governing shareholders of joint stock companies.

The founder portfolio management company establishes the fund and performs the duties assigned to the founder under the applicable legislation. Where management of the fund portfolio is delegated to another portfolio manager, the respective duties and responsibilities of the founder and the portfolio manager should be distinguished. The portfolio custodian, in addition to holding the fund assets in custody, performs the supervisory and control functions prescribed by the applicable legislation. This distinction is important in determining which obligation rests with which person or institution in a particular case.

Liquidation Process and Payments to Unit Holders

Under the CMB decisions dated 17 September 2026, certain investment funds were placed into liquidation and specific procedures and principles applicable to the liquidation process were established. Pursuant to CMB Bulletin No. 2026/61, investors’ unit records are to be reconciled between the Central Securities Depository of Türkiye (“MKK”) and the relevant banks, financial assets in the fund portfolios are to be held with Takasbank, and the portfolios are to be realised taking into account investor interests, market depth and liquidity conditions.

By its decision dated 20 September 2026 and numbered 59/1710, the CMB Decision-Making Body extended the three-month period set out in paragraph A/8 of the liquidation procedures and principles to six months, while preserving the remaining provisions. The CMB explained that the amendment was intended to allow the assets to be sold under more appropriate conditions having regard to the portfolio structure of the funds and prevailing market conditions. The six-month period does not mean that liquidation must necessarily continue for the full period and the process may be completed earlier depending on the circumstances.

In its announcement dated 28 September 2026, the CMB also clarified the treatment of certain purchase and redemption instructions relating to the funds in liquidation. Accordingly, investors whose instructions were submitted to TEFAS on 17 September 2026 and cancelled by the platform following the suspension of the funds from trading on TEFAS will receive payment from the liquidation balance in proportion to their unit holdings. The CMB further stated that instructions submitted to TEFAS on or before 16 September 2026 but not executed due to the relevant fund’s default or failure to publish a price would also fall within the liquidation process pursuant to paragraph A/6 of the liquidation procedures and principles.

By CMB decision dated 30 September 2026 and numbered 64/1775, an additional interim payment mechanism was introduced for certain funds placed into liquidation under the decisions dated 17 September 2026. Pursuant to CMB Bulletin No. 2026/67, the net investment amount determined by MKK will be taken as the basis for investors whose records have been reconciled, and the interim payment to each investor in respect of each fund will be capped at TRY 1 million. Investors whose net investment amount is below TRY 1 million will receive the full amount, while investors with a net investment amount equal to or exceeding TRY 1 million will receive an interim payment of up to TRY 1 million. The interim payment will be deducted from the final liquidation receivable and the relevant units will be redeemed at the time of the final payment. The mechanism is intended to be applied first to money market funds.

Under CMB decision numbered 64/1770, also published in the same Bulletin, a liquidation sequence was established for a separate group of funds, giving priority to money market funds and proceeding from funds with the highest number of investors to those with fewer investors. As the scope of this arrangement differs from that of the interim payment mechanism, neither should be regarded as a general rule applicable to all funds subject to liquidation.

By its announcement dated 1 October 2026, the CMB also introduced “Voluntary Restitution Accounts” for funds subject to liquidation. Amounts voluntarily returned by persons who had realised excessive gains from the sale of fund units prior to the liquidation decision are to be tracked in separate accounts for each fund. According to the announcement, such amounts will be included solely in the liquidation assets of the relevant fund, may not be transferred to another fund or account, and will be used in payments to be made to the unit holders of that fund as part of the liquidation process.

Duties Arising from the Management and Custody of the Fund

Duties of the Founder and Portfolio Manager

Pursuant to Article 52(3) of the Law and Article 9 of Communiqué No. III-52.1, the founder is responsible for representing the fund in a manner that protects the rights of unit holders, managing the fund or supervising its management, and ensuring that the fund’s activities are conducted in accordance with the fund documents. The outsourcing of services, including portfolio management, does not release the founder from this responsibility. Where management of the fund is delegated to another portfolio manager, the potential liability of that manager arising from its own activities and breaches of duty should also be assessed separately.

Article 10 of the Communiqué on Principles Regarding Portfolio Management Companies and Their Activities (III-55.1) (“PMC Communiqué”), issued pursuant to Article 55 of the Law, requires portfolio management companies to conduct their activities fairly and honestly, having regard to the interests of the persons to whom they provide services and the integrity of the market. In this context, companies are required to establish organisational structures and decision-making processes designed to prevent or mitigate conflicts of interest, adopt a written conflicts policy and ensure fair treatment where such conflicts cannot be avoided. Article 21 of the PMC Communiqué also sets out the professional care and diligence obligations applicable to managers and employees.

The internal control and risk management requirements set out in Articles 11 and 12 of the PMC Communiqué are intended to ensure that these obligations are effectively implemented within the company. Risk management activities must be carried out independently from the unit responsible for portfolio management, and the risks to which the funds are exposed must be regularly measured, monitored and controlled. Portfolio concentration, liquidity risk, investments in shares with low free-float ratios and related-party transactions are among the areas requiring particular attention in this context.

The amendments made to the Guidelines on Investment Funds in August 2026, including the recalibration of issuer concentration limits by reference to free-float ratios, the introduction of new restrictions on certain transactions of hedge funds and additional risk management requirements, also reflect the same regulatory approach. The CMB stated that these amendments were intended in particular to reduce systemic risks and limit unusual price movements that may arise through investment funds.

Duties of the Portfolio Custodian

Under Article 5 of the Communiqué on Principles Regarding Portfolio Custody Services and Institutions Providing Such Services (III-56.1) (“Communiqué No. III-56.1”), the portfolio custodian is required to verify that the issue and redemption of investment fund units comply with the applicable legislation and the fund rules, that the unit value is calculated in accordance with the relevant valuation principles, and that fund transactions are carried out in compliance with the applicable legislation.

Pursuant to Article 56(2) of the Law and Article 11 of Communiqué No. III-56.1, the portfolio custodian is liable for losses caused to the portfolio management company and unit holders as a result of its failure to perform its own obligations. The scope of such liability should be determined having regard to the custody, control and supervisory duties imposed on the portfolio custodian by law.

The portfolio custodian’s liability does not, however, amount to a guarantee of the fund’s investment performance or market prices. Under Article 11 of Communiqué No. III-56.1, losses arising from portfolio management or market price movements fall outside the scope of the portfolio custodian’s liability. Nevertheless, the fact that a loss arose in connection with a portfolio management transaction does not preclude a separate assessment of whether the portfolio custodian failed to perform its own custody, control or supervisory duties. The custodian’s liability should therefore be assessed by reference to whether a duty attributable to it was breached and whether there is an adequate causal link between that breach and the loss.

Investor Rights, Loss to the Fund and Civil Liability in the Liquidation of Investment Funds

Causal Link Between Breach of Duty and Loss

The fact that a fund has suffered losses or has been placed into liquidation is not, in itself, sufficient to give rise to civil liability. A decline in the value of capital market instruments, the failure of an investment strategy to produce the expected result, or a reduction in fund value due to market or macroeconomic conditions may fall within the ordinary risks of investment activity. Liability of the portfolio management company or portfolio custodian requires a specific breach of duty attributable to the relevant person or institution, a loss resulting from that breach, and an adequate causal link between the breach and the loss.

By contrast, where transactions are carried out contrary to the investment strategy set out in the fund rules or prospectus, regulatory portfolio limits are breached, the risk management system is not properly operated, conflicts of interest produce adverse consequences for investors, valuation rules are not complied with or fund assets are used for purposes other than those permitted, the resulting loss may not be treated merely as an ordinary consequence of investment activity.

In such cases, the effect of the identified breach on the loss should first be determined. The portion of the loss attributable to ordinary market conditions should be distinguished from the portion attributable to the relevant breach of duty. It should then be determined who is entitled to assert the relevant claim and to whom any damages should be paid.

Recovery of Losses Suffered by the Fund

Where fund assets are unlawfully disposed of below their actual value, for example, the loss first arises in the fund assets. The resulting reduction in the fund assets may in turn reduce the value of the units and cause an economic loss to investors. However, the mere fact that a loss suffered by the fund affects the unit value does not, by itself, mean that each investor is entitled to claim directly in its own name the portion of the fund’s loss corresponding to its units. Any such claim should be assessed having regard to the separate nature of the fund assets, the founder’s obligation to act for the account of the fund and the legal relationship between the unit holder and the fund.

Pursuant to Article 52(3) of the Law, the portfolio management company disposes of fund assets in its own name but for the account of the fund and exercises the rights arising from such assets. Article 52(4) further provides that, where the Law, the relevant secondary legislation and the fund rules are silent, Articles 502 to 514 of the Turkish Code of Obligations concerning mandate relationships apply by analogy to the relationship between the portfolio management company and the unit holders. This provision does not, however, lead to the conclusion that damages relating to a loss suffered by the fund must in all circumstances be paid directly to the unit holder.

Under Article 56(3) of the Law, the portfolio management company and the portfolio custodian are required to seek compensation from one another for losses arising from breaches of the Law. The same provision preserves the right of unit holders to bring proceedings. Article 11 of Communiqué No. III-56.1 likewise expressly preserves the right of unit holders to bring claims against the portfolio management company or the portfolio custodian. These provisions do not, however, expressly determine whether damages awarded in respect of a loss suffered by the fund must be paid to the fund or directly to the investor. The existence of a right to bring proceedings and the entitlement to receive the awarded amount directly should therefore be considered separately.

In our view, where the loss asserted by the investor arises solely from the effect of a reduction in the fund assets on the value of the units, it would be more appropriate for the damages relating to such loss to be restored to the fund assets rather than paid directly to the investor. Where the fund is in liquidation, any amount restored to the fund assets may then be taken into account in the payments made as part of the liquidation process. However, Turkish law does not contain a general provision expressly prescribing this result in all circumstances. This approach should therefore be regarded as an interpretation based on the segregation of the fund assets from the assets of the founder and the portfolio custodian, together with the principle that the founder acts for the account of the fund.

Indeed, in its announcement dated 1 October 2026, the CMB stated that separate “Voluntary Restitution Accounts” had been established for each fund in respect of persons wishing voluntarily to return excessive gains realised from the sale of fund units prior to the liquidation decision. According to the announcement, amounts deposited into these accounts will be included solely in the liquidation assets of the relevant fund and used in payments to the unit holders of that fund as part of the liquidation process. This mechanism does not directly determine who is entitled to bring civil compensation claims. Nevertheless, the fact that voluntarily returned amounts are required to be restored to the liquidation assets of the relevant fund rather than paid directly to particular investors is significant as an indication of the CMB’s regulatory approach to preserving the integrity of the relevant fund assets during liquidation.

On the other hand, given that Article 11(2) of Communiqué No. III-56.1 expressly preserves the right of unit holders to bring proceedings against the portfolio management company or portfolio custodian, and having regard to the legal relationship between the unit holder and the portfolio management company, it may also be argued that an investor may seek damages directly in its own name. However, while the provision expressly preserves the right to sue, it does not provide that any amount awarded in respect of a loss suffered by the fund must in all circumstances be paid directly to the investor.

Claims Arising from an Investor’s Separate Individual Loss

Unlike a loss suffered by the fund assets, certain breaches may cause loss directly in the investor’s own assets. Article 12 of Communiqué No. III-52.1, which provides for the founder’s liability for losses arising from incorrect, misleading or incomplete information contained in the investor information form, is an example of such a situation. A loss suffered by an investor as a result of making an investment decision on the basis of inaccurate or incomplete information may be legally distinct from the effect of a reduction in the fund assets on the value of the units.

In assessing such a compensation claim, it should be examined what information was provided to the investor, the extent to which that information affected the investment decision and whether there is a causal link between the breach of the disclosure obligation and the loss claimed. Not every inaccuracy or omission in an investor information form results in the founder being liable for all adverse consequences of the investment. The founder’s liability should be determined by reference to the specific disclosure obligation breached and the loss suffered by the investor as a result of that breach.

Effect of Liquidation on Claims and Determination of Loss

Payments made to investors in the course of liquidation are, in principle, distributions of amounts obtained from the realisation of the existing fund assets. Such payments should therefore not be treated as having the same legal nature as compensation for losses arising from management or custody breaches that may have occurred prior to liquidation. The fact that an investor has received a payment during liquidation does not, in itself, preclude a separate assessment of potential liability arising from earlier conduct.

The liquidation of a fund does not, by itself, alter the legal nature of a loss alleged to have arisen in the fund assets. Whether such loss may be claimed directly and separately by individual unit holders should be assessed by reference to the nature of the loss and the legal basis of the relevant claim. Where claims are brought after completion of the liquidation, the identity of the person entitled to assert the claim, who has standing to conduct the proceedings and how any amount recovered should be allocated among the relevant beneficiaries may require separate consideration.

The amount of loss should also be determined by reference to the nature of the claim asserted. Where the loss is considered to have arisen in the fund assets, regard may be had to the difference between the position in which the fund assets would have been had the unlawful transaction not occurred and their actual position. Where the investor is alleged to have suffered a direct loss in its own assets, the assessment should instead be based on the scope of that individual loss. Payments made during liquidation, interim payments and amounts previously recovered in respect of the same loss should also be taken into account in calculating damages. In this context, the difference between the amount originally invested by the investor and the amount ultimately received on liquidation does not, by itself, establish the amount of recoverable loss.

Enforcement of Rights and Available Remedies

Civil Law Claims

In any civil claim, it should be clearly determined who holds the relevant right, against which person or institution the claim should be directed and to whom any amount awarded should be paid. Since the fund does not have legal personality, the issues of representation and standing must be considered separately where rights relating to the fund assets are to be asserted. In particular, where the founder that represents the fund is itself alleged to have caused the relevant loss, the potential conflict of interest should be taken into account. In this context, the reciprocal claim mechanism between the portfolio management company and the portfolio custodian under Article 56 of the Law and the right of unit holders to bring proceedings should be considered together.

In determining the legal basis and scope of a potential claim, the fund rules and prospectus in force at the time of the alleged breach, the investor information form, portfolio transactions, valuation principles, risk limits and any breaches of such limits, conflicts policies and the control processes of the portfolio custodian should be examined together. Where the founder and portfolio manager are different entities, the allocation of duties between them and the party responsible for the relevant transaction should also be identified. The dates on which the investor acquired and disposed of the units, the period in which the alleged breach occurred, the stage of the liquidation process and any payments made to the investor may also be relevant in determining the scope of the claim, entitlement and the amount of loss.

Administrative and Criminal Remedies

Where there are grounds to believe that a breach of the applicable legislation occurred in the management or custody of the fund, an investor may apply to the CMB and request an examination of the relevant institutions and transactions. If the CMB identifies a regulatory breach, the measures provided for under Article 96 of the Law and other applicable administrative sanctions may be imposed. Depending on the nature of the conduct, the mechanisms provided for under capital markets legislation in relation to criminal investigations may also become relevant. Administrative investigations and sanctions, however, have legal consequences distinct from civil compensation claims that may be asserted by investors.

From a criminal law perspective, transactions intended to create a false or misleading impression as to the price, price movements, supply or demand of capital market instruments may fall within the scope of the market manipulation offence regulated under Article 107 of the Law. However, the fact that a fund has invested in a capital market instrument that is illiquid, has a low free-float ratio or carries a high level of risk is not, in itself, sufficient to reach such a conclusion. The purpose and manner of execution of the transactions, together with whether the material and mental elements of the relevant offence are present in the specific circumstances, should be considered.

Depending on the characteristics of the relevant conduct, other capital markets offences regulated under the Law or provisions of the Turkish Criminal Code may also apply. Accordingly, any criminal law assessment should focus not merely on the fact that the fund suffered losses or entered liquidation, but on the nature of the relevant transactions and the legal obligations that may have been breached.

Conclusion

The liquidation of an investment fund is not limited to determining and paying the amount due to an investor from the existing fund assets. Where it is alleged that an unlawful transaction occurred in the management or custody of the fund prior to liquidation, the conditions for liability, the nature of the loss and the person against whom the relevant claim may be brought must also be assessed. The fact that the right of unit holders to bring proceedings is protected under the applicable legislation does not mean that every loss suffered by the fund may be claimed directly and proportionately by individual investors.

In our view, where the loss arises solely from the effect of a reduction in the fund assets on the value of the units, the approach of restoring the relevant amount to the fund assets rather than paying it directly to the investor is more appropriate. The CMB’s announcement dated 1 October 2026, under which voluntarily returned amounts are to be included in the liquidation assets of the relevant fund, may also be regarded as a recent regulatory practice that is consistent with this approach from a structural perspective, although it is not directly determinative as a matter of private law. By contrast, where a breach causes a loss directly in the investor’s own assets independently of any loss suffered by the fund, the investor’s individual compensation claim should be assessed separately and on its own legal basis.