Turkey Arrests Fund Managers Over Stock Market Manipulation Scandal

A Turkish trader at the Borsa Istanbul Stock Exchange in Istanbul, August 2018. Photo: EPA/SEDAT SUNA. Turkish authorities arrested four suspects on Friday, including investment fund board members, and imposed travel bans on 51 others, as part of an investigation into alleged manipulation of the stock market, Justice Minister Akin Gurlek announced. Courts have also imposed precautionary measures on accounts and other assets linked to those under investigation, to prevent their transfer, Gurlek said. “Those who exploit the sweat, labour and savings of our citizens will be held accountable before the law,” he added. Turkey’s Capital Markets Board, SPK, has filed criminal complaints about alleged manipulative transactions in several funds and listed shares. In a separate investigation, a court ordered access blocked to 246 social media accounts accused of publishing speculative material capable of causing fear or panic among investors. Another investigation by prosecutors in Istanbul’s Bakirkoy District has resulted in 16 arrests over social media posts allegedly intended to manipulate capital markets, Gurlek said. Turkish Interior Minister Mustafa Ciftci on Thursday said operations related to the stock market investigation would continue, suggesting further action is likely. On Thursday the SPK ordered the liquidation of 130 funds managed by seven portfolio management companies after liquidity problems contributed to sharp market losses. Trading on Istanbul Stock Exchange was temporarily suspended on Wednesday after the benchmark BIST 100 index fell by more than 6 per cent, triggering a market-wide circuit breaker. Estimates of the combined size of the 130 funds differ. According to Reuters, their assets are worth around 21.4 billion US dollars, involving about 353,000 investors. CNBC-e puts the total at about 19.8 billion US dollars and the number of investors at more than 514,000. Liquidation does not mean that the investors’ money has been confiscated. Instead, banks are being tasked to deliver citizens’ money in these funds. Is Bank has been appointed to handle the liquidation of funds managed by Tera Portfoy, while state-owned Ziraat Bank will oversee funds belonging to the six other managers. The proceeds will be distributed to investors according to their holdings. However, investors may not recover the last reported value of their holdings, as the final amount will depend on prices achieved when the assets are sold. The crisis intensified after regulatory changes targeted risks associated with funds concentrated in thinly traded shares. “It has been observed that some funds have caused price movements that cannot be explained by the financial realities of companies,” the SPK said on Thursday, adding that the new measures were aimed at preventing market manipulation and increasing transparency.