It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of mails, or of any facility of any national securities exchange,
to employ any device, scheme, or artifice to defraud,
to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.
converting it to his/her own benefit even if properly obtained
According to Rule 10b5-2 a duty of trust or confidence exists when:
a person expressly agrees to maintain information in confidence;
the facts and circumstances of the relationship as a whole show a history, pattern or practice of mutual sharing of confidences; or
a person receives information from a spouse, parent, child or sibling, unless the person receiving the information can show that, under the facts and circumstances of the family relationship, no reasonable expectation of confidence existed.
Only specific regulation against insider trading is Article 47/A-1 of CML:
“ To benefit to his/her self-owned property or to eliminate a loss so as to damage equal opportunity among the participants in capital markets with the aim of gaining benefit for himself/herself or for third parties by making use of non-public information which will be able to affect the values of capital market instruments in insider trading. The chairman and members of the Board of Directors, directors, internal auditors and other staff of the issuers within the scope of Article 11, capital market institutions or of the subsidiary or dominant establishment, and apart from these the persons who are in a position to be have information while carrying out their professions or duties, and the persons who are in a position to have information because of their direct and indirect relations with these.”
A gain of profit or avoidance of loss is required,
Materiality depends on the ability of the non-public information to affect the value of the capital market instruments,
CMB may request a legal prosecution and/or may prohibit the violators temporarily or permanently from transactions on exchanges and other organized markets (According to Article 46/i of the CML).
The criminal penalty for the violation of this Article is a prison sentence from two to five years and a heavy pecuniary fine from 10 billion TL up to 25 billion; If 2 or more cases are combined then min 3 max 6 years of prison.
No upper limit for pecuniary punishment, but not less than threefold of the benefits
In Turkey; there is a public disclosure requirement similar to §16(a)
Securities do not have to be traded or listed on an exchange in order to attach a liability to an insider trader, in contrast to the case in many European countries
CMB’s power to temporarily (for 2 years) or permanently prohibit the violator from transacting on exchanges and other organized markets
WHAT IF FAMOUS CASES HAPPENED IN TURKEY? ? √ ? The attorney, after having learned of the law firm’s client’s planned tender offer , purchased call options in the target company prior to the announcement of the tender offer. O'Hagan √ In Turkey this case would be interpreted as manipulation. A columnist of the Wall Street Journal traded the securities he wrote about and in turn gained a profit. Carpenter √ √ √ A company’s former official’s selective disclosure of insider information to an analyst giving an unfair advantage to the analyst and the analyst’s clients over the public generally Dirks ? √ ? A financial printer deduced the names of the target companies in takeover bids from the documents he printed. He purchased the target company’s securities before the announcement of bids and sold them after the bids, thus making a profit. Chiarella √ √ √ Insiders of a mine company purchased company stock on the open market with knowledge of a valuable mineral find that had not been publicly announced and made a considerable profit after the announcement. Texas Gulf Sulphur √ √ √ A registered broker-dealer directed his customers to liquidate their holdings in Curtis-Wright stock because he had advance knowledge of a dividend cut . Cady Roberts Co. Turkey? Gain/Loss Materiality Subject Case Conviction in Turkey