Regulation Concerning the Principles of Issuance of Precious Metals Exchange Membership Certificate and the Conditions of the Foundation and Operation of Principles of Precious Metals Exchange Brokerage Houses

(Published in the Official Gazette, dated 16.10.1993, No. 21730 and amended by the Official Gazette respectively dated 26.06.1995, No. 22328; 10.06.1997, No. 23015 and 03.07.1999, No. 23744)

Purpose and Scope

ARTICLE 1 - The purpose of this Regulation is to regulate the conditions of foundation and operation principles of precious metals brokerage houses that will operate in the Precious Metal Exchanges on the basis of the provisions of Article 40/A of Code of Capital Markets, dated 28.7.1981, No. 2499, as amended by No. 3794 dated 29.4.1992, and on the basis of the provisions of the Decree No. 32, concerning the Protection of the Value of Turkish Currency, and further to regulate the conditions of the issuance of Precious Metals Exchanges Membership certificates.

Definitions and Abbreviations

ARTICLE 2 -The meaning certain terms, which appear in this Regulation, are as follows;
Law : Code of Capital Markets No. 2499 as amended by Law No. 3794,
Under-Secretariat : Under-Secretariat of Treasury,
Board : Board of Capital Markets,
CBRT : Central Bank of Republic of Turkey
Exchange : The Exchange where precious metals will be traded
Intermediary Institutions : The companies who trade for the account of and on behalf of themselves, for the account of and on behalf of third parties or on behalf of themselves but for account of third parties. The principles related to foundation and operation of these shall be governed by Article 3 of the current regulation.

Intermediary Institutions

ARTICLE 3 - Brokerage activities subject to this regulation will be performed by banks, authorized institutions, private financial institutions, precious metals brokerage houses, precious metals producing and marketing companies and foreign individuals and companies provided that they get operation licence to trade in the Exchange from Under-secretariat of Treasury and without prejudice to restrictions imposed by their respective internal regulations.

Fields of Activity of Intermediary Institutions

ARTICLE 4 -The Intermediary Institutions are authorised to perform the following activities within the scope of brokerage activities, without prejudice to their powers granted by their respective internal regulations:

a) 1) Purchasing and selling operations of precious metals,
2) Lending and borrowing operations of precious metals,
3) Operations of Capital Market instruments based on precious metals,
for the account of and on behalf of themselves, for the account of and on behalf of third persons or on behalf of themselves but for the account of third persons in compliance with the principles prescribed by related Regulations, such precious metals being limited to those the standards and degrees of purity of which are determined by the Under-Secretariat.

b) In compliance with the imports regulation, import unprocessed precious metals and processed or unprocessed precious metals and processed or unprocessed precious stones and precious goods made of these, temporarily import processed and unprocessed precious metals and stones to use them for the purpose of manufacturing finished products and export the same as finished or semi-finished goods and stones.

The brokerage houses may perform the foreign currency transactions other than those required by the activities mentioned above, subject to the condition that they have fulfilled the obligations prescribed for the certified corporations by laws and regulations concerning The Protection of the Value of Turkish Currency.

Conditions of Foundation of Brokerage Houses

ARTICLE 5- The brokerage houses must comply with the following requirements:

a) They must be incorporated companies,
b) Their paid up capital must be at least 100 Billion TL.,
c) Their founders must;

1. not have gone bankrupt and have no tax debts,

2. not have been sentenced to heavy imprisonment or to more than 5 years of imprisonment or by reason of such infamous crimes as embezzlement, pilfering, corruption, bribery, theft, fraud, swindle, abuse of good will, fraudulent bankruptcy and crimes of smuggling except smuggling for the purpose of one's own use and consumption, crimes of conspiracy in official tenders, purchases and sales, disclosing official tenders, disclosing official secrets, attempt at tax evasion or by reason of violating the laws and regulations about lending money, except for crimes of negligence and irrespective of any previous amnesty,

3. not have been subjected to a verdict of liquidation under the decree in Force of Law about the transactions of insolvent bankers, no. 35 and its appendices. This provision also applies to the corporations to which they have been partners.

d) the shares of the brokerage houses must be issued against cash and all such shares must be issued to the name of the bearer.

Foundation Procedures of the Brokerage Houses

ARTICLE 6- For the purpose of obtaining a preliminary licence for founding a brokerage house, the founders shall apply to the Under-Secretariat and submit the documents stated below:

a) Draft statute of the partnership
b) For each founding partner,
1. Documents issued by the Commercial Court of first Instance confirming that they are not bankrupt and documents issued by the court-bailiff's office confirming that they have not proclaimed composition with creditors,
2. Criminal record issued by the Public Prosecutor's Office confirming that they have not been sentenced by reason of any crimes listed in the second paragraph of clause (c) article 5 of the regulation.
3. The document issued by the Fund for the Protection of Savings, certifying that no decision of liquidation has been taken for the founders and the companies to which they have been partners, under the decree in the force of law, No.35 and its appendices mentioned in the third paragraph of clause (c) of the article 5 of the Regulation,
4. Documents issued by their respective tax offices certifying that there is no unsettled debt,
5. Detailed curriculum vitae,
6. Other information and documents required by the Under-Secretariat.
The preliminary licence issued by the Under -Secretariat is valid only for the foundation procedures of the brokerage houses, Applications for starting operation in the Exchange shall be assessed separately by the Under-Secretariat.

Licence for Operation and the Relevant Principles

ARTICLE 7- For the purpose of obtaining a licence for starting operation in the Exchange, the intermediary institutions shall apply to the Under-secretariat of Treasury. Under-secretariat of Treasury may demand additional information and documents when it deems necessary. Brokerage houses and currency offices are required to apply to the Under-secretariat with following documents:

a) A copy of the Trade Registry Gazette where their statute was published,

b) A document issued by the relevant governorship certifying that their work-place is equipped with sufficient physical security measures,

c) The members of Board of Directors, auditors and the signatories

1. must prove through a document issued by the relevant public prosecutor's office that they were not previously convicted by reason of violating the laws and regulations concerning lending money or by reason of an indecent crime.

2. must document that they have not been subjected to a verdict of liquidation under the Decree in the Force of Law about the transactions of insolvent bankers, no.35 and its appendices through a document issued by the Fund far the Protection of Savings. This provision also applies to the companies to which they have been partners.

d) The insurance policies certifying that the cash and other assets entrusted with the brokerage house have been insured against fire and theft risks.

The information and documents presented to the Under-Secretariat have to bear the signatures of the persons authorised to represent the brokerage house and have to be complete from the point of view of confirming the fulfilment of the conditions required for starting operation as prescribed by the regulations.

In case the brokerage houses do not apply to the Under-Secretariat within 180 days starting from the date of obtaining the licence of foundation, together with the information and documents mentioned above, for the purpose of obtaining a licence for starting operation in the Exchange, the licences permit already awarded shall be cancelled.

Brokerage houses cannot operate in offices except for the work places that are approved by the Under-Secretariat. They cannot open branches, except their head offices.

In case the intermediary institutions do not apply to the Exchange within 60 days starting from the date of obtaining the licence of operation for the purpose of obtaining Exchange Membership, the operation licence of precious metals companies shall be cancelled.

When the intermediary institutions ask for obtaining the membership certificate, the delivery will be announced in the daily bulletin of the Exchange by the Board of Directors.

The presentation of the operation document indicating there is no any limitations to their operations, issued by governmental offices of the countries their head offices resides are obligatory for application for individuals and establishments settled abroad, beside this finance sheets and tables belonging to the previous year should be supplied.

Transfer of Shares and Statute Amendment

ARTICLE 8 - On conditions of statute amendments, the brokerage houses must obtain the approval of Under-Secretariat and send a copy of the Trade Registry Gazette where their statute amendments was published within 30 days before applying to Ministry of Industry and Commerce.

In case the brokerage houses do not obtain the pre-permission before amending their statute, the Under-Secretariat is authorised to cease the operations of the brokerage houses in the Exchange temporarily beginning from one month up to six months.

The brokerage houses are not authorised to transfer shares, before completing 1.5 months from the date of obtaining the operation licence.

The individuals who will take over the shares have to posses the qualifications required of the founding partners, and further prove this point by presenting the documents stated in the Article 6 of this Regulation.

The partnership of the brokerage houses with other firms is dependent on the permission of Under-Secretariat.

Ceasing of the Operation of Brokerage Houses Temporarily or Permanently

ARTICLE 9 - In case transactions violating this regulations and the relevant laws and regulations has been found out as a result of inspections, the Under-Secretariat is authorised to cease the operation of the intermediary institutions in the Exchange either permanently or temporarily for up to six months according to the nature and importance of the said violations.

On condition of the cancellation of foundation licence of intermediary institutions, operation licence of the intermediary institutions will also be cancelled.

The operation licence of the intermediary institutions will be permanently cancelled by the Under-Secretariat in case the operation of the intermediary institutions is cancelled temporarily for second time in the same year.

The operation licence of the intermediary institutions will be cancelled in case the Exchange Membership licence is cancelled by the Board of Directors of the Exchange.

In case the brokerage house discontinue operations in the Exchange for 90 days or more without permission of the Under-secretariat of Treasury or on condition of insufficiency of operations of the intermediary institutions, by the request of the Exchange Administration, the operation licence of the shall temporarily be ceased or it will be cancelled if this situation is repeated in the same year.

The intermediary institutions whose operations are temporarily ceased or operation licences are cancelled do not have the authority to use any word, phrase or sign which may give the impression that they have the operation licence in their advertisement and announcement.

When the intermediary institutions whose operation licences are cancelled, continue to operate or do not give the Exchange Membership Certificate back, there will be a legal proceeding based on the Law no: 1567 dated 20/2/1930.

The intermediary institutions whose operations are temporarily ceased will be given the authority to begin operations again by the approval of Under-Secretariat in case the brokerage houses confirm that they have fulfilled the incongruities caused by the sanctions.

The decision of the Under-secretariat of Treasury to cease the operations of an intermediary institution temporarily or to begin operations again or to cancel the operation licences will be announced in the Exchange Bulletin and at least in two newspapers published nation-wide by the Board of Directors. .

The decision of the Under-Secretariat to cease the operation of an intermediary institution temporarily or permanently will be announced by the Board of Directors in the Exchange Bulletin and at least in two newspapers published nation-wide.

Transactions And Operations Which The Intermediary Institutions Are Not Allowed To Perform

ARTICLE 10 - Precious Metals Brokerage Houses and Authorized Institutions,

a) are not allowed to issue securities (including bonds) related to unprocessed precious metals they purchase or sell and borrow or lend within the framework of brokerage business or securities containing their financial undertakings independent of their proper business, except when it is allowed by this regulation and relevant laws, they are not allowed to purchase and sell capital market instruments and real estate or to perform lending money transactions.

b) are not allowed to engage in any industrial and agricultural business beyond the activities for the performance of which a licence has been obtained from the Under-Secretariat and the related transactions and operations; further, they are not allowed to acquire real estate beyond the level required for proper execution of their business.

c) are not allowed to collect savings as described in the Banking Code.

d) are not allowed to promise, either orally or in written form, that they guarantee a definite income to their customers through purchase and sale of precious metals.

e) are not allowed to make any advertisements or announcements containing information that is exaggerated, contrary to the facts and misleading for the customers and the public and to make any other oral or written announcement of the same nature.

f) are not allowed to take unprocessed precious metals in trust or receive them for safekeeping purposes

g) are not allowed to let their employees effect transactions on their own behalf and for their own account by making use of the facilities provided to them, beyond the ordinary customer-broker relationship.

h) are not allowed to engage in trading without a real change of ownership of the subject unprocessed precious metals, intended to increase, decrease or hold at a definite level the prices of precious metals artificially or to influence artificially the purchase and sale demands for precious metals or to create the impression that there is an active market.

The banks and private financial institutions, which will engage in brokerage house business included in the scope of this regulation, shall be subject to the provisions of sub-articles (d) (e) (f) (g) and (h) of this article,

Bookkeeping, Recording and Documentation

ARTICLE 11 - Brokerage houses and Authorized Institutions are obliged to keep the books and records and to issue the documents which are adequate to meet the requirements of their business and which the first class merchants are required to keep and are further obliged to comply with the arrangements made by the Exchange administration regarding the accounting, records, documents and transactions related to the brokerage activities, within the provisions of Turkish Code of Commerce, Code of Tax Procedure and the laws of regulations related to the precious metal Exchanges.

Concerning their business the brokerage houses are further obliged to send to Under-Secretariat the lists, financial statements and reports to be prepared in accordance with the principles and samples prescribed by the Under-Secretariat.

Information

ARTICLE 12 - Concerning their activities, the intermediary institutions are obliged to furnish information to the Under-Secretariat and to the Board about

a) the balance sheets, profit/loss statements and report on the activities of the relevant period, within one month and on a quarter basis,

b) the statement showing separately the total amounts of purchases and sales of unprocessed precious metals effected for their own portfolio and effected for their own portfolio and effected on behalf of and for account of their customers in each month, within fifteen days.

Despite the warnings if a brokerage house does not send the documents systematically on time, the Under-Secretariat has the authority to cease the operations of the brokerage house in the Exchange beginning from one month up three months.

Monitoring and Auditing

ARTICLE 13 -Intermediary institutions of precious metals shall be subject to monitoring and auditing of the Under-Secretariat. During the performance of monitoring and auditing duties, the intermediary institutions are obliged to present the relevant books, records and documents to the officials in charge of performing such duties and furnish any information that they may require and to sign the minutes prepared by such officials and to provide them with all facilities that may be required.

Exchange Membership

ARTICLE 14 - The Board of Directors of the Exchange shall issue a "certificate of precious metals membership to the precious metals Exchange " for the intermediary institutions which have obtained a licence of operation from the Under-Secretariat, for the purpose of enabling them to effect transactions in the Exchange. CBRT is a natural member of the Exchange.

Principles of Operation of Exchange Members

ARTICLE 15 - Exchange members are not allowed to engage in activities and transactions which are incompatible with the scope of the activities and transactions of the relevant Exchange, without prejudice to the duties and powers assigned to them by relevant laws, decrees etc.

Obligations of Exchange Members

ARTICLE 16 - Exchange members:

a) are obliged to behave and act according to the rules of good will and in compliance with the relevant laws and regulations and the order and discipline at the Exchange.

b) are free to reject wholly or partially purchase and sale orders given by their customers; however, they are obliged to inform their customers or representatives of the customers immediately thereof without being obliged to explain the reasons for such rejection.

c) are not allowed to receive or offer off-tariff commission.

d) are responsible for all transactions they effect in the exchange including the delivery of precious metals and payment at their price.

Cancellation of Certificate of Exchange Membership

ARTlCLE 17 - The certificates of Exchange membership of the intermediary institutions which are ceased to operate in the Exchange permanently by the Under-Secretariat shall be cancelled by the Board of Directors of the Exchange and this will be announced by the Exchange in Exchange bulletin and at least in two newspapers published nation-wide.

In case the intermediary institutions apply to the Exchange to leave the Exchange membership by their own request, they have to inform the Under-Secretariat about this demand.

Temporary ARTICLE 1-- The brokerage houses which had the authority to operate before the publication of this regulation do not have to complete the amount which is re-determined by the amendment of article 5/b of the regulation. However , in the transfer of shares of the partners, the capital has to be raised up to 100 billion TL in 90 days beginning from date of transfer in case the sum of transferred amounts catch up to 50% of paid-up capital or exceed this percent or in case the sum of transferred amounts bring about the change of the administration and inspection of the brokerage house directly or indirectly

Effective Date

ARTICLE 18 - This regulation shall come into effect on the date of its publication.

Execution

ARTICLE 19- The provisions of this regulation shall be executed by the Prime Minister