Public Disclosure Obligation
Investors transact in financial markets based on information reviewed. Such investment decisions are normally accessible as per public disclosures of each respective company. Accordingly, it has a significant impact on both the investors and the capital markets instruments to make public disclosures at the correct time, and with accurate content (other than the entities that are collecting funds through crowdfunding platforms) by legal entities, who issue capital markets instruments, who apply to the Capital Markets Board ("Board") to issue such instruments, or whose capital markets instruments are offered to the public and mutual funds. This Newsletter will mainly focus on the quality of the mandatory public disclosure obligations of the issuers under the capital markets legislation, and the procedures and principles of public disclosure as a result of continuous and material events.
The Legislation Applicable to the Public Disclosure Obligation
As per Article 14 (Financial Reporting and Independent Audit) and Article 15
(Material Events in Public Disclosure) of Capital Markets Law No. 6362 ("Law"), aside from the public disclosure of the continuous reporting materials, information, events and developments that may affect the value and price of capital market instruments or the investment decision of investors shall be disclosed to the public by issuers or related parties. Principles and procedures pertaining to financial reports to be prepared by entities, and the preparation and submission of them, with a view to assuring timely, adequate, and accurate information to the public is regulated under the Communiqué on Principles of Financial Reporting in Capital Markets (II-14.1) ("Communiqué on Financial Reporting"). Additionally, the principles and procedures relating to disclosure to the public of information, events, and developments that may affect the value or price of securities or the investment decisions of investors, with a view to assuring the operations of capital markets in a reliable, transparent, efficient, stabilized, fair and competitive atmosphere, by keeping investors informed on a timely basis, as well as completely and accurately informed, are set forth under the Communiqué on Material Events Disclosure (II-15.1) ("Communiqué on Material Events"). In order to guide the issuers and relevant parties with respect to public disclosures required under the Communiqué on Material Events, the Board has published a Guideline on Material Events.
Other than the aforementioned regulations, the procedures and principles of financial reports to be drawn up by investment funds, and of the preparation and submission thereof, are regulated in the Communiqué on Principles Regarding Financial Reporting of Investment Funds (II-14.2), and the procedures and principles as to public disclosure of information of publicly held corporations, the shares of which are not publicly traded, are stated under the Communiqué on Material Events Disclosure Regarding Non-Publicly Traded Corporations (II-15.2). Shareholders’ rights to obtain information of a non-public joint stock company are stipulated under Turkish Commercial Code numbered 6102.
Public Disclosure within the Scope of the Capital Markets Legislation
Public disclosure under the capital markets legislation is divided into two, those being continuous public disclosure, and disclosure as to material events. Information that is not misleading and not required to be disclosed under the legislation would be disclosed at the discretion of the issuer. Continuous, in other words, periodic, public disclosure is comprised of the public disclosure of information that is required by law to be prepared on a periodic basis, such as financial statements, annual reports of the board of directors, as well as independent audit reports. Since the respective reports are prepared periodically, the disclosure will be periodic. On the other hand, the public disclosure on material events would be performed once the events and transactions that are defined under the legislation occur. Public disclosure on material events is referred to as such due to the fact that the timing of the occurrence of the material events is undeterminable under the legislation. The disclosure of material events would have the effect to change the impact of the perception of the occurrence as per the information in the continuous public disclosures. Therefore, determination of the material events, and timing of the disclosures, is important.
Continuous Public Disclosures
As per Article 14 (Financial Reporting and Independent Audit) of the Law, the issuer is obliged to prepare and submit financial statements and reports to be disclosed to the public, or that which has been requested by the Board as necessary in compliance with the regulations established by the Board in a timely, complete, and accurate manner.
Pursuant to the Communiqué on Financial Reporting, financial statements refer to the statement of financial position, comprehensive income statement, cash flow statement, and statement of changes in equity, together with corresponding footnotes. The term of financial reports is further defined as the reports that are comprised of financial statements, board of directors’ reports and responsibility statements. Other than the financial statements, financial reports include the activity report of the boards of directors. Such reports have the same content of activity reports that are produced in a non-public joint stock company. The content of the activity reports is listed in the Communiqué on Financial Reporting, in detail.
The respective issuers and the capital markets institutions should take into account the Turkish Accounting Standards/ Turkish Financial Reporting Standards published by the Public Oversight, Accounting and Auditing Standards Authority as the basis in preparation of the financial statements.
The issuers may draw up annual financial statements in accordance with the principles set forth, annually. Investment companies that must prepare consolidated financial statements are obliged to prepare their annual consolidated financial statements, as well as their annual individual financial statements.
In addition to the annual financial statements, corporations stated under the Communiqué on Financial Reporting (investment enterprises, investment companies, etc.) are obliged to prepare interim financial reports quarterly, semi-annually, and every 9 months. Investment companies that are required to prepare consolidated financial statements are obliged to prepare their interim consolidated financial statements, together with their interim individual financial statements.
The boards of directors of the issuers are responsible depending upon any faults apportioned to them, and in the nature of things required for the preparation and submission of the annual and interim financial reports in accordance with the provisions of the legislation. Within this context, the boards of directors of the issuers are required to obtain separate decisions for acceptance of the financial statements.
Annual and interim financial reports to be disclosed to the public are accompanied, not only by the financial statements and boards of directors’ reports, but statements of the directors responsible for the financial reporting and the general managers of the entities or their managers in charge of the financial reporting. Such statements should include the affirmations that they have examined the reports, and the reports do not contain any untrue statements as to material events, or any deficiencies that may be misleading as of the date of each statement. The issuers are under the obligation to publish their annual and interim financial reports on their own websites after they have been disclosed to the public, in such a manner so as to allow easy access by the financial report-users thereto. Such information is required to be remain available to the public on the relevant websites for a minimum period of 5 years.
Public Disclosure on Material Events
The legislator has separately regulated the obligation of public disclosure for corporations, the shares of which are publicly traded under the Communiqué on Material Events, and for corporations, the shares of which are not publicly traded, under the Communiqué on Material Events Disclosure Regarding Non-Publicly Traded Corporations (II-15.2). Public disclosure of material events is announcement immediately on the information that may impact the price of the capital market instruments, the occurrence of which is not in a determinable manner. The timing of material events are undeterminable. Although the reports to be periodically disclosed are clearly stated, and the disclosures with respect to material events would require interpretation. This Newsletter focuses on the obligation of public disclosure of corporations, the shares of which are publicly traded.
- Material Events
The information to be publicly disclosed is separated into two – those being, inside information and continuous information. As per the Communiqué on Material Events, inside information refers to non-public information, and events and developments that may affect the value or price of securities or the investment decisions of investors. Continuous information is further defined as all information, events and developments that fall under the definition of inside information. On the one side, continuous information covers the information regarding changes to the capital structure and management control, and on the other side, inside information includes other material information that is comprised of general and broad content.
Inside information, and any changes in such information, that has previously been disclosed to the public, should be disclosed by issuers to the public whenever they come to light. The issuer may, at its sole discretion, postpone the public disclosure of insider information in order to avoid damages as to its legitimate interests, providing that it does not mislead its investors, and it ensures that such information is kept in strict confidence. As soon as the cause that justifies the postponement of public disclosure of insider information is removed, the issuers will disclose such insider information to the public.
Upon occurrence of a change in prices or trading volumes of securities that cannot be explained by ordinary and usual market conditions, the issuer is obliged to make a public disclosure, upon demand, of the relevant exchange. In the event of news or rumors about issuers having a content different from the information that has previously been disclosed to the public, or is disclosed to the public for the first time through the press and media, or by other means of communication, and which may affect the value and price of securities, or the investment decisions of investors, the relevant issuer is obliged to make a public disclosure as to whether or not such news or rumors are true or adequate.
- Procedure and Timing of Disclosures
Disclosures are made in Turkish and in the form attached to the Communiqué on Material Events within the public disclosure platform (PDP). Under the legislation, PDP is defined as the electronic system to which the information required to be disclosed to the public pursuant to the legislation is transmitted through electronic signature for disclosure to the public. A disclosure obligation is performed in such a manner so as to ensure quick access to information, and not to violate the principle of equal treatment of investors.
In principle, material events, other than information regarding capital and management control, should be disclosed to the public, immediately. The announcement of any change in capital and management control should be disclosed no later than the morning of the third day from the occurrence of the change.
Developments and changes in the previous public disclosures of material events are continuously updated and disclosed to public. If no development occurs to an event that has previously been disclosed to public by a public disclosure of material events, and has not yet completed, it is also separately disclosed to the public, together with reasons thereof, in intervals of sixty days, each starting from the date of the last public disclosure of material events relating thereto.
Finally, no later than the business day immediately after the date of disclosure to the public, the issuers are obliged to publish their public disclosures of material events on the website shown in the general information of the issuer published in the PDP, and to keep these disclosures on this same website for a period of five years.
Since investors make investment decisions based on public disclosures of the issuer, such disclosures are significant. Within this context, information, events and developments that may affect the value and price of capital markets instruments, or the investment decision of investors, shall be disclosed to the public. While continuous public disclosure is required to be made, periodically, public disclosure of material events is required to be made once such material events occur. The disclosures must be performed through the PDP in such a manner so as to ensure quick access to information, and not to violate the principle of equal treatment of investors.
 Capital Markets Law No. 6362 published in the Official Gazette dated 30 December 2012 and numbered 28513.
 The Communiqué on Material Events Disclosure numbered II-15.1 published in the Official Gazette dated 23 January 2014 and numbered 28891.
 Doç. Dr. Çağlar Manavgat, Publicly Held Companies and Public Offering from Legal Perspective, Research Institution on Banking and Commercial Law, Ankara, 2016 (Refer: Manavgat), p. 203.
 Manavgat, p. 210.