TCMA ANNUAL REPORT 2018

Initiatives Initial Collateral Practice for Leveraged Trading Transactions Article 27 of the Communiqué on Principles Regarding Investment Services, Activities and Ancillary Services (the Communiqué) covers revisions regarding maximum leverage ratio applied in leveraged trading transactions and collaterals. However, due to practical concerns, the Association requested the Capital Markets Board of Turkey’s (CMB) opinion about the matter to ensure uniformity across all intermediary institutions authorized to carry out leveraged training transactions. The CMB’s letter in response was announced to our members via the General Letter no. 795. Withholding Practice for Income on Repurchase Agreements Feedback was requested from the Revenue Administration to clarify whether our members have withholding obligation for income generated on reverse repurchase agreements to be derived by the European Bank For Reconstruction and Development (EBRD), so as to ensure uniformity of practice among our members. The Revenue Administration’s explanation that the interests to be derived by the EBRD from repo/reverse repo transactions should not be subjected to withholding under the (Law No. 193) Personal Income Tax - Provisional Article 67 was announced to our members with the General Letter no.800. Investor Compensation Center Dues Our opinions and suggestions regarding the reduction of the payments made by investor firms to the Investor Compensation Center (ICC) based on their assessment with respect to the intermediation costs incurred by our industry were conveyed to the Capital Markets Board of Turkey’s (CMB). In relation to our application, the CMB decided as follows in its meeting no. 47 held on 27: · To abolish the decision adopted in the CMB meeting no. 6 held on 26 February 2016 for increasing the dues charged based on leveraged trading transactions, which read “The rates set out in Article 21(4) of the ICC Regulation be increased by half under Article 21(9). · To decrease the coefficients in relation to leveraged trading transactions covered under Article 21 (4) of the ICC Regulation by 50%, until and unless a different decision is adopted by the CMB. Memo on Steps to be Taken and Expectations from the Viewpoint of the Sector Upon request by the Ministry of Treasury and Finance, the memo about the hardships experienced in the markets our members are operating, quantitative analyses and determinations in relation to the same, and the steps necessary to be taken with respect to the sector or expectations for a stronger financial system in the context of the developments in national economy and financial system was drafted upon compiling the opinions and suggestions of Professional Committees. “Report on Suggestions and Actions Action Plan for the Development of the Capital Market” produced by the Association and made public was submitted to the Ministry of Treasury and Finance in attachment to the memo. Suggested Revisions to the Withholding Tax Rate The Presidential Decree no. 53 dated 30 August 2018 published in the Official Gazette issue 30521 dated 31 August 2018 revised the withholding taxes applied to the following for a period of three months in the context of Provisional Article 67 of the Income Tax Law no. 193: · Interests accrued on FC deposit accounts and dividends paid by participation banks on FC participation accounts, · Interests on deposits, · Withholding taxes deducted from dividends paid by participation banks in return for participation accounts. Under this decree, considering that the withholding tax rates to be applied from 31 August 2018 through 30 November 2018 would constitute disadvantage for capital market products (debt instruments, lease certificates and mutual funds) that qualify as alternative products of deposit and participation accounts and might lead to significant withdrawals particularly from mutual funds, we have presented to the Ministry of Treasury and Finance our opinion and suggestions that the withholding tax reduction should be applied at the same rate to mutual funds and debt instruments as well. The fact that withholding rates on these alternative capital market products were kept constant posed a disadvantage for our capital markets during the three-month enforcement period, and significant outflows (approximately 20%) occurred particularly from mutual funds. Our opinion and suggestions that in the event the implementation period of the practice would be extended by a new decree prior to 30 November 2018 that marks the expiration of the term of the decree, withholding tax rate 26 TCMA 2018 ANNUAL REPORT