Turkey cracks down after fund turmoil

Türkiye’s Capital Markets Board has suspended purchases and redemptions for TEFAS-listed funds managed by seven portfolio management companies and ordered that 130 of these funds be liquidated. The action covers products run by Tera, Pusula, Hedef, Atlas, A1, Pardus and Bulls, marking a sweeping intervention in the local fund industry. The decision follows a period of intense volatility and large outflows from some asset managers that raised concerns about market functioning.

By freezing transactions and forcing an orderly wind-down of the affected vehicles, regulators aimed to limit further pressure on asset prices and prevent distress from spreading to other parts of the financial system. The suspension of purchases and redemptions on TEFAS-listed funds effectively ring-fences the turmoil within a defined set of portfolios while authorities conduct further inquiries.

Law-enforcement measures accompanied the regulatory steps. Police arrested or detained four senior figures linked to the fund turmoil. Pusula Portföy chairman Muhammed Yarız was arrested, while Destek Holding majority owner Altunç Kumova, Tera Portföy deputy CEO İbrahim Bekci and Hedef Holding chairman Namık Kemal Gökalp were detained.

These actions focus on executives connected to some of the portfolio management companies affected by the suspensions and liquidations. The measures signal that the authorities are pursuing potential individual responsibility alongside institutional sanctions as they respond to the recent market stress.

The Capital Markets Board has also filed criminal complaints over alleged manipulation involving shares of three listed companies: Katılımevim, Gündoğdu Gıda and Destek Finans Faktoring. In connection with these allegations, the regulator imposed two-year trading bans on some fund managers at Pusula Portföy and Tera Portföy.

These enforcement steps extend the response beyond fund liquidity issues to address suspected abuses in specific equities. By combining complaints to prosecutors with direct market-access restrictions, officials are attempting to deter further irregular trading while investigations proceed.

To help contain the fallout from the fund turmoil, the Central Bank of the Republic of Türkiye increased lira liquidity support. Measures included raising repo funding to 300 billion lira and easing banks’ borrowing limits in the interbank market. These steps are intended to ensure that banks and market participants have sufficient local-currency funding as they navigate tighter conditions.

Turkish equities came under significant pressure during the episode. One report indicated that the BIST 100 index fell about 8% across Tuesday and Wednesday, while another stated that it dropped almost 6% on Wednesday alone and that trading was briefly halted after automatic limits were triggered. The differing figures underline the severity of the sell-off, even as exact declines varied across accounts.

The combination of fund liquidations, executive arrests, criminal complaints and liquidity injections underscores the multi-pronged nature of the official response. Market supervisors are acting on both structural concerns in the fund sector and alleged misconduct in individual securities, while the central bank focuses on maintaining orderly trading conditions.

How investors and institutions respond to the forced liquidation of 130 funds and the new trading bans will be critical for the next phase of Türkiye’s capital-market development. The recent steps highlight both the rapid growth and the vulnerabilities of local investment products in an environment of heightened regulatory scrutiny.