Financial Adviser's Fund Promise: Court of Cassation Fraud Ruling

For years, a person has worked as a financial adviser at the same pension and life insurance company. He tells customers he knows, “let me put your money into the company's investment funds”. Believing he is authorised on behalf of the company, the customers send money to the accounts he indicates; some of them receive small payments described as “fund returns”. The real question debated in the criminal proceedings is which offence this conduct falls under: should a company employee be punished under Article 158/1-(h) of the Turkish Penal Code (TCK) as a “person acting on behalf of the company”, or is the conduct simple fraud?

In its decision of 08.10.2024, Docket No. (E.) 2024/4298, Decision No. (K.) 2024/11283, the 11th Criminal Chamber of the Court of Cassation affirmed the defendant's convictions under TCK Article 158/1-(h) by a majority vote, contrary to the Notice of Opinion of the Chief Public Prosecutor's Office. One member argued in a dissenting opinion that the conduct was simple fraud, which is subject to reconciliation. The appeal against the sentences of five years' imprisonment or less was rejected.

🧩 The Crux of the Dispute: An Employee, or a Person Acting on Behalf of the Company?

The basic form of fraud is regulated in TCK Article 157. TCK Article 158 lists, as qualified forms calling for a heavier penalty, the commission of the offence by certain means, by certain persons or in a certain setting. The sub-paragraph that comes to the fore in this case is sub-paragraph (h). According to the current text of the legislation, where fraud is committed;

“by merchants or company managers, or by persons acting on behalf of a company, during their commercial activities; by cooperative managers within the scope of the cooperative's activities”, imprisonment from three to ten years and a judicial fine of up to five thousand days is imposed.

The sub-paragraph speaks of a merchant, a company manager and a person acting on behalf of a company. The majority of the Chamber and the member who wrote the dissenting opinion parted ways on whether an employee who is neither a manager nor a representative falls within this scope.

🗂️ Facts of the Case

The facts set out in the reasoning for affirmance and in the dissenting opinion can be summarised as follows:

There are eighteen intervening parties. The court of first instance divided them into groups and, for every group but one, applied the continuing offence provision in TCK Article 43/1.

🏛️ High Criminal Court, Regional Appeal and Court of Cassation

The Kocaeli 7th High Criminal Court (30.11.2023, Docket No. 2022/231 E., Decision No. 2023/479 K.) issued five separate convictions against the defendant:

The 8th Criminal Chamber of the Sakarya Regional Court of Appeal rejected the appeals on the merits under CMK Article 280/1-(a). The judgments were appealed on points of law by both the defendant's counsel and the counsel of the intervening parties. The defendant's counsel argued that he had not committed the offence and that the aggravation and the continuing offence were applied unlawfully; the counsel of the intervening parties argued that TCK Article 158/1-(f) should have been applied and that an insufficient sentence was imposed.

The Notice of Opinion of the Chief Public Prosecutor's Office at the Court of Cassation was in favour of reversal. After discretionarily rejecting the requests for a review at a hearing under CMK Article 299/1, the Chamber stated that the evidence had been assessed at the trial in accordance with CMK Article 217, that the defendant had taken money by persuading the intervening parties that he would invest in the investment funds within the company and was authorised to do so, and that the intervening parties believed the defendant was authorised at the company. According to the Chamber, the legal characterisation of the conduct and the sanctions were correctly determined; the appeals on points of law were rejected on the merits and the judgments were affirmed.

✂️ The Five-Year Threshold: The Judgment That Was Not Reviewed

The procedural part of the decision deserves separate attention. The 4-year prison sentence imposed for three intervening parties was not examined on the merits. The Chamber relied on the provision in CMK Article 286/2-(b) that “decisions of regional courts of appeal that do not increase prison sentences of five years or less imposed by first-instance courts” cannot be appealed on points of law; it found that the offence is not among the exceptions in Article 286/3, and rejected the defendant's counsel's appeal against this judgment under CMK Article 298/1, contrary to the Notice of Opinion and unanimously.

Thus one of the judgments given on the same characterisation became final at the appeal stage; the characterisation debate in the dissenting opinion could arise only for the judgments open to appeal on points of law.

🧭 The Dissenting Opinion: The Possibility of Simple Fraud

According to the member who wrote the dissenting opinion, for sub-paragraph (h) to apply there must be a company with commercial activity, the offender must be the manager of that company or a representative authorised to act on its behalf, and the offence must be committed during the company's activity and in connection with it. Referring to the Chamber's earlier decisions, the member recalled this principle: where persons who work at a company without being its managers commit fraud by using the company's name, this qualified form cannot be applied; if the conditions of the other sub-paragraphs are also absent, TCK Article 157 must apply.

The case-specific grounds of the dissenting opinion are as follows:

According to the dissenting opinion, the conduct is simple fraud under TCK Article 157/1, which is subject to reconciliation, and the judgments issued under Article 158/1-(h) should be reversed. The majority, without writing a detailed counter-reasoning, kept the characterisation, regarding it as sufficient that the intervening parties believed the defendant was authorised at the company and that the defendant worked there with advisory authority.

The difference bears directly on the sentence. Under TCK Article 158/1, the penalty for sub-paragraph (h) is imprisonment from three to ten years; for simple fraud the upper limit is five years and the offence falls within the scope of reconciliation. Sentences such as the 17 years 6 months in this case are results reached through acceptance of the qualified form and the increase for the continuing offence.

📌 Implications for Investment-Promise Cases

There are two more decisions that approach the same subject from different angles: the decision on the capacity of an agentTR, in which an insurance agent was held not to be a self-employed professional and the conduct was accepted as falling under sub-paragraph (h), and the de facto manager decisionTR, concerning a person who has no authority on paper but in practice runs the company. For an example in which money collected by an adviser was assessed as breach of trust, see the TCK 155/2 decisionTR.

The points arising from this case can be listed as follows:

The majority vote shows that there is a difference of opinion within the Chamber on whether a company employee falls within sub-paragraph (h); the 2024 decisions cited in the dissenting opinion are reported to have reached a different result as regards employees.

🙋 Questions and Answers

For detailed information and legal support, you can contact Savun Law & Consultancy. Contact details are available on the contact page. Other Court of Cassation decisions on investment-promise fraud are listed on the Precedent DecisionsTR page.