Forex Ad Profit/Loss Ratio: Council of State Ruling 2024/4022

An internet advertisement for leveraged trading (forex) is a short message that passes before the eyes in a few seconds. Capital markets legislation places a mandatory piece of information even in this short message: what percentage of the brokerage firm's client accounts are in profit and what percentage are in loss. Does it make up for the missing figure in the advertisement itself if the ratio is published on the brokerage firm's own website? The decision affirmed by the Council of State (Danıştay) upholds lower court rulings that answered this question in the negative.

With its decision of 16 October 2024, Docket No. (E.) 2020/1566, Decision No. (K.) 2024/4022, the Council of State 13th Chamber affirmed, unanimously and with finality, the ruling dismissing a case brought against an administrative fine of TL 78,147.00 imposed by the Capital Markets Board on a brokerage firm whose leveraged trading advertisements did not show the proportional distribution of profitable and loss-making client accounts.

📢 The ratio that must appear in the advertisement

The rule at the centre of the dispute is Article 41 of Communiqué III-39.1, titled “Advertisements, announcements and notices”. Its first paragraph requires investment firms to be objective in any publication, announcement, advertisement and notice made through any means of communication, such as the written press, the internet, telephone, radio, television, cinema, outdoor media and printed material; not to rely on false, incorrect or misleading information; and not to exploit clients' lack of experience or knowledge.

The fourth paragraph, added to the article by an amendment published in the Official Gazette of 14 January 2016, introduced a separate obligation for leveraged transactions. Under it, in any publication, announcement, advertisement and notice they make about leveraged transactions through the channels in the first paragraph, brokerage firms must show, in line with the principles in Article 19 of the Regulation on Commercial Advertisements and Unfair Commercial Practices, the proportional distribution of profitable and loss-making client accounts for the period disclosed under Article 28 of the Communiqué.

The fifth paragraph, added by the same amendment, lists the statements that cannot be used in leveraged transaction advertisements. These include statements promising gain in all circumstances or loss-free trading, promises of extra income aimed at groups such as housewives or university students, the impression that transactions are safe or under the Board's assurance, messages that transactions carry no risk or can be learned with short training, and targets for specific exchange rates or parities.

The logic of the fourth paragraph is to place the brokerage firm's own client table next to the expectation of gain that the advertisement builds. The ratio gives the potential client not the world promised by the advertisement but a cross-section of the results of accounts that actually trade at that firm.

🔎 The Board's finding and the TL 78,147.00 fine

The claimant is a joint-stock investment firm operating in the field of leveraged transactions. In the Capital Markets Board's review, it was found that the firm's advertisements published through the internet channel did not show the proportional distribution of profitable and loss-making client accounts.

According to the administrative court's summary of the decision, the finding rests on screenshots attached to the report. The screenshots of the two separate web pages on which the advertisements were published contain no proportional distribution. On the other hand, the court also accepted that the proportional distribution of profitable and loss-making client accounts was shown on the firm's own website.

For this breach, the Board imposed an administrative fine of TL 78,147.00 on the firm under Capital Markets Law No. 6362. Article 103, paragraph 1 of the Law is the general provision under which an administrative fine is imposed on those who act contrary to regulations made under the Law, to the standards and forms set, and to general and specific decisions taken by the Board. The text of the decision does not separately explain how the amount of the fine was calculated.

🗂️ The brokerage firm's four objections

At the appeal stage, the company grouped its objections under the following headings:

Article 105, paragraph 2, on which the last objection rests, provides that where one of the regulatory offences defined in the Law is committed more than once until the administrative sanction decision is made, a single administrative fine is imposed and that fine is doubled. The company's argument was that there was only a single act and that the conditions for an increase were not met. The defendant Board argued that the act and the regional administrative court decision were lawful.

⚖️ Administrative court, appeal and Council of State

The administrative court found that the proportional distribution was on the firm's own website but not in the advertisements published through the internet channel. According to the court, the screenshots clearly show this omission, and there was nothing unlawful in the Board's decision on the TL 78,147.00 administrative fine. The case was dismissed.

The regional administrative court stated that the first-instance decision complied with procedure and law and that the claims made did not require it to be set aside, and rejected the appeal under Article 45, paragraph 3 of the Administrative Procedure Law No. 2577.

The Council of State 13th Chamber recalled that regional administrative court decisions can be reversed only if one of the grounds in Article 49 of Law No. 2577 exists; it stated that the decision under review complied with procedure and law and that the grounds of appeal in the petition did not require reversal, and AFFIRMED the decision. The decision was given on 16 October 2024, with finality and unanimously.

🧭 Distinctions drawn from the decision

The Council of State did not state a principle of its own; it adopted the reasoning of the lower court. Reading the affirmed reasoning together with the discussion in the case, the following distinctions stand out:

This site has also reviewed another decision of the same Chamber on forex advertisements: the SPK fine imposed for the phrase “Licensed Investment Assurance”TR. In that case, the problem was a misleading statement that was in the advertisement; in this case, the sanction concerned the absence of information that had to be in the advertisement. Together, the two decisions show both the prohibiting and the mandatory sides of Article 41. For a different dispute in the field of advertising, see also the decision on a crypto exchange's advertisement refusalTR.

💡 What the ratio does for the investor

The ratio of profitable to loss-making accounts is the only concrete piece of data that a person newly interested in leveraged transactions can see at the moment of meeting the advertisement. Because advertising copy is short and eye-catching, moving the same information to another page can in practice leave it unseen. The approach of the lower courts is that the information should be presented together with the advertisement, not after the advertisement is clicked.

This obligation applies to brokerage firms authorised by the SPK. Unauthorised platforms with an overseas base stand outside this regulation and can advertise without supervision. The complete absence of the proportional distribution in an advertisement may also raise the question of whether the party advertising is an authorised brokerage firm; the SPK's lists of authorised institutions are an official reference source in this respect.

A note is also needed on the legal consequences of the decision for the investor–brokerage firm relationship: This case is an administrative fine case; it does not examine a compensation claim by a client who says they suffered a loss because of the omission in the advertisement. The effect of a breach of advertising rules on a private-law dispute is determined by assessing the causal link and the other conditions in each case.

❓ Frequently Asked Questions

For detailed information and legal support, you can contact Savun Law & Consultancy. Contact details are on the contact page; other decisions on capital markets and leveraged transactions are on the Precedent DecisionsTR page.