Forex 'Licensed Guarantee' Ad Fined: Council of State 2023/4732
For many investors, seeing the word "licensed" on the home page of a forex site is a reassuring sign. When expressions such as "investment guarantee" and "the protection Turkish legislation can provide" are added next to the word, the message becomes even stronger: as if the state stood behind the transactions to be made. The Capital Markets Board (SPK) found this perception itself problematic, and the Council of State (Danıştay) found the Board's approach justified. The decision is a concrete example of how far the advertising language of even an authorised brokerage may go.
By its decision of 13.11.2023, Docket No. E.2018/225, Decision No. K.2023/4732, the 13th Chamber of the Council of State upheld, with modified reasoning, the dismissal of an action brought against an administrative fine of TRY 49,344.00 imposed on a brokerage operating in leveraged trading (forex) because of the phrase "Licensed Investment Guarantee" on its website. The decision was unanimous and final.
🖥️ The Phrase on the Site and the Board's First Warning
The starting point of the case is a finding made by the Board on the website of the claimant brokerage. In the promotional texts on leveraged trading, the site contained this sentence: "SPK Licensed Investment Guarantee, trade with the guarantee and protection that only Turkish legislation can provide."
By its decision of 27.02.2015, the Board found that the names and logos of capital markets institutions such as the Board, Borsa İstanbul A.Ş., the Istanbul Settlement and Custody Bank and the Central Registry Agency appeared on the company's website and in various advertisements and announcements. The decision stated that these practices must be ended urgently, that the company must act in line with the legislation, and that criminal provisions would otherwise apply. By a letter of 23.10.2015, the Board reminded the company of the same obligation.
According to the text of the decision, in the same period the Turkish Capital Markets Association also informed brokerages through its circulars that Board and Association rules must be followed in advertisements and that expressions misleading the public and creating unfair competition must not be used.
✂️ "SPK" Was Deleted, the Fine Came Anyway
Following the warnings, the company removed only the word "SPK" from the phrase. The statement remaining on the site became: "Licensed Investment Guarantee, trade with the guarantee and protection that only Turkish legislation can provide."
The Board did not find this correction sufficient, asked the company for a defence and then decided on an administrative fine. The assessments that stand out in the Board's decision are the following:
- That the practice was corrected afterwards does not remove responsibility for the violation found.
- Despite the earlier notifications, the violation was persistently continued.
- The advertisement was made through an electronic medium with limited access.
- With the statement, the company unfairly benefited from the Board's reputation.
On these grounds, an administrative fine of TRY 49,344.00 was imposed on the company for violating Article 20 of the Communiqué on the Principles Concerning Leveraged Trading Transactions and the Institutions That May Carry Out These Transactions (Series: V, No: 125). The said Article 20 required objectivity in every publication, announcement, notice and advertisement concerning leveraged transactions; it provided that authorised institutions could not prepare advertisements based on untrue, false, misleading or exaggerated information and could not give any undertaking that absolute returns would be achieved or that no loss would arise.
⚖️ The Administrative Court and the Appeal
The company brought an action seeking annulment of the fine. One of its arguments concerned procedure: the Communiqué (Series: V, No: 125), on which the fine was based, had been repealed by Communiqué No. III-37.1 on Investment Services and Activities and Ancillary Services; therefore a fine could not be imposed on the basis of that Communiqué.
The Administrative Court did not accept this argument. According to the Court, Communiqué No. III-37.1 provides that investment firms continue their activities within the framework of their existing operating principles until they obtain a new activity licence. It was therefore clear that the company had to comply with the ban on misleading advertising.
On the merits, the Court made the following finding: investment firms can carry out leveraged transactions only with the Board's permission; however, the fact that they are under the Board's supervision does not mean that all the transactions they carry out are under the Board's guarantee. The Board cannot be held responsible for transactions contrary to the legislation. The phrase used was capable of being understood as meaning that the Board gave a guarantee for leveraged transactions, and removing the word "SPK" did not change this result. The Court dismissed the case, and the Regional Administrative Court rejected the appeal under Article 45/3 of the Administrative Procedure Law No. 2577.
In its appeal petition to the Council of State, the company argued that the phrase had been removed entirely, that no advertising was being made, that the statement was for information purposes, that the Board's warnings had been complied with, and that in 27 years in the market it had committed no act misleading its customers.
🏛️ The Council of State's Correction of the Reasoning
The 13th Chamber of the Council of State did not change the outcome but resolved the question of the legal basis in a different way. The Chamber's findings can be summarised as follows:
- The Communiqué (Series: V, No: 125) was repealed by Communiqué No. III-37.1, which entered into force on 01.07.2014.
- According to the Board, the claimant's new activity licence became valid as of 01.01.2016 and an authorisation certificate dated 02.02.2016 was issued to the company; the act, however, was first identified on 27.02.2015.
- What was decisive was Article 41 of the Communiqué on the Establishment and Operating Principles of Investment Firms (No. III-39.1), which entered into force on the same date (01.07.2014). In parallel with the former Article 20, this article provides that investment firms must be objective in their advertisements and announcements, and that they cannot advertise on the basis of false, untrue or misleading information or in a way that exploits customers' lack of experience or knowledge.
- This rule was in force both on the date of the act and on the date of the Board's decision.
Within this framework, the Chamber accepted that using the phrase "Licensed Investment Guarantee, trade with the guarantee and protection that only Turkish legislation can provide" was contrary to the Communiqué in force. Finding no unlawfulness in the Board's decision and no error in its result in the Regional Administrative Court's decision, it upheld the judgment with reasoning.
The practical importance of this approach is clear: a fine imposed on the basis of a repealed regulation can still stand if a new regulation continuing the same obligation was in force on the date of the act. The defence that "the Communiqué relied on was repealed" does not by itself produce a result where the substance of the obligation has been kept in the new text.
🔐 The Difference Between a Licence and a Guarantee
For investors, the most instructive aspect of the decision is the line it draws between the concepts of "licence" and "guarantee". Under Article 39 of Capital Markets Law No. 6362, permission from the Board is mandatory for carrying out investment services as a regular occupation. This permission shows that the institution meets the conditions for starting activity and is subject to the Board's supervision.
However, as emphasised in the court decisions, the permission does not mean that every transaction the institution carries out is approved or guaranteed by the Board. This distinction mattered in this case in three respects:
- Deleting the word was not enough: Although "SPK" was removed, the same impression continued when "licensed", "guarantee" and "the protection Turkish legislation can provide" were read together.
- The information defence was not accepted: The claim that the statement was for information purposes did not change the result, given the effect the message had on the investor.
- Persistence was treated as aggravating: That the statement stayed online despite two separate warnings from the Board was expressly assessed in the Board's decision.
The decision also shows why advertising language is closely supervised in an area such as leveraged transactions, which carries a high risk of loss. In other Council of State decisions on leveraged transactions, procedural rules protecting investors are likewise in the foreground; for example, a fine imposed for the late transfer of collateral to the bank is covered in the article on late transfer of forex collateralTR, and the redirection of investors to institutions abroad in the article on redirection to an overseas forex company.
🆕 Today's Regulation and Penalty Regime
The fine in the decision relates to an act in 2015-2016. In the time since, both the advertising rule and the penalty regime have changed:
- The advertising rule was widened: By an amendment published in Official Gazette No. 29593 of 14.01.2016, fourth and fifth paragraphs were added to Article 41 of Communiqué No. III-39.1, and provisional Article 5 added to the Communiqué provides that all publications, announcements, advertisements and notices being published by brokerages are to be reorganised within the scope of these paragraphs.
- Turnover-based fines for legal entities: Under the sentence added to the first paragraph of Article 103 of Law No. 6362 by Law No. 7222 of 20.02.2020, an administrative fine may be imposed on legal entities, taking into account the seriousness of the violation and the number of victims affected, of no less than the minimum amount and up to the higher of 1% of gross sales revenue in the latest independently audited annual financial statements and 20% of pre-tax profit.
- Calculation of benefit: The ninth paragraph added to Article 103 by Law No. 7518 of 26.06.2024 provides that costs such as commission, tax, loan interest and consultancy fees are not taken into account in benefit calculations.
These changes show that, for a similar advertising violation today, the sanction may not remain limited to the TRY 49,344.00 of 2015. The provision applied in each case is determined according to the legislation in force on the date of the act and the assessment of the more favourable provision.
💬 Frequently Asked
Does an SPK-licensed brokerage mean my transactions are under state guarantee?
Why was the company fined although it corrected the phrase?
Why was the fine not annulled if the Communiqué relied on had been repealed?
Is the decision final, and what was the amount of the fine?
For detailed information and legal support, you can contact Savun Law & Consultancy. Contact details are available on the contact page, and other decision commentaries on capital markets and leveraged transactions can be found in the Precedent DecisionsTR archive.
This article is for general information purposes; its content was compiled from the Council of State 13th Chamber's affirming decision published on mevzuat.adalet.gov.tr and from the first-instance and appeal stages described in the decision. The identities of the parties are anonymised in the source. The lawfulness of administrative fines is assessed according to the legislation in force on the date of the act and the facts of each case; disputes with different facts may lead to different results. Savun Law & Consultancy cannot be held responsible for any application, lawsuit or defence made on the basis of this article.
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Have a question? Attorney Veli Savun answersThis page is an English adaptation of our Turkish article Forex’te Lisanslı Güvence Reklamı – Danıştay 13. D 2023/4732.
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