The fundamental prerequisite for capital markets to function fairly and reliably is that all investors be able to access market-related information at the same time and to the same extent. Insider trading — which deliberately undermines this equality by exploiting material non-public information — both harms individual investors and threatens the integrity and reliability of the market.
Explicitly prohibited under Article 106 of Capital Markets Law No. 6362 ('CML'), this offense is subject to severe administrative and criminal sanctions while also affording harmed investors an independent right to compensation.
II. Legal Definition of the Concept and Its Effects on Markets
A. Legal Definition: Market abuse encompasses the trading by persons in possession of material non-public information in capital market instruments based on that information, or the facilitation of trading by others through the transmission of such information. The fundamental feature distinguishing this offense from other market abuses is not the creation of artificial information or transactions, but the unfair use of genuine information that is not yet in the public domain.
B. Adverse Effects on Markets: Market abuse harms markets through four primary channels. Distortion of the principle of information equality: outside investors are placed in a structurally disadvantaged position. Dysfunction of the price discovery mechanism: prices deviate from the true supply-demand equilibrium, forming at artificial levels based on information asymmetry. Erosion of market confidence: investors tend to withdraw from the market in the belief that opportunities are not distributed equally. Increase in cost of capital: the rise in the risk premium attributable to information asymmetry adversely affects financing costs for publicly held companies.
III. Statutory Basis
A. Capital Markets Law No. 6362 — Article 106: The primary statutory basis for market abuse in Turkish law is CML Article 106. The provision explicitly prohibits trading using undisclosed inside information, facilitating trading by others by transmitting such information, and sharing the information in any manner. Criminal sanctions under CML Article 106/A: 2 to 5 years' imprisonment and a judicial monetary fine; where the offense is committed by multiple persons or within an organized structure, these penalties are aggravated.
B. CMB Communiqués: CMB communiqués on public disclosure and the Public Disclosure Platform ('KAP') regulations concretize the definition of inside information, the scope of insider status, and the timing of public disclosure obligations. Publicly held companies are obliged to transmit without delay to KAP any information capable of materially affecting the price.
IV. Elements
A. Material and Non-Public Information (Inside Information): For information to be deemed material, it must be of a nature that a reasonable investor could find relevant to an investment decision or capable of producing a decisive effect on the price of the relevant security. Unexpected financial results, merger and acquisition plans, critical product approvals, senior management changes, significant litigation outcomes, and capital decisions may be counted in this category. For information to be deemed non-public, it must not have been shared with the public through a press release, KAP announcement, or regulatory notification.
B. Insider Status: Primary insiders include board members, senior managers, employees with access to inside information by reason of their duties, and professionals providing services to the company such as accountants, lawyers, and bankers. Secondary insiders are persons who have received the information indirectly and are aware or should be aware of the confidential nature of the information; they may be held liable where the transmitting person has acted with a personal benefit motive.
C. Trading Based on Information or Transmission of Information: The third element encompasses actual trading on the basis of inside information or the transmission of that information to another person. This act constitutes a criminal offense in its own right in some legal systems, independent of whether it subsequently results in an actual transaction.
D. Mens Rea: Market abuse is an intentional offense under Turkish law. However, in CMB practice, behavioral patterns such as the timing, size, and direction of transactions may generate a strong presumption of intent and shift the burden of proof to the defendant.
V. Sanction Regime
A. Criminal Sanctions in Turkey: Pursuant to CML Article 106/A: 2 to 5 years' imprisonment and a judicial monetary fine; aggravated penalties in qualified cases. The entirety of proceeds obtained from the offense is subject to confiscation.
B. CMB Administrative Sanctions: Independently of criminal proceedings, the CMB may apply administrative monetary fines, trading bans, license revocations, and public warnings; it may also file criminal complaints with the prosecutor's office.
C. Civil Liability and Compensation: Independently of criminal prosecution and administrative sanctions, harmed investors may claim direct loss arising from price distortion attributable to market abuse, lost profits, and unjust gains obtained through trading on inside information (through an unjust enrichment action).
VI. Corporate Compliance Policies
A. Information Barriers and Access Controls: Information barriers are structural separation mechanisms that prevent inside information from spreading between different units within the same institution. Layered authorization systems, electronic surveillance tools, and physical/digital separation constitute the fundamental components of this mechanism.
B. Blackout Periods: Publicly held companies establish mandatory trading prohibition periods before and after financial result announcements. Periods beginning from the close of the financial period and ending upon publication of the quarterly report, and periods surrounding board meetings, are among the primary examples.
C. Employee Training and Whistleblowing Mechanisms: Regular employee training on the definition of inside information, trading bans, notification obligations, and violation sanctions forms the foundation of a robust compliance culture. Anonymous whistleblowing mechanisms directly contribute to the early detection of suspicious situations and the institution's capacity for self-protection.
VII. Conclusion
Market abuse is a serious form of unlawfulness that distorts the fair operation of markets, undermines the principle of information equality, and deeply erodes investor confidence. CML Article 106/A and related regulations establish a strong deterrence framework in Turkey by subjecting this offense to severe sanctions. This framework, supported by corporate compliance policies, information barriers, and effective whistleblowing mechanisms, serves both the protection of individual investors and the safeguarding of market integrity.