Vice President Cevdet Yılmaz on Monday said 17 of the investment funds ordered liquidated after last month's crisis were settled last week, and that talks on an ordinary liquidation of Atlas Pörtfoy should be finalized this week.
Authorities launched a sweeping investigation and market intervention last month after suspected price manipulation in a number of thinly traded stocks triggered heavy losses and redemption pressures at investment funds.
The Capital Markets Board (SPK) halted trading in 131 funds run by seven asset management companies on Sept. 17. Nearly half a million investors were affected.
The ruling Justice and Development Party (AK Party) submitted draft legislation governing the liquidation of the funds to Parliament on Friday.
Yılmaz said if the bill passes, fewer than 100,000 investors would be awaiting payment.
Three of the seven fund management companies, A1 Capital, Bulls and Pardus, accepted ordinary liquidation terms, the vice president told Anadolu Agency (AA). Payments to nearly 44,000 investors were made last Thursday, taking 17 funds run by the three firms out of the system, Yılmaz said.
Including a few thousand investors in closed funds at the same three companies, about 46,000 people have entered the ordinary process, he said. "No one has been left a victim" in these three companies, he said.
The largest fund company in the crisis is Tera, he said, followed by Pusula, Hedef and Atlas. Talks with Atlas's owners are continuing, and Yılmaz said it could conclude this week. If they do, about 58,000 Atlas investors would be paid under the ordinary liquidation method.
Payouts could be completed this month
Yılmaz said the bill setting out the rules for extraordinary liquidation was shared Friday after being discussed by the Fund Coordination Board and AK Party's parliamentary group. He stressed that it had not yet passed Parliament and that he was describing the current draft.
Under the draft, investors would get back principal of up to TL 1 million (about $20,000), calculated using the "net investment amount." Yılmaz said that in broad terms this reflects the money an investor put into a fund, as opposed to profits.
Anyone paid up to TL 1 million would later have their final rights and obligations calculated and offset against what they received, and the general rule still applies that whatever resources are collected will be shared out in the end.
The bill gives priority to money market funds and small investors, who make up the large majority of those affected. If it passes, Yılmaz said, the number of investors still waiting would fall below 100,000.
He said payments could be made within this month once the law is in force, and that all institutions had completed their technical preparations.
No state guarantee, no public money
Yılmaz said no public resources would be used for the liquidations. He said funds, unlike bank deposits, have no state guarantee, and that the Savings Deposit Insurance Fund (TMSF) insurance structure covers banks only.
Investors in hedge funds sign a professional or qualified investor agreement that accepts both gains and losses, he said, and the three largest funds would be liquidated with their own resources.
The SPK has opened 131 accounts at the TMSF, one for each fund, plus a general account for people who traded in shares rather than funds.
Yılmaz said money would come from people who voluntarily return excessive gains and from the sale of assets belonging to companies or individuals who acted unlawfully. He said each fund's legal situation differs and must be examined one by one.
Returning money does not close the investigations, he said. Legal responsibility remains for unlawful transactions, disruptive market activity and excessive profit-taking.
Judicial and administrative action
Yılmaz said the courts were taking effective action against those who harmed investors. Many people, he said, were in custody, detained or under investigation, and the owners of the companies were being prosecuted.
He said he did not recall any main suspect having fled abroad. He said significant investigations were underway into people who made excessive profits.
On the administrative side, he said the SPK and the banking regulator BDDK had issued various decisions, and that new rules had increased transparency. He said the funds with problems had been exposed by the new rules and then placed in "a kind of quarantine" through quick liquidation decisions so that the damage would not spread.
The State Supervisory Council (DDK) has begun fieldwork with about 15 auditors and inspectors, he said, and will draw on experts from other institutions. He said the inquiry would reveal both institutional shortcomings and individuals' responsibility.