The Regulation on Incorporation, Operation, and Supervision of the Central Registry Agency ("Regulation") was amended by a regulation published in the Official Gazette on 6 March 2019 and entered into force upon its publication on the same date ("Amendment Regulation"). The Amendment Regulation introduced new rules in relation to the definition and operation principles of the Central Dematerialized System and amended the procedures and requirements to be followed by institutions whose membership status is cancelled by the Central Registry Agency ("CRA") or which wish for their membership status to be cancelled by the CRA. The amendments that we consider important, among others, may be summarized as follows:

Definition of the Central Dematerialized System

The dematerialized system that is already operated by the CRA where capital market instruments are electronically issued without being attached to paper is called the Central Dematerialized System ("CDS") and under the Amendment Regulation, in line with the guidelines previously issued by the CRA and CDS, is defined as the system in which dematerialized capital market instruments and the rights attached thereto are monitored in an electronic environment for each member and rights holder.

Scope of the CRA Membership

According to the Regulation, the issuers, investment institutions operating in accordance with the Capital Markets Code No. 6362, central clearing institutions, and other institutions recommended by the CRA and accepted by the Capital Markets Board ("CMB") are eligible to be members of the CRA.

The Amendment Regulation defines the scope of the CRA membership and stipulates that CRA membership consists of the registration with, access to, and system usage of the CDS by the institutions who are accepted as members.In terms of being a member of the CRA, it is stipulated that institutions who wish to be a member have employed sufficient and qualified personnel to conduct CDS transactions or should notify the CRA in writing that they will indirectly and continuously conduct CDS transactions through another CRA member.

Voluntarily Cancellation of CRA Membership by Member Institutions

Institutions who wish to cancel their CRA membership are required to notify the CRA of this issue in writing and the membership of such institutions will be cancelled by a resolution of the Board of Directors of the CRA. The Amendment Regulation introduced additional requirements for issuers and investment institutions who wish to cancel their membership. In this respect, issuers wishing to cancel their membership should not have any dematerialized capital markets instruments and investment institutions wishing to cancel their membership should not have any active accounts.

Suspension of Membership

Cancellation cases regarding CRA membership for all institutions prior to the Amendment Regulation are listed among the suspension cases for investment institutions under the Amendment Regulation. It is also set forth under the Amendment Regulation that these cases will be applicable to CRA members other than investment institutions. Accordingly, among others, the membership status of all institutions shall be suspended and prohibited from conducting transactions on the CRA in cases where (i) the relevant member does not correct the breach within a certain time period decided by the CRA if this member fails to meet the membership requirements of the group they belong to or (ii) it is determined that there is a continuous breach in the CRA work or transactions in the inspection made by the CRA over the information and documents of the members.

Membership Cancellation by the CRA

The Amendment Regulation introduced substantial amendments to cases requiring membership cancellation by the CRA. In this respect, CRA membership will be cancelled if one of the following cases occurs:

1. Termination of monitoring activity for dematerialized capital market instruments that are issued or applied to the CMB for issuance, by the decision of the CMB,

2. Cancellation of custody authorization of investment institutions;

3. Termination of the member's legal personality, or

4. Full liquidation of the investment funds, the owner of which is the investment fund owners.

It is stipulated under the Amendment Regulation that, similar to the voluntarily cancellation of membership status by members, issuers should not have any dematerialized capital markets instruments and investment institutions should not have an active accounts in order for the CRA to cancel the membership. According to the Amendment Regulation, the member should apply to the CRA in writing for membership status cancellation after terminating the monitoring activity of dematerialized capital markets instruments other than share certificates.

As per the Amendment Regulation, if there is a remaining balance in the accounts opened at the investment institutions, the custody authorization of which is cancelled and the CDS access authorization of which is restricted by the CMB. The ability of such an investment institution to conduct transactions over the records of the member shall be performed by the CRA or an investment institution determined by the CRA and approved by the CMB.

Before the Amendment Regulation, if an issuer member whose membership was cancelled has dematerialized capital markets instruments being monitored in the CRA, prior consent of the CMB should have been obtained to put an end to the monitoring activity of the relevant dematerialized capital markets instruments. With the Amendment Regulation, the consent of the CMB should be obtained to put an end to the monitoring activity of dematerialized capital markets instruments of all the institutions, including the issuer in the CRA whose membership was cancelled.

Prior to the Amendment Regulation, the CRA was required to serve notification to the addresses of the rights holder investors, available in the CRA records, informing them that the monitoring activity of the issuer for the dematerialized capital markets instruments in the CRA have been terminated. As per the Amendment Regulation, this announcement with respect to terminating the monitoring activity of the issuer for the dematerialized capital markets instruments will be made on the Public Disclosure Platform instead of serving notification to the rights holder investors.