Domestic investors in limbo
Posted by meb at September 22nd, 2008
Some small investors in Turkey have been affected by the collapse of Lehman Brothers. With Citibank acting as an intermediary for the sale of some Lehman securities in Turkey, the Capital Markets Board said it is looking into the matter
The bankruptcy of the U.S. finance giant Lehman Brothers, which had the globe trembling, has created a group of aggrieved people in Turkey, as Citibank Turkey had acted as intermediary for some Lehman securities.
The Capital Markets Board, or SPK, has launched an investigation into the issue, and plans to overcome the uncertainty early this week.
“Citibank acts as intermediary for several local and global investment products,” said bank authorities upon the complaints of some small investors that had bought Lehman products from the bank. “Citibank Turkey has acted as intermediary for the purchase of some equities exported and guaranteed by a European subsidiary of Lehman Brothers Holding Inc., which made a bankruptcy application in the U.S.”
Although the bank declared it had been working on the issue, it did not direct the small investors on what to do. Therefore, the SPK began to investigate the situation and demanded information from Citibank on the sale of commercial papers.
Authority investigation
The SKP gives three certificates of authority for intermediary purposes, namely a repo/reverse repo certificate, an over-the-counter trade intermediary certificate and the intermediary authority certificate for the derivatives trade. Citibank has the first two certificates and has operated in these areas since May 2004. In this phase, the SKP investigates what Citibank sold to small investors and whether it has the authority certificate for the product.
“We have not done anything against the law. We are offering intermediary services within the framework of the legislation,” said Citibank authorities, preparing to submit the information and documents the SPK has demanded.
If the current investigation reveals that Citibank sold derivatives without receiving necessary permission, the SPK will penalize the bank. There are different penalties ranging from pecuniary penalties to the annulment of current authorities. If such a thing happened, it would be a first in Turkey.
The Banking Regulation and Supervision Agency, or BDDK, did not make a statement on the victims of the Lehman bankruptcy. However, just after the bankruptcy application, BDDK Chairman Tevfik Bilgin said, “The players in the Turkish banking system do not have any transactions that may create risks.” Just after the bankruptcy application, the BDDK demanded information from banks whether they have relations with Lehman or not, according to the data attained from anonymous sources.
source: Turkish Daily News
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