To boost morale and performance, multinational companies
often offer eligible employees the option to purchase common
stock shares at a discounted price. Unfortunately, the legal
position of such an offer and sale of foreign securities to
employees in Turkey is far from clear.
Conflicting regulations are the main source of this
ambiguity. Under the relevant communiqué of the Capital
Market Board (CMB), any foreign capital market instrument that
is traded in the country where it is issued should be
registered with the CMB - a lengthy and burdensome process - if
allocated for purchase by certain persons in Turkey. The number
of eligible employees is of no significance, and there are no
However, pursuant to a Council of Minister's Decree, Turkish
residents may freely purchase and sell securities trading in
foreign stock exchanges through banks, financial institutions
and brokerage houses without being subject to registration.
Some argue that employee offerings could be implemented in
Turkey pursuant to this decree instead of the CMB
communiqué, and a registration of the shares would not
be necessary since they would never be traded in Turkey.
However, the CMB does not interpret the provisions of this
decree to cover the employee offerings.
The solution is for the CMB to introduce new legislation
under which certain employee offerings would qualify as a
private placement exempt from registration. Although CMB
officials have long ignored this issue, they now seem to be
inclined to resolve it. In the meantime, although multinational
firms may be discouraged when trying to place their global
employee stock offerings in Turkey, several have gone forward
without a CMB registration.