Bank Liability in Fund Investments: Mis-Selling and Risk Disclosure
Last updated: 23.10.2026 · Author: Attorney Coşkun Genç, Istanbul cybercrime lawyer
Short answer: If the bank marketed the fund to you without a request on your part, it must carry out an appropriateness test, disclose the risks in writing and in a clear manner, and refrain from promising any return (Capital Markets Board Communiqué III-39.1, Articles 25, 33 and 41). Unless it proves that it was not at fault, the bank is liable under the rules of contract law for loss resulting from steering contrary to these obligations (Articles 112 and 506 of the Turkish Code of Obligations). The first step is to request copies of the forms you signed and of your correspondence with the branch, and to ask in writing that the call recordings be preserved.
A bank's liability in fund investments does not cover every loss an investor suffers; market risk is borne by the investor. Liability arises where the bank or brokerage firm breached its own obligations while selling the product: steering the client into a risky fund without a test, failing to explain the risk or explaining it incorrectly, or giving an assurance such as "your principal is protected". This article explains the legal framework governing fund distribution, the burden of proof, the competent court and the compensation process. The course of action for investors in criminal investigations against fund managers is addressed separately in the guide what investors should do in a fund investigation.
On what legal relationship is a bank liable when selling funds?
When a bank receives and transmits an order to buy or sell fund participation units, it provides an investment service within the meaning of capital markets legislation and bears contractual liability towards its client. Article 37 of the Capital Markets Law, in listing investment services, separately specifies the reception and transmission of orders, the execution of transactions on behalf of clients, portfolio management and investment advice. Only brokerage firms and banks authorised by the Capital Markets Board (SPK) may provide these services.
Article 24 of the Communiqué on the Principles Regarding the Establishment and Operation of Investment Firms (III-39.1) requires investment firms to act in accordance with the framework agreement and their duties of care and loyalty, to act as a prudent merchant, and to ensure adequate information and transparency on every matter concerning the client. The Communiqué expressly includes banks within the definition of "investment firm". Consequently, a fund recommendation made by branch staff is deemed an act of the bank itself.
Under general law, the relationship is closest to the rules on mandate. Article 506 of the Turkish Code of Obligations (TCO) imposes on the agent the duty to carry out the business faithfully and diligently, having regard to the legitimate interests of the principal. The standard of care is the conduct of a prudent agent working in that field. Since the bank operates professionally in this field, it is assessed against a higher standard of care than an ordinary agent.
Turkish Code of Obligations, Law No. 6098 – Article 506 (paragraphs 2 and 3) and Article 112
Art. 506: "The agent shall be obliged to perform the business and services undertaken faithfully and diligently, having regard to the legitimate interests of the principal. In determining the liability of the agent arising from the duty of care, the conduct expected of a prudent agent undertaking business and services in a similar field shall be taken as the basis."
Art. 112: "Where an obligation is not performed at all or is not duly performed, the obligor shall be obliged to compensate the obligee for the resulting loss, unless the obligor proves that no fault whatsoever is attributable to it."
Article 112 TCO is the fundamental rule of contractual liability: if the obligation was not duly performed, the obligor pays for the loss unless it proves that it was not at fault. The investor, for its part, must establish the breach of contract, the loss and the causal link between the two.
Are appropriateness and suitability tests mandatory when selling funds?
If the bank marketed the fund, an appropriateness test (uygunluk testi) is, as a rule, mandatory; if the investor requested the fund on its own initiative and was informed that no test would be carried out, the test is not required. The appropriateness test measures whether a retail client has the knowledge and experience to understand the risks of the product offered (Communiqué III-39.1, Article 33(1)). The test asks about the investment horizon, risk and return preference, age, occupation, education, and the type, volume and frequency of past transactions.
Communiqué on the Principles Regarding the Establishment and Operation of Investment Firms (III-39.1) – Article 33(2)
"(2) Provided that the product or service is offered at the client's own request and that the client is informed that the investment firm is not obliged to carry out an appropriateness test, the investment firm shall not be required to carry out an appropriateness test for: a) participation units of investment funds; b) public debt instruments issued by the Undersecretariat of Treasury and traded on exchanges and other organised marketplaces. The burden of proving such notification shall lie with the investment firm."
This exception is decisive in fund disputes. If branch staff called you and recommended a particular fund, the product is not deemed to have been offered at your request; the burden of proving that both conditions of the exception were met lies with the bank. If the test shows that the product is not appropriate for you, the bank must warn you in writing and may not give one-to-one general investment recommendations for that product (Article 33(9)). If you still wish to buy the product despite the warning, the bank is free to decide whether or not to provide the service (Article 33(10)).
The suitability test (yerindelik testi), by contrast, is more comprehensive and is mandatory only for individual portfolio management and investment advice agreements, before the agreement is signed. Under Article 40 of the Communiqué on the Principles Regarding Investment Services, Activities and Ancillary Services (III-37.1), this test also covers income level and assets held for investment purposes; a service inconsistent with the test result may not be provided. Article 45(6) of the same Communiqué does not treat guidance given according to risk and return preference regarding funds traded on the Turkey Electronic Fund Trading Platform (TEFAS) as investment advice. Even in such guidance, however, misleading and exaggerated statements must not be used, no specific return may be promised, and conflicts of interest must be disclosed.
Does signing a risk disclosure form protect the bank in every case?
No; a signed form is strong evidence, but it does not on its own release the bank from liability if it is proven that incorrect information was given orally or that the risk was never explained. Under Article 25 of Communiqué III-39.1, before the framework agreement the bank must provide the "General Risk Disclosure Form for Investment Services and Activities" (Yatırım Hizmet ve Faaliyetleri Genel Risk Bildirim Formu), separately explain the commissions, liquidity risk and market risk of the product concerned, and obtain a written declaration that these have been read and understood. The explanations must be plain and understandable and, where possible, include numerical examples; the burden of proving that this was done lies with the bank (Article 25(6)).
The Communiqué also introduces two further safeguards. The framework agreement may not contain a clause placing the burden of proving orders on the client (Article 26(5)). Investment firms may not give any undertaking guaranteeing an absolute return or protection against loss; this prohibition also applies to one-to-one promotions and briefings (Articles 41(2) and 41(6)). Being told "you will not lose money" in a branch meeting is therefore directly contrary to the legislation.
"the employee of the defendant bank misdirected the claimant as to the maturity of the forward transaction and failed to make the required risk disclosure, the employee of the defendant bank sought to motivate the claimant to enter into transactions, and although the claimant technically approved the transactions, it did so as a result of incomplete information"
Court of Cassation, 11th Civil Chamber, E. 2024/3662, K. 2025/3479, 20.05.2025 (reasoning of the first-instance court; the Chamber upheld the judgment)
This case concerned not a fund but derivative (forward) transactions carried out through a bank. By comparing the audio recordings with the transaction receipts, the commercial court held the bank partly liable on account of incomplete information, even though the client had approved the transactions; the 11th Civil Chamber of the Court of Cassation upheld that judgment. The significance of the decision for fund investors is this: approval or a signature does not mean that full information was provided, and call recordings may prove decisive.
The outcome is not the same in every case. In decision E. 2023/3801, K. 2024/6560, dated 19.09.2024, of the 11th Civil Chamber of the Court of Cassation, the judgment of the Regional Court of Appeal dismissing the action was upheld because the allegations of mis-selling and concealment of information could not be proven. In decision E. 2022/3927, K. 2023/3251, dated 24.05.2023, of the same Chamber, in a bond purchase case where the signed purchase instruction listed the risks in writing, including loss of principal, a judgment of dismissal rendered in compliance with the reversal judgment was upheld. In other words, what is decisive is not so much the existence of the form as proof of what was actually said in the specific conversation.
How is mis-selling proven?
Mis-selling is proven by assessing signed documents, bank records, telephone call recordings, correspondence and witness statements together. Under the legislation, the burden of proof lies with the bank as to whether the test was carried out, whether the risk disclosure was made and whether the conditions of the appropriateness-test exception for funds were met. As a rule, however, the investor must prove that an oral assurance of return was given. For this reason, gathering evidence early is important.
"during the sale of the fund, branch officials provided incomplete information and guidance to the effect that 'no deduction or loss other than the 1% exit commission would arise', thereby paving the way for unnecessary purchases and sales"
Court of Cassation, 11th Civil Chamber, E. 2023/5679, K. 2024/2980, 17.04.2024 (reasoning of the first-instance court; the Chamber upheld the judgment)
In this case, investors leaving a capital-protected fund before maturity were told at the branch that only a one per cent exit commission would be deducted. The commercial court accepted the loss beyond the commission as damage arising from the bank's incomplete information; the 11th Civil Chamber of the Court of Cassation upheld the judgment and characterised the dispute as falling under Article 4(1)(f) of the Turkish Commercial Code.
Document and evidence checklist
- ✓Signed copies of the framework agreement, the general risk disclosure form and the product-specific risk explanations
- ✓The appropriateness test form and notification of the result; if no test was carried out, a document showing that you were so informed
- ✓Fund purchase and sale instructions, transaction receipts, account statements and portfolio statements
- ✓The fund's key investor information document and prospectus (as in force on the date of sale)
- ✓Emails, messages and in-app correspondence with the client representative; presentations and promotional materials sent to you
- ✓A request that the audio recordings of telephone calls be preserved and provided to you
- ✓The names of the persons present at the meeting and the date and time of the meeting
- ✓Documents showing your income, savings and investment history (to demonstrate the mismatch between your profile and the product)
To obtain the records the bank holds about you, you may also exercise your right of application under Article 11 of the Personal Data Protection Law (KVKK). This article grants the data subject rights such as learning whether their personal data are processed, requesting information if they have been processed, and learning the persons to whom the data have been transferred. Once the action has been filed, you may also ask the court to order the bank to produce the records.
How does a compensation claim against a bank proceed, step by step?
The process consists of gathering documents, a written application to the bank, mandatory mediation and litigation. The sequence is as follows:
- Request the documents: By written application to the branch or head office, request copies of the agreement, forms, test result and transaction statements; separately request that the audio recordings be preserved.
- Calculate the loss: Determine separately the amount invested in the fund, the amount received on exit, the deductions and the alternative return items for the period.
- Complaint and formal notice to the bank: Notify the bank in writing of how you were steered, which obligation was breached and what you are claiming. A formal notice is also useful for the commencement of interest and for evidentiary purposes.
- Identify the competent forum: Depending on your status as a consumer and the nature of the transaction, the consumer arbitration committee, the consumer court or the commercial court of first instance is chosen (see the table below).
- Apply to a mediator: Both before the consumer court (Article 73/A of the Consumer Protection Law) and in commercial cases concerning monetary claims (Article 5/A of the Turkish Commercial Code), applying to a mediator before filing suit is a precondition for bringing an action; disputes within the jurisdiction of the arbitration committee are excluded.
- Action and expert examination: If no settlement is reached, an action is filed. In these cases, the loss and compliance with the legislation are generally determined by a court-appointed expert report in the field of banking and capital markets.
It is possible to lodge a complaint with the SPK or, as regards banking transactions, with the Banking Regulation and Supervision Agency (BDDK); however, the review by these authorities is in the nature of administrative supervision and does not replace an award of compensation in the investor's favour. Compensation requires recourse to the arbitration committee or the courts.
Which court is competent: the consumer court or the commercial court?
The competent court is determined by whether the investor entered into the transaction for a purpose outside its trade or profession, and practice on this point is not uniform. Article 3 of Law No. 6502 on Consumer Protection (TKHK) defines a consumer as "a natural or legal person acting for purposes outside its trade or profession" and expressly includes banking and mandate agreements within consumer transactions. Under Article 73 of the Consumer Protection Law, actions arising from consumer transactions are heard by consumer courts; actions brought by consumers are exempt from court fees and may also be filed at the consumer's place of residence.
On the other hand, Article 4(1)(f) of the Turkish Commercial Code deems actions arising from regulations concerning banks and financial institutions to be commercial cases, regardless of whether the parties are merchants. In a case concerning dual currency deposits and option transactions, the Civil General Assembly of the Court of Cassation did not regard the investor as a consumer:
"it being understood that the claimant obtained the service from the defendant bank for financial transactions and that the purpose for which the service was obtained must primarily be taken into account, it is not possible to regard the claimant as a consumer in view of this commercial purpose."
Civil General Assembly of the Court of Cassation, E. 2017/22, K. 2018/1102, 16.05.2018
This decision upheld the decision of resistance (direnme kararı) holding that the commercial court of first instance was competent. By contrast, the case underlying decision no. 2024/6560 mentioned above was heard by a consumer court and reached the Court of Cassation after examination on the merits. For fund investments, too, the outcome may vary depending on the nature and amount of the transaction, the investor's occupation and the frequency of transactions. Since subject-matter jurisdiction is a matter of public order, an action filed before the wrong court costs time; this assessment should be made before filing suit.
| Route | When does it apply? | Precondition / note |
|---|---|---|
| Consumer arbitration committee (tüketici hakem heyeti) | Disputes in which consumer status is accepted and the value falls below the monetary threshold increased each year by the revaluation rate; below this threshold, application is mandatory (Article 68 of the Consumer Protection Law) | Mediation is not required (Article 73/A(1)(a) of the Consumer Protection Law) |
| Consumer court | Where the investor acted for purposes outside its trade or profession | Mediation is a precondition for bringing an action (Article 73/A); exemption from court fees (Article 73(2)) |
| Commercial court of first instance (asliye ticaret mahkemesi) | If the transaction is deemed to serve a commercial purpose or the investor is a merchant (Article 4(1)(f) of the Turkish Commercial Code) | For monetary claims, mediation is a precondition for bringing an action (Article 5/A of the Turkish Commercial Code) |
| Complaint to the SPK / BDDK | Where an administrative review of the breach of legislation is sought | Does not award compensation; does not replace recourse to the arbitration committee or the courts |
When does the limitation period expire, and what does compensation cover?
If the claim is based on breach of contract, a ten-year statute of limitations applies as a rule (Article 146 TCO). If the claim is based on tort, under Article 72 TCO the action must be filed within two years from the date on which the loss and the liable person became known and, in any event, within ten years from the act; if the act constitutes an offence subject to a longer criminal limitation period, that period applies. Since which period runs depends on the specific facts, acting on the basis of the shortest period is the safe course.
Compensation is calculated on the basis of the difference between the position the investor would have been in had there been no mis-selling and its current position. In practice, the difference between the amount paid for the fund and the amount received on exit, deductions resulting from the breach, and interest are claimed. The expert also assesses the investor's level of knowledge, transaction history and conduct after suffering the loss; continuing to enter into new transactions for a long time without objecting may strengthen the bank's defence.
What are the exceptions and common mistakes?
The most common mistake is to treat a fall in the fund's value, in itself, as the bank's fault. A decline in the fund price may be the result of market risk; the action must be based on a specific breach in the sales process. Other important points:
- Professional client exception: An investor who moves into the professional client category upon request cannot benefit from certain protections (Communiqué III-39.1, Articles 31-32). Check the documents you signed for this reclassification.
- Fund bought at your own request: If you chose and requested the fund yourself and were informed that no test would be carried out, the absence of a test does not in itself give rise to liability.
- Requesting the audio recording late: Recordings are retained for a limited period; delaying the request may lead to the loss of the strongest evidence.
- Skipping mediation: An action filed without the mediation that is a precondition for bringing an action is dismissed on procedural grounds.
- Confusing criminal and civil routes: A criminal investigation concerning fund management does not by itself determine the bank's civil liability in the sales process; the two routes proceed separately.
- Failing to document a "guarantee": Oral promises can only be proven by recordings, correspondence or witnesses; taking a note with the date and time immediately after the event helps.
If the steering into risky products was done through an unauthorised platform, the matter is no longer the bank's contractual liability but a suspicion of fraud; in that case, the assessments in the article evidence in forex fraud are more relevant.
The Compensation Process with an Istanbul Capital Markets Lawyer
In fund compensation cases against banks, the outcome is often determined by three points: whether the fund was marketed by the bank or bought at the investor's request, whether the risk disclosure was made in a product-specific and understandable manner, and whether the call recordings were secured in time. Av. Coşkun Genç Law Office provides legal support to investors in Istanbul at the stages of requesting documents and records from the bank, preparing the loss calculation, mediation negotiations and litigation before the consumer or commercial court. In work carried out as an Istanbul capital markets lawyer, the competent route and the limitation period are assessed first, followed by an evidence plan.
Investors seeking the support of an Istanbul banking law lawyer may request a preliminary assessment through our contact page, together with the framework agreement, the risk disclosure form, the appropriateness test result, the transaction receipts and the branch correspondence. In cases that also have a criminal dimension relating to fund management, the assessment is made together with our work in the field of cybercrimes and economic crimes.
Sources
- Capital Markets Law (Law No. 6362), Article 37 – mevzuat.gov.tr
- Capital Markets Board (SPK), Communiqué on the Principles Regarding the Establishment and Operation of Investment Firms (III-39.1), Articles 24, 25, 26, 31-33, 41 – mevzuat.gov.tr
- Capital Markets Board (SPK), Communiqué on the Principles Regarding Investment Services, Activities and Ancillary Services (III-37.1), Articles 40, 45, 48 – mevzuat.gov.tr
- Turkish Code of Obligations (Law No. 6098), Articles 72, 112, 146, 506 – mevzuat.gov.tr
- Law No. 6502 on Consumer Protection, Articles 3, 68, 73, 73/A – mevzuat.gov.tr
- Turkish Commercial Code (Law No. 6102), Articles 4, 5/A – mevzuat.gov.tr
- Civil General Assembly of the Court of Cassation, E. 2017/22, K. 2018/1102, 16.05.2018
- Court of Cassation, 11th Civil Chamber, E. 2024/3662, K. 2025/3479, 20.05.2025
- Court of Cassation, 11th Civil Chamber, E. 2023/5679, K. 2024/2980, 17.04.2024
- Court of Cassation, 11th Civil Chamber, E. 2023/3801, K. 2024/6560, 19.09.2024
- Court of Cassation, 11th Civil Chamber, E. 2022/3927, K. 2023/3251, 24.05.2023
Important: This article is for general information purposes only and does not constitute legal advice. The bank's liability leads to different outcomes from case to case depending on the type of product, the sales process, the documents signed and the call recordings. The decisions cited are specific to their own facts. Since limitation periods and the time limits for preconditions to bringing an action may lead to loss of rights, it is advisable to have your specific situation assessed by a lawyer.