Capital Market Instruments are open to anyone: you do not have to hold an official or professional title to be an investor. Recently, amateur investors sent GameStop’s stock prices to dizzying heights. Especially in recent years, contracts signed between banks and individual customers are gaining importance with regard to consumer activities[i]. “Vadeli İşlem ve Opsiyon Piyasası” (abbreviated as VIOP) can be translated as Futures and Options Market. Contracts are used by investors for risk management, investment, speculation and arbitrage purposes – they entail an obligation to buy or sell a commodity, precious metal, energy, capital markets instrument or foreign currency at a pre-set price and amount at a certain maturity. VIOP trading is leveraged; so, the investor is risking high losses. Price fluctuations and a poor strategy leads to serious losses, even the principal capital might be fully lost. Intermediary institutions offer their advisory services to their customers to mitigate these risks – but there is one major problem with intermediary institutions as well: conflict of interest. While these institutions are called “intermediary”, they are not only in the intermediary position. Intermediary institutions act as both the other party in the contract and the intermediary via their employees; therefore, the acts of intermediary institutions have to be strictly regulated to make sure they do not advise against their customers. Market actors are not always professionals, sometimes they have no education or training in investment or trading. Therefore, it is very important to decide if the individual investors can be considered consumers.
The Turkish Law on Consumer Protection[ii] offers the insight and defines what consumer is. According to Law on Consumer Protection, consumer is the “real person or legal entity acting with non-commercial or non-professional purposes”. Persons usually engage in the markets by intermediary firms. Intermediary institutions offer their customers consultancy services regarding the capital market instruments. Banks act as intermediary and recommend investments, give advice and present business plans. This means that the individual investors are not only investors; they are also consumers buying service from the intermediary institutions. Intermediary institutions have obligations such as acting with care and honesty, protecting the interests of customers, preventing the conflicts of interests, keeping customers secrets and informing customers and explaining the risks. It is important to note that intermediary firms often prepare framework agreements; these agreements sometimes contain provisions that seriously violate the interest of the customers[iii]. Because of the nature of the financial instrument, conflict of interest might be unavoidable and, in these situations, customers are subject to serious risks and damages without being informed about it.
Turkish Law on Consumer Protection is parallel with the CJEU rulings and Advocate General Opinions. According to CJEU whether an investor should be considered a consumer is fact-specific in any given case; therefore, there are tests that should be applied in order to find out if the individual investor is acting as a consumer. Circumstances of each individual and the pattern of the investment are some key factors. Specifically, if the individual investor entered into the contract for a purpose which can be regarded as being outside their trade or profession, they can be considered as consumers. According to one recent Commercial Court decision[iv], despite the specialised nature of the products themselves, a wealthy individual committing substantial capital to speculative transactions in the hope of making investment gains was a consumer for the purposes of Article 17 of the Recast Brussels Regulation. According to an Advocate General ("AG") opinion[v] on whether a natural person who engages in trade on the currency exchange market is to be regarded as a consumer, a 'consumer' is a person acting 'for a purpose which can be regarded as being outside his trade or profession' order to determine whether a person has the capacity of a consumer. The position of the customer in a particular contract is important as according to AG opinion, self-same person may be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others. Consequently, only contracts concluded for the purpose of satisfying an individual's own needs in terms of private consumption come under the provisions designed to protect the consumer as the party deemed to be the weaker party economically[vi].
In conclusion, it is mandatory to provide adequate protection for the customers buying service from intermediary institutions and this can be only achieved by granting them the consumer protection.
[i] KABAN, İ. (2016). BİREYSEL MÜŞTERİLER VE BANKALAR ARASINDAKİ İLİŞKİLERDE YENİ DÖNEM: TÜKETİCİ KREDİSİ SÖZLEŞMELERİ YÖNETMELİĞİ ÜZERİNE BİR DEĞERLENDİRME. Journal of Management and Economics Research, 14(Cilt:14 Sayı:1), 227. https://doi.org/10.11611/jmer778
[ii] LAW ON CONSUMER PROTECTION. (2013, 28 November). Official Gazzette (No: 28835). https://www.resmigazete.gov.tr/eskiler/2013/11/20131128-1.htm
[iii] Kara, M.S. (2006). SERMAYE PİYASASI ARACILIK FAALİYETLERİNDE YATIRIMCININ KORUNMASI. Ankara Üniversitesi Sosyal Bilimler Enstitüsü, Ankara. https://dspace.ankara.edu.tr/xmlui/bitstream/handle/20.500.12575/34830/6199.pdf?sequence=1
[iv]  3 WLR 161,  WLR(D) 248,  EWHC 879 (Comm)
[v] Case C‑208/18 Jana Petruchová v FIBO Group Holdings Limited ECLI:EU:C:2019:314,  http://curia.europa.eu/juris/document/document.jsf;jsessionid=CF32703BDED9DC4568167A80F1A0048E?text=&docid=212925&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=491557