An appropriateness test refers to testing a client to determine whether or not he has got the knowledge and experience he needs to understand the risks carried by a product or service marketed by an investment company or demanded by the client, in order to assess whether the said product or service is suitable for the client. With regard to their brokerage and public offering commission services, investment companies are obliged to perform an appropriateness test on their general customers only.
Exceptions: It is not necessary to perform an appropriateness test on general clients for the instruments described below, provided that the relevant product or service is demanded by the client and that the investment company notifies the client that it is not obliged to perform an appropriateness test on him:
–Participation shares of Investment funds traded in Tefas, and money market funds and short-term investment funds.
–Public debt instruments issued by the Undersecretary of Treasure and traded in a stock exchange or other organized market.
As a minimum, the information described below must be received from the client for an appropriateness test:
–Investment maturity period, risk and return preferred by the client for his investment purposes.
–The age, profession, education level of the client, and the types, nature, volume and frequency of the capital market instrument transactions he did in the past, in order to determine whether or not he has got the knowledge and experience he needs to understand the risks carried by the transactions intended for its portfolio or account.
If the appropriateness test finds out that the relevant product or service is not suitable for the client, the investment company must notify the result in writing to the client. In this case the investment company will not recommend the client to invest in the relevant product or service. If it is not possible to determine what product or service is suitable for the client or if the investment company notifies the client that a particular product or service is not suitable for the client, but the client insists to buy the product or service in question, the investment company will be free whether or not to sell the product or service to client. In this case the client must be ensured to sign and deliver a Appropriateness Test Waiver. If the client insists to buy to buy the product or service after this stage, the investment company will be entitled to sell the product or service without giving any general guidance or recommendation to the client.