JCR EURASIA RATING THE GUIDELINE OF MORAL CONDUCT
JCR-ER is accurate on complying with the local legislation included in the regulations by BRSA (BDDK), CMB (SPK) and other public authorities, and protecting the leading decisions, ethical values, public conscience and best moral practices in international regulations (IOSCO, Basel Committee on Banking Supervision, US SEC, EU).
JCR-ER’s mission is to provide the markets with the high quality, independent, objective, exhaustive, attentive and analytical information. To achieve this, JCR-ER will consistently review its rating criteria, methodologies and procedures in accordance with the developments in local and international markets. The guidelines of moral conduct on which JCR-ER will base its rating activities are hereinafter set forth under 8 headings.
1. THE RATING METHODOLOGY AND QUALITY, INTEGRITY AND ACCURACY OF THE RATING PROCESSES OF JCR EURASIA RATING
The Quality of the Rating Process
a) The rating opinions that JCR Eurasia Rating (JCR-ER) disseminates will be based on a thorough analysis of all information known to JCR-ER that is relevant to its analysis according to its rating methodology.
b) In performing any rating action on behalf of JCR-ER, its analysts must use methodologies established by JCR-ER. Analysts must behave in a consistent manner with the given methodology, as determined by the JCR-ER.
c) Rating services must be performed by JCR-ER analysts, any independent analysts not listed in its payroll on a full-time basis cannot participate in any rating action.
d) Ratings must reflect all information known to JCR-ER, and believed to be relevant and consistent with its methodology.
e) JCR-ER consistently revises its procedures and technical infrastructure to reach an accurate, systematic, objective, and perfect methodology and it devotes sufficient resources in this field.
f) JCR-ER will employ internal and statistical time series archives with sectoral and regional breakdowns to facilitate the process of developing opinions and ratings.
The Policies for Quality Control, Continuity, and Updating
a) Except for ratings that clearly indicate they do not entail ongoing surveillance;
Once a rating is published, JCR-ER will monitor on an ongoing basis and update the rating.
In case JCR-ER obtains or becomes aware of any material information that has a material bearing on the announced rating as a result of the the rating methodology utilized, a rating action will be taken to incorporate the new information into the outstanding rating.
b) JCR-ER will make its ratings available to the public, and will publicly announce if it discontinues any rating assignment.
The Integrity and Accuracy of the Rating Process
a) JCR-ER and its employees will comply with all applicable code of conducts and principles governing its rating actions, and will perform its activities as such.
b) JCR-ER and its employees will deal fairly, honestly and equidistantly with issuers, investors, other market participants, and the public.
c) JCR-ER’s analysts will be held to high standards of honesty and ethics, and it will not employ individuals with demonstrably compromised integrity.
d) JCR-ER and its employees may not, either implicitly or explicitly, disclose or give any assurance or guarantee of a particular rating prior to a rating assessment.
e) JCR-ER will clearly institute policies and procedures that JCR-ER and its employees must comply with.
f) Upon becoming aware that another employee or entity under common control of JCR-ER is or has engaged in conduct that is illegal, unethical or contrary to the legislation or its policies and code of conduct, a JCR-ER employee must report such information immediately to the management.
The Policies for Quality Control, Continuity, and Updating
a) Except for ratings that clearly indicate they do not entail ongoing surveillance;
Once a rating is published, JCR-ER will monitor on an ongoing basis and update the rating.
In case JCR-ER obtains or becomes aware of any material information that has a material bearing on the announced rating as a result of the the rating methodology utilized, a rating action will be taken to incorporate the new information into the outstanding rating.
b) JCR-ER will make its ratings available to the public, and will publicly announce if it discontinues any rating assignment.
The Integrity and Accuracy of the Rating Process
a) JCR-ER and its employees will comply with all applicable code of conducts and principles governing its rating actions, and will perform its activities as such.
b) JCR-ER and its employees will deal fairly, honestly and equidistantly with issuers, investors, other market participants, and the public.
c) JCR-ER’s analysts will be held to high standards of honesty and ethics, and it will not employ individuals with demonstrably compromised integrity.
d) JCR-ER and its employees may not, either implicitly or explicitly, disclose or give any assurance or guarantee of a particular rating prior to a rating assessment.
e) JCR-ER will clearly institute policies and procedures that JCR-ER and its employees must comply with.
f) Upon becoming aware that another employee or entity under common control of JCR-ER is or has engaged in conduct that is illegal, unethical or contrary to the legislation or its policies and code of conduct, a JCR-ER employee must report such information immediately to the management.
2. SAFEGUARDING JCR-ER’s INDEPENDENCE AND AVOIDANCE OF CONFLICTS OF INTEREST
General
a) JCR-ER will not forbear from the potential effect (economic, political, or otherwise) of the rating action or refrain from taking decisions based on the possible adverse reactions by an issuer, an investor, or other market participants.
b) JCR-ER and its analysts will use care and professional judgment to maintain both the substance and appearance of independence and objectivity.
c) The determination of JCR-ER’s credit ratings will be influenced only by factors relevant to the credit assessment.
d) The credit ratings that JCR-ER assigns will not be affected by the existence of or the potential for any business relationship between JCR-ER and the issuer or any other party.
e) JCR-ER will perform its rating activities with its own methodology by avoiding and minimizing conflicts of interests within the agency and by not being influenced by the conflicts of interests from outside.
Procedures and Policies
a) JCR-ER may not refrain from taking the relevant actions and making decisions in connection to the rating based on the possible economic, political, or other effects of its rating decision on JCR-ER, investors and other market participants.
b) The credit ratings that JCR-ER assigns will not be determined by the existence of or potential for any business relationship between JCR-ER, its affiliates, and other entities with information sharing and its clients or clients’ affiliates.
c) JCR-ER must separate, operationally and legally, its credit rating business and JCR-ER analysts from any other businesses of JCR-ER that may present a conflict of interest. JCR-ER must have in place procedures and mechanisms designed to eliminate the likelihood that conflicts of interest will arise. These mechanisms include but are not limited to the following;
The rating analyst will be assigned by JCR-ER’s management in order to avoid conflicts of interest. It is not permitted that the client chooses rating analyst or vice versa.
When commissioning the rating analysts, the management takes their fields of expertise into account.
The management avoids discrimination by behaving equidistant with its employees.
While taking measures to avoid possible conflicts of interest between its employees, the management provides that the activities are performed in an objective, independent, and fair manner by settling all pre-existing conflicts of interest.
JCR-ER may not offer consulting services or services that may result in conflicts of interest to its existing rating clients in the same period and in the two consequent years. Similarly, it may not offer rating services to its existing consulting clients in the same period and in the two consequent years.
d) JCR-ER may not engage in trading of any securities or derivatives (except mutual fund shares) issued by its client and the client’s controlling shareholders, subsidiaries, and joint management.
e) JCR-ER and its employees comply with the following to secure independence and to eliminate or avoid conflicts of interest in the rating activities.
Working conditions and compensation arrangements of rating analysts and members of the rating committee are structured to eliminate potential conflicts of interests.
JCR-ER and its rating analysts and members of the rating committee must be independent and objective in their rating actions. Besides acting as honest and unbiased individuals, they must also act with an approach to execute the professional activities honestly and without any bias.
Rating analysts must refrain from potential conflicts of interest in their activities, and must prevent any interference that can affect their honesty and objectivity.
Members of the rating committee must constitute their opinions developed through analysis and assessment without taking other parties’ direct or indirect interests into consideration.
f) JCR-ER’s partners, managers, auditors, members of the rating committee, and rating analysts;
May not work for any other credit rating agency and client under any title through the period of their rating service.
May not be involved in any kind of business (except the partners without any title in the credit rating agency). May not work for the rating clients and the clients’ controlling shareholders, subsidiaries, and joint management unless 2 years have elapsed after the completion of the last rating action.
May not be involved in a rating action for the entities possessing directly or indirectly 10% or more of the capital shares of JCR-ER, nor these entities’ subsidiaries, joint management or affiliates.
May not receive any gifts from clients or obtain any favors for themselves and for third parties in the form of cash or any gifts.
g) JCR-ER may not compensate or evaluate the performance of its analysts on the basis of the amount of revenue that JCR-ER derives from issuers that the analysts rate.
h) The partners, managers, auditors, members of the rating committee and rating analysts (including their blood relationships of third degree and affinity relationships of a second degree, and their spouses) may not participate in any trading activity with the rated entity, and may not serve the rated entity in a managerial and/or administrative title during the rating period.
i) Rating analysts must inform JCR-ER of their personal affairs that may result or imply to result in a conflict of interest.
j) An analyst who becomes informed of any matter that affects his independence or objectiveness during his rating action should disclose such information immediately to the board. Then the board must immediately take the necessary measures consistent with the legislation. The independence of its analysts and employees is the bottom line for JCR-ER in terms of independence and objectivity of its rating processes. To achieve this;
a) JCR-ER and its employees develop honest and unbiased relations with the clients, investors, other market participants, and public.
b) Rating activities and relations particular to these activities are performed objectively and honestly. The employees who are found to be in violation of the principle of honesty and objectivity are dismissed from JCR-ER immediately.
c) JCR-ER and its employees may not, either implicitly or explicitly, give any assurance or guarantee of a particular rating prior to a rating assessment.
d) The assignment of the auditor by the board and the principals, procedures, and elements pertaining to his work and reporting are designated in written. These rules may not be disobeyed.
e) The auditor notifies in written, directly to JCR-ER board, of his report compiled as a result of his inspections.
f) The auditor may not be compensated or evaluated on the basis of the rating activities and their results.
g) The activities of the employees, which are illegal or contrary to the Code of Conduct and legislation, must be declared immediately to the auditor or managers. In such a case, JCR-ER must perform the necessary actions under the Code of Conduct and provisions of legislation, and prevent any obstructive behavior by other employees against auditor, and take necessary measures in this regard.
JCR-ER informs Capital Market Board (SPK) of the actions and/or measures taken based upon the auditor’s report within 6 business days.
3. JCR-ER’S RESPONSIBILITIES TO THE INVESTING PUBLIC AND ISSUERS
Timeliness and Transparency of Ratings Disclosure
JCR-ER has adopted written internal procedures and methods to identify, eliminate, manage and disclose any actual or potential conflicts of interest that influence the rating process, which may influence the opinions and decisions its analysts make. In accordance with the necessity that the credit rating agencies include these processes and methods in their codes of conduct, our disclosure procedure will be as follows:
a) JCR-ER will disclose in its web site the official annual financial statements and related independent audit reports, and information pertaining to its operational income classified in detailed breakdown of sources of its income. JCR-ER will also deliver these documents to Capital Market Board (SPK) in 10 weeks following the date of balance sheet and to BRSA (BDDK) in the prescribed time.
b) Information regarding JCR-ER’s rating opinions, reviews and updates;
JCR-ER will deliver this information to the relevant stock exchange and CMB (SPK) purposing to have it disclosed to the public on the business day following the day the information occurred until 09:00 AM by the quickest way of correspondence if this information is related to companies with its securities traded in the stock exchange.
JCR-ER will deliver this information to CMB (SPK) on the business day following the day the information occurred by the quickest way of correspondence if this information is related to companies with its securities not traded in the stock exchange.
In case the rating activity is withdrawn, the same procedures of public disclosure will be followed.
Other than the above mentioned cases, JCR-ER will disclose any information assessed to be disclosed to the public on its web site or by any other means and will deliver this information to CMB (SPK) within 6 business days following the day the information is disclosed.
The rating activity cannot be terminated in an effort to refrain from disclosure of credit rating. Other than these cases, any decision of withdrawal will be disclosed to the public. In this disclosure the points of when the credit rating was reviewed last and the reason for the termination of the rating activity will be included.
c) Within the scope of its responsibilities regarding public disclosure, JCR-ER will comply with the following principles in order to inform the public properly, accurately, and on a timely basis of its rating services.
JCR-ER must disclose the credit ratings, the reviews on credit ratings including the review dates, and all relevant information to the public. Public disclosures of this kind including all the necessary information will be delivered to the investors without any charges.
In order to ensure that the public has access to information regarding the rating activity, methodologies, procedures and assumptions (including financial statement adjustments that deviate materially from those contained in the issuer’s published financial statements) will be disclosed to the public. This information will include (but not be limited to) the meaning of each rating category and the definition of default or recovery, and the time horizon that JCR-ER used when making a rating decision.
In public disclosures, it must be clearly stated that the rating decision is not recommendatory for the rated entity or the debt securities it issues.
Prior to the public disclosure of credit ratings and any reviews on credit ratings, the customer will be informed of significant points in the rating activity. The relevant additional information provided by the customer will be assessed meticulously. In case the customer is not informed of the subject matter for this situation, it will be disclosed promptly following the publishing of the credit rating.
In order to promote transparency and to enable the market to best judge the performance of the ratings, JCR-ER will publish sufficient information about the historical default rates of the rating categories and whether the default rates of these categories have changed over time, so that interested parties can assess JCR-ER’s performance better.
If the nature of the rating or other circumstances make a historical default rate inappropriate, statistically invalid, or otherwise likely to mislead the investors, JCR-ER will explain this.
For each rating, JCR-ER should disclose whether the issuer participated in the rating process. Each rating not initiated at the request of the issuer should be identified as such. JCR-ER should also disclose its policies and procedures regarding unsolicited ratings.
JCR-ER will fully and publicly disclose any material modification to its methodologies and significant practices, procedures, and processes prior to their going into effect. The possible effects will be carefully considered before modifying its methodologies, practices, procedures and processes.
In order to fulfill the responsibilities of public disclosure, an official web site has been created.
d) JCR-ER’s public disclosures will be complete, clear, concise, and timely without causing any actual and potential conflicts of interest.
The Treatment of Confidential Information
Confidential information is the unpublished part of the written or verbal information and documents provided by the issuers themselves or their accountants, lawyers, representatives or other people or entities on behalf of the issuers. This information and documents cannot be accepted as confidential if they are:
• Already known by JCR-ER and third parties,
• Publicly disclosed,
• Developed through reasonable and analytical examinations by JCR-ER,
• Bounded by law to be disclosed.
a) JCR-ER must develop procedures and mechanisms to protect the confidential nature of information even in the absence of the terms of a confidentiality agreement or legal provisions. Unless otherwise permitted by the confidentiality agreement and consistent with applicable laws or regulations, JCR-ER and its employees are prohibited to disclose confidential information to investors and other persons.
b) JCR-ER can use confidential information only for purposes related to its rating activities or otherwise in accordance with any confidentiality agreements with the customer.
c) JCR-ER must take all reasonable measures to protect all property and records, including those related to the customer, from fraud, theft or misuse.
d) JCR-ER must not disclose any non-public information about rating opinions or possible future rating actions except to the customer or its designated agents. It cannot be accepted as a violation of confidentiality to deliver the confidential information to the officials regarding administrative actions, inspections and investigations, and criminal cases provided that they are authorized judicially or through legislation.
e) JCR-ER employees cannot share confidential information entrusted to JCR-ER with employees of any affiliated entities. JCR-ER employees cannot share confidential information within the agency except on an “as and when needed” basis.
f) JCR-ER employees cannot use or share confidential information for their or any other party’s benefit except the conduct of the agency’s business.
g) The responsibilities of JCR-ER’s partners, managers and employees on confidentiality regarding the confidential information they have acquired through their rating activities will be valid after their employment with JCR-ER is terminated.
4. JCR-ER’S COMPLIANCE WITH THE LEGISLATION
a) JCR-ER’s employees at all levels must observe the criteria, rules, principles and all sorts of regulations.
b) JCR-ER’s criteria, rules, principles and all sorts of regulations must comply with the current legislation.
5. DISCIPLINARY REGULATIONS
a) In case of any queries and need for further explanations about JCR-ER’s code of conduct, the subject must be communicated to the management instead of uttering personal comments, and the management must present detailed explanations by providing necessary participation.
b) In case of any breach of its code of conduct principles, JCR-ER will not abstain from executing verbal or written warnings, temporary removal from or termination of employment depending on the case. Being exposed to any general and material damages through any breach of code of conduct principles, these will be subject to indemnification.
c) In order to ensure the prospective employees to be informed of its code of conduct principles, JCR-ER will publish it in its web site. Each of new employees is supposed to enter into the commitment of having read and accepted all principles of code conduct and having admitted to perform all of the rating activities in accordance with these principles.
6. PROFESSIONAL PRINCIPLES
a) The prospective staff must hold a bachelor’s degree of 4 years in related fields or otherwise a graduate degree of 2 years in order to be employed in JCR-ER as a board member, a rating committee member, a rating specialist, and analyst. Furthermore, even if they hold these degrees, they cannot be assigned to these positions before the successfully completion of JCR-ER’s technical training sessions.
b) In order to be eligible for a post of a rating committee member or specialist/analyst, one must have sufficient professional knowledge, experience, accuracy, moral virtues and confidentiality, passion for his/her profession and be trustworthy, and it is JCR-ER’s duty to ensure these.
c) It’s the main and indispensable rule to comply to the rating agreements with the customers. JCR-ER cannot be involved in any commitment or action without modifying the terms of the agreement by mutual consent or making the necessary amendments.
d) The firms cannot get any rating services without their financial statements audited by independent audit companies or approved and consistent with the principles designated by Accounting Standards Board of Türkiye.
e) The rating opinions on the rated entity cannot be stated in the rating reports and disclosed to the public unless they are based on evidential information and documents.
f) JCR-ER cannot get involved in advance in any commitment or promise of assigning a certain grade among rating notations.
g) JCR-ER’s rating service does not include any opinion on the trading, creditworthiness or withdrawal of the securities.
h) The process to attain an opinion on the rated entity through a rating activity is not affected by any external or internal interference.
i) Disclosure of opinions is compulsory provided that it is based on objective information and document notwithstanding the rating action influences related parties and other parties.
j) JCR-ER’s rating infrastructure is designed to include all the relevant information.
k) The opinions of the rating specialist or analyst on the rated entity cannot be considered as finalized unless they agree with the rating committee.
l) The rating opinions and all the relevant information on which these are based are authenticated in writing. These and all other documents are protected also regarding the legal prescription periods.
m) JCR-ER cannot develop any rating opinion where it cannot access sufficient information and document, where it is not in cognition of the rating case, or where it is understood that the content of the case surpasses the agency’s capabilities.
n) JCR-ER will take the necessary measures to minimize personnel turnover in order to develop corporate culture and secure calibration in the rating process.
o) In order to ensure independence, reliability and objectiveness, it is essential to maintain privacy of the rating process and exchange of views within the agency.
p) In publishing opinions and decisions, the possibility of JCR-ER and its employees getting exposed to adverse effects due to the rating opinion when it will be published will be disregarded.
7. OTHER ISSUES
a) JCR-ER must:
-perform the rating activity in accordance with the rating methodology it has announced to public and through utilizing all the existing relevant information, develop a written guide, make use of it, and monitor the practice.
-use an attentive and systematic rating methodology which will provide an objective verification of its activities.
-maintain an internal records mechanism to support its credit opinions.
-take steps to avoid issuing any credit analyses or reports that contain misrepresentations or are otherwise misleading as to the general creditworthiness of an issuer or obligation.
-structure its rating teams to promote continuity and avoid bias in the rating process.
-ensure that it devotes sufficient resources to carry out high-quality credit assessments.
-assess whether it is able to devote sufficient personnel with sufficient skill sets to make a proper rating assessment when deciding whether to rate or continue rating an obligation or issuer.
-consider in the rating process the information not disclosed to the public on time or disclosed inadequately, and other financial and managerial risks significantly affecting the issuer’s activities.
-attend in its rating activities to financial statements concluded in accordance with CMB (SPK) regulations on accounting standards and audited by an independent auditor, and make sure that all of the resources utilized are authentic.
b) In case JCR-ER is involved in an information sharing agreement with an international rating agency, it has to comply with its methodologies and use the same symbols.
c) Rating analysts also must consistently implement JCR-ER’s methodology, offer high quality rating services through abstaining from making improper and misleading analyses by applying necessary professional care and accuracy.
d) JCR-ER cannot be involved directly or indirectly in activities of advertisement and submit proposals with business purposes.
e) JCR-ER can publish and circulate brochures covering agency presentation.
f) JCR-ER can advertise a vacancy for the agency or its customers.
g) JCR-ER employees can publish scientific materials in professional topics, arrange seminars, conferences or participate in these to submit declarations, or deliver courses. In performing these activities, they cannot make any promises in advance regarding the result of the activities, must behave in solemnity and limits as befits the profession, must not utter exaggerated, sentimental, improper, deceitful, misleading expressions, images and data items exploiting infirmities of experience, or must not leave any impression as such, must not cause any groundless expectations on the scope of services.
h) JCR-ER and its employees cannot compare themselves with other rating agencies and its employees.