2002 Annual Report

Regulatory and Legal Councel

As an effort to create sound and transparent capital market, the need for strong regulatory framework which not only meet international standard but also keep up with rapid development in capital market is inevitable. In line with the effort, revision and addition to existing capital market regulation is nevertheless required.

During year of 2002, Bapepam revised eight rules and created two new rule. Until the end of year 2002, Bapepam has issued a total of 147 rules.

Rules that were revised and added are as follows:

1.    Rule No. IX.H.1 concerning Open Company Take-Over.

Revision to Rule No IX.H.1 was intended to provide broader opportunity for investors to acquire issuers’ or public companies’ shares up to more than 25% without the obligation to go through tender offer process.

The provisions regarding percentage of shares ownership for Controller of Open Company were also revised from previously 20% to 25%. Nevertheless, not all shareholders who hold 25% shares will automatically be categorized as a Controller provided that there is no proof of intention whatsoever to do so.

2.    Rule No IX.F.1 concerning Tender Offer.

The revision of this rule was the consequence of amendment to Rule No IX.H.1 concerning Open Company Take-Over.  The revision was in the form of adding more provisions regarding the obligation of target company to keep information about tender offer confidential prior to official announcement through the media. Other added provision was concerning the due date of tender offer as the consequence of take offer which was 30 (thirty days) after the announcement of Statement of Effectiveness of the Tender Offer.

3.   Rule No X.K.2 concerning Obligation to Submit Periodic Financial Statements.

In order to provide investors with faster and accurate information concerning financial condition of issuer or public company, Bapepam amended provisions concerning time limit for the submission of financial statements as follows:

a.   Dateline for submission of Annual Financial Statements, which was previously no later than 120 days was shifted to no later than the end of the third month after the period of annual financial statements ended.

b.    Semi Annual Financial Statements

¨  If not accompanied by Accountant reports, the dateline for submission was shifted to no later than the end of the first month after the period semi annual financial statements ended.

¨   If accompanied by Accountant reports, the dateline for submission was shifted to no later than the end of the second month after the period of semi annual financial statements ended.

¨   If accompanied by Accountant reports which offer opinion concerning the qualification of the financial statements in general, the dateline for submission was shifted from 120 (one hundred twenty) days to no later than the end of the third month after the period of semi annual financial statements ended.

        In the case where the dateline for submission fell on holiday, the periodical financial statements must be submitted no later than one workday before the holiday.

         On the other hand, to enhance flexibility and efficiency of Investment Fund management, to broaden investment alternatives and to provide better protection for investors, as well as to improve the role of Investment Fund as an investment vehicle, Bapepam revised 4 (four) rules regarding Investment Fund.
 

4.   Rule No. IV.A.3 concerning Guideline of The Management of an Investment Fund in The Form of Corporate and Rule No. IV.B.1 Guidelines concerning the Management of an Investment Fund in the Form of a Collective Investment Contract.

With the revisions of these two rules, Investment Funds can only purchase or sell: securities that are traded through Public Offering and or registered with Securities Exchange either within the country or abroad, money market instruments that have maturities less than one year, and commercial papers that have maturities less than three years.
 

5.     Rule No. IV.A.4 concerning Guideline of The Management Contracts of an Investment Fund in The Form of Corporate and Rule No. IV.B.2 concerning Guidelines of The Investment Fund  Contract  of an Investment Fund in The Form of Collective Investment Contracts

With the revisions of these two rules, an Investment Fund cannot own shares of an Issuer more than 10% of its Net Assets Value at anytime instead of previously at the time of the purchase.

These revisions also prohibited Investment Fund from purchasing Asset Backed Securities whereby the Investment Manager of the Investment Fund was the same as or affiliated with initial creditors of the Asset Backed Securities.

These revisions also removed the responsibility of Investment Manager to submit semi annual financial statement to Bapepam and all unit holders.
 

6.    Rule No. IX.K.1 concerning Guidelines for Asset Backed Securities Collective Investment Contracts

The fundamental revision of Rule No. IX.K.1 concerning Guidelines for Asset Backed Securities Collective Investment Contracts was regarding the deletion of the clause “Thereby, Asset Backed Securities is not an Investment Fund as referred to in article 1 number 27 of Law No. 8 year 1995 concerning Capital Market,” as stated in point 1 letter b of the old rule.

The objective of this revision was to give Asset Backed Securities Collective Investment Contracts a tax incentive as it had been granted to the Investment Fund industry. It is expected that such incentive would help Contractual Asset Backed Securities to become an interesting investment alternative for market players so that illiquid financial assets could be turned to liquid ones, which in turn could create a new economic potential capable of boosting up national economic development.

7.    Rule No. VIII.A.2  concerning Accountant Independency in Audit Services in Capital Market

Other than revising, Bapepam also issued one new rule concerning Accountants Independency. This rule was aimed toward improving the quality of the disclosure of financial statements published by issuers or public companies. This rule provided detail clarification of article 67 Law Number 8 of 1995 concerning Capital Market which stated the obligation for Capital Market Supporting Professionals to produce independent opinions or judgments.

The new rule governed the responsibility of Accountants to continuously maintain their independency and laid out limitation of audit assignment for Public Accounting Firms and Public Accountants.

Auditing services from an Accountant on a client’s financial statements could be only be carried out three years carried out three fiscal years consecutively. Public Accounting Firms and Public Accountants could renew the assignments only after being absence from auditing the client’s financial statements for three consecutive fiscal years.
 

Establishment of Capital Market Arbitration Board (ICMAB)

Indonesian Capital Market has developed in a dynamic and rapid manner. It also has distinct mechanism and characteristics that can be only understood by market players and other parties closely involved with its activities. As the consequences of its full speed growth and complexity, it is not impossible for frictions among players to occur.

This can be observed from the number of complaints filed to Bapepam, including disputes between investors and Securities Companies, or among Securities Companies themselves. Conventionally, dispute can be settled at the Court of Law where the defendant and the plaintiff stand against one another. However, it will take quite a long time for the dispute to be settled.

Therefore, it is necessary to have an alternative dispute settlement system that is fast, effective, and efficient to meet the need of market players. The Law No. 30 year 1999 concerning Arbitration and Alternative Dispute Settlement has provided the legal basis for this off-the-court dispute settlement. The arbitration institution constituted in the Law was considered to be suitable alternative to settle cases that might arise among capital market players since the settlement mechanism through arbitration is quite fast, effective, and efficient, widely practiced by parties who fully grasp capital market activities.

Recognizing such condition, Bapepam and Self Regulatory Organization (SRO’s) along with Association of Capital Market Legal Consultants took the initiative to establish an Arbitration that would exclusively deal with the settlement of the capital market disputes. The arbitration was then named as Indonesian Capital Market Arbitration Board (ICMAB).

The efforts to establish this board had been pioneered by Self Regulatory Organization (SRO), Indonesian Securities Company Association, Association of Capital Market Legal Consultant, and Indonesian Community of Securities Investor (ICSI) since two years back. On 9 August 2002, an Agreement for the Establishment of ICMAB was signed. This constituted body was expected to become an effective, efficient, and valuable alternative for dispute settlement as well as to contribute to the development of Indonesian capital market in the future.
 

Litigation and Legal Counsel

In year 2002, Bapepam faced two cases of litigation that placed Bapepam as a Defendant. The first case concerning Mr. Ali Susanto’s lawsuit against PT Development Bank of Singapore (PT DBS) Securities Indonesia which sold Mr Ali’s shares without his approval. Meanwhile PT DBS Securities Indonesia sold the shares because Mr Ali had not given his Bandaranya shares for a total of 3,000,000 (three million) stocks on his previous transaction. In this trial, Mr Ali Susanto acted as a plaintiff that put PT DBS Securities Indonesia as Defendant I, Bapepam as Defendant II, and PT Vickers Ballas as Defendant No. III.

For this case, Board of Judges of the Court District  of Central Jakarta had decided to accept part of Mr Ali Susanto’s lawsuit against PT DBS Securities Indonesia  and ordered PT. DBS Securities Indonesia to pay compensation to Mr Ali Susanto amounted Rp. 78,772,628.00 and RM 374,235.00. However, the Court rejected his lawsuit against Bapepam to cancel or to postpone a merge between PT DBS Securities Indonesia and PT Vickers Ballas Indonesia.

Responding to this decision, the Defendant I applied for court appeal, but later Mr Ali Susanto and PT DBS Securities Indonesia settled the dispute peacefully and finally, PT DBS Securities Indonesia dropped its court appeal.

The second case related to the imposition of fines by Bapepam to PT Indocooper Investama Corporation Tbk. In this case, PT Indocooper Investama Corporation Tbk. acted as a Plaintiff and Bapepam as Defendant.

The case had been processed by the court since year 2001. The judges in their decision Number:99/G.TUN/2001/PTUN.JKT accepted part of plaintiff’s law suit, of which the court declared  the cancellation of  Bapepam’s letter Number: S-21/PM/S.2/2001 dated March 21, 2001 and ordered Bapepam to revoke the letter.

For this court decision, Bapepam filed a court appeal for which the memorandum of the appeal has been listed to the Administrative Court for the case number 99/G.TUN/2001 PTUN. JKT dated April 8, 2002. For the time being, both Bapepam and PT Indocooper Investama Corporation Tbk wait for the Administrative Court’s decision on the appeal.

Aside from being litigated, Bapepam during year 2002 has made some collaboration with other law enforcement authorities to act as an Expert for Indonesian Police Department on three cases; and for General Attorney, Commercial Court, District Court of West Jakarta, District Court of Bandung, and Administrative Court of Jakarta on one case each.  

Table of Contents Bapepam Annual Report 2002

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