Article 5 letter c Law No 8 of 1995 concerning Capital Market give Bapepam an authorization to determine qualifications and procedures of nominating for commissioners and directors of Securities Exchange.

On January 17, 1996, Bapepam published rule No III.A.3 which stipulate the "package" system ( currently in use ) in nominating for commissioners and directors of securities exchange. For the last 3 (three) years, Bapepam had the opportunity to perform thorough examinations on this system effectiveness also embraced ideas and opinions from capital market participants.

On August 1996, Minister of Finance published Five Years Planning of Capital Market, described specific objective on Securities Exchange management particularly in leadership toward the development of Indonesian Capital Market. During this period of Securities management, Bapepam has been running some specific evaluation concerning Securities Exchanges’ earnings and expenses, also supervision on allocate expenditures realization and objective achievement of five years planning of securities exchange.

Comply with principle of Good Corporate Governance, this rule amendment create chances for securities exchange’s members for using more professional manners to recruit and to select individual director and to negotiate the director’s salary and other benefit for him, thereupon to nominate candidate, who had been selected by members of securities exchange, for director who will be appointed by General Meeting of Shareholders.

In order to avoid undesired influences along with unqualified and careless selection, this rule requires transparence procedure of selection, and reveal complete information of the candidates to whole members of securities exchange also announce information and description of selection method which will be use.

According to former rule, procedure of nominating candidates for commissioners and directors was proposed by a group of shareholders consist of at least 3 ( three ) shareholders who all together performed securities transaction of at least 4%.

Whereas in revised rule, system of nominating candidates for commissioners and directors has to be proposed by a group of Securities Exchange’s members consist of at least 10 members who all together performed securities transaction of at least 10% of entire frequency and securities trading value in Securities Exchange for the last 12 ( twelve ) months and each of the members had performed, at least, 0.2% of total numbers and securities trading value in Securities Exchange for the last 12 ( twelve ) months.

This increment of Securities Exchange’s members also total value and frequency within the group, is designed to implement an objective and sensible recruitment system, consequently, can attain quality directors who meet the requirements of Securities Exchange.

The rule requires Securities Exchange to have at least 5 ( five ) commissioners, with the specification 4 of them are directors of securities exchange’s members and had performed, at least, 1% of securities transaction of total numbers and securities trading value in Securities Exchange for the last 12 ( twelve ) months.

Such policy is necessary to strengthen self-regulation principle, by reason of their importance to create orderly, fair, and efficient Securities Exchange. Board of commissioners, actively, should have perform its supervising function by calling a meeting once a month, at least. This policy intends to ensure that Securities Exchange management works hard and effectively for the interest of market.

Composition of directors consists of 5 ( five ) commissioners at least, and 4 of them were selected from people who have an experience as a director or in a management position of financial company. This policy is necessary, because Security Exchange itself is a financial institution.

Amendment of Rule No III.A.3 realize that every directors has its distinct responsibility which requires different kinds of quality, skill, or experience. Therefore, it is possible to differentiate salary, and other benefits for each directors base on the experience and quality they have, nevertheless it should be in accordance with market condition.

More specifically, the directors must be recruited for distinct responsibility which has been clearly categorized, such as : President Director, Director of Operation, Director of Trading, Director of Administration, Director of Membership, Director of Audit, and Director of Listing. Each of the directors must be recruited and selected for specific position, also in process of selection and recruitment, each of candidates must meet the qualification and experience needed for the position.

This rule determined that Director of Audit can not have dual functions, this position can not be adjoined with other Directors. Director of Operation can be adjoined by President Director only. Other Director can not be adjoined more than two functions. As stated in Article 9 of Government Regulation No 45 of 1995 concerning Capital Market Organization, there are 7 ( seven ) directors at the most.

The rule is, also, clearly affirmed that directors of Securities Exchange can not misuse their authority to give advantage or other benefit to commissioners or other affiliated party. In addition, provided that director quits or dismissed (fired), they have the right to have compensation which have been agreed prior to their election.

© 1999 Bapepam, All Rights Reserved. Notice.