Like the SEC’s Rules of Practice and Rules on Fair Fund and Disgorgement Plans in the US, Indonesia now has a rule for disgorgement and disgorgement funds to protect and award damages to capital market investors losses due to what so-called unlawful profits. Essentially, it is defined as profits obtained by capital market business doers by violating the law and regulations in the capital market regulatory regime. The same is reflected in Indonesia’s Financial Services Authority Regulation No.65/POJK.04/2020 regarding the Return of Unlawful Profits and Compensation Funds for Investor Losses Within the Capital-Market Sector. You may have aware that Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) is the supervisory government body for capital market activities like the US’ SEC.
The regulation stipulates the mechanism of how the OJK exercise their authorities on the disgorgements and the disgorgements of funds punishing the capital market business doers who have obtained the unlawful profits (“Perpetrators”). These authorities are exercised mainly in the form of order to pay the disgorgement fund, exercise seizure, and liquidate the assets of the Perpetrators may it be fixed assets such as lands and buildings or moving assets such as fund in bank accounts, securities accounts, or other tangible assets such as motor vehicles, and productions machines. Should the needs exist, the regulation also authorizes OJK to organize creation of disgorgement fund for investors’ loss compensation. OJK may appoint individuals or legal entities to manage and distribute the said fund. These parties must be certified accordingly to exercise the OJK’s mandate. Side by side with the disgorgement exercise, OJK still have the authorities to implement a wide array of administrative and criminal sanctions stipulated under the capital market regulatory regime.
The government has obviously taken a major step forward in the protection for investors with a hope to stimulate investment in the capital market sectors by issuing this OJK’s regulation. The successful rate of the same, however, is yet to be seen. In addition, that the ruling power of the regulation will take place in the middle of this year, like many other OJK regulations, detailed rules and procedures may be governed under various OJK circular letters, which we understand that currently are in the process of finalization.
Michel Rako, Partner
Bezaliel Erlan, Partner