The capital market industry is developing very rapidly and has an important role for the business world and the development of the country’s economy. The capital market is now known as a profitable place to invest, both in the short and long term.
People who make transactions in the capital market industry are known as investors. They require legal protection from unscrupulous elements in the market.
Currently, investor protection has been governed by Law Number 18 of 1995 on the Capita Market Law. A number of protections guaranteed by the Capital Market Law include information related to information misleading in Article 93, market manipulation in Articles 91 and 92, fraudulent securities trading practices such as insider trading in Articles 95 and 96, and fraud in Article 90.
Although investor protection has already been regulated in Indonesia, there are still cases related to company information as well as financial and management data reports that harm investors in the capital market.
PT Garuda Indonesia (Persero) Tbk, for example, has involved in a financial scandal case related to fraudulent financial data reports or fraud with the type of Fraudulent Statements. In that particular case, there was a discrepancy in the 2018 annual financial statements. The discrepancy found was the manipulated financial statements in such a way that their performance appeared well by recording a net profit of US$ 809 thousand or around Rp 11.33 billion.
A company commits fraud in financial statements by doing, telling to do, participating in direct or indirect actions to deceive, deceive other parties by using any means or means as stipulated in Article 90 letter a and b of the Capital Market Law. If the act has a detrimental impact on investors who buy the company’s shares and affect shares on the Indonesia Stock Exchange (IDX), it is considered a crime punishable by a maximum prison sentence of 10 years and a maximum fine of Rp 15 billion as stipulated in Article 104 of the Capital Market Law.
In addition to PT Garuda Indonesia (Persero) Tbk., there was a case of financial statements manipulation carried out by PT Tiga Pilar Sejahtera Food Tbk in 2017. The manipulation of financial statements was carried out by two former directors of PT Tiga Pilar Sejahtera Food Tbk, namely Joko Mogoginta and Budhi Istanto. Both were found guilty and sentenced to imprisonment for 4 (four) years each and a fine of Rp 2 billion each and additional 3 (three) months in prison.
The financial statements manipulation was in the form of listing six privately owned companies of the former Directors of PT Tiga Pilar Sejahtera Food Tbk as a third party and the overstatement of receivables from six of these companies in the 2017 financial statements. As a result, these actions damaged the interests of the investors and disrupted the protection for capital market investors.
Manipulation of financial statements in this case is a violation of Article 93 of the Capital Market Law, which prohibits any party from making statements or providing material information that is untrue or misleading or not careful enough in determining the material truth of the statement or description so as to affect the price of securities on the IDX.
Such violation that damage the interests of investors who buy the company’s shares and affect shares on the IDX is punishable by a maximum imprisonment of 10 years and a maximum fine of Rp 15 billion as stipulated in Article 104 of the Capital Market Law.
The two cases above indicate the need for more efforts for investor protection by ensuring the implementation of company information disclosure in conjunction with financial and management data reports.
One of the efforts that can be done is through compiling or updating existing regulations in the capital market industry, especially those related to the Financier Protection Fund (DPP) and the Organizers Financier Protection Fund.
Protection of Investors and Its Terms
In Indonesia, institutions that have the authority to provide protection and supervision of capital market activities are the Financial Services Authority (OJK) and the IDX.
The main task of the OJK is to ensure the implementation of the Capital Market Law by all capital market participants. For this reason, OJK has established several regulations that prioritize the rights for investors in transacting on the stock exchange floor by optimizing monitoring activities for stock exchange activities, especially for those responsible for the protection of investors.
IDX as the stock exchange supervisory authority is also committed to providing protection for investors by forming a business entity called PT Penyelenggara Program Perlindungan Investor Efek Indonesia (P3IEI). This business entity is a mandate from the Financial Services Authority (POJK) Regulation No. 49 / POJK.04 / 2016 on the Investor Protection Fund and POJK No. 50 / POJK.04 / 2016 on the Organizer of the Financier Protection Fund.
The institution, which was officially established on December 23, 2013, has a role as the Organizer of the Financier Protection Fund (PDPP) or Indonesia Securities Investor Protection Fund (SIPF) through the implementation of the Protection Fund Financier (DPP).
The investors who get facilities from the DPP must meet a number of requirements, namely: entrusting their assets and having a securities account with the custodian, opening a sub-securities account at the depository institution and settlement by the custodian and having a single investor identification number of the Depository and Settlement Institution.
However, this facility from the DPP does not apply to investors meeting one or more of the following criteria:
a. has involved or caused the Financier’s Assets to be lost;
b. is the controlling shareholder, director, commissioner, or officer one level below the custodian director; and/or
c. is an Affiliate of these parties in numbers 1 and 2.
DPP organizers are required to carry out activities to handle investor claims for investor asset losses after the OJK declares the following conditions:
a. there is a loss of investor assets;
b. the custodian failed to recover the investor’s asset losses;
c. the custodian who carries out activities as a Securities Trader Intermediary who carries out securities administration is declared incapable of continuing his business activities and his business license is revoked by the OJK;
d. the custodian was declared incapable of continuing his business activities as a custodian bank and his business license as a Custodian was revoked by the OJK.
No later than three working days after the OJK decision, the DPP Board of Directors is required to announce to the public through newspapers/other media about the occurrence of the above conditions and invite financiers to lodge claim to the Financier Protection Fund no later than 30 days, give advice to form a claim committee to the FSA and provide advice to form a claim committee to the FSA.
Author / Contributor:
 | Ika Ayu Puspitaningrum, S.H. Associate Contact: Mail : ayu@siplawfirm.id Phone : +62-21 799 7973 / +62-21 799 7975 |