Bapepam cannot regulate asset-backed securities

Bapepam cannot regulate asset-backed securities

JAKARTA (JP): The Capital Market Supervisory Agency (Bapepam)
has no specific rule to regulate the trade of asset-backed
securities, agency chairman I Putu Gede Ary Suta said yesterday.

He said the absence of a specific ruling should not discourage
the domestic asset-backed securities trade because existing
regulations could accommodate it.

"The legal format of collective investment contracts as
stipulated in the 1995 Capital Market Law may be used as a
vehicle for asset-backed securities," he said.

But underwriters, accountants and lawyers must be innovative
in adapting contracts, Ary told a seminar on asset-backed
securitization.

In his speech, read by Bapepam Legal Bureau head I Nyoman
Tjager, he said the agency had issued rules on collective
investment contracts to support open-ended mutual funds and money
market funds.

"These mutual-fund rules are probably not what is needed for
collective investment contracts to be used as a vehicle for
asset-backed securities," he said.

Since asset-backed securities could be structured many ways,
the agency did not attempt to outguess the market and issue rules
on specific uses of collective investment contracts for asset-
back securities, he said.

"Rather, as (Bapepam's) five-year plan has stated, we are
encouraging input from the private sector regarding specific
types of asset-backed securities to be marketed so that
supporting regulations may be drafted," he said.

Collective investment contracts are agreements between a
securities company, that is licensed as an investment manager, an
approved custodian bank and investors.

The arrangement's terms and conditions are defined in the
contract. They include the portfolio composition and the rights
and obligations of the investment manager, custodian bank and
investors.

Putu said the agency had regulated the terms and conditions of
contracts for open-ended funds.

"I call upon underwriters that see a market for asset-backed
securities to work with their accountants and legal advisors to
design the type of asset-backed security that they would like to
issue, and then submit a proposal to Bapepam," he said. (pwn)