Bapepam gains momentum in insider trading probe

Fitri Wulandari The Jakarta Post Jakarta

An investigation into alleged insider trading in the sale of government shares in state-owned telecommunications firm PT Indosat gained momentum after the Capital Market Supervisory Agency (Bapepam) managed to obtain the list of beneficial owners from U.S. investment firm Merrill Lynch, analysts said.

"It (the list of beneficial owners) brings Bapepam closer to unraveling the case," analyst at BNI Securities Research Adrian Rukmana told The Jakarta Post.

Analyst Jasso Winarto concurred, adding that Bapepam should also question brokers involved in the trading as they kept records of share transactions.

Beneficial owners are people who enjoy the benefits of ownership even though title is in another's name. When shares of a mutual fund are held by a custodian bank or when securities are held by a broker under an assumed name, the real owner is the beneficial owner, even though, for safety or convenience, the bank or broker holds title.

Bapepam claimed on Monday that it had received the list of beneficial owners from Merrill Lynch, which had allegedly been involved in insider trading.

"We have received from Merrill Lynch the list of beneficial owners from transactions carried out by the firm," head of the legal department at Bapepam Robinson Simbolon told reporters.

He said that the lists would be used to track down the possible involvement of certain people inside the firm.

Robinson did not reveal any names on the list.

Both analysts, however, said that it would still take a long time for Bapepam to fully unravel the insider trading allegations.

Adrian said that it was hard to prove insider trading because the divestment plan had been publicly revealed.

The issue of alleged insider trading was first raised by State Minister of State Enterprises Laksamana Sukardi after an unsuccessful secondary offering of publicly listed Indosat.

The government had planned to divest an 11.32 percent stake in Indosat via a private placement on May 16, but because of low investor interest and a drop in the share price of Indosat at the time, the government managed to sell only an 8.1 percent stake at the relatively low price of Rp 12,000 per share.

A few days before the divestment program was launched, Merrill Lynch sold 40 percent, or 4 million shares, in Indosat. The sell- off helped send Indosat's share price by 5 percent.

The government suspected Merrill Lynch of insider trading as the latter was also Indosat's financial adviser for its five percent rights issue plan.

The firm, however, was not involved in the private placement, which was jointly carried out by Credit Suisse First Boston and state-owned securities firm PT Danareksa Sekuritas.

Danareksa had been questioned as a witness, Robinson said.

Robinson also said that his office had begun questioning former Indosat directors over a possible role in the insider trading case.

Meanwhile, there has been a growing demand for Bapepam to also direct its attention toward Danareksa.

Legislator Paskah Suzetta told the media that Bapepam should also examine Danareksa for possible involvement in insider trading.