More stringent capital market law needed: Bapepam

More stringent capital market law needed: Bapepam

JAKARTA (JP): The Capital Market Supervisory Agency (Bapepam)
is preparing a draft law to provide sterner sanctions against law
violators, according to the agency's chairman, Herwidayatmo.

"We have a target of completing the draft law for the
amendments to the existing 1995 Capital Market Law by September,"
Herwidayatmo said on Monday.

He said the draft law would also contain clauses which allowed
the country's stock exchanges to raise funds from the public by
floating their shares on the stock exchange.

"In preparing the draft law, Bapepam, so far, has been working
with the Jakarta Stock Exchange (JSX)," he added.

Herwidayatmo also said he had met with members of the House of
Representatives Commission IX for the budget and finance, adding
that they discussed further issues about improving the existing
Law.

Basically, the Capital Market Law should apply clearer, fairer
and sterner sanctions on the violators, according to
Herwidayatmo.

Herwidayatmo gave an example of an administrative penalty of
only Rp 500 million imposed on a listed company which in bad
faith used public money for purposes other than intended.

Earlier reports said there were nine companies that had loaned
funds to external companies owned by the companies' majority
and/or founding shareholder without the consent of the minority
shareholders.

The nine companies were fined Rp 4.2 billion, cumulatively,
for their actions that hurt the interests of the minority
shareholders, according to Herwidayatmo.

The companies are PT Surya Dumai Industri, PT Wania Indah
Busana (previously PT Indosteel), PT Dharmala Agrifood, PT
Dharmindo Adhiduta, PT Aster Dharma Industry, PT Anwar Sierad, PT
London Sumatera Plantations, PT Sekar Laut and PT Sekar Bumi.

"A maximum penalty of Rp 500 million for each of these
companies is just not enough," Herwidayatmo said.

Asked whether any of these companies had paid the penalty fees
charged by Bapepam, Herwidayatmo said, "None of them have paid.
But if a tolerable time limit is passed, we will hand over the
case to BUPLN (the National Body for Asset Recovery and
Auctions).

Herwidayatmo admitted, however, that there was a dilemma in
the above case in that when the companies finally paid the fees,
it would also mean the interests of the minority shareholders of
the respective companies would be hurt once again.

"The company, which is still owned by the minority
shareholders, bears the burden of the penalty. So when the
company is charged, the bill effectively also goes to the
minority shareholders," he said.

He said the breach of the law by the above companies occurred
in 1998, and that it was the mistake of the then management to
bow to the controlling shareholders and loan money to a third
party at the expense of the minority shareholders.

"Maybe there have to be some improvements in this particular
area as well," he said.

JSX president Achmad Daniri said that good punishment alone
was not the whole of the story.

"The main concern is not actually in meting out punishment to
violators; are our efforts in making our stock market work better
is more important," he said.

Meanwhile, regarding PT Lippo e-Net, Herwidayatmo denied
Bapepam would end an investigation into the company for alleged
market manipulation after the firm made public on Tuesday the
clarification of its inconsistent statements previously made to
the public.

"Lippo e-Net's public clarification may emphasize the evidence
of the company's inconsistency," Herwidayatmo said.

PT Lippo e-Net was required by Bapepam last week to provide
the public with explanations of its inconsistent statements
contained in one-page advertisements in two national newspapers.
(udi)