New bourse law to make Bapepam more independent
JAKARTA (JP): Minister of Finance Mar'ie Muhammad said yesterday that the new capital market law, when enacted, will enable the Capital Market Supervisory Agency (Bapepam) to operate more independently.
Under the new capital market law, the capital market watchdog will directly handle almost all aspects of capital market operations, he said at a plenary session of the House of Representatives.
"The Ministry of Finance will then be responsible only in issuing a general policy in directing capital market activities," he told the session, which marked the start of deliberations over draft bills on capital markets, customs and excise.
The issuance of operational licenses of all agencies involved in capital market activities and that of other operational requirements will, therefore, be directly handled by Bapepam, he said.
Bapepam has been widely criticized for being too dependent on the Ministry of Finance in conducting its supervisory tasks and for lacking the power to enforce laws.
Besides giving Bapepam more independence, the draft law on the capital market also designates more judicial power such as the ability to carry out on-site investigations and to issue sanctions against those involved in insider trading and other trading fraud.
At present, Bapepam has difficulty investigating share issuers or other market-supporting agencies for fraud or manipulation due to its inability to carry out on-site investigations.
The capital market law draft, which was formally submitted to the House early last month, contains 16 chapters and 123 articles. It will replace the 1952 Capital Market Law, which is not only considered as being too simple but also too weak to cover the rapid developments in capital market activities. The debate on the new market law is expected to last about three months before being endorsed.
Automation
Another important aspect of the law is the introduction of a legal base for trading automation.
Answering House members' questions about possible excesses in supervising market-supporting professionals, the minister said that such power is a precondition to secure the investing public's interest.
House members said the authority given to Bapepam to operate both as a trading supervisor and agency with judicial power is too much.
They said that such a privilege could compel Bapepam overact due to its stronger investigative and judicial privileges.
But Mar'ie defended the exclusive prerogative and said that such power should be included in the new capital market law because the agency wouldn't be able to guarantee fair trading with out it.
He said that Bapepam should also be able to set an accounting standard to ensure financial statements issued by publicly listed companies aren't misleading or incorrect.
The information about listed companies should be objective so the investing public will have a reliable source of information in making their investment decisions, the minister said.
"The Securities and Exchange Commission of the United States, for example, has the administrative power to set the professional standards to all those involved in the capital market activities such as a public accountant," he said.
In Indonesia, Bapepam has the same power but in the formulation of the professional standards, the agency cooperates with its respective professional associations such as the Association of Indonesian Accountants, the minister said.(hen)