No limitation of foreign ownership in mutual funds
No limitation of foreign ownership in mutual funds
JAKARTA (JP): The government issued a decree yesterday allowing foreign investors to buy 100 percent of mutual fund shares listed on the local stock exchange.
The chairman of the Capital Market Supervisory Agency (Bapepam), I Putu Gede Ary Suta, said that the change is stipulated in one of the finance minister's capital market decrees issued yesterday.
Increasing the foreign ownership ratio in listed mutual funds to 100 percent will not enable foreign institutions to control any particular fund, he said, because each investor in the mutual fund is only allowed to buy a maximum of one percent of the fund's total stocks.
He said that investors are limited to buying a maximum of one percent of the mutual funds to prevent fund managers from going bankrupt.
"If an open-end mutual fund is controlled by a single majority shareholder, it can easily collapse, especially when the majority shareholder redeems most of its stakes with the fund manager," he said.
According to the new capital market law (article 19), a mutual fund has to buy back its shares if a shareholder wants to return the shares.
One of the decrees issued yesterday -- No.647/KMK.010/1995 -- also raises the foreign ownership portion in listed securities companies to 85 percent from 49 percent previously. The easing of foreign ownership in listed securities companies, however, is limited only to non-financial institutions or individual investors.
Bapepam also issued yesterday a number of regulations on mutual funds, such as the procedure for licensing a mutual fund, the operation of mutual fund as a limited company as well as a collective-contract fund, the procedure of assessment, and the statute of a mutual fund as a limited company.
Putu added that in the near future, the agency will invite the top 20 securities companies to work out the best ways to accelerate the establishment of open-end mutual funds.
Directors
The new regulations also include a new procedure for nominating directors and commissioners on a stock exchange.
Putu said that candidates must be nominated by at least three active members on the exchange, whose combined transaction value must reach a minimum of 4 percent of the exchange's total transaction value during the last 12 months.
The majority of each group nominating the candidates must be comprised of local securities companies while each member of the group must have a minimum of 0.2 percent of the exchange's total transaction value.
Putu said, however, that all exchange members have the right to elect the exchange's directors or commissioners even though the nomination of the candidates can only be made by active members.
Putu said that the regulation is designed to improve the quality of the stock market's management and the professionalism of the stock exchange's members.
"Our stock exchange activities should be based on a market mechanism. Therefore, an exchange member should be able to meet the market's demands," he said.
Putu denied the notion that the rulings would discourage the participation of small brokerages, arguing that the regulations would instead motivate them to be more active. (08)