Nominees to ensure fair rights share disbursing

Nominees to ensure fair rights share disbursing

JAKARTA (JP): Stock dealers and analysts have asked the
Capital Market Supervisory Agency to allow foreign investors to
use nominees in order to prevent unfair distribution of rights
shares in the future.

Nurkhamid, chairman of the Jakarta Brokers Club, said
yesterday that by using nominees, foreign investors would still
be able to buy shares, even though the 49 percent ceiling
allocated to them had been achieved.

"It is essential to deal with foreign investors' strong demand
for popular shares," he said.

The nominee arrangement is applied in a number of Asian stock
exchanges to accommodate the growing demand from foreign
investors for local popular stocks, while at the same time
securing the foreign ownership restriction.

Nurkhamid said foreign investors, under the nominee
arrangement, will have the same rights as other investors, except
the right to vote.

"Therefore, the nominee arrangement will not pose a problem
for the management of publicly listed firms because the user
would not have the voting right," he argued.

The capital market watchdog issued a strong warning to the
publicly-listed Bank Bali last week for the unfair distribution
of its rights shares.

The bank used the first-come, first-serve procedure in the
conversion of rights certificates into its new shares. The
distribution mechanism had led to improper distribution of shares
to foreign investors because a large number of the rights shares
bought by foreigners from local investors were registered as
foreign-held stocks.

As a consequence, many foreign investors could not execute
their rights because the 49 percent of rights shares allocated to
the foreigners had been used up.

Bank Bali

In its warning letter to Bank Bali, the agency urged them to
settle the problem and said that foreign investors who were
registered before the ex-rights (dead line) should be guaranteed
to receive the new shares according to the existing regulation.

Many foreign buyers, securities dealers said, benefited from
the bank's first-come first-served procedure to increase their
holdings. On the other side, local investors also illegally used
foreign names to enable them to sell their shares on the foreign
board, where prices are often 20 percent higher than those on the
regular board.

Nurkhamid said that prices on the foreign board are higher
because the foreigners can not buy stocks from the regular
market.

The foreign board is served only for shares which have already
achieved the 49 percent ceiling. (hen)