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)