Pros and cons of new JSX nomination rules
Pros and cons of new JSX nomination rules
JAKARTA (JP): The new procedures for nominating stock exchange directors, included in a new regulation issued last week by the Capital Market Supervisory Agency (Bapepam), have been criticized as unfair by a number of smaller securities companies.
A director of PT Argaartha Sekuritas, Nurkhamid Akhmad, told The Jakarta Post yesterday that the new procedures allow major securities companies to install their own people on the board of directors and pursue their own interests through the directors.
Bapepam regulation No. 04/PM/1996 stipulates that the candidates for directors and commissioners of the stock exchange should be nominated by a minimum of three active exchange members, who have a combined trading value and trading frequency of at least 4 percent of the total trading value of the exchange during the last 12 months.
The majority of each group of three securities members, which nominate the candidates, must be local securities companies and each member of the group must have a minimum of 0.2 percent of the total transaction value and frequency.
"The regulation is surprising and we don't understand how Bapepam could make such a ruling," said Nurkhamid, who is also the chairman of the Jakarta Brokers Club.
Based on last year's trading activities, only 74 securities companies met the minimum trading value and frequency required. They represent 37 percent of the Jakarta Stock Exchange (JSX)'s total membership.
A local securities company, PT Makindo, was among those at the top with a total trading value of 8.7 percent of the total value of trading on the JSX.
Fair
However, a director of PT Sigma Batara, Ignasius Yonan, argued that the fears of inactive brokerages were unfounded.
Yonan told the Post that each member must realize that the highest authority on the stock exchange is the general shareholders meeting and not the directors.
"Furthermore, each member has only one vote in the general shareholders meeting, meaning that even the inactive securities companies also have the right to choose or turn down any candidates nominated," he said.
Yonan hailed the new regulation as fair overall.
"It's fair because the less active members still have the right to elect the directors in the general shareholders meeting," he contended.
He said that it is misleading to assume that the elected directors will automatically represent the interests of the major securities companies.
The most important thing, according to Ignasius, is that none of the regulations on the stock exchange have loopholes allowing directors to collaborate with exchange members. (08)