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)