Stock market bill passed into law

JAKARTA (JP): The House of Representatives gave its approval yesterday to the long-awaited stock exchange bill, which will provide increased protection for investors.

At yesterday's plenary session, the four factions of the House -- the Armed Forces, the ruling Golkar, the Moslems-dominated United Development Party and the Indonesian Democratic Party -- unanimously endorsed the bill.

The bill, however, still needs President Soeharto's approval to become a new law. It is expected that the new law will come to effect early next year.

After attending the House of Representatives' plenary session, Minister of Finance Mar'ie Muhammad said the bill will give a strong legal basis to Indonesia's stock exchanges.

"This is a good moment for the development of our stock markets," Mar'ie told journalists, adding that the bill will improve the business community's trust in local stock exchanges.

Currently Indonesia has two stock markets, the Jakarta Stock Exchange (JSX) in Jakarta and the Surabaya Stock Exchange (SSE) in Surabaya, East Java.

Amid tough competition among stock exchanges in the region, Mar'ie said, the most important thing for local stock exchanges in the long run is to improve the quality of the exchanges themselves.

"I don't say that our stock exchanges have to be the largest in the region. It is important to be the largest, but it is more important to maintain the quality of the stock exchanges over the long run," Mar'ie said.

Investigation

Mar'ie explained that to give more protection to investors, the stock market bill, which will replace the 1952 Bourse Law, will empower the Capital Market Supervisory Agency to examine the files of publicly-listed companies in the course of investigations of stock market-related crimes.

It is stated in the bill that those convicted of committing any stock market-related crime, such as fraud, market manipulation and insider trading, face maximum imprisonment of 10 years or a fine of Rp 15 billion (US$6.6 million).

The bill also empowers the agency to impose administrative penalties on stock market players who breach the existing market regulations.

Any company wishing to float shares on the stock exchanges is required to disclose its circumstances. Under the bill, any company which has already fulfilled the requirements for becoming a public company is automatically subject to such transparency provisions and is required to make reports to the agency.

"In relation to the criteria for whether a company qualifies to go public, the stock market bill stresses the information disclosure system rather than a merit system," Mar'ie said.

He added that, to ensure the disclosure of information, the bill requires stock market-supporting professions, such as accountants, lawyers and notaries, to abide by their respective rules.

The bill provides that securities companies, clearance houses and underwriters serve as self-regulatory organizations. They are allowed to govern themselves by introducing their own rules. However, such rules must receive the agency's consent before being promulgated.

To avoid hostile takeovers and unwanted privatization practices, the bill regulates any tender offer, merger or acquisition involving a listed company.

The bill also accommodates the establishment of investment companies, either open-ended or closed, to meet the needs of a wide range of investors, especially small investors wishing to participate in stock markets but lacking the time or resources to handle the paper work, analyze opportunities, monitor exposure or manage trade.

The House's four factions suggested that the government soon provide regulations to support the implementation of the new law.

Mar'ie said the government is currently preparing a number of new stock market regulations which will be announced by early next year to coincide with the implementation of the new law. (rid)