Stock market bill passed into law

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)