Financial Services Authority Regulation Number 72/POJK.04/2017 on the Main Provisions of Subordinated Loan Agreements for Securities Companies

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 72 /POJK.04/2017
CONCERNING
THE MAIN PROVISIONS OF SUBORDINATED LOAN AGREEMENTS FOR SECURITIES COMPANIES BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that with the enactment of Law Number 21 of 2011 concerning the Financial Services Authority, since December 31, 2012, the functions, duties, and authority for the regulation and supervision of financial services activities in the capital market sector, including regulation regarding the main provisions of subordinated loan agreements for securities companies, have transferred from the Capital Market and Financial Institution Supervisory Board to the Financial Services Authority; b. that to provide clarity and certainty regarding the regulation of the main provisions of subordinated loan agreements for securities companies, provisions of legislation in the capital market sector regarding the main provisions of subordinated loan agreements for securities companies issued prior to the establishment of the Financial Services Authority need to be changed into a Financial Services Authority Regulation;
c. that based on considerations as referred to in letters a and b, it is necessary to establish the FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA
Financial Services Authority Regulation on the Main Provisions of Subordinated Loan Agreements for Securities Companies; Recalling:

1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
   DECIDING:
   Establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE MAIN PROVISIONS OF SUBORDINATED LOAN AGREEMENTS FOR SECURITIES COMPANIES.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Securities Company is a Party that conducts business activities as an Underwriter of Securities, Securities Broker, and/or Investment Manager.
2. Adjusted Net Working Capital, hereinafter abbreviated as ANWC, is the amount of current assets of the Securities Company minus all current liabilities of the Securities Company and ranking liabilities, plus subordinated debt, and other adjustments.
3. Securities are securities, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, participation units of collective investment contracts, futures contracts on securities, and any derivatives of Securities.
4. Clearing and Guarantee Institution is a party that provides clearing and guarantee services for the settlement of Exchange Transactions.

CHAPTER II
MAIN PROVISIONS OF SUBORDINATED LOAN AGREEMENTS FOR SECURITIES COMPANIES
Article 2
In the calculation of ANWC, Securities Companies may use subordinated loans as a component to reduce total liabilities, subject to subordinated loan agreements in accordance with the provisions regulated in this Financial Services Authority Regulation.

Article 3
Subordinated loan agreements as referred to in Article 2 must meet the following provisions:
a. subordinated loans are provided in cash or by converting existing loans into subordinated loans, with the condition that the purpose and intended use of the loan are the same as the purpose and intended use of funds derived from capital through the issuance of shares; b. subordinated loan agreements must be made in writing;
c. the maturity date for the payment of principal, interest, or other compensation from subordinated loans, either partially or fully, is prohibited from being less than 1 (one) year, unless the parties agree in writing to accelerate the payment of subordinated loans, with the condition that the Securities Company continues to meet the ANWC size requirements as referred to in the provisions of legislation in the capital market sector regulating the maintenance and reporting of adjusted net working capital;
d. in the event that the payment of subordinated loans at maturity causes the Securities Company to fail to meet the ANWC requirements as regulated in the provisions of legislation in the capital market sector regulating the maintenance and reporting of adjusted net working capital, the maturity date for the principal, interest, or other compensation of subordinated loans is automatically extended until the time the Securities Company can make the payment without causing a violation of ANWC requirements; e. subordinated loan agreements may provide the following settlement options:

1. settlement in cash;
2. settlement through conversion of subordinated loans, either partially or fully, into unplaced shares of the Securities Company to the subordinated loan provider, at any time, with the following conditions:
   a) the settlement plan through conversion must first be submitted to the Financial Services Authority to obtain approval in order to fulfill the provisions of Article 35 paragraph (1) of Government Regulation Number 45 of 1995 concerning the Conduct of Activities in the Capital Market Sector; and b) the settlement plan through conversion must obtain approval from the General Meeting of Shareholders of the Securities Company; and
3. settlement by having specific shareholders donate the shares of the Securities Company owned by those shareholders to the Securities Company, which are then used by the Securities Company to settle subordinated loans, either partially or fully, at the choice of the subordinated loan provider, with the following conditions:
   a) the settlement plan through conversion must first be submitted to the Financial Services Authority to obtain approval for the fulfillment of the provisions of Article 35 paragraph (1) of Government Regulation Number 45 of 1995 concerning the Conduct of Activities in the Capital Market Sector; and b) the settlement plan must obtain approval from the General Meeting of Shareholders of the Securities Company; f. the position of the rights of the subordinated loan provider is lower than the position of the rights of other lenders; g. the provisions in the subordinated loan agreement must state that the right of the subordinated loan provider to receive payment of principal, interest, or other compensation must be exercised after all rights of other lenders to receive payment of principal, interest, or other compensation that have matured earlier or simultaneously with the subordinated loans, including ownership rights over the Securities Company's Securities accounts, have been paid; and h. Securities Companies are prohibited from pledging company assets that are included in the ANWC calculation components, Securities, or other customer assets held in the company's custodian, or company assets used in the administration of Securities accounts.

Article 4
In exercising its functions, the Clearing and Guarantee Institution must create a standard form of subordinated loan agreement whose content is in accordance with the provisions regulated in this Financial Services Authority Regulation, which can be used by Securities Companies that are members of the Clearing and Guarantee Institution.

Article 5
Securities Companies that are not members of the Clearing and Guarantee Institution may use the form as referred to in Article 4.

Article 6
Securities Companies that do not use the standard subordinated loan agreement form as referred to in Article 4 may create subordinated loan agreements whose content is in accordance with the provisions regulated in this Financial Services Authority Regulation.

Article 7
In the event that the Securities Company is a member of the Clearing and Guarantee Institution, the agreement as referred to in Article 6 must first obtain approval from the Clearing and Guarantee Institution.

Article 8
The standard subordinated loan agreement form as referred to in Article 4 and the subordinated loan agreement as referred to in Article 6 must be accompanied by legal opinions from 2 (two) legal consultants registered with the Financial Services Authority and must be submitted to the Financial Services Authority to obtain approval before becoming effective.

CHAPTER III
SANCTION PROVISIONS
Article 9
(1) Without prejudice to criminal provisions in the capital market sector, the Financial Services Authority has the authority to impose administrative sanctions on any party that violates the provisions of this Financial Services Authority Regulation, including parties that cause the violation to occur, in the form of:
a. written warning; b. fine, namely the obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business license; f. cancellation of approval; and/or g. cancellation of registration.
(2) Administrative sanctions as referred to in paragraph (1) letters b, c, d, e, f, or g may be imposed with or without being preceded by the imposition of an administrative sanction in the form of a written warning as referred to in paragraph (1) letter a. (3) Administrative sanctions in the form of a fine as referred to in paragraph (1) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (1) letters c, d, e, f, or g.

Article 10
In addition to administrative sanctions as referred to in Article 9 paragraph (1), the Financial Services Authority may take certain actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 11
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 9 paragraph (1) and certain actions as referred to in Article 10 to the public.

CHAPTER IV
CLOSING PROVISIONS
Article 12
At the time this Financial Services Authority Regulation takes effect, the Decision of the Chairman of the Capital Market and Financial Institution Supervisory Board Number Kep-28/PM/1999 concerning the Main Provisions of Subordinated Loan Agreements for Securities Companies, along with Regulation Number V.D.7 which is its attachment, is repealed and declared invalid.

Article 13
This Financial Services Authority Regulation takes effect on the date of its promulgation.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Yuliana
To ensure that everyone knows, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on December 21, 2017
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY, signed
WIMBOH SANTOSO
Promulgated in Jakarta on December 22, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 293

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 72 /POJK.04/2017
CONCERNING
THE MAIN PROVISIONS OF SUBORDINATED LOAN AGREEMENTS FOR SECURITIES COMPANIES
I. GENERAL
That since December 31, 2012, the functions, duties, and authority for the regulation and supervision of financial services activities in the capital market sector, insurance, pension funds, financing institutions, and other financial service institutions have transferred from the Minister of Finance and the Capital Market and Financial Institution Supervisory Board to the Financial Services Authority. In relation to the above, it is necessary to reorganize the existing regulatory structure, particularly those related to the capital market sector, by converting Capital Market and Financial Institution Supervisory Board regulations related to the capital market sector into Financial Services Authority Regulations. This reorganization is carried out so that there are Financial Services Authority Regulations related to the capital market sector that are consistent with Financial Services Authority Regulations in other sectors. Based on the background and aspects mentioned, it is necessary to replace the provisions of legislation in the capital market sector regulating the main provisions of subordinated loan agreements for Securities Companies, namely the Decision of the Chairman of the Capital Market and Financial Institution Supervisory Board Number Kep-28/PM/1999 concerning the Main Provisions of Subordinated Loan Agreements for Securities Companies, along with Regulation Number V.D.7 which is its attachment, into a Financial Services Authority Regulation on the Main Provisions of Subordinated Loan Agreements for Securities Companies.

II. ARTICLE BY ARTICLE
Article 1
Clearly sufficient.
Article 2
Clearly sufficient.
Article 3
Clearly sufficient.
Article 4
Clearly sufficient.
Article 5
Clearly sufficient.
Article 6
Clearly sufficient.
Article 7
Clearly sufficient.
Article 8
Clearly sufficient.
Article 9
Clearly sufficient.
Article 10
Clearly sufficient.
Article 11
Clearly sufficient.
Article 12
Clearly sufficient.
Article 13
Clearly sufficient.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6161