Criteria and Publication of the Sharia Securities List

FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 35 /POJK.04/2017
CONCERNING
CRITERIA AND PUBLICATION OF THE SHARIA SECURITIES LIST BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that to encourage the development of the Islamic capital market industry in Indonesia, it is necessary to refine the provisions of legislation in the capital market sector regarding the criteria and publication of the Sharia Securities List; b. that based on the considerations referred to in letter a, it is necessary to establish a Financial Services Authority Regulation concerning the Criteria and Publication of the Sharia Securities List;

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);

THE FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY

DECIDES:
To establish:
FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING CRITERIA AND PUBLICATION OF THE SHARIA SECURITIES LIST.

CHAPTER I
GENERAL PROVISIONS

Article 1
In this Financial Services Authority Regulation, the following terms are defined:

1. Securities are negotiable instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, units of participation in collective investment contracts, forward contracts on Securities, and any derivatives of Securities.
2. Sharia Principles in the Capital Market are Islamic legal principles in Sharia activities in the capital market based on the fatwa of the National Sharia Council - Indonesian Ulema Council, provided that the said fatwa does not conflict with Financial Services Authority Regulations concerning the Implementation of Sharia Principles in the Capital Market and/or other Financial Services Authority Regulations based on the fatwa of the National Sharia Council - Indonesian Ulema Council.
3. Sharia Securities are Securities as referred to in Law Number 8 of 1995 concerning the Capital Market and its implementing regulations that:
   a. the contract, management method, and business activities; b. the assets underlying the contract, management method, and business activities; and/or
   c. the assets related to the said Securities and their issuer,
   do not conflict with Sharia Principles in the Capital Market.
4. Investment Manager is a party whose business activity manages a portfolio of Securities for clients or manages a collective investment portfolio for a group of clients, except insurance companies, pension funds, and banks that conduct their own business activities based on legislation provisions.
5. Sharia Investment Manager is an Investment Manager that in its articles of association states that:
   a. its activities and types of business; b. its management method; and/or
   c. the services provided,
   are conducted based on Sharia Principles in the Capital Market.
6. Sharia Investment Management Unit is a part of an Investment Manager that has the duty and responsibility to manage a portfolio of Securities or a collective investment portfolio that does not conflict with Sharia Principles in the Capital Market, and to develop and market Sharia investment management services or products.
7. Party Issuing the Sharia Securities List is:
   a. a party that has obtained approval from the Financial Services Authority to publish the Sharia Securities List; b. a Sharia Investment Manager that has met the required provisions to conduct activities as a Party Issuing the Sharia Securities List as regulated in this Financial Services Authority Regulation; or
   c. an Investment Manager that has a Sharia Investment Management Unit that has met the required provisions to conduct activities as a Party Issuing the Sharia Securities List as regulated in this Financial Services Authority Regulation.
8. Sharia Securities List is a collection of Sharia Securities, determined by the Financial Services Authority or published by the Party Issuing the Sharia Securities List.
9. Public Offer is the activity of offering Securities conducted by an Issuer to sell Securities to the public based on procedures regulated in Law Number 8 of 1995 concerning the Capital Market and its implementing regulations.
10. Issuer is a party conducting a Public Offer.
11. Public Company is a corporation whose shares are owned by at least 300 (three hundred) shareholders and has paid-up capital of at least Rp3,000,000,000.00 (three billion rupiah) or a number of shareholders and paid-up capital determined by Government Regulation.
12. Sharia Issuer is an Issuer whose articles of association state that its activities, types of business, and management methods are based on Sharia Principles in the Capital Market.
13. Sharia Public Company is a Public Company whose articles of association state that its activities, types of business, and management methods are based on Sharia Principles in the Capital Market.
14. Capital Market Sharia Expert, hereinafter abbreviated as ASPM, is:
    a. an individual who has knowledge and experience in the Sharia field; or b. a business entity whose board of directors and employees have knowledge and experience in the Sharia field, who provides advice and/or supervises the implementation of Sharia Principles in the Capital Market in business activities and/or provides a Sharia compliance statement for Sharia products or services in the capital market.
15. Sharia Supervisory Board, hereinafter abbreviated as DPS, is a board responsible for providing advice and suggestions and supervising the fulfillment of Sharia Principles in the Capital Market for parties conducting Sharia activities in the capital market.

CHAPTER II
SECURITIES AND CRITERIA FOR SECURITIES IN THE SHARIA SECURITIES LIST

Article 2
(1) Securities included in the Sharia Securities List cover:
a. Sharia Securities in the form of shares, including Sharia pre-emptive rights and Sharia warrants issued by a Sharia Issuer or Sharia Public Company; b. Securities in the form of shares, including Sharia pre-emptive rights and Sharia warrants issued by an Issuer or Public Company that does not state that its activities, types of business, management methods, and/or services are based on Sharia Principles in the Capital Market, provided that the said Issuer or Public Company:

1. does not conduct activities and types of business that conflict with Sharia Principles in the Capital Market, including:
   a) gambling and games classified as gambling; b) ribawi financial services; c) risk trading containing elements of uncertainty (gharar) and/or gambling (maisir); d) producing, distributing, trading, and/or providing:

1. haram substances (haram li-dzatihi);
2. items or services haram not due to substance (haram li-ghairihi) determined by the National Sharia Council - Indonesian Ulema Council;
3. items or services that damage morality and are harmful; and/or
4. other items or services conflicting with Sharia principles based on determinations by the National Sharia Council - Indonesian Ulema Council; and
   e) conducting other activities conflicting with Sharia principles based on determinations by the National Sharia Council - Indonesian Ulema Council;

2. does not conduct transactions conflicting with Sharia Principles in the Capital Market;
3. meets the following financial ratios:
   a) total interest-based debt to total assets is not more than 45% (forty-five percent); and b) total interest income and other non-halal income to total business income and other income is not more than 10% (ten percent); and
   c. other Securities, including:
4. Sharia Securities other than shares issued through a Public Offer; and
5. Sharia Securities other than shares issued:
   a) without a Public Offer; and b) in accordance with legislation provisions in the capital market sector.
   (2) The Financial Services Authority may determine different financial ratios than those referred to in paragraph (1) letter b number 3, considering the conditions and development of the Sharia capital market.

CHAPTER III
SHARIA SECURITIES LIST DETERMINED BY THE FINANCIAL SERVICES AUTHORITY

Article 3
The Financial Services Authority determines the Sharia Securities List using the Sharia Securities criteria as referred to in Article 2.

Article 4
The Sharia Securities List determined by the Financial Services Authority includes Securities as referred to in Article 2 paragraph (1) issued by an Issuer through a Public Offer or a Public Company in Indonesia.

Article 5
(1) The Sharia Securities List as referred to in Article 4 is determined periodically 2 (two) times in 1 (one) year, namely:
a. the first determination of the Sharia Securities List is conducted no later than 5 (five) working days before the end of May and becomes effective on June 1; and b. the second determination of the Sharia Securities List is conducted no later than 5 (five) working days before the end of November and becomes effective on December 1. (2) The Sharia Securities List as referred to in paragraph (1) is announced by the Financial Services Authority through the Financial Services Authority website and/or other mass media.

Article 6
In the event of a Public Offer, corporate actions, information, or facts from an Issuer or Public Company that may cause the fulfillment or non-fulfillment of the Sharia Securities criteria as referred to in Article 2, the Financial Services Authority may:
a. announce the addition of Securities meeting the Sharia Securities criteria in the Sharia Securities List as referred to in Article 5; or b. announce that specific Sharia Securities in the Sharia Securities List no longer meet the Sharia Securities criteria.

Article 7
The Sharia Securities List determined by the Financial Services Authority as referred to in Article 4 must be used as a reference by:
a. parties publishing Sharia Securities indices domestically; b. Investment Managers managing domestic Sharia Securities investment portfolios;
c. Securities Companies having a Sharia online trading system; and
d. other parties conducting the compilation and/or management of domestic Sharia Securities investment portfolios for the benefit of their clients or other parties, as regulated in legislation provisions.

CHAPTER IV
SHARIA SECURITIES LIST PUBLISHED BY THE PARTY ISSUING THE SHARIA SECURITIES LIST

First Section
Sharia Securities List

Article 8
(1) The Sharia Securities List published by the Party Issuing the Sharia Securities List may only contain Sharia Securities traded outside the country.
(2) Sharia Securities as referred to in paragraph (1) include:
a. shares meeting Sharia Principles in the Capital Market traded on foreign stock exchanges; b. sukuk listed on foreign stock exchanges;
c. Sharia commercial paper with a maturity of 1 (one) year or more; and
d. other foreign Sharia Securities.
(3) The Party Issuing the Sharia Securities List is prohibited from including Sharia Securities already included in the Sharia Securities List determined by the Financial Services Authority.

Article 9
(1) The Sharia Securities List published by the Party Issuing the Sharia Securities List as referred to in Article 8 paragraph (1) may:
a. be announced to the public; and/or b. be used limitedly for the benefit of specific parties.
(2) The announcement as referred to in paragraph (1) letter a is conducted at least through a daily newspaper in Indonesian with national circulation or electronic media accessible to the public.

Article 10
Shares as referred to in Article 8 paragraph (2) letter a may be included in the Sharia Securities List if the shares:
a. are foreign Sharia shares determined by a regulator in another country, index provider, and/or other party conducting selection based on business activities and financial ratios consisting of at least debt-related and/or interest-based debt ratios and non-halal income-related ratios; or b. are selected using the criteria as referred to in Article 2.

Article 11
(1) In the event the Sharia Securities List refers to foreign Sharia Securities determined by a regulator in another country, index provider, and/or other party, the Party Issuing the Sharia Securities List must state the regulator in another country, index provider, and/or other party used as a reference. (2) The Party Issuing the Sharia Securities List must ensure that the index provider and/or other party as referred to in paragraph (1) has Sharia supervision and a methodology for selecting foreign Sharia Securities.

Article 12
The DPS must ensure the fulfillment of Sharia Principles in the Capital Market over the Sharia Securities as referred to in Article 8 paragraph (2) included in the Sharia Securities List published by the Party Issuing the Sharia Securities List.

Second Section
Approval and Requirements for the Party Issuing the Sharia Securities List

Article 13
(1) Parties wishing to become the Party Issuing the Sharia Securities List must obtain approval from the Financial Services Authority.
(2) The application for approval as referred to in paragraph (1) must meet the following requirements:
a. be a legal entity located in Indonesia; b. have a DPS having an ASPM license from the Financial Services Authority as regulated in the Financial Services Authority Regulation concerning Capital Market Sharia Experts;
c. have standard operating procedures for compiling the Sharia Securities List at least including:

1. data collection procedures including the mechanism for requesting additional information;
2. selection procedures based on the Sharia Securities List criteria used and review procedures;
3. the purpose of publishing the Sharia Securities List;
4. Sharia Securities List monitoring procedures; and
5. Sharia Securities List change procedures.
   (3) In the event the Party Issuing the Sharia Securities List refers to foreign Sharia Securities determined by a regulator in another country, index provider, and/or other party, the standard operating procedure requirements as referred to in paragraph (2) letter c must at least include:
   a. procedures for selecting the party to be used as a reference (regulator in another country, index provider, and/or other party); b. procedures for collecting information on foreign Sharia Securities from the party used as a reference;
   c. the purpose of publishing the Sharia Securities List;
   d. Sharia Securities List monitoring procedures; e. Sharia Securities List change procedures; and f. information regarding the use of paid references, in the event of using paid references.

Article 14
(1) The Party Issuing the Sharia Securities List must submit a report to the Financial Services Authority in the event of changing the mechanism for compiling the Sharia Securities List.
(2) The report as referred to in paragraph (1) is submitted to the Financial Services Authority concurrently with the publication of the next period's Sharia Securities List.
(3) The submission of the report as referred to in paragraph (2) must be accompanied by the standard operating procedures for compiling the Sharia Securities List conducted.

Article 15
(1) In the event the Party Issuing the Sharia Securities List as referred to in Article 13 paragraph (3) conducts a cooperation contract with an index provider and/or other party, the Party Issuing the Sharia Securities List must submit the cooperation contract to the Financial Services Authority:
a. no later than 6 (six) months since the application as Party Issuing the Sharia Securities List was approved by the Financial Services Authority; or b. no later than 1 (one) month since the Party Issuing the Sharia Securities List made a new cooperation contract with the index provider and/or other party. (2) In the event the deadline for submitting the cooperation contract as referred to in paragraph (1) falls on a holiday, the cooperation contract must be submitted no later than the next working day. (3) In the event the Party Issuing the Sharia Securities List submits the cooperation contract after the deadline as referred to in paragraph (2), the calculation of the number of days of delay in submitting the report is calculated from the first day after the final deadline for submitting the report as referred to in paragraph (2).

Article 16
(1) In the event the party wishing to become the Party Issuing the Sharia Securities List is a Sharia Investment Manager and/or an Investment Manager having a Sharia Investment Management Unit, the Sharia Investment Manager and/or Investment Manager having a Sharia Investment Management Unit is not required to submit an application for approval as referred to in Article 13 paragraph (2). (2) The Sharia Investment Manager and/or Investment Manager having a Sharia Investment Management Unit as referred to in paragraph (1) must submit a report to the Financial Services Authority attaching the standard operating procedures for compiling the Sharia Securities List as referred to in Article 13 paragraph (2) letter c or paragraph (3).

Third Section
Procedure for Application for Approval of the Party Issuing the Sharia Securities List

Article 17
(1) The application for approval as referred to in Article 13 paragraph (2) must be submitted in printed document form to the Financial Services Authority using the Application for Approval as Party Issuing the Sharia Securities List format as contained in the Appendix which is an integral part of this Financial Services Authority Regulation. (2) The application for approval as referred to in paragraph (1) must be accompanied by the following document completeness:
a. documents concerning the applicant:

1. photocopy of proof of payment for the application for approval as Party Issuing the Sharia Securities List;
2. photocopy of the latest articles of association or similar document that has obtained approval from the competent authority, in the event the applicant has not obtained a license, approval, or registration from the Financial Services Authority;
3. company organizational structure;
4. photocopy of Taxpayer Identification Number in the name of the applicant;
5. list of names and data of board of directors members, including:
   a) latest curriculum vitae signed by the concerned party; b) photocopy of valid ID Card/Passport; c) photocopy of Foreign Worker Work Permit for foreign directors from the competent authority in accordance with legislation provisions; and d) latest 4x6 cm passport-size photos with a red background, 2 (two) sheets; and
6. director's statement as the party responsible for compiling the Sharia Securities List using the Director's Statement of Responsibility for Compiling the Sharia Securities List format as contained in the Appendix which is an integral part of this Financial Services Authority Regulation;
   b. documents concerning the DPS:
7. photocopy of the ASPM license of DPS members responsible for Sharia compliance of the published Sharia Securities List;
8. letter of appointment by the board of directors to the DPS as the party responsible for Sharia compliance of the published Sharia Securities List;
9. letter of willingness statement by the DPS regarding the appointment by the board of directors as the party responsible for Sharia compliance of the published Sharia Securities List, using the DPS Statement of Willingness as Party Responsible for Sharia Compliance of the Published Sharia Securities List format as contained in the Appendix which is an integral part of this Financial Services Authority Regulation; and
10. DPS statement regarding the Sharia compliance statement of Sharia Securities included in the Sharia Securities List published by the Party Issuing the Sharia Securities List, using the Sharia Supervisory Board Sharia Compliance Statement format as contained in the Appendix which is an integral part of this Financial Services Authority Regulation; and
    c. documents concerning standard operating procedures, namely photocopy of the standard operating procedures document for compiling the Sharia Securities List using company-logoed paper and stating the approval date and signed by board of directors members.
    (3) In the event the Financial Services Authority has provided an electronic system for applying for approval as Party Issuing the Sharia Securities List, the application may be conducted electronically. (4) Provisions concerning the submission of the application for approval as Party Issuing the Sharia Securities List electronically as referred to in paragraph (3) are regulated by a Circular Letter of the Financial Services Authority.

Article 18
The Financial Services Authority may request additional documents and/or information to complete the application for approval as Party Issuing the Sharia Securities List as referred to in Article 17.

Article 19
(1) In the event the application as referred to in Article 17 does not meet requirements, no later than 45 (forty-five) days since the receipt of the application, the Financial Services Authority provides a notification letter to the applicant stating that:
a. the application is incomplete; or b. the application is rejected due to not meeting requirements.
(2) The applicant must complete missing documents and/or additional information as referred to in paragraph (1) letter a within a period of 45 (forty-five) days after the date of the Financial Services Authority notification letter. (3) The submission of document completeness and/or additional information as referred to in paragraph (2) is considered received by the Financial Services Authority on the date of receipt of the document changes and/or additional information. (4) Since the receipt of document changes, additional information, and/or completeness of missing requirements as referred to in paragraph (3), the application for approval is considered newly received by the Financial Services Authority and processed as referred to in paragraph (1). (5) An applicant who does not complete the required missing items within the period as referred to in paragraph (2) is considered to have cancelled the application for approval as Party Issuing the Sharia Securities List already submitted to the Financial Services Authority. (6) In the event the Financial Services Authority does not request additional documents and/or information within a period of 45 (forty-five) days after the submission of the application for approval and/or the last additional information from the application for approval to the Financial Services Authority, the Financial Services Authority provides an approval letter to the applicant.

Fourth Section
Announcement and Reporting by the Party Issuing the Sharia Securities List

Article 20
(1) In the event the Party Issuing the Sharia Securities List announces the Sharia Securities List as referred to in Article 9 paragraph (1) letter a, the Party Issuing the Sharia Securities List must announce every change to the Sharia Securities List. (2) The announcement as referred to in paragraph (1) is conducted at least through a daily newspaper in Indonesian with national circulation or electronic media accessible to the public no later than 5 (five) working days after the change to the Sharia Securities List is declared effective. (3) Proof of announcement as referred to in paragraph (2) is submitted to the Financial Services Authority no later than 2 (two) working days after the Sharia Securities List is published. (4) The submission of proof of announcement as referred to in paragraph (3) must be accompanied by a Sharia compliance statement from the DPS using the Sharia Supervisory Board Sharia Compliance Statement format as contained in the Appendix which is an integral part of this Financial Services Authority Regulation.

Article 21
(1) In the event the Party Issuing the Sharia Securities List uses the Sharia Securities List as referred to in Article 9 paragraph (1) letter b, the Party Issuing the Sharia Securities List must submit a report every

year to the Financial Services Authority using the format of the Report of the Sharia Compliant Securities List Issuer as set forth in the Appendix which is an integral part of this Financial Services Authority Regulation.

(2) The report as referred to in paragraph (1) must be accompanied by the following documents:
a. The Sharia Compliant Securities List issued along with its amendments during the current year with the reporting period deadline on December 31; and b. A Sharia compliance statement from the DPS for each issuance of the Sharia Compliant Securities List using the format of the Sharia Compliance Statement of the Sharia Supervisory Board as set forth in the Appendix which is an integral part of this Financial Services Authority Regulation.

(3) Submission of the report as referred to in paragraph (1) must be done no later than January 31 of the following year.

(4) In the event that the submission deadline for the report as referred to in paragraph (3) falls on a holiday, the report must be submitted no later than 1 (one) working day thereafter.

(5) In the event that the Issuer of the Sharia Compliant Securities List submits the report after the deadline as referred to in paragraph (4), the calculation of the number of days of delay in submitting the report is counted from the first day after the final submission deadline as referred to in paragraph (4).

Article 22
In the event that the Issuer of the Sharia Compliant Securities List issues the Sharia Compliant Securities List either for public announcement as referred to in Article 9 paragraph (1) letter a or for limited use as referred to in Article 9 paragraph (1) letter b, the Issuer of the Sharia Compliant Securities List is required to follow the provisions as referred to in Article 20 and Article 21.

Article 23
(1) In the event that the Financial Services Authority has provided an electronic reporting system for the Issuer of the Sharia Compliant Securities List, the submission of the report by the Issuer of the Sharia Compliant Securities List may be conducted through the electronic system.

(2) Provisions regarding the electronic submission of the report by the Issuer of the Sharia Compliant Securities List as referred to in paragraph (1) are regulated by a Circular Letter of the Financial Services Authority.

CHAPTER V
OTHER PROVISIONS

Article 24
The Issuer of the Sharia Compliant Securities List is required to store all documents related to the listing of Sharia Compliant Securities in the Sharia Compliant Securities List for the period as regulated in the provisions of legislation governing corporate documents.

CHAPTER VI
SANCTION PROVISIONS

Article 25
(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 on 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 administrative sanctions 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 26
In addition to administrative sanctions as referred to in Article 25 paragraph (1), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 27
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 25 paragraph (1) and specific actions as referred to in Article 26 to the public.

CHAPTER VII
TRANSITIONAL PROVISIONS

Article 28
Parties that have obtained approval as the Issuer of the Sharia Compliant Securities List before the entry into force of this Financial Services Authority Regulation are required to adjust to the provisions as referred to in this Financial Services Authority Regulation no later than 6 (six) months from the entry into force of this Financial Services Authority Regulation.

CHAPTER VIII
CLOSING PROVISIONS

Article 29
Upon the entry into force of this Financial Services Authority Regulation, the Decision of the Chairman of the Capital Market Supervisory Agency and Financial Institutions Institution Number Kep-208/BL/2012 concerning Criteria and Issuance of the Sharia Compliant Securities List, along with Regulation Number II.K.1 which is its appendix, is repealed and declared invalid.

Article 30
This Financial Services Authority Regulation enters into force on the date of its promulgation.

This copy is in accordance with the original
Legal Director 1
Legal Department signed
Yuliana

To ensure everyone is aware, 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 July 7, 2017
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Promulgated in Jakarta on July 10, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 137

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 35 /POJK.04/2017
CONCERNING
CRITERIA AND ISSUANCE OF THE SHARIA COMPLIANT SECURITIES LIST

I. GENERAL
In efforts to develop the Sharia capital market to grow stably and sustainably, adequate market infrastructure development is required. One important infrastructure is the availability of clear and easily understood regulations that can be implemented. Furthermore, the dynamics of the development of the Sharia capital market require improvements to Regulation Number II.K.1, the appendix of the Decision of the Chairman of the Capital Market Supervisory Agency and Financial Institutions Institution Number Kep-208/BL/2012 concerning Criteria and Issuance of the Sharia Compliant Securities List. The improvement of Regulation Number II.K.1 is carried out to support the development of the Sharia capital market through the growth of Sharia Securities and to align with several Financial Services Authority Regulations related to the Sharia capital market, namely POJK Number 16/POJK.04/2015 concerning Sharia Capital Market Experts, POJK Number 19/POJK.04/2015 concerning Issuance and Requirements for Sharia Mutual Funds, and POJK Number 61/POJK.04/2016 concerning the Application of Sharia Principles in the Capital Market on Investment Managers.

The improvements to the regulations regarding the criteria and issuance of the Sharia Compliant Securities List that were previously in effect are carried out by adding new provisions in this Financial Services Authority Regulation, namely among others:

a. expanding the scope of parties required to use the Sharia Compliant Securities List established by the Financial Services Authority; b. expanding the scope of types of Securities that can be included in the Sharia Compliant Securities List issued by the Issuer of the Sharia Compliant Securities List;
c. adding provisions requiring the Issuer of the Sharia Compliant Securities List to have a DPS that holds an ASPM license from the Financial Services Authority; and
d. adding provisions requiring the DPS to ensure compliance with Sharia Principles in the Capital Market over the Sharia Securities included in the Sharia Compliant Securities List issued by the Issuer of the Sharia Compliant Securities List.

Based on the background and aspects mentioned above, it is necessary to change the provisions of legislation in the capital market sector regulating the criteria and issuance of the Sharia Compliant Securities List, namely the Decision of the Chairman of the Capital Market Supervisory Agency and Financial Institutions Institution Number Kep-208/BL/2012 concerning Criteria and Issuance of the Sharia Compliant Securities List, along with Regulation Number II.K.1 which is its appendix, by issuing a Financial Services Authority Regulation concerning Criteria and Issuance of the Sharia Compliant Securities List.

II. ARTICLE BY ARTICLE

Article 1
Sufficiently clear.

Article 2
Paragraph (1)
Letter a
What is meant by "Sharia preferential rights" is the right attached to shares that are included in the Sharia Compliant Securities List, which gives the opportunity for the respective shareholders to buy shares and/or other equity-like Securities, whether those that can be converted into shares or those that give the right to buy shares, before they are offered to other parties. Such rights must be transferable. What is meant by "Sharia warrants" is Securities issued by a company that gives the right to holders of the Securities to order Sharia shares from that company at a certain price after 6 (six) months or more from the date the Securities in question are issued.

Letter b
Number 1
Letter a)
Sufficiently clear.

Letter b)
Examples of ribawi financial services include conventional banks (interest-based) and conventional financing companies (interest-based).

Letter c)
Examples of risk sales containing elements of uncertainty (gharar) and/or gambling (maisir) include conventional insurance.

Letter d)
Sufficiently clear.

Letter e)
The determination of the National Sharia Council - Indonesian Ulema Council can be in the form of a fatwa, opinion, or other decision issued by the National Sharia Council - Indonesian Ulema Council.

Number 2
Examples of transactions that contradict Sharia Principles in the Capital Market are as follows:
a. trading or transactions with false offers and/or demands; b. trading or transactions not accompanied by the delivery of goods and/or services, including index trading;
c. sale of goods that have not been owned;
d. purchase or sale of Securities using or exploiting insider information from the Issuer or Public Company; e. margin transactions over Sharia Securities containing interest (riba) elements; f. trading or transactions with the purpose of hoarding (ihtikar); g. conducting trading or transactions containing elements of bribery (risywah); and h. other transactions containing elements of speculation (gharar), fraud (tadlis) including hiding defects (ghisysy), and efforts to influence other parties containing lies (taghrir).

Number 3
Letter a)
Sufficiently clear.

Letter b)
Examples of other unlawful income include income derived from:
a. sale of food containing pork; b. sale of alcoholic beverages; and
c. sale of cigarettes.

Letter c
Number 1
Examples of Sharia Securities other than shares issued through a Public Offering include sukuk, units of participation in Sharia mutual funds, Sharia asset-backed Securities, and Sharia real estate investment funds in the form of collective investment contracts.

Number 2
Letter a)
Examples of Sharia Securities other than shares issued without a Public Offering include units of participation in Sharia mutual funds in the form of limited partnership collective investment contracts, and Sharia medium-term notes.

Letter b)
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Article 3
Sufficiently clear.

Article 4
Sufficiently clear.

Article 5
Sufficiently clear.

Article 6
What is meant by "corporate actions" includes among others affiliate transactions, material transactions, changes in main business activities, and business mergers or consolidations.

Article 7
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Examples of other parties conducting the compilation of Sharia Securities investment portfolios include Sharia insurance and Sharia pension funds.

Article 8
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Examples of other foreign Sharia Securities include Islamic Real Estate Investment Trusts (iREITS), Islamic asset-backed securities, Islamic ETFs, and depositary receipts.

Paragraph (3)
Sufficiently clear.

Article 9
Paragraph (1)
Letter a
Sufficiently clear.

Letter b
Examples of specific parties are Investment Managers issuing Sharia mutual funds based on foreign Sharia Securities.

Paragraph (2)
What is meant by "electronic media" includes among others websites.

Article 10
Sufficiently clear.

Article 11
Paragraph (1)
Examples of regulators in other countries, index providers, and/or other parties used as references include the Securities Commission Malaysia, Dow Jones Islamic Market, Financial Times Stock Exchange, Morgan Stanley Capital International, and stock exchanges both domestically and internationally.

Paragraph (2)
Sufficiently clear.

Article 12
Sufficiently clear.

Article 13
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
The DPS can come from within the company or from outside the company.

Letter c
What is meant by "standard operating procedures" are standard operating procedures in the form of flowcharts and explanations.

Paragraph (3)
Sufficiently clear.

Article 14
Paragraph (1)
Examples of changes in the mechanism for compiling the Sharia Compliant Securities List include among others:
a. changes in the compilation of the Sharia Compliant Securities List from the original mechanism of self-selection by the Issuer of the Sharia Compliant Securities List to a mechanism referring to regulators in other countries, index providers, and/or other parties or vice versa; and b. changes in the compilation of the Sharia Compliant Securities List from the original use of only one mechanism to using 2 (two) mechanisms, both using the self-selection mechanism and the mechanism referring to regulators in other countries, index providers, and/or other parties.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Article 15
Paragraph (1)
What is meant by "making new cooperation contracts with index providers and/or other parties abroad" is if there are:
a. changes in the mechanism for compiling the Sharia Compliant Securities List by the Issuer of the Sharia Compliant Securities List from originally compiling it themselves to referring to index providers and/or other parties; or b. changes to the index provider and/or other party used as a reference.

Paragraph (2)
Sufficiently clear.

Article 16
Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Sufficiently clear.

Article 19
Sufficiently clear.

Article 20
Sufficiently clear.

Article 21
Paragraph (1)
If there are several changes to the Sharia Compliant Securities List within 1 (one) year, the content of the submitted report is a recap of the changes to the Sharia Compliant Securities List accompanied by a Sharia compliance statement from the DPS for each changed Sharia Compliant Securities List.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Sufficiently clear.

Article 22
Sufficiently clear.

Article 23
Sufficiently clear.

Article 24
Sufficiently clear.

Article 25
Sufficiently clear.

Article 26
What is meant by "specific actions" includes among others ordering the Issuer of the Sharia Compliant Securities List to remove Securities that do not meet the criteria as regulated in this Financial Services Authority Regulation from the Sharia Compliant Securities List they issue.

Article 27
Sufficiently clear.

Article 28
Sufficiently clear.

Article 29
Sufficiently clear.

Article 30
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6083