Amendment to Financial Services Authority Regulation Number 3/POJK.05/2015 on Pension Fund Investments

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 29 /POJK.05/2018
CONCERNING
AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 3/POJK.05/2015 ON PENSION FUND INVESTMENTS BY THE GRACE OF THE ALMIGHTY GOD THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in providing alternative investment instrument choices for pension funds without ignoring the aspect of prudence, suitability with the characteristics of pension fund liabilities, and the returns obtained, as well as increasing the role of domestic investors in supporting infrastructure development, it is necessary to improve the Financial Services Authority Regulation Number 3/POJK.05/2015 concerning Pension Fund Investments; b. that based on the considerations as referred to in letter a, it is necessary to establish a Financial Services Authority Regulation concerning the Amendment to the Financial Services Authority Regulation Number 3/POJK.05/2015 concerning Pension Fund Investments;

Recalling:

1. Law Number 11 of 1992 concerning Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 37, Supplement to the State Gazette of the Republic of Indonesia Number 3477);
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);
3. Financial Services Authority Regulation Number 3/POJK.05/2015 concerning Pension Fund Investments (State Gazette of the Republic of Indonesia Year 2015 Number 82, Supplement to the State Gazette of the Republic of Indonesia Number 5692);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 3/POJK.05/2015 CONCERNING PENSION FUND INVESTMENTS.

Article I
Several provisions in the Financial Services Authority Regulation Number 3/POJK.05/2015 concerning Pension Fund Investments (State Gazette of the Republic of Indonesia Year 2015 Number 82, Supplement to the State Gazette of the Republic of Indonesia Number 5692) are amended as follows:

1. The provisions of paragraph (1) and paragraph (2) of Article 2 are amended, and 1 (one) paragraph is inserted between paragraph (2) and paragraph (3), namely paragraph (2a), so that Article 2 reads as follows:

Article 2
(1) Pension Funds are prohibited from placing investments, except in the following types of investments:
a. savings at Banks; b. call deposits at Banks;
c. term deposits at Banks;
d. deposit certificates at Banks; e. securities issued by Bank Indonesia; f. Government Securities; g. stocks listed on the Indonesia Stock Exchange; h. corporate bonds listed on the Indonesia Stock Exchange;
i. Mutual Funds consisting of:

1. Money Market Mutual Funds, Fixed Income Mutual Funds, Mixed Mutual Funds, and Equity Mutual Funds;
2. Protected Mutual Funds, Guaranteed Mutual Funds, and Index Mutual Funds;
3. Mutual Funds in the form of limited participation collective investment contracts; and/or
4. Mutual Funds whose stocks or participation units are traded on the Indonesia Stock Exchange;
   j. Medium-Term Notes (MTN); k. asset-backed securities;
   l. real estate investment funds in the form of collective investment contracts;
   m. options contracts and derivative contracts for securities traded on the Indonesia Stock Exchange; n. REPO; o. direct investments in Indonesia; p. land in Indonesia; q. buildings in Indonesia; r. regional bonds; and/or s. infrastructure investment funds in the form of collective investment contracts.

(2) Types of Pension Fund investments as referred to in paragraph (1) also include types of investments using Sharia principles if there are types of investments using Sharia principles.

(2a) Provisions regarding the valuation basis for types of investments consisting of:
a. regional bonds as referred to in paragraph (1) letter r follow the provisions regarding the valuation basis for corporate bonds listed on the Indonesia Stock Exchange as referred to in paragraph (1) letter h; and b. infrastructure investment funds in the form of collective investment contracts as referred to in paragraph (1) letter s follow the provisions regarding the valuation basis for real estate investment funds in the form of collective investment contracts as referred to in paragraph (1) letter l that are not traded on the stock exchange.

(3) Provisions regarding the valuation basis for each type of investment as referred to in paragraph (1) and paragraph (2) are regulated in an OJK Circular Letter.

2. The provisions of paragraph (1) of Article 6 are amended, so that Article 6 reads as follows:

Article 6
(1) Pension Funds that invest in Mutual Funds in the form of limited participation collective investment contracts as referred to in Article 2 paragraph (1) letter i number 3, investments in MTN as referred to in Article 2 paragraph (1) letter j, investments in REPO as referred to in Article 2 paragraph (1) letter n, and investments in infrastructure investment funds in the form of collective investment contracts as referred to in paragraph (1) letter s must meet the following requirements:
a. have a minimum investment amount of Rp500,000,000,000.00 (five hundred billion rupiah); b. have adequate risk management; and
c. use the services of investment advisors who have obtained a business license from OJK.

(2) Investments in REPO as referred to in Article 2 paragraph (1) letter n must be carried out on REPO that meets the following requirements:
a. use standardized agreements by OJK; b. collateral types are limited to Government Securities, securities issued by Bank Indonesia, and/or corporate bonds that have an investment grade rating issued by securities rating companies that have obtained a business license from OJK;
c. maturity does not exceed 90 (ninety) days;
d. REPO value is at most 80% (eighty percent) of the market value of the collateral securities; and e. REPO transactions are registered at the Indonesia Central Securities Depository or Bank Indonesia Scriptless Securities Settlement System (BI-S4).

3. The provisions of paragraph (5), paragraph (6), and paragraph (7) of Article 8 are deleted, so that Article 8 reads as follows:

Article 8
(1) Investments in Mutual Funds in the form of limited participation collective investment contracts and MTN as referred to in Article 2 paragraph (1) letter i number 3 and letter j, respectively, are prohibited from exceeding 10% (ten percent) of the total Pension Fund investments.

(2) Direct investment investments in Indonesia as referred to in Article 2 paragraph (1) letter o are prohibited from exceeding 15% (fifteen percent) of the total Pension Fund investments.

(3) Pension Funds may carry out direct investments as referred to in paragraph (2) exceeding 15% (fifteen percent) of the total Pension Fund investments with the condition that they are directed at direct investments in limited liability companies operating in the financial services sector, provided that prior approval from OJK is obtained.

(4) Further provisions regarding Pension Funds that can carry out direct investments exceeding 15% (fifteen percent) as referred to in paragraph (3) are regulated in an OJK Circular Letter.

(5) Deleted.
(6) Deleted.
(7) Deleted.

(8) Investments in land and/or buildings in Indonesia as referred to in Article 2 paragraph (1) letter p and/or letter q are prohibited from exceeding 20% (twenty percent) of the total Pension Fund investments.

4. The provisions of paragraph (1), paragraph (3), paragraph (4), and paragraph (7) of Article 9 are amended, 2 (two) paragraphs are inserted between paragraph (6) and paragraph (7), namely paragraph (6a) and paragraph (6b), and paragraph (8) is deleted, so that Article 9 reads as follows:

Article 9
(1) The total amount of investments as referred to in Article 2 paragraph (1) letter a to letter e, letter g to letter i number (1), number (2), and number (4), letter k to letter o, letter r, and letter s with one Counterparty is prohibited from exceeding 20% (twenty percent) of the total Pension Fund investments.

(2) All Pension Fund investments may be placed in Government Securities as referred to in Article 2 paragraph (1) letter f.

(3) Without prejudice to the provisions as referred to in paragraph (1), the total amount of investments in:
a. MTN as referred to in Article 2 paragraph (1) letter j or direct investments in Indonesia as referred to in Article 2 paragraph (1) letter o with one Counterparty, respectively, are prohibited from exceeding 10% (ten percent) of the total Pension Fund investments; b. REPO as referred to in Article 2 paragraph (1) letter n for each counterparty is prohibited from exceeding 2% (two percent) of the total Pension Fund investments and in total is prohibited from exceeding 5% (five percent) of the total Pension Fund investments;
c. regional bonds as referred to in Article 2 paragraph (1) letter r, for each issuer is at most 10% (ten percent) of the total investments and in total is prohibited from exceeding 20% (twenty percent) of the total Pension Fund investments; and
d. infrastructure investment funds in the form of collective investment contracts as referred to in Article 2 paragraph (1) letter s, for each Investment Manager is at most 10% (ten percent) of the total investments and in total is prohibited from exceeding 20% (twenty percent) of the total Pension Fund investments.

(4) Provisions regarding limits on direct investments in Indonesia with one Counterparty as referred to in paragraph (3) letter a do not apply to direct investments in limited liability companies operating in the financial services sector.

(5) Investments in MTN as referred to in Article 2 paragraph (1) letter j are prohibited from exceeding 10% (ten percent) of the total MTN issuance.

(6) Investments in MTN as referred to in Article 2 paragraph (1) letter j must meet the following criteria:
a. MTN are registered at the Indonesia Central Securities Depository; b. MTN have a monitoring agent that has obtained a license as a trustee from OJK; and
c. MTN have an investment grade rating issued by a securities rating company that has obtained a business license from OJK.

(6a) Investments in regional bonds as referred to in Article 2 paragraph (1) letter r must meet the following provisions:
a. have obtained an effective statement from OJK; and b. have an investment grade rating from a securities rating company that has obtained a business license from OJK.

(6b) Investments in infrastructure investment funds in the form of collective investment contracts as referred to in Article 2 paragraph (1) letter s must meet the following provisions:
a. for infrastructure investment funds in the form of collective investment contracts issued through a public offering, have obtained an effective statement from OJK; b. for infrastructure investment funds in the form of collective investment contracts issued not through a public offering, have been registered with OJK;
c. have an investment grade rating from a securities rating company recognized by OJK; and
d. one of the investment portfolios of the infrastructure investment fund in the form of a collective investment contract consists of infrastructure assets that have generated revenue.

(7) The total amount of investments with one Counterparty as referred to in paragraph (1) for Mutual Funds, asset-backed securities, real estate investment funds in the form of collective investment contracts, and/or infrastructure investment funds in the form of collective investment contracts as referred to in Article 2 paragraph (1) letter i, letter k, letter l, and/or letter s are Mutual Fund participations, asset-backed securities, real estate investment funds in the form of collective investment contracts, and/or infrastructure investment funds in the form of collective investment contracts managed by the same Investment Manager.

(8) Deleted.

(9) Pension Fund Management Companies (DPPK) located in regions that do not allow the placement of assets in the form of term deposits, call deposits, and deposit certificates in accordance with the provisions as referred to in paragraph (1) and within the Pension Fund Investment Guidelines, where no other types of investments are specified, may place assets in the form of investments in any Bank in that region exceeding the 20% (twenty percent) limit of the total Pension Fund investments, while still paying attention to the principle of risk diversification.

5. The provisions of paragraph (2) and paragraph (3) of Article 28 are amended, so that Article 28 reads as follows:

Article 28
(1) Pension Funds that do not meet the provisions as referred to in Article 14 paragraph (1), Article 14 paragraph (5), Article 14 paragraph (6), Article 14 paragraph (8), Article 15 paragraph (1), Article 15 paragraph (2), Article 15 paragraph (3), Article 15 paragraph (4), Article 17, Article 20 paragraph (1), Article 23, Article 24 paragraph (1), Article 24 paragraph (4), Article 25, Article 26 paragraph (1), Article 26 paragraph (2), and Article 27 paragraph (1) are subject to administrative sanctions in the form of written warnings.

(2) In the event that Pension Funds cannot meet the provisions as referred to in Article 2 paragraph (1), Article 3, Article 4, Article 5, Article 6, Article 7, Article 8 paragraph (1), Article 8 paragraph (2), Article 8 paragraph (3), Article 8 paragraph (8), Article 9 paragraph (1), Article 9 paragraph (3), Article 9 paragraph (5), Article 9 paragraph (6), Article 9 paragraph (6a), Article 9 paragraph (6b), Article 10 paragraph (1), Article 11 paragraph (1), Article 11 paragraph (4), Article 11 paragraph (5), Article 12, Article 16, Article 19 paragraph (2), Article 19 paragraph (3), Article 19 paragraph (4), Article 19 paragraph (5), Article 21 paragraph (1), Article 21 paragraph (2), and Article 21 paragraph (3), OJK issues a written notification to the Pension Fund to meet the specified provisions for a maximum of 40 (forty) working days calculated from the date of notification from OJK.

(3) If the time limit as referred to in paragraph (2) has expired and the Pension Fund cannot meet the provisions as referred to in Article 2 paragraph (1), Article 3, Article 4, Article 5, Article 6, Article 7, Article 8 paragraph (1), Article 8 paragraph (2), Article 8 paragraph (3), Article 8 paragraph (8), Article 9 paragraph (1), Article 9 paragraph (3), Article 9 paragraph (5), Article 9 paragraph (6), Article 9 paragraph (6a), Article 9 paragraph (6b), Article 10 paragraph (1), Article 11 paragraph (1), Article 11 paragraph (4), Article 11 paragraph (5), Article 12, Article 16, Article 19 paragraph (2), Article 19 paragraph (3), Article 19 paragraph (4), Article 19 paragraph (5), Article 21 paragraph (1), Article 21 paragraph (2), and Article 21 paragraph (3), then the relevant Pension Fund is subject to administrative sanctions in the form of written warnings.

(4) The imposition of administrative sanctions in the form of written warnings as referred to in paragraph (1) or paragraph (3) for each type of violation is imposed for a maximum of 3 (three) consecutive times with a time limit of at most 1 (one) month each.

(5) In the event that OJK assesses that the type of violation committed cannot be resolved within the time limit as referred to in paragraph (4), OJK may establish a longer time limit than 1 (one) month with the condition that the specified time limit is at most 1 (one) year.

(6) In the event that Pension Funds have been subject to administrative sanctions up to the third written warning and have not resolved the cause of the sanction, OJK may impose additional sanctions in the form of:
a. suspension of investment management by financial institutions; b. reduction of risk assessment levels;
c. re-evaluation of competence and propriety for the Supervisory Board, Management, and/or Acting Management; and/or
d. issuance of written orders to the Founder to replace the Supervisory Board, Management, and/or Acting Management.

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

Article II
This OJK Regulation comes into force on the date of enactment.

For the information of everyone, ordering the enactment of this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on 10 December 2018
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Enacted in Jakarta on 10 December 2018

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2018 NUMBER 245

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 29 /POJK.05/2018
CONCERNING
AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 3/POJK.05/2015 ON PENSION FUND INVESTMENTS

I. GENERAL
The Financial Services Authority Regulation Number 3/POJK.05/2015 concerning Pension Fund Investments is the legal basis for OJK in regulating investments by Pension Funds that can accommodate the needs of Pension Funds in achieving optimal investment returns, healthy asset-liability management, and increasing the role of Pension Funds in national economic development.

One of the provisions regulated in the Financial Services Authority Regulation Number 3/POJK.05/2015 concerning Pension Fund Investments is the choice of investment instruments that can serve as alternatives for Pension Funds to invest.

Currently, there are several existing investment products that have not been included in the Pension Fund investment instrument choices, namely regional bonds and infrastructure investment funds in the form of collective investment contracts. Both types of investment instruments can be used to provide alternative investment instrument choices for Pension Funds, while always prioritizing the aspect of prudence, suitability with the characteristics of Pension Fund liabilities, and the returns obtained.

Furthermore, both types of investment instruments can be used to increase the role of domestic investors, namely Pension Funds, in supporting infrastructure development.

In relation to the above, it is necessary to improve the Financial Services Authority Regulation Number 3/POJK.05/2015 concerning Pension Fund Investments.

II. ARTICLE BY ARTICLE
Article I
Number 1
Article 2
Paragraph (1)
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
Clear enough.
Letter d
Clear enough.
Letter e
Clear enough.
Letter f
Clear enough.
Letter g
Clear enough.
Letter h
Corporate bond types include subordinated bonds/subdebt listed on the Indonesia Stock Exchange.
Letter i
Clear enough.
Letter j
MTN investment types can be directed towards infrastructure financing, venture capital, and other financing.
Letter k
Asset-backed securities include asset-backed securities from collective investment contracts and asset-backed securities in the form of participation certificates. Letter l Clear enough. Letter m Clear enough. Letter n Clear enough. Letter o Clear enough. Letter p Clear enough. Letter q Clear enough. Letter r What is meant by "regional bonds" is regional loans offered to the public through a public offering in the capital market. Letter s What is meant by "infrastructure investment funds in the form of collective investment contracts" is a collective investment contract vehicle used to raise funds from public investors for the most part to be invested in infrastructure assets by investment managers. Paragraph (2) Types of investments using Sharia principles include:
a. Sharia banking products as regulated in Laws regarding Sharia banking, including savings and Sharia deposits; b. Sharia Government Securities (Sukuk);
c. Corporate Sukuk;
d. Sharia Mutual Funds; e. Sharia asset-backed securities; f. Sharia real estate investment funds; and g. Sharia MTN.
Paragraph (2a)
Clear enough.
Paragraph (3)
Provisions regulated in OJK Circular Letters are the valuation basis for each type of investment for Pension Fund financial and investment reporting.
Number 2
Article 6
Paragraph (1)
Letter a
Clear enough.
Letter b
What is meant by "having adequate risk management" covers at least:
a. active supervision by Management and the Supervisory Board to carry out the management and supervision functions of the Pension Fund; b. adequacy of policies, procedures, and risk limit determinations;
c. adequacy of risk identification, measurement, monitoring, and control processes;
d. risk management information systems; and e. comprehensive internal control systems.
Letter c
Clear enough.
Paragraph (2)
Clear enough.
Number 3
Article 8
Clear enough.
Number 4
Article 9
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
Clear enough.
Paragraph (5)
Clear enough.
Paragraph (6)
Letter a
Clear enough.
Letter b
What is meant by "monitoring agent" is a party carrying out the function as a trustee.
Such monitoring agents are intended to fulfill the prudence principle for Pension Funds when investing in MTN.
Letter c
Clear enough.
Paragraph (6a)
Clear enough.
Paragraph (6b)
Clear enough.
Paragraph (7)
What is meant by "managed by the same Investment Manager" is, if Pension Funds have investment types in Mutual Funds, asset-backed securities, real estate investment funds, and infrastructure investment funds in the form of collective investment contracts managed by one or more Investment Managers, then the calculation of investment limits with one Counterparty by grouping these investment types based on their Investment Manager. Example:
Pension Fund A has the following investment types:

Investment Type	Investment Manager	Fair Value of Investment
Mutual Fund 1	A	Rp100,000,000.00
Mutual Fund 2	B	Rp200,000,000.00
Asset-backed securities 1	A	Rp300,000,000.00
Asset-backed securities 2	C	Rp200,000,000.00
Real estate investment fund 1	B	Rp200,000,000.00
Real estate investment fund 2	A	Rp100,000,000.00

Based on the data above, the grouping by Investment Manager is as follows:

Investment Manager	Investment Type	Fair Value of Investment
A	Mutual Fund 1	Rp100,000,000.00
A	Asset-backed securities 1	Rp300,000,000.00
A	Real estate investment fund 2	Rp100,000,000.00
Total		Rp500,000,000.00
B	Mutual Fund 2	Rp200,000,000.00
B	Real estate investment fund 1	Rp200,000,000.00
Total		Rp400,000,000.00
C	Asset-backed securities 2	Rp200,000,000.00
Total		Rp200,000,000.00

Paragraph (8)
Deleted.
Paragraph (9)
Clear enough.
Number 5
Article 28
Clear enough.
Article II
Clear enough.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6276