Financial Services Authority Regulation Number 27/POJK.04/2019 Concerning Approval of Commercial Banks as Custodians

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 27 /POJK.04/2019
CONCERNING
APPROVAL OF COMMERCIAL BANKS AS CUSTODIANS
BY THE GRACE OF GOD THE ALMIGHTY
THE COMMISSIONER BOARD OF THE FINANCIAL SERVICES AUTHORITY, Considering: a. that with the shift of functions, duties, and authorities for the regulation and supervision of financial services activities in the capital market sector, including the approval of commercial banks as custodians, from the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority; b. that to provide clarity and certainty regarding the approval of commercial banks as custodians, provisions of legislation in the capital market sector regarding the approval of commercial banks as custodians issued before 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 a Financial Services Authority Regulation concerning the Approval of Commercial Banks as Custodians;
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:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE APPROVAL OF COMMERCIAL BANKS AS CUSTODIANS.

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

1. Commercial Bank is a bank that conducts business activities conventionally and/or based on Sharia principles, which in its activities provides services in the payment circulation as referred to in the Law concerning banking.
2. Custodian is a Party that provides safekeeping services for Securities and other assets related to Securities and other services, including receiving dividends, interest, and other rights, settling Securities transactions, and representing account holders who are its clients.
3. Custodian Bank is a Commercial Bank that has obtained approval from the Financial Services Authority to conduct business activities as a Custodian.

Article 2
(1) Commercial Banks conducting business activities as Custodians must obtain approval from the Financial Services Authority. (2) The application by a Commercial Bank to obtain approval as a Custodian is submitted to the Financial Services Authority using the format of the Application for Approval of Commercial Banks as Custodians contained in the Appendix which is an integral part of this Financial Services Authority Regulation.

CHAPTER II
APPLICATION FOR APPROVAL OF COMMERCIAL BANKS AS CUSTODIANS
Article 3
(1) The application for approval as referred to in Article 2 paragraph (2) must be accompanied by documents and information as follows:
a. articles of association along with its amendments; b. photocopy of the company's Taxpayer Identification Number (NPWP) card;
c. business license as a Commercial Bank;
d. the latest financial statements audited by an accountant registered with the Financial Services Authority; e. operational manual regarding the Custodian activities to be conducted and description of the physical facilities to be used by the Commercial Bank; f. recommendation from the banking sector supervisor of the Financial Services Authority that the Commercial Bank can conduct business activities as a Custodian viewed from the health level of the Commercial Bank; g. director's statement letter stating the fulfillment of the following requirements:

1. willingness to obey all provisions of legislation, especially in the capital market field;
2. adequate security equipment; and
3. Custodian administration separated from other activities conducted by the Commercial Bank;
   h. list of names and data of members of the board of directors and board of commissioners, which at least includes:
4. curriculum vitae;
5. photocopy of valid Identity Card or Passport; and
6. Permit to Employ Foreign Workers for incoming foreign citizens;
   i. list of officials responsible for the Custodian section, including:
7. curriculum vitae;
8. photocopy of Identity Card;
9. copy of citizenship proof for foreign citizens;
10. Permit to Employ Foreign Workers for incoming foreign citizens;
11. photocopy of formal education diploma; and
12. latest color passport-sized photo 4x6 cm with a red background.
    (2) The operational manual as referred to in Article 3 letter e must at least contain:
    a. the organizational structure of the Commercial Bank and the organizational structure of the Custodian; b. list of employees handling Custodian activities accompanied by job descriptions;
    c. standard operating procedures for Custodian activities;
    d. standard contracts with clients which at least describe:
13. special matters regarding the duties and obligations of the Custodian related to the provision of services for collecting dividends, interest or other rights, transfer of ownership, delivery or receipt of instruments, reporting, and other services; and
14. affirmation of fees and taxes charged for the services provided;
    e. list of fees for services provided; f. security program for Custodian activities; and g. policy on providing compensation to clients for any losses arising from negligence or intent of the Custodian in managing client assets.

Article 4
In the event that a Commercial Bank has obtained approval as a Custodian Bank, the Custodian Bank must have an operational manual as referred to in Article 3 paragraph (2).

Article 5
In processing the application for approval of a Commercial Bank as a Custodian, the Financial Services Authority:
a. conducts research on document completeness; b. may request a presentation; and
c. may conduct inspections at the applicant's office.

Article 6
In the event that the application for approval of a Commercial Bank as a Custodian as referred to in Article 2 paragraph (2) does not meet the requirements, within a maximum period of 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 because it does not meet the requirements.

Article 7
In the event that the application for approval of a Commercial Bank as a Custodian as referred to in Article 2 paragraph (2) meets the requirements, within a maximum period of 45 (forty-five) days since the receipt of the complete application, the Financial Services Authority provides a letter of approval for the Commercial Bank as a Custodian.

CHAPTER III
OTHER PROVISIONS
Article 8
(1) In the event that the Financial Services Authority has provided an electronic system, the application for approval of a Commercial Bank as a Custodian as referred to in Article 2 paragraph (2) must be submitted through that electronic system. (2) In the event that the electronic system as referred to in paragraph (1) experiences technical disturbances or force majeure occurs, the application for approval of a Commercial Bank as a Custodian as referred to in Article 2 paragraph (2) may be conducted in the form of printed documents.

CHAPTER IV
ADMINISTRATIVE SANCTIONS
Article 9
(1) Any party that violates the provisions as referred to in Article 4 shall be subject to administrative sanctions.
(2) Sanctions as referred to in paragraph (1) shall also be imposed on parties causing the violation as referred to in paragraph (1). (3) Sanctions as referred to in paragraph (1) and paragraph (2) are imposed by the Financial Services Authority. (4) Administrative sanctions as referred to in paragraph (1) consist 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. (5) Administrative sanctions as referred to in paragraph (4) letters b, c, d, e, f, or g may be imposed with or without prior imposition of administrative sanctions in the form of a written warning as referred to in paragraph (4) letter a. (6) Administrative sanctions in the form of a fine as referred to in paragraph (4) letter b may be imposed separately or together with the imposition of sanctions as referred to in paragraph (4) letters c, d, e, f, or g. (7) Provisions regarding the procedure for imposing administrative sanctions as referred to in paragraph (3) are carried out in accordance with provisions of legislation.

Article 10
In addition to administrative sanctions as referred to in Article 9 paragraph (4), the Financial Services Authority may take specific 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 (4) and specific actions as referred to in Article 10 to the public.

CHAPTER V
TRANSITIONAL PROVISIONS
Article 12
Applications for approval of Commercial Banks as Custodians that have been submitted to the Financial Services Authority before this Financial Services Authority Regulation takes effect and are still in the process of resolution, shall continue to be processed based on the Decision of the Chairman of the Capital Market Supervisory Agency and Financial Institutions Number Kep-34/PM/1996 concerning the Approval of Commercial Banks as Custodians along with Regulation Number VI.A.1 which is its appendix.

CHAPTER VI
CLOSING PROVISIONS
Article 13
Upon the taking effect of this Financial Services Authority Regulation, the Decision of the Chairman of the Capital Market Supervisory Agency Number Kep-34/PM/1996 concerning the Approval of Commercial Banks as Custodians along with Regulation Number VI.A.1 which is its appendix, are repealed and declared invalid.

Article 14
This Financial Services Authority Regulation takes effect on the date of its promulgation.

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

In order that everyone may know it, 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 5 November 2019

CHAIRMAN OF THE COMMISSIONER BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on 7 November 2019

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2019 NUMBER 214

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 27 /POJK.04/2019
CONCERNING
APPROVAL OF COMMERCIAL BANKS AS CUSTODIANS

I. GENERAL
That since December 31, 2012, the functions, duties, and authorities for the regulation and supervision of financial services activities in the capital market, insurance, pension funds, financing institutions, and other financial service institutions have shifted from the Minister of Finance and the Capital Market Supervisory Agency and Financial Institutions 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 Supervisory Agency and Financial Institutions Regulations related to the capital market sector into Financial Services Authority Regulations. The 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 above, it is necessary to replace the provisions of legislation in the capital market sector regulating the Approval of Commercial Banks as Custodians, namely the Decision of the Chairman of the Capital Market Supervisory Agency Number Kep-34/PM/1996 concerning the Approval of Commercial Banks as Custodians, along with Regulation Number VI.A.1 which is its appendix, into a Financial Services Authority Regulation concerning the Approval of Commercial Banks as Custodians.

II. ARTICLE BY ARTICLE
Article 1
Clear enough.
Article 2
Clear enough.
Article 3
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
The term "directors" also includes management for Commercial Banks in the form of Cooperatives.
Number 1
Clear enough.
Number 2
Adequate security equipment includes among others vaults, anti-tampering equipment that can lock outer doors and windows directly leading to the safekeeping section, and robbery alarm signs that will send a silent signal to security personnel. Number 3 Clear enough. Letter h The term "board of commissioners" also includes supervisors for Commercial Banks in the form of Cooperatives. Letter i Clear enough. Paragraph (2) Letter a Clear enough. Letter b Clear enough. Letter c Clear enough. Letter d Clear enough. Letter e The list of fees for services provided includes among others stock registration, splitting of collective stock certificates, merging of collective stock certificates, asset storage, transaction settlement, and other services provided. Letter f The security program for Custodian activities includes among others disaster recovery programs, insurance programs, internal control systems, layout, and spatial arrangements that support the smooth operation of Custodian activities. Letter g Clear enough.
Article 4
Clear enough.
Article 5
Clear enough.
Article 6
Clear enough.
Article 7
Clear enough.
Article 8
Clear enough.
Article 9
Clear enough.
Article 10
The term "specific actions" includes among others orders to improve operational manuals.
Article 11
Clear enough.
Article 12
Clear enough.
Article 13
Clear enough.
Article 14
Clear enough.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6416

APPENDIX
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 27 /POJK.04/2019
CONCERNING
APPROVAL OF COMMERCIAL BANKS AS
CUSTODIANS
APPLICATION FOR APPROVAL OF COMMERCIAL BANKS AS CUSTODIANS (place), (date, month) 20...
Number :
Attachment :
Subject : Application for Approval of Commercial Banks as Custodians.
To
The Executive Head
Capital Market Supervisor
Financial Services Authority in Jakarta
With respect,
Hereby we submit an application for approval as a Custodian. As consideration material, we submit the following data:

1. Applicant Name : ………………………………..
2. Applicant Address : ………………………………..
   ………………………………..
   (street name & number)
   ................................... -
   (city & postal code)
3. Commercial Bank Name : ………………………………..
4. Commercial Bank Address : ………………………………..
   ………………………………..
   (street name & number)
   ................................... -
   (city & postal code)
5. Telephone & Fax Number : ………………………………..
6. Number and date
   of Articles of Association approval by the Ministry of Law and Human Rights : ………………………………..
   (include power of attorney)
7. Taxpayer Identification Number (NPWP) : ………………………………..
   Completing this application, we attach the following documents:
8. Articles of Association of the Commercial Bank and its amendments approved by the Ministry of Law and Human Rights;
9. photocopy of Taxpayer Identification Number (NPWP);
10. business license as a Commercial Bank;
11. latest financial statements audited by an accountant registered with the Financial Services Authority;
12. Custodian Operational Manual;
13. recommendation from the banking sector supervisor of the Financial Services Authority that the Commercial Bank can conduct business activities as a Custodian viewed from the health level of the Commercial Bank;
14. Director's statement willing to obey provisions of legislation in the capital market field:
15. List of names, data of members of the board of directors and board of commissioners;
16. List of officials responsible for the Custodian section;
17. Answers to questions contained in the questionnaire;
    Thus this application is submitted and for your attention, thank you.
    Applicant stamp
    ................................................
    (full name)

QUESTIONNAIRE
I. INSTRUCTIONS FOR ANSWERING QUESTIONS:

1. All questions (Part I to Part II) in this Business License application must be answered by the Applicant.
2. Questions in Part I relate to integrity and must be answered by prospective members of the board of commissioners, members of the board of directors, or Officials one level below board members.
3. Place a check mark √ in the box in front of the word "Yes" if your answer is "Yes", or place a check mark √ in the box in front of the word "No" if your answer to the following questions is "No".
   II. MANAGEMENT OF ACTIVITIES
4. Is your Custodian administrative unit operated separately from other Commercial Bank activities?

• Yes □ No
  If "Yes":
  a. To whom is information or activity reports regarding the Custodian provided? b. Attach the security manual for safekeeping services which among others regulates employees of the safekeeping section who can only work in sections related to the receipt and delivery of assets in safekeeping.
  c. Attach the names of employees along with their positions where the relevant person does not provide other services for other sections in your Commercial Bank.
  d. Is the cashier location and the desk for receiving and delivering assets in safekeeping located close to the Custodian management section?
• Yes □ No
  e. Are the vault and safe located close to the Custodian management section?
• Yes □ No
  f. Are all deposited assets stored in the administrative officer's room of the Custodian section?
• Yes □ No

2. Are all records related to deposited assets stored near the Custodian management section and under the control of that section and separate from other records and documents of the Commercial Bank in question?

• Yes □ No
  III. SECURITY REQUIREMENTS

1. Is there a security official or officer responsible for the installation, maintenance, and operation of security equipment, and responsible for the development and administration of the security program?

• Yes □ No

2. Is the security official supervised by the board of directors of the respective company?

• Yes □ No

3. Is the area around the vault illuminated during darkness?

• Yes □ No

4. Are outer doors and windows directly leading to the safekeeping section locked with anti-tampering equipment?

• Yes □ No

5. Has the Custodian section been equipped with a robbery alarm sign that will send a silent signal to security personnel stationed outside the safekeeping section?

• Yes □ No

6. Does the Commercial Bank have a written security program designed to secure the Custodian section from robbery, theft, and which can help identify parties committing such actions? Attach the written security program?

• Yes □ No

7. Is there a schedule for inspection, testing, and maintenance of all security equipment installed in the Custodian section?

• Yes □ No

8. How do you demonstrate the official or officer who will be responsible for the implementation of inspection, testing, maintenance, and proper functioning of security equipment?
9. Is there a provision that the official in number 8 above is required to maintain records of inspection, testing, and maintenance of security equipment?

• Yes □ No

10. Is there a minimum limit requirement for each currency controlled by the Custodian section?

• Yes □ No

11. How is payment to all depositing clients and third parties carried out?
12. Is there a requirement that payment to third parties must be carried out by deducting from their current account at the Commercial Bank?

• Yes □ No

13. Is there a requirement that all currencies, Securities, and similar securities are stored in a vault or safe locked outside working hours?

• Yes □ No

14. What are the standards for the vault and safe used to store currencies, Securities, and other valuables?
15. Has one or more persons been appointed to ensure that all security equipment works properly?

• Yes □ No

16. Has one or more employees been appointed to conduct inspections after office hours to ensure that currencies, Securities, and securities are stored neatly and to ensure that no unauthorized parties are in the place?

• Yes □ No

17. Have periodic drills been conducted for employees assigned to the security program?

• Yes □ No

18. Is the cashier post designed such that cashiers can be protected from direct danger of attack with firearms or sharp weapons?

• Yes □ No
  If "Yes", describe the specifications of the cashier protection?

19. State the specifications of the Custodian vault and safe.
20. Are duplicate accounting records related to the operation of all Custodian assets stored in a separate and secure room?

• Yes □ No
  IV. OPERATIONAL GUIDELINES

1. Is there a standard service contract between the Custodian and clients?

• Yes □ No

2. Describe the procedures for each service listed in the standard service contract.
3. Attach the list of fees charged to clients for services provided according to the contract in question.
4. Is there a written security program approved by the board of commissioners?

• Yes □ No
  If "Yes", attach it.

5. Is there a disaster recovery program approved by the board of commissioners?

• Yes □ No
  If "Yes", attach it.

6. Attach the Custodian organizational chart and describe the duties of each employee approved by the board of commissioners.
7. Is there an approved procedure for each service depicted in the standard service contract?

• Yes □ No

8. Do you have an internal audit procedure containing mechanisms for calculating Securities and other securities controlled?

• Yes □ No
  If "Yes", this internal audit is conducted every few months.

9. Is there an insurance program related to the operation of the Custodian?

• Yes □ No
  If "Yes", attach it.

10. Is there an overview of the financial examination procedures to be conducted by an accountant registered with the Financial Services Authority?

• Yes □ No

11. Is there an example of the form and content of reports to be submitted to the Financial Services Authority?

• Yes □ No

12. Is there an example of the form and content of written instructions to deliver Securities or money on behalf of clients or their proxies?

• Yes □ No
  If "Yes", attach it.

13. Is there a procedure to be followed for losses or damages to any deposited assets?

• Yes □ No
  If "Yes", attach it.

14. Is there a procedure for each client to file complaints regarding losses caused by loss, negligence, or failure to execute instructions?

• Yes □ No
  If "Yes", attach it.

This copy is in accordance with the original
Director of Legal Affairs 1
Legal Department signed
Yuliana
15. Is there securities lending and borrowing between Custodians and clients?

• Yes □ No
  If "Yes", explain how the securities lending and borrowing procedure is implemented.
  (place), (date, month, year)
  Applicant stamp
  ..................................................
  (full name)
  Established in Jakarta on 5 November 2019
  CHAIRMAN OF THE COMMISSIONER BOARD
  FINANCIAL SERVICES AUTHORITY
  REPUBLIC OF INDONESIA signed
  WIMBOH SANTOSO