Financial Services Authority Regulation Number 34/POJK.04/2017 Regarding Target Date Funds

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 34 /POJK.04/2017
REGARDING
TARGET DATE FUNDS
BY THE GRACE OF THE ALMIGHTY GOD,
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in order to provide investment alternatives for investors, it is necessary to increase the diversity of investment products; b. that in order to meet investors' needs for investment products suitable for the investors' financial planning cycles, it is necessary to create investment products whose investment policies can change in accordance with the investors' financial planning cycles;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation regarding Target Date Funds;
Recalling:

1. Law Number 8 of 1995 concerning Capital Markets (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
   FINANCIAL SERVICES AUTHORITY
   REPUBLIC OF INDONESIA

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 REGARDING TARGET DATE FUNDS.

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

1. Mutual Fund is a vehicle used to gather funds from public investors to be subsequently invested in a Securities Portfolio by an Investment Manager.
2. Target Date Fund is a Mutual Fund that has a specific duration and investment policy that adjusts in accordance with that duration.
3. Target Date is the year in which the Target Date Fund's investment policy has the lowest risk level and no longer changes.
4. Investment Units are the unit of measurement indicating the portion of interest of each Party in the collective investment portfolio.
5. Prospectus is any written information related to a Public Offering with the aim that other Parties purchase Securities.
6. Investment Manager is a Party whose business activity manages Securities Portfolios for clients or manages collective investment portfolios for a group of clients, except insurance companies, pension funds, and banks that conduct their own business activities based on statutory regulations.
7. Securities are negotiable instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, Investment Units of collective investment contracts, futures contracts over Securities, and any derivatives of Securities.
8. Net Asset Value is the fair market value of a Security and other assets of the Mutual Fund minus all its liabilities.

Article 2
(1) Target Date Funds have a specific duration up to the designated Target Date.
(2) The investment policy of Target Date Funds as referred to in paragraph (1) adjusts in accordance with the duration up to the designated Target Date.
(3) The collective investment contract of Target Date Funds must contain clauses explaining that Target Date Funds can automatically terminate upon reaching the designated Target Date or continue to be managed by the Investment Manager based on the final investment policy.

Article 3
Regulations regarding the investment policy of Money Market Mutual Funds, Fixed Income Mutual Funds, Equity Mutual Funds, and Mixed Mutual Funds as regulated in the Financial Services Authority Regulation concerning Guidelines for Daily Net Asset Value Announcements of Open-Ended Mutual Funds do not apply to Target Date Funds.

Article 4
(1) Regulations concerning guidelines for managing Mutual Funds, guidelines for collective investment contracts, guidelines for the form and content of prospectuses in the context of public offerings of Mutual Funds, registration statements in the context of public offerings, and reporting of Mutual Funds in the form of collective investment contracts as referred to in statutory regulations in the capital market sector regulating Mutual Funds in the form of collective investment contracts apply to Target Date Funds in the form of collective investment contracts, unless otherwise regulated in this Financial Services Authority Regulation. (2) Regulations concerning guidelines for management, management contract guidelines, articles of association guidelines, guidelines for the form and content of prospectuses in the context of public offerings of Mutual Funds, custody contract guidelines, and procedures for applying for business licenses for Mutual Funds in the form of corporations as referred to in statutory regulations in the capital market sector regulating Mutual Funds in the form of corporations apply to Target Date Funds in the form of corporations, unless otherwise regulated in this Financial Services Authority Regulation.

Article 5
In the event that Target Date Funds are Mutual Funds whose investment portfolios consist largely of foreign securities, the composition of the Target Date Fund's investment portfolio regarding foreign securities refers to the Financial Services Authority Regulation concerning Sharia Mutual Funds.

Article 6
The name of Target Date Funds must include the year number designated as the Target Date.

Article 7
The public offering of Investment Units of Target Date Funds can be continuous or limited, both in terms of the offering period and the number of Investment Units offered.

CHAPTER II
GUIDELINES FOR MANAGING TARGET DATE FUNDS
Article 8
Investment Managers managing Target Date Funds must:
a. prepare a schedule for changing investment policies for the period from the issuance of the Target Date Fund until the designated Target Date and include it in:

1. collective investment contracts for Mutual Funds in the form of collective investment contracts;
2. management contracts for Mutual Funds in the form of corporations; and
3. Prospectuses of Target Date Funds; and
   b. manage Target Date Fund investments in accordance with the investment policy change schedule as referred to in letter a.

Article 9
(1) The investment policy change schedule as referred to in Article 8 letter a can be made in the form of graphs and/or tables accompanied by narrative or explanatory notes.
(2) The graphs and/or tables as referred to in paragraph (1) must represent the percentage of planned investment allocations for each type of Security for each period segment from the issuance of the Target Date Fund until the designated Target Date. (3) The percentage of planned investment allocations for each type of Security as referred to in paragraph (2) can be established in the form of absolute numbers or as a range of numbers, provided that the difference between the highest and lowest numbers cannot be greater than 20% (twenty percent). (4) The period segments as referred to in paragraph (2) must be established for a maximum of 5 (five) years.

Article 10
In the event that Investment Managers establish the percentage of planned investment allocations for each type of Security for each period segment in the form of absolute numbers as referred to in Article 9 paragraph (3), Investment Managers in managing Target Date Funds can invest in each type of Security with allocation percentages greater or smaller than the established allocation percentages, provided that the difference between the actual allocation percentage and the established allocation percentage cannot be greater than 10% (ten percent) at any time.

CHAPTER III
PROSPECTUS OF TARGET DATE FUNDS
Article 11
(1) Investment Managers managing Target Date Funds must include additional information in the Prospectus of Target Date Funds which at least contains the following:
a. information regarding the nature and features of Target Date Funds, including explanations regarding investment policies that change in accordance with the established investment policy change schedule; b. information that Target Date Funds:

1. do not guarantee the achievement of returns;
2. may experience losses; and/or
3. may lose returns or principal investment even though investments are near, at, or after the Target Date;
   c. information stating that the year designated as the Target Date for Target Date Funds is a reference year for investors, which generally represents the estimated time for investors to retire, withdraw their investments, or stop adding to their investments;
   d. illustrations in the form of graphs and/or tables regarding the investment policy change schedule and accompanied by narratives or explanations describing the illustrations; and e. information explaining the risks borne by shareholders or holders of Investment Units of Target Date Funds in relation to the established investment policies. (2) In addition to the additional information in the Prospectus of Target Date Funds as referred to in paragraph (1), in the event that Investment Managers managing Target Date Funds decide to continue managing Target Date Funds even after the Target Date Fund has reached the designated Target Date, Investment Managers must include additional information in the Prospectus of Target Date Funds explaining that Target Date Funds can automatically terminate upon reaching the designated Target Date or continue to be managed by the Investment Manager based on the final investment policy that has been disclosed.

Article 12
Regulations regarding Target Date Funds as referred to in this Financial Services Authority Regulation apply mutatis mutandis to the issuance of Target Date Fund products whose contracts, management methods, and portfolios are in accordance with Sharia principles.

CHAPTER IV
SANCTION PROVISIONS
Article 13
(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 causing the violation, in the form of:
a. written warnings; b. fines, namely the obligation to pay a certain amount of money;
c. restrictions on business activities;
d. suspension of business activities; e. revocation of business licenses; f. cancellation of approvals; and/or g. cancellation of registrations.
(2) Administrative sanctions as referred to in paragraph (1) letters b, c, d, e, f, or g can be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (1) letter a. (3) Administrative sanctions in the form of fines as referred to in paragraph (1) letter b can 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 14
In addition to administrative sanctions as referred to in Article 13 paragraph (1), the Financial Services Authority can take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

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

Article 15
The Financial Services Authority can announce the imposition of administrative sanctions as referred to in Article 13 paragraph (1) and specific actions as referred to in Article 14 to the public.

CHAPTER V
CLOSING PROVISIONS
Article 16
This Financial Services Authority Regulation takes effect on the date of enactment.
In order that everyone knows it, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on July 3, 2017
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD
Enacted in Jakarta on July 3, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 135

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 34 /POJK.04/2017
REGARDING
TARGET DATE FUNDS

I. GENERAL
Mutual Funds are vehicles used to gather funds from public investors to be subsequently invested in Securities Portfolios by Investment Managers. The significant development of Mutual Funds in Indonesia has caused demand for Mutual Fund products to increase, accompanied by the hope that Mutual Funds not only provide relatively high and safe profits but also the ability to adjust to the specific or changing needs of investors over time. Target Date Funds are expected to be able to meet these specific needs by offering an investment product that is not fixed on the majority of Security types in its portfolio, but rather refers to a specific date in the future, or a specific long-term investment target time. Target Date Funds can change the composition of their Securities portfolio from one containing mostly high-risk equity Securities to one that tends to be conservative and invests mostly in debt Securities or money market instruments as the Target Date Fund ages and approaches the reference date. This type of Fund is very suitable for investors who use Mutual Funds as an investment vehicle to meet specific needs in the future, such as weddings, children's education costs, and retirement planning. The development of this type of Mutual Fund is expected to be able to meet the needs of Indonesian public investors and encourage the growth of Indonesia's safe and sustainable capital market.

II. ARTICLE BY ARTICLE
Article 1
Clear enough.
Article 2
Clear enough.
Article 3
Clear enough.
Article 4
Paragraph (1)
What is meant by "statutory regulations in the capital market sector regulating Mutual Funds in the form of collective investment contracts" applicable at the time this Financial Services Authority Regulation was enacted includes among others:

1. Financial Services Authority Regulation Number 23/POJK.04/2016 concerning Mutual Funds in the Form of Collective Investment Contracts (State Gazette of the Republic of Indonesia Year 2016 Number 109, Supplement to the State Gazette of the Republic of Indonesia Number 5886);
2. Regulation Number X.D.1, appendix of the Chairman of the Capital Market Supervisory Board Decision Number KEP-06/PM/2004 concerning Mutual Fund Reports; and
3. Regulation Number IX.C.6, appendix of the Chairman of the Capital Market Supervisory Board Decision Number KEP-22/PM/2004 concerning Guidelines for the Form and Content of Prospectuses in the Context of Public Offerings of Mutual Funds.
   Paragraph (2)
   What is meant by "statutory regulations in the capital market sector regulating guidelines for managing Mutual Funds in the form of corporations" applicable at the time this Financial Services Authority Regulation was enacted includes among others:
4. Financial Services Authority Regulation Number 39/POJK.04/2016 concerning Procedures for Applying for Business Licenses for Mutual Funds in the Form of Corporations (State Gazette of the Republic of Indonesia Year 2016 Number 268, Supplement to the State Gazette of the Republic of Indonesia Number 5694);
5. Financial Services Authority Regulation Number 40/POJK.04/2016 concerning Guidelines for the Articles of Association of Mutual Funds in the Form of Corporations (State Gazette of the Republic of Indonesia Year 2016 Number 269, Supplement to the State Gazette of the Republic of Indonesia Number 5965);
6. Regulation Number IV.A.3, appendix of the Chairman of the Capital Market Supervisory Board Decision Number KEP-13/PM/2002 concerning Guidelines for Managing Mutual Funds in the Form of Corporations;
7. Regulation Number IV.A.4, appendix of the Chairman of the Capital Market Supervisory Board Decision Number KEP-14/PM/2002 concerning Guidelines for Management Contracts of Mutual Funds in the Form of Corporations;
8. Regulation Number IV.A.5, appendix of the Chairman of the Capital Market Supervisory Board Decision Number KEP-21/PM/1996 concerning Guidelines for Custody Contracts of Mutual Funds in the Form of Corporations; and
9. Regulation Number IX.C.6, appendix of the Chairman of the Capital Market Supervisory Board Decision Number KEP-22/PM/2004 concerning Guidelines for the Form and Content of Prospectuses in the Context of Public Offerings of Mutual Funds.
   Article 5
   Clear enough.
   Article 6
   Examples of Target Date Fund names include "Gatotkaca Asset Management 2045 Mutual Fund", "XYZ Investment 2055 Mutual Fund", "ABC 2060 Mutual Fund", or "ABC Sharia Global 2030 Mutual Fund".
   Article 7
   Clear enough.
   Article 8
   In practice, the "schedule for changing Target Date Fund investment policies" referred to is also known as a glide path.
   Article 9
   Paragraph (1)
   Clear enough.
   Paragraph (2)
   What is meant by "investment allocation percentage" is the percentage of the Net Asset Value (NAV) of the Mutual Fund allocated to each type of Security.
   Paragraph (3)
   Example of investment allocation percentages established in the form of absolute numbers:
   Gatotkaca Asset Management 2045 Mutual Fund in the investment policy change schedule has been established:
   Investment Type | Percentage 2016-2021 | Percentage 2022-2027 | Etc. up to 2045...
   Equity Securities | 70% | 65%
   Debt Securities | 20% | 25%
   Money Market Instruments | 10% | 10%
   Paragraph (4)
   Clear enough.
   Article 10
   Example of absolute number allocation percentages for Target Date Funds, where in management the difference between the actual allocation percentage and the established allocation percentage is not greater than 10% (ten percent), for example:
   Gatotkaca Asset Management 2045 Mutual Fund in the investment policy change schedule has been established:
   Investment Type | Percentage 2016-2021 | Percentage 2022-2027 | Etc. up to 2045...
   Equity Securities | 70% | 65%
   Debt Securities | 20% | 25%
   Money Market Instruments | 10% | 10%
   Then in its management in the years 2016-2021, Gatotkaca Asset Management 2045 Mutual Fund can have investments in each of the aforementioned Securities and instruments with less than 10% from the lower limit established, i.e., up to 60%, or more than 10% from the upper limit established, i.e., up to 80%.
   Article 11
   Clear enough.
   Article 12
   Clear enough.
   Article 13
   Clear enough.
   Article 14
   Clear enough.
   Article 15
   Clear enough.
   Article 16
   Clear enough.
   SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6082