FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 32 /POJK.04/2017

CONCERNING

GUIDELINES FOR THE MANAGEMENT CONTRACT OF MUTUAL FUNDS IN THE FORM OF A LIMITED LIABILITY COMPANY

BY THE GRACE OF THE ALMIGHTY GOD,

THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that with the enactment of Law Number 21 of 2011 concerning the Financial Services Authority, since December 31, 2012, the functions, duties, and authority for regulating and supervising financial services activities in the capital market sector, including regulations regarding guidelines for the management contract of mutual funds in the form of a limited liability company, have shifted from the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority; b. that to provide clarity and certainty regarding regulations on guidelines for the management contract of mutual funds in the form of a limited liability company, existing statutory regulations in the capital market sector regarding such guidelines issued prior to the establishment of the Financial Services Authority need to be incorporated into a Financial Services Authority Regulation;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Guidelines for the Management Contract of Mutual Funds in the Form of a Limited Liability Company;

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY

Considering:

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 GUIDELINES FOR THE MANAGEMENT CONTRACT OF MUTUAL FUNDS IN THE FORM OF A LIMITED LIABILITY COMPANY.

CHAPTER I

GENERAL PROVISIONS

Article 1

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

1. Mutual Fund in the Form of a Limited Liability Company is an Issuer whose business activity involves raising funds by selling shares, and subsequently, the funds from the sale of such shares are invested in various types of Securities traded in the capital market and money market.
2. Securities are negotiable instruments, namely debt acknowledgment instruments, commercial papers, shares, bonds, debt certificates, units of participation in collective investment contracts, futures contracts over Securities, and any derivatives of Securities.
3. Participation Unit is a unit of measurement indicating the interest portion of each party in a collective investment portfolio.
4. 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 applicable statutory regulations.
5. Custodian Bank is a general bank that has obtained approval from the Financial Services Authority to conduct business as a custodian.
6. Party is an individual, company, joint venture, association, or organized group.
7. Issuer is a Party that conducts a Public Offering.
8. Public Offering 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.
9. Stock Exchange is a Party that organizes and provides systems and/or facilities to match buy and sell offers of Securities from other Parties with the aim of trading Securities among them.
10. Affiliation is:
    a. family relationships due to marriage and descent up to the second degree, both horizontally and vertically; b. relationships between a Party and its employees, directors, or commissioners;
    c. relationships between 2 (two) companies where there is one or more members of the board of directors or board of commissioners that are the same;
    d. relationships between a company and a Party, directly or indirectly, controlling or being controlled by such company; e. relationships between 2 (two) companies controlled, directly or indirectly, by the same Party; or f. relationships between a company and its major shareholders.

CHAPTER II

GUIDELINES FOR THE MANAGEMENT CONTRACT OF MUTUAL FUNDS IN THE FORM OF A LIMITED LIABILITY COMPANY

Article 2

The management contract of a Mutual Fund in the Form of a Limited Liability Company must contain at least:
a. the name and address of the Investment Manager; b. the investment composition in the money market and capital market;
c. the plan for diversification of Securities in bonds and shares;
d. the plan for diversification of Securities investments based on the type of Issuer industry; e. obligations for the Investment Manager; f. the allocation and breakdown of costs for the Investment Manager with the Mutual Fund in the Form of a Limited Liability Company; g. accounting and reporting provisions, including the calculation of net asset value; h. procedures for termination and modification of the contract;
i. procedures for the sale or repurchase (redemption) of shares, for Mutual Funds in the Form of a Limited Liability Company that are open-ended;
j. the Investment Manager must guarantee that all Securities, funds, and other assets of the Mutual Fund in the Form of a Limited Liability Company are stored by a Custodian Bank; k. circumstances that can serve as the basis for liquidation of the Mutual Fund in the Form of a Limited Liability Company;
l. prohibitions for the Mutual Fund in the Form of a Limited Liability Company;
m. prohibitions on investment in certain fields; n. the responsibility of the Investment Manager for any losses arising from its actions; o. all new contracts, extensions, or transfers from a Mutual Fund in the Form of a Limited Liability Company must be the result of negotiations made based on the objective interests of the respective Parties, as if such negotiations were made by Parties without interest in the other Parties; p. the management contract of a Mutual Fund in the Form of a Limited Liability Company, the wealth storage contract, or the use of accountant services contract can only be created, extended, or transferred based on the approval of the majority of the members of the board of directors of the Mutual Fund in the Form of a Limited Liability Company; q. a Mutual Fund in the Form of a Limited Liability Company is prohibited from entering into contracts to compensate for losses arising for the Mutual Fund in the Form of a Limited Liability Company or shareholders of the Mutual Fund in the Form of a Limited Liability Company as a result of the abuse of power, negligence, or carelessness committed by the Investment Manager; r. the separation of assets of the Mutual Fund in the Form of a Limited Liability Company and the assets of the Investment Manager; s. matters that allow the Mutual Fund in the Form of a Limited Liability Company to postpone repurchase (redemption) by investors; t. the obligation to calculate the net asset value of the Mutual Fund in the Form of a Limited Liability Company, if the Investment Manager is tasked with calculating the net asset value; and u. in the event that a Mutual Fund in the Form of a Limited Liability Company is dissolved, the costs of legal consultants, accountants, and other third-party expenses become the responsibility and must be paid by the Investment Manager to the respective Parties.

Article 3

Prohibitions for Mutual Funds in the Form of a Limited Liability Company as referred to in Article 2 letter l include at least:
a. purchasing Securities traded on foreign stock exchanges whose information cannot be accessed through media or available internet facilities; b. purchasing Securities traded on foreign stock exchanges whose information can be accessed through media or available internet facilities exceeding 15% (fifteen percent) of the net asset value;
c. purchasing equity-type Securities issued by companies that have listed their Securities on a Stock Exchange in Indonesia exceeding 5% (five percent) of the paid-up capital of such company;
d. purchasing Securities issued by a company exceeding 10% (ten percent) of the net asset value of the Mutual Fund in the Form of a Limited Liability Company at any time, with the provision that this restriction includes ownership of securities issued by banks but does not include Bank Indonesia certificates and bonds issued by the Government of the Republic of Indonesia; e. selling shares of an open-ended Mutual Fund in the Form of a Limited Liability Company to any investor exceeding 2% (two percent) of the issued capital, except for the Investment Manager of the relevant open-ended Mutual Fund in the Form of a Limited Liability Company; f. purchasing asset-backed Securities exceeding 10% (ten percent) of the net asset value of the Mutual Fund in the Form of a Limited Liability Company, with the provision that each type of asset-backed Securities does not exceed 5% (five percent) of the net asset value of the Mutual Fund in the Form of a Limited Liability Company; g. purchasing Securities not conducted through a Public Offering and/or not listed on a Stock Exchange in Indonesia, except money market instruments and bonds issued by the Government of the Republic of Indonesia; h. purchasing Securities issued by affiliated parties, both with the Investment Manager and participation unit holders, exceeding 20% (twenty percent) of the net asset value, except for Affiliation relationships resulting from government capital participation;
i. engaging in activities other than investment, reinvestment, or trading of Securities;
j. engaging in the sale of Securities not yet owned; k. engaging in the purchase of Securities on margin;
l. issuing bonds or credit securities;
m. engaging in various forms of loans, except short-term loans related to transaction settlement and such loans do not exceed 10% (ten percent) of the net asset value of the Mutual Fund in the Form of a Limited Liability Company at the time of purchase; n. purchasing Securities currently being offered in a Public Offering where the Investment Manager acts as the underwriter of such Securities; o. engaging in joint transactions or profit-sharing contracts with the Investment Manager or its Affiliated Parties; p. paying dividends other than from profits; q. purchasing asset-backed Securities where the Investment Manager is the same as the Investment Manager of the Mutual Fund in the Form of a Limited Liability Company and/or is affiliated with the original creditor of such asset-backed Securities; or r. purchasing asset-backed Securities that are not listed on a Stock Exchange.

CHAPTER III

SANCTION PROVISIONS

Article 4

(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 warning; b. fine, namely the obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business license; f. cancellation of approval; and/or g. cancellation of registration.

(2) Administrative sanctions as referred to in paragraph (1) letters b, c, d, e, f, or g may be imposed with or without being preceded by the imposition of an administrative sanction in the form of a written warning as referred to in paragraph (1) letter a.

(3) Administrative sanctions in the form of a fine as referred to in paragraph (1) letter b may be imposed independently or together with the imposition of administrative sanctions as referred to in paragraph (1) letters c, d, e, f, or g.

Article 5

In addition to administrative sanctions as referred to in Article 4 paragraph (1), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 6

The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 4 paragraph (1) and specific actions as referred to in Article 5 to the public.

CHAPTER IV

CLOSING PROVISIONS

Article 7

Upon the enactment of this Financial Services Authority Regulation, the Decision of the Chairman of the Capital Market Supervisory Agency Number Kep-14/PM/2002 concerning Guidelines for the Management Contract of Mutual Funds in the Form of a Limited Liability Company, along with Regulation Number IV.A.4 which is its attachment, is revoked and declared invalid.

Article 8

This Financial Services Authority Regulation takes effect upon being enacted.

This copy is consistent with the original.
Director of Law 1
Department of Law signed
Yuliana

To ensure 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 June 21, 2017

CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Enacted in Jakarta on June 22, 2017

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 132

EXPLANATION

OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 32 /POJK.04/2017
CONCERNING
GUIDELINES FOR THE MANAGEMENT CONTRACT OF MUTUAL FUNDS IN THE FORM OF A LIMITED LIABILITY COMPANY

I. GENERAL

Since December 31, 2012, the functions, duties, and authority for regulating and supervising 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 light of 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 regulations related to the capital market sector into Financial Services Authority Regulations. This reorganization is conducted to ensure 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 statutory regulations in the capital market sector regulating guidelines for the management contract of Mutual Funds in the Form of a Limited Liability Company, namely the Decision of the Chairman of the Capital Market Supervisory Agency Number Kep-14/PM/2002 concerning Guidelines for the Management Contract of Mutual Funds in the Form of a Limited Liability Company, along with Regulation Number IV.A.4 which is its attachment, with a Financial Services Authority Regulation concerning Guidelines for the Management Contract of Mutual Funds in the Form of a Limited Liability Company.

II. ARTICLE BY ARTICLE

Article 1
Clear enough.

Article 2
Clear enough.

Article 3
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
Clear enough.

Letter i
Clear enough.

Letter j
In practice, "sale of Securities not yet owned" is also known as short sale.

Letter k
Clear enough.

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
Clear enough.

Article 4
Clear enough.

Article 5
Clear enough.

Article 6
Clear enough.

Article 7
Clear enough.

Article 8
Clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6079