Internal Control of Securities Companies Acting as Securities Trading Intermediaries

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 50 /POJK.04/2020
CONCERNING
INTERNAL CONTROL OF SECURITIES COMPANIES ACTING AS SECURITIES TRADING INTERMEDIARIES BY THE GRACE OF THE ALMIGHTY GOD THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that with the shift of functions, duties, and authority for the regulation and supervision of financial services activities in the capital market sector, including regulations regarding the internal control of securities companies acting as securities trading intermediaries, from the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority; b. that to provide clarity and certainty regarding regulations on the internal control of securities companies acting as securities trading intermediaries issued prior to the establishment of the Financial Services Authority, it is necessary to change them into a Financial Services Authority Regulation;
c. that based on the considerations referred to in letters a and b, it is necessary to establish the FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA

Financial Services Authority Regulation on Internal Control of Securities Companies Acting as Securities Trading Intermediaries; 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);
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 ON INTERNAL CONTROL OF SECURITIES COMPANIES ACTING AS SECURITIES TRADING INTERMEDIARIES.

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

1. Party is an individual, company, joint venture, association, or organized group.
2. Securities are securities instruments, namely debt acknowledgment instruments, commercial securities, shares, bonds, debt certificates, Unit Participation in collective investment contracts, futures contracts over Securities, and any derivatives of Securities.
3. Securities Company is a Party that conducts business activities as a Securities Issuance Underwriter, Securities Trading Intermediary, and/or Investment Manager.
4. Securities Trading Intermediary is a Party that conducts business activities buying and selling Securities for its own interest or for other Parties.
5. Securities Issuance Underwriter is a Party that enters into a contract with an Issuer to conduct a Public Offering for the benefit of the Issuer with or without the obligation to purchase remaining unsold Securities.
6. Investment Manager is a Party whose business activities manage Securities portfolios for clients or manage collective investment portfolios for a group of clients, except insurance companies, pension funds, and banks that conduct their own business activities based on applicable laws and regulations.
7. Online Trading System is a trading system provided by a Securities Trading Intermediary through electronic communication media including the internet, short message services, wireless application protocol services, or other electronic media to conduct Securities transactions.
8. Stock Exchange is a Party that organizes and provides systems and/or facilities to match buy and sell offers of Securities between Parties with the aim of trading Securities among them.
9. Custodian is a Party that provides services for the safekeeping of Securities and other assets related to Securities, as well as other services, including receiving dividends, interest, and other rights, settling Securities transactions, and representing account holders who are its clients.
10. Clearing and Custody Agency is a Party that conducts Central Custodian activities for Custodian Banks, Securities Companies, and other Parties.

Article 2
The regulations in this Financial Services Authority Regulation apply to Securities Trading Intermediaries that administer customer securities accounts.

CHAPTER II
INTERNAL CONTROL OF SECURITIES TRADING INTERMEDIARIES
Article 3
Securities Trading Intermediaries must ensure that their internal control system meets at least the provisions of this Financial Services Authority Regulation to minimize the risk of errors and misuse.

Article 4
Securities Trading Intermediaries must have and implement at least 6 (six) functions:
a. marketing; b. risk management;
c. accounting;
d. Custodian; e. information technology; and f. compliance.

Article 5
Securities Trading Intermediaries must perform function separation as referred to in Article 4.

Article 6
In the event that a Securities Trading Intermediary has a research function, that function must be separated from other functions as referred to in Article 4.

Article 7
Function separation as referred to in Article 5 and Article 6 is subject to the following provisions:
a. employees executing each of the said functions are prohibited from:

1. holding concurrent positions to execute other functions;
2. performing tasks outside their own tasks and responsibilities without written approval from the Board of Directors;
3. having access to records, books, and accounts of other functions of the Securities Trading Intermediary without written approval from the Board of Directors; and/or
4. having access to or accessing computer hardware, software, and documentation of the said Securities Trading Intermediary, except for employees of the work unit, members of the Board of Directors, or officials at a level below the Board of Directors who execute the compliance function in the course of executing their function; and
   b. in the event that the business activities of the Securities Trading Intermediary are still combined with the business activities of Securities Issuance Underwriters and/or Investment Managers within the same Securities Company:
5. standard operating procedures for functions in carrying out activities as Securities Issuance Underwriters and/or Investment Managers must be separate from the standard operating procedures for functions of Securities Trading Intermediaries as referred to in Article 4 and Article 6; and
6. the execution of each risk management function, accounting function, information technology function, compliance function, and/or research function present in the activities of Securities Trading Intermediaries, Securities Issuance Underwriters, and/or Investment Managers may be executed by a single work unit executing that function.

Article 8
If there are problems causing one or more functions of the Securities Trading Intermediary as referred to in Article 4 and Article 6 to be unable to operate properly, the Securities Trading Intermediary must, no later than the next trading day, submit a report to the Stock Exchange with a copy to the Financial Services Authority containing at least:
a. an explanation of the problem that occurred; b. the time the problem occurred;
c. the duration of the problem;
d. the function experiencing the problem and its impact; e. information on whether the problem has occurred previously; f. the impact of the problem on client interests and the number of clients, if calculable; g. steps taken to handle the problem; and h. steps taken to ensure the same problem does not recur.

CHAPTER III
MARKETING FUNCTION
Article 9
The implementation of the marketing function as referred to in Article 4 letter a must meet the following provisions:
a. the work unit performing the marketing function is responsible for:

1. applying customer due diligence in accordance with Financial Services Authority Regulations regarding the implementation of anti-money laundering and counter-terrorism financing programs in the financial services sector;
2. creating regular securities account opening contracts with clients;
3. creating financing securities account opening contracts with clients for clients receiving financing facilities in accordance with Financial Services Authority Regulations regarding securities transaction financing by Securities Companies for clients and short selling transactions by Securities Companies;
4. creating other securities account opening contracts with clients if there are other securities account opening contracts with clients;
5. receiving orders and/or instructions for client interests; and
6. communicating with clients, including notifying clients after receiving notification from the information technology function in the event that the online communication system experiences delays or malfunctions;
   b. in creating securities account opening contracts with clients as referred to in letter a numbers 2 and 3, Securities Trading Intermediaries must meet the following provisions:
7. securities transactions for client interests cannot be executed before a securities account is opened in the name of the respective client, except:
   a) buying or selling investment products managed by Investment Managers not listed on the Stock Exchange; b) ordering Securities in the context of a public offering before the client receives an allocation of Securities; and c) buying or selling Securities for the interest of other Securities Companies, banks, insurance companies, pension funds, or other financial institutions;
8. opening a securities account is followed by:
   a) opening sub-securities accounts at the Custodian and opening fund accounts in the name of the client at a bank for each client; and b) creating a single unique client identification number at the Clearing and Custody Agency, for clients who do not yet have a single unique client identification number;
9. securities account opening contracts contain at least provisions regarding:
   a) Securities and/or funds in the client's securities account that can be used as collateral to settle obligations only for the respective client against the Securities Trading Intermediary, unless specifically agreed in a separate agreement with the securities account opening contract; b) the Securities Trading Intermediary may request funds and/or Securities from the holder of the securities account before the execution of the securities transaction; c) funds owned by the client are stored separately in bank accounts for each client in the name of the client; d) Securities owned by the client are stored separately in sub-securities accounts at the Custodian for each client in the name of the client; e) the Securities Trading Intermediary has the right to buy or borrow Securities or sell other Securities owned by the client for the client's securities account, with the aim of closing negative balances of Securities not financed by the Securities Trading Intermediary or not sufficiently guaranteed by the client; f) in the event that funds show a negative balance in the client's regular securities account, the Securities Trading Intermediary may:

1. use Securities in the client's securities account as collateral for bank credit or other financial institutions; or
2. forcibly sell Securities without client approval,
   only for the settlement of the respective client's obligations; g) for financing securities account opening contracts with clients as referred to in letter a number 3, provisions regarding the Securities Company to sell or buy Securities or take other actions agreed upon with the client at any time without providing reasons or notification or obtaining prior approval from the client if the client fails to meet guarantee requests, in accordance with Financial Services Authority Regulations regarding securities transaction financing by Securities Companies for clients and short selling transactions by Securities Companies; h) the client's willingness to grant power of attorney to the Securities Trading Intermediary to:
3. transfer funds in the client's fund account at the bank for the purpose of the client's securities transactions; and
4. provide data including statements and/or fund balances in the bank accounts as referred to in number 3 letter c) to the Clearing and Custody Agency;
   i) for clients as referred to in number 1 letter c), clients must make a written statement containing at least:
5. the client agrees to guarantee the availability of funds and/or Securities for the purpose of transaction settlement before placing buy or sell orders; and
6. in the event that the client cannot provide funds and/or Securities, the client agrees to bear and compensate for all losses arising from the failure to settle transactions on the settlement date; and
   j) provisions and procedures for closing securities accounts, stating at least provisions for closing securities accounts if the balance in the client's securities account is zero for a period of at least 6 (six) consecutive months;

4. special agreements as referred to in number 3 letter a) contain at least:
   a) the principal agreement underlying the agreement is a loan agreement; b) benefits obtained by the client; c) procedures agreed upon in the event of disputes between the client and the Securities Trading Intermediary; d) the duration of the agreement; and e) termination of the agreement;
5. securities account opening contract documents as referred to in letter a numbers 2 and 3 must be stored in archives at the work unit performing the marketing function, accompanied by documents:
   a) related to client acceptance and identification and supporting documents as required in Financial Services Authority Regulations regarding the implementation of Anti-Money Laundering and Counter-Terrorism Financing Programs in the Financial Services Sector and photocopies of single unique client identification number documents; b) related to financing securities account opening contracts with clients for clients receiving financing facilities as required in Financial Services Authority Regulations regarding securities transaction financing by Securities Companies for clients and short selling transactions by Securities Companies; c) power of attorney from clients who are legal entities granting authority to specific officials of the legal entity to place orders and/or instructions to the Securities Trading Intermediary regarding the client's securities account; d) power of attorney from clients granting authority to third parties to place orders and/or instructions to the Securities Trading Intermediary regarding the client's securities account if such power of attorney exists; e) power of attorney from clients to the Securities Trading Intermediary as referred to in number 3 letter h); f) documents required for the transfer of Securities and/or funds; and g) mutual fund management contracts, collective investment contracts other than mutual funds, and/or other investment products granting authority to Investment Managers to place orders and/or instructions for the benefit of mutual funds, collective investment contracts other than mutual funds, and/or clients of other investment products managed by them;
6. forms for individual clients must contain at least information regarding clients as referred to in Financial Services Authority Regulations regarding the implementation of Anti-Money Laundering and Counter-Terrorism Financing Programs in the Financial Services Sector:
   a. client acceptance and identification; and b. single unique client identification numbers for clients who already have them and for clients who do not yet have them must be stated after being created as referred to in number 2 letter b).
7. securities account opening contracts as referred to in letter a numbers 2 and 3 must be approved and signed by directors or employees and supervisors in the work unit executing the marketing function; and
8. Securities Companies must provide copies of securities account opening contracts and bank fund account opening contracts to clients; and
   c. in executing the responsibility of receiving orders and/or instructions for client interests as referred to in letter a number 5, Securities Trading Intermediaries must meet at least:
9. ensuring that clients placing orders and/or instructions have single unique client identification numbers;
10. receiving client orders and/or instructions to buy and/or sell Securities, modify, or cancel client orders and/or instructions;
11. creating and storing detailed records and/or recordings of conversations for each order and/or each client instruction according to chronological order, including information regarding:
    a) order and/or instruction details including:

1. name and type of Securities;
2. quantity of Securities;
3. price of Securities; and/or
4. name and identification number of the source and destination securities accounts;
   b) date and time the order and/or instruction was received; c) date and time of each purchase, sale, modification, or cancellation of the order and/or instruction; d) order and/or instruction requirements; e) client identification codes; and f) single unique client identification numbers;

4. forwarding client orders and/or instructions to the work unit executing the risk management function; and
5. recording all communications related to client orders and/or instructions and conducted through communication networks connected to the Securities Trading Intermediary's communication system.

CHAPTER IV
RISK MANAGEMENT FUNCTION
Article 10
The implementation of the risk management function as referred to in Article 4 letter b must meet the following provisions:
a. the work unit performing the risk management function is responsible for managing the risk control system, formulating parameters, and performing verification in processing orders and/or instructions for both client interests and the Securities Trading Intermediary's interests, and executing Securities transactions, with the following provisions:

1. formulating and ensuring the implementation of transaction limit parameters for both client interests and the Securities Trading Intermediary's interests, the formulation of which is contained in the Securities Trading Intermediary's standard operating procedures;
2. verifying that the client's securities account has been opened and approved by the work unit performing the marketing function;
3. verifying before executing client orders and/or instructions to ensure the availability of funds and/or Securities in the client's securities account for the purpose of settling the respective Securities transaction;
4. for clients who do not have securities accounts at the Securities Trading Intermediary as referred to in Article 9 letter b number 1 letter c), verification of the availability of funds and/or Securities is conducted by ensuring that the respective client has made a written statement as referred to in Article 9 letter b number 3 letter i); and
5. the execution of verification regarding securities accounts and the availability of funds and/or Securities as referred to in numbers 2 and 3 may be conducted both manually and electronically through the Securities Trading Intermediary's integrated risk management system; and
   b. the work unit performing the risk management function formulates standard operating procedures related to Securities transactions conducted for the interest of the Securities Trading Intermediary itself or affiliated Parties of the Securities Trading Intermediary including but not limited to shareholders, members of the Board of Directors, commissioners, and employees, covering at least:
6. not conducting securities transactions listed on the Stock Exchange for affiliated Parties or for its own interest if non-affiliated clients of the respective Securities Trading Intermediary have placed instructions to buy and/or sell the respective Securities and the respective Securities Trading Intermediary has not yet executed the instruction; and
7. reporting the respective securities transactions to the work unit executing the compliance function.

CHAPTER V
ACCOUNTING FUNCTION
Article 11
The implementation of the accounting function as referred to in Article 4 letter c must meet the following provisions:
a. Securities Trading Intermediaries record all transactions executed daily in accordance with applicable financial accounting standards and Financial Services Authority Regulations related thereto; b. the work unit performing the accounting function is responsible for maintaining company records and books, including at least the general ledger;
c. the general ledger as referred to in letter b contains details describing the following:

1. assets;
2. liabilities;
3. equity; and
4. income and expenses;
   d. recording as referred to in letter a may be conducted manually, electronically, or by other means, as long as it does not contradict applicable laws and regulations; e. the recording system used must have security measures that can prevent the risk of forgery and/or misuse of the records; f. the recording system must be able to provide fast, accurate, and understandable information for interested Parties regarding the documents; g. the work unit executing the accounting function stores additional records and other supporting documents, including:
5. check issuance receipts;
6. bank accounts;
7. check cancellations if there are check cancellations;
8. bank account reconciliations;
9. notifications of debits and credits to securities accounts;
10. balances of all accounts in the general ledger in the form of a trial balance, at least every month;
11. daily records which are proof of all cash debits and credits for that day; and
12. daily reconciliations between the general ledger and subsidiary securities books; and
    h. information about clients including transaction activities is kept confidential by the Securities Trading Intermediary and its employees, except with client permission or upon request by authorized Parties based on laws.

CHAPTER VI
CUSTODIAN FUNCTION
Article 12
The implementation of the Custodian function as referred to in Article 4 letter d must meet the following provisions:
a. the work unit performing the Custodian function is responsible for executing the Securities Trading Intermediary's obligations as a Custodian as regulated in Financial Services Authority Regulations regarding securities accounts at Custodians; b. the work unit performing the Custodian function is responsible for maintaining company records and books, including:

1. securities accounts;
2. subsidiary securities books;
3. subsidiary fund books; and
4. subsidiary transaction books;
   c. securities accounts as referred to in letter b number 1 contain the following:
5. for each securities account, it is necessary to record:
   a) the name and address of the account holder; b) the representative of the Securities Trading Intermediary or appointed representative of the Securities Issuance Underwriter; c) Taxpayer Identification Number; and d) the name, address, telephone number, and facsimile number of the Securities Trading Intermediary;
6. purchases, sales, receipts, and deliveries of Securities and/or funds for each securities account are recorded at least regarding:
   a) transaction date; b) transaction description; c) fund amount if there is a fund amount; d) Securities quantity if there is a Securities quantity; and e) transaction exchange rate if there is a transaction exchange rate;
7. securities account reports must contain the client's Securities portfolio position on the report date, and must be sent to the client no later than the 10th (tenth) day of each month, including the client's transaction activities for one month; and
8. transactions contained in securities account reports include:
   a) executed transactions; b) the amount of dividends, bonus shares, interest, pre-emptive rights, and other rights; and c) withdrawals or deposits of funds and/or Securities. d. subsidiary securities books as referred to in letter b number 2 are created in a dual-entry bookkeeping format, containing information as regulated in Financial Services Authority Regulations

regarding the control and protection of Securities held by Securities Companies; e. the auxiliary fund book as referred to in letter b number 3 contains detailed information describing the following:

1. fund ownership:
   a) company; b) clients:

1. affiliated;
2. unaffiliated;

2. fund storage:
   a) details of the balance of each bank account; b) the balance of each client's funds every day; c) the balance of the company's funds every day;

3. status of client funds, free or pledged;

4. company funds as referred to in number 1 letter a) are company funds stored and administered by the unit performing the accounting function;
   f. The auxiliary fund book report as referred to in letter e is prepared using the Auxiliary Fund Book Report Form (Form 6), which is an integral part of the adjusted net working capital report as referred to in the Financial Services Authority Regulation governing the maintenance and reporting of adjusted net working capital; g. The auxiliary transaction book as referred to in letter b number 4, is made no later than the next business day based on written confirmation sent to clients and contains the following:

5. transaction date;

6. type of transaction, e.g., sell or buy;

7. price;

8. commissions and fees;

9. settlement obligation date;

10. client name and code;

11. transaction number;

12. number of Securities;

13. settlement method; and

14. information regarding the follow-up of transaction settlement, according to the settlement method;
    h. The work unit performing the Custodian function must obtain notes and/or recordings of conversations regarding Securities transactions to maintain and manage records and company books as referred to in letter b;
    i. Recording as referred to in letter b, can be carried out manually, electronically, or by other means, as long as it does not conflict with legislation;
    j. The recording system used must have sufficient security so as to prevent the risk of forgery and/or misuse of the records; k. The recording system must be able to provide information that is fast, accurate, and understandable by the Parties interested in the document;
    l. The work unit performing the Custodian function stores additional records and other supporting documents, including:

15. Securities transaction confirmation;

16. notification of debit and credit of Securities accounts;

17. Securities transaction contracts with other Securities Companies; and

18. proof of all accounting for the auxiliary Securities book;
    m. The work unit performing the Custodian function is responsible for the receipt, delivery, and storage of funds, Securities, and/or documents related to Securities with the following provisions:

19. funds, Securities, and/or documents related to Securities must be stored in iron rooms, safes, secure iron cabinets, banks, Custodian banks, or a Clearing and Guarantee Institution;

20. funds, Securities, and/or documents as referred to in number 1 are calculated and reconciled with the auxiliary Securities book and Securities accounts at least:
    a) every day by employees in the work unit performing the Custodian function; b) every month by employees in the work unit performing the compliance function; and c) every year by Accountants registered with the Financial Services Authority;

21. funds, Securities, and/or documents as referred to in number 2, owned by the Securities Trading Intermediary, are stored separately from funds, Securities, and/or documents owned by clients of the Securities Trading Intermediary, with the following provisions:
    a) funds owned by clients are stored separately in bank accounts for each client in the name of the client; b) Securities owned by clients are stored separately in Securities sub-accounts at the Clearing and Guarantee Institution for each client in the name of the client; c) documents related to clients are stored in separate places with the following provisions:

1. physical documents are stored in a safe place; and
2. electronic documents are stored in an information technology system that meets the provisions of this Financial Services Authority Regulation;

4. funds, Securities, and/or documents as referred to in number 1 are secured from misuse, loss, damage, and forgery;
5. records and detailed reports by the work unit performing the Custodian function regarding the receipt and delivery of funds, Securities, and/or documents related to Securities, are made and stored by the work unit performing the Custodian function containing information regarding:
   a) certificate number if there is a certificate number; b) name and type of Securities; c) Securities code; d) number of Securities; e. transaction date; and f. name and number of the Securities account;
6. funds, Securities, and/or documents as referred to in number 1 are prohibited from being removed and/or transferred from the work unit performing the Custodian function, unless based on valid authority; and
7. the authority as referred to in number 6 is stated in standard operating procedures and job descriptions;
   n. the work unit performing the Custodian function is responsible for the execution of Securities transaction settlement, including:
8. calculation of rights and obligations for Securities transaction settlement;
9. transfer of Securities and/or funds; and
10. submission of written confirmation to each client;
    o. information about clients, including transaction activities, is kept confidential by the Securities Trading Intermediary and its employees, except with client permission or upon request by authorized Parties based on laws.

CHAPTER VII
INFORMATION TECHNOLOGY FUNCTIONS
Article 13
The implementation of information technology functions as referred to in Article 4 letter e must meet the following provisions:
a. the work unit performing the information technology function must fulfill:

1. having human resources with competence in the field of information technology;

2. having system capacity that can anticipate transaction growth;

3. conducting periodic capacity testing;

4. conducting assessments of the performance and weaknesses of the technology used;

5. having backup systems to overcome system failures;

6. having procedures to overcome system problems;

7. notifying the unit performing the marketing function and providing alternative systems if the online communication system experiences delays or is not functioning;

8. building and installing systems that can help detect and prevent access by unauthorized Parties;

9. applying continuous supervision and crisis management procedures;

10. applying systems that can ensure data integrity, whether stored, transmitted, or displayed on client screens;

11. conducting regular security testing of information technology systems, whether conducted internally or by third parties;

12. using encryption, authentication, and non-repudiation techniques such as obtaining digital certificates from authorized certificate issuing Parties;

13. keeping systems free from system disturbances such as computer viruses and/or other malicious software;

14. appointing professional information technology auditors to audit information technology systems whenever there are material changes, whether software or hardware;

15. maintaining databases and applications that can be used to reconstruct financial transactions;

16. maintaining records related to the system if problems occur;

17. having systems used to handle client complaints related to information technology infrastructure; and

18. conducting education regarding the use of information technology systems used by Securities Trading Intermediaries to their clients;
    b. Databases that can be used to reconstruct financial transactions as referred to in letter a number 15 include at least databases regarding:

19. placement, cancellation, modification, or execution of orders and/or instructions accompanied by time notes and unique reference numbers;

20. incoming and outgoing activities in the system;

21. verification of fund and/or Securities availability, such as the establishment and exclusion of transaction limits;

22. password management for client access and Securities Trading Intermediary employee access; and

23. changes to system parameters and master files;
    c. Securities Trading Intermediaries using Online Trading Systems present information through the Securities Trading Intermediary's website, including:

24. explanations regarding risks of Securities transactions;

25. examples of Securities account opening contracts for their clients;

26. statements regarding the security and confidentiality of all data and information;

27. statements and general information regarding how orders are received, processed, and executed through electronic communication media;

28. statements regarding system handling policies in the event of problems and explanations of alternative systems that clients can use;

29. timely notifications regarding system problems, whether via email, website, or other media; and

30. explanations of order handling procedures and/or instructions that are delayed when problems occur with the Online Trading System; and
    d. Securities Trading Intermediaries using Online Trading Systems provide clients with dedicated officers and sufficient standby telephone communication channels that are continuously available on every trading day to facilitate client contact with the Securities Trading Intermediary.
    CHAPTER VIII
    COMPLIANCE FUNCTIONS
    Article 14
    The implementation of compliance functions as referred to in Article 4 letter f must meet the following provisions:
    a. compliance functions can be carried out by a work unit, members of the Board of Directors, or officials at a level below the Board of Directors, with the following provisions:

31. the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions must be independent from other functions but have unlimited access to other functions related to their tasks to ensure the Securities Trading Intermediary's compliance;

32. the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions must be established as part of the Securities Trading Intermediary's organizational structure;

33. the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions must be established as representatives entrusted by the Securities Trading Intermediary to handle inspection processes from the Financial Services Authority and the Stock Exchange;

34. in establishing the formation of a work unit, or appointing members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions, the Securities Trading Intermediary considers:
    a) the types of products and services offered; b) the types, numbers, and distribution of clients, both retail and institutional; c) the organizational structure and distribution of operational activities, including geographical distribution; d) the volume and value of transactions conducted; and e) the number of employees;

35. the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions are responsible for at least:
    a) identifying policies, standard operating procedures, and legislation related to Securities Trading Intermediaries; b) formulating policies and procedures for the main tasks and functions of the compliance unit; c) ensuring the Securities Trading Intermediary's compliance with policies and standard operating procedures; d) ensuring the Securities Trading Intermediary's compliance with licensing regulations;

e) ensuring the Securities Trading Intermediary's compliance with regulations regarding employee supervision; f) ensuring the Securities Trading Intermediary's compliance with internal control regulations; g) ensuring the Securities Trading Intermediary's compliance with regulations regarding the prevention and eradication of money laundering and terrorism financing crimes; h) ensuring the Securities Trading Intermediary's compliance with Securities trading regulations, at least by:

1. preventing the disclosure of confidential data by employees;
2. detecting, preventing, and handling conflicts of interest;
3. supervising the opening of new client Securities accounts;
4. supervising Securities transactions, including but not limited to transactions for the benefit of the Securities Trading Intermediary itself or its affiliated Parties;
5. supervising the management of the Securities Trading Intermediary's portfolio;
6. supervising all information, advice, recommendations, and/or research results issued by the Securities Trading Intermediary to be provided to clients and/or disseminated to the public; and
7. supervising recording and documentation, including storage and prevention of disclosure of records and information that are still confidential;

i) handling and administering client complaints with a special mechanism to handle and follow up on written client complaints, with the following provisions at least:

1. having client complaint handling procedures;
2. having dispute resolution procedures;
3. having complaint archives that must be arranged alphabetically by client name;
4. complaint records must be accompanied by documents related to the issues complained about;
5. complaint records must also include actions taken, including the resolution of the proposed problems; and
6. in the event that there are no complaints from clients or other Parties, the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions must store complaint archives every month with a note that there are no complaints;
   j) supervising business continuity plans; k) submitting reports periodically at least 1 (one) time in 1 (one) year, and incidental reports to the Board of Commissioners and/or the Board of Directors; and l) providing assistance and/or conducting training for employees in work units performing other functions in order to fulfill compliance with the aforementioned functions regarding legislation in the capital market and other related legislation; and

6. the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions formulate standard compliance operating procedures in accordance with capital market legislation regulations, including but not limited to compliance with regulations regarding:
   a) risk and violation identification procedures; b) handling potential risks (risk mitigation) and violation indicators procedures; c) reporting procedures, both incidental and periodic; d) supervision procedures to correct violations and ensure that violations do not occur again; and e) document maintenance procedures related to the implementation of compliance functions; b. the authority of the compliance function must be established in a pact that binds in writing the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions and other functions as referred to in Article 4 and Article 6; and
   c. the work unit, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions report confidentially to the Board of Commissioners and the Financial Services Authority if they find indications of violations of legislation regulations committed by the Securities Trading Intermediary and/or its clients.

CHAPTER IX
OUTSOURCING OF SECURITIES TRADING INTERMEDIARY FUNCTIONS
Article 15
Outsourcing of Securities Trading Intermediary functions to other Parties must meet the following provisions:
a. Securities Trading Intermediaries may appoint other Parties to perform marketing functions, accounting functions, Custodian functions, and/or information technology functions, with the following provisions:

1. outsourcing of marketing functions is carried out with reference to legislation in the capital market sector governing guidelines for agreements between Securities Company agents who are members of the Stock Exchange;
2. outsourcing of Custodian functions is carried out to service providers who are Securities Trading Intermediaries administering client Securities accounts or Custodian banks;
3. outsourcing of accounting functions, Custodian functions, and information technology functions is carried out to service providers with the following provisions:
   a) Securities Trading Intermediaries report information regarding plans to outsource accounting, Custodian, and/or information technology functions to the Financial Services Authority using the Outsourcing Plan Report Form as stated in the Appendix which is an integral part of this Financial Services Authority Regulation; b) before appointing service providers to perform accounting, Custodian, and/or information technology functions, Securities Trading Intermediaries conduct due diligence on the service providers, covering at least:

1. the service provider's ability to meet high standards in performing its functions;

2. the service provider's ability to fulfill its obligations according to the agreement;

3. operational factors and financial capabilities, both qualitatively and quantitatively;

4. reputation factors;

5. the scope of insurance by the service provider if the service provider has insurance;

6. the existence of potential conflicts of interest, especially if the service provider operates in the same business field; and

7. the ability and adequacy of resources owned by the service provider if it has outsourcing agreements for Securities Trading Intermediary functions to other Parties with multiple Parties;
   c) Securities Trading Intermediaries conduct periodic reviews of the functions performed by service providers to ensure that the functions have been executed well and correctly according to the standard operating procedures for implementing the functions; d) Securities Trading Intermediaries have written agreements with service providers, which at least include:

8. party names;

9. scope, terms, and conditions of the Securities Trading Intermediary functions whose implementation is entrusted to the service provider;

10. responsibilities of the Securities Trading Intermediary and service providers, and supervision over the implementation of such responsibilities;

11. service standards, and mechanisms to ensure that these standards can be met at all times;

12. confidentiality and information security;

13. responsibilities related to information technology system security;

14. reporting by service providers to Securities Trading Intermediaries;

15. accountability of service providers to Securities Trading Intermediaries for unsatisfactory services or other violations of the agreement;

16. guarantees of service quality and compensation;

17. the obligation of service providers, at all times if requested, to provide any records, information, and/or assistance related to the Securities Trading Intermediary functions they perform to the Securities Trading Intermediary appointing the service provider, the auditors of the Securities Trading Intermediary, the Financial Services Authority and/or other Parties appointed by the Financial Services Authority, as well as the Stock Exchange;

18. prohibitions for service providers to appoint third parties (subcontractors) in fulfilling their obligations;

19. provisions regarding the continuity of Securities Trading Intermediary functions in the event that service providers experience emergency conditions so that they cannot perform their functions;

20. termination of agreements, which at least includes information transfer and steps for terminating agreements, and transition procedures; and

21. mechanisms for resolving disputes arising between Securities Trading Intermediaries and service providers.
    e) Securities Trading Intermediaries ensure that service providers maintain the confidentiality of information received from Securities Trading Intermediaries; f) Securities Trading Intermediaries report to the Stock Exchange on the next trading day, with a copy to the Financial Services Authority, if service providers are unable to fulfill their obligations; g) Securities Trading Intermediaries ensure that at all times the Financial Services Authority and/or other Parties appointed by the Financial Services Authority, as well as the Stock Exchange, can access the accounting, records, and documents of service providers related to the outsourcing of Securities Trading Intermediary functions to other Parties; and h) Securities Trading Intermediaries appoint service providers whose operational activities are located in Indonesia; and b. Securities Trading Intermediaries are responsible for Securities Trading Intermediary functions whose implementation has been entrusted to other Parties.
    CHAPTER X
    OTHER PROVISIONS
    Article 16
    All documents, data records, and/or conversations and recordings of Securities Trading Intermediaries determined in this Financial Services Authority Regulation must:
    a. be stored for at least 5 (five) years; and b. for at least the first 2 (two) years of the 5 (five) year period, must be stored in easily accessible places.

Article 17
Parties who are not employees of the Securities Trading Intermediary are prohibited from entering the work unit rooms performing marketing functions, risk management functions, accounting functions, Custodian functions, information technology functions, compliance functions, and research functions, unless strictly supervised and accompanied by authorized employees of the Securities Trading Intermediary or in the course of exercising their authority based on laws.
Article 18
Any unauthorized Parties are prohibited from having access to or accessing the hardware and software of Securities Trading Intermediaries and documentation, except for parties as referred to in Article 7 letter a number 4.
Article 19
Securities Trading Intermediaries must have procedures and notify clients, service providers, and other related parties regarding the handling of client orders if the business activities of the Securities Trading Intermediary are temporarily frozen.
Article 20
The Board of Commissioners of Securities Trading Intermediaries must supervise the implementation of compliance function responsibilities and follow up on reports submitted by work units, members of the Board of Directors, or officials at a level below the Board of Directors performing compliance functions.
Article 21
(1) Securities Trading Intermediaries must formulate standard operating procedures for the implementation of functions as referred to in Article 4, Article 6, Article 15 letter a number 3 letter c), and Article 19 and ensure

that procedures are complied with and implemented by all employees performing those functions.

(2) In the event of material changes to the standard operating procedures as referred to in paragraph (1), each material change must be reported to the Financial Services Authority no later than 7 (seven) days after the change is made in accordance with the provisions of Article 55 paragraph (1) letter j of the Financial Services Authority Regulation regarding licensing of Securities Companies.

CHAPTER XI
ADMINISTRATIVE SANCTIONS

Article 22
(1) Any party that violates the provisions as referred to in Article 3, Article 4, Article 5, Article 6, Article 7, Article 8, Article 9, Article 10, Article 11, Article 12, Article 13, Article 14, Article 15, Article 16, Article 17, Article 18, Article 19, Article 20, and Article 21, shall be subject to administrative sanctions.

(2) Sanctions as referred to in paragraph (1) shall also be imposed on parties that cause the occurrence of violations as referred to in paragraph (1).

(3) Sanctions as referred to in paragraph (1) and paragraph (2) shall be imposed by the Financial Services Authority.

(4) Administrative sanctions as referred to in paragraph (1) consist of:
a. written warning; b. fines, 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) letter b, letter c, letter d, letter e, letter f, or letter g may be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (4) letter a.

(6) Administrative sanctions in the form of fines as referred to in paragraph (4) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (4) letter c, letter d, letter e, letter f, or letter g.

(7) The procedures for imposing sanctions as referred to in paragraph (3) shall be carried out in accordance with the provisions of applicable legislation.

Article 23
In addition to administrative sanctions as referred to in Article 22 paragraph (4), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 24
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 22 paragraph (4) and specific actions as referred to in Article 23 to the public.

CHAPTER XII
CLOSING PROVISIONS

Article 25
Upon the commencement of this Financial Services Authority Regulation, the Decision of the Head of the Capital Market Supervisory Board Number Kep-548/BL/2010 concerning Internal Control of Securities Companies Conducting Business as Securities Brokers, along with Regulation Number V.D.3 which is its attachment, is repealed and declared invalid.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

Article 26
This Financial Services Authority Regulation shall come into force on the date of its promulgation.
To ensure that everyone knows 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 3 December 2020
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on 11 December 2020
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 274

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 50 /POJK.04/2020
CONCERNING
INTERNAL CONTROL OF SECURITIES COMPANIES CONDUCTING BUSINESS AS SECURITIES BROKERS

I. GENERAL

That since December 31, 2012, the functions, duties, and authorities for 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 Board 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 Board and Financial Institutions Regulations related to the capital market sector into Financial Services Authority Regulations. This 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, it is necessary to replace the existing legislation in the capital market sector regulating internal control of securities companies conducting business as securities brokers, namely the Decision of the Head of the Capital Market Supervisory Board and Financial Institutions Number Kep-548/BL/2010 concerning Internal Control of Securities Companies Conducting Business as Securities Brokers Number V.D.3 which is its attachment, into a Financial Services Authority Regulation concerning Internal Control of Securities Companies Conducting Business as Securities Brokers.

II. ARTICLE BY ARTICLE

Article 1
Clearly sufficient.

Article 2
Clearly sufficient.

Article 3
Clearly sufficient.

Article 4
Clearly sufficient.

Article 5
Clearly sufficient.

Article 6
Clearly sufficient.

Article 7
Clearly sufficient.

Article 8
Clearly sufficient.

Article 9
Letter a
Number 1
Customer due diligence includes enhanced due diligence when the broker's customer has a high risk.

Number 2
Clearly sufficient.

Number 3
Clearly sufficient.

Number 4
Clearly sufficient.

Number 5
Clearly sufficient.

Number 6
Clearly sufficient.

Letter b
Number 1
Clearly sufficient.

Number 2
Letter a)
Clearly sufficient.

Letter b)
The "single customer identity number" which in practice is often called single investor identification (SID) is the single identity number of investors at the Depository and Clearing Institution.

Number 3
Clearly sufficient.

Number 4
Clearly sufficient.

Number 5
Clearly sufficient.

Number 6
Clearly sufficient.

Number 7
Clearly sufficient.

Number 8
Clearly sufficient.

Letter c
Clearly sufficient.

Article 10
Clearly sufficient.

Article 11
Clearly sufficient.

Article 12
Clearly sufficient.

Article 13
Letter a
Clearly sufficient.

Letter b
Number 1
Clearly sufficient.

Number 2
The term "activity entering the system" refers to log in.
The term "activity exiting the system" refers to log out.

Number 3
Clearly sufficient.

Number 4
Clearly sufficient.

Number 5
Clearly sufficient.

Letter c
Clearly sufficient.

Letter d
Clearly sufficient.

Article 14
Clearly sufficient.

Article 15
Clearly sufficient.

Article 16
Clearly sufficient.

Article 17
Clearly sufficient.

Article 18
Clearly sufficient.

Article 19
Clearly sufficient.

Article 20
Clearly sufficient.

Article 21
Clearly sufficient.

Article 22
Clearly sufficient.

Article 23
Clearly sufficient.

Article 24
The term "specific actions" includes, among others, ordering the Securities Company to adjust customer transaction books.

Article 25
Clearly sufficient.

Article 26
Clearly sufficient.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6587

ATTACHMENT
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 50 /POJK.04/2020
CONCERNING
INTERNAL CONTROL OF SECURITIES
COMPANIES CONDUCTING BUSINESS
AS SECURITIES BROKERS

FUNCTION OUTSOURCING PLAN REPORT
Number : ...................................... ............., ...................20.....
Attachment : ......................................
Subject : Function Outsourcing Plan Report
...........................
To

The Executive Head
Capital Market Supervision
Financial Services Authority in Jakarta

Hereby we submit our company's plan to outsource the function ........................... As information, attached herewith we submit:

1. Description of the service provider receiving the function outsourcing, including:
   a. Name of the service provider; b. Business field of the Service Provider;
   c. The service provider's ability to high standards in performing its functions;
   d. The service provider's ability to fulfill its obligations in accordance with the agreement; e. Operational factors and the service provider's financial capabilities qualitatively and quantitatively; f. The service provider's reputation factors;

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

g. Coverage of insurance by the Service Provider (if any); h. Existence of potential conflicts of interest, especially if the service provider operates in the same business field; and
i. The adequacy and sufficiency of resources owned by the service provider if it has a function outsourcing agreement of the Securities Broker to other parties with several parties.

2. Description of the activities to be handed over to the service provider.

Thus this report is submitted, thank you for your attention Mr./Mrs.*) *) strike what is not needed

Board of Directors PT
....................
.....................................
(clear name)

Established in Jakarta on 3 December 2020
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY, signed
WIMBOH SANTOSO