Issuance and Requirements of Sharia Asset-Backed Securities

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 20 /POJK.04/2015
CONCERNING
THE ISSUANCE AND REQUIREMENTS OF SHARIA ASSET-BACKED SECURITIES BY THE GRACE OF THE MOST HIGH GOD, THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering: that in order to encourage the development of the Sharia Capital Market industry in Indonesia, it is necessary to perfect regulations regarding the Issuance of Sharia Asset-Backed Securities by establishing a Financial Services Authority Regulation concerning the Issuance and Requirements of Sharia Asset-Backed Securities; 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 ISSUANCE AND REQUIREMENTS OF SHARIA ASSET-BACKED SECURITIES.

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

1. Sharia Asset-Backed Securities Collective Investment Contract is a contract between the Investment Manager and the Custodian Bank that binds holders of Sharia Asset-Backed Securities, where the Investment Manager is authorized to manage the collective investment portfolio and the Custodian Bank is authorized to carry out Collective Custody, the implementation of which does not conflict with Sharia Principles in the Capital Market.
2. Sharia Asset-Backed Securities issued by the Sharia Asset-Backed Securities Collective Investment Contract, hereinafter referred to as Sharia Asset-Backed Securities, are Asset-Backed Securities that:
   a. their portfolio consists of financial assets in the form of receivables, financing, or other financial assets; b. the contract; and
   c. the manner of management,
   do not conflict with Sharia Principles in the Capital Market.
3. Sharia Asset-Backed Securities in the form of Participation Certificates, hereinafter abbreviated as EBAS-SP, are Sharia Asset-Backed Securities issued by the Issuer whose contract and portfolio consist of a Collection of Receivables or home ownership financing that does not conflict with Sharia Principles in the Capital Market and constitutes proof of proportional ownership held jointly by a group of EBAS-SP holders.
4. Sharia Principles in the Capital Market are Islamic legal principles in Sharia Activities in the Capital Market based on the fatwa of the National Sharia Board - Indonesian Ulema Council, provided that the aforementioned fatwa does not conflict with Financial Services Authority Regulations concerning the Implementation of Sharia Principles in the Capital Market and/or other Financial Services Authority Regulations based on the fatwa of the National Sharia Board - Indonesian Ulema Council.
5. Sharia Supervisory Board is a board responsible for providing advice and suggestions and supervising the fulfillment of Sharia Principles in the Capital Market towards Parties conducting Sharia Activities in the Capital Market.
6. Sharia Expert Team is a team responsible for the Sharia compliance of Sharia products or services in the Capital Market issued or released by the company.
7. Sharia Contract is a written agreement or contract between the parties containing the rights and obligations of each party that does not conflict with Sharia Principles in the Capital Market.

Article 2
Every Party conducting the issuance of Sharia Asset-Backed Securities and EBAS-SP must comply with the Sharia Principles in the Capital Market as regulated in the Financial Services Authority Regulation concerning the Implementation of Sharia Principles in the Capital Market, this Financial Services Authority Regulation, and legislation in the Capital Market sector.

Article 3
(1) Asset-Backed Securities fulfill Sharia Principles in the Capital Market if the contract, manner of management, and portfolio do not conflict with Sharia Principles in the Capital Market as regulated in the Financial Services Authority Regulation concerning the Implementation of Sharia Principles in the Capital Market. (2) Asset-Backed Securities in the form of Participation Certificates fulfill Sharia Principles in the Capital Market if the contract and portfolio consisting of a Collection of Receivables or home ownership financing do not conflict with Sharia Principles in the Capital Market as regulated in the Financial Services Authority Regulation concerning the Implementation of Sharia Principles in the Capital Market.

CHAPTER II
ISSUANCE OF SHARIA ASSET-BACKED SECURITIES
Article 4
Parties conducting the issuance of Sharia Asset-Backed Securities must follow legislation in the Capital Market sector regulating general provisions for the submission of Registration Statements, legislation in the Capital Market sector regulating Registration Statements for the purpose of Public Offering of Asset-Backed Securities (Asset Backed Securities), and legislation in the Capital Market sector regulating other related Sharia Asset-Backed Securities Collective Investment Contracts, unless otherwise and specifically regulated in this Financial Services Authority Regulation.

Article 5
(1) Investment Managers managing Sharia Asset-Backed Securities must have a Sharia Supervisory Board appointed by the Board of Directors.
(2) The issuance of Sharia Asset-Backed Securities must obtain a Sharia compliance statement issued by the Sharia Supervisory Board of the Investment Manager or the Sharia Expert Team.
(3) Members of the Sharia Supervisory Board and the Sharia Expert Team as referred to in paragraph (2) must possess a Capital Market Sharia Expert license from the Financial Services Authority as regulated in the Financial Services Authority Regulation concerning Capital Market Sharia Experts. (4) The Sharia Supervisory Board of the Investment Manager as referred to in paragraph (1) is responsible for the fulfillment of Sharia Principles in the Capital Market for Sharia Asset-Backed Securities issued by the Sharia Asset-Backed Securities Collective Investment Contract. (5) Costs arising related to the implementation of duties and responsibilities of the Sharia Supervisory Board and the Sharia Expert Team as referred to in paragraph (2) become the burden of the Investment Manager.

Article 6
(1) The Sharia Supervisory Board as referred to in Article 5 paragraph (1) must prepare an annual supervision report on compliance with Sharia Principles in the Capital Market for the supervised Sharia Asset-Backed Securities.
(2) The report as referred to in paragraph (1) must be submitted by the Sharia Supervisory Board to the Investment Manager managing the Sharia Asset-Backed Securities.
(3) The report as referred to in paragraph (2) must contain at least:
a. the intended recipient; b. the report date;
c. a statement that the prepared report is in accordance with this Financial Services Authority Regulation;
d. a statement regarding the time frame and scope of supervision conducted by the Sharia Supervisory Board; e. the opinion of the Sharia Supervisory Board over the supervision conducted as referred to in letter d; and f. signature, name of the Sharia Supervisory Board member, position of the Sharia Supervisory Board member, and Capital Market Sharia Expert license number. (4) The Sharia supervision activity report as referred to in paragraph (1) must be submitted by the Investment Manager managing the Sharia Asset-Backed Securities to the Financial Services Authority, at the latest by the end of the third month. (5) In the event that the deadline for submitting the report as referred to in paragraph (4) falls on a holiday, the report must be submitted at the latest on the next 1 (one) working day.

Article 7
(1) The Sharia Asset-Backed Securities Collective Investment Contract must contain at least the following provisions:
a. the word "Sharia" in the name of the issued Sharia Asset-Backed Securities; b. a statement that:

1. the Investment Manager and Custodian Bank are representatives (wakil) acting on behalf of the holders of Sharia Asset-Backed Securities as the principals (muwakil), where the Investment Manager is authorized to manage the collective investment portfolio and the Custodian Bank is authorized to carry out Collective Custody;
2. the assets forming the portfolio of Sharia Asset-Backed Securities do not conflict with Sharia Principles in the Capital Market; and
   c. information regarding:
3. the portfolio cleansing mechanism that forms the basis of Sharia Asset-Backed Securities from elements conflicting with Sharia Principles in the Capital Market;
4. the management of funds forming the wealth of the Sharia Asset-Backed Securities Collective Investment Contract is prohibited from conflicting with Sharia Principles in the Capital Market;
5. the Sharia Contract and Sharia transaction scheme used in the issuance of Sharia Asset-Backed Securities;
6. a summary of the Sharia Contracts conducted by the Parties;
7. the magnitude of the profit-sharing ratio, margin, or service fee;
8. the planned schedule and method for the distribution and/or payment of profit-sharing, margin, or service fee.
   (2) The provisions in the Sharia Asset-Backed Securities Collective Investment Contract as referred to in paragraph (1) must also be included as additional information in the Prospectus accompanied by information regarding:
   a. the Sharia Supervisory Board of the Investment Manager; b. directors or officials responsible for the implementation of Custodian activities at the Custodian Bank who understand activities conflicting with Sharia Principles in the Capital Market; and
   c. the rating result of Sharia Asset-Backed Securities, if offered through a Public Offering.

Article 8
(1) In the event that the actions of the Investment Manager and Custodian Bank result in the wealth of Sharia Asset-Backed Securities containing elements conflicting with Sharia Principles in the Capital Market, the Financial Services Authority has the authority to:
a. prohibit the Investment Manager and Custodian Bank from transferring the wealth of Sharia Asset-Backed Securities except for the purpose of cleansing the wealth of Sharia Asset-Backed Securities from elements conflicting with Sharia Principles in the Capital Market; b. require the Investment Manager and Custodian Bank to be jointly and severally liable to purchase the Asset-Backed Securities portfolio at acquisition price or cleanse the Asset-Backed Securities funds conflicting with Sharia Principles in the Capital Market within a time frame determined by the Financial Services Authority;
c. require the Investment Manager on behalf of the Sharia Asset-Backed Securities Collective Investment Contract to sell or transfer the wealth elements of the Sharia Asset-Backed Securities Collective Investment Contract from wealth elements conflicting with Sharia Principles in the Capital Market, with the provision that any excess profit from the sale price over the last Fair Market Value while still fulfilling Sharia Principles in the Capital Market is separated from the calculation of the Net Asset Value of the Sharia Asset-Backed Securities Collective Investment Contract and treated as social funds; and/or
d. require the Investment Manager to announce to the public the prohibition and/or obligation established by the Financial Services Authority as referred to in letters a, b, and c as soon as possible, at the latest by the end of the 2nd (second) working day after receiving the Financial Services Authority letter, in 2 (two) daily newspapers in Indonesian with national circulation at the expense of the Investment Manager and Custodian Bank. (2) The Custodian Bank must submit to the Financial Services Authority and holders of Sharia Asset-Backed Securities information regarding the acquisition of excess profit from the sale price over Fair Market Value as referred to in paragraph (1) letter c and information regarding its use as social funds at the latest on the 12th (twelfth) day of each month (if any). (3) In the event that the 12th (twelfth) day falls on a holiday, the information as referred to in paragraph (2) must be submitted at the latest on the next 1 (one) working day.

Article 9
(1) In the event that the Investment Manager and/or Custodian Bank do not fulfill obligations as referred to in Article 7, the Financial Services Authority has the authority to replace the Investment Manager, Custodian Bank, or order the dissolution of the Sharia Asset-Backed Securities Collective Investment Contract. (2) In the event that the Investment Manager and Custodian Bank do not dissolve the Sharia Asset-Backed Securities Collective Investment Contract as referred to in paragraph (1), the Financial Services Authority has the authority to dissolve the Sharia Asset-Backed Securities Collective Investment Contract.

CHAPTER III
ISSUANCE OF SHARIA ASSET-BACKED SECURITIES IN THE FORM OF PARTICIPATION CERTIFICATES
Article 10
Parties conducting the issuance of EBAS-SP must follow the Financial Services Authority Regulation concerning Guidelines for the Issuance and Reporting of Asset-Backed Securities in the Form of Participation Certificates in the Context of Secondary Housing Financing, unless otherwise and specifically regulated in this Financial Services Authority Regulation.

Article 11
(1) The issuance of EBAS-SP must obtain a Sharia compliance statement issued by:
a. the Sharia Supervisory Board, in the event the Issuer has a Sharia Supervisory Board; or b. the Sharia Expert Team in the event the Issuer does not have a Sharia Supervisory Board.
(2) Members of the Sharia Supervisory Board and the Sharia Expert Team as referred to in paragraph (1) must possess a Capital Market Sharia Expert license from the Financial Services Authority as regulated in the Financial Services Authority Regulation concerning Capital Market Sharia Experts. (3) In the event that the EBAS-SP Issuer does not have a Sharia Supervisory Board, the Director of the Issuer or the person responsible for activities mandated by the Board of Directors who has adequate knowledge and/or experience in the field of Sharia finance is responsible for the fulfillment of Sharia Principles in the Capital Market for EBAS-SP issued by the Issuer. (4) Costs arising related to the Sharia Supervisory Board or Sharia Expert Team as referred to in paragraph (1) become the burden of the Issuer.

Article 12
(1) The EBAS-SP Prospectus must follow the Financial Services Authority Regulation concerning Guidelines for the Issuance and Reporting of Asset-Backed Securities in the Form of Participation Certificates in the Context of Secondary Housing Financing, unless otherwise and specifically regulated in this Financial Services Authority Regulation. (2) The EBAS-SP Prospectus must contain at least the following information:
a. The portfolio consisting of a Collection of Receivables or home ownership financing forming the basis of EBAS-SP does not conflict with Sharia Principles in the Capital Market; b. The existence of a guarantee from the EBAS-SP Issuer stating that during the EBAS-SP period, the Collection of Receivables or home ownership financing forming the basis of EBAS-SP does not conflict with Sharia Principles in the Capital Market;
c. Officials responsible for the implementation of activities of the Trustee and Custodian Bank of EBAS-SP understand activities conflicting with Sharia Principles in the Capital Market, if the Trustee and Custodian Bank of EBAS-SP do not have a Sharia Supervisory Board;
d. The Sharia Contract and Sharia transaction scheme used in the issuance of EBAS-SP; e. A summary of the Sharia Contracts conducted by the Parties; f. The magnitude of the profit-sharing ratio, margin, or service fee; g. The planned schedule and method for the distribution and/or payment of profit-sharing, margin, or service fee; and h. The rating result of EBAS-SP, if offered through a Public Offering.

CHAPTER IV
REPORTING
Article 13
Provisions regarding the obligation for monthly reporting as referred to in the Financial Services Authority Regulation concerning Monthly Reporting of Asset-Backed Securities Collective Investment Contracts apply mutatis mutandis to the Investment Manager of the Sharia Asset-Backed Securities Collective Investment Contract.

Article 14
Provisions regarding the obligation to report the results of the sale of Asset-Backed Securities offered through a Public Offering, reports to each holder of Asset-Backed Securities every month, annual financial reports, and reports on the replacement of the Custodian Bank as referred to in legislation in the Capital Market sector regulating the functions of the Investment Manager concerning Asset-Backed Securities (Asset Backed Securities) apply mutatis mutandis to the Investment Manager of the Sharia Asset-Backed Securities Collective Investment Contract.

Article 15
Provisions regarding the obligation to report if the Investment Manager conducts activities that can harm holders of Asset-Backed Securities as referred to in legislation in the Capital Market sector regulating the functions of the Custodian Bank concerning Asset-Backed Securities (Asset Backed Securities) apply mutatis mutandis to the Custodian Bank of the Sharia Asset-Backed Securities Collective Investment Contract.

Article 16
Provisions regarding the reporting obligations as referred to in the Financial Services Authority Regulation concerning Guidelines for the Issuance and Reporting of Asset-Backed Securities in the Form of Participation Certificates in the Context of Secondary Housing Financing apply mutatis mutandis to EBAS-SP.

CHAPTER V
SANCTION PROVISIONS
Article 17
(1) Without prejudice to criminal provisions in the Capital Market field, 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 who cause the violation to occur, 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 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 preceding 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 separately or together with the imposition of administrative sanctions as referred to in paragraph (1) letters c, d, e, f, or g.

Article 18
In addition to administrative sanctions as referred to in Article 17 paragraph (1), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 19
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 17 paragraph (1) and specific actions as referred to in Article 18 to the public.

CHAPTER VI
TRANSITIONAL PROVISIONS
Article 20
(1) The obligation of members of the Sharia Supervisory Board and Sharia Expert Team to possess a Capital Market Sharia Expert license as referred to in Article 5 paragraph (3) and Article 11 paragraph (2) for a period of 2 (two) years since this Financial Services Authority Regulation takes effect may be replaced by individuals who meet the requirements as referred to in Article 29 paragraph (1) of the Financial Services Authority Regulation concerning Capital Market Sharia Experts, provided that they report to the Financial Services Authority at the latest 6 (six) months since the taking effect of the Financial Services Authority Regulation concerning Capital Market Sharia Experts. (2) Individuals who have submitted reports to the Financial Services Authority as referred to in paragraph (1) may become members of the Sharia Supervisory Board or members of the Sharia Expert Team even if they do not yet possess a Capital Market Sharia Expert license as referred to in Article 5 paragraph (3) and Article 11 paragraph (2) for a maximum of 2 (two) years since the taking effect of the Financial Services Authority Regulation concerning Capital Market Sharia Experts.

CHAPTER VII
CLOSING PROVISIONS
Article 21
Upon the taking effect of this Financial Services Authority Regulation, the Decision of the Head of the Capital Market and Financial Institution Supervisory Board Number: KEP-181/BL/2009 concerning the Issuance of Sharia Securities dated June 30, 2009, along with Regulation Number IX.A.13 which is its attachment, is revoked and declared invalid.

Article 22
This Financial Services Authority Regulation takes effect on the date of its enactment.

In order that everyone may know it, order the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on November 3, 2015
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD
Enacted in Jakarta on November 10, 2015
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 271 Copy in accordance with the original Director of Law 1 Ministry of Law Sudarmaji