Mechanism and Procedure for Designating Equity Securities as Sharia Securities in Information Technology-Based Crowdfunding Services

To:
Crowdfunding Service Organizers,
At your location.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 3 /SEOJK.04/2022 CONCERNING MECHANISM AND PROCEDURE FOR DESIGNATING EQUITY SECURITIES AS SHARIA SECURITIES IN INFORMATION TECHNOLOGY-BASED CROWDFUNDING SERVICES

In order to implement the mandate of Article 29 paragraph (3) of Financial Services Authority Regulation Number 57/POJK.04/2020 concerning the Offer of Securities through Information Technology-Based Crowdfunding Services (State Gazette of the Republic of Indonesia Year 2020 Number 281, Supplement to the State Gazette of the Republic of Indonesia Number 6594) as amended by Financial Services Authority Regulation Number 16/POJK.04/2021 concerning Amendments to Financial Services Authority Regulation Number 57/POJK.04/2020 concerning the Offer of Securities through Information Technology-Based Crowdfunding Services (State Gazette of the Republic of Indonesia Year 2021 Number 193, Supplement to the State Gazette of the Republic of Indonesia Number 6714), it is necessary to regulate provisions regarding the mechanism and procedure for designating equity securities as Sharia securities in information technology-based crowdfunding services, in the Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS
In this Financial Services Authority Circular Letter, the following terms are meant:

1. Offer of Securities through Information Technology-Based Crowdfunding Services, hereinafter referred to as Crowdfunding Services, is the provision of securities offer services conducted by issuers to sell securities directly to investors through an open electronic system network.

2. Securities are negotiable instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, Units of Participation in Collective Investment Contracts, futures contracts over Securities, and every derivative of Securities.

3. Sharia Securities are Securities as referred to in the Law on the Capital Market and its implementing regulations, whose contract, management method, business activities, and/or assets underlying the contract, management method, business activities, and/or assets related to the said Securities and its issuer do not contradict Sharia principles in the capital market.

4. Crowdfunding Service Organizer, hereinafter referred to as Organizer, is an Indonesian legal entity that provides, manages, and operates Crowdfunding Services.

5. Sharia Organizer is an Organizer that has obtained a business license from the Financial Services Authority and whose articles of association state that its activities and types of business, as well as its business management methods, are based on Sharia principles in the capital market.

6. Sharia Crowdfunding Service Unit is a part of the Organizer that has obtained a business license from the Financial Services Authority and is formed to conduct Crowdfunding Services based on Sharia principles in the capital market.

7. Issuer is an Indonesian business entity, whether in the form of a legal entity or other business entities, that issues Securities through Crowdfunding Services.

8. Issuer that is an entity conducting business activities based on Sharia principles, hereinafter referred to as Sharia Issuer, is an Issuer whose articles of association state that its activities and types of business, as well as its business management methods, are based on Sharia principles.

9. Capital Market Sharia Expert, hereinafter abbreviated as ASPM, is an individual who has knowledge and experience in the field of Sharia and has a license to provide advice and/or supervise the implementation of Sharia principles in the capital market by parties conducting Sharia activities in the capital market and/or provide Sharia compliance statements for Sharia products or services in the capital market.

10. Sharia Supervisory Board, hereinafter abbreviated as DPS, 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.

II. DESIGNATION OF EQUITY SECURITIES AS SHARIA SECURITIES IN CROWDFUNDING SERVICES

1. Parties Who Can Designate Equity Securities as Sharia Securities in Crowdfunding Services

a. Organizers that are entities conducting business activities based on Sharia principles as referred to in Article 29 paragraph (1) of the Financial Services Authority regulations regarding the Offer of Securities through Information Technology-Based Crowdfunding Services, may designate Equity Securities as Sharia Securities in Crowdfunding Services.

b. Organizers as referred to in letter a may be:

1. Sharia Organizers; or
2. Organizers that have a Sharia Crowdfunding Service Unit.

c. In the event that the Organizer is a Sharia Organizer, the Organizer's articles of association must state that its activities and types of business, as well as its business management methods, are conducted based on Sharia principles in the capital market.

d. In the event that the Organizer is an Organizer that has a Sharia Crowdfunding Service Unit, the Organizer's articles of association must also state that Crowdfunding Service activities are based on Sharia principles in the capital market.

e. Organizers as referred to in letter d must have a Sharia Crowdfunding Service Unit that has at least 1 (one) person acting as the Head of the Sharia Crowdfunding Service Unit.

f. Organizers as referred to in letter b have the duties and responsibilities:

1. to compile standard operating procedures for designating Equity Securities as Sharia Securities in Crowdfunding Services, which must at least contain the mechanism and procedures for activities:
   a) designating Equity Securities as Sharia Securities; b) monitoring the fulfillment of Sharia Securities criteria for each Equity Security designated as a Sharia Security; and c) resolution for Equity Securities that no longer meet Sharia Securities criteria; and
2. to conduct activities as referred to in item 1) in accordance with the standard operating procedures.

2. Sharia Securities in Crowdfunding Services

a. Sharia Securities in Crowdfunding Services include:

1. Equity Securities issued by Sharia Issuers; or
2. Equity Securities issued by Issuers that do not state that their activities and types of business, as well as their business management methods, are based on Sharia principles, which are designated as Sharia Securities based on Sharia Securities criteria.

b. Sharia Securities criteria as referred to in letter a include Equity Securities issued by:

1. Issuers that do not conduct activities and types of business that contradict Sharia principles, including:
   a) gambling and games classified as gambling; b) usurious financial services; c) sales and purchases of risk containing elements of uncertainty (gharar) and/or gambling (maisir); d) producing, distributing, trading, and/or providing:
   (1) goods or services that are inherently haram (haram li-dzatihi); (2) goods or services that are haram not due to their substance (haram li-ghairihi) as determined by the National Sharia Council - Indonesian Ulema Council; (3) goods or services that are morally corrupting and harmful; and/or (4) other goods or services that contradict Sharia principles based on determinations from the National Sharia Council - Indonesian Ulema Council; and e) conducting other activities that contradict Sharia principles based on determinations from the National Sharia Council - Indonesian Ulema Council;

2. Issuers that do not conduct transactions that contradict Sharia principles in the capital market, including:
   a. trading or transactions with false offers and/or demands; b. sales of goods not yet owned;
   c. trading or transactions with the purpose of hoarding (ihtikar);
   d. conducting trading or transactions containing elements of bribery (risywah); and e. other transactions containing elements of speculation (gharar), fraud (tadlis) including concealing defects (ghisysy), and efforts to influence other parties containing lies (taghrir); and

3. Issuers that meet the following financial ratios:
   a) total interest-based debt compared to total assets is not more than 45% (forty-five percent); and b) total interest income and other haram income compared to total business income and other income is not more than 10% (ten percent).

3. Notification by Sharia Organizers and Organizers with Sharia Crowdfunding Service Units as Parties to Designate Equity Securities as Sharia Securities in Crowdfunding Services

a. Sharia Organizers and Organizers with Sharia Crowdfunding Service Units that will designate Equity Securities as Sharia Securities in Crowdfunding Services are required to submit a notification to the Financial Services Authority using the format of Notification by Organizers as Parties to Designate Equity Securities as Sharia Securities in Crowdfunding Services contained in the Appendix which is an integral part of this Financial Services Authority Circular Letter, accompanied by documents:

1. standard operating procedures for designating Equity Securities as Sharia Securities in Crowdfunding Services as referred to in item 1 letter f item 1); and
2. a statement letter from the board of directors or management as the party responsible for designating Equity Securities as Sharia Securities in Crowdfunding Services using the format of Statement Letter from Board of Directors or Management regarding Responsibility for Designating Equity Securities as Sharia Securities in Crowdfunding Services as contained in the Appendix which is an integral part of this Financial Services Authority Circular Letter.

b. For Organizers that have a Sharia Crowdfunding Service Unit, in addition to the documents and/or information as referred to in letter a, they must submit documents:

1. photocopy of the latest articles of association of the Organizer that also state Crowdfunding Service activities based on Sharia principles in the capital market;
2. letter of appointment of DPS by the board of directors or management;
3. photocopy of the ASPM license held by DPS;
4. letter of determination by the board of directors or management regarding the appointment of the Head of the Sharia Crowdfunding Service Unit;
5. organizational structure of the Organizer that has a Sharia Crowdfunding Service Unit depicting the position of the Sharia Crowdfunding Service Unit in the structure; and
6. cooperation agreement with a Sharia bank regarding the opening of an escrow account.

c. Sharia Organizers and Organizers with Sharia Crowdfunding Service Units may only designate Equity Securities as Sharia Securities in Crowdfunding Services after the notification and its appendix documents as referred to in item 3 letter a and letter b are declared by the Financial Services Authority to be received completely.

d. In the event that the Financial Services Authority does not submit a request for document completeness within a maximum period of 20 (twenty) working days after the notification is received by the Financial Services Authority, Sharia Organizers and Organizers with Sharia Crowdfunding Service Units are considered to have submitted documents completely.

4. Procedure for Designating Equity Securities as Sharia Securities in Crowdfunding Services

a. Organizers that designate Equity Securities as Sharia Securities in Crowdfunding Services must:

1. add to the Crowdfunding Service implementation agreement between the Organizer and the Issuer as regulated in Financial Services Authority regulations regarding the Offer of Securities through Information Technology-Based Crowdfunding Services regarding at least:
   a) approval from the Issuer whose Securities are designated as Sharia Securities; b) commitment from the Issuer to maintain Equity Securities designated as Sharia Securities to continue meeting Sharia Securities criteria; c) resolution mechanism in the event that Equity Securities no longer meet Sharia Securities criteria according to the resolution procedures as regulated in this Financial Services Authority Circular Letter; d) statement of willingness from the Issuer to implement the resolution mechanism in the event that Equity Securities no longer meet Sharia Securities criteria as referred to in letter c), including regarding commitment to ensure the existence of a party that will buy Equity Securities that no longer meet Sharia Securities criteria; and e) termination of the Crowdfunding Service implementation agreement between the Organizer and the Issuer as a consequence of the change in status of Equity Securities that no longer meet Sharia Securities criteria.
2. add disclosure regarding the risk of change in Sharia Securities status and the consequences arising from such status change as one of the risks contained on the Organizer's website as regulated in Financial Services Authority regulations regarding the Offer of Securities through Information Technology-Based Crowdfunding Services.

b. Designation of Equity Securities as Sharia Securities in Crowdfunding Services is conducted:

1. upon each issuance of Equity Securities through Crowdfunding Services; and
2. periodically at least 1 (one) time in 1 (one) year with the provision that designation is conducted at the latest 1 (one) month after the end of the deadline for submission of the Issuer's annual report.

c. Designation of Equity Securities as referred to in letter b is conducted with:

1. using Sharia Securities criteria as referred to in item 2 letter b; and
2. based on the Issuer's financial reports submitted to the Organizer which is the main source in conducting review in the process of designating the said Equity Securities.

5. Announcement of Designation of Equity Securities as Sharia Securities

a. Sharia Organizers and Organizers with Sharia Crowdfunding Service Units are required to announce to the public through the Organizer's website regarding the designation of Equity Securities as Sharia Securities in Crowdfunding Services as referred to in item 4 letter b.

b. The announcement of the first designation of Equity Securities as Sharia Securities in Crowdfunding Services must be conducted at the latest 2 (two) working days before the start of the Securities offer period.

c. Periodic announcements of the designation of Equity Securities as Sharia Securities in Crowdfunding Services must be conducted at the latest 2 (two) working days after the designation of Equity Securities as Sharia Securities.

6. Change of Sharia Securities Status

a. Equity Securities no longer meet Sharia Securities criteria if they do not meet one or all of the Sharia Securities criteria as referred to in item 2 letter b.

b. In the event that Equity Securities no longer meet Sharia Securities criteria as referred to in letter a, Sharia Organizers or Organizers with Sharia Crowdfunding Service Units are required to announce to the public through the Organizer's website at the latest 2 (two) working days after the information is known by the Organizer.

c. Announcements as referred to in letter b must contain information regarding:

1. change in Sharia Securities status;
2. the time period for the Issuer to adjust business activities and/or financial structure for a maximum of 90 (ninety) days so that the Equity Securities as referred to in letter a meet Sharia Securities criteria again; and
3. the resolution procedures to be conducted by the Issuer if the Equity Securities as referred to in letter a cannot meet Sharia Securities criteria again.

d. Issuers must adjust business activities and/or the Issuer's financial structure so that Equity Securities as referred to in letter a meet Sharia Securities criteria at the latest 90 (ninety) days after the date of announcement as referred to in letter b.

e. In the event that within the time period as referred to in letter d, Equity Securities as referred to in letter a can meet Sharia Securities criteria again, the said Securities are designated again as Sharia Securities.

f. Organizers are required to announce the re-designation of Equity Securities as Sharia Securities as referred to in letter e to the public through the Organizer's website at the latest 2 (two) working days after the designation.

g. In the event that within the time period as referred to in letter d, Equity Securities as referred to in letter a cannot meet Sharia Securities criteria again, Organizers are required to announce to the public that the said Equity Securities cannot meet Sharia Securities criteria again through the Organizer's website at the latest 2 (two) working days after the end of the time period as referred to in letter d and inform the resolution of the Securities that no longer meet Sharia Securities criteria in the form of buyback by the Issuer and/or purchase by other parties.

7. Disclosure in Annual Reports and Interim Reports

a. Organizers are required to disclose information regarding:

1. designation of Equity Securities as Sharia Securities in Crowdfunding Services as referred to in item 4 letter b and item 6 letter e; and
2. Equity Securities that no longer meet Sharia Securities criteria both before and after the adjustment period as referred to in item 6 letter d,
   in the interim and annual reports of the Organizers submitted to the Financial Services Authority.

b. Disclosure as referred to in letter a must contain at least:

1. The number and names of Issuers whose Equity Securities are designated as Sharia Securities as referred to in item 4 letter b and item 6 letter e;
2. The number and names of Issuers whose Equity Securities no longer meet Sharia Securities criteria both before and after the adjustment period as referred to in item 6 letter d that occurred during the reporting period;
3. Actions taken by the Organizer regarding Equity Securities as referred to in item 2); and
4. Stages of resolution for Equity Securities that no longer meet Sharia Securities criteria if there are Equity Securities that no longer meet Sharia Securities criteria.

8. Resolution Procedures for Equity Securities that No Longer Meet Sharia Securities Criteria

a. In the event that there are Equity Securities that no longer meet Sharia Securities criteria as referred to in item 6 letter g, Sharia Organizers and Organizers with Sharia Crowdfunding Service Units are required to ensure the implementation of resolution procedures for Equity Securities that no longer meet Sharia Securities criteria.

b. Resolution procedures as referred to in letter a include:

1. The Issuer conducts a buyback of Equity Securities that no longer meet Sharia Securities criteria from investors and/or other parties purchase Equity Securities that no longer meet Sharia Securities criteria from investors;
2. Buyback by the Issuer as referred to in item 1) can be conducted without first obtaining approval from the General Meeting of Shareholders and can be conducted up to an amount exceeding 10% (ten percent) of the Issuer's paid-up capital;
3. Implementation of the purchase of Securities as referred to in item 1) must be completed at the latest 150 (one hundred fifty) days after the date of announcement as referred to in item 6 letter g;
4. Organizers must terminate the Crowdfunding Service implementation agreement between the Organizer and the Issuer at the latest 15 (fifteen) working days after the completion of the resolution mechanism as referred to in item 3); and
5. Organizers are required to ensure that the Issuer has completed all its obligations to all parties in Crowdfunding Services before conducting the termination of the Crowdfunding Service agreement as referred to in item 4).

c. The purchase price of Equity Securities as referred to in letter b item 1) must comply with the following provisions:

1. for Equity Securities of Issuers that have been traded through the Securities trading system on Crowdfunding Services, the purchase price of Equity Securities must be higher than the highest trading price during the last 1 (one) trading period before the announcement of Equity Securities that no longer meet Sharia Securities criteria as referred to in item 6 letter b; or
2. for Equity Securities of Issuers that have not been traded through the Securities trading system on Crowdfunding Services, the purchase price of Equity Securities must be higher than the fair value determined by an appraiser registered with the Financial Services Authority.

III. CLOSING
This Financial Services Authority Circular Letter takes effect on the date of determination.

Determined in Jakarta on January 26, 2022
EXECUTIVE HEAD
CAPITAL MARKET SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, sd
HOSEN

APPENDIX
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 3 /SEOJK.04/2022 CONCERNING MECHANISM AND PROCEDURE FOR DESIGNATING EQUITY SECURITIES AS SHARIA SECURITIES IN INFORMATION TECHNOLOGY-BASED CROWDFUNDING SERVICES

NOTIFICATION BY ORGANIZER
AS A PARTY TO DESIGNATE EQUITY SECURITIES
AS SHARIA SECURITIES IN CROWDFUNDING SERVICES

Number : ........, ................
Attachment :
Subject : Submission of Notification by Sharia Organizers or Organizers with Sharia Crowdfunding Service Units*) as Parties to Designate Equity Securities as Sharia Securities in Crowdfunding Services

To

The Executive Head of Capital Market Supervision Financial Services Authority in Jakarta

I, the undersigned below:

1. Name : …………………………………………………

2. Position : …………………………………………………

3. Name of Organizer : …………………………………………………

4. Address of Organizer : ...........................................................
   (Street Name & Number)
   …………………………………………………
   (City & Postal Code)

5. Telephone Number, Fax,
   and Email : ………………………………………………...

6. Number and Date of License
   from the Financial Services
   Authority as
   Organizer
   : ………………………………………………… hereby submit a notification that our company will become a Crowdfunding Service Organizer that will designate Equity Securities as Sharia Securities in Crowdfunding Services. Attached to this letter, we submit:

7. photocopy of the standard operating procedure document for designating Equity Securities as Sharia Securities in Crowdfunding Services;

8. statement letter from the board of directors or management as the party responsible for designating Equity Securities as Sharia Securities in Crowdfunding Services;

9. photocopy of the latest articles of association of the Organizer that also state Crowdfunding Service activities based on Sharia principles in the capital market.*;

10. letter of appointment of DPS by the board of directors or management.*;

11. photocopy of the ASPM license held by DPS*;

12. letter of determination by the board of directors or management regarding the appointment of the Head of the Sharia Crowdfunding Service Unit.*;

13. organizational structure of the Organizer that has a Sharia Crowdfunding Service Unit depicting the position of the Sharia Crowdfunding Service Unit in the structure.*; and

14. cooperation agreement with a Sharia Bank regarding the opening of an escrow account*.

Thus this notification is submitted and for your attention, thank you.
Director/Management stamp
……………………………………
(clear name)

Note:
*Filled by Organizers that have a Sharia Crowdfunding Service Unit.

This copy is consistent with the original
Acting Director of Legal Affairs 1
Legal Department signed
Evi Maria
DIRECTOR'S OR MANAGEMENT'S STATEMENT
REGARDING
RESPONSIBILITY FOR DESIGNATING EQUITY-LIKE SECURITIES AS SHARIA SECURITIES IN CROWDFUNDING SERVICES

I, the undersigned below:

1. Name : .……………………………………………………………
2. Position : …….………………………………………………………
3. Service Provider Name : …….………………………………………………………
4. Business Activities : …….………………………………………………………
5. Address : …….………………………………………………………
   (street name and number)
   …….………………………………………………………
   (city and postal code)
6. Telephone : …….………………………………………………………
   hereby declare that I will take full responsibility for the designation of Equity-like Securities as Sharia Securities in Crowdfunding Services issued by the company in accordance with capital market legislation and other applicable laws and regulations.

This statement is made truthfully so that it may be used as appropriate.
(place), (date, month, year)
Chief Executive Officer/Chairman stamp
...……………………………………
(name and signature)

Determined in Jakarta on January 26, 2022
CHIEF EXECUTIVE OFFICER
CAPITAL MARKET SUPERVISORY AGENCY
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
HOESEN