POJK on Direct Examination of Venture Capital Companies

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 37/POJK.05/2015
ON
DIRECT EXAMINATION OF VENTURE CAPITAL COMPANIES BY THE GRACE OF THE ALMIGHTY GOD THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in order to ensure the effectiveness of regulation and supervision of venture capital companies, direct examination of venture capital companies is necessary to ensure compliance with the applicable regulations in the field of venture capital companies; b. that to support the tasks of the Financial Services Authority in regulating and supervising venture capital companies through the direct examination process in line with the mandate of the Law on the Financial Services Authority, it is necessary to establish legal regulations to provide a legal basis for the Financial Services Authority;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on Direct Examination of Venture Capital Companies;

COPY

Considering:
Law Number 21 of 2011 on 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);

DECIDES:
Establish:
FINANCIAL SERVICES AUTHORITY REGULATION ON DIRECT EXAMINATION OF VENTURE CAPITAL COMPANIES.

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

1. Venture Capital Business is a financing business through capital participation and/or financing for a specific period in order to develop the business of partner businesses or debtors.
2. Venture Capital Company, hereinafter abbreviated as PMV, is a business entity that conducts Venture Capital Business, venture fund management, fee-based service activities, and other business activities with the approval of the Financial Services Authority.
3. Sharia Venture Capital Business is a financing business through investment activities and/or service provision for a specific period in order to develop the business of partner businesses, implemented based on Sharia principles.
4. Sharia Venture Capital Company, hereinafter abbreviated as PMVS, is a business entity that conducts Sharia Venture Capital Business, venture fund management, and other business activities with the approval of the Financial Services Authority, all of which are implemented based on Sharia principles.
5. Sharia Business Unit, hereinafter abbreviated as UUS, is a working unit of the PMV headquarters that functions as the parent office of offices conducting Sharia Venture Capital Business.
6. Board of Directors is the Board of Directors as referred to in Law Number 40 of 2007 on Limited Liability Companies for PMV or PMVS in the form of a limited liability company or equivalent to the Board of Directors for PMV or PMVS in the form of a cooperative legal entity or a limited partnership business entity.
7. Direct Examination is a series of activities to collect, search, process, and evaluate data and information regarding the business activities of PMV, PMVS, and/or UUS, conducted at the offices of PMV, PMVS, and/or UUS, and at other places directly or indirectly related to the activities of PMV, PMVS, and/or UUS.
8. Examiner is an employee of the Financial Services Authority or another party appointed by the Financial Services Authority to conduct Direct Examination.
9. Direct Examination Order is a letter issued by the Financial Services Authority used by the Examiner as the basis for conducting Direct Examination.
10. Direct Examination Notification Letter is a letter issued by the Financial Services Authority delivered to the PMV, PMVS, and/or UUS to be examined.
11. Financial Services Authority, hereinafter abbreviated as OJK, is the Financial Services Authority as referred to in Law Number 21 of 2011 on the Financial Services Authority.

CHAPTER II
DIRECT EXAMINATION
Article 2
(1) In carrying out the regulatory and supervisory functions, OJK conducts Direct Examination of PMV, PMVS, and/or UUS.
(2) Direct Examination aims to:
a. ensure that periodic reports correspond to the actual state of PMV, PMVS, and/or UUS; b. obtain adequate assurance of the truthfulness of periodic reports; and
c. assess compliance with applicable regulations in the field of PMV, PMVS, and/or UUS.

Article 3
(1) The implementation of Direct Examination of each PMV, PMVS, and/or UUS is conducted:
a. periodically at least 1 (one) time in 3 (three) years; or b. at any time when necessary.
(2) The implementation of periodic Direct Examination as referred to in paragraph (1) letter a includes Direct Examination of the substance of periodic reports and compliance with applicable statutory regulations on PMV, PMVS, and/or UUS. (3) Direct Examination at any time as referred to in paragraph (1) letter b is a special Direct Examination conducted when:
a. based on the analysis of periodic reports submitted by PMV, PMVS, and/or UUS, it is suspected that the management of the business activities of PMV, PMVS, and/or UUS deviates from statutory regulations in the field of PMV, PMVS, and/or UUS; b. based on research on information obtained or complaint letters received by OJK, it is suspected that the management of the business activities of the concerned PMV, PMVS, and/or UUS deviates from statutory regulations in the field of PMV, PMVS, and/or UUS;
c. PMV, PMVS, and/or UUS is suspected of not fulfilling obligations related to the implementation of customer due diligence principles; and/or
d. based on considerations and reasons causing OJK to need to conduct Direct Examination.

Article 4
(1) Direct Examination as referred to in Article 3 is conducted by Examiners based on the Direct Examination Order.
(2) Before conducting Direct Examination as referred to in paragraph (1), the Direct Examination Notification Letter is first delivered to PMV, PMVS, and/or UUS.
(3) The Direct Examination Notification Letter as referred to in paragraph (2) is delivered no later than 3 (three) working days before the date of implementation of the Direct Examination activity. (4) The provisions of paragraph (2) are excluded if it is suspected that the delivery of the Direct Examination Notification Letter may cause actions to obscure the actual state or actions to hide data, information, or reports required in the implementation of Direct Examination.

Article 5
(1) Direct Examination as referred to in Article 3 is conducted based on direct examination guidelines.
(2) Further provisions regarding the direct examination guidelines as referred to in paragraph (1) are regulated in a Circular Letter of the Board of Commissioners of OJK.

Article 6
(1) OJK may appoint other parties as Examiners.
(2) The appointment of other parties as referred to in paragraph (1) is stipulated in a work order letter.
(3) Further provisions regarding the appointment of other parties as referred to in paragraph (1) are regulated in an OJK Circular Letter.

Article 7
(1) Direct Examination as referred to in Article 3 is conducted through the following stages:
a. preparation of Direct Examination; b. implementation of Direct Examination; and
c. reporting of Direct Examination results.
(2) Preparation of Direct Examination as referred to in paragraph (1) letter a is made based on the analysis of periodic reports and other supporting data.
(3) Implementation of Direct Examination as referred to in paragraph (1) letter b is conducted by:
a. Direct Examination at the offices of PMV, PMVS, and/or UUS; b. Direct Examination at the OJK office; and/or
c. Direct Examination at other places determined by OJK.
(4) To support the implementation of Direct Examination as referred to in paragraph (1) letter b, confirmation may be conducted with third parties related to the concerned PMV, PMVS, and/or UUS.
(5) Reporting of Direct Examination results as referred to in paragraph (1) letter c must be prepared based on data or information obtained during the Direct Examination process, which is documented in Direct Examination working papers.

Article 8
(1) At the time Direct Examination is about to begin, the Examiner shows the Direct Examination Order and the Examiner's identification.
(2) In the event that the Examiner cannot meet the provisions as referred to in paragraph (1), the PMV, PMVS, and/or UUS to be examined may refuse the Direct Examination.
(3) In the event that the Examiner has shown the Direct Examination Notification Letter, Direct Examination Order, and the Examiner's identification, the Examiner has the right to:
a. examine and/or borrow books, notes, and supporting documents, including outputs from data processing or other electronic data processing media and devices; b. obtain oral and/or written information from the examined PMV, PMVS, and/or UUS;
c. enter places or rooms suspected to be places storing documents, money, or goods that can provide clues about the state of the examined PMV, PMVS, and/or UUS; and
d. obtain information and/or data required from third parties having a relationship with the examined PMV, PMVS, and/or UUS.
(4) Examiners are obligated to keep confidential data and/or information obtained during Direct Examination from unauthorized parties, except in the course of carrying out functions, tasks, and authorities based on a decision of the OJK Board of Commissioners or as mandated by Law.

Article 9
(1) With regard to the provisions as referred to in Article 8 paragraph (3), the examined PMV, PMVS, and/or UUS is prohibited from refusing and/or hindering the smooth process of Direct Examination. (2) In the implementation of Direct Examination, the examined PMV, PMVS, and/or UUS is obligated to:
a. fulfill requests to provide or lend books, notes, and documents required for the smoothness of Direct Examination during the Direct Examination process; b. provide necessary information in writing and/or orally;
c. provide access to Examiners to enter places or rooms deemed necessary;
d. provide information and/or data required from third parties having a relationship with the examined PMV, PMVS, and/or UUS; and e. cooperate in other matters necessary in Direct Examination.
(3) PMV, PMVS, and/or UUS is considered to hinder the smooth process of Direct Examination if it does not fulfill the obligations as referred to in paragraph (2) and/or fulfills the obligations as referred to in paragraph (2) but the books, notes, documents, or information provided are incorrect or misleading. (4) In the event that PMV, PMVS, and/or UUS is considered to hinder the smooth process of Direct Examination as referred to in paragraph (3), it will be documented in the Direct Examination results report. (5) In the event that PMV, PMVS, and/or UUS refuses Direct Examination as referred to in paragraph (1), the Examiner establishes a record of refusal of Direct Examination with or without the signature of the Board of Directors of PMV or PMVS.

Article 10
(1) After the implementation of Direct Examination as referred to in Article 7 paragraph (1) letter b ends, the Examiner prepares the Direct Examination results report.
(2) The Direct Examination results report as referred to in paragraph (1) consists of:
a. interim Direct Examination results report; and b. final Direct Examination results report.
(3) The Direct Examination results report as referred to in paragraph (2) is determined by OJK.

Article 11
(1) OJK delivers the interim Direct Examination results report to the Board of Directors of PMV or PMVS no later than 30 (thirty) working days after the end of the implementation of Direct Examination. (2) The examined PMV or PMVS may submit comments on the interim Direct Examination results report as referred to in paragraph (1) to OJK no later than 15 (fifteen) working days after the receipt of the interim Direct Examination results report by PMV or PMVS. (3) In the event that after the time limit as referred to in paragraph (2) has passed, PMV or PMVS does not provide written comments on the interim Direct Examination results report, OJK establishes the interim Direct Examination results report as the final Direct Examination results report no later than 15 (fifteen) working days after the time limit as referred to in paragraph (2) ends. (4) In the event that PMV or PMVS submits comments that do not contain objections to the interim Direct Examination results report already submitted, so that discussion is not necessary, OJK establishes the interim Direct Examination results report as the final Direct Examination results report no later than 15 (fifteen) working days after the receipt of comments from the examined PMV or PMVS. (5) In the event that PMV or PMVS submits comments containing objections to the interim Direct Examination results report already submitted and discussion of the interim Direct Examination results report is necessary, OJK invites the concerned PMV or PMVS to conduct discussion on the submitted comments. (6) The discussion process on comments on the interim Direct Examination results report as referred to in paragraph (5) is conducted no later than 15 (fifteen) working days since the receipt of the comment letter. (7) Based on the results of the discussion as referred to in paragraph (6), OJK establishes the interim Direct Examination results report as the final Direct Examination results report no later than 15 (fifteen) working days after the completion of the discussion with the examined PMV or PMVS.

CHAPTER III
FOLLOW-UP OF DIRECT EXAMINATION RESULTS
Article 12
(1) In order to follow up on the recommendations contained in the final Direct Examination results report as referred to in Article 11 paragraph (7), PMV, PMVS, and/or UUS is obligated to report the implementation of follow-up steps to OJK. (2) The obligation to report the implementation of follow-up steps as referred to in paragraph (1) ends when OJK assesses that PMV, PMVS, and/or UUS has implemented the follow-up steps as referred to in paragraph (1). (3) OJK monitors the implementation of follow-up by PMV, PMVS, and/or UUS as referred to in paragraph (1) as part of supervisory activities regarding PMV, PMVS, and/or UUS.

CHAPTER IV
SANCTIONS
Article 13
(1) PMV and PMVS that do not fulfill the provisions as referred to in Article 9 paragraph (1) and paragraph (2), and/or Article 12 paragraph (1) are subject to administrative sanctions in stages consisting of:
a. warning; b. suspension of business activities; or
c. revocation of business license.
(2) Warning sanctions as referred to in paragraph (1) letter a are given in writing by OJK to PMV or PMVS up to 3 (three) times consecutively with a validity period of each of no more than 2 (two) months. (3) In the event that before the validity period of the warning sanctions as referred to in paragraph (2) ends, PMV or PMVS has fulfilled the provisions as referred to in paragraph (1), OJK revokes the warning sanctions. (4) In the event that the validity period of the third warning sanctions as referred to in paragraph (2) ends and PMV or PMVS still does not fulfill the provisions as referred to in paragraph (1), OJK imposes sanctions on the suspension of business activities. (5) Sanctions on the suspension of business activities as referred to in paragraph (1) letter b are given in writing by OJK to the concerned PMV or PMVS, and the suspension of business activities is valid for 6 (six) months since the suspension of business activities sanction letter is issued. (6) If the validity period of warning sanctions as referred to in paragraph (2) and sanctions on the suspension of business activities as referred to in paragraph (5) ends on a holiday, the warning sanctions and sanctions on the suspension of business activities are valid until the first working day following. (7) PMV or PMVS subject to sanctions on the suspension of business activities as referred to in paragraph (4) is prohibited from conducting business activities except to fulfill the Investment and Financing to Assets Ratio minimum provisions as regulated in the Financial Services Authority Regulation on the management of venture capital company business. (8) In the event that before the validity period of sanctions on the suspension of business activities as referred to in paragraph (5) ends, PMV or PMVS has fulfilled the provisions as referred to in paragraph (1), OJK revokes the sanctions on the suspension of business activities. (9) In the event that sanctions on the suspension of business activities as referred to in paragraph (5) are still valid and PMV or PMVS continues to conduct Venture Capital Business or Sharia Venture Capital Business, OJK may directly impose sanctions on the revocation of business license. (10) In the event that until the validity period of sanctions on the suspension of business activities as referred to in paragraph (5) ends, PMV or PMVS still does not fulfill the provisions as referred to in paragraph (1), OJK revokes the business license of the concerned PMV or PMVS. (11) OJK may announce sanctions on the suspension of business activities as referred to in paragraph (4) or sanctions on the revocation of business license as referred to in paragraph (9) and paragraph (10) to the public.

Article 14
(1) PMV that has a UUS and does not fulfill the provisions as referred to in Article 9 paragraph (1) and (2), and/or Article 12 paragraph (1) of this Financial Services Authority Regulation is subject to administrative sanctions consisting of:
a. warning; b. suspension of UUS activities; or
c. revocation of UUS license.
(2) Warning sanctions as referred to in paragraph (1) letter a are given in writing by OJK to PMV that has a UUS up to 3 (three) times consecutively with a validity period of each of no more than 2 (two) months. (3) In the event that before the validity period of the warning sanctions as referred to in paragraph (2) ends, PMV that has a UUS has fulfilled the provisions as referred to in paragraph (1), OJK revokes the warning sanctions. (4) In the event that the validity period of the third warning sanctions as referred to in paragraph (2) ends and PMV that has a UUS still does not fulfill the provisions as referred to in paragraph (1), OJK imposes sanctions on the suspension of UUS activities. (5) Sanctions on the suspension of business activities as referred to in paragraph (1) letter b are given in writing by OJK to PMV that has a UUS, and the suspension of UUS activities is valid for 6 (six) months since the suspension of UUS activities sanction letter is issued. (6) If the validity period of warning sanctions as referred to in paragraph (2) and sanctions on the suspension of UUS activities as referred to in paragraph (5) ends on a holiday, the warning sanctions and sanctions on the suspension of UUS activities are valid until the first working day following. (7) PMV that has a UUS subject to sanctions on the suspension of UUS activities as referred to in paragraph (4) is prohibited from conducting UUS activities except to fulfill the Investment and Financing to Assets Ratio minimum provisions as regulated in the Financial Services Authority Regulation on the management of venture capital company business. (8) In the event that before the validity period of sanctions on the suspension of UUS activities as referred to in paragraph (5) ends, PMV that has a UUS has fulfilled the provisions as referred to in paragraph (1), OJK revokes the sanctions on the suspension of UUS activities. (9) In the event that sanctions on the suspension of UUS activities as referred to in paragraph (5) are still valid and PMV that has a UUS continues to conduct Sharia Venture Capital Business, OJK may directly impose sanctions on the revocation of UUS license. (10) In the event that until the validity period of sanctions on the suspension of UUS activities as referred to in paragraph (5) ends, PMV that has a UUS still does not fulfill the provisions as referred to in paragraph (1), OJK revokes the UUS license of the concerned party. (11) OJK may announce sanctions on the suspension of UUS activities as referred to in paragraph (4) or sanctions on the revocation of UUS license as referred to in paragraph (9) and paragraph (10) to the public.

CHAPTER V
CLOSING PROVISIONS
Article 15
At the time this Financial Services Authority Regulation takes effect, regulations regarding Direct Examination of PMV, PMVS, and/or UUS are subject to this Financial Services Authority Regulation.

Article 16
This Financial Services Authority Regulation takes effect on the date of enactment.

In order for everyone to know it, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on 21 December 2015
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Enacted in Jakarta on 28 December 2015
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 2015 YEAR 2015 Copy in accordance with the original Legal Director 1 Legal Department signed Sudarmaji

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 37/POJK.05/2015
ON
DIRECT EXAMINATION OF VENTURE CAPITAL COMPANIES

I. GENERAL
Venture Capital Company (PMV) or Sharia Venture Capital Company (PMVS) is one of the non-bank financial institutions expected to be one of the alternative financial services that can be utilized by partner businesses and/or debtors to finance their business activities. With the existence of PMV or PMVS, it is expected to provide an impact on national economic growth. Therefore, effective and efficient management of business activities is required, implemented by PMV or PMVS to achieve the aforementioned objectives. To ensure the effectiveness of the management of PMV or PMVS business activities, including compliance with applicable regulations, supervision in the form of on-site supervision through Direct Examination is necessary.

With the ratification of Law Number 21 of 2011 on the Financial Services Authority on 22 November 2011, the supervisory duties over PMV or PMVS shifted to the Financial Services Authority as of 31 December 2012. Certainly, a legal basis is required for the Financial Services Authority to exercise its functions and authorities to supervise PMV or PMVS in the form of Direct Examination.

In this regard, the Financial Services Authority establishes the Financial Services Authority Regulation on Direct Examination of Venture Capital Companies.

II. ARTICLE BY ARTICLE
Article 1
Sufficiently clear.

Article 2
Sufficiently clear.

Article 3
Sufficiently clear.

Article 4
Sufficiently clear.

Article 5
Sufficiently clear.

Article 6
Paragraph (1)
What is meant by "other parties" includes public accountants, appraisers, legal consultants, and/or the National Sharia Council of the Indonesian Ulema Council (DSN MUI).
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.

Article 7
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
What is meant by "third parties" includes:
a. partner businesses and/or debtors of PMV, PMVS, and/or UUS;

b. shareholders or their equivalents of the VCC or VCCS; and/or
c. other parties related to the investment/financing transactions by the VCC, VCCS, and/or UUS.
Paragraph (5)
Clearly stated.
Article 8
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3)
Letter a
Clearly stated
Letter b
Clearly stated
Letter c
Clearly stated
Letter d
The term "third party" includes:
a. business partners and/or debtors of the VCC, VCCS, and/or UUS; b. shareholders or their equivalents of the VCC or VCCS; and/or
c. other parties related to the investment/financing
transactions by the VCC, VCCS, and/or UUS.
Paragraph (4)
Clearly stated
Article 9
Clearly stated.
Article 10
Clearly stated.

Article 11
Clearly stated.
Article 12
Clearly stated.
Article 13
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3)
Clearly stated.
Paragraph (4)
Clearly stated.
Paragraph (5)
Clearly stated.
Paragraph (6)
Clearly stated.
Paragraph (7)
The term "investment value, participation, and/or receivable value arising from business activities relative to the total assets of the VCC and VCCS" refers to the Investment and Financing to Assets Ratio (IFAR) as referred to in the Financial Services Authority Regulation concerning the Conduct of Business by Venture Capital Companies. Paragraph (8) Clearly stated. Paragraph (9) Clearly stated. Paragraph (10) Clearly stated. Paragraph (11) Clearly stated.

Article 14
Clearly stated.
Article 15
Clearly stated.
Article 16
Clearly stated.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5789

---