POJK on Guarantee of Stock Exchange Transaction Settlement

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 26/POJK.04/2014
ON
GUARANTEE OF STOCK EXCHANGE TRANSACTION SETTLEMENT BY THE GRACE OF THE ALMIGHTY GOD, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that one of the objectives of establishing the Clearing and Guarantee Institution is to carry out the Guarantee of Stock Exchange Transaction Settlement in an orderly, fair, and efficient manner as mandated in Law Number 8 of 1995 concerning Capital Markets; b. that the guarantee of Stock Exchange Transaction Settlement is one of the risk management activities in the Capital Markets sector requiring clear regulations and legal certainty;
c. that regulations regarding the Guarantee of Stock Exchange Transaction Settlement and regulations regarding the Guarantee Fund need to be adjusted in accordance with the development of guarantee and settlement practices in the Stock Exchange;
d. that based on the considerations referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning the Guarantee of Stock Exchange Transaction Settlement;

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 AUTHABILITY REGULATION CONCERNING THE GUARANTEE OF STOCK EXCHANGE TRANSACTION SETTLEMENT.

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

1. Guarantee of Stock Exchange Transaction Settlement is the obligation of the Clearing and Guarantee Institution to immediately and directly take over the responsibility of a Clearing Member who fails to fulfill their obligations related to the settlement of Stock Exchange Transactions and to settle such transactions at the same time and in the same manner as required of the relevant Clearing Member.
2. Guarantee Fund is a collection of funds and/or Securities administered and managed by the Clearing and Guarantee Institution used to carry out the Guarantee of Stock Exchange Transaction Settlement by the Clearing and Guarantee Institution.
3. Guarantee Reserve is the accumulation of funds derived from the allocation of the net profit of the Clearing and Guarantee Institution in the form of cash or cash equivalents used to carry out the Guarantee of Stock Exchange Transaction Settlement by the Clearing and Guarantee Institution.
4. Clearing is the process of determining rights and obligations arising from Stock Exchange Transactions.
5. Netting is a Clearing activity that creates rights and obligations for each Clearing Member to deliver or receive a certain balance of specific Securities for each type of Security traded and to receive or pay a certain balance of funds for all or each type of Security traded.
6. Clearing Member is a Stock Exchange Member or other party that meets the requirements to obtain Clearing and Guarantee of Stock Exchange Transaction Settlement services based on the regulations of the Clearing and Guarantee Institution.
7. Collateral is funds, Securities, and/or other financial instruments owned by the Clearing Member as a guarantee that can be used by the Clearing and Guarantee Institution to settle Stock Exchange Transactions and/or to settle the Clearing Member's obligations to the Clearing and Guarantee Institution.
8. Guarantee Account is the Clearing Member's Securities Account at the Custody and Settlement Institution to place Collateral in the form of Securities and/or funds that can be used by the Clearing and Guarantee Institution to settle Stock Exchange Transactions and/or to settle the Clearing Member's obligations to the Clearing and Guarantee Institution.
9. Stock Exchange Transaction is a contract made by Stock Exchange Members in accordance with the requirements determined by the Stock Exchange regarding the sale and purchase of Securities, borrowing and lending of Securities, or other contracts regarding Securities or the price of Securities.
10. Segregated Transaction is a Stock Exchange Transaction that is segregated from the Guarantee of Stock Exchange Transaction Settlement based on regulations established by the Stock Exchange and the Clearing and Guarantee Institution or by order of the Financial Services Authority.
11. Unsecured Security is a Security designated by the Stock Exchange and the Clearing and Guarantee Institution based on specific requirements, the settlement of which is not guaranteed.
12. Credit Network is Clearing Members, individually or collectively, who are obligated to cover the obligations of the Clearing and Guarantee Institution related to the Guarantee of Stock Exchange Transaction Settlement.
13. Credit Policy and Risk Control Committee is a committee appointed and dismissed by the Clearing and Guarantee Institution to provide credit policy and risk control input to support the implementation of the Guarantee of Stock Exchange Transaction Settlement.

CHAPTER II
GUARANTEE OF STOCK EXCHANGE TRANSACTION SETTLEMENT OBLIGATIONS
Article 2
The Stock Exchange is obligated to regulate each type of Stock Exchange Transaction as referred to in this Financial Services Authority Regulation regarding Securities Transactions and this Financial Services Authority Regulation.

Article 3
The Clearing and Guarantee Institution is obligated to implement the Guarantee of Stock Exchange Transaction Settlement in accordance with this Financial Services Authority Regulation, Stock Exchange regulations, and Clearing and Guarantee Institution regulations.

Article 4
The Clearing and Guarantee Institution is responsible for losses suffered by each party as a result of the Clearing and Guarantee Institution's delay in settling the Stock Exchange Transactions it guarantees.

Article 5
(1) Directors and/or Commissioners of the Clearing and Guarantee Institution may be held personally liable, individually or jointly, for all losses suffered by the Clearing and Guarantee Institution or other parties. (2) The liability of the directors and/or commissioners of the Clearing and Guarantee Institution as referred to in paragraph (1) arises from negligence or violation of regulations committed by the directors and/or commissioners of the Clearing and Guarantee Institution that causes the Clearing and Guarantee Institution to fail to fulfill its obligations for the Guarantee of Stock Exchange Transaction Settlement.

Article 6
(1) The Clearing and Guarantee Institution is obligated to ensure that all Stock Exchange Transaction orders from Clearing Members before execution have sufficient Collateral controlled by the Clearing and Guarantee Institution. (2) The obligation of the Clearing and Guarantee Institution as referred to in paragraph (1) is implemented with the following provisions:
a. Securities that cannot be sold quickly or that are temporarily suspended from trading on the Stock Exchange cannot be used as Collateral in the Guarantee Account except to guarantee the settlement of the sale of those Securities; b. The Clearing and Guarantee Institution is obligated to require Clearing Members to deposit additional Collateral in the Guarantee Account if the market value of such Collateral falls below the Collateral value limit established by the Credit Policy and Risk Control Committee and the Clearing and Guarantee Institution, and the Clearing and Guarantee Institution has the right to reject Stock Exchange Transaction orders from Clearing Members until such additional Collateral is fulfilled; and
c. The Clearing and Guarantee Institution is obligated to reject new Stock Exchange Transaction orders from Clearing Members who have a debit balance in their Collateral until the Collateral balance is positive or who fail to fulfill their settlement obligations to the Clearing and Guarantee Institution until such obligations are fulfilled.

Article 7
(1) In order to perform the function of the Guarantee of Stock Exchange Transaction Settlement, the Clearing and Guarantee Institution establishes a Guarantee Reserve.
(2) The establishment of the Guarantee Reserve by the Clearing and Guarantee Institution as referred to in paragraph (1) and its use are implemented with the following provisions:
a. the amount of allocation from the net profit of the Clearing and Guarantee Institution for the current year, allocated to the Guarantee Reserve, is determined by the General Meeting of Shareholders; and b. the use of the Guarantee Reserve does not require the approval of the General Meeting of Shareholders.

Article 8
(1) The Stock Exchange is obligated to enter into a contract with the Clearing and Guarantee Institution regarding the Guarantee of Stock Exchange Transaction Settlement.
(2) The contract between the Stock Exchange and the Clearing and Guarantee Institution as referred to in paragraph (1) must at least contain the following provisions:
a. the Clearing and Guarantee Institution has the authority to determine Clearing Members who are allowed to conduct Stock Exchange Transactions and Clearing Members who are prohibited from conducting Stock Exchange Transactions based on the results of guarantee risk analysis; b. the Stock Exchange is obligated to ensure that the Clearing and Guarantee Institution has facilities to analyze the risk level of Clearing Members and has the right to approve or reject each order before the order can be executed on the Stock Exchange;
c. the Clearing and Guarantee Institution has the right to know information related to the Guarantee Account of each Clearing Member and is obligated to have facilities to receive such information at all times and is obligated to establish Collateral requirements to be met by each Clearing Member;
d. the Clearing and Guarantee Institution is obligated to require each Clearing Member to submit the Stock Exchange shares they own as Collateral; e. the Clearing and Guarantee Institution may require each Clearing Member to ensure that majority shareholders and/or principal shareholders of the Clearing Member submit part or all of the Clearing Member's shares they own as Collateral; f. the Clearing and Guarantee Institution is obligated to require each Clearing Member to accept Credit Network responsibility in accordance with this Financial Services Authority Regulation; g. the Stock Exchange and the Clearing and Guarantee Institution are obligated to establish requirements and procedures for designating Unsecured Securities in accordance with this Financial Services Authority Regulation; h. the Stock Exchange and the Clearing and Guarantee Institution are obligated to establish requirements and procedures for designating Segregated Transactions in accordance with this Financial Services Authority Regulation;
i. the Stock Exchange and the Clearing and Guarantee Institution are obligated to establish parameters for the temporary suspension of trading of specific Securities and/or specific Clearing Members in order to implement guarantee risk management; and
j. the Clearing and Guarantee Institution is obligated to establish parameters for Clearing Member conditions declared to have failed to fulfill settlement obligations for Stock Exchange Transactions and actions taken by the Clearing and Guarantee Institution in handling the failure of such Clearing Members.

Article 9
(1) The Clearing and Guarantee Institution is obligated to enter into a contract with each Clearing Member regarding the Guarantee of Stock Exchange Transaction Settlement.
(2) The contract between the Clearing and Guarantee Institution and each Clearing Member as referred to in paragraph (1) must at least contain the following provisions:
a. the Clearing and Guarantee Institution is only responsible for performing the Guarantee of Stock Exchange Transaction Settlement to Clearing Members; b. the Guarantee of Stock Exchange Transaction Settlement by the Clearing and Guarantee Institution is based on the results of Clearing conducted via Netting for each Clearing Member established by the Clearing and Guarantee Institution;
c. the conditions of Clearing Members declared to have failed to fulfill settlement obligations for Stock Exchange Transactions and actions taken by the Clearing and Guarantee Institution in handling the failure of Clearing Members;
d. the Clearing Member's obligation to pay contributions to the Guarantee Fund as regulated in this Financial Services Authority Regulation and Clearing and Guarantee Institution regulations; and e. the Clearing Member's obligation to accept Credit Network responsibility in accordance with this Financial Services Authority Regulation and Clearing and Guarantee Institution regulations.

CHAPTER III
GUARANTEE FUND
Article 10
(1) Clearing Members are obligated to pay a sum of money as a contribution to the Guarantee Fund, which is non-withdrawable, to ensure the smoothness and security of Stock Exchange Transaction settlement. (2) The obligation of Clearing Members as referred to in paragraph (1) is implemented with the following provisions:
a. Guarantee Fund contributions come from initial contributions of new Clearing Members and contributions based on the transaction value of each Clearing Member; b. the determination of the initial contribution amount for new Clearing Members, including the collection procedure, is established in Clearing and Guarantee Institution regulations;
c. contributions based on transaction value as referred to in letter a are paid no later than the settlement day of Stock Exchange Transactions through the Clearing and Guarantee Institution; and
d. the determination of the contribution amount based on transaction value as referred to in letter a is regulated by a Circular Letter of the Financial Services Authority.

Article 11
(1) The Guarantee Fund can only be used by the Clearing and Guarantee Institution in the context of the Guarantee of Stock Exchange Transaction Settlement.
(2) The use of the Guarantee Fund as referred to in paragraph (1) is implemented with the following provisions:
a. if financial sources in the form of Guarantee Reserves and bank credits have been used but are insufficient to settle the obligations of Clearing Members who failed to fulfill their settlement obligations for Stock Exchange Transactions; and b. as a guarantee to obtain bank credits that are solely intended for the Guarantee of Stock Exchange Transaction Settlement. (3) The Guarantee Fund used to obtain bank credit as referred to in paragraph (2) letter b must first obtain approval from the Credit Policy and Risk Control Committee. (4) Each use of the Guarantee Fund as referred to in paragraph (2) must be reported by the Clearing and Guarantee Institution to the Financial Services Authority no later than 1 (one) working day following the use of the Guarantee Fund.

Article 12
The use of the Guarantee Fund to settle Stock Exchange Transactions must be repaid by the Clearing Member who failed to settle such Transactions.

Article 13
The Guarantee Fund is not the property of any specific party and is not distributed to anyone for any purpose except for the purposes referred to in Article 11 paragraph (2).

Article 14
(1) The Clearing and Guarantee Institution is obligated to manage the Guarantee Fund.
(2) In the event that the Financial Services Authority considers that the Clearing and Guarantee Institution is unable to manage the Guarantee Fund and cannot continue its functions, or there is no other party capable of performing the functions and responsibilities of the Clearing and Guarantee Institution, the Guarantee Fund must be handed over by the Clearing and Guarantee Institution to the Financial Services Authority for the Guarantee of Stock Exchange Transaction Settlement.

Article 15
(1) The Clearing and Guarantee Institution may charge fees for investment management services of the Guarantee Fund of at most 10% (ten percent) of the net income of the Guarantee Fund after tax. (2) The Financial Services Authority may determine other smaller limits on Guarantee Fund management service fees considering the financial condition of the Clearing and Guarantee Institution.

Article 16
(1) The Guarantee Fund can only be invested in bank deposits and/or Government Securities.
(2) The investment of the Guarantee Fund as referred to in paragraph (1) is implemented with the following provisions:
a. the composition and value limits of investments are in accordance with the determination of the Credit Policy and Risk Control Committee; and b. such Government Securities can be used as collateral or guarantee in securities sale with agreement to repurchase (repurchase agreement) transactions and/or securities borrowing and lending transactions with the Government and Bank Indonesia.

Article 17
In managing the Guarantee Fund, the Clearing and Guarantee Institution is obligated to meet the following provisions:
a. separating the storage, recording, and accounting of the Clearing and Guarantee Institution's assets from the Guarantee Fund's assets; b. providing secure storage for Guarantee Fund assets;
c. Guarantee Fund invested in bank deposits must be placed in banks approved by the Credit Policy and Risk Control Committee; and
d. Guarantee Fund invested in Government Securities must be stored in Securities Accounts at Custodians approved by the Credit Policy and Risk Control Committee.

Article 18
Investment returns from the Guarantee Fund must be added to the Guarantee Fund after deducting fees for investment management services by the Clearing and Guarantee Institution.

Article 19
(1) The Clearing and Guarantee Institution is obligated to submit monthly and annual financial reports of the Guarantee Fund to the Financial Services Authority.
(2) The reporting obligation as referred to in paragraph (1) is implemented with the following provisions:
a. reports are prepared and submitted separately from the financial reports of the Clearing and Guarantee Institution; b. reports are presented using applicable Financial Accounting Standards;
c. reports are signed by at least 1 (one) member of the Board of Directors of the Clearing and Guarantee Institution;
d. monthly reports are submitted no later than the 15th (fifteenth) day of the following month, with copies to the Credit Policy and Risk Control Committee and the Board of Commissioners of the Clearing and Guarantee Institution; and e. annual financial reports are submitted no later than 60 (sixty) days after the end of the fiscal year and are audited by accountants registered with the Financial Services Authority. (3) Costs related to accounting and audit services for the annual financial reports of the Guarantee Fund are charged to the Guarantee Fund, and the amount of such costs must first be approved by the Clearing and Guarantee Institution to the Credit Policy and Risk Control Committee. (4) In the event that the reporting deadline as referred to in paragraph (2) letters d and e falls on a holiday, the reports are submitted on 1 (one) working day following the holiday.

CHAPTER IV
GUARANTEE OF STOCK EXCHANGE TRANSACTION SETTLEMENT PROCEDURE
Article 20
Clearing Members are declared to have failed to fulfill their obligations related to the settlement of Stock Exchange Transactions if Clearing Members cannot fulfill part or all of their obligations to settle Stock Exchange Transactions in accordance with the time and manner regulated in Clearing and Guarantee Institution regulations.

Article 21
(1) In the event of Clearing Member failure as referred to in Article 20, the Clearing and Guarantee Institution is obligated to perform the function of the Guarantee of Stock Exchange Transaction Settlement. (2) The function of the Guarantee of Stock Exchange Transaction Settlement as referred to in paragraph (1) is implemented with financial sources and the following order:
a. Guarantee Reserve; b. Bank Credit, if there is already a contract between the Clearing and Guarantee Institution and the bank;
c. Guarantee Fund;
d. financial sources from other members of the Credit Network, if all financial sources as referred to in letters a, b, and c have been used but are insufficient, distributed as follows:

1. 20% (twenty percent) of the amount needed to pay the obligations of the Clearing and Guarantee Institution is divided equally among the remaining members of the Credit Network;
2. 80% (eighty percent) of the amount needed to pay the obligations of the Clearing and Guarantee Institution is divided among the remaining members of the Credit Network proportionally based on the Clearing value of each member of the Credit Network during the last 6 (six) months; and
3. the amount not paid within 30 (thirty) days by certain members of the Credit Network is redistributed among the remaining members of the Credit Network in accordance with items 1 and 2.

Article 22
The Financial Services Authority may take certain legal actions against Credit Network members who fail to fulfill their obligations as referred to in Article 21 paragraph (2) letter d item 3, considering proposals from the Clearing and Guarantee Institution.

Article 23
(1) Each use of financial sources as referred to in Article 21 paragraph (2) must be repaid from the financial sources of the Clearing Member who failed to settle the Stock Exchange Transactions. (2) Repayment as referred to in paragraph (1) is conducted as follows:
a. the Clearing and Guarantee Institution conducts the process of requesting fund deposits and/or using financial sources of the Clearing Member who failed to settle Stock Exchange Transactions that are under the control of the Clearing and Guarantee Institution no later than 2 (two) Trading Days after the use of financial sources as referred to in Article 21 paragraph (2); b. the Clearing and Guarantee Institution conducts the process of selling Securities in the Guarantee Account of the Clearing Member who failed to settle Stock Exchange Transactions no later than 10 (ten) Trading Days after the use of financial sources;
c. the Clearing and Guarantee Institution requests the revocation of Stock Exchange membership of the Clearing Member who failed to settle Stock Exchange Transactions, followed by the sale of Stock Exchange shares and/or the sale of shares of the Clearing Member who failed to settle Stock Exchange Transactions owned by majority shareholders no later than 60 (sixty) Trading Days after the use of financial sources; and
d. the Clearing and Guarantee Institution files a bankruptcy petition against the Clearing Member who failed to settle Stock Exchange Transactions with the Financial Services Authority no later than 90 (ninety) Trading Days after the use of financial sources, followed by liquidation and/or sale of the Clearing Member's assets. (3) The repayment of financial sources as referred to in paragraph (1) must be done in the following priority order:
a. Guarantee Fund; b. Credit Network;
c. Bank Credit; and
d. Guarantee Reserve.
(4) The Clearing and Guarantee Institution may conduct the process of requesting fund deposits and/or liquidation of other financial sources owned by the Clearing Member who failed to settle Stock Exchange Transactions as referred to in paragraph (2) letters a and b, on the same day as the use of financial sources as referred to in Article 21 paragraph (2).

Article 24
In the event that the financial sources as referred to in Article 23 paragraph (2) are still insufficient to repay the use of the Guarantee Fund used to settle the failure of Clearing Members in settling Stock Exchange Transactions, the shortfall in the repayment of the Guarantee Fund is done using the financial sources of other members of the Credit Network with a distribution mechanism as referred to in Article 21 paragraph (2) letter d, within a period of 1 (one) year after the use of the Guarantee Fund.

CHAPTER V
EXCLUDED STOCK EXCHANGE TRANSACTIONS
Article 25
(1) The Stock Exchange and the Clearing and Guarantee Institution may designate Unsecured Securities.
(2) Unsecured Securities must be announced to the public and reported to the Financial Services Authority by the Stock Exchange and the Clearing and Guarantee Institution no later than 2 (two) Trading Days before the Unsecured Securities take effect. (3) The designation of Unsecured Securities as referred to in paragraph (1) is implemented with the following provisions:
a. the requirements and procedures for designating Unsecured Securities must be established in Stock Exchange and Clearing and Guarantee Institution regulations; b. in establishing the requirements for Unsecured Securities as referred to in letter a, the Stock Exchange and the Clearing and Guarantee Institution must consider at least:

1. the composition of Security ownership, including the proportion of public ownership and the concentration of Security ownership;

2. the pattern...

3. the pattern, volume, and frequency of Securities transactions; and

4. the fluctuation of Security prices.
   c. the procedure for determining Unsecured Securities as referred to in letter a includes, among others, the data and information period used, the review period, and the procedure for announcing Unsecured Securities.
   (4) The Clearing and Guaranteeing Institution does not provide Guarantee of Stock Exchange Transaction Settlement for Stock Exchange Transactions regarding Unsecured Securities.

Article 26
(1) The Stock Exchange and the Clearing and Guaranteeing Institution may determine Segregated Transactions.
(2) The determination of Segregated Transactions as referred to in paragraph (1) must first obtain approval or be based on an order from the Otoritas Jasa Keuangan.
(3) Segregated Transactions must be announced to the public and reported to the Otoritas Jasa Keuangan by the Stock Exchange and the Clearing and Guaranteeing Institution no later than 2 (two) Trading Days after the determination of Segregated Transactions. (4) The determination of Segregated Transactions as referred to in paragraph (1) is carried out with the following provisions:
a. Segregated Transactions may be determined in cases including, but not limited to, indications of unfair transactions, high risk, and/or endangering market integrity; b. the requirements and procedures for determining Segregated Transactions must be established in the regulations of the Stock Exchange and the Clearing and Guaranteeing Institution;
c. in determining the requirements for Segregated Transactions as referred to in letter a, the Stock Exchange and the Clearing and Guaranteeing Institution must consider at least:

1. the condition of Clearing Members whose transactions can be applied as Segregated Transactions, including but not limited to the transaction value size that has the potential to be unable to be settled and the transaction pattern of the respective Clearing Member; and
2. the condition of Securities including but not limited to the pattern, volume, and frequency of Securities transactions, as well as the fluctuation of Security prices.
   d. the procedure for determining Segregated Transactions as referred to in letter b includes, among others, the data and information period used, the review period, and the announcement of the determination of Segregated Transactions. (5) The Clearing and Guaranteeing Institution may postpone the Settlement of Stock Exchange Transactions and/or not provide Guarantee of Stock Exchange Transaction Settlement for Segregated Transactions after obtaining the approval of the Otoritas Jasa Keuangan or based on an order from the Otoritas Jasa Keuangan.

CHAPTER VI
CREDIT POLICY AND RISK CONTROL COMMITTEE

Article 27
(1) In order to support the implementation of the Guarantee of Stock Exchange Transaction Settlement, the Clearing and Guaranteeing Institution must establish a Credit Policy and Risk Control Committee. (2) The establishment of the Credit Policy and Risk Control Committee as referred to in paragraph (1) is carried out with the following provisions:
a. the membership of the Credit Policy and Risk Control Committee must consist of 5 (five) directors from Clearing Members who are not affiliated with each other; and b. the membership of the Credit Policy and Risk Control Committee is determined by the Clearing and Guaranteeing Institution based on candidates proposed by the Clearing Members. (3) The Credit Policy and Risk Control Committee has duties and obligations including:
a. recommending risk management policies for the Guarantee of Stock Exchange Transaction Settlement to the Board of Directors and Board of Commissioners of the Clearing and Guaranteeing Institution; b. monitoring the risk management policies for the Guarantee of Stock Exchange Transaction Settlement;
c. recommending the percentage of the Clearing and Guaranteeing Institution's net profit that must be set aside to form the Guarantee Reserve to the Board of Directors, Board of Commissioners, and shareholders of the Clearing and Guaranteeing Institution; and
d. determining policies for the use and investment of the Guarantee Fund.
(4) The Credit Policy and Risk Control Committee must hold meetings at least once every 2 (two) months or whenever a specific condition requires a decision and/or recommendation from the Credit Policy and Risk Control Committee. (5) Every meeting of the Credit Policy and Risk Control Committee must create minutes or meeting records signed by at least 3 (three) committee members and stored.

Article 28
The Clearing and Guaranteeing Institution must submit to the Credit Policy and Risk Control Committee data and information related to the duties and obligations of the Credit Policy and Risk Control Committee as referred to in Article 27 paragraph (3) in the manner determined by the Credit Policy and Risk Control Committee.

Article 29
The requirements and procedures for selecting members of the Credit Policy and Risk Control Committee and the procedures for decision-making and/or recommendations of the Credit Policy and Risk Control Committee are further established in the regulations of the Clearing and Guaranteeing Institution.

CHAPTER VII
SANCTION PROVISIONS

Article 30
(1) Without prejudice to criminal provisions in the Capital Market, the Otoritas Jasa Keuangan has the authority to impose administrative sanctions on any party that violates the provisions of this Otoritas Jasa Keuangan Regulation, including parties causing the violation, in the form of:
a. written warning; b. fine, namely the obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business license; f. cancellation of approval; and g. cancellation of registration.
(2) Administrative sanctions as referred to in paragraph (1) letter b, letter c, letter d, letter e, letter f, or letter g may be imposed with or without being preceded by the imposition of an administrative sanction in the form of a written warning as referred to in paragraph (1) letter a. (3) Administrative fine sanctions as referred to in paragraph (1) letter b may be imposed separately or together with the imposition of sanctions as referred to in paragraph (1) letter c, letter d, letter e, letter f, or letter g.

Article 31
In addition to administrative sanctions as referred to in Article 30 paragraph (1), the Otoritas Jasa Keuangan may take certain actions against any party that violates the provisions of this Otoritas Jasa Keuangan Regulation.

Article 32
The Otoritas Jasa Keuangan may announce the imposition of administrative sanctions as referred to in Article 30 paragraph (1) and certain actions as referred to in Article 31 to the public.

CHAPTER VIII
TRANSITIONAL PROVISIONS

Article 33
The Stock Exchange and the Clearing and Guaranteeing Institution must have established regulations and facilities related to the Guarantee of Stock Exchange Transaction Settlement no later than December 31, 2015.

Article 34
This Otoritas Jasa Keuangan Regulation takes effect from the date of enactment, except for the provisions in Article 25 and Article 26 which take effect from January 1, 2016.

CHAPTER IX
CLOSING PROVISIONS

Article 35
At the time this Otoritas Jasa Keuangan Regulation takes effect:
a. The Decision of the Chairman of Bapepam Number Kep-46/PM/2004 dated December 9, 2004 concerning the Guarantee of Stock Exchange Transaction Settlement, along with Regulation Number III.B.6 which is its appendix; and b. The Decision of the Chairman of Bapepam Number Kep-47/PM/2004 dated December 9, 2004 concerning the Guarantee Fund, along with Regulation Number III.B.7 which is its appendix; are declared revoked and not applicable, except for the provisions of number 3 letter a of Regulation Number III.B.7 Appendix of the Decision of the Chairman of Bapepam Number Kep-47/PM/2004 dated December 9, 2004 concerning the Guarantee Fund which remain applicable until the issuance of the Circular Letter from the Otoritas Jasa Keuangan as referred to in Article 10 paragraph (2) letter d.

To ensure that everyone knows it, ordering the enactment of this Otoritas Jasa Keuangan Regulation by placing it in the State Bulletin of the Republic of Indonesia.

Established in Jakarta
On the date of November 19, 2014
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY,
Signed,
MULIAMAN D. HADAD

Enacted in Jakarta
On the date of November 19, 2014
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Signed,
YASONNA H. LAOLY

STATE BULLETIN OF THE REPUBLIC OF INDONESIA YEAR 2014 NUMBER 361 Copy in accordance with the original Director of Legal Affairs I Department of Law, Signed, Tini Kustini

EXPLANATION
OF
FINANCIAL SERVICES AUTHABILITY REGULATION
NUMBER 26/POJK.04/2014
CONCERNING
GUARANTEE OF STOCK EXCHANGE TRANSACTION SETTLEMENT

I. GENERAL
Several provisions in Regulation Number III.B.6 concerning the Guarantee of Stock Exchange Transaction Settlement and Regulation Number III.B.7 concerning the Guarantee Fund need to be adjusted to align with the recommendations of the International Organization of Securities Commissions (IOSCO) and to provide a legal basis for handling the failure of Stock Exchange Transactions identified as unfair transactions and the use of the Guarantee Fund for settlement in cases of unfair Stock Exchange Transactions.

IOSCO, as an international capital market regulator organization, has provided guidelines and policies for its members to increase high-standard regulations to achieve a fair and efficient market. One of the guidelines and policies issued by IOSCO is a recommendation related to an institution formed to protect market participants from counterparty risk in stock exchange transactions, namely the Central Counterparty (CCP). One of IOSCO's recommendations states that CCP failure procedures must be made as clear as possible and include conditions considered or categorized as stock exchange transaction failure and the methods used to identify the existence of failure.

Several IOSCO recommendations and common practices not yet adopted in Regulation Number III.B.6 concerning the Guarantee of Stock Exchange Transaction Settlement and Regulation Number III.B.7 concerning the Guarantee Fund include provisions related to netting, Unsecured Securities, Segregated Transactions, contract adjustments between the Stock Exchange and the Clearing and Guaranteeing Institution, contracts between the Clearing and Guaranteeing Institution and Clearing Members, the order of use and financial sources in guarantee, as well as contributions and the use of the Guarantee Fund. Therefore, it is deemed necessary to refine the provisions in Regulation Number III.B.6 concerning the Guarantee of Stock Exchange Transaction Settlement and Regulation Number III.B.7 concerning the Guarantee Fund by issuing this Otoritas Jasa Keuangan Regulation. Several technical provisions will be established in the regulations of the Stock Exchange and the Clearing and Guaranteeing Institution as Self Regulatory Organizations (SRO) and inter-SRO agreements after this Otoritas Jasa Keuangan Regulation is issued.

II. ARTICLE BY ARTICLE

Article 1
Clear enough.

Article 2
At the time this Otoritas Jasa Keuangan Regulation is issued, the Otoritas Jasa Keuangan Regulation related to Securities Transactions is Regulation Number III.A.10 concerning Securities Transactions, Appendix of the Decision of the Chairman of the Capital Market Supervisory Board Number Kep-42/PM/1997 dated December 26, 1997.

Article 3
Clear enough.

Article 4
The Clearing and Guaranteeing Institution is not responsible for losses suffered by other parties due to the delay in the settlement of Stock Exchange Transactions if the delay occurs due to force majeure that cannot be avoided by the Clearing and Guaranteeing Institution.

Article 5
Clear enough.

Article 6
Clear enough.

Article 7
Clear enough.

Article 8
Paragraph (1)
Clear enough.
Paragraph (2)
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
Clear enough.
Letter d
Clear enough.
Letter e
The term 'part or all of the shares of the Clearing Member owned by the majority shareholder and/or main shareholder' is limited to shares owned in the Clearing Member.
Letter f
Clear enough.
Letter g
Clear enough.
Letter h
Clear enough.
Letter i
Clear enough.
Letter j
Clear enough.

Article 9
Clear enough.

Article 10
Clear enough.

Article 11
Clear enough.

Article 12
The Guarantee Fund must be returned first by the failed Clearing Member; in the event that the return from the failed Clearing Member is insufficient, it will be jointly covered by the Credit Network Members.

Article 13
Clear enough.

Article 14
Clear enough.

Article 15
Clear enough.

Article 16
Clear enough.

Article 17
Letter a
Clear enough.
Letter b
Guarantee Fund assets are deposits, cash, Government Securities (SBN), and current accounts.
Letter c
Clear enough.
Letter d
Clear enough.

Article 18
Clear enough.

Article 19
Clear enough.

Article 20
Clear enough.

Article 21
Clear enough.

Article 22
Certain legal actions may include filing a bankruptcy petition against Credit Network members. This action is carried out by considering and adjusting to the applicable legislation for Securities Companies and other parties who are Credit Network Members.

Article 23
Paragraph (1)
Clear enough.
Paragraph (2)
Letter a
The term 'Trading Day' refers to the day when Securities trading is held at the Stock Exchange.
Letter b
Clear enough.
Letter c
Shares owned by the majority shareholder that can be sold by the Clearing and Guaranteeing Institution are only shares pledged by the Clearing Member to the Clearing and Guaranteeing Institution. Letter d Clear enough. Paragraph (3) Clear enough. Paragraph (4) Clear enough.

Article 24
Clear enough.

Article 25
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
Announcement to the public can be conducted, among others, through the Stock Exchange website and the Clearing and Guaranteeing Institution website.
Paragraph (4)
Clear enough.

Article 26
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
Letter a
Unfair transactions include but are not limited to criminal acts in the Capital Market as regulated in Articles 95 to 99 of Law Number 8 of 1995 concerning the Capital Market.
Letter b
Clear enough.
Letter c
Clear enough.
Letter d
Announcement of the determination of Segregated Transactions to the public can be conducted, among others, through the Stock Exchange website and the Clearing and Guaranteeing Institution website. Paragraph (5) The decision to postpone the Settlement of Stock Exchange Transactions and/or not to provide Guarantee of Stock Exchange Transaction Settlement for Segregated Transactions is based on the results of the review conducted by the Otoritas Jasa Keuangan regarding the application from the Stock Exchange and the Clearing and Guaranteeing Institution.

Article 27
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
Clear enough.
Paragraph (5)
Documentation of minutes or meeting records can be requested by the Otoritas Jasa Keuangan at any time.

Article 28
Clear enough.

Article 29
Clear enough.

Article 30
Clear enough.

Article 31
Clear enough.

Article 32
Clear enough.

Article 33
Clear enough.

Article 34
Clear enough.

Article 35
Clear enough.

SUPPLEMENT TO THE STATE BULLETIN OF THE REPUBLIC OF INDONESIA NUMBER 5635