POJK on Guidelines for the Implementation of Investment Manager Functions

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
EXTRACT
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 24/POJK.04/2014
CONCERNING
GUIDELINES FOR THE IMPLEMENTATION OF INVESTMENT MANAGER FUNCTIONS BY THE GRACE OF GOD ALMIGHTY, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in order to ensure professionalism and customer protection, Investment Managers need to improve the quality of their functions; b. that based on the considerations referred to in letter a, it is necessary to establish a Financial Services Authority Regulation concerning Guidelines for the Implementation of Investment Manager Functions; Recalling:

1. Law Number 8 of 1995 concerning Capital Markets (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING GUIDELINES FOR THE IMPLEMENTATION OF INVESTMENT MANAGER FUNCTIONS.

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

1. Investment Manager is a Party whose business activity manages Securities Portfolios for customers or manages collective investment portfolios for a group of customers, except insurance companies, pension funds, and banks that conduct their own business activities based on applicable laws and regulations.
2. Deputy Investment Manager is an individual who acts on behalf of the interests of a Securities Company conducting business as an Investment Manager.
3. Investment Committee is a committee tasked with directing and supervising the Investment Management Team in implementing investment policies and strategies.
4. Investment Management Team is a team tasked with managing Securities Portfolios for customers or collective investment portfolios for the benefit of a group of customers.
5. Risk Management is a series of procedures and methodologies used to identify, measure, monitor, and control risks arising from the business activities of an Investment Manager.

CHAPTER II
INVESTMENT MANAGER FUNCTIONS
Article 2
In conducting their activities, Investment Managers are required to have and implement the following functions:
a. investment and research function; b. trading function;
c. securities transaction settlement function;
d. risk management, compliance, and internal audit function; e. marketing and customer complaint handling function; f. information technology function; g. accounting and finance function; and h. human resource development function.

Article 3
(1) Investment Managers are required to separate the implementation of the investment and research function as referred to in Article 2 letter a from the trading function as referred to in Article 2 letter b, the securities transaction settlement function as referred to in Article 2 letter c, and the risk management, compliance, and internal audit function as referred to in Article 2 letter d. (2) Coordinators and employees implementing one of the four functions referred to in paragraph (1) are prohibited from holding concurrent positions as coordinators and employees in the other three functions. (3) Board of Directors members are prohibited from acting as coordinators for the investment and research function as referred to in Article 2 letter a, the trading function as referred to in Article 2 letter b, and/or the securities transaction settlement function as referred to in Article 2 letter c. (4) Board of Directors members acting as coordinators for the risk management, compliance, and internal audit function as referred to in Article 2 letter d are prohibited from holding concurrent positions as coordinators for other functions.

Article 4
Investment Managers are required to have standard operating procedures for the implementation of the functions referred to in Article 2 and ensure that standard operating procedures are complied with and implemented by coordinators and all employees implementing those functions.

Article 5
In the event that the business activities of an Investment Manager are conducted within a Securities Company conducting business as an Underwriter and/or Securities Broker, then:
a. standard operating procedures for the implementation of Investment Manager functions must be separate from standard operating procedures for business activities as an Underwriter and/or Securities Broker; and b. the implementation of the research function, risk management, compliance, and internal audit function, accounting and finance function, information technology function, and/or human resource development function in the business activities of an Investment Manager and Underwriter and/or Securities Broker may be implemented by a single work unit implementing those functions.

CHAPTER III
IMPLEMENTATION OF INVESTMENT MANAGER FUNCTIONS First Section Investment and Research Function
Article 6
The implementation of the investment and research function must be coordinated by an employee who holds a Deputy Investment Manager license and has at least 3 (three) years of work experience in the field of investment management.

Article 7
In implementing the investment function, the coordinator of the investment and research function as referred to in Article 6 is responsible for:
a. making the best investment decisions for the benefit of customers; b. creating and maintaining records and/or working papers for the purpose of making investment decisions for the benefit of customers;
c. conducting periodic analysis of investment product performance;
d. ensuring the consistency between investment decisions taken and:

1. investment policies and strategies established in the Securities Portfolio management agreement for customers or collective investment portfolio agreements for a group of customers; and
2. investment policies and strategies established by the Investment Committee;
   e. ensuring that every investment decision taken is made based on rational considerations and supported by sufficient research results; and f. applying prudence principles and Risk Management, including:
3. considering potential investment risks and actions to be taken if such investment risks occur; and
4. having clear division of authority in determining transaction volumes.

Article 8
(1) The investment function is performed by an Investment Management Team consisting of at least 2 (two) people, including a team leader and team members.
(2) The team leader and members of the Investment Management Team must hold a Deputy Investment Manager license from the Financial Services Authority.
(3) The Investment Management Team is prohibited from holding concurrent positions as coordinators or implementers of the trading function as referred to in Article 2 letter b, the securities transaction settlement function as referred to in Article 2 letter c, and/or the risk management, compliance, and internal audit function as referred to in Article 2 letter d.

Article 9
(1) The implementation of the investment function is based on directives from the Investment Committee.
(2) The Investment Committee as referred to in paragraph (1) must consist of at least 2 (two) people who have at least 2 (two) years of experience in the Capital Markets and/or financial fields. (3) The Investment Committee as referred to in paragraph (1) must:
a. establish investment policies and strategies; and b. supervise the implementation of investment management activities conducted by the Investment Management Team.
(4) Members of the Investment Committee are prohibited from:
a. holding concurrent positions as coordinators and implementers of the trading function as referred to in Article 2 letter b, the securities transaction settlement function as referred to in Article 2 letter c, and the risk management, compliance, and internal audit function as referred to in Article 2 letter d; and/or b. holding concurrent positions as members of the Investment Management Team for the same 1 (one) investment product.

Article 10
In implementing the research function, the coordinator of the investment and research function as referred to in Article 6 is responsible for:
a. conducting research and analysis of macroeconomic conditions and industrial sectors; b. conducting research and analysis of Securities in investment portfolios that are or will be included in the portfolio; and
c. creating and documenting records and research result reports.

Second Section
Trading Function
Article 11
The implementation of the trading function as referred to in Article 2 letter b must meet the following requirements:
a. the implementation of the trading function must be coordinated by a coordinator who is an employee holding a Deputy Securities Company license from the Financial Services Authority and has at least 2 (two) years of work experience in the Capital Markets and/or financial fields; b. the coordinator of the trading function is responsible for:

1. executing transactions for Securities determined by the investment function at the best price and time for the benefit of customers; and
2. coordinating with the coordinator of the investment and research function in selecting Securities Brokers, considering among other factors the costs charged and services provided by such Securities Brokers.

Third Section
Securities Transaction Settlement Function
Article 12
The implementation of the securities transaction settlement function as referred to in Article 2 letter c must meet the following requirements:
a. the implementation of the securities transaction settlement function must be coordinated by a coordinator who is an employee holding a Deputy Securities Company license from the Financial Services Authority and has at least 2 (two) years of work experience in the Capital Markets and/or financial fields; b. the coordinator of the securities transaction settlement function is responsible for:

1. reconciling transaction data with related parties such as Securities Brokers and Custodian Banks; and
2. cross-checking data existing in the Securities administration of Mutual Fund portfolios or products managed by the Investment Manager.

Fourth Section
Risk Management, Compliance, and Internal Audit Function
Article 13
(1) The implementation of the risk management, compliance, and internal audit function must be coordinated by a coordinator who is a unit head, Board of Directors member, or an official at a level below the Board of Directors. (2) The coordinator of the risk management, compliance, and internal audit function as referred to in paragraph (1) must:
a. hold a Deputy Investment Manager license from the Financial Services Authority and have at least 3 (three) years of work experience holding managerial positions in institutions operating in the Capital Markets and/or financial fields; b. be established as part of the Investment Manager's organizational structure and have a direct reporting line to the Board of Commissioners; and
c. act independently and have unlimited access to other Investment Manager functions related to their duties to ensure compliance with the implementation of Investment Manager functions.

Article 14
In implementing the risk management function, the coordinator of the risk management, compliance, and internal audit function is responsible for:
a. formulating Risk Management strategies; b. updating Risk Management strategies if:

1. there are changes and/or additions to the Investment Manager's activities; and/or
2. there are new regulations and/or changes to Financial Services Authority Regulations or other related regulations;
   c. periodically monitoring and reviewing the implementation of Risk Management strategies;
   d. monitoring overall risk positions and per risk type; and e. applying Risk Management effectively and in accordance with the size and complexity of the business and the capabilities of the Investment Manager.

Article 15
The application of the risk management function as referred to in Article 14 letter c must be conducted based on Risk Management strategies containing at least:
a. identification of all risks that may arise in Investment Manager activities; b. explanations regarding the causes of such risks;
c. identification of the likelihood of such risks occurring;
d. explanations regarding the implications of such risks occurring; and e. steps that must be taken if such risks occur.

Article 16
In implementing the compliance function, the coordinator of the risk management, compliance, and internal audit function is responsible for:
a. ensuring the Investment Manager's compliance with applicable laws and regulations; b. acting as a liaison officer with the Financial Services Authority;
c. formulating compliance strategies;
d. updating compliance strategies if:

1. there are changes and/or additions to the Investment Manager's activities; and/or
2. there are new regulations and/or changes to Financial Services Authority Regulations or other related regulations;
   e. disseminating and socializing compliance manuals, policies, procedures, and other compliance-related information to relevant parties within the Investment Manager; f. conducting supervision and ensuring the implementation of business continuity plans in accordance with established company policies; g. ensuring employees receive training and education related to compliance; h. formulating and submitting annual work plans for the compliance function to the Board of Commissioners, containing activities and schedules for compliance function activities;
   i. formulating and submitting mid-year and annual reports on the implementation of the compliance function to the Board of Commissioners; and
   j. submitting incidental reports to the Board of Commissioners if there are suspicions of violations of Capital Markets laws and regulations by the Investment Manager and/or customers, no later than 2 (two) working days from the discovery of the suspected violation.

Article 17
The duties and responsibilities of the compliance function must be established in a written charter binding the Investment Manager functions.

Article 18
In implementing the internal audit function, the coordinator of the risk management, compliance, and internal audit function is responsible for ensuring the implementation of Investment Manager functions in accordance with written procedures/standard operating procedures.

Article 19
In implementing the internal audit function, the coordinator of the risk management, compliance, and internal audit function must:
a. plan, control, and record all internal audit activities; b. record all findings, conclusions, and recommendations from internal audit activities; and
c. prepare internal audit reports after each internal audit is conducted for submission to the Board of Commissioners.

Fifth Section
Marketing and Customer Complaint Handling Function
Article 20
The implementation of the marketing and customer complaint handling function must meet the following requirements:
a. the implementation of the marketing and customer complaint handling function must be coordinated by a coordinator who is an employee holding a Deputy Securities Company license from the Financial Services Authority and has at least 2 (two) years of work experience in the Capital Markets and/or financial fields; b. employees conducting Mutual Fund marketing activities must hold a Deputy Securities Company license or Deputy Mutual Fund Sales Agent license;
c. employees conducting marketing for collective investment portfolio management services other than Mutual Funds and investment management services must hold a Deputy Securities Company license;
d. in the event that the marketing and customer complaint handling functions are not implemented in a single unit, then:

1. the marketing function is coordinated by a coordinator who is an employee holding a Deputy Securities Company license from the Financial Services Authority and has at least 2 (two) years of work experience in the Capital Markets and/or financial fields; and
2. the customer complaint handling function is coordinated by a coordinator who is an employee holding a Deputy Securities Company license or Deputy Mutual Fund Sales Agent license from the Financial Services Authority and has at least 2 (two) years of work experience in the Capital Markets and/or financial fields.
3. The marketing function coordinator is responsible for coordinating:
   a) the process of opening Mutual Fund, collective investment portfolio (other than Mutual Funds), and investment management service accounts, considering policies and procedures established for the application of Customer Due Diligence principles; and b) investment product marketing activities accurately and professionally, applying customer risk profile regulations and other related regulations.
4. The customer complaint handling function coordinator is responsible for coordinating:
   a) the receipt and administration of customer complaints; b) the handling and follow-up of customer complaints; and c) the administration of complaint handling and follow-up results.

Sixth Section
Information Technology Function
Article 21
The implementation of the information technology function must meet the following requirements:
a. The information technology function is coordinated by a coordinator who is a Board of Directors member or an employee with at least 1 (one) year of work experience in the field of information technology; b. The information technology function coordinator is responsible for:

1. conducting periodic reviews and maintenance of information technology systems to ensure:
   a) information technology systems can support Investment Manager operational activities to run smoothly; and b) information technology systems used are suitable for electronic reporting activities to the Financial Services Authority so that reporting activities can be carried out in accordance with regulations; and
2. conducting periodic data backup storage.

Seventh Section
Human Resource Development Function
Article 22
The implementation of the human resource development function must meet the following requirements:
a. the human resource development function is coordinated by a coordinator who is a Board of Directors member or an employee with at least 1 (one) year of work experience in the field of human resources; b. the human resource development function coordinator is responsible for:

1. formulating and implementing training programs to improve employees' technical capabilities and compliance with employee codes of ethics and behavioral standards;
2. conducting screening procedures for the acceptance of new employees in accordance with standard operating procedures and applicable regulations; and
3. maintaining records and documents related to the human resource development function, including but not limited to documents related to training and personnel administration.

Eighth Section
Accounting and Finance Function
Article 23
The implementation of the accounting and finance function must meet the following requirements:
a. the accounting and finance function is coordinated by a coordinator who is a Board of Directors member or an employee with at least 1 (one) year of work experience in the field of accounting and finance; b. the accounting and finance function coordinator is responsible for:

1. planning and managing accounting and finance activities; and
2. ensuring that annual financial reports, mid-year financial reports, monthly Investment Manager activity reports, Adjusted Net Working Capital reports, and other reports submitted to the Financial Services Authority are prepared based on accurate data and in accordance with Financial Services Authority regulations and Accounting Standards.

CHAPTER IV
TRANSFER OF FUNCTION IMPLEMENTATION
Article 24
Investment Managers may transfer the implementation of the information technology function, human resource development function, and accounting and finance function to service providers in the form of legal entities, while still observing regulations related to the implementation of these functions in this Financial Services Authority Regulation and applicable laws and regulations.

Article 25
In the event that an Investment Manager transfers functions as referred to in Article 24, the Investment Manager is responsible for the behavior and activities conducted by the service provider receiving the transfer of functions from the said Investment Manager.

Article 26
Investment Managers transferring the implementation of functions as referred to in Article 24 must ensure that the service provider receiving the transfer of function implementation is a professional with the capacity and capability standards to perform the functions and is able to fulfill obligations in accordance with the function transfer agreement.

Article 27
Investment Managers are required to have and implement standard operating procedures to supervise the behavior and activities of service providers receiving the transfer of Investment Manager functions.

Article 28
The transfer of implementation of the information technology function, human resource development function, and accounting and finance function may only be conducted to service providers under the following conditions:
a. Investment Managers are required to report information regarding the planned transfer of implementation of the information technology function, human resource development function, and accounting and finance function to the Financial Services Authority in accordance with the report format for the planned transfer of functions as contained in the Appendix, which is an integral part of this Financial Services Authority Regulation. b. Before appointing a service provider to implement the information technology function, human resource development function, and accounting and finance function, Investment Managers must conduct due diligence on the service provider, including among other things:

1. the service provider's capability in implementing Investment Manager functions;

2. the service provider's capability to fulfill obligations in accordance with the agreement;

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

4. reputation factors;

5. insurance coverage by the service provider (if any);

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

7. the adequacy and sufficiency of resources possessed by the service provider, if having agreements for the transfer of Investment Manager functions to service providers (outsourcing) with multiple Parties; and
   c. Investment Managers must conduct periodic reviews of functions performed by service providers to ensure that such functions have been implemented well and correctly in accordance with the standard operating procedures for the implementation of the relevant functions.
   d. Investment Managers must have a written agreement with the service provider, containing at least:

8. party names;

9. scope, conditions, and terms of the Investment Manager functions whose implementation is transferred to the service provider;

10. responsibilities of the Investment Manager and service provider and supervision over the implementation of such responsibilities;

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

12. information confidentiality and security;

13. responsibilities related to information technology system security;

14. service provider reporting to the Investment Manager;

15. accountability...

16. accountability from the service provider to the Investment Manager for unsatisfactory services or other violations of the agreement;

17. guarantees on service quality and compensation;

18. the obligation of the service provider, at any time upon request, to provide any records, information, and/or assistance related to the Investment Manager functions it performs to the Investment Manager appointing the service provider, the Investment Manager's auditor, and/or the Financial Services Authority;

19. prohibition for the service provider to appoint third parties (subcontractors) in carrying out its obligations;

20. provisions regarding the continuity of the Investment Manager's functions in the event the service provider experiences an emergency condition preventing it from performing its functions;

21. termination of the agreement, which includes among other things the transfer of information and steps for terminating the agreement, as well as transition procedures; and

22. mechanisms for resolving disputes arising between the Investment Manager and the service provider.

e. Investment Managers are required to ensure that service providers maintain the confidentiality of information received from the Investment Manager.

f. Investment Managers are required on the next business day to report to the Financial Services Authority if the service provider is unable to fulfill its obligations.

g. Investment Managers are required to ensure that the Financial Services Authority can access the accounting books, records, and documents of the service provider related to the delegation of Investment Manager functions to the service provider at any time.

h. Investment Managers may only appoint service providers whose operational activities are located in Indonesia.

CHAPTER V
REPORTING OBLIGATIONS

Article 29
(1) Investment Managers are required to submit the following reports to the Financial Services Authority:
a. annual work plan report for the compliance function, as referred to in Article 16 letter h, in accordance with the format of the annual work plan report for the compliance function as contained in the Appendix which is an integral part of this Financial Services Authority Regulation, at the latest on the 12th (twelfth) day after the end of December; b. mid-year report on the implementation of the compliance function, as referred to in Article 16 letter i, in accordance with the format of the mid-year report on the implementation of the compliance function as contained in the Appendix which is an integral part of this Financial Services Authority Regulation, at the latest on the 12th (twelfth) day after the end of June;
c. annual report on the implementation of the compliance function, as referred to in Article 16 letter i, in accordance with the format of the annual report on the implementation of the compliance function as contained in the Appendix which is an integral part of this Financial Services Authority Regulation, at the latest on the 12th (twelfth) day after the end of December; and
d. incidental report, as referred to in Article 16 letter j, in accordance with the format of the incidental report as contained in the Appendix which is an integral part of this Financial Services Authority Regulation, at the latest within 7 (seven) business days from the time the event is known.

(2) In the event that the submission deadline for reports as referred to in paragraph (1) letters a, b, and c falls on a holiday, the report must be submitted at the latest on the 1 (one) next business day.

CHAPTER VI
SANCTIONS

Article 30
(1) Without prejudice to criminal provisions in the Capital Market sector, the Financial Services Authority is authorized to impose administrative sanctions on any party that violates the provisions of this regulation, including parties that cause the violation to occur, consisting 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, or e may be imposed with or without prior 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, or e.

Article 31
In addition to administrative sanctions as referred to in Article 30 paragraph (1), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 32
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 30 paragraph (1) and specific actions as referred to in Article 31 to the public.

CHAPTER VII
TRANSITIONAL PROVISIONS

Article 33
Investment Managers are required to adjust and comply with the provisions as referred to in this Financial Services Authority Regulation at the latest within 6 (six) months from the promulgation of this Financial Services Authority Regulation.

CHAPTER VIII
CLOSING PROVISIONS

Article 34
Further provisions regarding the technical implementation of Investment Manager functions not regulated in this Financial Services Authority Regulation shall be regulated in a Circular Letter of the Financial Services Authority.

Article 35
Upon the commencement of this Financial Services Authority Regulation, the Decision of the Chairman of the Capital Market Supervisory Board and Financial Institutions Number: KEP-480/BL/2009 dated December 31, 2009 regarding Guidelines for the Implementation of Investment Manager Functions along with Regulation Number V.D.11 which is its appendix is repealed and declared invalid.

Article 36
This Financial Services Authority Regulation shall come into force on the date of its promulgation.

To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta
On the date of November 19, 2014

CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY,
Ttd
MULIAMAN D. HADAD

Promulgated in Jakarta on the date of November 19, 2014

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Ttd.
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2014 NUMBER 359

Copy in accordance with the original
Director of Legal Affairs I
Ministry of Law,
Ttd.
Tini Kustini