FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 43 / POJK.04 / 2015

CONCERNING

INVESTMENT MANAGER CONDUCT GUIDELINES

BY THE GRACE OF GOD THE ALMIGHTY

THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that public trust and capital market investor protection, particularly regarding Investment Management, need to be enhanced through ethical, credible, and good corporate governance behavior by Investment Managers; b. that regulations related to Investment Manager behavior are scattered across several regulations in the capital market sector;
c. that based on the considerations referred to in letter a, regulations related to Investment Manager behavior need to be refined and adjusted to align with the behavior of Investment Managers prevailing in the capital market society and international principles;
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 Investment Manager Conduct Guidelines;

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY

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 TO:
Establish: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING INVESTMENT MANAGER CONDUCT GUIDELINES.

CHAPTER I

GENERAL PROVISIONS

Article 1

In this Financial Services Authority Regulation, the following terms are defined:

1. Investment Manager is a Party whose business activities manage Securities Portfolios for clients or manage collective investment portfolios for a group of clients, except Insurance Companies, Pension Funds, and Banks that carry out their own business activities based on applicable legislation.
2. Securities are negotiable instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, Unit Participation in Collective Investment Contracts, forward contracts over Securities, and any derivatives of Securities.
3. Securities Portfolio is a collection of Securities owned by a Party.
4. Custodian Bank is a General Bank that has obtained approval from the Financial Services Authority as a Custodian.
5. Custodian is a Party providing services for the safekeeping of Securities and other assets related to Securities, as well as other services, including receiving dividends, interest, and other rights, settling Securities transactions, and representing account holders who are its clients.
6. Affiliation is:
   a. family relationship due to marriage and descent up to the second degree, either horizontally or vertically; b. relationship between a Party and employees, directors, or commissioners of that Party;
   c. relationship between 2 (two) companies where there is one or more members of the board of directors or board of commissioners who are the same;
   d. relationship between a company and a Party, directly or indirectly, controlling or controlled by that company; e. relationship between 2 (two) companies controlled, directly or indirectly, by the same Party; or f. relationship between a company and major shareholders.
7. Investment Committee is a committee tasked with directing and supervising the Investment Management Team in implementing investment policies and strategies.
8. Investment Management Team is a team tasked with managing Securities Portfolios for clients or collective investment portfolios for the benefit of a group of Clients.
9. Compliance Function Coordinator is the board of directors or an employee of the Investment Manager tasked with coordinating matters related to the Investment Manager's compliance.
10. Rebate is the return in cash form from a third party related to transactions conducted by the Investment Manager for the benefit of Clients.
11. Commission in the form of goods and/or benefits hereinafter referred to as Commission is the provision in the form of goods and/or benefits from a third party related to transactions conducted by the Investment Manager for the benefit of Clients.
12. Client is:
    a. a Party that invests funds and/or Securities to be managed by an Investment Manager in the form of Securities Portfolio management for the benefit of the concerned individual; or b. a group of Parties that invest their funds to be managed by an Investment Manager in the form of collective investment portfolio management for the group of Parties concerned in accordance with legislation in the capital market sector.
13. Party is an individual, company, joint venture, association, or organized group.

Article 2

In carrying out its business activities, the Investment Manager is required to apply principles including:
a. integrity; b. professionalism;
c. prioritizing Client interests;
d. supervision and control; e. adequacy of resources; f. protection of Client assets; g. information openness; h. conflict of interest; and
i. compliance.

Article 3

(1) Investment Managers must become members of an association that accommodates Investment Managers that have received recognition from the Financial Services Authority.
(2) The association accommodating Investment Managers must have a code of ethics.
(3) The code of ethics created and established by the association accommodating Investment Managers is prohibited from conflicting with this Financial Services Authority Regulation and legislation in the capital market sector. (4) Provisions regarding the association accommodating Investment Managers are regulated by a Circular Letter of the Financial Services Authority.

CHAPTER II

OPENNESS OF INTEREST, GIFTS OR BENEFITS, AS WELL AS REBATES AND COMMISSIONS

First Section

Openness of Interest of Investment Managers and Their Affiliations

Article 4

An Investment Manager conducting Securities Portfolio management for Clients individually and having a conflict of interest is required to disclose in writing to the Client the existence of a conflict of interest regarding the Securities transacted, with the provisions:
a. Disclosure is carried out when entering into a written agreement (contract) for investment management in the Securities Portfolio with the Client, if the Securities constituting the Securities Portfolio have already been determined by the Client in the agreement. b. Disclosure is carried out before executing Securities transactions for the Client's benefit, if the determination of Securities constituting the Securities Portfolio:
1. is recommended by the Investment Manager but the decision lies with the Client; or
2. is entrusted entirely to the Investment Manager.

Article 5

(1) Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager are required to disclose to the Investment Manager:
a. the presence or absence of interest and/or ownership of certain Securities, whether directly or indirectly, including through nominees or affiliated Parties, since assuming office or working at the Investment Manager; and b. every change in interest and/or ownership of certain Securities, whether directly or indirectly, including through nominees or affiliated Parties, as referred to in letter a, including interest or ownership of certain Securities held by the said Party while holding office or working at the Investment Manager. (2) Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager are required to notify in writing no later than 2 (two) working days to the said Investment Manager before and after executing buy or sell Securities transactions conducted by:
a. themselves for personal benefit, nominees, and/or affiliated Parties which are Parties where the person has ownership of certain Securities, whether directly or indirectly, as referred to in paragraph (1); and b. nominees or affiliated Parties which are Parties where the person has ownership of certain Securities, whether directly or indirectly, as referred to in paragraph (1). (3) Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager who execute buy or sell Securities transactions for personal benefit, nominees, and/or affiliated Parties which are Parties where the Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager have ownership of certain Securities, whether directly or indirectly, are prohibited from:
a. executing transactions first on specific Securities based on knowledge that Clients will execute large volume transactions on those Securities estimated to affect market prices, with the aim of gaining profit or reducing losses; b. executing cross transactions with Clients of the Investment Manager; and/or
c. selling Securities held for less than 30 (thirty) days.
(4) Disclosure of interest or ownership of Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager regarding certain Securities as referred to in paragraph (1) and written notification to the Investment Manager before and after executing buy or sell Securities transactions for personal benefit, nominees, and/or affiliated Parties which are Parties where the Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager have ownership of certain Securities, whether directly or indirectly, as referred to in paragraph (3), is carried out under the coordination of the Investment Manager's Compliance Function.

Article 6

Members of the Investment Committee who have a conflict of interest regarding decisions to be taken in the Investment Committee meeting must abstain from voting in that meeting.

Article 7

Investment Managers must prioritize Client interests above the interests of:
a. the Investment Manager; b. Parties having an Affiliation relationship with the Investment Manager; and/or
c. Parties having an Affiliation relationship with members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager.

Article 8

(1) Investment Managers are required to create, document, and maintain documents and/or records regarding interests or Security ownership disclosed by:
a. Investment Managers conducting Securities Portfolio management for Clients individually to Clients as referred to in Article 4; and b. Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager to the Investment Manager as referred to in Article 5 paragraph (1). (2) Investment Managers are required to create, document, and maintain documents and/or records regarding written notifications before and after executing buy or sell Securities transactions conducted by Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager to the Investment Manager as referred to in Article 5 paragraph (2). (3) The obligation to create, document, and maintain documents and/or records as referred to in paragraphs (1) and (2) is carried out by the Compliance Function Coordinator.

Article 9

Investment Managers are required to formulate and implement written policies and procedures regarding:
a. disclosure of interest or ownership of certain Securities by Parties as referred to in Article 5 paragraph (1); and b. prohibitions as referred to in Article 5 paragraph (3).

Second Section

Receipt and Provision of Gifts or Benefits

Article 10

Investment Managers, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and/or employees of the Investment Manager are prohibited from receiving gifts or benefits containing conflicts with Client interests or conflicts with their obligations towards Clients.

Article 11

(1) Investment Managers, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager may provide gifts or benefits to Clients and other Parties provided that the provision of such gifts or benefits does not originate from the wealth of the Securities Portfolio or collective investment portfolio of Clients managed by them and/or does not harm Clients. (2) The provision of gifts or benefits as referred to in paragraph (1) must be based on rational considerations.

Article 12

(1) Investment Managers are required to create, document, and maintain documents and/or records regarding gifts or benefits received and/or given by the Investment Manager, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager. (2) The obligation to create, document, and maintain documents and/or records as referred to in paragraph (1) is carried out by the Compliance Function Coordinator.

Article 13

(1) Investment Managers are required to formulate and implement written policies and procedures regarding:
a. receipt of gifts or benefits by the Investment Manager, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager; and b. provision of gifts or benefits by the Investment Manager, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager to Clients and/or other Parties. (2) Written policies and procedures as referred to in paragraph (1) must contain at least:
a. monetary value limits that can:
1. be received by the Investment Manager, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager; and
2. be given by the Investment Manager, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager;
b. reporting provisions for the receipt or provision of gifts or benefits by Members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager to the Investment Manager; and
c. provisions for the creation, documentation, and maintenance of documents and/or records of gifts or benefits given or received by the Investment Manager, members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager.

Third Section

Rebates and Commissions

Article 14

(1) Investment Managers are prohibited from receiving Rebates except for the benefit of Clients.
(2) Rebates for the benefit of Clients as referred to in paragraph (1) must be conveyed directly to the respective Client's bank account proportionally.

Article 15

Investment Managers may receive Commissions, provided that such Commissions directly benefit the Investment Manager in the investment decision-making process for the benefit of Clients and do not cause conflicts of interest with Clients and/or harm Client interests.

Article 16

(1) Investment Managers are required to create, document, and maintain documents and/or records regarding every Rebate and/or receipt of Commission.
(2) The obligation to create, document, and maintain documents and/or records as referred to in paragraph (1) is carried out by the Compliance Function Coordinator.
(3) The Compliance Function Coordinator is required to verify every Rebate and/or Commission received by the Investment Manager in accordance with the provisions as referred to in Article 14 and Article 15 of this Financial Services Authority Regulation.

Article 17

Investment Managers are required to formulate and implement written policies and procedures regarding the receipt of Rebates and Commissions originating from transactions or orders for the benefit of Clients.

CHAPTER III

MANAGEMENT OF CLIENT INVESTMENTS

First Section

Rational Reasons and Mandate-Compliant Investment in Investment Management

Article 18

Investment Managers are required to create and implement every investment policy, provide investment recommendations, and execute transactions for the benefit of Clients based on rational reasons.

Article 19

Investment Managers are required to ensure:
a. investment policies, investment recommendations, and/or transactions for the benefit of Clients are carried out in accordance with the objectives, limitations, and investment guidelines contained in the investment management agreement and legislation in the capital market sector related to investment management; and b. the implementation of investment policies, provision of investment recommendations, and/or transactions in the context of investment for the benefit of Clients are documented in writing for every investment portfolio managed by them.

Article 20

Investment Managers conducting Securities Portfolio management for Clients individually are prohibited from:
a. providing recommendations to Clients in the form of:
1. investment management services; and/or
2. consultation services for the purchase, sale, or exchange of Securities,
without considering the investment objectives, financial condition, and needs of Clients and other Client information known by the Investment Manager; b. executing buy and/or sell Securities orders for the Client's account based on instructions from third parties who have not been granted prior written authority by the Client; and
c. purchasing and/or selling Securities for the benefit of Clients that are not in accordance with:
1. investment policies as regulated in legislation in the capital market sector related to investment management; and/or
2. investment policies contained in the investment management agreement unless prior written approval has been obtained from the Client.

Article 21

In implementing investment policies, Investment Managers are required to create, document, and maintain records and/or worksheets regarding the reasons for every investment decision to purchase or sell Securities for the benefit of Clients.

Second Section

Investment Research

Article 22

(1) Investment Managers are required to formulate and implement written policies and procedures related to research so that research conducted by the Investment Manager's analysts to support the company's investment decisions, providing information, advice, and recommendations to clients and/or disseminated to the public, is independent. (2) Written policies and procedures as referred to in paragraph (1) must cover at least the reporting flow of the Investment Manager's analysts and the basis for calculating compensation for such analysts that can eliminate or significantly restrict existing, customary, or potential conflicts of interest.

Third Section

Order Allocation

Article 23

(1) Investment Managers are required to create written records or documents regarding the basis for the plan to allocate purchases and/or sales of Securities Portfolios for the benefit of each Client with the principle of fair and reasonable allocation and are prohibited from harming specific Clients. (2) Investment Managers are required to create, document, and maintain documents and/or records of the allocation of Securities resulting from transactions for each Client along with the reasons, so that the allocation complies with the principle of fair and reasonable allocation and does not harm specific Clients.

Article 24

(1) Investment Managers executing Securities transactions for the benefit of more than 1 (one) Client or in large volumes for the benefit of more than 1 (one) Client must allocate successfully transacted Securities pro-rata using average prices. (2) In the event that the allocation of Securities as referred to in paragraph (1) cannot be done pro-rata and using average prices, the Investment Manager is required to make decisions regarding the allocation of such Securities based on rational reasons. (3) Investment Managers are required to create, document, and maintain records and/or worksheets regarding the reasons as referred to in paragraph (2).

Article 25

Investment Managers executing Securities transactions for the benefit of Clients are prohibited from directing such Securities transactions for the benefit of the Investment Manager, Affiliated Parties of the Investment Manager, or specific Clients.

Article 26

Investment Managers are prohibited from using investment management service fees or service fees for specific transactions received from Clients as considerations in determining the allocation of purchases and/or sales of Securities for each Client.

Article 27

Investment Managers are required to formulate and implement written policies and procedures related to the allocation of purchases and/or sales of Securities for the benefit of each Client so that the aforementioned allocation is implemented fairly and reasonably.

Fourth Section

Execution of Securities Transactions

Article 28

Investment Managers are required to execute Securities transactions for the benefit of Clients under the best available conditions at the time the transaction is executed.

Article 29

(1) Investment Managers are required to conduct due diligence before appointing Securities Trading Brokers used in executing Securities transactions for the benefit of Clients.
(2) Investment Managers are required to conduct periodic reviews at least once every 1 (one) year against Securities Trading Brokers appointed to execute Securities transactions for the benefit of Clients. (3) Investment Managers are prohibited from executing Securities transactions through 1 (one) Securities Trading Broker exceeding 30% (thirty percent) of the total transaction value during 1 (one) year. (4) The prohibition as referred to in paragraph (3) does not include cases where the Investment Manager executes:
a. Securities purchase transactions in Public Offerings; b. transactions over Securities that are the underlying assets forming Exchange-Traded Mutual Funds and Index Mutual Funds, for Investment Managers managing Exchange-Traded Mutual Funds and Index Mutual Funds;
c. transactions over Securities offered not through Public Offerings;
d. transactions over foreign Securities; e. transactions exercising Preemptive Rights; and/or f. other transactions over Securities that must be conducted through specific Securities Trading Brokers as determined in legislation in the capital market sector or determined by the Party conducting the purchase and/or sale of such Securities.

Fifth Section

Purchase of Securities in Public Offerings

Article 30

Investment Managers purchasing Securities in Public Offerings for the benefit of Clients are required to:
a. allocate the distribution of Securities received to Clients proportionally and reasonably in accordance with investment policies; and b. create, document, and maintain documents and/or records of the basis for allocating Securities purchases to Clients.

Sixth Section

Securities Transactions Through Affiliated Parties

Article 31

Investment Managers are prohibited from executing Securities transactions for the benefit of Clients through Affiliated Parties, except:
a. Such Securities transactions are conducted under arm's length conditions; b. commission or transaction fees charged by Affiliated Parties are not higher than commission or transaction fees charged by non-Affiliated Parties;

c. such Securities transactions are not conducted excessively; and

d. consistent with best execution standards.

Article 32

An Investment Manager may place funds for the benefit of Clients with Affiliated Parties, provided that the interest rate received is not lower than the interest rate received from Non-Affiliated Parties for the same or equivalent value and duration.

Seventh Section

Cross Transactions

Article 33

An Investment Manager may only conduct cross transactions between Client accounts under the following conditions:

a. the decision to sell or buy Securities must be based on the interests of both Client Parties; b. the transaction is executed through a Securities Trading Intermediary under arm’s length conditions at the prevailing market price; and
c. the reasons for conducting the cross transaction are documented prior to the execution of the transaction.

Article 34

(1) An Investment Manager is prohibited from conducting cross Securities transactions between:
a. the Investment Manager’s account and a Client’s account, except for cross transactions conducted in the context of forming a Protected Mutual Fund portfolio; and b. the accounts of members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager with Client accounts.

(2) In the event that an Investment Manager conducts cross Securities transactions between the Investment Manager’s account and a Client’s account in the context of forming a Protected Mutual Fund portfolio as referred to in paragraph (1) letter a, such Securities transactions must be executed through a Securities Trading Intermediary under arm’s length conditions at the prevailing market price.

Eighth Section

Securities Transactions for Own Interest

Article 35

An Investment Manager that conducts the same Securities transactions at the same time, for its own interest and for the interest of Clients, must prioritize the Securities transactions and allocation of Securities for the interest of Clients, including in cases where orders for Securities transactions for Clients are combined with orders for Securities transactions for its own interest, but such orders cannot all be fulfilled.

Article 36

(1) An Investment Manager must create, document, and maintain documents and/or records related to the same Securities transactions conducted simultaneously for its own interest and for the interest of Clients, including Securities transactions for its own interest combined with Securities transactions for the interest of Clients.

(2) An Investment Manager must formulate and implement written policies and procedures related to Securities transactions for its own interest, including Securities transactions for its own interest combined with Securities transactions for the interest of Clients.

CHAPTER IV

INTERACTION WITH CLIENTS

First Section

Provision of Company Information

Article 37

(1) An Investment Manager must:
a. provide sufficient information regarding the identity of the Investment Manager, business license, scope of business activities, and the identity and position of Parties acting on behalf of the Investment Manager when the Investment Manager offers investment management services or products to Clients or prospective Clients; and b. convey Material Facts regarding the Investment Manager, services, and/or products offered that are necessary for Clients.

(2) An Investment Manager is prohibited from:
a. providing misleading information to Clients or prospective Clients regarding the qualifications of the Investment Manager, services, and/or products offered; and/or b. failing to convey Material Facts regarding the qualifications of the Investment Manager, services, and/or products offered to Clients or prospective Clients.

Second Section

Single Investor Identity Number

Article 38

(1) An Investment Manager must create a single investor identity number for each of its Clients at the Depository and Clearing Institution.

(2) In the event that an Investment Manager delegates the authority to create the single investor identity number to a Mutual Fund Sales Agent, the Investment Manager must ensure that each Client has a single investor identity number.

Third Section

Confidentiality

Article 39

(1) An Investment Manager is prohibited from disclosing Client data, information, and activities to Unauthorized Parties, except with written approval from the Client or as required by applicable laws and regulations.

(2) An Investment Manager must formulate and implement written policies and procedures to maintain the confidentiality of Client data and information.

Fourth Section

Valuation of Client Investment Portfolios

Article 40

An Investment Manager must calculate the Fair Market Value of Client Securities in accordance with applicable laws and regulations in the Capital Market sector.

Fifth Section

Commissions and Fees

Article 41

An Investment Manager must determine fair and reasonable commissions and fees for services provided to Clients.

Sixth Section

Client Complaints

Article 42

An Investment Manager must create, document, and maintain documents and/or records regarding all Client complaints received, the steps taken, and the resolution status of each such Client complaint.

Article 43

An Investment Manager must formulate and implement written policies and procedures to ensure that every Client complaint is handled properly and in a timely manner.

CHAPTER V

MARKETING ACTIVITIES, ADVERTISING, AND PROMOTIONAL MATERIALS

Article 44

(1) An Investment Manager must provide true, non-misleading, and non-contradictory information to Clients in accordance with applicable laws and regulations, including when the Investment Manager provides marketing materials, advertisements, and/or promotions in electronic or non-electronic forms.

(2) Information to Clients, including marketing materials, advertisements, and/or promotions as referred to in paragraph (1), is prohibited from containing:
a. false information; b. words or sentences that give the impression that Clients will not incur losses or will gain profits;
c. impressions that Clients can obtain profits without risk; and/or
d. information that defames:

1. services or products offered by other Investment Managers;
2. other Investment Managers; and/or
3. the investment management industry in the Capital Market sector as a whole.

(3) Marketing materials, advertisements, and/or promotions as referred to in paragraph (1) must contain information regarding investment risks.

(4) Marketing materials, advertisements, and/or promotions for Mutual Funds must comply with applicable laws and regulations in the Capital Market sector governing Mutual Fund advertising guidelines.

Article 45

(1) In the event that information, including marketing materials, advertisements, and/or promotions, contains statements regarding the Investment Manager’s investment management performance, the Investment Manager must make clear and non-misleading statements regarding such performance.

(2) An Investment Manager is responsible for statements regarding the Investment Manager’s investment management performance as referred to in paragraph (1).

CHAPTER VI

CLIENT ASSET SAFEGUARDING

Article 46

(1) An Investment Manager must store funds and/or Client Securities in the name of each respective Client at a Custodian.

(2) An Investment Manager must ensure that the Custodian administers and stores funds and/or Client Securities in the name of each respective Client.

Article 47

An Investment Manager that appoints a Custodian for the administration and storage of funds and/or Client Securities must conduct due diligence on the Custodian’s ability to perform its duties.

Article 48

An Investment Manager must create, document, and maintain documents and/or records related to its investment management activities for at least 5 (five) years since the closure of accounts, including:
a. records related to Client accounts, including information regarding the single investor identity number; and b. records of all Securities transactions, both for the interest of Clients and for the interest of the Investment Manager, including audit trails for all Securities transactions conducted by the Investment Manager.

CHAPTER VII

SANCTION PROVISIONS

Article 49

(1) Without prejudice to criminal provisions in the Capital Market sector, the Otoritas Jasa Keuangan (OJK) is authorized to impose administrative sanctions on any Party that violates the provisions of this OJK Regulation, including parties causing such violations, in the form of:
a. Written warnings; b. Fines, namely the obligation to pay a specific amount of money;
c. Restriction of business activities;
d. Suspension of business activities; e. Revocation of business licenses; f. Cancellation of approvals; and g. Cancellation of registrations.

(2) Administrative sanctions as referred to in paragraph (1) letters b, c, d, e, f, or g may be imposed with or without being preceded by the imposition of administrative sanctions in the form of written warnings as referred to in paragraph (1) letter a.

(3) Administrative sanctions in the form of fines as referred to in paragraph (1) letter b may be imposed separately or concurrently with the imposition of administrative sanctions as referred to in paragraph (1) letters c, d, e, f, or g.

Article 50

In addition to administrative sanctions as referred to in Article 49 paragraph (1), the Otoritas Jasa Keuangan may take specific actions against any Party that violates the provisions of this OJK Regulation.

Article 51

The Otoritas Jasa Keuangan may announce the imposition of administrative sanctions as referred to in Article 49 paragraph (1) and specific actions as referred to in Article 50 to the public.

CHAPTER VIII

TRANSITIONAL PROVISIONS

Article 52

Investment Managers that have obtained business licenses from the Otoritas Jasa Keuangan prior to the implementation of this OJK Regulation must:
a. formulate and implement written policies and procedures related to research, ensuring that research conducted by the Investment Manager’s analysts to support the company’s investment decisions, providing information, advice, and recommendations to clients and/or disseminated to the public, is independent as referred to in Article 22; and b. submit the written policies and procedures as referred to in letter a to the Otoritas Jasa Keuangan, no later than 6 (six) months from the implementation of this OJK Regulation.

Article 53

(1) The obligation of Investment Managers to create a single investor identity number for each of its Clients as referred to in Article 38 paragraph (1) must be carried out no later than 6 (six) months from the enactment of this OJK Regulation.

(2) The obligation of Investment Managers to formulate written policies and procedures as referred to in Article 9, Article 13, Article 17, Article 27, Article 36 paragraph (2), Article 39 paragraph (2), and Article 43 must be carried out no later than 6 (six) months from the enactment of this OJK Regulation.

CHAPTER IX

CLOSING PROVISIONS

Article 54

Upon the implementation of this OJK Regulation:
a. Decision of the Chairman of the Capital Market Supervisory Board Number Kep-31/PM/1996 dated January 17, 1996 regarding Prohibited Conduct for Investment Managers, along with Regulation Number V.G.1 as its attachment; and b. Decision of the Chairman of the Capital Market Supervisory Board Number Kep-32/PM/1996 dated January 17, 1996 regarding Guidelines for Recording in the Context of Decision-Making by Investment Managers, along with Regulation Number V.G.3 as its attachment, are revoked and declared invalid.

Article 55

This OJK Regulation comes into force on the date of enactment.

To ensure everyone knows, it is ordered to publish this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Issued in Jakarta on December 23, 2015

CHAIRMAN OF THE BOARD OF COMMISSIONERS
OTORITAS JASA KEUANGAN,

signed

MULIAMAN D. HADAD

Enacted in Jakarta on December 28, 2015

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

signed

YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 370

A copy consistent with the original

Legal Director 1

Legal Department

signed

Sudarmaji

EXPLANATION

OF

OTORITAS JASA KEUANGAN REGULATION

NUMBER 43/POJK.04/2015

REGARDING

INVESTMENT MANAGER CONDUCT GUIDELINES

I. GENERAL

Law Number 8 of 1995 concerning Capital Markets emphasizes that an Investment Manager is a Party whose business activities manage Securities Portfolios for Clients or manage collective investment portfolios for a group of Clients, except Insurance Companies, Pension Funds, and Banks that conduct their own business activities based on applicable laws and regulations.

Based on the Capital Market Law, Investment Managers play a significant role in managing Securities portfolios for Clients and managing collective investment portfolios for groups of Clients.

Given that Investment Managers play a significant role, particularly in protecting investors or consumers who invest in Securities portfolios, regulations regarding Investment Manager Conduct are necessary to ensure that Investment Managers perform their duties, responsibilities, and obligations solely for the benefit of investors or consumers.

Regulations on Investment Manager Conduct should not only cover prohibited actions for Investment Managers and guidelines for decision-making but also cover other matters such as the disclosure of conflicts of interest, order allocation, best execution, rebates, commissions, acceptance and provision of gifts or benefits, cross transactions, transactions through Affiliated Parties, transactions for own interest, commissions and fees, and marketing, advertising, and promotional activities.

II. ARTICLE BY ARTICLE

Article 1

Sufficiently clear.

Article 2

Letter a

The application of the principle of “integrity” means that Investment Managers conduct their business activities in good faith and with full responsibility, uphold honesty, and commit to complying with written agreements (contracts) and applicable laws and regulations.

Letter b

The application of the principle of “professionalism” means that Investment Managers conduct their business activities professionally.

An example of an Investment Manager applying the principle of professionalism is when it complies with Article 27 of the Capital Market Law, which emphasizes that Investment Managers must perform their duties in good faith and with full responsibility as best as possible solely for the benefit of Mutual Funds.

Letter c

The application of the principle of “prioritizing Client interests” means that Investment Managers always prioritize the interests of their Clients and are prohibited from endangering or ignoring Client interests as long as Client interests do not contradict applicable laws and regulations, including by implementing laws and regulations in the Capital Market sector related to Investment Manager conduct.

Examples of laws and regulations in the Capital Market sector related to Investment Manager conduct include:

1. The obligation of Investment Managers to perform their duties in good faith and with full responsibility;
2. Prohibitions for Securities Companies acting as Investment Managers and also Securities Trading Intermediaries or Affiliated Parties of such Securities Companies acting as Securities Trading Intermediaries from charging commissions or fees higher than those charged by Non-Affiliated Securities Trading Intermediaries; and
3. Prohibitions for Securities Companies acting as Investment Managers or their Affiliated Parties from receiving remuneration in any form, directly or indirectly, that may influence the respective Investment Manager to buy or sell Securities for Clients.

Letter d

The application of the principle of “supervision and control” means that Investment Managers organize, supervise, and control their activities effectively and responsibly through adequate supervision and control systems, at least as regulated in this OJK Regulation and applicable laws and regulations in the Capital Market sector related to supervision and control that must be performed by Investment Managers.

An example of laws and regulations in the Capital Market sector related to supervision and control that must be performed by Investment Managers is OJK Regulation Number 24/POJK.04/2014 concerning Guidelines for the Implementation of Investment Manager Functions.

Letter e

The application of the principle of “adequacy of resources” means that Investment Managers have and maintain adequate financial resources, human resources, and other resources in accordance with their business activities, at least as regulated in this OJK Regulation and applicable laws and regulations in the Capital Market sector.

As an example, an Investment Manager has adequate financial resources if it has Adjusted Net Working Capital at least as required by regulations concerning the Maintenance and Reporting of Adjusted Net Working Capital.

Letter f

The application of the principle of “Client asset protection” means that Investment Managers:
a. create and maintain good records of orders, transactions, and Client investment activities; b. store Client assets in separate accounts and storage locations from the Investment Manager’s own accounts and storage locations and those of other Clients;
c. are prohibited from using Client assets for the benefit of any Party other than the interest of Clients; and
d. ensure that the storage of Client assets, for example, Custodian Banks, stores Collective Investment Contract Mutual Funds managed by them safely and provides regular Client investment information, at least as regulated by applicable laws and regulations in the Capital Market sector.

Letter g

The application of the principle of “information transparency” means that Investment Managers provide and/or convey true, non-misleading, and non-contradictory information to Clients in accordance with applicable laws and regulations.

Letter h

The application of the principle of “conflicts of interest” means that Investment Managers establish and implement written policies and procedures related to:

1. actions to avoid conflicts of interest between Client interests and the interests of the Investment Manager and Affiliated Parties of the Investment Manager’s company as regulated in this OJK Regulation and applicable laws and regulations in the Capital Market sector; and
2. information transparency if there are conflicts of interest between the Investment Manager and individual Client interests regarding a specific Security.

Letter i

The application of the principle of “compliance” means that Investment Managers have and implement written policies and procedures related to supervision of Investment Manager behavior and activities to support Investment Manager compliance with applicable laws and regulations in the Capital Market sector as regulated in this OJK Regulation and applicable laws and regulations in the Capital Market sector, as well as internal company regulations and/or standard operating procedures.

An example of laws and regulations related to the application of the “compliance” principle by Investment Managers as mentioned above is Article 16 of OJK Regulation Number 24/POJK.04/2014 concerning Guidelines for the Implementation of Investment Manager Functions.

Article 3

Sufficiently clear.

Article 4

Investment Manager interests in Securities arise, among others, when:

1. The Investment Manager, directly or indirectly, individually or together with other Parties, owns Securities or is entitled to dividends, interest, or proceeds from the sale and/or use of Securities; and
2. The Investment Manager has entered into an agreement or contract to buy Securities, has the right to transfer or assign Securities, or has Pre-emptive Rights.

Article 5

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Letter a

In practice, “gaining profits or reducing losses” is commonly referred to as front running.

Letter b

Cross transactions (cross trades) prohibited in this letter are Securities transactions on the Stock Exchange other than the Regular Market conducted by members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and/or employees of the Investment Manager with Counterparty Clients of the Investment Manager.

Letter c

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Article 6

Sufficiently clear.

Article 7

Sufficiently clear.

Article 8

Sufficiently clear.

Article 9

Sufficiently clear.

Article 10

Gifts or benefits containing conflicts with Client interests or conflicts with obligations to Clients include gifts or benefits that can influence the independence and/or objectivity of Investment Managers in managing investments for the interest of Clients.

Article 11

Paragraph (1)

The term “gifts” in these provisions refers to the provision of goods as consideration for the use of services or business relationships with other Parties.

The term “benefits” in these provisions includes but is not limited to the provision of facilities as consideration for the use of services or business relationships with other Parties.

The provision of gifts or benefits by Investment Managers to Clients or other Parties in this OJK Regulation refers to those provided by anyone for the interest of the Investment Manager.

Paragraph (2)

Rational considerations in providing gifts or benefits to Clients and other Parties include considering the financial health of the company.

Article 12

Paragraph (1)

The term “gifts” in these provisions refers to the receipt or provision of goods as consideration for the use of services or business relationships with other Parties.

The term “benefits” in these provisions includes but is not limited to the receipt or provision of

forms of facilities as a return for the use of services or business relationships with other Parties.

Paragraph (2)
Sufficiently clear.

Article 13

Paragraph (1)
Sufficiently clear.

Paragraph (2)
The monetary limit is a maximum value limit on benefits or gifts in the form of goods/facilities that can be valued in money that can be received or given by Investment Managers who are members of the Board of Commissioners, members of the Board of Directors, members of the Investment Committee, members of the Investment Management Team, and employees of the Investment Manager.

Article 14

Paragraph (1)
Examples of Rebates in this Article include interest rate differences on deposits, vouchers given for deposit placements, and transaction fee refunds.

Paragraph (2)
As an example of "proportional" in this regulation, if an Investment Manager receives a Rebate from a Securities Trading Intermediary for transactions intended by the Investment Manager for several Clients, then such Rebate is allocated to each Client's account proportionally according to the transaction value of the Client's account conducted through such Securities Trading Intermediary.

Article 15

Examples of Commissions include seminar financing, travel financing for research purposes, paid research facilities, and information technology facilities.

Article 16

Sufficiently clear.

Article 17

Sufficiently clear.

Article 18

An Investment Manager is considered to have a rational basis for investment decisions if such decisions are in accordance with:
a. investment methods or combinations of various investment methods contained in books or various articles published regarding Securities analysis and portfolio management; b. methods created by the Investment Manager as described in private documents; or
c. investment methods or combinations of various investment methods commonly used by the Investment Manager profession or taught in official courses regarding Securities analysis and portfolio management.
Investment decisions or their implementation are considered to have met the interests of Clients if:
a. the Investment Manager has asked Clients regarding their general financial situation and made notes regarding such matters which must be signed by the respective Client, except for Mutual Funds; and b. the investment decision or its implementation is in accordance with written investment policies that have been understood and approved by the Client, and such policies have fully and clearly disclosed the nature, methods, and investment risks.

Article 19

Letter a
Investment management agreements include Collective Investment Contracts for the benefit of a group of clients and Portfolio Management Agreements for the benefit of Clients individually.

Letter b
Investment portfolios include Securities Portfolios for individual Clients and collective investment portfolios for a group of Clients.

Article 20

Sufficiently clear.

Article 21

Notes and/or working papers related to the reasons for making investment decisions include:

1. research result notes;
2. notes in electronic form;
3. writings on transaction instructions; and/or
4. results of investment committee meetings.

Article 22

Paragraph (1)
Sufficiently clear.

Paragraph (2)
Analyst work based on Financial Services Authority Regulation Number 24/POJK.04/2014 regarding Guidelines for the Implementation of Investment Manager Functions and relevant legislation in the Capital Market sector regarding Internal Control of Securities Companies conducting business as Securities Trading Intermediaries is conducted under the research function.

An example of policies regarding the reporting flow of analysts from Securities Companies conducting business as Investment Managers, Securities Issuance Underwriters, and/or Securities Trading Intermediaries, whether the research function of the Securities Company is conducted by one work unit under one of the Securities Company's business activities or not under the Securities Company but for the benefit of all the above business activities of the Securities Company, then the results of analysts in the research function produced are not reported to or require approval from other work units existing in the Securities Company that requests, needs, or bases its work on the results of analysts in such research function or uses the results of analysts in such research function to conduct its work on behalf of the Securities Company.

Furthermore, compensation received by analysts of such Securities Companies cannot be linked to the performance of other work units that request, need, or base their work on the results of such analysts or use the results of such analysts to conduct their work on behalf of the Securities Company, or the amount of remuneration received by the Securities Company based on the results of such analysts.

Compensation as referred to in this paragraph includes but is not limited to salaries received by analysts from Securities Companies.

Article 23

Sufficiently clear.

Article 24

Paragraph (1)
Example of Calculation:
Investment Manager ABC conducts transactions in large volumes (block trades) for 1,000,000 WXYZ shares for 4 Mutual Funds it manages, with initial allocation as follows: 500,000 WXYZ shares for RD 1, 200,000 WXYZ shares for RD 2, 200,000 WXYZ shares for RD 3, and 100,000 WXYZ shares for RD 4. The transaction purchase results for WXYZ shares by the designated Securities Trading Intermediary amounted to 800,000 WXYZ shares. The market price at the time of purchase for 800,000 WXYZ shares consists of 1470, 1495, and 1490.

WXYZ shares are allocated proportionally among the 4 (four) Mutual Funds according to the magnitude of the allocation needs that have been done since the beginning, as follows:
RD1 = 5/10 x 800,000 = 400,000
RD2 = 2/10 x 800,000 = 160,000
RD3 = 2/10 x 800,000 = 160,000
RD4 = 1/10 x 800,000 = 80,000

The price for WXYZ shares for the 4 Mutual Funds uses the average price, resulting in an average price of 1485.

Paragraph (2)
Securities allocation cannot be done on a pro-rata basis and using an average price, among others, can be caused by:
a. transaction execution results that do not allow for pro-rata allocation; or b. transaction allocation results done on a pro-rata basis would result in odd lots.

Paragraph (3)
Sufficiently clear.

Article 25

Sufficiently clear.

Article 26

Sufficiently clear.

Article 27

Sufficiently clear.

Article 28

Transactions for the benefit of Clients under the best conditions are determined based on considerations of price, cost, volume, and/or other relevant factors regarding transaction execution.

In practice, "best available conditions" is commonly referred to as best available term.

Article 29

Paragraph (1)
In practice, "due diligence" is commonly referred to as due diligence.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
The calculation method for the percentage of transaction execution of Securities through 1 (one) Securities Trading Intermediary as referred to in this regulation is based on the total overall transaction value of Securities during January to December of the current year.

Paragraph (4)

Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Examples of transactions for offered Securities not through Public Offerings (private placement) include transactions for Medium Term Notes (MTN) for Clients of Mutual Funds in the form of Limited Participation Collective Investment Contracts or transactions for shares offered not through Public Offerings for the benefit of Clients individually.

Letter d
Sufficiently clear.

Letter e
Sufficiently clear.

Letter f
Examples of other transactions that must be conducted through specific Securities Trading Intermediaries or determined by Parties conducting the purchase and/or sale of Securities include tender offer transactions.

Article 30

Letter a
What is meant by "proportional and fair" in this regulation is that Securities received in the context of an Initial Public Offering are allocated equally to all Clients who ordered such Securities, taking into account the proportion of allocation planning established since the beginning.

Letter b
Sufficiently clear.

Article 31

Letter a
What is meant by "arm's length conditions" in this regulation is conditions in transactions between Parties that are fair and independent. In this case, even though there is an affiliation relationship between the Investment Manager and the Securities Trading Intermediary, such transactions must be conducted like transactions conducted with unaffiliated Parties.

Letter b
Sufficiently clear.

Letter c
What is meant by "excessive Securities transactions" in this regulation is Securities transactions for Client accounts in quantities or frequencies that do not take into account, among others, financial conditions, Client profiles, and Client investment objectives.

Letter d
What is meant by "consistent with best execution standards" in this regulation is Securities transactions conducted for the benefit of Clients through Affiliated Parties must still consider the best available conditions (best available term) at the time the Securities transaction is conducted, which is at least determined based on considerations of price, cost, volume, and/or other relevant factors regarding Securities transaction execution and aims to obtain the best available price.

Article 32

As an example, values and tenors that are the same are when Investment Manager A places funds with an Unaffiliated Party amounting to Rp.1,000,000,000.00 (one billion) with a tenor of 6 (six) months at an interest rate of 7% p.a., then the placement of funds with an Affiliated Party by Investment Manager A with the same value and tenor, the interest rate to be received by Investment Manager A must not be less than 7% p.a.

Article 33

In practice, "cross-trades between Client accounts" is commonly referred to as cross trades.

Letter a
Sufficiently clear.

Letter b
Examples of current market values applicable in this regulation are as follows:
a. For Securities traded on the Stock Exchange, the applicable market price is the last regular market transaction price of the Securities before the cross-trade was conducted. The price referred to is not the closing price on the Stock Exchange on the previous trading day. b. For Securities other than those traded on the Stock Exchange, the last fair market price is used, calculated based on Regulation Number IV.C.2, Appendix of the Decision of the Chairman of the Capital Market Supervisory Board and Financial Institutions Number Kep-367/BL/2012 dated July 9, 2012 regarding Fair Market Value of Securities in Mutual Fund Portfolios.

Letter c
Sufficiently clear.

Article 34

Paragraph (1)

Letter a
In practice, "Investment Manager accounts" is commonly referred to as proprietary accounts.

Letter b
Sufficiently clear.

Paragraph (2)
In practice, "applicable market prices" is commonly referred to as current market value.

Article 35

Sufficiently clear.

Article 36

Sufficiently clear.

Article 37

Paragraph (1)

Letter a
The provision of information as referred to in this regulation can be contained in investment product offering materials, Websites, and/or other media.

Letter b
The delivery of Material Facts regarding Investment Managers as referred to in this regulation aims to ensure that information or statements made or delivered to Clients regarding the qualifications of Investment Managers, services, and/or products offered, as well as other related material facts or information, are not misleading.

Paragraph (2)

Letter a
Qualifications as referred to in this regulation include, among others, experience in managing investment products, expertise of the Investment Management Team, and awards for product management received by Investment Managers.

Letter b
Sufficiently clear.

Article 38

In practice, "single investor identification number" is commonly referred to as single investor identification.

Article 39

Paragraph (1)
Sufficiently clear.

Paragraph (2)
Written policies and procedures as referred to in this regulation include written policies and procedures to maintain the confidentiality of Client data and information from third parties working for Investment Managers.

Article 40

Sufficiently clear.

Article 41

Reasonable and justifiable Commissions and fees as referred to in this regulation are based on:

1. Commissions and fees charged by other Investment Managers to Clients for similar products and/or services;
2. Services provided to Clients; and
3. Operational costs for product management.

Article 42

Sufficiently clear.

Article 43

In practice, "handled well and in a timely manner" is commonly referred to as timely and appropriate manner.

Article 44

Paragraph (1)
Legislation related to information delivered to Clients includes:

1. Financial Services Authority Regulation regarding Consumer Protection in the Financial Services Sector; and
2. Law Number 8 of 1999 regarding Consumer Protection.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
At the time this Financial Services Authority Regulation takes effect, legislation in the Capital Market sector regulating Mutual Fund Advertising Guidelines is Regulation Number IV.D.1, Appendix of the Decision of the Chairman of the Capital Market Supervisory Board and Financial Institutions Number Kep-19/PM/2004 dated April 29, 2004 regarding Mutual Fund Advertising Guidelines.

Article 45

Examples of misleading statements regarding Investment Manager investment management performance as referred to in this regulation include an Investment Manager managing Mutual Fund X which has only been running for 3 (three) months but displaying annualized performance in marketing materials.

Article 46

Sufficiently clear.

Article 47

In practice, "due diligence" is commonly referred to as due diligence.

Article 48

Letter a
Sufficiently clear.

Letter b
What is meant by "audit trail" in this letter is documentation that allows tracing data from Securities transactions from the beginning (e.g., order communication) to the storage of Securities transaction results.

Article 49

Sufficiently clear.

Article 50

Sufficiently clear.

Article 51

Sufficiently clear.

Article 52

Sufficiently clear.

Article 53

In practice, "single investor identification number" is commonly referred to as single investor identification.

Article 54

Sufficiently clear.

Article 55

Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5810