Prohibited Conduct for Investment Advisors

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 5/POJK.04/2019
CONCERNING
PROHIBITED CONDUCT FOR INVESTMENT ADVISORS
BY THE GRACE OF THE ALMIGHTY GOD,
THE COMMISSIONERS' COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that with the enactment of Law Number 21 of 2011 concerning the Financial Services Authority, since December 31, 2012, the functions, duties, and authority for regulation and supervision of financial services activities in the capital market sector, including regulations regarding prohibited conduct for investment advisors, have transferred from the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority; b. that to provide clarity and certainty regarding regulations on prohibited conduct for investment advisors, existing capital market sector regulations on prohibited conduct for investment advisors issued prior to the establishment of the Financial Services Authority need to be converted into a Financial Services Authority Regulation; FINANCIAL SERVICES AUTHORITY OF THE REPUBLIC OF INDONESIA

c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Prohibited Conduct for Investment Advisors;
Recalling:

1. Law Number 8 of 1995 concerning the Capital Market (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);
   DECIDES:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING PROHIBITED CONDUCT FOR INVESTMENT ADVISORS.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation:

1. Party means an individual, company, joint venture, association, or organized group.
2. Investment Advisor means a Party that provides advice to another Party regarding the sale or purchase of Securities in exchange for service fees.
3. Securities means securities instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, investment contract unit participation, futures contracts over Securities, and any derivatives of Securities.

CHAPTER II
PROHIBITIONS FOR INVESTMENT ADVISORS
Article 2
Investment Advisors are prohibited from:
a. requesting remuneration that is very high compared to remuneration requested by other Investment Advisors providing the same services without informing the client that there are other service providers available; b. disclosing the identity of clients to third parties unless required by applicable laws and regulations;
c. providing false information to clients regarding the qualifications of the Investment Advisor, providing false information regarding the nature of the services provided, or failing to disclose material facts necessary so that statements made regarding the qualifications of the Investment Advisor, the nature of services, and material facts are not misleading;
d. providing reports or advice to any client that were not prepared by them without mentioning the party that prepared the report or advice; e. promising a specific result that will be achieved if the client follows the advice given; f. providing advice to clients regarding the purchase, sale, or exchange of Securities without a rational basis for thought; g. failing to disclose in writing to clients before advice is given regarding conflicts of interest of the Investment Advisor that may reduce the objectivity of the advice; h. establishing, modifying, extending, shortening, or renewing investment advisory contracts without written approval from the client;
i. managing client funds; and/or
j. rating Securities for Investment Advisors that are not Securities Rating Companies.

CHAPTER III
SANCTION PROVISIONS
Article 3
(1) Any Party violating the provisions as referred to in Article 2 shall be subject to administrative sanctions.
(2) Sanctions as referred to in paragraph (1) shall also be imposed on Parties causing the violation as referred to in paragraph (1).
(3) Sanctions as referred to in paragraph (1) and paragraph (2) shall be imposed by the Financial Services Authority.
(4) Administrative sanctions as referred to in paragraph (1) consist of:
a. written warnings; b. fines, namely the obligation to pay a certain amount of money;
c. business activity restrictions;
d. business activity suspension; e. business license revocation; f. approval cancellation; and/or g. registration cancellation.
(5) The procedure for imposing sanctions as referred to in paragraph (3) shall be carried out in accordance with applicable laws and regulations.
(6) Administrative sanctions as referred to in paragraph (4) letters b, c, d, e, f, or g may be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (4) letter a. (7) Administrative sanctions in the form of fines as referred to in paragraph (4) letter b may be imposed independently or concurrently with the imposition of administrative sanctions as referred to in paragraph (4) letters c, d, e, f, or g.

Article 4
In addition to administrative sanctions as referred to in Article 3 paragraph (4), the Financial Services Authority may take specific actions against any Party violating the provisions of this Financial Services Authority Regulation.

Article 5
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 3 paragraph (4) and specific actions as referred to in Article 4 to the public.

CHAPTER IV
CLOSING PROVISIONS
Article 6
Upon the enactment of this Financial Services Authority Regulation, the Decision of the Chairman of the Capital Market Supervisory Agency Number Kep-33/PM/1996 concerning Prohibited Conduct for Investment Advisors, along with Regulation Number V.H.1 which serves as its attachment, are revoked and declared invalid.

Article 7
This Financial Services Authority Regulation shall come into force upon enactment.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana
To ensure everyone is aware, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia. Established in Jakarta on February 8, 2019 CHAIRMAN OF THE COMMISSIONERS' COUNCIL FINANCIAL SERVICES AUTHORITY OF THE REPUBLIC OF INDONESIA, signed WIMBOH SANTOSO Enacted in Jakarta on February 11, 2019 MINISTER OF LAW AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA, signed YASONNA H. LAOLY STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2019 NUMBER 27

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 5/POJK.04/2019
CONCERNING
PROHIBITED CONDUCT FOR INVESTMENT ADVISORS

I. GENERAL
That since December 31, 2012, the functions, duties, and authority for regulation and supervision of financial services activities in the capital market, insurance, pension funds, financing institutions, and other financial service institutions have transferred from the Minister of Finance and the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority. In light of the above, it is necessary to reorganize the existing regulatory structure, particularly those related to the capital market sector, by converting Capital Market Supervisory Agency regulations related to the capital market sector into Financial Services Authority Regulations. This reorganization is conducted so that Financial Services Authority Regulations related to the capital market sector are aligned with Financial Services Authority Regulations in other sectors. Based on the background thinking and aspects mentioned, it is necessary to replace existing capital market sector regulations governing prohibited conduct for investment advisors, namely the Decision of the Chairman of the Capital Market Supervisory Agency Number Kep-33/PM/1996 concerning Prohibited Conduct for Investment Advisors, along with Regulation Number V.H.1 which serves as its attachment, with a Financial Services Authority Regulation concerning Prohibited Conduct for Investment Advisors.

II. ARTICLE BY ARTICLE
Article 1
Sufficiently clear.
Article 2
Sufficiently clear.
Article 3
Sufficiently clear.
Article 4
What is meant by "specific actions" includes among others the postponement of granting extensions of Investment Advisor licenses.
Article 5
Sufficiently clear.
Article 6
Sufficiently clear.
Article 7
Sufficiently clear.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6312