SEOJK on Special Criteria for Investment Products in the Capital Market to Support the Tax Amnesty Law

To: Investment Managers

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 49 /SEOJK.04/2016

ON

SPECIAL CRITERIA FOR INVESTMENT PRODUCTS IN THE CAPITAL MARKET IN SUPPORT OF THE LAW ON TAX AMNESTY

In order to implement Article 19 of Financial Services Authority Regulation Number 26/POJK.04/2016 concerning Investment Products in the Capital Market in Support of the Law on Tax Amnesty (State Gazette of the Republic of Indonesia Year 2016 Number 145, Additional State Gazette of the Republic of Indonesia Number 5906), it is necessary to regulate special criteria for investment products in the Capital Market in support of the Law on Tax Amnesty in this Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

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

1. Taxpayer Asset Manager acting as an entry point for the transfer and/or management of Taxpayer funds, hereinafter referred to as Gateway, is a Bank, Investment Manager, or Securities Broker appointed by the Minister to receive the transfer of Taxpayer Assets and/or conduct the management and placement of Taxpayer funds into investment instruments for the purpose of Tax Amnesty.

2. Investment Manager is a Party whose business activity manages Securities Portfolios for clients or manages collective investment portfolios for a group of clients, except for insurance companies, pension funds, and banks conducting their own business activities based on applicable legislation.

3. Mutual Fund in the Form of a Limited Investment Contract, hereinafter referred to as Limited Mutual Fund, is a vehicle used to gather funds from professional investors, which are then invested by the Investment Manager into Securities Portfolios based on Real Sector Activities.

4. Management of Securities Portfolios for Individual Client Interests is a fund management service conducted by an Investment Manager for a specific client, where based on an agreement on Securities Portfolio Management, the Investment Manager is granted full authority by the client to manage the Securities Portfolio according to the said agreement.

5. Offer is the activity of conveying information or forwarding leaflets, brochures, and/or similar items containing information and/or explanations.

6. Investor is a Taxpayer, either an individual or a legal entity, that has obtained a Tax Amnesty Certificate as referred to in the Law on Tax Amnesty.

7. Asset-Backed Securities Collective Investment Contract, hereinafter abbreviated as KIK-EBA, is a contract between an Investment Manager and a Custodian Bank that binds Asset-Backed Securities holders, where the Investment Manager is granted authority to manage the collective investment portfolio and the Custodian Bank is granted authority to execute Collective Custody.

8. Asset-Backed Securities, hereinafter abbreviated as EBA, are Securities issued by KIK-EBA whose portfolio consists of financial assets in the form of receivables arising from commercial paper, credit card receivables, future receivables, lending including home or apartment ownership loans, Government-guaranteed debt securities, Credit Enhancement/Cash Flow, and equivalent financial assets and other financial assets related to such financial assets.

9. Real Estate Investment Fund, hereinafter abbreviated as DIRE, is a vehicle used to gather funds from public investors to be subsequently invested in Real Estate Assets, Real Estate-Related Assets, and/or cash and cash equivalents.

10. Original Creditor (Originator) is a Party that has transferred its financial assets to Asset-Backed Securities holders collectively, where such financial assets were obtained by the said Party through lending, sales, and/or provision of other services related to its business.

II. LIMITED MUTUAL FUNDS

1. In the event the Target Company conducts a Public Offer, a Limited Mutual Fund investing in equity-type Securities of the Target Company must sell the said equity-type Securities within the timeframe stipulated in Financial Services Authority Regulation Number 37/POJK.04/2014 concerning Mutual Funds in the Form of Limited Investment Contracts, or a specific longer timeframe as stipulated in the Collective Investment Contract.

2. The Investment Manager managing the Limited Mutual Fund may purchase for the benefit of the Limited Mutual Fund Securities issued by parties affiliated with the Investment Manager, subject to the following conditions:

a. the purchase transaction of the Target Company's Securities must be conducted under arm's length conditions, where transactions between Parties are conducted independently and at fair prices;

b. in the event the Target Company's Securities to be purchased are debt-type Securities, such Securities must be supported by collateral in the form of fiduciary guarantees and/or lien rights valued at least 100% (one hundred percent) of the nominal value of the said debt-type Securities, except for debt-type Securities that have been rated by a Securities Rating Company holding a business license from the Financial Services Authority with an investment grade rating;

c. in the event the Target Company's Securities to be purchased are equity-type Securities, the due diligence of the Target Company and real sector activities must be supported by an independent valuation report prepared by an Appraiser registered with the Financial Services Authority; and

d. the Investment Manager must disclose information regarding the Limited Mutual Fund's investment in Securities issued by parties affiliated with the Investment Manager in the Limited Mutual Fund's disclosure documents.

3. The Investment Manager managing the Limited Mutual Fund must hold Units of each Limited Mutual Fund it manages of at least 1,000,000 (one million) Units until the dissolution of the Limited Mutual Fund.

III. MANAGEMENT OF SECURITIES PORTFOLIOS FOR INDIVIDUAL CLIENT INTERESTS

1. An Investment Manager appointed as a Gateway may use the services of third parties to conduct Offers for the Management of Securities Portfolios for Individual Client Interests to prospective Investors.

2. Third parties as referred to in item 1 may be:

a. Securities Brokers appointed as Gateways; or

b. commercial banks appointed as Gateways or Collection Banks.

3. In conducting Offers, the authority of third parties is limited to:

a. conveying information related to the Management of Securities Portfolios for Individual Client Interests from the Investment Manager to Investors; or

b. providing information regarding Investors to the Investment Manager with the Investor's consent.

4. Offer activities conducted by third parties to prospective Investors may be conducted through direct meetings (face to face), letters, and/or electronic media.

5. Investment Managers using third-party services to conduct Offers for the Management of Securities Portfolios for Individual Client Interests must:

a. create written policies and procedures related to the Management of Securities Portfolios for Individual Client Interests offered through third parties;

b. provide information related to the Management of Securities Portfolios for Individual Client Interests for Offer purposes;

c. create a written agreement between the Investment Manager and the third party, which must at least contain:

1. rights, obligations, and responsibilities of each party;
2. costs; and
3. dispute resolution in the event of disagreements; and

d. be responsible for resolving client complaints.

6. The initial deposit of the Investor in the Management of Securities Portfolios for Individual Client Interests may consist of Securities with a value of at least IDR 5,000,000,000.00 (five billion rupiah).

7. In the event the Investor's initial deposit is in the form of Securities, the initial value of the Securities investment in the Individual Client Portfolio Management must be valued based on fair market value calculated according to Regulation Number IV.C.2, Appendix of the Decision of the Chairman of the Capital Market Supervisory Agency and Financial Institutions Number: Kep-367/BL/2012 dated July 9, 2012 concerning Fair Market Value of Securities in Mutual Fund Portfolios.

IV. ASSET-BACKED SECURITIES COLLECTIVE INVESTMENT CONTRACT (KIK-EBA)

1. The transfer of financial assets from the Original Creditor (Originator) to the KIK-EBA must meet the criteria for a true sale or complete transfer as follows:

a. financial assets must be separated from the financial assets owned by the Original Creditor (Originator);

b. the Original Creditor (Originator) must transfer all rights and obligations related to the financial assets to the KIK-EBA and is prohibited from retaining any benefits from such financial assets;

c. the Original Creditor (Originator) no longer acts as the holder of rights over the financial assets, either directly or indirectly;

d. the Original Creditor (Originator) must not be in a position as the controller of the KIK-EBA in the financial asset securitization transaction;

e. the KIK-EBA does not have the right to request recourse from the Original Creditor (Originator) for losses arising from such financial assets;

f. in the event the Original Creditor (Originator) also acts as a servicer, the servicer services must be provided based on arm's length principles;

g. in the event the Original Creditor (Originator) also acts as a paying agent, there must be no obligation imposed on the Original Creditor (Originator) to provide funds to the KIK-EBA except until such funds are received from the debtor; and

h. despite the criteria stipulated in letters a through g:

1. in the event financial assets in the KIK-EBA have decreased to an uneconomical scale, the Original Creditor (Originator) has the right to refuse to repurchase the financial assets in the KIK-EBA at fair value; or
2. the Original Creditor (Originator) may repurchase financial assets from the KIK-EBA if the Original Creditor (Originator) has an obligation to do so based on the securitization transaction because the Original Creditor (Originator) violated conditions or warranties in the securitization transaction.

2. Compliance with the true sale or complete transfer criteria as referred to in item 1 may be sufficiently supported by the opinion of a Legal Consultant registered with the Financial Services Authority.

V. REAL ESTATE INVESTMENT FUNDS

1. DIRE may invest in a portion of a Real Estate Asset, with the condition that the acquisition of the Real Estate Asset is conducted in the best interest of the DIRE Unit holders.

2. DIRE may invest in Real Estate Assets indirectly through the takeover of shares of the company owning the Real Estate Asset, with the condition that the Real Estate owned by the company whose shares are taken over by DIRE must have generated income.

3. In the event DIRE invests in Real Estate Assets as referred to in item 2, the Investment Manager is exempted from possessing and administering documents related to the Registration Statement for the Public Offer of the Real Estate Investment Fund as follows:

a. real estate management agreement;

b. real estate valuation documents;

c. copies of lease agreements related to the Real Estate;

d. copies of real estate purchase agreements; and

e. photocopies of building use right certificates and land and/or building ownership certificates.

VI. CLOSING PROVISIONS

This Financial Services Authority Circular shall take effect on the date of determination.

Determined in Jakarta on December 19, 2016

EXECUTIVE HEAD
CAPITAL MARKET SUPERVISOR,

signed

NURHAIDA

Copy matches the original

Legal Director 1
Legal Department

signed

Yuliana