Stimulus Policy and Relaxation of Investment Management Regulations to Maintain Capital Market Performance and Stability Due to the Spread of Coronavirus Disease 2019

To:

1. Investment Manager Directors;
2. Custodian Banks; and
3. Mutual Fund Securities Selling Agents,

At your location.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 19/SEOJK.04/2021 CONCERNING STIMULUS POLICY AND RELAXATION OF REGULATIONS RELATED TO INVESTMENT MANAGEMENT TO MAINTAIN CAPITAL MARKET PERFORMANCE AND STABILITY DUE TO THE SPREAD OF CORONAVIRUS DISEASE 2019

In relation to the provisions of Article 3 paragraph (1) letter g of Financial Services Authority Regulation Number 7/POJK.04/2021 concerning Policies in Maintaining Capital Market Performance and Stability Due to the Spread of Coronavirus Disease 2019 (State Gazette of the Republic of Indonesia Year 2021 Number 81, Supplement to the State Gazette of the Republic of Indonesia Number 6671), and considering that pressure on the performance of capital market industry actors, capital market stability, and Indonesia's economic growth as a result of the spread of coronavirus disease 2019 affects the investment management industry, particularly mutual fund products, it is necessary to relax certain regulations related to mutual fund management in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

1. In this Financial Services Authority Circular Letter, the following terms are defined as:
   a. Investment Manager is a party whose business activities manage securities portfolios for customers or manage 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. b. Mutual Fund is a vehicle used to gather funds from public investors to be subsequently invested in securities portfolios by the Investment Manager.
   c. Securities are negotiable instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, units of participation in collective investment contracts, futures contracts over Securities, and any derivatives of Securities.
   d. Sharia Mutual Fund is a Mutual Fund as referred to in the Law on Capital Markets and its implementing regulations, the management of which does not conflict with Sharia principles in the capital market. e. Public Offering is the activity of offering Securities conducted by the issuer to sell Securities to the public based on procedures regulated in the Law on Capital Markets and its implementing regulations. f. Collective Investment Contract is a contract between the Investment Manager and the custodian bank that binds unit holders, wherein the Investment Manager is authorized to manage the collective investment portfolio and the custodian bank is authorized to execute collective custody. g. Mutual Fund Securities Selling Agent is a party that sells Mutual Fund Securities based on a cooperation contract with the Mutual Fund managing Investment Manager.

2. That in order to reduce the impact of market condition pressures, it is necessary to facilitate Investment Managers to take adjustment actions in investment management policies, particularly Mutual Funds, without violating applicable laws and regulations while maintaining fairness, orderliness, and management efficiency, through Financial Services Authority policies.

II. STIMULUS AND RELAXATION OF CERTAIN REGULATIONS RELATED TO INVESTMENT MANAGEMENT

1. Certain regulations as regulated in Financial Services Authority Regulation Number 23/POJK.04/2016 concerning Mutual Funds in the Form of Collective Investment Contracts and Financial Services Authority Regulation Number 33/POJK.04/2019 concerning the Issuance and Requirements of Sharia Mutual Funds are adjusted as follows:
   a. Regarding the composition of Mutual Fund Securities portfolios and the obligation to adjust the composition of Mutual Fund Securities in the form of Collective Investment Contracts:

1. the obligation to adjust the composition of Mutual Fund Securities in the form of Collective Investment Contracts not caused by transaction actions taken by the Investment Manager is adjusted to a maximum of 40 (forty) trading days; and
2. the obligation to adjust the composition of Mutual Fund Securities in the form of Collective Investment Contracts caused by transaction actions taken by the Investment Manager is adjusted to a maximum of 20 (twenty) trading days.
   b. Regulations regarding the time limit for the obligation of Mutual Funds in the form of Collective Investment Contracts whose registration statements have become effective to have managed funds of at least Rp10,000,000,000 (ten billion rupiah) are adjusted to:
3. within a time limit of 130 (one hundred thirty) trading days after the Mutual Fund registration statement becomes effective; or
4. within a time limit of 160 (one hundred sixty) trading days after the Mutual Fund registration statement becomes effective for Protected Mutual Funds, Guaranteed Mutual Funds, and Index Mutual Funds conducting Limited Public Offerings.
   c. Regulations regarding the time limit for the obligation to dissolve Mutual Funds in the form of Collective Investment Contracts with total net asset value of Mutual Funds less than Rp10,000,000,000 (ten billion rupiah) are adjusted to 160 (one hundred sixty) consecutive trading days.

2. For Investment Managers and Mutual Fund Securities Selling Agents selling Mutual Fund Securities through electronic systems, to facilitate the purchase of Mutual Funds by investors conducting electronic Mutual Fund transactions, Mutual Fund purchases can be conducted through electronic payment systems in the form of virtual accounts provided by payment gateway service companies, fund transfer services that have obtained permits from Bank Indonesia, and other innovative mechanisms for Mutual Fund transaction payments, with the condition that Investment Managers and Mutual Fund Securities Selling Agents conducting sales through electronic systems must:
   a. obtain approval from the Financial Services Authority regarding the plan to use virtual accounts provided by payment gateway service companies and/or fund transfer services that have obtained permits from Bank Indonesia and other innovative mechanisms for Mutual Fund transaction payments; b. ensure that the virtual account is in the name of each respective Mutual Fund unit holder;
   c. ensure that the virtual account is always at a zero balance at the end of the trading day by immediately forwarding the funds from the Mutual Fund purchase (subscription) transactions to the Mutual Fund account administered by the custodian bank;
   d. have adequate standard operating procedures and risk management regarding the use of virtual accounts by Investment Managers and Mutual Fund Securities Selling Agents conducting sales through electronic systems as a supporting facility for electronic Mutual Fund transaction payments; and e. have written agreements with the parties involved in the operational use of virtual accounts by Investment Managers and Mutual Fund Securities Selling Agents conducting sales through electronic systems as a supporting facility for electronic Mutual Fund transaction payments, which include at least:

1. the identity of each party;
2. the rights, obligations, and responsibilities of each party;
3. the duration of the agreement;
4. the mechanism for the use of virtual accounts by Investment Managers and Mutual Fund Securities Selling Agents conducting sales through electronic systems;
5. provisions in the event of disputes; and
6. provisions for the termination of the agreement.

3. For Mutual Funds other than Money Market Mutual Funds and Protected Mutual Funds that have obtained effective statements and have invested in debt-type Securities and/or corporate sukuk not offered through Public Offerings before the issuance of Financial Services Authority Letter Number S-97/D.04/2020 dated March 20, 2020 concerning Stimulus and Relaxation Policies to the Investment Management Industry in the Context of Significant Fluctuating Economic Conditions Due to the Covid-19 Pandemic, may invest in debt-type Securities and/or corporate sukuk not offered through Public Offerings with a BBB- rating or equivalent issued by rating agencies.

4. For Mutual Funds other than Money Market Mutual Funds and Protected Mutual Funds that have obtained effective statements and have invested in debt-type Securities and/or corporate sukuk not offered through Public Offerings after the issuance of Financial Services Authority Letter Number S-97/D.04/2020 dated March 20, 2020 concerning Stimulus and Relaxation Policies to the Investment Management Industry in the Context of Significant Fluctuating Economic Conditions Due to the Covid-19 Pandemic, must follow the provisions of Financial Services Authority Regulation Number 2/POJK.04/2020 concerning the Amendment of POJK Number 23/POJK.04/2016 concerning Mutual Funds in the Form of Collective Investment Contracts.

5. In the event of a rating downgrade of debt-type Securities and/or corporate sukuk not offered through Public Offerings in Mutual Funds as referred to in item 3 to a rating below BBB- or equivalent, the Investment Manager may request a relaxation of the portfolio adjustment time limit from the Financial Services Authority.

6. For Protected Mutual Funds that have obtained effective statements and have invested in debt-type Securities and/or corporate sukuk as the protection basis before the issuance of Financial Services Authority Letter Number S-97/D.04/2020 dated March 20, 2020 concerning Stimulus and Relaxation Policies to the Investment Management Industry in the Context of Significant Fluctuating Economic Conditions Due to the Covid-19 Pandemic, may invest in debt-type Securities and/or corporate sukuk with a BBB- rating or equivalent issued by rating agencies.

7. In the event that the portfolio of Securities consisting of debt-type Securities, including cash flow-secured asset-backed Securities as the protection basis for Protected Mutual Funds, experiences a rating downgrade below BBB- or equivalent issued by rating agencies or falls into a category outside the investment-grade category, the Investment Manager may request a relaxation of the portfolio replacement time limit from the Financial Services Authority, with the following provisions:
   a. submitting a follow-up plan for the resolution and/or restructuring of the portfolio of Securities serving as the protection basis in Protected Mutual Funds; and b. acting in good faith and professionally in the interest of investors to formulate steps for the resolution and/or restructuring of the portfolio of Securities serving as the protection basis in Protected Mutual Funds.

8. For Mutual Funds in the form of Limited Participation Collective Investment Contracts that have obtained registration and have invested in debt-type Securities and/or corporate sukuk before the issuance of Financial Services Authority Letter Number S-97/D.04/2020 dated March 20, 2020 concerning Stimulus and Relaxation Policies to the Investment Management Industry in the Context of Significant Fluctuating Economic Conditions Due to the Covid-19 Pandemic, may invest in debt-type Securities and/or corporate sukuk with a BBB- rating or equivalent issued by rating agencies.

9. In the event of a rating downgrade of debt-type Securities and/or corporate sukuk in the portfolio of Mutual Funds in the form of Limited Participation Collective Investment Contracts as referred to in item 8 to a rating below BBB- or equivalent, the Investment Manager may request a relaxation of the time limit for fulfilling guarantees for investments in Mutual Funds in the form of Limited Participation Collective Investment Contracts in debt-type Securities and/or corporate sukuk from the Financial Services Authority, with the following provisions:
   a. submitting a follow-up plan and time limit for fulfilling the guarantee participation obligation from the target company; and b. acting in good faith and professionally in the interest of investors to formulate steps for fulfilling guarantees for debt-type Securities and/or corporate sukuk in the portfolio of Mutual Funds in the form of Limited Participation Collective Investment Contracts.

10. In the event that after the guarantee fulfillment mechanism as referred to in item 9, there is an option for restructuring debt-type Securities and/or corporate sukuk in the portfolio of Mutual Funds in the form of Limited Participation Collective Investment Contracts, the Investment Manager must:
    a. submit a restructuring plan for debt-type Securities and/or corporate sukuk in the portfolio of Mutual Funds in the form of Limited Participation Collective Investment Contracts to the Financial Services Authority no later than 10 (ten) working days since the existence of such an option from the target company; b. obtain approval from unit holders through a general meeting of unit holders regarding the restructuring plan for debt-type Securities and/or corporate sukuk in the portfolio of Mutual Funds in the form of Limited Participation Collective Investment Contracts;
    c. amend the Collective Investment Contract and disclosure documents for Mutual Funds in the form of Limited Participation Collective Investment Contracts; and
    d. submit documents related to the restructuring of debt-type Securities and/or corporate sukuk in the portfolio of Mutual Funds in the form of Limited Participation Collective Investment Contracts to the Financial Services Authority no later than 10 (ten) working days before the restructuring is conducted, with document completeness the same as the documents submitted during the registration application for Mutual Funds in the form of Limited Participation Collective Investment Contracts, which have been adjusted in relation to the restructuring of the Securities.

11. In order to process requests from Investment Managers or Mutual Fund Securities Selling Agents regarding stimulus and relaxation of regulations related to investment management to maintain capital market performance and stability due to the spread of Coronavirus Disease 2019 as referred to in items 2, 7, and 9, the Financial Services Authority reviews the data and information in the request documents.

12. In order to support the review process of documents submitted by Investment Managers or Mutual Fund Securities Selling Agents regarding stimulus and relaxation of regulations related to investment management to maintain capital market performance and stability due to the spread of Coronavirus Disease 2019, the Financial Services Authority is authorized to:
    a. request the parties to present; and/or b. request changes and/or additional information regarding the completeness of the submitted documents.

13. The Financial Services Authority may approve and/or not approve requests from Investment Managers or Mutual Fund Securities Selling Agents regarding stimulus and relaxation of regulations related to investment management to maintain capital market performance and stability due to the spread of Coronavirus Disease 2019.

14. In the event that requests from Investment Managers or Mutual Fund Securities Selling Agents regarding stimulus and relaxation of regulations related to investment management to maintain capital market performance and stability due to the spread of Coronavirus Disease 2019 meet the requirements or do not meet the requirements, and there are no indications of violations committed, the Financial Services Authority provides a response within 180 (one hundred eighty) trading days.

15. Responses as referred to in item 14 may include:
    a. approving and/or not approving; b. conducting confirmation and/or requesting follow-up actions to meet requirements; or
    c. requesting the completion of data, information, and documents.

This copy is consistent with the original.
Legal Director 1
Legal Department signed,
Mufli Asmawidjaja

III. CLOSING

This Financial Services Authority Circular Letter takes effect on the date of establishment.
Established in Jakarta on August 5, 2021

EXECUTIVE HEAD
CAPITAL MARKET SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed,
HOESEN