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12 February 2019
The Financial Services Authority (OJK) recently issued Regulation 25/POJK.04/2018 (OJK Regulation 25), which provides a framework to establish the Securities Finance Agency (SFA). The agency aims to boost transaction volumes and liquidity in the Indonesian stock market, particularly by encouraging margin trading and short selling.
Upon its establishment, the SFA will provide securities financing to brokerage firms, which are currently hindered by limited internal resources and a lack of access to funding from banks and other sources. The SFA is expected to provide an alternative source of financing to brokerage firms to fund margin trading, short selling and other types of securities transaction.
The new regulation entered into force on 5 December 2018.
The SFA, which must be a limited liability company and be licensed by the OJK, is expected to provide facilities to brokerage firms in the form of cash or securities for the settlement of margin-trading and short-selling transactions. Upon securing approval from the OJK, financing may also be provided for other types of securities transaction, such as public offerings on the primary market, repurchase agreements and securities lending activities.
The SFA must be majority owned, either directly or indirectly, by the Indonesian Stock Exchange. Other shareholders may consist of:
The SFA must have a minimum paid-up capital of Rp250 billion ($17.6 million). However, its shareholders may be required to contribute additional capital with regard to business and operational exigencies.
Only Indonesian citizens may serve as directors and commissioners of the SFA. In addition, directors must be resident in Indonesia. Both directors and commissioners are required to undergo fit-and-proper tests conducted by the OJK prior to their appointments.
The SFA may raise capital by means of:
OJK Regulation 25 also contains detailed provisions governing the SFA's:
For further information on this topic please contact Elsie F Hakim or Novario Asca Hutagalung at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125) or email (firstname.lastname@example.org or email@example.com). The Ali Budiardjo, Nugroho, Reksodiputro website can be accessed at www.abnrlaw.com.
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Elsie F Hakim
Novario Asca Hutagalung