The stock market authorities are reviving a plan to create an insurance scheme to back investor funds whenever they become at risk for reasons other than market mechanisms, such as embezzlement or fraud.
The scheme would allow the pooling of funds, into an investor protection fund, to provide a greater assurance to investors whenever their investments might be compromised by fraudulent practices, Indonesia Stock Exchange (IDX) president director Erry Firmansyah said over the weekend.
“It will be like insurance for customers’ funds and assets in the stock market,” Erry said, stressing that the fund would not be available to be distributed to compensate investors’ losses caused by market risks.
He said officials from the IDX and the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) had held a meeting last weekend in Bandung, West Java, to discuss the possibility of establishing such a fund.
The investor protection fund plan actually first emerged a year ago but despite initial discussions the idea was never brought to fruition.
But the stock market authorities began to realize its increasing significance only recently following a series of fraud cases in the capital market that have caused significant losses to investors.
The latest fraud cases included one involving PT Sarijaya Permana Sekuritas, one of the country’s large securities houses, under which the company’s president commissioner Herman Ramli allegedly embezzled up to Rp 245 billion (about US$23.1 million) from clients funds.
Another prominent case involved hundreds of customers of PT Antaboga Delta Sekuritas now under serious threat of losing their investment as the company’s owner Robert Tantular allegedly swindled Rp 1.4 trillion of their money.
Both Herman and Ramli are now in police custody while the police are still investigating these cases, but there is no assurance whatsoever in these cases that investors would be able to reclaim the embezzled funds in full, as the two companies are now on the brink of bankruptcy, with very little assets in hand.
Nurhaida, Bapepam’s head of division for securities transactions, anticipates that an investor’s protection fund could help keep investors’ assets safe from unscrupulous or fraudulent deals as happened in the cases of Sarijaya and Antaboga.
Commenting on this, the chairman of the Indonesian Securities Brokers Association, Saida Solihin said the association welcomed the plan, saying that this would give the local market added value as the investors’ interest would be more protected, which could eventually attract more investors to the stock market.
Saida said however that the authorities needed to consult the association over the proposed mechanisms, for example, where the funds would come from, either directly levied from investors or via the fees charged by securities houses.
“I think we need to discuss it with them (BEI and Bapepam),” he said.
M. Alfatih, a BNI Securities broker, said that basically the industry welcomed the idea but stressed that it should not end up burdening the industry, with many stakeholders still struggling to get back on their feet having been hammered by the crisis of confidence triggered by the October 2008 market collapse.
After suffering greatly from the global economic downturn in the fourth quarter of last year, the Indonesian stock market has slowly recovered since early this year, with daily trading values now averaging around Rp 4.5 trillion, much higher than the Rp 2 trillion or so booked at the beginning of the year.
Total market capitalization rose to Rp 1,489 trillion on May 22 from Rp 1,131 trillion in Jan. 9, as shown by data from the IDX.
Currently, there are almost 1 million IDX investors in Indonesia with the number of securities houses now reaching 119 companies.
The scheme would allow the pooling of funds, into an investor protection fund, to provide a greater assurance to investors whenever their investments might be compromised by fraudulent practices, Indonesia Stock Exchange (IDX) president director Erry Firmansyah said over the weekend.
“It will be like insurance for customers’ funds and assets in the stock market,” Erry said, stressing that the fund would not be available to be distributed to compensate investors’ losses caused by market risks.
He said officials from the IDX and the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) had held a meeting last weekend in Bandung, West Java, to discuss the possibility of establishing such a fund.
The investor protection fund plan actually first emerged a year ago but despite initial discussions the idea was never brought to fruition.
But the stock market authorities began to realize its increasing significance only recently following a series of fraud cases in the capital market that have caused significant losses to investors.
The latest fraud cases included one involving PT Sarijaya Permana Sekuritas, one of the country’s large securities houses, under which the company’s president commissioner Herman Ramli allegedly embezzled up to Rp 245 billion (about US$23.1 million) from clients funds.
Another prominent case involved hundreds of customers of PT Antaboga Delta Sekuritas now under serious threat of losing their investment as the company’s owner Robert Tantular allegedly swindled Rp 1.4 trillion of their money.
Both Herman and Ramli are now in police custody while the police are still investigating these cases, but there is no assurance whatsoever in these cases that investors would be able to reclaim the embezzled funds in full, as the two companies are now on the brink of bankruptcy, with very little assets in hand.
Nurhaida, Bapepam’s head of division for securities transactions, anticipates that an investor’s protection fund could help keep investors’ assets safe from unscrupulous or fraudulent deals as happened in the cases of Sarijaya and Antaboga.
Commenting on this, the chairman of the Indonesian Securities Brokers Association, Saida Solihin said the association welcomed the plan, saying that this would give the local market added value as the investors’ interest would be more protected, which could eventually attract more investors to the stock market.
Saida said however that the authorities needed to consult the association over the proposed mechanisms, for example, where the funds would come from, either directly levied from investors or via the fees charged by securities houses.
“I think we need to discuss it with them (BEI and Bapepam),” he said.
M. Alfatih, a BNI Securities broker, said that basically the industry welcomed the idea but stressed that it should not end up burdening the industry, with many stakeholders still struggling to get back on their feet having been hammered by the crisis of confidence triggered by the October 2008 market collapse.
After suffering greatly from the global economic downturn in the fourth quarter of last year, the Indonesian stock market has slowly recovered since early this year, with daily trading values now averaging around Rp 4.5 trillion, much higher than the Rp 2 trillion or so booked at the beginning of the year.
Total market capitalization rose to Rp 1,489 trillion on May 22 from Rp 1,131 trillion in Jan. 9, as shown by data from the IDX.
Currently, there are almost 1 million IDX investors in Indonesia with the number of securities houses now reaching 119 companies.