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The Implication of OJK Regulation No.: 37/POJK.04/2020 Year 2020

The Implication of OJK Regulation No.: 37/POJK.04/2020 Year 2020 regarding the Procedures for Exemptions to the Obligation of Accountability Principles for the Issuing Company or Public Company which are Financial Institution in order to Prevent and Manage the Crisis on Financial System

As we are may well aware, the Government of Indonesia has enacted the Regulation of the Government in Lieu of Law No. 1 of 2020 on State Financial Policies and the Stability of the Financial System in Relation to the Handling of the Coronavirus 2019 (COVID-19) Pandemic and/or Threats That Are Potentially Harmful to the National Economy and/or Stability of the Financial System (“Law 1/2020”). Furthermore, under the Law 1/2020[1], the Financial Services Authority (“OJK”) has the authority to declare the exemption for certain parties on the obligation of accountability principle in capital market in order to prevent and manage the crisis on financial system.

The said authority has been confirmed through the OJK Regulation No. 37/POJK.04/2020 of 2020 on Procedures for Exemptions to Transparency Principles for Issuers and Publicly-Traded Companies Which Are Financial Service Institutions Engaged in the Prevention and Handling of Financial System Crises (“Regulation 37/2020”), however, the implementation of the said exemption is only limited for Issuers or Public Company which are licensed Financial Service Institution engaging in the collection and/or management of funds sourced from the general public (“Certain Parties”) from the implementation of transparency principles (“Exemptions”).[2]

The determination of the Exemptions under Regulation 37/2020 can be done based on OJK review on Certain Parties or by the application submitted to the OJK by Certain Parties.[3] OJK review on Certain Parties is conducted by the OJK to Certain Parties that facing several following conditions:

  1. Certain issues are being experienced (i.e. issues relating to the soundness levels of the relevant financial service institutions) which could potentially jeopardize the overall stability of the financial system;
  2. Have received written orders from the OJK demanding that they settle the problem in question; or
  3. Have received written orders from the OJK demanding that they implement specific transactions or corporate actions.

On the other hand, the requirements for Certain Parties who may apply for the Exemptions must also fulfil the same conditions as the OJK review on Certain Parties that set out in the previous paragraph, except for the condition that they have received written orders from the OJK demanding that they settle the problem in question. The Exemptions application shall be submitted to the Chairman of the Board of Commissioners of the OJK and a copy shall also be submitted to the Chief Executive of the Capital Market Supervisor, as well as to the Chief Executive which is implementing the supervision of the relevant applicants. The application should address issues, such as the reason why the fulfilment of the transparency principle may jeopardize the overall stability of the financial system, as confirmed through relevant supporting documents and analysis reports, type of transparency principle for which an Exemption is being sought, and required exemption period.[4]

The application then will be reviewed by the OJK based on the condition of the relevant Certain Parties and their relation to the overall stability of the financial system. When the review has been completed, OJK may decide to fully grant the application, partially grand and partially reject the application, fully reject the application, or order the relevant Certain Parties to implement or to not implement certain measures.[5]

As an illustration, one of the material facts in which shall be reported to the public is labor disputes that may interfere with company operations[6]. The said labor disputes may occurred due to the problems derived as the results of the COVID-19 pandemic which may significantly affected the performance as well as the value of the shares of the company. However, the said matters will be subject to review from OJK, whether this kind of facts may be exempted or triggered a possibility for a crisis on the financial system.

 

[1] Paragraph (1) of Article 23 of Law 1/2020.
[2] Article 2 of Regulation 37/2020
[3] Article 3-5 of Regulation 37/2020
[4] Article 6-7 of Regulation 37/2020
[5] Article 8 of Regulation 37/2020
[6] Point o of Article 6 of OJK Regulation No. 31/POJK. 04/2015 regarding Disclosure of Information or Material Facts by Emitents or Public Companies.