INVESTMENT PRODUCT BANNED FOR NOW

INVESTMENT PRODUCT BANNED FOR NOW


Yohannes Obor
Jakarta Globe Friday,February 19,2010

The capital market and financial Institutions SupervisorAagency on Thursday ruled that fund managers are no longer allowed to raise public money via discretionary funds until a regulation governing the investment product is enacted in march.
Djoko Hendratto, head of investment management at the agency which is known as Bapeppam-LK, said existing discretionary funds would have to adaptance the regulation was issued.
“we are still drafting rules on bilateral and collective funds management contracts. Once the rules are issued, the issuance of traditional bilateral and collective funds management contracts will be prohibited,” Djoko told the jakarta globe on Thursday.
A discretionary fund is a two party investment contract between a fund manager and an individual customer. Bapepam-LK has not regulated this business as the transaction only involves two parties.
However recent cases of alleged fraud caused cusromer to suffer multitrillion-rupiah losses, prompting Bapepam-LK to draft a reglulation on discretionanry funds.
One such scandal involvedPT Antaboga Delta Securitas, an affiliate of the former PT Bank Century, whose customer lost up to Rp 2.5 trillion.
Djiko earlier said that under the planned regulation, investment managers will be requaired to separate discretionary funds between customers’ accounts and the accounts of investment managers and put the customers’ funds in custodian banks.
Investment managers are also requaired to offer bilateral investments contract in a certain nominal value, as discretionary funds impose higher risk than investments in mutual funds, he said.