Bapepam-LK blames law for weak supervision
Having received intense criticism for supervisory failures in relation to risky banking derivative products, the Capital Market and Financial Supervisory Agency (Bapepam-LK) passed the blame Monday onto inadequate regulations which undermined its capacity to function effectively.
Bapepam-LK head of investigation and inspection bureau Sardjito said the watchdog would need a more powerful legal basis to work from in order to ensure comprehensive settlement and supervision in the capital market.
"The existing capital market law has limited us in making necessary responses," he said.
According the 1995 Law on Capital Markets, Bapepam could not access banking records immediately without an approval from the police and the central bank.
This situation has rendered the agency unable to develop an early warning capacity on investment products sold by banks, and to respond to reports from investors on irregularities.
"It takes time, and is very frustrating. If we can't follow the money flow, where can we go then?" Sardjito said.
The agency and the central bank have been accused of being uninformed of the circumstances in responding to the case of the alleged investment fraud reportedly carried out by PT Antaboga Delta Sekuritas Indonesia, which sold its securities through the recently bailed out Bank Century.
The Century-Antaboga case unfolded weeks ago after hundreds of investors were unable to recover their funds.
The losses suffered by the investors have reached more than Rp 1.4 trillion (US$124.5 million).
Last week, hundreds of Century's customers protested to Bapepam-LK, challenging the agency's statement that Century had no authority to sell the Antaboga product, which came in the form of a mutual fund and was therefore said not to be a banking product.
Analysts, however, have argued that the Bapepam early warning system on problematic investment products, which should have been functioning, had totally failed, raising the suspicion that the agency was not serious in cracking down on recalcitrant securities houses.
Sardjito said another problem in the existing law included Bapepam's inability to conduct civil proceedings.
Civil proceedings would mean that Bapepam would be able, on behalf of investors, to file civil litigation against a company allegedly committing a crime in the capital market.
"Such a legal process would be faster, cheaper and more certain," he said.
Sardjito also said the existing criminal code could not nail all capital market criminals as it had yet to regulate for cases of sophisticated fraud through investment schemes.
"That is why we can only charge Antaboga with article 372 and 378 of the criminal code on deception," he said.(hwa)
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