By Maria Yudhitama Eka Dewi and Vicky Karnadi
The Indonesian Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) has issued a regulation that sets the guidelines for a fit and proper reassessment of the primary parties of a financial services institution, including the scope, procedure, results and consequences of such reassessment.
OJK Regulation No. 34/POJK.03/2018 regarding Fit and Proper Test Reassessment for the Primary Parties of a Financial Services Institution (“POJK 34/2018”) came into effect on January 28, 2019.
This new regulation supplements OJK Regulation No. 27/POJK.03/2016 regarding Fit and Proper Test for the Primary Parties of a Financial Services Institution (“POJK 27/2016”). While POJK 27/2016 regulates the initial fit and proper tests for primary parties, this new regulation authorizes and regulates the OJK’s reassessment of a primary party that has previously passed a fit and proper test.
Parties Subject to Reassessment
A “primary party” of a financial services institution, and thus subject to reassessment under POJK 34/2018, is a party that owns, manages, monitors, and/or has significant influence over a financial services institution. This includes a controlling shareholder, members of the Board of Directors or Board of Commissioners, executive officers, members of the Sharia Supervisory Board, internal auditors, company actuary, and/or the executive manager of a bank, securities company, investment advisory company, insurance company, pension fund, and/or financing company. Note that a primary party that no longer holds that position is still subject to reassessment by the OJK.
Scope of Reassessment
The OJK has the authority to reassess a primary party that it had previously approved due to issues of integrity, financial feasibility, financial reputation, and/or competency that arise for a number of reasons, including being convicted of a crime, causing the company to face financial problems, having bad debt, and being declared bankrupt.
Method of Reassessment
The OJK may initiate a reassessment based on any data, information, or evidence collected by the OJK itself or provided by other sources. The OJK will arrange a face-to-face meeting with the party concerned to seek clarification on the data, information, or evidence it has gathered.
Consequences of Reassessment
Depending of their position in the financial services company, if a primary party does not pass the reassessment they could be prohibited from holding a position or owning shares in a financial services company, lose their right to vote in general meetings of shareholders, or be required to dispose of their shares in the financial services company, for a period of 3 to 20 years.
Request for Review
A primary party that does not pass the reassessment may submit a request to the OJK for a review before their prohibition ends, subject to meeting certain criteria. The OJK has the discretion to entertain or not entertain such requests for review. In the event the request is granted, the review process is similar to the reassessment.
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