BANK INDONESIA REGULATION NUMBER: 5/5/PBI/2003 CONCERNING RUPIAH AND FOREIGN CURRENCY MONEY MARKET BROKERAGE COMPANIES THE GOVERNOR OF BANK INDONESIA,

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1 BANK INDONESIA REGULATION NUMBER: 5/5/PBI/2003 CONCERNING RUPIAH AND FOREIGN CURRENCY MONEY MARKET BROKERAGE COMPANIES THE GOVERNOR OF BANK INDONESIA, Considering : a. whereas the integrated development of the Rupiah and foreign currency money markets requires greater effectiveness in monetary, banking, and foreign exchange policy and the efficient operation of Rupiah and foreign currency money market transactions; b. whereas through their contribution to the maintenance and support of Rupiah stability, Rupiah and foreign currency money market brokerage companies have a strategic role as supporting institutions in the financial sector; c. whereas with the increasing diversity of money market instruments, it is necessary to make adjustments to the role of money market brokers in providing brokerage services on the Rupiah and foreign currency money markets, including brokerage services for Sovereign Debt Instruments; d. now therefore, it is necessary for the existing provisions concerning Rupiah and foreign currency money market brokerage companies to be replaced by new provisions stipulated in a Bank Indonesia Regulation concerning Rupiah and foreign currency money market brokerage companies; Indonesia...

2 - 2 - In view of : 1. Act Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Number 31 of 1992, Supplement to the State Gazette Number 3472) as amended by Act Number 10 of 1998 (State Gazette of the Republic of Indonesia Number 182 of 1998, Supplement to the State Gazette Number 3790); 2. Act Number 23 of 1999 concerning Bank Indonesia (State Gazette of the Republic of Indonesia Number 66 of 1999, Supplement to the State Gazette Number 3843); 3. Act Number 24 of 1999 concerning Foreign Exchange Flows and the Exchange Rate System (State Gazette of the Republic of Indonesia Number 67 of 1999, Supplement to the State Gazette Number 3844); 4. Act Number 24 of 2002 concerning Sovereign Debt Instruments (State Gazette of the Republic of Indonesia Number 110 of 2002, Supplement to the State Gazette No. 4236); HAS DECREED: To enact : THE BANK INDONESIA REGULATION CONCERNING RUPIAH AND FOREIGN CURRENCY MONEY MARKET BROKERAGE COMPANIES. CHAPTER I GENERAL PROVISIONS Article 1 The terminology used in this Bank Indonesia Regulation is defined as follows: CHAPTER I...

3 Rupiah and Foreign Currency Money Market Brokerage Company, hereinafter referred to as Brokerage Company, is a company established specifically to provide brokerage services for the account of customers on the Rupiah and foreign currency money market, earning fees for services rendered. 2. Bank is a Commercial Bank as stipulated in Act Number 7 of 1992 concerning Banking as amended by Act Number 10 of Users are parties using the services of Rupiah and foreign currency money market brokerage companies. 4. Sovereign Debt Instruments are securities in the form of debt instruments as referred to in Act Number 24 of 2002 concerning Sovereign Debt Instruments, consisting of Treasury Bills and Sovereign Bonds. 5. Treasury Bills are Sovereign Debt Instruments with maturity of up to 12 (twelve) months, bearing interest paid on a discount basis. 6. Sovereign Bonds are Sovereign Debt Instruments with maturities of more than 12 (twelve) months, carrying coupons and/or bearing interest paid on a discount basis. 7. Board of Directors is the organ of a brokerage company bearing full responsibility for corporate management for the interests and purposes of the company, and representing the company in and out of court in accordance with the provisions of the articles of association. 8. Board of Commissioners is the organ of a brokerage company having the task of general and/or specific supervision and providing advice to the Board of Directors in the operation of the brokerage company. 9. Day is a calendar day unless specified as working day. CHAPTER II LINE OF BUSINESS CHAPTER II... Article 2

4 - 4 - (1) The line of business conducted by a Brokerage Company is the provision of brokerage services for the account of its customers on the Rupiah and foreign currency money markets. (2) During the course of business as referred to in paragraph (1), a brokerage company may earn fees for services rendered. (3) The users of a Brokerage Company on the Rupiah and foreign currency money markets are banks, except in the case of brokerage services for Sovereign Debt Instruments in which users may be banks and non-bank parties. (4) If necessary, Bank Indonesia may use the services of a Brokerage Company. Article 3 A Brokerage Company may only provide brokerage services for transactions customarily conducted on the Rupiah money market and on the foreign currency market. Article 4 Brokerage Companies are prohibited from: a. conducting transactions on the Rupiah and foreign currency money markets for their own account and/or with their own funds; b. conducting transactions on the Rupiah and foreign currency money markets for the account of a Brokerage Company owner and/or using the funds of an owner of the Brokerage Company concerned; c. providing brokerage services on the capital market, except for brokerage services in transactions of Sovereign Bonds; d. conducting settlement for users; and d. conducting... e. disclosing information on names of users before approval of transactions.

5 - 5 - CHAPTER III LICENSING Section One Establishment of Brokerage Companies Article 5 (1) A Brokerage Company may only be established and conduct business pursuant to a license issued by Bank Indonesia. (2) A license as referred to in paragraph (1) shall be issued in two stages: a. approval in principle, namely approval to conduct preparations for establishment of the Brokerage Company; and b. operating license, namely the license issued for conducting the business operations of the Brokerage Company after the preparations referred to in letter a are completed. Article 6 The paid up capital for establishment of a Brokerage Company is stipulated at no less than Rp 5,000,000,000 (five billion Rupiahs). Article 7 (1) A Brokerage Company shall be legally incorporated as a Limited Liability Company established specifically to conduct business as Brokerage Company on the Rupiah and foreign currency money markets. (2) A Brokerage Company may only be established by: a. Indonesian citizens and/or Indonesian legal entity; or a. Indonesian... b. Indonesian citizens and/or Indonesian legal entity with foreign citizens and/or foreign legal entity on a partnership basis.

6 - 6 - (3) Ownership held by foreign citizens and/or foreign legal entity as referred to in paragraph (2) letter b shall not exceed 99% (ninety-nine percent) of the paid up capital of the Brokerage Company. Section Two Approval in Principle and Operating License Article 8 (1) Application for approval in principle as referred to in Article 5 paragraph (2) letter a shall be submitted by at least one prospective owner to Bank Indonesia, accompanied by: a. draft deed of incorporation of legal entity, including draft articles of association stating at least the following: 1. name and domicile; 2. line of business as Brokerage Company; 3. capital; 4. ownership; 5. powers, responsibilities, and term of office of the Board of Commissioners and Board of Directors; b. ownership data comprising a list of candidate shareholders and details of individual share ownership; c. list of members of the Board of Commissioners and members of the Board of Directors, accompanied by: 1. recent 4 x 6 cm passport photograph; 2. photocopy of identification in the form of Identity Card (KTP) or passport; 2. photocopy curriculum vitae;

7 personal statement of never having committed disgraceful acts in banking, finance, and other line of business, and of never having been convicted of a felony; d. planned composition and organizational structure, including personnel; e. business plan for the first year, containing at least a feasibility study of market opportunities and economic potential; f. medium-term and long-term corporate plan; g. working systems and procedures; h. proof of payment of capital amounting to at least 30% (thirty percent) of minimum paid up capital as referred to in Article 6, comprising a photocopy of a deposit slip in Rupiahs validated by the Bank in Indonesia at which the deposit is placed, in the name of one of the candidate owners for establishment of the Brokerage Company concerned; (2) The list of candidate shareholders as referred to in paragraph (1) letter b: a. in the case of a natural person, must be accompanied by the documents referred to in paragraph (1) letter c number 1 through number 4; b. in the case of a legal entity, must be accompanied by: 1. deed of incorporation of legal entity, setting forth the articles of association and any amendments thereto having been validated by the competent agency, including in the case of a foreign legal entity, complying with prevailing regulations in the country of origin of the legal entity; 2. documents as referred to in paragraph (1) letter c number 1 through number 4 from all members of the Board of Commissioners and Board of Directors of the legal entity concerned; 3. entire structure of the business group pertaining to the Brokerage Company and of legal entities owning the Brokerage Company up to the ultimate owner. 3. entire...

8 - 8 - Article 9 Approval or rejection of application for approval in principle as referred to in Article 5 paragraph (2) letter a shall be issued no later than 60 (sixty) days after receipt of the complete application. Article 10 (1) Approval in principle as referred to in Article 5 paragraph (2) letter a shall be valid for a period of 6 (six) months commencing from the date of issuance of the approval in principle by Bank Indonesia. (2) A party having received approval in principle as referred to in paragraph (1) shall be prohibited from conducting brokerage business prior to obtaining the operating license. (3) If after the period referred to in paragraph (1) the party having received approval in principle as referred to in paragraph (2) has not submitted an application for an operating license, the approval in principle issued by Bank Indonesia shall be declared no longer valid. Article 11 Application for operating license as referred to in Article 5 paragraph (2) letter b shall be submitted to Bank Indonesia by the parties referred to in Article 8 paragraph (2), accompanied by: a. deed of incorporation of legal entity, setting forth the articles of association validated by a competent agency; b. ownership data as referred to in Article 8 paragraph (1) letter b, each accompanied by documents as referred to in Article 8 paragraph 2, in the event of any change; b. ownership...

9 - 9 - c. composition of the Board of Commissioners and Board of Directors, accompanied by identification and documents as referred to in Article 8 paragraph (2) letter c, in the event of any change; d. proof of payment of minimum paid up capital as referred to in Article 6, comprising a photocopy of a deposit slip at a Bank in Indonesia and in the name of one of the candidate owners of the brokerage company concerned; e. proof of operational readiness, encompassing at least the following: 1. financial projection, including list of fixed assets and inventory; 2. proof of ownership, control, or leasing arrangements for office premises; 3. photograph of office building and layout of office space; 4. possession of adequate facilities for operations; 5. Taxpayer s Identification Number (NPWP) and Corporate Registration Number (TDP). Article 12 Bank Indonesia may conduct on-site examination in respect of the operational readiness of a candidate Brokerage Company. Article 13 Approval or rejection of application for operating license as referred to in Article 6 paragraph (2) letter b shall be issued no later than 90 (ninety) days after receipt of the complete application by Bank Indonesia. Article 14...

10 Article 14 (1) A Brokerage Company having received an operating license from Bank Indonesia shall open business operations no later than 60 (sixty) days commencing from the date of issuance of the operating license. (2) A Brokerage Company having opened business operations as referred to in paragraph (1) shall report the opening of business operations to Bank Indonesia no later than 10 (ten) days after commencement of operations. (3) If after the period referred to in paragraph (1) the Brokerage Company has not opened business operations, Bank Indonesia shall revoke the issued operating license. Article 15 A minimum of half of the Board of Directors and Board of Commissioners of a Brokerage Company shall possess adequate knowledge and/or experience in the Rupiah and foreign currency money markets, as approved by Bank Indonesia. CHAPTER IV SUPERVISION AND REPORTING Article 16 Bank Indonesia shall conduct supervision and training of Brokerage Companies. Article 17 (1) In conducting supervision and training for Brokerage Companies, Bank Indonesia may cooperate with another appointed party. (2) The other party cooperating with Bank Indonesia as referred to in paragraph (1) shall be required to: a. maintain...

11 a. maintain confidentiality of data obtained from the results of supervision and training and to be subject to prevailing laws and regulations concerning professional confidentiality; and/or b. submit reports to Bank Indonesia. Article 18 (1) Brokerage Companies shall submit monthly and annual periodic reports, in addition to special reports to Bank Indonesia. These reports shall be true and accurate. (2) Monthly reports shall comprise reports of business operations, submitted no later than 14 (fourteen) working days after the end of the reporting month. (3) Annual reports shall comprise annual reports audited by a public accountant, submitted no later than 3 (three) months after the end of the reporting year. (4) In the event that the deadline for submission of reports falls on a Saturday, Sunday, or public holiday, the report shall be submitted on the following working day. Article 19 (1) A Brokerage Company is required to submit an application to Bank Indonesia for approval in the event of any change in ownership and composition of Board of Directors and Board of Commissioners. (2) Approval from Bank Indonesia pertaining to paragraph (1) shall be issued no later than 60 (sixty) days after receipt of the application. CHAPTER V...

12 CHAPTER V SANCTIONS Article 20 (1) In the event that a Brokerage Company breaches the matters provided for in this Regulation, Bank Indonesia shall impose sanctions as follows: a. First warning; b. Second warning; c. Summons for management and/or shareholders; d. Revocation of operating license. (2) Bank Indonesia shall impose the sanction of the first warning in the event that a Brokerage Company commits any of the following offences: a. discloses information on users prior to approval of transaction; or b. conducts settlement for users; or c. ownership of the Brokerage Company by foreign citizen and/or foreign legal entity exceeds 99% (ninety-nine percent); or d. does not report the opening of business operations to Bank Indonesia within 10 (ten) days after the opening date; or e. does not submit true and accurate monthly reports, annual reports, and special reports within the stipulated deadlines. (3) Bank Indonesia shall impose the sanction of the second warning in the event that a Brokerage Company commits any of the following offences: a. ignores and/or does not follow through on the sanction of the first warning in respect of an offence as referred to in paragraph (2) no later than 3 (three) months after the date of imposition of the sanction of the first warning; or b. commits the same offence as referred to in paragraph (2) for the second time. (4) Bank...

13 (4) Bank Indonesia shall impose sanctions comprising summons for management and/or shareholders in the event that a Brokerage Company commits any of the following offences: a. conducts brokerage business prior to obtaining an operating license from Bank Indonesia; or b. does not submit an application for approval to Bank Indonesia in the event of any change in ownership, composition of board of directors or board of commissioners, and/or does not report to Bank Indonesia any change in the company name; or c. conducts transaction on the Rupiah and foreign currency money markets in its own name and/or using its own funds; or d. conducts transactions on the Rupiah and foreign currency money market for the account of a Brokerage Company owner and/or using the funds of the Brokerage Company; or e. conducts business other than the stipulated line of business, namely restricted to brokerage services on the Rupiah and foreign currency money markets with the exception of brokerage services in Sovereign Bond transactions; f. ignores and/or does not follow through on the sanction of the second warning within a period not exceeding 3 (three) months after the date of imposition of the sanction of the second warning. (5) Bank Indonesia shall impose sanctions of revocation of business license in the event that a Brokerage Company ignores and/or does not follow through on any sanctions as referred to in paragraph (4) within a period not exceeding 6 (six) months commencing from the date of imposition of sanctions of summons for management and/or shareholders. CHAPTER VIII...

14 CHAPTER VIII TRANSITIONAL PROVISIONS Article 21 (1) Any Brokerage Company established and operating prior to the promulgation of this Bank Indonesia Regulation shall be deemed to have complied with the requirements for establishment of a Brokerage Company in accordance with the provisions of this Bank Indonesia Regulation. (2) A Brokerage Company as referred to in paragraph (1) shall be required to reregister with Bank Indonesia at the Directorate of Foreign Exchange Management, Building B 8 th floor, Jakarta 10010, no later than December 31, (3) The operating license of a Brokerage Company that has not re-registered within the deadline referred to in paragraph (2) shall be declared no longer valid. CHAPTER IX CONCLUDING PROVISIONS Article 22 Provisions for implementation of this Bank Indonesia Regulation shall be stipulated further in a Circular Letter of Bank Indonesia. Article 23 With the enactment of this Bank Indonesia Regulation: (1) Decree of the Management of Bank Indonesia No. 23/83/KEP/DIR and Circular Letter to All Banks and NBFIs in Indonesia No. 23/24/UD dated February 28, 1991, concerning Establishment of Money Market and Foreign Currency Brokerage Companies in Indonesia; (2) Decree...

15 (2) Decree of the Management of Bank Indonesia No. 25/1/KEP/DIR and Circular Letter to Rupiah and Foreign Currency Money Market Brokerage Companies in Indonesia No. 25/1/UD dated April 1, 1992, concerning Rupiah and Foreign Currency Money Market Brokerage Companies in Indonesia; (3) Circular Letter to Rupiah and Foreign Currency Money Market Brokerage Companies in Indonesia No. 25/2/UD dated April 1, 1992, concerning Supervision of Rupiah and Foreign Currency Money Market Brokerage Companies in Indonesia; are declared no longer valid. Article 24 This Bank Indonesia Regulation shall come into force on the date of its enactment. Enacted in Jakarta Dated April 1, 2003 THE GOVERNOR OF BANK INDONESIA (signed) SYAHRIL SABIRIN STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 44 OF 2003 DPD

16 ELUCIDATION TO BANK INDONESIA REGULATION NUMBER: 5/5/PBI/2002 CONCERNING RUPIAH AND FOREIGN CURRENCY MONEY MARKET BROKERAGE COMPANIES GENERAL REVIEW Activity on the Rupiah and foreign currency money market in Indonesia has been marked by rapid expansion as a result of the positive impact of deregulatory policies in monetary affairs, banking, and foreign exchange. The era of globalization has also placed additional demands on Banks to improve efficiency and effectiveness in conducting Rupiah and foreign currency money market transactions. Brokerage companies operating on the Rupiah and foreign currency money market are thus perceived as having an increasingly important role in the pursuit of these objectives. As a mediator for interbank transactions, brokers are also expected to work professionally and with due prudence so that overall banking operations are conducted according to prudential principles. ARTICLE BY ARTICLE Article 1 Number 1 Number 2...

17 - 2 - Number 2 Number 3 Number 4 Number 5 Number 6 Number 7 Number 8 Number 9 Article 2 Paragraph (3) The definition of non-bank parties includes natural persons and non-bank companies. Paragraph (4) Article 3 Transactions customarily performed by brokerage companies on the Rupiah and foreign currency money markets include but are not limited to: a. Rupiah money market transactions 1) Overnight money market 2) Deposits...

18 - 3-2) Deposits on call 3) Time deposits 4) Bank Indonesia Certificates (SBIs) 5) Certificates of deposit 6) Bank Indonesia Deposit Facility (FASBI) 7) Treasury Bills b. Foreign currency money market transactions 1) transactions between Rupiahs and foreign currencies i. Spot ii. Swap iii. Forward iv. Option v. Futures 2) transactions between foreign currencies i. Overnight ii. Deposits on call iii. Time deposits iv. Certificates of Deposit v. Floating Rate Notes (FRN) vi. Floating Rate Certificates of Deposit (FRCD) vii. Banker s Acceptance (BA) viii. Treasury Bills (TB) Article 4 letter a letter b Owner of Brokerage Company is owner of a Brokerage Company listed in the deed of incorporation of the Brokerage Company concerned. letter c through letter e Article 5...

19 - 4 - Article 5 Article 6 Article 7 Paragraph (3) Article 8 Article 9 Article 10 Paragraph (3) Article 11 Article 12...

20 - 5 - Article 12 Article 13 Article 14 Paragraph (3) Article 15 Article 16 Article 17 Article 18 Paragraph (3) Paragraph (4) Paragraph (5) Article 19...

21 - 6 - Article 19 Article 20 Sanction of warning is defined as written warning. Paragraph (3) Paragraph (4) Paragraph (5) Article 21 Paragraph (3) Article 22 Article 23 Article 24 SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 4283 OF 2003