01 Dec 2014
OJK REGULATION ON CONSUMER PROTECTION IN THE FINANCIAL SERVICES INDUSTRY
On 6 August 2014, a new regulation on customer protection in the financial services industry became effective one year after its issue. Regulation No. 1/POJK.07/2013, which was issued on 26 July 2013 and enacted on 6 August 2013 (the “Regulation”), was issued by the newly established Financial Services Authority to implement Article 30 and Article 31 of Law No. 21/2011 regarding Financial Services Authority (Otoritas Jasa Keuangan, “OJK”). OJK itself was established as an “umbrella” organization for all of the financial services industries with the exception of the futures industry.
On the Regulation’s effective day, OJK also issued Circular Letter No. 12/SEOJK.07/2014 (“Circular”) as the “implementing regulation” for the Regulation.
In addition to serving as an implementing regulation for Law No. 21/2011, the Regulation addresses the concern about investment scams which have been on the rise in Indonesia in recent years, substantially being the result the community’s low investment literacy level.
This Regulation-Circular pair is a new phenomenon in that it solves the issue of disconnect which was apparent in the previous regulations which were issued by different regulators governing the different segments of the industry. Before OJK, the financial products sale and the financial products providers were regulated by different institutions. Currently, the OJK is the only one institution which governs all of the segments in the financial sector. Under Article 30 of Law No. 21/2011, for the sake of community and consumer protection OJK is vested with the power to (i) order financial services providers to settle complaints filed by detrimentally affected parties and to (ii) initiate a legal act against financial service providers in order to reclaim assets belonging to investors which are either controlled by the providers or other parties acting in bad faith, while at the same time to seek damages for the losses resulting from purchasing the products. Needless to say, this Article 30 of Law No. 21/2011 puts consumers in a stronger position and pressure financial services provider to act in compliance with the Regulation and the Circular.
A future possible act of the OJK which would not come as a surprise would be the disgorgement of ill gotten profit from bogus investments or investment products deemed by OJK as lacking sufficient information on their character and risks - an act already taken with successful results by other countries. (by: Hamud M. Balfas)