You can contact the author (Teguh Hidayat) by email, The author live in Jakarta, Indonesia.

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Investor Protection? By Who?

About two months ago, a man with bicycle named Elianto Wijoyono stood in the middle of an intersection in City of Jogja to confront a Harley Davidson convoy, because the convoy was deliberately going to break through a red light. This action of ‘Bicycle vs. Harley’ gained a lot of comments on social media, and Elianto explained that he had planned his action, because he was concerned with the bad behavior of those motorists which often violate the traffic signals, causes trouble for other road users in the city of Yogyakarta.

From many comments, one comment came from a member of the Yogyakarta Police which say that Elianto has just committed a vigilantism, which can be considered as a crime. Because, if there was motorcycle riders who violate traffic light or something, then it is the police who have the authority to give a warning or ticket, and not Elianto because he was just a civilian.

Well, it’s a naive statement, is not it? If it was the police who have the authority to give a warning or ticket to Harley riders who break through the red light, then why when these thugs repeatedly did it, the police did nothing? They even escorting the convoys and help them to break through the red light! If the police do their job well in regulating traffic and take action against all offenders indiscriminately, including those Harley riders, do you think that Elianto would wasting his time to stop the riders? It's no secret that the police in Indonesia are still not carrying out their function of ‘Protect and Serve’ to the whole society, because they only protect and serve the people who pay them money.

But maybe, in Indonesia, it is not only the police that haven’t yet working properly.

A few days ago, I was called by a journalist who asks opinions regarding the statement of one of the director of the Indonesia Stock Exchange (IDX), that ‘IDX expects the addition of one hundred thousand of new investors every year’. So far there are about 400 thousand registered investors/stock traders in the stock market in Indonesia, or only a little compared to the total population of the country of about 270 million people. If the addition of one hundred thousand new investors per year was realized, then in a few years the number of investors in the Indonesian stock market will reach one million people or even more, and it will bring the more turnover to the stock market itself.

The question, as a market regulator, do you think that these one hundred thousand people are willing to open an account to buy stock in the market? And what will be your answer, if they asking about protection from the potential crime of capital markets?

Because, invest in stock market is just like driving a car/motorcycle on the road. If you are driving recklessly, then you might have an accident, and that’s your own fault. But what if you are driving a car carefully and always obey traffic signs, but nonetheless had an accident because of being hit by another driver who break through a red light, and it is because the police allow such traffic violations???

Similarly, in the stock market, an investor may suffer losses because he does not yet understand how to analyze the company, lack of experience, or simply because the Jakarta Composite Index (JCI) was dropped, and these are parts of the risk of losses that is already in one ‘package’ with the potential of profits an investor might earn.

But if investors suffer losses because got fooled by a stock that kept rising until suddenly it fall mercilessly as the case of Trada Maritime (TRAM), or a company whose management is subject to a bankruptcy case such as Cipaganti (CPGT), or a company that keep making losses until its equity became negative such as Bumi Resources (BUMI), or other cases where certain stocks move up or down extremely without certain reasons.. then hey, FSA! What the hell are you doing? Why didn’t you take action against whoever behind these companies/stocks???

While in fact, under the law, the tasks of the Financial Service Authority (FSA) are: 1. To protect the consumers, or in this case the investors, where it can be done by: 2. Providing administrative sanctions against individuals/institutions who violate the law of financial services. If the FSA are firm enough and always ready to impose sanctions on companies, broker, or anyone who obviously has committed crime or whatever that harm the public investors, then the companies would not dare to break the law, and investors will automatically be protected.

Well, since the FSA was formed in 2011, there were so many stocks that, intentional or not, moving irrationally, causing huge losses to a large number of public investors. But what did the FSA do to stop them? Almost nothing! At most, they only impose sanctions in the form of a written warning, or fine of US$ 100 per day to the company who delayed the releasie of its financial statements. Based on information from, between 2011 until August 2014, the FSA has dropped a total of 316 sanctions consisting of 280 penalties to the companies who delayed the release of their financial statements or other disclosure documents, 32 written warning, and the revoke of license against two private financial service companies.

But what about the legal cases that involving public companies, or the case of insider trading or securities fraud that involving certain brokers, which obviously has been detrimental to investors? Well well well, no problem!

And what about the IDX? Sadly, it is exactly the same. Whenever a stock flying way up high or down low, the IDX would only ask the management of the company: ‘What happen?’ But no further action at all. If they impose sanctions, the sanctions is almost the same of FSA: To suspend the trading of a stock, set the status of UMA (unusual market activity), or impose a fine or written warnings to companies who delayed the release of the financial statements, like if the crime in the capital market is that one thing only: Delaying the release of the financial statements.

So when the director of IDX say 'We want the addition of one hundred thousand investors per year', I was amused.. How can you expect that the people will enter the stock market while the market itself is full of white collar bandit who, almost freely, committing their crime? That's like if you expect that the people would willingly risk their safety by driving on chaotic streets where almost everyone else violates traffic signs, because the police never do anything to stop them!

While, indeed, if based on existing laws and regulations, there are no legal sanctions for a capital market crime such as insider trading, securities fraud, or the like. So maybe it is not FSA or IDX’s fault if the thieves are still wandering in the stock market, because they are not authorized to take legal action (FSA can only impose administrative sanctions, not criminal or even civil sanctions). But if it is not the authority of these two, then the authority of whom? And if it's not their authority, then what is meant by the word of ‘protection’ which obviously is one of the functions and powers of the FSA???

This article may sounds like criticism, and I, frankly, do not like to critic anyone. But I believe that we all want that the stock market could be a friendly place for everyone, and it can only be realized if all stakeholders, including the authorities and the stock exchange regulators, carry out their roles, functions, and duties respectively. If someone has committed a crime in the Indonesia Stock Exchange, then as in the movie National Treasure, one must dare to say, 'Someone's got to go to prison, Ben'. And, Mr. Tito Sulistio, I hope it’s you.

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