Author: Felicia Cindy Hanubrata
“The Regulation of Financial Services Authority have laid out several activities that a Crowdfunding Company are prohibited from doing, including having affiliated relationship with an issuer”
As defined in Article 1 Point 6 of Regulation of the Financial Services Authority No. 57/POJK.04/2020 of 2020 concerning Securities Offering through Technology-Based Crowdfunding as has been recently amended by Regulation of the Financial Services Authority No. 16/POJK.04/2021 of 2021 concerning Amendment of Regulation of the Financial Services Authority No. 57/POJK.04/2020 of 2020 concerning Securities Offering through Technology-Based Crowdfunding (“POJK Securities Crowdfunding”), a crowdfunding service organizer is an Indonesian legal entity that provides, manages and operates crowdfunding services. Furthermore, based on this regulation, crowdfunding services are considered to be a financial service in the capital market. As such, parties which provide this service are considered as a party that conducts financial service in the capital market and must abide by the rules and regulations governing the capital market.
Prohibition of Affiliated Transactions
Stated in Article 21 of POJK Securities Crowdfunding, in conducting business, a Crowdfunding Company are prohibited from doing the following activities:
1. Conducting business activities aside from Crowdfunding Services activities, except:
- As Organizer of Technology Information-based financial services that has permit from the Financial Service Authority;
- Activities in the capital market sector that according to the laws and regulations in the capital market sector can carry out business activities as the Organizer.
2. Having an affiliation relationship with Issuer that uses the Crowdfunding Service;
3. Giving financial aid to the Investor to Invest on Issuer Security that uses the Crowdfunding Service;
4. Giving Investment Advice and/or Recommendation to the Investor and/or Investor candidate to Invest on Issuer;
5. Provide gifts or compensation to party that giving information on potential Investor;
6. Receive and/or holding Investor’s Fund;
7. Treat User Differently;
8. Publishing incorrect information regarding the Crowdfunding Services being held;
9. Offering Crowdfunding Services to users and/or the public via private communication means without the User’s consent; and
10. Charge any fees to Users for submitting complaints.
From the abovementioned activities, it could be seen that a Crowdfunding Company is prohibited from having affiliated relationships, which includes transactions, with issuers that use their services. Issuer in this regard is the Indonesian business entity that issued the effect, and is deemed to be affiliated if:
- Having family relationship due to marriage and descendant up to the second degree, both horizontally and vertically;
- Having employment relationship, members of the board of directors, or members of the board of commissioners;
- There are one or more members of the same board of directors or board of commissioners;
- The relationship between the company and the party, whether directly or indirectly, controlling or controlled by the company;
- Both companies are controlled, either directly or indirectly, by the same party; or
- The relationship is between the company and its major shareholders.
Sanctions
It is imperative that a Crowdfunding Company does not do the activities prohibited in Article 21 of the POJK Securities Crowdfunding as the conduct of such activities would result in administrative sanctions imposed by the Financial Service Authority. Based on Article 85 of POJK Securities Crowdfunding, the administrative sanctions may be in the form of:
- written warning;
- fine;
- restriction of business;
- suspension of business;
- revocation of business license;
- withdrawal of consent; or
- cancellation of registration;
Aside from the administrative sanctions mentioned above, the Financial Service Authority may also suspend trading activities by the company for a certain period.
Author: Felicia Cindy Hanubrata
Gaffar & Co. is an Indonesian Boutique Law Firm focusing on commercial law and capital market, and financial services, including financial technology company.
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