Insider Trading in Indonesia
The capital market has positive and negative sides. The positive side, a firm can raise fund from initial public offering to expand its business and investor can obtain capital gain and dividend. The negative side, there is a opportunities for crime perpetrators to either directly or indirectly aim of gaining profits in the capital market through illegal practices. The illegitimate road can be categorised as an act insider trading. Insider trading can be translated as trading securities that is done by someone and or a group of people on basis of information or material facts that have been known beforehand before the information is informed to the public, with the aim of getting a short swing profit in the market capital. Insider trading is one of illegal activity that may be caused by the asymmetry information between the firm’s management, institution investor, and retail investor. The insider gets positive information or plans for corporate action before it is announced and executed. This information is used to buy shares before the price rises.
In Indonesia, Law No. 8 of 1995 concerning the capital market has banned the crime of insider trading through article 95, but this article does not explain further about what is meant by the elements of insider trading. The article 95 only states that an insider from an issuer or public company that has inside information is prohibited from buying or selling securities. Insider trading is said to occur when three elements have been fulfilled. First, there are insiders. Secondly, insider information is material and has not been made public. Third, there are securities trading transactions by insiders based on that information.
Unfortunately, there have been no cases of insider trading that have been successfully proven in Indonesia. Director of Transaction and Compliance Supervision Bursa Efek Indonesia (BEI), Hamdi Hassyarbaini, said that insider trading is one of the illegal trading that is very difficult to be proven because of the limited authority of Otoritas Jasa Keuangan (OJK) as capital market supervisor. In order to investigate this illegal activity, it requires authority to examine more than privacy limits such as telephone tapping, as the Securities and Exchange Commission (SEC) did in United States. Other than that, tapping telephone requires a lot of time and whistle-blower who leaks the trusted information. OJK only has authorities to check the brokers indicated as the intermediaries for perpetrator. Singapore is more capable to investigate insider trading activity because of better whistle-blower system where the intention to report illegal activity is greater than its neighbour countries.
For your information, in 2017, BEI is suspicious of fraud in the PT Minna Padi Investama Sekuritas Tbk (PADI) stock transaction. Previously there were rumours that the company would acquire Bank Muamalat, which made PADI’s shares skyrocket. But the company has denied that it was only a mere issue. In 2015, BEI also plans to meet UBS Indonesia’s management today regarding the disclosure of insider trading cases or fraudulent transactions in PT Bank Danamon Indonesia Tbk (BDMN) shares due to the introduction of information carried out by the former Head of UBS Group. In 2002, The Chairman of Badan Pengawas Pasar Modal (Bapepam) or OJK for now, Herwidayatmo, was alleged to have been involved in the insider trading case of PT Semen Gresik Tbk (SMGR) shares in 1998. However, the Bapepam complaint report never reached the attorney general’s office.
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