Mechanism and Procedure for the Determination of Equity Securities as Sharia Securities in the Information Technology-Based Crowdfunding Services

Indonesia Financial Services Authority/Otoritas Jasa Keuangan (“OJK”) has issued a Circular Letter No. 3/SEOJK.04/2022 of 2022 on the Mechanism and Procedure for the Determination of Equity Securities as Sharia Securities in the Information Technology-Based Crowdfunding Services (“Circular Letter”). The Circular Letter was enacted and came into effect on 26 January 2022.

The Circular Letter is the implementing regulation of the Article 29 Paragraph (3) of the OJK Regulation No. 57/POJK.04/2020 on the Securities Offerings Through Information Technology-Based Crowdfunding Services as amended by OJK Regulation No. 16/POJK.04/2021 (“POJK 57/2020”).

Pursuant to the POJK 57/2020, a Crowdfunding Operator that carries out business activities based on the sharia principles may determine the equity securities offered in its crowdfunding services as sharia securities. The Crowdfunding Operator shall have a Sharia Supervisory Board and mechanism and procedure for determining the equity securities as sharia securities. OJK sets the mechanism and procedure for the determination of equity securities as sharia securities in the information technology-based crowdfunding services under the Circular Letter as follows:

1. The Party that Can Determine the Equity Securities as Sharia Securities

The Crowdfunding Operator can be in the form of:

a. A Sharia Crowdfunding Operator
The article of association of the sharia Crowdfunding Operator shall explicitly stipulate that its activities and types of business, as well as the ways of managing its business, are based on the sharia principles in the capital market; or

b. A Crowdfunding Operator That has Sharia Crowdfunding Service Unit
The article of association of the Crowdfunding Operator that has Sharia Crowdfunding Service Unit shall explicitly stipulate that the crowdfunding services activities are based on the sharia principles in the capital market. Besides that, the Sharia Crowdfunding Service Unit shall have one person acting as the chief of the Sharia Crowdfunding Service Unit.

The Sharia Crowdfunding Operator and the Crowdfunding Operator That has the Sharia Crowdfunding Service Unit that will determine the equity securities as sharia securities shall submit notification to OJK, supported by (i) the standard operating procedures for determining the equity securities as the sharia securities in the crowdfunding services, and (ii) the statement letters of its directors or its management who will be responsible for the determination of equity securities as sharia securities.

Furthermore, the Crowdfunding Operator That has Sharia Crowdfunding Service Unit shall submit the following additional documents:

a. A copy of its article of association;
b. the appointment letter of  Sharia Supervisory Board by the board of directors (“BOD”) or management;
c. A copy of its sharia expert of capital market  license (ASPM);
d. the appointment letter of the Sharia Crowdfunding Service Unit by BOD or management;
e. the organization structure showing the position of the Sharia Crowdfunding Service  Unit; and
f. the cooperation agreement with sharia bank regarding the opening of escrow account.

2. Sharia Securities in the Crowfunding

The sharia securities in the crowdfunding consist of:

a. Equity securities that are issued by a Sharia issuer; or
b. Equity securities that are issued by a non-sharia issuer but determined as sharia securities based on the criteria of sharia securities.

The criteria of sharia securities are as follows:

a. The issuer does not conduct activities or types of business that are against the sharia principles;
b. The issuer does not conduct transaction that are against the sharia principles; and
c. The issuer that meets the financial ratio of  (i) total interest-based debts compared to total assets is no more than 45%; and (ii) total interest income and other non-halal income compared to total operating income and other incomes are not more than 10%.

3. Procedure on the Determination of Equity Securities as Sharia Securities in the Crowdfunding

a. The Crowdfunding Operator that determines the equity securities as sharia securities shall:
(i). add the following information in the agreement between the Crowdfunding Operator and issuer of the securities:
A. the approval of the issuer, which securities are determined as sharia securities;
B. a commitment of the issuer to manage the equity securities that are determined as sharia securities to always meet the criteria of the sharia securities;
C. a settlement mechanism if the equity securities no longer meet the requirements of the sharia securities;
D. a statement letter of the issuer on its capability to implement the settlement mechanism if the equity securities no longer meet the requirements of the sharia securities;
E. termination of the crowdfunding services agreement as a consequences of status change of equity securities that no longer meet the requirements of the sharia securities.

(ii). Add the disclosure of the risk of status change of equity securities that no longer meet the requirements of the sharia securities and its consequences on the Crowdfunding Operator’s website.

b. Determination of the equity securities as sharia securities in the crowdfunding shall be conducted (i) on each issuance of the equity securities through crowdfunding, and (ii) periodically, at least once a year, provided that the determination is made no later than one month after the expiration of the deadline to submit the issuer annual report.

The determination shall also be subject to the requirements as sharia securities and shall be based on the financial reports of the issuer that are submitted to the Crowdfunding Operator.

Furthermore, the determination shall be announced on the website of the Crowdfunding Operator and the Crowdfunding Operator that has the Sharia Crowdfunding Service Unit. For the first announcement, it shall be conducted by no later than two business days prior to the offering period, and for the periodic announcement, it shall be conducted by no later than two business days after the determination the equity securities as sharia securities.

Other than the mecanishm and procedure, this Circular Letter also regulates the status change of sharia securities, the disclosure obligations in the annual report and semester report for the determination and change status of sharia securities, and the procedure for settlement of equity securities that are no longer meet the requirements as sharia securities.  

By: Sheni Adriana