The Financial Services Authority (“OJK”) in carrying out its supervisory duties, is vested with the authority to issue written order (or perintah tertulis) to Financial Services Institutions (“LJK”) and/or “certain parties” (or pihak tertentu). Any issuance of written orders by OJK is aimed at preventing, mitigating, and resolving issues arising within LJK and/or certain parties. On 19 December 2024, OJK issues Regulation No. 31/2024 on Written Order (“POJK 31/2024”), which came into effect on 23 December 2024.

Subject Parties

Written order issued by OJK is directed at LJK and/or certain parties. LJK, in this regard, encompass institutions engaged in activities within the banking sector, capital markets, insurance, pension funds, venture capital, microfinance institutions, financing institutions, and other financial service institutions.

Meanwhile, certain parties refer to entities other than LJK that may also be subject to written order. These include entity/person which are: (i) a principal party: party that owns, manages, supervises, and/or has significant influence on LJK as referred to in OJK Regulation on reassessment for the principal party of financial services institutions; (ii) a party that has relationship with LJK (by way of legal relationship, direct or indirect ownership, and/or financial relationship); (iii) any financial services business entities other than LJK: such as parties which carry out activities in fund-raising, fund distribution, and/or fund management business activities in the financial services sector, etc.; and (iv) an Issuer or public companies, including members of board of directors and board of commissioners, shareholders, and/or investors of such issuer or public companies.

Scope of Written Order

A written order issued by OJK to LJK and/or certain parties constitutes an instruction to perform or to refrain from performing specific activities to ensure compliance with laws and regulations in the financial services sector and/or to prevent and mitigate loss for consumers, community, and financial services sector.

The issuance of POJK 31/2024, as mandated by Law 4 of 2023 on Development and Strengthening of Financial Sector, provides far-reaching authority to OJK since OJK is authorised to issue a written order instructing LJK to conduct and/or accept a merger, consolidation, acquisition, integration, and/or conversion in accordance with the prevailing regulations (such as Company Law, Development and Strengthening of Financial Sector Law and OJK Regulation on Mergers, Consolidations, Acquisition, Integrations, and/or Conversions of Commercial Bank) to deal with issues experienced by LJK.

Prior to this, a written order from OJK can be given: (i) to instruct replacement or change of company’s board or a particular party at LJK, (ii) to terminate, restrict, or improve business activities or transactions, (iii) to terminate or amend any agreement between an LJK with other parties that allegedly causing losses to customers, communities and financial services sector, and (iv) to convey information, documents, and/or specific reports to the OJK.

Take-aways

OJK is equipped with authority to issue written order which now extends instructing LJK to conduct and/or accept a merger, consolidation, acquisition, integration, and/or conversion. It is obvious that OJK would optimize its monitoring role to create a sustainable and stable financial system and also to support protection for consumer and public at large.

OJK (being the authority) has been serious in monitoring the financial services space. It is not an easy task – we may expect enforcement of sanctions to be imposed along the way.

*Shabrina Hanifa (Associate) assisted in the preparation of this insight

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