Market supervisory body to promote share, bond issues

Aditya Suharmoko, The Jakarta Post, Jakarta

The stock market regulator's plan to introduce a so-called "shelf registration" scheme to ease procedural requirements for bond and share issues has been praised by business players.

Last week, the head of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), Fuad Rahmany, said the agency would put into effect the scheme later this year, allowing firms to issue new shares or bonds over a shorter duration.

"The scheme will fasten the duration in the issuance of new shares or bonds, which is good for businesses. It will also be useful for companies wanting to do initial public offerings," Erry Firmansyah, Indonesia Stock Exchange chairman, told The Jakarta Post on Sunday.

Currently, it can take companies up to three months to fulfill all the requirements before they can issue new shares or bonds -- which many say hampers business.

The shelf registration scheme involves the registration of a new bond or share issuance that can be prepared up to two years in advance, so the issue can be offered quickly as soon as funds are needed or market conditions are favorable.

The scheme allows a single registration document to be used multiple times within two years.

It also gives underwriters greater flexibility in timing market issues and involves little or no increase in direct costs.

For example, a tollway company can launch a rights issue as soon as the government announces it will prioritize tollway projects.

"Under the shelf registration (scheme), companies that want to issue new shares or bonds more than once in a year do not have to register again prior to the next issuance," said Fuad.

Companies, he said, only need to update their documents should there be any changes prior to the next issuance, thus simplifying the bureaucratic procedures, while maintaining the companies' accountability disclosures.

Erry said the scheme would also help companies launch IPOs when the market was most favorable.

According to Bapepam-LK, the scheme has been adapted from the U.S., where the Securities and Exchange Commission -- whose main job is to enforce federal securities laws and to regulate the stock market -- permits the issuance of multiple securities through a single document.

An analyst at PT Eurocapital Peregrine Securities, Poltak Hotradero, told the Post if the scheme was properly implemented, it would benefit companies and shareholders by allowing companies to secure quick funding.

"And in turn, it (the scheme) will also grow the country's economy as companies can expand their businesses quicker," said Poltak.

However, he said, Bapepam-LK should scrutinize companies' updated documents to ensure they are not fabricated.