Urgency of Increasing Investor Regulation and Protection

Oct 13, 2025 by talynt.org 130 views

The Principle of Openness as a Protection of Investors in Transactions Outside the Exchange (Over the Counter) as Transactions in the Indonesian Capital Market

Introduction

The Indonesian capital market has been growing rapidly in recent years, with an increasing number of investors participating in various types of transactions, including those outside the official stock exchange, also known as Over the Counter (OTC) transactions. While OTC transactions offer flexibility and convenience, they also pose significant risks to investors, particularly in terms of lack of transparency and protection. This article aims to discuss the principle of openness as a protection of investors in OTC transactions in the Indonesian capital market.

Background

Outside the Exchange (Over the Counter/OTC) transaction in the Indonesian capital market is a transaction of buying and selling securities carried out outside the official stock exchange. Although regulated in Bapepam Rule Number III.a.10 of 1997, this regulation does not specifically regulate aspects of disclosure of information and investor protection in OTC transactions. This raises various questions, such as how to practice OTC transactions in Indonesia? What is the principle of openness to protect investors in OTC transactions? And, what forms of fraud occur in OTC transactions and what is the urgency of the formation of regulations that accommodate investor protection?

The Principle of Openness

The principle of openness is a fundamental concept in protecting investors in OTC transactions. It requires that all relevant information about the transaction, including the issuer, the security, and the transaction itself, be disclosed to investors in a transparent and timely manner. This principle is essential in preventing fraud and manipulation, which are common risks associated with OTC transactions.

Lack of Transparency: Fraud Gap and Investor Risk

Lack of transparency in OTC transactions becomes a gap for various forms of fraud that are detrimental to investors. One example is the dissemination of inaccurate information by the issuer of the effect, which is more concerned with the broker fee without regard to the security aspects and the value of the effect. Information distorted regarding data and issuer values is a potential loss for investors who do not have accurate access to information.

Urgency of Increasing Investor Regulation and Protection

Seeing this situation, the urgency of the formation of regulations governing OTC transactions and protecting investors is increasingly felt. Comprehensive and detailed regulations need to be arranged for:

Increasing transparency: Ensuring accurate and easily accessible access to investors regarding OTC transactions. Strengthening the mechanism of information disclosure: Asking the issuer to reveal information accurately and on time regarding the effects traded outside the stock exchange. Establishing ethical and governance standards: Determine strict ethical and governance rules in the implementation of OTC transactions to prevent fraud and manipulation. Increasing legal protection for investors:* Providing strong legal protection for investors who are victims of fraud or losses in OTC transactions.

The Importance of the Role of Regulators and Capital Market Associations

The role of regulators and capital market associations is very important in realizing investor transparency and protection in OTC transactions. They need to be active in:

Facilitating access to information: Creating an information platform that is easily accessible and understood by investors regarding OTC transactions. Increasing investor education: Increasing investors' knowledge and understanding of risks and opportunities in OTC transactions. Overseeing the application of regulations: Ensuring the application of regulations consistently and effectively.

Conclusion

In conclusion, the principle of openness is a crucial aspect of protecting investors in OTC transactions in the Indonesian capital market. The lack of transparency and protection in OTC transactions poses significant risks to investors, and it is essential to establish comprehensive and detailed regulations to address these issues. The role of regulators and capital market associations is also crucial in realizing investor transparency and protection in OTC transactions. Through joint efforts, we can build a healthier, transparent, and protect the interests of investors.

Recommendations

Based on the findings of this study, the following recommendations are made:

The government should establish comprehensive and detailed regulations governing OTC transactions and protecting investors.
Regulators and capital market associations should be active in facilitating access to information, increasing investor education, and overseeing the application of regulations.
Investors should be aware of the risks and opportunities associated with OTC transactions and take necessary precautions to protect their interests.
The government and regulators should provide strong legal protection for investors who are victims of fraud or losses in OTC transactions.

Future Research Directions

This study has highlighted the importance of the principle of openness in protecting investors in OTC transactions in the Indonesian capital market. Future research directions could include:

Conducting a detailed analysis of the current regulations governing OTC transactions in Indonesia and identifying areas for improvement.
Investigating the impact of OTC transactions on the Indonesian capital market and the economy as a whole.
Examining the role of technology in facilitating OTC transactions and protecting investors.
Developing a framework for evaluating the effectiveness of regulations governing OTC transactions and protecting investors.

References

Bapepam Rule Number III.a.10 of 1997.
Indonesian Capital Market Supervisory Agency (Bapepam).
Indonesian Stock Exchange (IDX).
Securities and Exchange Commission (SEC).
World Federation of Exchanges (WFE).

Appendices

List of abbreviations used in this study.
Glossary of terms related to OTC transactions.
Summary of the current regulations governing OTC transactions in Indonesia.
List of references cited in this study.
Frequently Asked Questions (FAQs) about the Principle of Openness in OTC Transactions in the Indonesian Capital Market

Introduction

The principle of openness is a crucial aspect of protecting investors in Over the Counter (OTC) transactions in the Indonesian capital market. However, there are still many questions and concerns about this principle. In this article, we will address some of the frequently asked questions (FAQs) about the principle of openness in OTC transactions in the Indonesian capital market.

Q1: What is the principle of openness in OTC transactions?

A1: The principle of openness in OTC transactions requires that all relevant information about the transaction, including the issuer, the security, and the transaction itself, be disclosed to investors in a transparent and timely manner.

Q2: Why is the principle of openness important in OTC transactions?

A2: The principle of openness is essential in preventing fraud and manipulation, which are common risks associated with OTC transactions. It also helps to ensure that investors have accurate and reliable information about the transactions they are participating in.

Q3: What are the benefits of the principle of openness in OTC transactions?

A3: The benefits of the principle of openness in OTC transactions include:

Increased transparency and accountability
Reduced risk of fraud and manipulation
Improved investor confidence and participation
Enhanced market efficiency and stability

Q4: How can investors ensure that they are protected by the principle of openness in OTC transactions?

A4: Investors can ensure that they are protected by the principle of openness in OTC transactions by:

Conducting thorough research and due diligence on the issuer and the security
Requiring accurate and timely disclosure of information
Monitoring the transaction and reporting any suspicious activity
Seeking advice from a qualified financial advisor

Q5: What are the consequences of not following the principle of openness in OTC transactions?

A5: The consequences of not following the principle of openness in OTC transactions can include:

Loss of investor confidence and participation
Increased risk of fraud and manipulation
Reduced market efficiency and stability
Potential legal and regulatory consequences

Q6: How can regulators and capital market associations support the principle of openness in OTC transactions?

A6: Regulators and capital market associations can support the principle of openness in OTC transactions by:

Establishing and enforcing clear regulations and guidelines
Providing education and training for investors and market participants
Monitoring and enforcing compliance with the principle of openness
Encouraging transparency and accountability in the market

Q7: What are the challenges of implementing the principle of openness in OTC transactions?

A7: The challenges of implementing the principle of openness in OTC transactions include:

Ensuring accurate and timely disclosure of information
Preventing fraud and manipulation
Balancing the need for transparency with the need for confidentiality
Ensuring compliance with regulations and guidelines

Q8: How can investors and market participants work together to support the principle of openness in OTC transactions?

A8: Investors and market participants can work together to support the principle of openness in OTC transactions by:

Sharing information and best practices
Collaborating on education and training initiatives
Encouraging transparency and accountability in the market
Supporting regulatory efforts to establish and enforce clear regulations and guidelines

Conclusion

The principle of openness is a crucial aspect of protecting investors in OTC transactions in the Indonesian capital market. By understanding the benefits and challenges of this principle, investors and market participants can work together to support transparency and accountability in the market. Regulators and capital market associations also play a critical role in establishing and enforcing clear regulations and guidelines to support the principle of openness.

References

Bapepam Rule Number III.a.10 of 1997.
Indonesian Capital Market Supervisory Agency (Bapepam).
Indonesian Stock Exchange (IDX).
Securities and Exchange Commission (SEC).
World Federation of Exchanges (WFE).

Appendices

List of abbreviations used in this study.
Glossary of terms related to OTC transactions.
Summary of the current regulations governing OTC transactions in Indonesia.
List of references cited in this study.