Bapepam-LK Supervision Function In The Practice Of Insider Trading On Public Companies In The Capital Market

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Introduction

The capital market plays a vital role in supporting the implementation of national development to improve economic equity, growth, and stability for the welfare of the people. As one of the sources of financing for the business world, the capital market is also an investment vehicle for the community, including for small and medium investors. However, in the management of public companies, various problems and obstacles often arise. One of the obstacles that is quite troubling is the practice of insider trading.

Insider Trading: A Threat to the Capital Market

Insider trading refers to the activity of buying or selling shares based on material information that has not been published to the public. This lack of understanding of the principle of information disclosure is what results in ethical violations in stock trading. This can damage investor confidence and result in capital escape, which in turn can destroy the capital market itself. In this practice, stock prices do not reflect accurate information, which harms all investors who do not have access to that information.

The Role of Bapepam-LK in Supervising Insider Trading

To prevent unfair practices in stock trading, an active role of the capital market regulator is needed, namely Bapepam-LK. Based on Article 3 and Article 4 of Law No. 8 of 1995 concerning the Capital Market, Bapepam-LK is given the task of conducting guidance, regulation, and supervision of capital market activities. The aim is to create a regular, fair, efficient market atmosphere and protect the interests of investors and the general public.

Bapepam-LK's Supervisory Approach

As a supervisory agency, Bapepam-LK has two approaches in carrying out its supervisory functions: preventive and repressive. The preventive approach includes the preparation of regulations, guidelines, and guidance to market participants to prevent violations. Meanwhile, a repressive approach in the form of actions such as inspection, investigation, and application of sanctions for violators, becomes a firm step in cracking down on insider trading practices.

Examples of Insider Trading Cases

One example of cases involving insider trading is what happened at PT. Bank Mashill Utama, where the culprit, Jensen Kohardjo, sold 23.96% shares without first informing the company's management. The Bapepam-LK investigation found that the company was late reporting the material event and did not tell the public in the specified time. As a result, PT. Bank Mashill Utama was sentenced to a fine of Rp. 7,000,000, while Jensen Kohardjo is subject to a fine of Rp. 500,000,000 for insider trading violations.

The Importance of Bapepam-LK's Supervision

Through this example, it is clear that the importance of supervision carried out by Bapepam-LK to maintain the integrity of the capital market and protect the interests of investors. Without strict supervision and effective regulation, the capital market can be a fertile land for adverse practices, such as insider trading. Therefore, Bapepam-LK plays an important role in creating a good and fair investment climate.

Conclusion

Thus, supervision carried out by Bapepam-LK in the practice of insider trading not only serves to impose sanctions on violators, but also to maintain public confidence in the capital market. The existence of Bapepam-LK as a supervisor is a crucial step to ensure that all parties have the same access to information and can invest fairly.

Recommendations

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

  • Bapepam-LK should continue to strengthen its supervisory functions to prevent insider trading practices.
  • Market participants should be aware of the risks of insider trading and take necessary steps to prevent such practices.
  • The government should provide adequate resources to Bapepam-LK to enable it to carry out its supervisory functions effectively.

By implementing these recommendations, Bapepam-LK can play a more effective role in maintaining the integrity of the capital market and protecting the interests of investors.

Limitations of the Study

This study has several limitations, including:

  • The study only focuses on the practice of insider trading in public companies listed on the capital market.
  • The study does not examine the impact of insider trading on the capital market as a whole.
  • The study relies on secondary data and does not conduct primary research.

Future studies can build on this study by examining the impact of insider trading on the capital market and conducting primary research to gather more detailed data.

Future Research Directions

Future research can explore the following directions:

  • Examining the impact of insider trading on the capital market as a whole.
  • Conducting primary research to gather more detailed data on insider trading practices.
  • Analyzing the effectiveness of Bapepam-LK's supervisory functions in preventing insider trading practices.

By exploring these research directions, future studies can provide more comprehensive insights into the practice of insider trading and the role of Bapepam-LK in supervising it.

Q: What is insider trading?

A: Insider trading refers to the activity of buying or selling shares based on material information that has not been published to the public. This lack of understanding of the principle of information disclosure is what results in ethical violations in stock trading.

Q: What is the role of Bapepam-LK in supervising insider trading?

A: Bapepam-LK is given the task of conducting guidance, regulation, and supervision of capital market activities to create a regular, fair, efficient market atmosphere and protect the interests of investors and the general public.

Q: What are the two approaches of Bapepam-LK in carrying out its supervisory functions?

A: Bapepam-LK has two approaches in carrying out its supervisory functions: preventive and repressive. The preventive approach includes the preparation of regulations, guidelines, and guidance to market participants to prevent violations. Meanwhile, a repressive approach in the form of actions such as inspection, investigation, and application of sanctions for violators.

Q: What is an example of a case involving insider trading?

A: One example of cases involving insider trading is what happened at PT. Bank Mashill Utama, where the culprit, Jensen Kohardjo, sold 23.96% shares without first informing the company's management. The Bapepam-LK investigation found that the company was late reporting the material event and did not tell the public in the specified time.

Q: What is the importance of Bapepam-LK's supervision in the practice of insider trading?

A: The importance of supervision carried out by Bapepam-LK to maintain the integrity of the capital market and protect the interests of investors. Without strict supervision and effective regulation, the capital market can be a fertile land for adverse practices, such as insider trading.

Q: What are the recommendations for Bapepam-LK to strengthen its supervisory functions?

A: Bapepam-LK should continue to strengthen its supervisory functions to prevent insider trading practices. Market participants should be aware of the risks of insider trading and take necessary steps to prevent such practices. The government should provide adequate resources to Bapepam-LK to enable it to carry out its supervisory functions effectively.

Q: What are the limitations of this study?

A: This study has several limitations, including: the study only focuses on the practice of insider trading in public companies listed on the capital market; the study does not examine the impact of insider trading on the capital market as a whole; the study relies on secondary data and does not conduct primary research.

Q: What are the future research directions?

A: Future research can explore the following directions: examining the impact of insider trading on the capital market as a whole; conducting primary research to gather more detailed data on insider trading practices; analyzing the effectiveness of Bapepam-LK's supervisory functions in preventing insider trading practices.

Q: What is the conclusion of this study?

A: Thus, supervision carried out by Bapepam-LK in the practice of insider trading not only serves to impose sanctions on violators, but also to maintain public confidence in the capital market. The existence of Bapepam-LK as a supervisor is a crucial step to ensure that all parties have the same access to information and can invest fairly.