Indonesia has seen significant and sustained economic growth despite global economic pressures. The nation's economy continued to demonstrate resilience, achieving a year-on-year growth rate of 5.04% in the fourth quarter of 2023. This growth was primarily driven by increased household consumption and investment. In 2023, household consumption emerged as the largest contributor to Indonesia's gross domestic product (GDP), expanding by 4.82%. Factors contributing to this growth include rising minimum wages and government social assistance programs. Despite global economic challenges and rising inflation, the continued strength in household consumption indicates that the purchasing power of Indonesians remains robust.

Simultaneously, investment grew by 4.40%, bolstered by ongoing infrastructure development initiatives. Although the pace of investment growth was slower compared to previous years, it still reflects investor confidence in the Indonesian economy. The country's political and economic stability, along with its vast market potential, continue to attract investors seeking to allocate capital in Indonesia.

The robust role of capital market activities in Indonesia has been a key driver of the country’s economic development. The capital market provides a platform for individuals and entities with surplus funds to invest, offering potential returns in the form of dividends and capital gains. For companies, the capital market serves as a vital source of investment capital, enabling them to finance growth and expansion without relying solely on funds generated from their operations, thereby accelerating access to necessary capital.

The importance of the capital market in fostering economic growth is evident through its fundamental roles, which include:

1. Mobilizing Public Funds: The capital market channels public funds into productive ventures, driving economic activity.
2. Providing Accessible Funding: It offers businesses a cost-effective and prudent source of funding, essential for both business growth and national development.
3. Stimulating Entrepreneurship and Job Creation: By encouraging the growth of entrepreneurial ventures, the capital market also contributes to job creation.
4. Enhancing Resource Allocation Efficiency: It improves the efficiency of resource allocation for production, ensuring that capital is directed toward the most productive uses.
5. Supporting Financial Market Operations: The capital market strengthens the operational capacity of financial markets and can act as an "open market operation" tool for the Central Bank when needed.

Capital market activities in Indonesia have seen considerable growth, as reflected in the rise of transactions within the Composite Stock Price Index (JCI). According to the latest reports, the JCI reached a trading level of 7,303.89 points, marking a 6.62% growth for the year. Market capitalization also grew by 23.82% year on year, reaching IDR 11,762 trillion. Additionally, the Indonesia Composite Bond Index experienced an 8.51% increase in 2022, rising from 344.78 to 374.20 points. Corresponding with this growth, the Financial Services Authority (Otoritas Jasa Keuangan “OJK”) issued Effective Statements for 211 public offerings, with a total value of IDR 247.06 trillion

With the growth of the capital market in Indonesia, the country is advancing towards economic strength on the international stage. However, this progress is sometimes overshadowed by unscrupulous individuals who exploit capital market activities to commit financial crimes.

For instance, in 2014, there were cases of fraud involving deceptive investment or fund-raising schemes, such as those perpetrated by PT Reliance Securities Tbk. and PT Magnus Capital. The situation came to light when clients of PT Reliance Securities Tbk., Alwi Susanto and Sutanni, encountered difficulties in withdrawing their investments. Towards the end of 2014, these clients were offered FR0035 bond products by an individual named EP Larasati, who falsely claimed to be an employee of PT Magnus Capital. They were instructed to transfer their investment funds to an account at PT Magnus Capital. As the situation escalated, investors found themselves unable to recover their funds. PT Reliance Securities Tbk. later acknowledged that EP Larasati was a former employee who had resigned in mid-2014 . Ultimately, EP Larasati was convicted of fraud and sentenced to three years in prison.

In addition, there have been capital market violations that extend into the realms of corruption and money laundering, including:

1. The case of corruption and money laundering involving the financial management and investment funds of PT Asuransi Jiwasraya (Persero) for the period 2008 to 2018 (source: Supreme Court Verdict/Opinion No. 2937 K/Pid.Sus/2021 dated August 24, 2021).
2. The case of corruption and money laundering involving the financial management and investment funds of PT Asabri (Persero) for the period 2012 to 2019 (source: DKI Jakarta High Court Verdict/Opinion No. 11/Pid.Sus-TPK/2022/PT DKI dated May 23, 2022).

Referring to the cases mentioned above, the wrongdoer/perpetrators of capital market violations and crimes typically face criminal prosecution but do not provide restitution or compensation to investors for their losses.

To address this, the Law of the Republic of Indonesia No. 8 of 1995 on the Capital Market ("Law 8/1995"), as amended by the Law of the Republic of Indonesia No. 4 of 2023 on the Development and Strengthening of the Financial Sector ("Law 4/2023"), includes updated provisions related to the recovery of illegal gains. OJK, which is authorized to regulate and supervise all capital market transactions, has issued implementing regulations under POJK No. 65/POJK.04/2020 on the Return of Illegal Gains and the Investor Loss Compensation Fund in the Capital Market Sector ("POJK 65/2020").

These regulations aim to protect minority public shareholders by ensuring that the party from those who have violated and/or committed a crime of capital market laws and regulations such as insider trading, pump and dump, short selling, and any untrue or misleading statement regarding information disclosure ("Wrongdoer/Perpetrator") cannot benefit from illegal gains through asset transfers or withdrawals in financial services institutions, then the OJK is empowered to seize these gains, which are then allocated to as Disgorgement Fund (“Disgorgement Fund”). This Disgorgement Fund is subsequently distributed to minority public shareholders who have suffered losses (“Suffered Loss Investor”), subject to the terms and conditions set forth in POJK 65/2020.

Pursuant to Article 1 of POJK 65/2020, OJK will render orders to the Wrongdoer/Perpetrator to return the illegal gains, in which OJK must include the violations committed by the party in question as stipulated in Article 3 paragraph (2) of POJK 65/2020, including:

1. the laws and regulations in the field of capital markets that were violated;
2. the time of the violation;
3. summary of the violation; and
4. the amount of unauthorized profit refund.

If based on the disgorgement order by OJK, the wrongdoer/perpetrator does not make payment to OJK, OJK is entitled to:

1. Order financial service institutions (banks and/or securities companies) to block securities accounts, other accounts, and/or book-entry of assets belonging to the wrongdoer/perpetrator (Article 8 paragraph (1) POJK 65/2020).
2. If the Wrongdoer/Perpetrator's assets are not contained in a securities account or other account, OJK has the right to pursue legal action in the form of: (i) further processing to the investigation stage based on criminal law; (ii) filing a civil lawsuit in accordance with the applicable provisions; and (iii) filing a civil lawsuit in accordance with Law No. 34 of 2007 on Bankruptcy and Suspension of Debt Payment Obligations (Article 9 POJK 65/2020).

Furthermore, if OJK could collect the disgorgement fund from the wrongdoer/perpetrator, OJK would appoint an administrator registered in OJK. Pursuant to Article 15 of POJK 65/2020, the administrator itself is obliged to:

1. submit a recommendation to OJK in relation to the criteria of investors that fulfilled the requirements to file claims—Suffered Loss Investor.
2. ensure that investors who suffered losses and filed claims (Suffered Loss Investor) have not received compensation from the wrongdoer/perpetrator.
3. administer Disgorgement Fund for Suffered Loss Investor.
4. prepare the Distribution Plan of the Disgorgement Fund for Suffered Loss Investors.
5. distribute the Disgorgement Fund for Suffered Loss Investor
6. establish a website on Disgorgement Fund.
7. maintain the confidentiality of data related to the Disgorgement Fund obtained from the OJK, Suffered Loss Investor, and other parties;
8. submit reports to OJK.
9. coordinate with the fund Provider in the administration and distribution of the Disgorgement Fund, and
10. carry out other things stipulated by OJK.

To conclude, the disgorgement concept, as regulated by Article 33 of Law 4/2023 in conjunction with Article 100B of Law 8/1995 and further implemented through POJK 65/2020, provides a significant legal protection mechanism for the suffered loss investor due to the actions of the wrongdoer/perpetrator in the capital market. This framework ensures that legal enforcement against wrongdoers/perpetrators extends beyond mere criminal prosecution; it also focuses on the recovery of losses suffered by the suffered loss investor.

The disgorgement concept mechanism empowers OJK to seize illegal gains from the wrongdoer/perpetrator. These seized assets are then allocated to a disgorgement fund, which is specifically designed to compensate minority public shareholders who have incurred losses. This process ensures that the wrongdoers/perpetrators are not allowed to benefit from their unlawful activities, thereby restoring some measure of justice and financial recovery to the investor suffering loss.

By implementing this mechanism, the Indonesian government aims to bolster the integrity and reliability of its capital market. The hope is that this enhanced legal protection will increase confidence among both local and foreign investors, reinforcing the perception that the Indonesian Stock Exchange is a trustworthy and secure environment for capital market activities. This, in turn, could attract more investment and contribute to the continued growth and stability of Indonesia’s financial markets.