Breakthrough Developments in Indonesian Capital Markets Under the P2SK Law

Law No 4 of 2023 on Financial Sector Development and Reinforcement is an omnibus law that both amends existing laws and introduces new concepts and practices to the financial services sector. The P2SK law strengthens the authority of the Indonesian Financial Services Authority (OJK) and amends a number of laws involving capital markets transactions in Indonesia. In addition, the P2SK law addresses new market practices and covers a variety of new products and financial instruments, including those with tax base innovations.

The P2SK Law aims to enhance financial markets, strengthen law enforcement, reinforce interpretation, develop lending infrastructure, strengthen corporate governance, stabilise financial markets and enhance consumer and investor protection.

Previously, Indonesian capital markets law prohibited Indonesian mutual funds from borrowing or lending money or purchasing shares in or participating in units of other mutual funds. Under the P2SK Law, mutual funds can now carry out these activities subject to compliance with OJK requirements. The P2SK law also introduces carbon trading and exchange to Indonesian capital markets.

The P2SK law also introduces several new or refined definitions to Indonesian law. For example, “securities” were previously defined as traditional commercial paper, with an enumeration of the types of securities available. In the three decades that have passed since this definition was introduced, global capital markets have dynamically evolved. The P2SK law intends to capture those dynamics by redefining securities with a definition that is simultaneously clearer and wider.