THE WRITING ON THE WALL: Employees of PT Sarijaya Permana Sekuritas are seen working at the company’s office in Jakarta on Tuesday. The Indonesian Stock Exchange has suspended the security house’s trading activities over allegations of financial fraud involving the firm’s owner. (JP/Ricky Yudhistira)

Widely criticized for operating toothless watchdogs, the capital market industry has become entangled in a string of alleged fraud committed by one of the country’s largest securities houses — PT Sarijaya Permana Sekuritas.

The capital market’s watchdogs announced the owner of the company, Herman Ramli, was involved in an alleged embezzlement involving investor money worth Rp 245 billion (US$22.5 million) spread across 8,700 accounts, 6,500 of which belong to retail investors.

“There has been an alleged misuse of client accounts by Sarijaya president commissioner (Herman Ramli),” said Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) in a statement Tuesday.

At the request of Bapepam, the Indonesia Stock Exchange (IDX) suspended Sarijaya activities Tuesday, and requested PT Kliring Penjaminan Efek Indonesia and central custodian PT Kustodian Sentral Efek Indonesia freeze all assets belonging to the broker and its clients.

In its statement, Bapepam said Sarijaya had falsefied reports on its net adjusted working capital.

National Police chief of detectives Comr. Gen. Susno Duadji said the police had arrested Herman on Dec. 24 on charges of fraud.

Bapepam will also verify the client accounts and assets already submitted by Herman to guarantee Sarijaya’s operation.

“Should there be no problems, we will unfreeze them as soon as possible,” IDX president director Erry Firmansyah said.

Erry also said the suspension of all Sarijaya activities had not come earlier because the authorities had wanted to avoid panic on the trading floor as Sarijaya was one of the nation’s biggest securities houses.

Sarijaya, which has 31 branches in Java, Bali, Sumatera, Kalimantan and Sulawesi, has relinquished assets in the form of equity, a multi-finance firm, an insurance firm and a plastic plant to authorities, Erry said.

Company director Zulfian Alamsyah said the case only implicated Herman. “We are now seeking new investors to immediately settle the problem as requested by the authorities,” he said.

The Sarijaya case is the latest in a string of fraud cases involving brokers. PT Antaboga Delta Sekuritas was charged in an alleged scam worth Rp 1.4 trillion, which brought into question Bapepam’s supervisory role. Bapepam is currently investigating 49 other securities houses for irregularities.

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