The need for stronger, targeted, and transparent enforcement against stock price manipulation in Indonesia

Recently, Finance Minister Purbaya Yudhi Sadewa voiced concerns that the prevalence of stock price manipulation threatens to undermine investor confidence, particularly among younger and retail investors. He challenged the Financial Services Authority (OJK) and the Indonesia Stock Exchange (BEI) to clean up manipulative practices before seeking further incentives or tax breaks for the market. His message was clear that integrity must precede growth. Purbaya recounted how speculative trading and manipulative practices nearly brought the institution down. His insistence that enforcement come first before incentives is a strong signal of policy alignment and political will at the highest level.

Purbaya's statements also emphasize transparency and fairness as the cornerstones of market sustainability. He cautioned that young investors, especially Gen Z, would lose interest in investing if they continue to perceive the market as being dominated by stock price manipulation.

His call for OJK and BEI to actively sanction manipulators strengthens the argument that deterrence must be visible, consistent, and proportionate. The Finance Minister also provides the political backing necessary for OJK and BEI to take firmer action.

This alignment between regulatory reform and ministerial leadership creates a rare opportunity for meaningful change. It reinforces the editorial argument that Indonesia's capital-market governance must evolve from aggregate reporting and symbolic penalties to targeted, transparent, and data-backed enforcement. The Finance Ministry's position that incentives should be contingent on cleaner practices ensures that growth will not come at the cost of integrity.

On the other hand, despite measurable progress by OJK and BEI in supervising trading and sanctioning violations, the scope of enforcement remains far too limited compared with the scale of investor losses that have swept through the financial sector in recent years. Between 2017 and 2023, OJK reported public losses of nearly Rp 140 trillion from illegal or fraudulent investment schemes. Yet annual fines for capital-market violations such as price manipulation, insider trading, and disclosure breaches typically range between Rp 10 and 80 billion, a fraction of the potential gains generated by stock price manipulation practices.

This mismatch highlights a deeper problem in deterrence. Market manipulation is profit-driven. When the potential gains from inflating and dumping stock-prices outweigh the likely penalties, manipulation becomes a rational, low-risk, high-reward strategy. Small administrative fines and the scarcity of criminal prosecutions make the cost of breaking the law insignificant compared with the rewards. The Capital Market Law allows imprisonment of up to ten years and fines of up to Rp 15 billion, yet enforcement seldom reaches that level. Without visible prosecutions or detailed disclosure of manipulation losses, deterrence remains weak and market confidence continues to erode.

The absence of transparent, per-case accounting of investor losses compounds the problem. OJK's current reporting aggregates fines and violations but does not reveal which stocks were manipulated, how much investors lost, or who gained from the schemes. This opacity conceals the true economic harm of stock price manipulation, making it difficult to justify stronger enforcement or communicate the seriousness of these offenses to the investing public. Publishing per-case loss estimates and naming affected issuers would transform market accountability. When investors and journalists can trace a manipulation case to its specific cost and enforcement outcome, deterrence becomes visible, and credibility naturally follows.

Smarter, not just tougher, enforcement is essential. Surveillance should focus on high-risk areas such as thinly traded, newly listed, or unusually volatile stocks where manipulation thrives. Artificial intelligence and real-time analytics could detect suspicious price or volume movements early. Coordination between OJK, BEI, and the Financial Transaction Reports and Analysis Center (PPATK) is vital to follow suspicious money flows, connecting market manipulation to financial crimes like money laundering. Each enforcement action should be made public with a clear narrative of who was involved, how the manipulation occurred, what losses were incurred, and what penalties were imposed.

Transparency itself acts as a deterrent. In jurisdictions like the United States and Singapore, regulators such as the SEC and MAS regularly publish detailed enforcement releases naming offenders, explaining schemes, and quantifying financial penalties. This openness builds investor trust and market discipline. Indonesia can and should adopt a similar approach. Enforcement that is specific, visible, and data-driven would send a clear message: manipulation carries real consequences.

In 2024 – 2025 in Australia, ASIC charged four individuals (Larissa Quinlan; Kurt Stuart; Emma Summer; Syed Yusuf) with conspiracy to commit market rigging and false trading: they allegedly used a private Telegram group to coordinate purchases of penny stocks, then promoted them via a public Telegram group dubbed the "ASX Pump and Dump Group" and sold at inflated price. Then, they face maximum penalties of up to 15 years imprisonment and fines exceeding A$1 million.

In Indonesia, however, the enforcement framework remains predominantly penal and administrative, without a direct pathway for victims to claim compensation. The absence of such restitution mechanisms undermines the perceived fairness of the market and dilutes the deterrent effect of enforcement. As a result, even when manipulators are sanctioned, the broader investor community receives no tangible redress, leading to a persistent perception of impunity and systemic asymmetry between perpetrators and retail investors. A credible full-compensation framework, either through a market-funded investor protection fund or court-mandated restitution, would mark a major institutional advancement. It would also align Indonesia's regulatory standards with global norms under IOSCO principles emphasizing investor protection as a cornerstone of capital-market development.

Implications for foreign investor confidence

Foreign investors, particularly institutional funds and sovereign wealth entities, evaluate not only macroeconomic fundamentals but also the institutional quality of market governance before allocating capital to emerging economies. Transparency, rule of law, and enforcement credibility are decisive factors in such assessments. When enforcement outcomes are opaque and investor restitution is absent, the perceived risk premium for investing in Indonesia's equity market rises. This deters long-term and reputable foreign investors, leaving the field vulnerable to short-term speculative flows that exacerbate volatility.

Conversely, a market that demonstrates visible accountability and full-compensation provisions signals institutional maturity and regulatory reliability. It reassures global investors that their rights are enforceable and that the market operates under predictable, rules-based governance rather than discretionary enforcement. In this sense, investor protection and compensation mechanisms are not merely legal instruments but vital determinants of market attractiveness and cross-border capital flows.

Thus, OJK should impose clear investor restorative justice mechanisms. Unlike jurisdictions where victims of manipulation may claim full compensation programs, OJK offers limited avenues for this matter. Without full compensation, justice remains incomplete even when perpetrators are fined.

If Indonesia succeeds in embedding restorative justice, through full compensation, transparent case disclosures, and consistent enforcement that it would elevate its stock exchange from a liquidity-driven market to a credibility-driven investment destination. Such progress would attract not only portfolio investors seeking yield but also strategic and ESG-oriented funds seeking long-term, integrity-based partnerships in emerging Asia.

The future of Indonesia's capital market depends not only on liquidity and listings but on fairness and accountability. Investors, both domestic and international, need assurance that the market is governed by law rather than speculation. Enforcement that is strong, targeted, and transparent will build that assurance. Unless deterrence is made visible and penalties are substantial, manipulators will continue to view the market as fertile ground for easy profit.

Indonesia has an opportunity with the combined leadership of OJK, BEI, and the Finance Ministry to realign incentives, strengthen oversight, and restore trust. The path forward requires courage, coordination, and commitment to transparency. When enforcement becomes credible and manipulation becomes costly, confidence will return. Only then can Indonesia's capital market grow not just larger, but stronger, fairer, and truly worthy of its investors.