Liability of Securities Companies and Disgorgement Funds in Insider Trading in the Indonesian Capital Market

Abstract

This study examines the legal liability of securities companies in insider trading cases within the Indonesian capital market and the urgency of strengthening the disgorgement fund mechanism as a corrective legal instrument. The findings show that liability is not absolute but manifests in three forms: fault-based liability (negligence), contractual liability toward clients, and regulatory or administrative liability arising from violations of prudential and compliance obligations, particularly failures in internal control, due diligence, and supervision. The study identifies critical regulatory gaps in the implementation of disgorgement funds under POJK No. 65/POJK.04/2020, including: (i) the absence of clear methods for calculating illicit gains and establishing causal linkage; (ii) unclear procedures for investor identification and verification in dispersed market transactions; (iii) limited provisions on fund administration and proportional distribution, including dispute resolution; and (iv) the lack of integration with existing civil and administrative remedies. These deficiencies generate legal uncertainty and reduce the effectiveness of disgorgement as both a remedial and deterrent mechanism. Conceptually, this article develops a hybrid liability framework that integrates proportional liability with a corrective justice–based disgorgement model, positioning disgorgement funds as institutional mechanisms for collective investor recovery. It further proposes a normative reconstruction through a more structured and transparent disgorgement regime based on systematic and teleological interpretation, supported by comparative insights. Strengthening the coherence between liability doctrines and disgorgement mechanisms is essential to enhance legal certainty, investor protection, and market integrity.