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The capital market watchdog said on Tuesday that it was facing difficulties establishing an investor protection fund as it had yet to find suitable models in other stock markets after which to pattern the plan.

“The obstacle the capital market authority is facing in setting up the investor protection fund is that we have yet to find an ideal format in other countries for pooling funds that could be used as an example,” Ahmad Fuad Rahmany, chairman of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), told reporters. He added that the agency’s study would not be completed until next year.

The investor protection fund would be an insurance scheme to protect against embezzlement or fraud, not for shielding investors from market risks.

Bapepam has been considering the possibility of setting up the fund after police said investors’ funds were stolen by executives of brokerage houses PT Sarijaya Sekuritas and PT Antaboga Sekuritas in 2008.

Antaboga, an affiliate of PT Bank Century, defaulted on Rp 1.5 trillion ($129 million) in unregistered investment funds, with the money allegedly being embezzled by company executives.

Other Asian countries, including Japan, China, Vietnam, Thailand, Malaysia and India, already have protection funds. But Fuad said that some of these had proved ineffective and needed to be improved.

“Bapepam has to establish criteria governing which investors and funds are entitled to protection,” Fuad said.

He added that the protection fund could be established through Bapepam regulations without amending the Capital Market Law.

Ito Warsito, president director of the Indonesia Stock Exchange (IDX), said that the model might be similar to the Deposit Insurance Corporation (LPS), meaning that a new institution would have to be created.

He said the body might be jointly managed by the Indonesian Clearing and Guarantee Corporation (KPEI) and the Indonesian Central Securities Depository (KSEI).

Ito said the fund could be financed either through the national budget or by levies on brokerage firms.

Hariajid Ramelan, head of the Indonesian Securities Analysts Association, said Bapepam needed to conduct further studies on what shape the fund should take. He added that some investors might not welcome the plan if they had to pay for the protection.

“Investors are already burdened by transaction fees. [The protection fund] would be meaningless if investors don’t want to pay to protect their funds,” he said.