While Indonesia's Capital Market and Financial Institution Supervisory Agency - known as Bapepam-LK - is responsible for supervising any probe into the finances at PT Bumi Resources (BUMI.JK), it lacks the teeth needed to force Asia's biggest thermal coal exporter into action.

"There tends to be weak enforcement of capital markets rules in Indonesia, so the direct regulatory impact will probably be limited," said Kevin O'Rourke, an independent risk consultant in Jakarta. Sarjito, head of Bapepam's investigation bureau, said his agency had not yet received anything on the matter from Bumi.

That suggests a slow start to the probe launched by Bumi Plc into potential irregularities in more than $500 million of funds at its Indonesian subsidiaries, which could reinforce growing uncertainty over its troubled stock, which tumbled 25 percent on Monday.

Bumi Plc shares recovered nearly 6 percent on Tuesday, having lost over half their value in the past five sessions. The stock is down 82 percent this year, compared to an 18 percent rise in the UK mid-cap stock index .FTMC. In Jakarta, Bumi Resources fell as much as 13 percent on Tuesday on a perception the crisis could drag on, before closing up 1.5 percent.

Analysts at UBS still expect more selling pressure. "We worry about Bumi's ability to meet interest cost obligations over the next 12-18 months," they said in a client note. Nomura analyst Patrick Jones downgraded the stock to 'reduce', noting challenges in servicing Bumi Resources' $4.1 billion gross debt.

FUND WRITEDOWNS

Bumi, co-founded by Rothschild, on Monday commissioned an independent investigation after allegations concerning the use of company funds at its affiliates, including its 29 percent-owned Bumi Resources, one of several foreign-owned, London-listed miners that have raised corporate governance concerns among investors over the past year.

It is the latest problem to plague Bumi, listed in London last year via a reverse takeover engineered by Rothschild, the 41-year-old scion of the centuries-old European banking dynasty, in a $3 billion deal with Indonesia's powerful Bakrie family. They aimed to create an international coal-mining titan with mines in Indonesian Borneo, and one of the biggest listed companies on the London exchange.

But the partnership has steadily unraveled. Rothschild's influence has waned since his role as co-chairman ended in March following public rancor with the Bakries and Bumi's new co-chairman, Samin Tan. The Bakries and Tan now own 47 percent.

In November, Rothschild called for a "radical cleaning up" of the balance sheet and corporate culture at the chronically indebted Bumi Resources, the Bakries' flagship company. In a letter written to Ari Hudaya, then-CEO of both Bumi Plc and Jakarta-listed Bumi Resources, Rothschild expressed concern his Indonesian partners remained "over-leveraged".

Hudaya resigned on Monday from Bumi Plc's board after the firm launched its investigation into Bumi Resources' so-called business development assets. Sources familiar with the investigation estimate those assets' value at $293 million.

"The local authorities will pick it up and speak to Bumi here, though it's tough to say if that will result in anything further," said Charles Ball, international counsel for law firm Herbert Smith in Jakarta.

Indonesia came last in the Asian corporate governance rankings in last week's biennial report from the Asian Corporate Governance Association and CLSA. It had briefly overtaken the Philippines in 2010 on hopes that President Susilo Bambang Yudhoyono was committed to meaningful reform.

"There has been no revision of the country's main code of good corporate governance since 2006, rules to prevent insider trading and market manipulation are inadequate and enforcement of securities regulations is so woeful as to render the discussion almost academic," the report said.

POLITICAL INFLUENCE

The Bakries' political influence - patriarch Aburizal is a major contender for president in 2014 - mean Bapepam, which reports to the Ministry of Finance, must tread carefully.

Bapepam has in the past delisted firms, but these tended to be small, O'Rourke said. Indonesia's stock exchange fined four companies in July 2010, including three in the Bakrie Group, for failing to explain discrepancies in financial statements.

If the Bumi investigation drags into next year, it could become an early test for a new Indonesian regulatory body, the OJK, which will take over the role of Bapepam and the central bank in overseeing financial regulation from January. Its future head, Muliaman Hadad, declined to comment.

(Additional reporting by Fergus Jensen in JAKARTA, Rachel Armstrong in SINGAPORE and Viparat Jantraprap in BANGKOK; Writing by Jason Szep; Editing by Ian Geoghegan)

• A Permanent Economic Emergency