legal and regulatory framework of islamic capital market

The SC is a regulatory body established under the Securities Commission Malaysia Act 1993 (SCMA), which is mandated to regulate the Malaysian capital market (including the Islamic capital market) and which is directly responsible for the regulation, supervision and monitoring of all persons licensed under the CMSA with the main objective of protecting investors. ", © Copyright 2006 - 2021 Law Business Research. In July 2017, BNM, in collaboration with certain Islamic banking and finance institutions, embarked on the development of several strategies aimed at strengthening the roles and impact of Islamic banking institutions. In carrying out the above functions, the SC SAC adopts two significant approaches. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Legal & Regulatory Framework Totally conventional – e.g. IslamicCapital Market International Regulatory Framework Developing internationally-compatible Islamic accounting standards Differentiation from conventional financial system Promotes and enhances the soundness and stability of the Islamic finance industry Issuing global standards and guiding principles for the industry, including capital markets In this regard, the CMSA provides, inter alia, as follows: The following features of the CMSA accord greater protection to investors of securities (including Islamic securities) in Malaysia: (1) the SC's power to take civil and administrative actions; (2) the SC is allowed to recover three times the amount of losses through civil action for a wider range of market misconduct; (3) the standards of trustees for debenture holders are enhanced; and (4) investor protection is extended to clients of financial institutions. Securities & Exchange Ordinance, 1969 Companies Ordinance, 1984 Securities & Exchange Rules, 1971 Brokers & Agents Rules, 2001 Non-Banking Finance Companies (Establishment & Regulation) Rules, 2003 Non-Banking Finance Companies Regulations, 2008 REIT Regulations, 2008 Due to the unique nature of the Islamic capital market, the legal framework includes both the dispute resolution aspect as well as the dispute avoidance mechanism to regulate the matrixes of the financial products in the market. • a company may undertake an IPO • a government may issue Sharia’acompliant securities or Sukuk to raise funding for public projects • Role of Investors - purchase Sharia’acompliant securities in order to extract a return and earn profit on the securities. Following therefrom, the IFSA provides that the operations, structure and the terms and conditions of Islamic financial products and services provided by financial institutions must be shariah-compliant. These approaches have formed the basis in developing several key shariah rulings on sukuk issuance. This expansion is driven mainly by the sukuk market and the Islamic … Minimum Disclosure Requirements 92 III. See our Privacy Policy and User Agreement for details. the Islamic capital market, where Shari’a and western legal framework can be in a harmony to govern sukuk operations. Japan, US, China Conventional framework with special law / regulation for IFS – e.g. The LIFSSA must be read together with any guidelines or circulars issued by the Labuan Financial Services Authority (Labuan FSA). Pursuant thereto, the MIFC was established as a network of the country's financial sector regulators, including BNM, the SC, the Labuan FSA, Bursa and government ministries and agencies, together with industry participation from the banking, takaful, capital markets, research and talent development institutions and service providers within Islamic finance. Why we build a legal and regulatory framework for Islamic Banking • Islamic banking is a realization of the needs of the public seeking an alternative banking system that is both capable of delivering sound banking services and comply with sharia rules. What might be part of a robust disclosure regime for the principal Islamic capital market product, Sukūk? The SSC, however, may only make rulings upon reference being made to it by licensed or regulated entities under the LIFSSA or as determined by the Labuan FSA. The Capital Markets and Services Act 2007 (CMSA) constitutes a single framework regulating the licensing of both conventional and Islamic capital market services, market conduct and offering and issuances of securities, including unlisted Islamic securities or sukuk, with the exception of specific laws, regulations and guidelines that apply exclusively to the operation of the Islamic capital market. 1.1 Research Background . The next generation search tool for finding the right lawyer for you. such functions as may be prescribed by the Minister. As the primary source of legislation governing the licensing and operation of Islamic and international Islamic banking businesses conducted by financial institutions, the IFSA, together with guidelines and circulars issued by BNM, contains extensive provisions on end-to-end shariah compliance, governance and enforcement, which include the following basic premises: Under the IFSA, BNM was conferred regulatory and supervisory powers and was also empowered to issue guidelines and circulars on shariah requirements to promote financial stability and ensure shariah compliance. Under the IFSA, any companies that are in the takaful business or international takaful business must hold a valid licence granted by the Minister on the recommendation of BNM. It argues that the regulatory matrix must totally comply with the … Due to the unique nature of the Islamic capital market, the legal framework includes both the dispute resolution aspect as well as the dispute avoidance mechanism to regulate the matrixes of the financial products in the market. Sukuk . This research focuses on the Islamic capital market (ICM) in Malaysia which is a pioneering model in the modern world. the regulatory framework applied to Islamic financial services and products, and issues pertaining to Shariah compliance and investor protection; (iii) the state of Islamic capital market development including an examination of growth factors and Malaysia’s Islamic capital market (ICM) has shown tremendous growth in recent years. that Islamic securities are securities for the purposes of securities laws; that any proposal, scheme, transaction, arrangement, activity, product or matter relating to Islamic securities shall comply with the relevant requirements under securities laws and guidelines issued by the SC; and. Understand your clients’ strategies and the most pressing issues they are facing. Such markets are essential for efficient resource mobilization and allocation. The Capital Markets and Services Act 2007 (CMSA) constitutes a single framework regulating the licensing of both conventional and Islamic … Malaysia, Brunei, Indonesia Generally Islamic law – e.g. system, Islamic insurance (takaful), financial markets, the bond market, and the equity market. The development of Islamic capital markets is integral part of development of capital markets in general. The LIFSSA provides for the establishment of the Shariah Supervisory Council (SSC), and for the SSC to (1) ascertain Islamic law for the purposes of any business regulated or supervised by the Labuan FSA and issue rulings; and (2) advise on any shariah issue relating to any business regulated or supervised by the Labuan FSA. listed shariah-compliant instruments, such as Islamic exchange-traded funds, Islamic real estate trusts and Islamic unit trusts. This marked a major milestone in the SC's continuous efforts to strengthen the capital market regulatory framework. Monetary and Capital Markets Department ... paper concludes that they need a legal, corporate and regulatory framework as much as CB does. Generally, under the BNM Guidelines, there are two categories of investments that may be made by financial institutions: (1) investment in shares or interest-in-shares of any corporation; or (2) investment in CISs, which includes unit trusts. Collectively, these guidelines seek to spur greater innovation in the takaful industry while further safeguarding the position of takaful participants. In June 2019, BNM issued the guidelines on Takaful Operational Framework, which will come into force on 1 July 2020, thereafter superseding the current guidelines, which were issued on 26 June 2013. Where, exactly, is the Islamic capital market located? Now customize the name of a clipboard to store your clips. As mentioned earlier, the BNM SAC was established under the CBA as the authority for the ascertainment of Islamic law for the purposes of Islamic financial business. With the CMSA, there are various guidelines and practice notes issued by the SC to regulate the Malaysian capital markets, including Islamic capital markets. Malaysia recognises that certain areas of regulation, particularly inspection and supervision, need to be further enhanced to ensure that its ICM is appropriately regulated. to ascertain the application of shariah principles on any matter relating to Islamic capital market business or transactions; to issue rulings on any matters relating to Islamic capital market business or transactions; to advise the SC on any shariah issue relating to Islamic capital market business or transactions; to provide advice to any person on any shariah issue relating to Islamic capital market business or transactions; and. Introducing PRO ComplianceThe essential resource for in-house professionals. Malaysia has demonstrated an enabling environment to spur Islamic capital markets given a supportive regulatory framework with the introduction of Sustainable and Responsible Investment (SRI) Sukuk Framework in 2014 and the issuance of revised Guidelines on Unlisted Capital Market Products by the SC under the Lodge and Launch Framework in 2017. Of financial institutions for breaches of the Islamic capital market product, Sukūk want. With a market size of keywords: sukuk, Islamic real estate trusts and Islamic unit.! Services Authority ( Labuan FSA ) paper concludes that they need a legal, regulatory and supervis framework... Institutional framework is practised in various jurisdictions throughout the world ) areas of Islamic banking towards a of. 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