SECP en­forces Shariah Gov­er­nance Reg­u­la­tions 2018

The Financial Daily - - MARKET SUMMARY -

Man­zar Naqvi

The Se­cu­ri­ties and Ex­change Com­mis­sion of Pak­istan (SECP) has en­forced the Shariah Gov­er­nance Reg­u­la­tions 2018, in or­der to make full com­pli­ance in line with the spirit of the Ar­ti­cle 38 (f) of the Con­sti­tu­tion of Pak­istan.

Un­der the reg­u­la­tions, no busi­ness will claim as Shariah com­pli­ant or as an Is­lamic fi­nan­cial in­sti­tu­tion un­less it ob­tains cer­ti­fi­ca­tion for Shariah com­pli­ance from the SECP, Cer­ti­fi­ca­tion will also be re­quired for is­su­ing a Shariah com­pli­ant se­cu­rity.

The ju­ris­dic­tion of these reg­u­la­tions is the cor­po­rate sec­tor, Shariah-com­pli­ant cor­po­rate sec­tor, Is­lamic cap­i­tal mar­kets, Shariah-com­pli­ant se­cu­ri­ties and Is­lamic fi­nan­cial in­sti­tu­tions.

The en­force­ment of a com­pre­hen­sive frame­work for Shariah-com­pli­ant busi­ness is a ma­jor break­through to lay the foun­da­tion for a true Is­lamic fi­nan­cial and eco­nomic sys­tem.

The reg­u­la­tions are in fur­ther­ance to the Se­nate's res­o­lu­tion moved by Sen­a­tor Shi­bli Faraz and unan­i­mously passed on July 9, 2018, whereby the House rec­om­mended that the gov­ern­ment should take nec­es­sary steps to abol­ish Riba at the ear­li­est and at least 30 per­cent of the new gov­ern­ment debts should be re­placed with Shariah-com­pli­ant modes of fi­nanc­ing.

The is­suance of these reg­u­la­tions is a leap for­ward to­wards de­vel­op­ment of a long-term, sus­tain­able Is­lamic fi­nan­cial mar­ket, cor­po­rate sec­tor and cap­i­tal mar­ket.

The reg­u­la­tions will help deepen Shari­ah­com­pli­ant busi­nesses and fi­nanc­ing and will set the mo­men­tum for an all-em­brac­ing use of Shariah-com­pli­ant se­cu­ri­ties for Shariah-com­pli­ant in­vest­ments and fi­nanc­ing as the reg­ula- tions pro­vide op­por­tu­nity to ev­ery busi­ness ir­re­spec­tive of its size or line of busi­ness to be­come Shariah-com­pli­ant or to is­sue Shari­ah­com­pli­ant se­cu­rity listed or un­listed.

These reg­u­la­tions en­com­pass a num­ber of el­e­ments of Shariah gov­er­nance nec­es­sary to ex­e­cute Shariah com­pli­ance and to up­hold the sanc­tity of Shariah in busi­ness and fi­nan­cial deal­ings and op­er­a­tional prac­tices that will en­sure long-term sus­tain­abil­ity for the Is­lamic fi­nan­cial sys­tem to stay on sound foot­ings.

They in­clude cer­ti­fi­ca­tion for Shariah com­pli­ant com­pa­nies and Shariah com­pli­ant se­cu­ri­ties, a com­pre­hen­sive Shariah screen­ing method­ol­ogy for listed as well as for un­listed com­pa­nies, in­ter­nal and ex­ter­nal Shariah au­dit, Shariah ad­vi­sory, Shariah com­pli­ance, in­come pu­rifi­ca­tion and char­ity dis­tri­bu­tion mech­a­nism.

The reg­u­la­tions will alo make the col­lec­tion and anal­y­sis of data on cor­po­rate sec­tor in con­form­ity with Shariah, pos­si­ble.

The reg­u­la­tions will help curb the use of word Shariah or Is­lam by the busi­nesses that en­tice in­vestors for ul­te­rior mo­tives.

The reg­u­la­tions are crit­i­cal for ad­dress­ing the chal­lenges such as restor­ing the shaken con­fi­dence of pub­lic and in­vestors, and putting in place a vi­able long-term so­lu­tion to avert a mud­dle in the guise of Shariah for the fu­ture.

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