Question

Briefly explain ‘Shariah compliance securities’ and the regulator that regulates the Shariah compliance securities in Malaysia

Answer 1

Shariah-compliant funds are investment funds governed by the requirements of Shariah law and the principles of the Muslim religion. Shariah-compliant funds are considered to be a type of socially responsible investing. The concept requires considerable effort to implement, since much attention must be paid to compliance with a comprehensive set of rules and requirements guided by the Shariah principles.

Shariah-compliant funds have many requirements that must be adhered to. Some of the requirements for a Shariah-compliant fund include the exclusion of investments which derive the majority of their income from the sale of alcohol, pork products, pornography, gambling, military equipment or weapons. Other characteristics of a Shariah-compliant fund include an appointed Shariah board, an annual Shariah audit and purifying certain prohibited types of income, such as interest, by donating them to a charity.