Shariah Advisory Council (BNM)

In the screening process, all the requirements had been set by the Shariah Advisory
Council (SAC) to avoiding the shariah issues. As general, Central Bank of Malaysia (BNM)
had been introduced the SAC on May 1997. The purpose of the establishment to be the
authority entity about the shariah issue. The SAC for Central Bank of Malaysia have the
authority to covers the Islamic banking, takaful, Islamic financial business, Islamic
development or financial business based on Shariah principles which are regulated by Central
Bank of Malaysia (BNM).

The Shariah Advisory Council for BNM also need to advise the BNM on any shariah
issues including the Islamic financial business, activities and the transactions made by the
others bank. For the Islamic bank in Malaysia, they need to have their Shariah Committee to
advise the board regarding the Shariah guidance that had been set by Shariah Advisory
Council for BNM. The Shariah Committee must be consisting minimum of five members
appointed by the Board of Director. The Islamic Bank and takaful company must have their
own shariah committee to make sure their transactions is comply with the Shariah matters.

There are several duties and responsibilities of the Shariah Committee. The first duty
is responsibility and accountability. The Shariah Committee is need to understand the duties
and responsibilities as a Shariah Committee member and they are responsible for all Shariah
decisions, opinions and views provided by them for the bank. Other than that, Shariah
Committee must advise to the board and bank including the bank’s subsidiaries. This is
important to make sure the Islamic Bank is following the Shariah compliance requirement
that had been given by the Central Bank of Malaysia.

Then, they need to endorse and validate the relevant documentations. To ensure the
Islamic Bank following the Shariah principles, Shariah Committee must approve the
marketing advertisements, sales illustrations, product manual and brochures used to describe
the product. They also need to approve the terms and conditions in the forms, agreements or
other legal documentations used in transactions.
Shariah Advisory Council (Securities Commission)

In general, the Shariah compliant securities are securities of companies that are listed
in Bursa Malaysia Securities Berhad. The businesses were operated following the shariah
rules and avoiding the prohibited elements. The Shariah criteria had been established by
Shariah Advisory Council of Securities Commission. The SAC for Securities Commission
will release the list of Shariah-compliant securities and update it twice a year. So, the
businesses must followed the requirement from SAC of Securities Commission to get the
Shariah-compliant securities title.

Securities Commission is a statutory body that had been set up under the Securities
Commission Act 1993 (SCA) that are reporting to the Minister of Finance directly. Securities
Commission is the regulatory body that related with Capital Market in Malaysia. They are
responsible regarding the development of Islamic Capital Market and specific regulations
about Capital Market.

In developing the national Capital Market, the main target is to develop the Islamic
Capital Market industry in Malaysia. The agenda incorporated into the Malaysia Capital
Market Masterplan that had been launched on 22 February 2001. The main objectives to
make the Malaysia as an International Islamic Capital Market Centre. The Commission need
to take the approaches to achieve this objective which is to make the Malaysia as an avenue
for International Capital Market. The first approach is supplying the necessary infrastructure
for the research, discussion and dialogues purpose. Second approach is undertaking the
efforts to strengthen and develop the market.

By using these two approaches, Securities Commission has taken several steps to
strengthen the infrastructure for the development of the Islamic Capital Market in Malaysia.
There are including establishing the Islamic Capital Market Department (ICMD), Islamic
Instrument Study Group (IISG) and Shariah Advisory Council (SAC). The establishment
of these entity will help the Islamic Capital Market industry to be known globally. The
Shariah matters also will be the main things in terms to make sure they will not face the
Shariah issue.
ISLAMIC CAPITAL MARKET DEPARTMENT

To develop the Islamic Capital Market, Securities Commission established a

department under Market Policy and Development Division called Islamic Capital Market
Department. The main responsibility is to conducting the research and develop Islamic
Capital market products in the debt, derivatives and equity.

It is needed the full-time officers with the Shariah education background especially in
modern finance and Fiqh Muamalat (Islamic commercial law). The combination of these two
different backgrounds is important and essential to creating a capable working group to
achieve the main objectives which is to make Malaysia as a Centre for Islamic Capital
Market globally.

ISLAMIC INSTRUMENT STUDY GROUP (IISG)

The Securities Commission established the IISG on 1994 with a membership between
Shariah consultants and corporate figures. The main objectives through the establishment is
to discussed and made the decisions regarding the Islamic Capital Market in Malaysia.

The following is list of the IISG members from 1994 until 1996. The members are: -

 Dato’ Mohd Khudzairi Dainuri

 Dato’ Sheikh Azmi Ahmad
 Associate Prof Md Hashim Yahaya
 Dr Abdullah Ibrahim
 Nor Mohamed Yakcop
 Dato’ Dr Abdul Halim Ismail
 Ustaz Hassan Ahmad
 Ustaz Md Nurdin Ngadimon
SHARIAH ADVISORY COUNCIL (SC)

It is different with the Shariah Advisory Council for Central Bank of Malaysia
(BNM). Shariah Advisory council for Securities Commission have the authority regarding the
Islamic Capital Market in Malaysia. The authorities for Shariah Advisory Council for BNM
are Islamic banking, takaful, Islamic financial business, Islamic development or financial
business based on Shariah principles which are regulated by BNM.

The Islamic Capital Market Department (ICMD) accomplish the research activities as
a secretariat to the Islamic Instrument Study Group (IISG). The Securities Commission
noticed that the role of IISG need to be expand regarding the Shariah matters and after that it
was upgraded to the more formal body called as Shariah Advisory Council (SAC) on 16 May
1996. The establishment of SAC had been endorsed by the Minister of Finance and the
mandate given is to ensure the implementation of Islamic Capital Market is following and
binding with the Shariah rules. The scope of job for SAC is to advice the Securities
Commission on Shariah matters related to the development of Islamic Capital Market in
Malaysia. The important thing is SAC will be the main reference centre regarding Shariah
and Islamic Capital Market issues.

In term to introducing the Islamic Capital Market instruments, the Shariah Advisory
Council (SAC) introduced the two approaches. The first approach to study the validity of
conventional capital market instruments from the Shariah perspectives. They were focused on
mechanism used, structure and used of the instruments to identify whether it is against
Shariah principle or not. The second approach that introduced by SAC is developing the new
financial instruments that are followed the Shariah rules and avoid the prohibited elements
such as riba, gharar and maysir.

The Shariah Advisory Council have a mandate for issuing a list of Shariah-compliant
securities. It was 857 securities had been classified as Shariah-compliant securities by the
SAC up to 28 October 2005 and it is representing 85% securities listed in Bursa Malaysia.
The list will be updated and announced twice a year. It will helps the muslim investors to
identify the Shariah compliant securities easily and it will make them more confident to make
the investments in Bursa Malaysia. The SAC advices to the muslim investors to dispose any
non-shariah compliant securities. Any profit from capital gain or dividend must be channeled
to the baitulmal or charitable bodies. The investors only can get the principle amount of
investments.

MEMBERS OF THE SHARIAH ADVISORY COUNCIL (SC)

No Name Designation/Former position

1 Datuk Dr Mohd Daud Bakar Group Chairman
Amanie Advisors
2 Dato’ Ahmad Tajudin Haji Abdul Rahman Former Managing Director
Bank Islam Malaysia Berhad
3 Professor Dr. Ashraf Md Hashim Chief Executive Officer
ISRA Consultancy Sdn. Bhd.
4 Professor Dr. Engku Rabiah Adawiah Engku Ali Professor
IIUM Institute of Islamic Banking and
Finance
International Islamic University Malaysia
5 Professor Dr. Asmadi Mohamed Naim Dean
Islamic Business School
Universiti Utara Malaysia
6 Associate Professor Dr. Syed Musa Syed Jaafar Associate Professor
Alhabshi IIUM Institute of Islamic Banking and
Finance
International Islamic University Malaysia
7. Associate Professor Dr. Aznan Hasan Associate Professor
IIUM Institute of Islamic Banking and
Finance
International Islamic University Malaysia
8 Dr. Shamsiah Mohamad Former Senior Researcher
International Shari’ah Research Academy
for Islamic Finance (ISRA)
9 Associate Professor Dr. Mohamed Fairooz Abdul Associate Professor
Khir School of Law and Shariah
Islamic University of Malaysia
(1 JULY 2017 – 30 JUNE 2020)