Professional Documents
Culture Documents
1
Objectives
01
Describe the roles played by Bursa
Malaysia and Securities Commission in
regulating the capital market system
02
Compare the existing regulatory
framework governing the Islamic
capital market
2
1. Regulatory
framework for ICM
Regulatory Framework for ICM
01 02 03 04 and/or to adjudicate on
issues and disputes
relating to the matter;
4
Essentials of a capital market
5
Global Regulatory Framework
6
IOSCO’s core objectives for securities regulation
7
ICM International Regulatory Framework - Voluntary
8
International Organization of Securities
Commissions (IOSCO)
The International Organization of Securities Commissions (IOSCO) is the international
body that brings together the world's securities regulators and is recognized as the global
standard setter for the securities sector.
IOSCO was established in 1983. Its membership regulates more than 95% of the world's
securities markets in more than 130 jurisdictions: securities regulators in emerging
markets account for 75% of its ordinary membership.
https://www.iosco.org/
9
Accounting & Auditing Organization for Islamic
Financial Institutions (AAOIFI)
AAOIFI, established in 1991 and based in Bahrain, is the
leading international not-for-profit organization primarily
responsible for development and issuance of standards
for the global Islamic finance industry. It has issued a total • Shariah
of 100 standards in the areas of Shari’ah, accounting, • Accountings
auditing, ethics and governance for international Islamic • Auditing
finance. It is supported by a number of institutional members,
• Ethics
including central banks and regulatory authorities, financial
institutions, accounting and auditing firms, and legal firms, • Governance
from over 45 countries. Its standards are currently followed
by all the leading Islamic financial institutions across the
world and have introduced a progressive degree of
harmonization of international Islamic finance practices.
http://aaoifi.com/?lang=en
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International Islamic Financial Market (IIFM)
IIFM is a global standard-setting body of the Islamic Financial Services Industry (IFSI)
focusing on standardization of Shari’ah-compliant financial contracts and product
templates.
IIFM is hosted by the Central Bank of Bahrain (CBB) and was established under Royal
Decree No (23) Year 2002 of the Kingdom of Bahrain as a neutral and non-profit
international Islamic infrastructure institution created by the collective efforts of the
CBB (formerly Bahrain Monetary Agency), Islamic Development Bank, Bank Indonesia,
Bank Negara Malaysia (delegated to Labuan Financial Services Authority), Central
Bank of Sudan and Brunei Darussalam Central Bank (formerly Autoriti Monetari Brunei
Darussalam).
https://www.iifm.net/about-iifm/corporate-profile/
11
Islamic Financial Services Board (IFSB)
https://www.ifsb.org/background.php
12
Regulate activities of ICM
Investment advisory by market professionals;
Issuance by securities issuers;
Trading by securities traders;
Substantial transactions such as takeovers, mergers and
acquisitions;
Institutional investments (such as collective investment
schemes); and
Investor protection through corporate governance and
compliance issues.
13
Regulatory Models And Approaches
1
Fraud and Abuse
Inhibition Approach
2 Merit Approach
14
2. Regulatory
framework in
Malaysia
Covers
16
Does regulation of ICM differ from the regulation of
conventional capital market ?
17
Malaysian Approach in Regulating the ICM
Two-tier Structure
18
Promoting ICM through facilitative
legal and tax framework
19
Authorities/Bodies that Form and Support
The Regulatory Framework - Malaysia ICM
Self-Regulatory
Statutory Authorities Exchange Authorities Organizations and Industry
Associations
20
Reform Initiatives
21
CAPITAL MARKET REGULATORY FRAMEWORK
Source :
Javestock
22
SC Regulatory framework for Islamic capital
market products and services – equity
Industry-led innovation in tandem with Securities Commission Malaysia (SC)'s developmental
initiatives also resulted in a diverse range of Islamic investment products including unit trust funds,
wholesale funds, private retirement schemes, ETFs and REITs.
• Capital Markets And Services Act 2007 (CMSA) [Investor protection and disclosure requirement
http://www.sc.com.my/eng/html/cmsa/cmsa.html
• Islamic REITS
Guidelines on Islamic Real Estate Investment Trusts
https://www.sc.com.my/api/documentms/download.ashx?id=afacc30c-060e-
4cc0-b40f-d4546db74724
https://www.sc.com.my/regulation/guidelines
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• Islamic Fund Management
Guidelines on Islamic Fund Management
http://www.sc.com.my/eng/html/resources/guidelines/FundManagers/IslamicFundManagement.pdf
• Islamic ETF
Guidelines on Exchange-Traded Funds (Provision)
http://www.sc.com.my/eng/html/resources/guidelines/ETF/ETF%20Guidelines.pdf
• Islamic stockbroking
Best Practices In Islamic Stockbroking Services Undertaken by Participating Organisations
http://www.bursamalaysia.com/website/bm/rules_and_regulations/bursa_rules/downloads/bm_cir_rr1
6_180907.pdf
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MALAYSIAN LEGISLATION AND GUIDELINES
IN ICM: ONSHORE
25
MALAYSIAN LEGISLATION AND GUIDELINES
IN ICM: ONSHORE
Guidelines
01 on Sukuk
Prospectus
Guidelines
GUIDELIN
02
Registration of
ES
04
Shariah Advisers
Guidelines
Guidelines
on Trust
Deeds
03
26
MALAYSIAN LEGISLATION AND GUIDELINES
IN ICM: OFFSHORE
27
https://www.youtube.com/
watch?v=a4dzx-Rx1Uo
28
Offshore
The term offshore refers to a location outside of one's home country. The term is
commonly used in the banking and financial sectors to describe areas where
regulations are different from the home country. Offshore locations are generally island
nations, where entities set up corporations, investments, and deposits.
Companies and individuals (typically those with a high net worth) may move offshore
for more favorable conditions, including tax avoidance, relaxed regulations, or asset
protection. Although offshore institutions can also be used for illicit purposes, they
aren't considered illegal.
29
• Offshore refers to any (business) activity that takes place outside an entity's
home base.
• The term may be used to describe foreign banks, corporations, investments, and
deposits.
• A company may legitimately move offshore for the purpose of tax avoidance or to
enjoy relaxed regulations.
• Offshore financial institutions can also be used for illicit purposes such as money
laundering and tax evasion.
• Increased pressure is leading to more reporting of foreign accounts to
international tax authorities.
30
BEST PRACTICES ICM
31
Source of Authority
Section 316A(1) of the Malaysian CMSA provides for this, and empowers the SAC to
determine its own procedures. The SAC also advises on the operation and development
of Sharīʿah regulations on Islamic securities, compliance criteria and guidelines; reviews
proposals and inquiries; renders Sharīʿah opinions; and promotes harmonisation and
convergence of Sharīʿah principles.
Section 316F(1) CMSA provides that where, in any proceedings before any court or
arbitrator, issues concerning a Sharīʿah matter in relation to ICM business or transactions
arise, the court or the arbitrator, as the case may be, shall either: (i) take into
consideration any ruling of the SAC; or (ii) refer such matter to the SAC for its ruling.
To ensure the effectiveness of the ruling made by the SAC, section 316G CMSA states
that any ruling made by the SAC shall be binding on: (i) the licensed person, stock
exchange, derivatives exchange, clearing house, central depository, listed corporation or
any other person referred to in section 316E; and (ii) the court or arbitrator referred to in
section 316F.
Furthermore, section 316H(1) CMSA mentions that where a ruling given by registered
Sharīʿah adviser to a person engaging in any ICM business or transaction is different
from the ruling given by the SAC, the ruling of the SAC shall prevail.
32
Issues and Challenges of the ICM
Regulatory Framework
33
Tutorial
Tutorial
NEXT WEEK
1. Explain general 4 elements needed in regulatory
framework
MCQs and Review Qs and Ps (Q1, 2, 4, 7, 8)
2. Describe functions of law vs regulations/bylaws
Page 201-202.
3. Explain functions of statutory bodies, exchange
https://www.nst.com.my/business/2018/03/3454 authorities, and self regulatory bodies in the ICM
79/securities-commission-push-ahead-digital-ag context
enda 4. Bring examples of rules and regulations on;
a. Sukuk issuance
- List All Innovations in Islamic Capital Market
b. Unit trust offering
c. Share issuance
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