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Regulation of the Ṣukūk Market: Case of Malaysia, the UAE, and the KSA

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Abstract

This chapter outlines how ṣukūk is regulated in three key domestic markets. Regulation of ṣukūk markets is at the heart of this discussion of asset-backed ṣukūk and asset-based ṣukūk; however, there has so far been little concrete discussion about the regulations concerning ṣukūk. Ṣukūk regulation refers to the formal regulations which are aimed specifically at offers of ṣukūk to the public, covering the buyers, sellers, and holders of ṣukūk engaging in different ṣukūk activities including issuance, offering, invitation to subscribe, and invitation to purchase. This chapter provides a legal framework for ṣukūk practice and the principal means of issuing ṣukūk to the public in the selected countries.

For the purpose of this chapter, Malaysia, the United Arab Emirates (UAE), and the Kingdom of Saudi Arabia (KSA) have been chosen as case studies. The discussion of ṣukūk regimes in this chapter is presented in this sequence because it begins with the most pioneering ṣukūk market worldwide first and then moves to the following market. Historically, these territories have been the most important locations for ṣukūk issuance and investment. Therefore, understanding regulations of ṣukūk in these countries provides the best illustration of the key ṣukūk practices worldwide.

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Notes

  1. 1.

    Malaysia is a federation consisting of 13 states and three federal territories, founded in 1957.

  2. 2.

    The UAE is a federation of seven emirates, founded in 1971.

  3. 3.

    The KSA was founded in 1932.

  4. 4.

    E Avgouleas, The Mechanics and Regulation of Market Abuse: a Legal and Economic Analysis (Oxford University Press 2005) 172.

  5. 5.

    D Gowland, The Regulation of Financial Markets in the 1990s (Edward Elgar Publishing Limited 1990) 1.

  6. 6.

    I MacNeil, An Introduction to the Law on Financial Investment (2nd edn, Hart Publishing Ltd. 2012) 39.

  7. 7.

    B Rider, C Abrams and M Ashe, Guide to Financial Services Regulation (3rd edn, CCH Editions 1997) 1.

  8. 8.

    I MacNeil, supra note 6, 17, 20.

  9. 9.

    B Grewal, ‘Constraints on Growth in Islamic Finance’ (IFSB 4th Public Lecture on Financial Policy and Stability, Jordan, 2011) 14, 15.

  10. 10.

    B Rider, ‘Legal Aspects of Islamic Asset Securitisation’ in IFSB (ed), Strategies for the Development of Islamic Capital Markets: Infrastructures and Legal Aspects of Islamic Asset Securitisation (IFSB 2011) 50.

  11. 11.

    Ibid. 52.

  12. 12.

    C Goodhart and others, Financial Regulation: Why, How and Where Now? (Routldge 1998) 142.

  13. 13.

    I MacNeil, supra note 6, 32, 33.

  14. 14.

    Ibid. 32.

  15. 15.

    Ibid. 33.

  16. 16.

    Ibid. 34–39.

  17. 17.

    R McCormick, Legal Risk in the Financial Markets (2nd edn, Oxford University Press 2010) 307–308.

  18. 18.

    G Walker, ‘Financial Markets and Exchanges’ in M Blair, G Walker and S Willey (eds), Financial Markets and Exchanges Law (2nd edn, Oxford University Press 2012) 10–11.

  19. 19.

    C Goodhart and others, supra note 12, 191.

  20. 20.

    I MacNeil, supra note 6, 20.

  21. 21.

    C Goodhart and others, supra note 12, 192.

  22. 22.

    F Mishkin and S Eakins, Financial Markets and Institutions (6th edn, Pearson Prentice Hall 2009) 33; C Goodhart and others, supra note 12, 192; E Ferran and C Goodhart (eds), Regulating Financial Services and Markets in the Twenty First Century (Hart Publishing 2001) 8.

  23. 23.

    E Avgouleas, supra note 4, 169.

  24. 24.

    I MacNeil, supra note 6, 31–32.

  25. 25.

    C Goodhart and others, supra note 12, 190.

  26. 26.

    F Fabozzi and F Modigliani, Capital Markets: Institutions and Instruments (2nd edn, Prentic Hall 1996) 28.

  27. 27.

    D Llewellyn, The Economic Rationale for Financial Regulation (Financial Services Authority 1999) 21.

  28. 28.

    B Rider, supra note 10, 50.

  29. 29.

    Ibid. 47.

  30. 30.

    A Mirakhor and N Krichene, ‘The Recent Crisis: Lessons for Islamic Finance’ (IFSB 2dn Public Lecture on Financial Policy and Stability, Kuala Lumpur, 2009) 3, 71.

  31. 31.

    N Thani and A Othman, ‘The Effective of the Legal and Regulatory Framework for Islamic Financial Services’ in IFSB (ed), Islamic Finance: Global Legal Issues and Challenges (IFSB 2008) 3.

  32. 32.

    R Wilson, ‘Sharīʿah Governance for Islamic Financial Instituions’ (2009) 1 ISRA International Journal of Islamic Finance 59, 61.

  33. 33.

    For more discussions about Islamic Financial Services Act 2013, see Z Hasan, ‘An Overview of the Recent Malaysian Islamic Financial Stability Act’ (2013) 8 Journal of International Banking Law and Regulation 297.

  34. 34.

    Labuan, a federal territory in east Malaysia, was declared as an international centre for business and finance in 1990 by the Government of Malaysia. This was accompanied by the establishment of Labuan International Business and Financial Centre (Labuan IBFC). For more information about the launch of Labuan IBFC, see BNM, ‘Speeches and Interviews’ (BNM, 10 March 2009). http://www.bnm.gov.my/index.php?ch=9&pg=15&ac=268. Accessed 6 June 2014.

  35. 35.

    Labuan FSA was established in 1996. According to Section 3 (2) of Labuan Financial Services Authority Act 1996, it aims at achieving the following: (1) promoting Labuan as an international centre for business and financial services; (2) developing national policies and objectives for the development of financial services in Labuan; (3) acting as the central regulatory, supervisory, and enforcement authority of financial services in Labuan.

  36. 36.

    LFX, one of the Bursa Malaysia subsidiaries, was established in 2000. It mainly offers listing and trading facilities for all financial instruments traded in Labuan.

  37. 37.

    SC was established in 1993. According to Section 15 (1) of Securities Commission Act 1993, its functions, among others, include: (1) regulating all matters pertaining to securities and derivatives; (2) regulating takeovers and mergers of companies; (3) maintaining the investors’ confidence in the securities and derivatives markets; (4) licensing and supervising all licensed persons; and (5) promoting and developing securities market in Malaysia. Prior to its establishment, Malaysian capital market was overseen by six public bodies: (1) Capital Issues Committee, Ministry of Finance; (2) Panel on Takeovers and Mergers, Prime Minister’s Department; (3) Foreign Investment Committee, Prime Minister’s Department; (4) Companies Commission of Malaysia; (5) Ministry of International Trade and Industry (MITI); and (6) BNM. See M Omar, M Abduh and S Raditya, Fundamentals of Islamic Money and Capital Markets (John Wiley & Sons 2013) 42.

  38. 38.

    BNM was established in 1959. According to Section 5 (2) of the Central Bank of Malaysia Act 2009, it aims, among others, at achieving the following: (1) formulating monetary policy in Malaysia; (2) issuing currency in Malaysia; (3) regulating and supervising financial institutions which are subject to the BNM’s laws, and (4) promoting a sound financial system. Financial institutions licensed under the Banking and Financial Institutions Act 1989 are required to seek an approval from BNM for the issuance of securities. See SC, Regulatory Requirement, Legal Documentation, Accounting, Auditing and Taxation in the Islamic Capital Market (LexisNesis 2009) 26.

  39. 39.

    Established in 1973, Bursa Malaysia (previously known as Kuala Lumpur Stock Exchange) is an exchange holding company consisting of ten subsidiaries. Bursa Malaysia Securities Bhd and LFX are the relevant financial exchanges for the ṣukūk market in Malaysia. While the former provides and maintains securities exchange under the wider Malaysia regulatory scheme, the latter provides and maintains offshore financial exchange under the Labuan regulatory scheme. See M Omar, M Abduh and S Raditya, supra note 37, 45.

  40. 40.

    This Act comprises 12 Parts accounting for 161 Sections. It provides a comprehensive legal framework for licensing and regulating sharia-compliant financial activities in Labuan. It forms a one-stop reference for conducting Islamic finance services in Labuan.

  41. 41.

    These Rules, which are issued by LFX, comprises eight Chapters.

  42. 42.

    These Guidelines, which are issued by SC, comprise 21 Chapters. These Guidelines are the first of its kind in the world, which was known as Guidelines on the Offering of Islamic Securities, which came into effect on 26 July 2004. Previously, Islamic securities including ṣukūk were subject to the Guidelines on the Offering of Private Debt Securities (PDS) which are equally applicable to conventional securities. This was an obstacle for Malaysian ṣukūk market since the PDS Guidelines recognise only issuance of ṣukūk representing debt obligation such as ijara, BBA, and Murābaḥah (a sale with a mark-up), and not equity-based ṣukūk. Guidelines on Ṣukūk discuss different aspects of ṣukūk in detail and provide a comprehensive guide covering one-off ṣukūk issuance, ṣukūk programme, ringgit currency-denominated ṣukūk, and foreign currency-denominated ṣukūk. The bulk of the Guidelines on Ṣukūk is made up of the provisions fleshing out the details of four main parts: requirements for ṣukūk issuance and trading, approval for ṣukūk issuance and trading, requirements for retail ṣukūk issuance, and trading and approved sharia rulings, principles, and concepts. See A Mutalip, ‘Guidelines on Offering Islamic Securities’ (Azmi & Associates, 2005). http://www.azmilaw.com.my/archives/Article_outside_publications_asian_counsel/Guidelines_on_offering_islamic_securities_%2800124292%29.PDF. Accessed 17 March 2014.

  43. 43.

    These Guidelines, which are issued by SC, comprise four Parts.

  44. 44.

    These Listing Requirements, which are issued by the Main Market of Bursa Malaysia Securities Berhad, comprise 16 Chapters.

  45. 45.

    Paragraph 11.03 of the Guidelines on Ṣukūk says ‘[a]n issuer and its principal adviser must ensure that the issue, offer or invitation to subscribe or purchase ṣukūk has complied with all the relevant laws which govern the proposal, including:

    1. (a)

      the CMSA;

    2. (b)

      the Companies Act 1965; and

    3. (c)

      all other relevant SC guidelines’.

  46. 46.

    This Act comprises 394 Sections.

  47. 47.

    This Act comprises 374 Sections.

  48. 48.

    See generally L Keong, Securities Regulation in Malaysia (Butterworths 1997).

  49. 49.

    Guidelines on Ṣukūk, Paragraphs 3.01–3.02.

  50. 50.

    Ibid., Paragraph 5.01.

  51. 51.

    Ibid. According to Principal Advisor Guidelines, the term principal advisor refers to ‘the corporate finance advisor responsible for making submissions to the SC for corporate proposals’. Principal advisor plays several roles in the process of ṣukūk issuance as provided by Guidelines on Ṣukūk.

  52. 52.

    For more information, see Capital Market Services Act 2007, Section 2 (1).

  53. 53.

    Guidelines on Ṣukūk, Paragraph 2.01.

  54. 54.

    See ibid., Paragraph 5.04. It excludes foreign currency-denominated ṣukūk from the requirement to comply with sharia principles endorsed by SAC.

  55. 55.

    Ibid., Paragraph 2.01.

  56. 56.

    Capital Market Services Act 2007, Section 212 (2).

  57. 57.

    Guidelines on Ṣukūk, Paragraph 10.01. See also Capital Market Services Act 2007, Section 258.

  58. 58.

    Capital Market Services Act 2007, Section 227.

  59. 59.

    Ibid., Section 226.

  60. 60.

    This Division, which entirely focuses on the information to be disclosed in the ṣukūk prospectus, comprises 16 Chapters.

  61. 61.

    Capital Market Services Act 2007, Section 232 (1).

  62. 62.

    See ibid., Section 226 and Section 231 (1).

  63. 63.

    The term ‘retail investors’ means ‘any person who is not a high net-worth individual, a high net-worth entity or is an accredited investor as specified in these Guidelines’. The term accredited investor includes BNM, Labuan bank, takāful operator, and others. See Guidelines on Sales Practices of Unlisted Capital Market Products.

  64. 64.

    Guidelines on Ṣukūk, Paragraph 21.02.

  65. 65.

    Labuan Islamic Financial Services and Securities Act 2010, Section 13 (1).

  66. 66.

    See ibid., Section 13 (5) (b) and Section 13 (6).

  67. 67.

    Ibid., Section 16.

  68. 68.

    Ibid., Sections 16–20.

  69. 69.

    Ibid., Section 2 (1).

  70. 70.

    Ibid.

  71. 71.

    For the definition of sharia principles, see ibid.

  72. 72.

    This Chapter comprises 5 Parts.

  73. 73.

    Main Market Listing Requirements, Chapter 4B, Paragraph 4B.01 (2).

  74. 74.

    Ibid., Paragraph 4B.02. Exempt Regime includes ṣukūk which are excluded offers and excluded issues.

  75. 75.

    Ibid., Paragraph 4B.04.

  76. 76.

    Ibid.

  77. 77.

    Ibid., Paragraph 4B.06. This requirement does not apply to ṣukūk issued by the Government of Malaysia and others.

  78. 78.

    Ibid., Paragraph 4B.07.

  79. 79.

    Ibid., Paragraph 4B.09.

  80. 80.

    Ibid., Paragraphs 4B.10–4B.11.

  81. 81.

    Ibid., Paragraph 4B.15.

  82. 82.

    Ibid., Paragraph 4B.16 (2).

  83. 83.

    Ibid.

  84. 84.

    Ibid., Paragraphs 4B.18–4B.19.

  85. 85.

    For more information, see ibid., Paragraph 4B.22.

  86. 86.

    These Rules comprises 40 Rules.

  87. 87.

    LFX Rules, Chapter 4, Rules 1–5.

  88. 88.

    Ibid., Rules 6–9. In this case, the financial instrument is agreed to be listed on another exchange as the primary exchange.

  89. 89.

    Ibid., Rules 10–13.

  90. 90.

    Ibid., Rule 10. Listing sponsor, as the issuer’s main channel of communication with LFX, is responsible for submission of complete and proper application to LFX.

  91. 91.

    Ibid., Rules 14–19.

  92. 92.

    Ibid., Rule 20.

  93. 93.

    Ibid., Rule 26.

  94. 94.

    Ibid., Rules 27–35.

  95. 95.

    Ibid., Rules 36–40.

  96. 96.

    DIFC is a financial free zone established in Dubai according to Federal Decree No. 35 of 2004 to Establish Financial Free Zone in Dubai. Federal Law No.8 of 2004 Regarding the Financial Free Zones laid the ground for establishing a financial free zone in any Emirate of the UAE. Having its own legal system and courts based on common law system, DIFC is a city within a city which is empowered to create its own laws regarding civil and commercial matters. However, UAE criminal law is still applicable in the DIFC. Article 3 (2) of Federal Law No.8 of 2004 Regarding the Financial Free Zones states: ‘These Zones and Financial Activities shall also be subject to all Federal laws, with the exception of Federal civil and commercial laws’. For more information about the DIFC establishment, see Dubai Law No. 9 of 2004 in Respect of the Dubai International Financial Centre. For more information about DIFC legal system, see A Carballo, ‘The Law of the Dubai International Financial Centre: Common Law Oasis or Mirage Within the UAE?’ (2007) 21 Arab Law Quarterly 91.

  97. 97.

    SCA is a public regulatory authority established in Abu Dhabi according to the Federal Law No. 4 of 2000 Concerning the Emirates Securities and Commodities Authority and Market. According to Article 4 of this Law, its functions and powers include (1) proposing regulations to the Council of Ministers; (2) making certain regulations; (3) forming specialist technical committees to perform a specific work; (4) being in touch with international markets; and (5) performing any acts according to its objectives.

  98. 98.

    Union Law No. 10 of 1980 Concerning the Central Bank, the Monetary System, and Organisation of Banking laid the ground for its establishment. Article 5 of this Law provides the main functions of the Central Bank of the UAE which include (1) issuing and managing the UAE currency; (2) managing the credit policy of the UAE; (3) developing and overseeing the banking system in the UAE; (4) acting as the Government’s banker; (5) providing financial assistance to the Government; (6) maintaining UAE’s gold and currency reserves; and (7) acting as the lender of last resort to banks operating in the UAE.

  99. 99.

    ADX is a stock exchange established in Abu Dhabi according to Local Law No. 3 of 2000.

  100. 100.

    DFM is a stock exchange established in Dubai according to Local Decree No. 14 of 2000.

  101. 101.

    Dubai Law No. 9 of 2004 in respect of the Dubai International Financial Centre laid the ground for the establishment of various bodies within DIFC including DFSA.

  102. 102.

    NASDAQ Dubai is a stock exchange located in DIFC which started its operation in 2005. It is regulated and licensed by the DFSA according to DIFC Law No.1 of 2004 Regulatory Law. For the purpose of DIFC laws and regulations, it refers to an authorised market institution since it is the only one existing in the DIFC jurisdiction.

  103. 103.

    See generally G Mayew, ‘Securities Regulation in the UAE’ (International Financial Law Review October 2010). http://www.iflr.com/Article/2680248/Securities-regulation-in-the-UAE.html. Accessed 8 May 2014.

  104. 104.

    This Decision, which is issued by SCA Board, comprises 28 Articles. Prior to this Decision, ṣukūk activities were governed by Decision No. (93/r) of 2005 Concerning the Listing of Islamic Bonds. This Decision, which is issued by SCA Board, comprises 37 Articles.

  105. 105.

    This Law, which is one of the DFSA Administrated Laws, comprises two Parts.

  106. 106.

    This Law, which is one of the DFSA Administrated Laws, comprises nine Parts.

  107. 107.

    DFSA Rulebook is made up of 15 modules by the Board of Directors of the DFSA according to DIFC Law No.1 of 2004 Regulatory Law.

  108. 108.

    MKT, which is part of DFSA Rulebook, comprises ten Chapters.

  109. 109.

    IFR, which is part of DFSA Rulebook, comprises eight Chapters.

  110. 110.

    NASDAQ Dubai has issued four Rulebooks comprising NASDAQ Dubai Business Rules which are approved by DFSA. Rulebook 3 is ADS which comprises five Standards.

  111. 111.

    Decision No. 16 of 2014 Concerning the Regulation of Ṣukūk, Article 1.

  112. 112.

    Ibid., Article 2 (2).

  113. 113.

    Ibid.

  114. 114.

    Ibid., Article 2 (3).

  115. 115.

    Ibid., Article 3 (1).

  116. 116.

    Ibid., Article 3 (2).

  117. 117.

    Ibid., Article 4.

  118. 118.

    Ibid., Article 5.

  119. 119.

    Ibid., Article 6.

  120. 120.

    Ibid., Article 11.

  121. 121.

    DIFC Law No.13 of 2004 Law Regulating Islamic Financial Business, Article 9 (1).

  122. 122.

    DFSA Rulebook: Islamic Financial Rules, Rule 7.1.1.

  123. 123.

    Ibid.

  124. 124.

    DFSA Rulebook: Glossary Module (GLO).

  125. 125.

    This Part comprises 4 Chapters.

  126. 126.

    This Chapter comprises 13 Rules.

  127. 127.

    Article 13 (2) of the DIFC Law No. 1 of 2012 Markets Law defines an exempt offeror as ‘a recognised government or other person included in the list of Exempt Offerors maintained by the DFSA in the Rules’.

  128. 128.

    Ibid., Article 13 (1).

  129. 129.

    Ibid., Article 12.

  130. 130.

    Ibid., Article 14 (1).

  131. 131.

    Ibid., Article 14 (2) (a).

  132. 132.

    Ibid., Article 14 (3).

  133. 133.

    Ibid., Article 15.

  134. 134.

    Decision No. 16 of 2014 Concerning the Regulation of Ṣukūk, Article 3 (2).

  135. 135.

    Ibid., Article 4 (2).

  136. 136.

    Ibid., Article 7.

  137. 137.

    Ibid., Article 8.

  138. 138.

    Ibid., Article 17.

  139. 139.

    Ibid., Article 18.

  140. 140.

    Ibid., Articles 19–23.

  141. 141.

    Ibid., Articles 24–28.

  142. 142.

    See Article 29 of the DIFC Law No. 1 of 2012 Markets Law relating to maintaining an official list of securities. Guidance 6 under Chapter 9 of the MKT states: ‘The DFSA will maintain the List on the DFSA website’.

  143. 143.

    DIFC Law No. 1 of 2012 Markets Law, Article 33 (1).

  144. 144.

    See ibid., Article 33 (3) and Article 33 (5).

  145. 145.

    This Chapter comprises eight Rules.

  146. 146.

    DFSA Rulebook: Markets Rules, Rule 9.3.

  147. 147.

    See DFSA Rulebook: Islamic Financial Rules, Rules 7.3–7.4.

  148. 148.

    CMA is a government organisation established by Capital Market Law. This Law, which was issued by Royal Decree No. (M/30) dated 2/6/1424 H. (2 July 2003), comprises ten Chapters. Prior to 2003, capital market activities were regulated by two authorities: Ministry of Commerce and SAMA, the central bank. For more information, see J Beach, ‘The Saudi Arabian Capital Market Law: A Practical Study of the Creation of Law in Developing Markets’ (2005) 41 Stanford Journal of International Law 307, 311.

  149. 149.

    Established as a joint stock company in 2007, Saudi Stock Exchange constitutes the sole market for the trading in securities in Saudi Arabia. Chapter 3 of the Capital Market Law laid the grounds for its establishment.

  150. 150.

    These Regulations comprise six Parts accounting for 19 Articles.

  151. 151.

    These Rules comprise nine Parts accounting for 53 Articles.

  152. 152.

    Although it is called Listing Rules, it sets out some requirements regarding the public offer. Article 2 (a) of the Listing Rules states: ‘The purpose of these Rules is to regulate the public offering, registration and admission to listing of securities in the Kingdom’.

  153. 153.

    Offers of Securities Regulations, Article 1.

  154. 154.

    Ibid., Article 6.

  155. 155.

    Ibid., Article 7.

  156. 156.

    Ibid., Article 8.

  157. 157.

    Listing Rules, Article 11 (a).

  158. 158.

    Ibid., Articles 2–4.

  159. 159.

    Offers of Securities Regulations, Article 9 (a).

  160. 160.

    Ibid., Article 9 (b).

  161. 161.

    Ibid., Article 10.

  162. 162.

    However, less than this amount is allowed when the ṣukūk total value does not exceed SAR 5 million or an equivalent amount. See ibid., Article 11 (b).

  163. 163.

    Ibid., Article 11 (a).

  164. 164.

    Listing Rules, Article 22 (a).

  165. 165.

    Ibid., Article 23.

  166. 166.

    Ibid., Annex 5.

  167. 167.

    Ibid., Article 2 (b).

  168. 168.

    Ibid., Article 5 (a).

  169. 169.

    Ibid., Article 5 (b).

  170. 170.

    Ibid., Article 5 (c).

  171. 171.

    Ibid., Articles 6–10.

  172. 172.

    Ibid., Article 11.

  173. 173.

    Ibid., Article 12.

  174. 174.

    Ibid., Article 19.

  175. 175.

    Ibid., Article 35.

  176. 176.

    Ibid., Articles 36–39.

  177. 177.

    Ibid., Articles 40–52.

  178. 178.

    A Haynes, ‘New Sources of Finance’ (2011) 2 Company Lawyer 33.

  179. 179.

    B Rider, supra note 10, 49.

  180. 180.

    Ibid.

  181. 181.

    I Shihata, ‘The Role of Law in Business Development’ (1996) 20 Fordham International Law Journal 1577, 1782.

  182. 182.

    IFSB, ‘Appendix: Case Studies’ in IFSB (ed), Strategies for the Development of Islamic Capital Markets (IFSB 2011) 247.

  183. 183.

    J Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge University Press 2015) 293.

  184. 184.

    Ibid.

  185. 185.

    Central Bank of Malaysia Act 2009, Article 60.

  186. 186.

    For more information about the development of the IFSI in Malaysia, see M Laldin, ‘Islamic Financial System: The Malaysian Experience and the Way Forward’ (2008) 24 Humanomics 217.

  187. 187.

    IFSB, supra note 182, 245.

  188. 188.

    E Chand and Wam, ‘Dubai-World Capital of Islamic Economy: Initiative Unveiled’ (Emirates 24/7 News, 5 October 2013). http://www.emirates247.com/news/dubai-world-capital-of-islamic-economy-initiative-unveiled-2013-10-05-1.523457. Accessed 16 August 2015.

  189. 189.

    See DFSA, ‘The DFSA’s Approach to Regulating Islamic Finance in the DIFC’ (DFSA, undated). http://www.dfsa.ae/Documents/Islamic%20finance%20docs%20for%20upload/DFSA’s%20approach%20to%20regulating%20Islamic%20finance.pdf. Accessed 17 August 2015.

  190. 190.

    M Parker, ‘Islamic Finance is Growing at a Phenomenal Pace: Al-Jasser’ (Arab News, 30 November 2009). http://www.arabnews.com/node/330520. Accessed 31 July 2015.

  191. 191.

    A Al Elsheikh and J Tanega, ‘Sukuk Structure and its Regulatory Environment in the Kingdom of Saudi Arabia’ (2011) Law and Financial Markets Review 183,190.

  192. 192.

    Ibid.

  193. 193.

    B Rider, supra note 10, 193.

  194. 194.

    SC, Regulatory Requirement, Legal Documentation, Accounting, Auditing and Taxation in the Islamic Capital Market 22.

  195. 195.

    Recommendation 75 of CMP1 says ‘[t]he government and government-related entities should consider issuing Islamic debt securities in the global market’. See SC, Capital Market Masterplan (SC 2001) 183.

  196. 196.

    See SC, Capital Market Masterplan 2 (SC 2011) 55.

  197. 197.

    SC, Regulatory Requirement, Legal Documentation, Accounting, Auditing and Taxation in the Islamic Capital Market 26.

  198. 198.

    BNM, Financial Sector Masterplan (BNM 2001) 81.

  199. 199.

    BNM, Financial Sector Blueprint 2011–2020 (BNM 2011) 110.

  200. 200.

    BNM, ‘Financial Stability and Payment Systems Report 2010’ (BNM, 2011) 53. http://www.bnm.gov.my/files/publication/fsps/en/2010/fs2010_book.pdf. Accessed 30 January 2014.

  201. 201.

    Bursa Malaysia, ‘Shariah Committee’ (Bursa Malaysia, 2014). http://www.bursamalaysia.com/market/islamic-markets/shariah-committee/. Accessed 17 February 2014.

  202. 202.

    BNM, ‘Financial Stability and Payment Systems Report 2012’ (BNM, 2013) 79. http://www.bnm.gov.my/files/publication/fsps/en/2012/fs2012_book.pdf. Accessed 29 January 2014.

  203. 203.

    B Rider, supra note 10, 197.

  204. 204.

    For more information about the specific role of these institutions, see ibid. 198–199.

  205. 205.

    For more information, see J Colon, ‘Choice of Law and Islamic Finance’ (2011) 46 Texas International Law Journal 421.

  206. 206.

    See DFM Fatwa and the Sharia Supervisory Board, ‘DFM Standard for Issuing, Acquiring and Trading Ṣukūk’ (DFM, 2014). http://www.dfm.ae/documents/sukuk/DFMSukukStandardFinalEn3032014.pdf. Accessed 28 September 2015.

  207. 207.

    DIFC, Clifford Chance and Amani Consulting, Dubai International Financial Centre: Sukuk Guidebook (DIFC 2009).

  208. 208.

    See DIEDC, ‘DIEDC’ (DIEDC, undated). http://www.iedcdubai.ae/index. Accessed 18 August 2015.

  209. 209.

    See ibid.

  210. 210.

    T Fleihan, ‘UAE top Arab Nation and Second Globally in 73-Country Islamic Economy Indicator’ (GIES, 28 September 2015) accessed 29 September 2015.

  211. 211.

    DIEDC, ‘Dubai Global Sukuk Centre’ (DIEDC, undated). http://www.iedcdubai.ae/initiatives/dubai_global_sukuk_centre. Accessed 18 August 2015.

  212. 212.

    Ibid.

  213. 213.

    See J Colon, supra note 205, 422.

  214. 214.

    Saudi Hollandi Capital, Sukuk Market in Saudi Arabia (Saudi Hollandi Capital 2013) 12.

  215. 215.

    V Rabindranath and P Gupta, An Overview – Sukuk Market in Saudi Arabia (Watheeqa Capital Company 2010) 1.

  216. 216.

    Ibid.

  217. 217.

    Ibid. 2. See also D Elshurafa, ‘Project Finance and Sukuk in Saudi Arabia: An Ongoing Project?’ Butterworths Journal of International Banking and Financial Law 99.

  218. 218.

    V Rabindranath and P Gupta, supra note 215, 3.

  219. 219.

    Ibid.

  220. 220.

    See A Hudson, Securities Law (2nd edn, Sweet & Maxwell 2013) 226.

  221. 221.

    P Latimer, ‘How to Ensure Disclosure of Information in Securities Markets Post-GFC’ (2013) 42 Common Law World Review 111, 136.

  222. 222.

    LFX Rules, Chapter 4, Rules 27–35.

  223. 223.

    For more information about this Law, see J Beach, supra note 148.

  224. 224.

    Main Market Listing Requirements, Chapter 4B, Paragraph 4B.10.

  225. 225.

    Guidelines on Prospectus, Division 2 (Debenture and Ṣukūk).

  226. 226.

    See Decision No. 16 of 2014 Concerning the Regulation of Ṣukūk, Articles 17–18.

  227. 227.

    See Decision No (93/r) of 2005 Concerning the Listing of Islamic Bonds, Article 10.

  228. 228.

    See DFSA Rulebook: Islamic Financial Rules, Rule 7.2.3 (c).

  229. 229.

    See ibid., Rule 7.3.

  230. 230.

    For specific discussion on sharia as a constitutional source, see L Al-Rimawi, Raising Capital on Arab Equity Markets: Legal and Juridical Aspects of Arab Securities Regulation (Kluwer Law International 2012) 101–133.

  231. 231.

    J Ercanbrack, supra note 183, 1.

  232. 232.

    B Rider, supra note 10, 53.

  233. 233.

    Federal Constitution 1957, Article 3 (1).

  234. 234.

    Z Hasan, ‘The Position of Al-Quran As a Source of Law Under the Malaysian Legal System’ (Zulkiflihasan, undated) 7. https://zulkiflihasan.files.wordpress.com/2008/06/jurnal-quran.pdf. Accessed 23 August 2015.

  235. 235.

    Federal Constitution 1957, Article 4 (1).

  236. 236.

    For more discussion, see S Ahmad and R Rajasingham, ‘IDE Asian Law Series No. 4: The Malaysian Legal System, Legal Practice and Legal Education’ (Institute of Developing Economies, 2001) 23. http://www.ide-jetro.jp/English/Publish/Download/Als/pdf/04.pdf. Accessed 23 August 2015.

  237. 237.

    Federal Constitution 1957, Articles 74 (1) and 74 (2).

  238. 238.

    Ibid., Article 74 (2).

  239. 239.

    Ibid., Ninth Schedule, List II–State List.

  240. 240.

    Ibid., Ninth Schedue, List I–Federal List.

  241. 241.

    Ibid., Articles 121 (1) and 121 (1A).

  242. 242.

    Ibid., Article 121 (1A).

  243. 243.

    Ibid., Ninth Schedule, List II–State List.

  244. 244.

    For more discussion of these cases, see Z Hasan and M Asutay, ‘An Analysis of the Courts’ Decisions on Islamic Finance Disputes’ (2011) 3 ISRA International Journal of Islamic Finance 41.

  245. 245.

    Kuala Lumpur High Court, Unreported Civil Suit No. S3-22-101-91.

  246. 246.

    M Ibrahim, ‘The Regulatory Framework and Legal Aspects of Islamic Banking and Finance in Malaysia’ in M Bakar and E Ali (eds), Essential Readings in Islamic Finance (CERT Publications 2008) 272.

  247. 247.

    Ibid. 277.

  248. 248.

    Ibid. 278.

  249. 249.

    Central Bank of Malaysia Act 2009, Article 56.

  250. 250.

    Ibid., Article 51.

  251. 251.

    Islamic Financial Services Act 2013, Article 30 (1).

  252. 252.

    Sharia Governance Framework for Islamic Financial Institutions, Paragraph 3.1.

  253. 253.

    Guidelines on Ṣukūk, Chapters 5 and 6.

  254. 254.

    Ibid., Paragraph 5.01.

  255. 255.

    Ibid., Paragraph 5.01 (b).

  256. 256.

    Ibid., Chapters 7 and 8.

  257. 257.

    Ibid., Paragraph 7.01.

  258. 258.

    Ibid., Paragraph 7.05.

  259. 259.

    Ibid., Appendix 1.

  260. 260.

    Labuan Islamic Financial and Securities Act 2010, Part III, Chapter 1, Section 13, Paragraph 1 (b) and Subsection 9.

  261. 261.

    UAE Constitution, Article 7.

  262. 262.

    J Ercanbrack, supra note 183, 264.

  263. 263.

    UAE Civil Transactions Code, Article 1.

  264. 264.

    Ibid., Article 2.

  265. 265.

    The discussion of the UAE judicial system needs careful consideration because of the presence of four judicial systems in the UAE. These are the Federal judicial system, Abu Dhabi judicial system, Dubai judicial system, Ras al-Khaimah judicial system, and the DIFC judicial system. For more discussion on the UAE judicial system, see B Al-Muhairi, ‘The Development of the UAE Legal System and Unification with the Judicial System’ (1996) 11 Arab Law Quarterly 116. For more discussion on the DIFS judicial system, see A Campbell and E Campbell, ‘The Courts of the Dubai International Financial Centre’ (2012) 1 Journal of International Banking Law and Regulation 12.

  266. 266.

    Federal Law No. 6 of 1985 regarding Islamic Banks, Financial Institutions and Investment Companies, Article 6.

  267. 267.

    H Haider, ‘Shariah Authority on Cards’ (Khaleej Times, 22 March 2015). http://www.khaleejtimes.com/article/20150322/ARTICLE/303229876/1037. Accessed 28 August 2015.

  268. 268.

    Federal Law No. 14 of 2018 Regarding the Central Bank and Organization of Financial Institutions and Activities, Article 17.

  269. 269.

    Ibid, Article 79.

  270. 270.

    Decision No. 4 of 2010 Takaful Insurance Regulations, Article 17.

  271. 271.

    Decision No. 16 of 2014 Concerning the Regulation of Ṣukūk, Article 1 and 11.

  272. 272.

    Latham & Watkins, ‘Doing Business in Saudi Arabia’ (Latham & Watkins, May 2010) 2. http://www.lw.com/upload/pubContent/_pdf/pub3507_1.pdf. Accessed 28 August 2010.

  273. 273.

    KSA Constitution 1992, Article 48.

  274. 274.

    Latham & Watkins, supra note 270, 2.

  275. 275.

    Ibid.

  276. 276.

    See B Al Hamidani, ‘The New Court System in Saudi Arabia’ (Al Tamimi & Co., May 2014). http://www.tamimi.com/en/magazine/law-update/section-8/may-7/the-new-court-system-in-saudi-arabia.html. Accessed 28 August 2015.

  277. 277.

    Latham & Watkins, supra note 270, 2.

  278. 278.

    Dhabaan & Partners, ‘Report to Cambridge Regional College on Legal Issues Around Operating in Saudi Arabia’ (Cambridge Regional College, 8 November 2013) 3. http://www.camre.ac.uk/wp-content/uploads/2013/12/Eversheds-advice-on-Saudi-Arabia.pdf. Accessed 28 August 2015.

  279. 279.

    Ibid.

  280. 280.

    Ibid. 3–4.

  281. 281.

    A Al Elsheikh and J Tanega, supra note 191, 195–196.

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    Salim Al-Ali

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Al-Ali, S. (2019). Regulation of the Ṣukūk Market: Case of Malaysia, the UAE, and the KSA. In: Raising Capital on Ṣukūk Markets. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-14536-1_7

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