SEC exposes new rule on Shariah advisory services 

The Securities and Exchange Commission has exposed new rules on Shariah Advisory Services for non-interest capital market products and services.

According to the SEC, Shariah governance is crucial considering that compliance with Shariah rules and principles is important in Non-interest Capital Market operations/transactions.

“The provision of the rules is in line with local and international best practices. The regulatory organization in the Nigerian Financial System such as CBN, NAICOM had issued such guidelines to provide clear and good Shariah governance in their respective sectors.

“Making the Shariah Advisory service a registrable function in the market will assist in effective implementation of the proposed consolidation of the Shariah governance rules and will also be an additional source of revenue to the Commission” the Commission stated.

The Commission stated that the Non-interest Capital Market activities in recent times are exponentially increasing as the market is witnessing the entrance of more asset managers, emergence of i-REIT, listing of sovereign Sukuk on the Exchanges, issuance of corporate Sukuk, emergence of shariah advisory function etc. 

Going by the Rule, an issuer or fund manager with the consent of the trustee (where applicable) shall appoint a Shariah Adviser to provide Shariah Advisory services for Shariah products, issuances and schemes.

A capital market operator seeking to provide Shariah compliant products and services shall appoint a registered Shariah Adviser for the firm and notify the Commission of such appointment within five (5) business days of the appointment.

The rule stipulates that the SEC may register a Shariah Adviser or renew the registration of a registered Shariah Adviser subject to the applicant satisfying some criteria.

On experience, the applicant is expected to: Have at least two years of relevant experience in Islamic finance; or have at least one year of relevant experience in Islamic finance and have attended at least five relevant Islamic finance courses/workshops.

The Rule also states that the roles and responsibilities of a Shariah adviser shall include: Advising on all aspects of the Non-Interest Capital Market Products and Services including documentation and structuring;

Issuing Shariah certification which outlines the basis and rationale of the structure and mechanism, the applicable Shariah principles used and relevant Shariah matters relating to the documentation of the Non-Interest Capital Market Products and Services; Providing Shariah expertise/guidance on all matters, particularly on investment instruments and reviewing compliance reports of the Shariah product’s proceeds utilization (where applicable) to ensure that investment activities are Shariah compliant.

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