By Onu Okorie
The Securities and Exchange Commission SEC has released new rules on Shariah Advisory Services for non-interest capital market products and services.
This was disclosed in a statement made available to the media yesterday in Abuja.
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 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.
“An individual eligible to provide Shariah Advisory services under these rules shall satisfy the following requirements: Possession of a minimum of a Bachelor’s degree in Shariah, which includes study in Usul Fiqh (principles of Islamic jurisprudence) or Fiqh Muamalat (Islamic transaction/commercial law) or a person with vast knowledge in Usul Fiqh (principles of Islamic jurisprudence) or FiqhMuamalat (Islamic transaction/commercial law) acquired through Islamic system of education: Ability to read and write in Arabic and English Language respectively and Possession of basic knowledge of business or finance particularly in Islamic finance and capital market.
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.
Other roles and responsibilities are: Providing a periodic report to the trustees certifying whether Sukuk proceeds, Islamic fund or any other Non-Interest Capital Market products have been managed/administered in accordance with Shariah principles and rules; Ensuring that the applicable Shariah principles and any relevant resolutions and rulings endorsed are complied with; Applying ijtihad (where applicable) to ensure all aspects of the Non-Interest Capital Market products comply with Shariah principles; and accountability for the quality, accuracy and soundness of his own decision or advice.
The Rule also places some restrictions as a Shariah adviser cannot accept any appointment in more than one registered Islamic Fund Management Company/Fund Management company offering Islamic products provided that the Shariah Adviser could serve in multiple Fund Management Companies with the consent of the Fund Managers, Trustees, and prior approval of the SEC.
Also, a Shariah Adviser shall immediately disclose to the Commission, Issuing House or Fund Manager any circumstances that may affect his ability to meet any of the requirements of the rule.
Registered Shariah Advisers shall be exempted from appointing compliance officers as required under the Commission’s Rules and Regulation on Appointment of Compliance Officers.
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.
“These developments coupled with the necessity of shariah services for the market affirms the critical need for a framework/guideline to set a minimum standard for persons (corporate or individual) seeking to provide shariah advisory services for Non-Interest Capital Market activities.
“The guideline is essential for the development of this nascent sector, as it will promote transparency and confidence, whilst creating a level playing field for all participants in the market.