The Securities Commission Malaysia issues Consolidated Guidelines on Islamic Capital Market Products and Services

The Securities Commission Malaysia (‘SC’) issued new Guidelines on Islamic Capital Market Products and Services (‘ICMPS Guidelines’) that took effect on 28 November 2022 with the exception of Chapter 341 relating to listed Real Estate Investment Trusts and Exchange-Traded Funds (which is effective from 3 April 2023) and paragraph 14.01(d)2 (which is effective from 1 January 2023).3
 
According to the SC, the ICMPS Guidelines is one of its initiatives to further enhance the Shariah governance framework for the Islamic capital market and will henceforth be the central source of reference on all types of offerings of Islamic Capital Market (‘ICM’) products and services for sophisticated and retail investors.
 
The ICMPS Guidelines apply to (a) Shariah advisers or persons intending to register as a Shariah Adviser; (b) Islamic fund management companies; (c) fund management companies that carry on Islamic fund management business under an Islamic ‘window’; (d) issuers seeking to make available, issue or offer Islamic capital market products; (e) Registered Corporations4 undertaking venture capital or private equity activity; and (d) recognised market operators seeking to facilitate the making available, issuance or offering of an Islamic capital market product through its platform.
 
The ICMPS Guidelines consolidate all Shariah requirements previously set out in various guidelines issued by the SC. The ICMPS Guidelines are divided into two main parts, Part A which sets out the requirements in relation to the carrying out of an Islamic capital market activity, and Part B sets out the additional requirements to be complied with for the purposes of making available, offering or issuing an Islamic capital market product.
 
Part A, inter alia, sets out the requirements relating to a Shariah Adviser and the requirements relating to Islamic fund management.
 
Part B sets out the general requirements relating to ICM products and the additional requirements applicable to specific ICM products, namely: 
  • Sukuk, Islamic convertible notes and Islamic structured products;
  • Islamic collective investment schemes, i.e. Islamic unit trust fund, Islamic exchange traded fund, Islamic wholesale fund, Islamic real estate investment trust, Islamic collective investment scheme with waqf feature and Islamic business trust; and
  • Other ICM products, i.e. Islamic private retirement scheme, Islamic venture capital and private equity and ICM products offered through a recognised market operator5
The ICMPS Guidelines which took effect on 28 November 2022 must be read together with the relevant provisions in the securities laws and the relevant guidelines issued by SC including: 
  • Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework;
  • Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors;
  • Guidelines on Real Estate Investment Trusts;
  • Guidelines on Listed Real Estate Investment Trusts;
  • Guidelines on Exchange-Traded Funds;
  • Guidelines on Unit Trust Funds;
  • Guidelines on the Registration of Venture Capital and Private Equity Corporations and Management Corporations;
  • Guidelines on Recognized Markets;
  • Guidelines on Compliance Function for Fund Management Companies;
  • Guidelines on Private Retirement Schemes;
  • Guidelines on the Registration and Conduct of Capital Market Services Providers;
  • Business Trusts Guidelines; and
  • Licensing Handbook.6 
The Guidelines for Shariah Advisers and the Guidelines on Islamic Fund Management will be replaced by the ICMPS Guidelines.
 
The ICMPS Guidelines also introduce a new chapter (Chapter 34) dedicated to waqf and extends the Waqf-Featured Fund Framework (‘WQ-FF Framework’) to include Islamic Real Estate Investment Trusts and Islamic Exchange Traded Funds that are listed on Bursa Malaysia. The WQ-FF Framework has hitherto applied only to unit trust funds under the Guidelines on Unit Trust Funds and wholesale funds under the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework.7
 
A set of Frequently Asked Questions issued by the SC on the on the ICMPS Guidelines can be accessed here.
 
Alert by Sharifah Shafika Alsagoff (Partner) and Hafidah Aman Hashim (Partner) of the Islamic Finance Practice of Skrine.
 
 
 

1 Chapter 34 of the ICMPS Guidelines sets out the requirements for Islamic Collective Investment Schemes with Waqf feature. Waqf is an Islamic endowment typically linked with social development and public good objectives.
2 Paragraph 14.01(d) of the ICMPS Guidelines requires a fund management company to ensure that its compliance officer attends two courses on Islamic finance or Islamic capital market annually.
3 See footnote 1 of the ICMPS Guidelines.
4 Registered corporations are corporations which are registered under the Guidelines on the Registration of Venture Capital and Private Equity Corporations and Management Corporations.
5 A ‘recognised market operator’ refers to an operator of an equity crowdfunding platform, peer-to-peer financing platform, e-services platform, property crowdfunding platform or a digital asset exchange which is registered by the SC under section 34 of the Capital Market and Services Act 2007.
6 The Licensing Handbook and the guidelines mentioned in this paragraph (other than the Guidelines on the Registration and Conduct of Capital Market Services Providers and the Business Trusts Guidelines) were amended with effect from 28 November 2022 to reflect changes consequent upon the issuance of the ICMPS Guidelines.
7 Our alert on the introduction of the framework for Islamic funds with waqf features can be read here.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.