Securities Commission revises Guidelines on Islamic Capital Market Products and Services

The Securities Commission Malaysia (“SC”) issued a set of revised Guidelines on Islamic Capital Market Products and Services (“Guidelines”) on 8 February 2024 that took effect immediately.
The main amendments to the Guidelines are highlighted below.
New definition
A new definition of “ICN” which refers to “Islamic convertible note” has been included in paragraph 3.01 of the Guidelines for clarity. Consequent thereto, references in the Guidelines to “Islamic convertible note” are replaced by “ICN”.
Withdrawal of registration of Shariah adviser
Paragraph 9.06 of the Guidelines has been amended to prescribe the method of submission for withdrawal of registration wherein the withdrawal of registration of a Shariah adviser may be effected by the Shariah adviser submitting in writing the relevant notice of withdrawal as specified in Appendix 4A of the Guidelines.
Appendix 4A comprises two forms of withdrawal – Forms 4(a) and 4(b) which are to be submitted by an individual Shariah adviser and a corporate Shariah adviser respectively.
Replacement of references to clients’ assets to clients’ monies
References to “clients’ assets” in paragraphs 15.03 and 15.04 of the Guidelines have been replaced by references to “clients’ monies”.
The Guidance note in paragraph 15.03 has been deleted in consequence of the replacement of the phrase “clients’ assets” with “clients’ monies”.
Placement of clients’ monies for settlement of non-ringgit transactions
The requirement for a fund management company under paragraph 15.04 of the Guidelines to place clients’ monies received or managed in a place outside Malaysia into a non-interest bearing account maintained outside Malaysia, subject to approval from the Shariah adviser, has been extended to include clients’ monies received or managed for the purpose of settling a non-ringgit transaction.
Exemptions relating to Recognized Market Operator providing e-services
A new paragraph 23.08A clarifies that the requirement in paragraph 23.08 of the Guidelines for a recognized market operator (“RMO”) who offers an Islamic capital market product on or through a recognized market to appoint a Shariah adviser does not apply to a RMO who is an e-services platform operator (as defined in the Guidelines on Recognized Markets).
Likewise, a new paragraph 38.00 clarifies that the requirements in Chapter 38 of the Guidelines relating to the offering of Islamic capital market products on or through a recognized market does not apply to a RMO providing e-services on or through its platform.
Compliance officer
Paragraph 24.02 of the Guidelines now provides that where an issuer is required to appoint a compliance officer, the issuer must ensure that the compliance officer appointed has basic knowledge of Shariah laws and principles. The newly inserted phrase (as underscored above) provides clarity that the requirement under paragraph 24.02 only applies to issuers with the obligation to appoint a compliance officer.
Relocation of provision
The Guidance to paragraph 30.04 which, inter alia, permits a fund management company to undertake securities lending involving foreign securities and repurchase transaction on behalf of its Islamic unit trust fund has been relocated as a new paragraph 30.04A of the Guidelines.
Apart from clarifying the drafting of several provisions of the Guidelines, the revisions provide clarity on certain requirements set out in the Guidelines. First, they establish the procedure for the withdrawal of registration by a Shariah adviser. Second, the revisions clarify that certain provisions of the Guidelines which apply to RMOs do not apply to an RMO which is an e-services platform operator. Third, the revisions make clear that the requirement, for an issuer to appoint a compliance officer with basic knowledge of Shariah laws and principles only applies to issuers with the obligation to appoint a compliance officer.
Alert by Sharifah Shafika Alsagoff (Partner) of the Islamic Finance Practice and Siti Ayenaa Binti Mohd Anis (Associate) of the Corporate Practice of Skrine.

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