MFSA issues notes on Shariah compliant funds
On the 24th March 2010, the MFSA published a Guidance note for Shariah Compliant Funds. This Guidance Note explains how the legal and regulatory framework established under the Investment Services Act would apply to Shariah-compliant funds established under Maltese law.
Malta’s principles-based regulatory regime lays emphasis on the disclosure of all information that the investor needs to know before taking the investment decision and on the transparency of investment management process. As a result of this one can find a high degree of freedom on the choice of investment strategies and asset allocation policies adopted by investment funds, subject to conditions that vary according to the level of experience and investment expertise of the target investor.
Therefore, irrespective of whether set up as Professional Investor Funds, UCITS or non-UCITS Retail Funds, Shariah Funds may be regulated in the same manner as non-Shariah Funds. Furthermore, the level of disclosure and the applicable conditions would be the same as those that are applicable to the respective category of retail or professional funds. The Guidance Note therefore requires that all funds presenting themselves as Shariah compliant disclose all the relevant details in this respect in the fund prospectus or offering document as well as in their financial statements as part of their ongoing obligations.
The role of the Shariah Advisory Board in relation to that of the fund manager is also explained in the Guidance note. While the role of the Advisory Board is to ensure that the financial soundness of the manager’s decisions is not conditioned by non-financial considerations, it is however also the manager’s responsibility to ensure that the fund does satisfy the relevant Shariah principles and requirements as disclosed in the offering document.
Reference to the Guidance Note may be made from the MFSA website www.mfsa.com.mt.