SEC Unveils New Rules On Shariah Services

The Securities and Exchange Commission, (SEC) has moved to justify its new regulations on Shariah Advisory Services for non-interest capital market products and services.

The Commission in a statement, yesterday in Abuja explained that Shariah governance “is crucial considering that compliance with Shariah rules and principles is important in Non-interest Capital Market operations/transactions”.

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.

Justifying the rule, SEC stated that 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 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.