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Islamic capital markets regulation

Islamic capital markets regulation. Peter Casey Director, Policy & Head of Islamic Finance 19 May 2009. IOSCO Core Principles provide the norm Analysis of application to Islamic finance published September 2008 Followed earlier (2004) report No major issues of compatibility

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Islamic capital markets regulation

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  1. Islamic capital markets regulation Peter Casey Director, Policy & Head of Islamic Finance 19 May 2009

  2. IOSCO Core Principles provide the norm Analysis of application to Islamic finance published September 2008 Followed earlier (2004) report No major issues of compatibility For this talk will focus on capital markets Securities regulation and Islamic finance

  3. Equities Funds Sukuk Few exotic products – though fertile minds are working The key products

  4. Issues are underlying activities … … and receipt/payment of interest Few issues – unless exchange chooses to “tag” securities Equities

  5. Tend to be long-only Property is popular (hence liquidity issues) Some exploration of other strategies, but limited acceptance of contractual structures Shari’a screens, often operated by external agencies Issues of Shari’a governance Funds

  6. In principle (at least) 14 base contracts In practice many fewer used But structures may involve several contracts Cannot identify economic effect from “leading” contract Controversy over permitted features Sukuk

  7. Shari’a governance (and competence) Disclosure, and the alternatives Issues for regulators

  8. Affects funds, intermediaries and issuers To call a product Islamic is an implied representation Three broad approaches: Not our business Shari’a systems Regulatory standards and rulings For sukuk, how long must governance last? Approaches could differ in wholesale and retail markets Shari’a governance

  9. For regulators, key issue is understanding product structure and risks May mirror a conventional product, but may not Also issue of Shari’a disclosure Product disclosure – initial and ongoing

  10. Mainly affects intermediaries Disclosure still central … but with intelligibility Disclosure, suitability and product regulation The sales process

  11. New fund structures New sukuk structures Repos, swaps, options etc Achieving active trading Challenges for the future

  12. Dubai Financial Services Authority www.dfsa.ae info@dfsa.ae +971 4 362 1500

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