The Theory and Practice of Profit Sharing Investment
Foundations of Islamic Finance series
Edited by Mohamed Ariff, Munawar Iqbal and Shamsher Mohamad
Chapter 6: Regulatory Lessons on Sukuk Financial Products, an Opinion
Peter Casey 6.1 INTRODUCTION In this chapter, I consider the regulatory issues on sukuk securities from the point of my view of essentially secular financial services regulation. That is, I do not consider the question of what is, or is not, compliant with shari’ah, though I shall necessarily consider issues of shari’ah governance. This partly reflects my own background, but it also reflects the fact that the sukuk market is an international one, despite my location in Dubai as the regulator. Sukuk are originated, bought and listed in many countries of the world, including some (like the United States) where Muslims are a relatively small percentage of the population. In many such countries, regulators for constitutional, political or practical reasons must approach sukuk from an essentially secular standpoint, and this chapter sets out some of the issues they will face. Questions relating to shari’ah permissibility are considered in other chapters. In dealing with the regulatory issues, I shall consider sukuk both as capital market instruments raising market conduct issues which bear on investor protection, and as instruments which may be held (or issued) by financial institutions, raising issues of their treatment for capital adequacy purposes. I shall consider first the sukuk market as it currently exists, and then possible developments of it. I shall concentrate on the corporate, rather than the sovereign, market, since that is where the main regulatory issues lie, but shall include within it the various government-related (but non-sovereign) issuers. I shall deal only minimally with the...
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