Cos and IFIs: Names on ATL a must for appointing Shariah board members: SECP

ISLAMABAD: The Shariah-compliant companies and Islamic Financial Institutions have been barred from appointing members of the Shariah supervisory board, whose names are not appearing on the Federal Board of Revenue’s Active Taxpayers List.

This condition has been mentioned in the draft of the Shariah Governance Regulations, 2023 issued by the Securities and Exchange Commission of Pakistan (SECP).

According to the new regulations, the SECP has imposed restrictions on such Islamic Financial Institutions from appointing persons as members of the Shariah supervisory board, whose names are not appearing on the FBR’s ATL. The “Shariah supervisory board” means a board constituted, appointed or engaged by the Islamic financial institution to advise it on matters concerning Shariah principles and rules.

Every Shariah-compliant company and Islamic financial institution shall form, constitute, appoint, or engage a Shariah supervisory board within such period as may be notified by the Commission, comprising at least two persons.

Provided that until a Shariah supervisory board is formed, appointed, or engaged by a Shariah-compliant company or an Islamic financial institution, it must appoint or engage a Shariah advisor registered under these regulations to perform the functions of the Shariah supervisory board. The Shariah supervisory board shall not function unless one of its members is registered as a resident member of the Shariah supervisory board under these regulations.

The term of appointment or engagement of the Shariah supervisory board or Shariah advisor shall be for a period of three years that may be extended further with mutual consent. However, such a term may be capped for the duration of the applicable Shariah-compliant security if it is a redeemable capital instrument. In the case of short-term securities for a period less than a year, the issuer may not retain the Shariah supervisory board or Shariah advisor for that particular security after its issuance.

Any person, other than the issuer of Shariah-compliant securities, involved in the stock screening process, shall also appoint a Shariah supervisory board or the Shariah advisor.

The Shariah supervisory board shall enjoy such powers and perform such functions as may be agreed upon between the Shariah-compliant company or the Islamic financial institution, as the case may be, and members of the Shariah supervisory board. The said requirements shall be applicable to Shariah-compliant companies and Islamic financial institutions, as the case may be, on the principle of proportionality.

A person shall be disqualified to become a member of a Shariah supervisory board, if he has been declared by a court of competent jurisdiction to be in default in the repayment of a loan to a financial institution. In case of a Pakistani national, his name is not included in active tax payer list of the FBR, Shariah Governance Regulations, 2023 added.

Copyright Business Recorder, 2023