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InvestorEducationandFinancialCapabilityinIslamicFinanceContext:
InvestorEducationandFinancialCapabilityinIslamicFinanceContext:
IFIE-IOSCOGLOBALINVESTOREDUCATIONCONFERENCEISTANBULJUNE2016
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KhairulRidzwanAbdulKuddusInvestorAffairsandComplaints
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SnapshotoftheIslamicCapitalMarket(ICM)
q SizeofMalaysia’sIslamiccapitalmarketisRM1.69trillionq TheIslamiccapitalmarketis60%ofoverallcapitalmarketq Compoundedannualgrowthrateof11.7%between2005and2015
AsatDecember2015
SnapshotofIslamiccapitalmarketstatisticsinMalaysia
1,086.18
608.60Marketcap(RM’bil.)
Shariah-compliant
Conventional607.93
516.91
Bondsoutstanding(RM’bil.)
Sukuk
Conventional
132.38
535.5
AUM(RM’bil.)
Islamic
Conventional
193
419
No.ofUTfunds
IslamicConventional
ComprehensiverangeofICMproductsandservices
Islamicunittrusts
IslamicExchangeTradedFund
IslamicRealEstateInvestment
Trusts
SukukIslamic
structuredproducts
Shariahcompliantsecurities
Islamicstapledsecurities
Islamicfundmanagement
IslamicStockbroking
CommodityTradingPlatform
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RegulationofICMispartoftheoverallcapitalmarketregulations
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ICM business and transactions accord same level of investorprotection as in conventional market, e.g. process of regulation,supervision and enforcement;
Common regulatory approach to regulating ICM products – sameliability on the part of the intermediaries, e.g. due diligence andrepresentation; and
Disclosure, transparency and governance apply equally to bothconventional and Islamic products, hence same legal andregulatory protection.
Atwo-tierregulatorframework
• Bonds/Sukuk – trustdeed,mandatoryrating,eligibleperson
• Unittrust/Islamicunittrust–managementcompany,trustee,investmentcommittee
• REITs/IslamicREITs – atleast50%investmentinrealestate
GeneralRegulatory
Requirements
• Sukuk – ApprovedShariah principles,Shariah adviser,utilisationofproceeds
• Islamicunittrust– Shariah adviser,investments,annualcertificationbytheShariah adviser
• IslamicREITs– tenants’activitiesandrentalincomemustcomplywithShariah requirements
Shariah – specificrequirements
Tier1
Tier2
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Applicabletoboth
conventionalandIslamicproducts
ApplicabletoIslamicproducts
RobustShariah governanceframeworkisfundamentalforICM
• SACrecognisedasthecentralauthorityfortheascertainmentof Shariah principles forIslamicfinance
• Comprisesprominent Shariah scholars,juristsandmarketpractitioners
• Actsasareferencepointforindustry• PublicationofResolutionsoftheSAC
NationalShariahAdvisoryCouncil
attheSC
• Mandatedbyregulation• Toadvise,reviewandendorsecomplianceof
products/serviceswithShariah principles• ForIslamiccapitalmarket,mustberegistered
withSCbasedoncompliancewiththeRegistrationofShariah AdvisersGuidelines
• ForIslamicbanking, mustadheretotheShariah Governanceframeworkissuedbythecentralbank(BankNegaraMalaysia)
Shariah Advisers/CommitteeattheIndustryLevel
Tier1
Tier2
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Progressionoftheguidelinesfortheissuanceofsukuk
GuidelinesontheOfferingofPDS(2000)• GovernissuanceofbothconventionalandIslamicPDS
• Provisionson IslamicPDSembeddedinthesameguidelines
GuidelinesontheOfferingofIslamicSecurities(2004)• FacilitatetheintroductionofawiderrangeofIslamicinstruments,particularly
thoseissuedundertheShariahprinciplesofMudharabah orMusharakah• Guidelinesarereleasedpursuanttotheprescriptionby theMinisterofFinance
thatsecuritiesusingMusharakah orMudharabah principles,aswellasSukukissuances,areclassifiedas“securities”throughtheSecuritiesCommission(PrescriptionofIslamicSecurities)Order2004(PrescriptionOrder).
• ComplementstrategicinitiativesintheCapitalMarketMasterplan (CMP)tofacilitatethedevelopmentofacompetitiveandinnovativeIslamiccapitalmarket,attractivetoboth localandtheglobalmarkets.
GuidelinesonSukuk (2012)• SpecificprovisiononShariah rulings
applicabletoalltypesofSukuk;• SpecificprovisiononShariah rulings
applicabletospecifictypesofSukuk;• Requirementfortheappointmentof
Shariah advisers;and• submissionofdocumentsand
information.• Providinggreaterclaritytoensure
complianceofShariah rulingsandprinciplesendorsedby theSACoftheSC;
GuidelinesonSukuk (2014)• IntroductionofSustainableand
Responsible Investment(SRI)Sukukframework tofacilitatefinancingofsustainableandresponsibleinvestmentinitiatives.
• TheadditionalareasfortheissuanceofSRIsukuk includeutilisationofproceeds,eligibleSRIprojects,disclosurerequirement,appointmentofindependentpartyandreportingrequirement.
GuidelinesonUnlistedCapitalMarketProducts for theLodgeandLaunchFramework(2015)• Intended toshortentime-to-marketbyenablingwholesaleproducts tobelaunched
once therequiredinformationislodgedwiththeSCviaitsonlinesubmissionsystem,ascomparedtothecurrent14-21daysapprovaltimeframe.
• Wholesaleproducts thatarecoveredunder theframeworkincludewholesalefunds,structuredproducts,bonds, sukuk andasset-backedsecurities.
• InlinewithSC’snewregulatoryphilosophywhichadvocatesproportionalityofregulationandrecognises thematurityoftheMalaysiancapitalmarketandthesophisticationofinvestorswithinthewholesalemarket.
• TheGuidelinesfortheLodgeandLaunchframeworksupersedestheexistingguidelineson thevariouswholesaleproducts.
GuidelinesonIssuanceofPrivateDebtSecuritiesandSukuk toRetailInvestors(2015)• Tofacilitateretailparticipationinthebondandsukuk market.• Enablesretailbondsandsukuk tobeissuedandtradedeitherontheexchange(Bursa
Malaysia)orover thecounter(OTC)viaappointedbanks.
InvestorEducationiscarriedoutthroughInvestSmart
Timelyandfitforpurposeprogrammes,acrossalllevelsofsophistication, viamultipleplatforms/delivery channels
Must resonate withtarget groups so thatknowledge and skills areappreciated & embedded
COMPREHEN-SIVENESS
MULTIPLE MODALITIES
SIMPLICITY
Extensive & diverse target groups
Bursa,FIMM,PPA,SIDREC,OtherAgenciesandSIDC Industry
B.Media–Print,Broadcast,Digital
andSocial
A.Exhibitions&Roadshows
C.TargetedProgrammes
D.Strategicpartnerships
Through
3Principles inimplementing ourinitiatives
Mass Reach Programmes
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SCMalaysia’sapproachtoInvestorEducation
InvestorEducationinitiatives
Conventional
Islamic
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• SC’sIslamicinvestoreducationinitiativesaredoneaspartofouroverallinvestoreducationinitiatives
• InlinewithrecommendationsofIOSCO’sICMTaskForcein2004*
*“Theconventional securitiesregulationframeworkandprinciplesequallyapplytotheICM,withtheadditionofsomeformofaShariah approvalorcertificationprocess- noneedtoformulateseparateregulatoryprinciples forthefortheIslamiccapitalmarket.Byextension,IOSCO’sobjectivesandprinciplesofsecuritiesregulationcanbeappliedtotheIslamiccapitalmarket”
InvestorEducationapproachtoICMproducts
ShariahInvestmentProduct
BasicShariahcompliance
Musliminvestorsseeking
permissibleinvestments
Allinvestorsseeking“ethical”-typeinvestments
UnderstandingofShariah concepts
Shariahprofessionals,
scholars
Risk/returnprofile
Allinvestors
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HowICMfitsintooverallIEinitiatives
• ParticipatinginHalalexhibitions• MalaysiaInternationalHalalShowcase(MIHAS)• HalalMalaysia
• Outreachprogrammes androadshows
Exhibitionsandoutreachprogrammes
• ICMisincorporatedintofinancialcapabilityprogrammes.Examples:• BeMoneyWise(BMW)seminars• Retailinvestorseminarsonunittrustsandthestockmarket
Seimnars forgeneralpublic
• MakinglistofShariah-compliantsecuritiespubliclyavailable• Islamicunittrustfunds, IslamicETFs,etc
Websitesandpublications
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IEforICMproducts:ObservationsandLessonsLearnt
• ListofShariah-compliantstocks• TypesofShariah-compliantcollectiveinvestmentschemes
“Education”onShariah-compliantproducts throughinformation
• Scammerstakeadvantageof“Shariah compliant”label• ProductmustnotonlybeShariah-compliantbutlegallycompliant
“Halal”ismorethantechnicalcompliance
• 60.4%ofMalaysianpopulationareMuslim• MuslimsacceptcertificationbynationalShariah body,SAC• Non-muslims persuadedbycommercialconsiderations (iflowercost,higher returns)orethicalelement
• RegulatorsensurelevelofprotectionforconventionalandIslamicisthesame
Levelofacceptancebyinvestors
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IEforICMproducts:ObservationsandLessonsLearnt(cont’d)
• TenetsofsmartinvestingmustbeinculcatedwhetherconventionalorIslamic
• Regulatorsensureparityofsafeguards
Riskandreturnarekeyconsiderations
• National-levelSACinstrumentalinensuringgeneralacceptanceofShariah-compliantproducts
• Regulardissemination oflistofShariah-compliantproducts• Highlevelof trustinSACpronouncements: Importantfactorinencouraging financialparticipationinthe(largelyMuslim) ruralheartland
Shariah certification
• Transparencytoensureacceptance• Ofinterestmainlytoscholarsandprofessionals
Shariah conceptsandmethodologies
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ThankYou
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