The commission is the only securities regulator in the world that requires such registration.
The list, published recently in Kuala Lumpur, shows that Malaysia has 45 individual Shariah advisers and 10 Shariah advisory companies registered with the commission, who are authorized to provide such advisory services to market players in the local ICM, which comprises investment funds, asset management, unit trusts, sukuk, private debt securities and other fixed income instruments.
The five registered individual Shariah advisers are Dr Muhammed Elgari of Saudi Arabia; Sheikh Nizam Yaquby of Bahrain; Dr. Abdul Sattar Abdul Karim Mohamed Abu Ghuddah of Syria; Dr. Muhammad Humayon Abbas Dar of the UK and Dr. Abdulazeem Abozaid of the UAE.
One or two of these registrations have raised some concern about the SC’s Shariah advisory registration regime.
In addition, through the registration of the 10 Shariah advisory companies, a total of 11 foreign Shariah advisers are also registered. However, they include four of the above individual Shariah advisers, but not Dr Humayon Dar, who is in the curious and anomalous position of being registered as an individual Shariah adviser but who is not on the board of BMB Islamic UK Ltd, the Shariah advisory company which he founded and which is registered with the commission.
Effectively, there are now 12 foreign Shariah advisers registered with the commission as at June 1, 2011.
While this signifies an important shift in cross-border Shariah advisory and greater interaction between Shariah adviseries from different parts of the world, it does not necessarily imply greater convergence of Shariah interpretations and standards between the four main Sunni Schools of Islamic Law — Hanbali, Shafie, Maliki and Hanafi; and the predominant Shia Jaafari School of Islamic Law.
This development has more to do with the continuing liberalization of the Malaysian Islamic financial sector by successive governments.
In April 2009, the current government of Prime Minister Mohd Najib Abdul Razak launched a landmark latest phase of Islamic financial liberalization, which is still in the process of being implemented.
This includes the adoption of two new acts — the Central Bank Act 2010 (amended) and the Capital Markets Act 2011 (amended) — both of which have comprehensive Shariah Governance Frameworks.
With more foreign institutions setting up shop and more foreign and local joint ventures being established in the Islamic financial sector, it is inevitable that a stream of Shariah adviseries from abroad would migrate or be in demand in Malaysia.
This also underpins the policy rationale of Malaysia that the involvement of foreign Shariah adviseries especially from GCC countries would make Malaysian Islamic financial products more acceptable to the perceivedly more conservative Gulf markets and effectively amount to a seal of approval for such products.
It may also help overcome some issues relating to home-host regulation including the Shariah advisory space.
The underlying trend, however, is that this migration remains largely in one direction from the GCC into Malaysia.
In reality, there are very few Malaysian Shariah adviseries that sit on the boards of Islamic financial institutions in the GCC countries.
The notable exception is Dr Daud Bakar, whose Amanie Advisory company is registered in Malaysia (as a Shariah advisory), and in Dubai and Luxembourg as commercial entities but whose core business is Shariah advisory. Yes, there are a few other Malaysian Shariah adviseries, who sit on the board of the odd financial institution in South Africa, the UK, Kazakhstan and so on.
This may still reflect the entrenched suspicion and chauvinism with which Malaysian Shariah adviseries are wrongly and perhaps subliminally held in some parts of the GCC and beyond because of their perceivedly more moderate interpretations under the regime of the Shafie School of Islamic Law. Suffice to say, this perception has now become a tedious stereotype and red herring, especially for the cynics and detractors of Islamic finance, for the differences between the scholars from the various schools of law are minor and there is consensus on the overwhelming corpus of Fiqha Al-Muamalat (Islamic law relating to financial transactions) including on the core Shariah principles relating to the proscription on riba (interest), gharar (deception), speculation through gambling, certain types of activities and the financial ratios governing whether a company’s stocks are Shariah-compliant or not.
A major anomaly in the SC’s registration of Shariah advisory companies is that several sit on the board of more than one company.
Dr Abdul Sattar Abu Ghuddah and Daud Bakar, for instance, are registered on the board of four Shariah advisory companies on the SC list.
Dr Hussein Hamed Sayed Hassan similarly sits on the board of three such companies, while Dr Elgari, Prof. Dr. Ali Muhyealdin Al-Quradaghi of Qatar and Abdulaziz Fawzan Saleh Al-Fawzan sit on the Shariah board of two such companies. Only Sheikh Nizam Yaquby and Dr. Abdulazeem Abozaid sit on the board of a single Shariah advisory company. — M.P.
The obvious question that arises is that how is this reconciled with the SC’s ruling that a Shariah advisory can only impart such services to a single institution in a particular financial services category — namely, commercial bank, investment bank, asset management company, Takaful company and so on.
Surely, if the advisory is registered as an individual and as a member of the board of an advisory company then theoretically it is possible for the advisory to advise more than one institution in the individual financial services categories.
Would the SC or for that matter Bank Negara Malaysia consider this type of anomaly a violation of that ruling?
