Podcast
Questions and Answers
Activities that involve riba are considered permissible in Islam.
Activities that involve riba are considered permissible in Islam.
False
The 10 percent benchmark is used to assess contributions from activities involving umum balwa.
The 10 percent benchmark is used to assess contributions from activities involving umum balwa.
True
Contributions from hotels and resorts are categorized under the 25 percent benchmark.
Contributions from hotels and resorts are categorized under the 25 percent benchmark.
True
A small percentage of activities are considered non-permissible due to being associated with the rights of non-Muslim communities.
A small percentage of activities are considered non-permissible due to being associated with the rights of non-Muslim communities.
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The 5 percent benchmark is used to evaluate contributions from gambling and liquor trading.
The 5 percent benchmark is used to evaluate contributions from gambling and liquor trading.
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Bursa Malaysia develops infrastructure to use CPO as an underlying instrument for Islamic banking transactions.
Bursa Malaysia develops infrastructure to use CPO as an underlying instrument for Islamic banking transactions.
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The Securities Commission's role as a planner includes initiating measures for capital market development.
The Securities Commission's role as a planner includes initiating measures for capital market development.
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The Shariah Advisory Council of the Securities Commission was established on 16 May 1998.
The Shariah Advisory Council of the Securities Commission was established on 16 May 1998.
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The Shariah Index includes only those securities that have not been approved by the SAC.
The Shariah Index includes only those securities that have not been approved by the SAC.
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Securities Commissions (SC) was established as a governmental body in 1993.
Securities Commissions (SC) was established as a governmental body in 1993.
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The SAC of SC is responsible for promoting convergence of Shariah opinions related to conventional financial instruments.
The SAC of SC is responsible for promoting convergence of Shariah opinions related to conventional financial instruments.
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The SAC reviews Shariah compliant securities twice a year and publishes updates in May and November.
The SAC reviews Shariah compliant securities twice a year and publishes updates in May and November.
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Bursa Malaysia does not engage in risk management duties.
Bursa Malaysia does not engage in risk management duties.
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Corporate governance is a top priority for the Malaysian capital market's transparency and accountability goals.
Corporate governance is a top priority for the Malaysian capital market's transparency and accountability goals.
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The Securities Industry Development Centre (SIDC) is part of SC's mandate to enhance research and training.
The Securities Industry Development Centre (SIDC) is part of SC's mandate to enhance research and training.
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Bursa Malaysia's offerings include only traditional, non-Islamic securities.
Bursa Malaysia's offerings include only traditional, non-Islamic securities.
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The Shariah criteria for listed securities only consider the financial performance of the company.
The Shariah criteria for listed securities only consider the financial performance of the company.
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The Securities Commission's agenda is influenced by the development of Islamic capital market (ICM) initiatives.
The Securities Commission's agenda is influenced by the development of Islamic capital market (ICM) initiatives.
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The SC does not have powers for investigation and enforcement.
The SC does not have powers for investigation and enforcement.
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Bursa Malaysia's Financial Market Trading Platform (FTMP) includes trade negotiation and market surveillance functions.
Bursa Malaysia's Financial Market Trading Platform (FTMP) includes trade negotiation and market surveillance functions.
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The SAC of SC conducts research to ensure compliance with Shariah principles for Islamic capital market products and services.
The SAC of SC conducts research to ensure compliance with Shariah principles for Islamic capital market products and services.
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Bursa Malaysia is the main regulator of Islamic banking in Malaysia.
Bursa Malaysia is the main regulator of Islamic banking in Malaysia.
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The Central Bank of Malaysia Act was enacted in 2009.
The Central Bank of Malaysia Act was enacted in 2009.
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The Securities Commission of Malaysia oversees the regulation of listed companies.
The Securities Commission of Malaysia oversees the regulation of listed companies.
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Islamic Financial Service Act was introduced in 2013.
Islamic Financial Service Act was introduced in 2013.
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Bursa Malaysia provides treasury management services to its subsidiaries.
Bursa Malaysia provides treasury management services to its subsidiaries.
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Bank Negara Malaysia covers the regulation of offshore companies.
Bank Negara Malaysia covers the regulation of offshore companies.
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Bursa Malaysia only offers trading services and does not engage in clearing or settlement.
Bursa Malaysia only offers trading services and does not engage in clearing or settlement.
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The Securities Commission of Malaysia is not responsible for promoting the Islamic Capital Market.
The Securities Commission of Malaysia is not responsible for promoting the Islamic Capital Market.
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Study Notes
Malaysian Capital Market
- The Malaysian Capital Market (ICM) has experienced rapid growth because of continuous government support.
- Government support is provided through Securities Commissions, Bank Negara Malaysia, and Bursa Malaysia.
- These institutions play a key role in promoting the ICM and provide infrastructure to facilitate financial players.
Regulators
- The Central Bank of Malaysia Act (CBA 2009) empowers the central bank to license and regulate institutions like banks, investments, and money brokers.
- Bank Negara Malaysia (BNM) has pushed forward legislation to promote Islamic banking and finance in Malaysia.
- Examples of legislation include the Islamic Financial Service Act 2013 (IFSA 2013), Offshore Companies Act 1990, and Labuan Offshore Securities Industry Act 1998.
Regulatory Authorities
- The Securities Commission of Malaysia (SC) is the main regulator for securities laws.
- Bursa Malaysia Securities Berhad (Bursa Securities) is the approved stock exchange, regulating listed companies and other stakeholders.
Bursa Malaysia
- Bursa Malaysia is an exchange holding company, approved under the Capital Market and Services Act 2007.
- Main activities include treasury management and provision of management/administrative services to subsidiaries.
- Bursa Malaysia operates a fully integrated exchange offering services like trading, clearing, settlement and depository services.
- Bursa Malaysia provides companies with access to capital and investors with opportunities to own shares and receive potential financial performance gains.
Roles and Responsibilities of Bursa Malaysia
- Bursa Malaysia strives to be a platform for trading Islamic securities and plays a significant role by offering competitive and innovative products with a sophisticated market structure.
- Bursa Malaysia is exploring the potential growth of the ICM. An example is developing infrastructure enabling CPO usage in Islamic banking transactions.
- Producing more Islamic funds that are Shariah compliant to meet demand from investors who seek to invest in Shariah compliant stock. The Shariah Index is a weighted average index.
- Performing regulatory and risk management duties set up by voluntary guidelines to ensure broking services accord with Shariah requirements.
- Introducing a strong risk management process to manage/settle risk.
- Developing and operating infrastructure for the Malaysia Capital Market. An example is the creation of a Financial Market Trading Platform (FTMP) with functions that include order matching, trade negotiation, trades reporting, and market surveillance.
Securities Commissions (SC)
- The SC was officially set up on March 1, 1993, under the Securities Commissions Act 1993.
- It is a self-funding, statutory body with investigative and enforcement powers, reporting to the Ministry of Finance.
- Annual accounts are tabled in Parliament.
Roles of Securities Commissions (SC)
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Regulatory Roles: The SC issues rules and regulations related to security issuance, Islamic securities offering, and penalties.
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Development Roles: The Securities Industry Development Centre (SIDC) is part of SC, promoting research and training in the securities and futures markets.
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Planner Role: The SC initiates measures to orchestrate multi-party collaboration to actualize the Capital Market Master Plan.
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Building Foundation of ICM: The SC initiative for building the foundation of the ICM has been an integral part of its capital market development agenda.
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Enhancing Corporate Governance: The SC prioritizes corporate governance to enable the Malaysian capital market to become transparent, accountable, and well-performing.
Shariah Advisory Council (SAC) of Securities Commission (SC)
- The SAC was established on May 16, 1996, to ensure the Malaysian capital market (ICM) complies with Shariah Principles.
- It conducts twice-yearly reviews of Shariah-compliant securities and issues updated lists of these in May and November.
Responsible of SAC of SC
- Advises the Commission on all matters related to comprehensive development of the Islamic capital market.
- Promotes harmonization of Sharia opinions related to ICM transactions.
- Standardizes Shariah rulings relating to ICM products and services that are examined through research and deliberations.
Approach SAC of SC
- Studies validity of conventional instruments from the Shariah point of view, with a focus on transaction structure, mechanisms, and instrument use, to ensure compliance with Shariah Principles.
- Formulates and develops new financial instruments based on Shariah principles.
Syariah Criteria for Listed Securities
- The SAC of the SC thoroughly examines companies with mixed activities (compliant and non-compliant). Evaluation criteria include public perception and image, the company's core activities, importance and maslahah (benefit), and avoiding umum balwa (common plight), uruf (custom), and non-Muslims' rights.
Benchmark
- 5% benchmark: Used to access the level of mixed activities clearly prohibited. Examples include interest-based activities like conventional banks, gambling, trading in liquor, and pork.
- 10% benchmark: Used to assess contributions involving umum balwa (prohibited elements affecting most people and are hard to avoid). Example – interest income from conventional current accounts or fixed deposits.
- 20% benchmark: Used to assess contributions from mixed rental payment from non-compliant activities. Example – rental from premises involved in gambling or liquor sales.
- 25% benchmark: Assesses contributions from generally permissible activities with maslahah elements, which might affect Shariah status. Examples include hotel operations, resort share trading, and stockbroking.
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Description
Test your knowledge on the principles and benchmarks of Islamic finance. This quiz covers topics such as permissible and non-permissible activities, the role of the Securities Commission, and the function of the Shariah Advisory Council. Improve your understanding of Islamic banking transactions and capital market development.
