Implementing Financial Capability/Investor Education ... Webinar 2.14 - Malaysia -FINAL.pdf ·...
Transcript of Implementing Financial Capability/Investor Education ... Webinar 2.14 - Malaysia -FINAL.pdf ·...
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Implementing Financial Capability/Investor Education Programmes in the Context of Islamic Finance Principles:
The Malaysian Experience
IFIE WEBINAR 13th NOVEMBER 2013
Noraizat Shik Ahmad Product Evaluation
Islamic Capital Market 1
Khairul Ridzwan Abdul Kuddus Investor Affairs and Complaints
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Islamic Capital Market (ICM) Products & Services
Regulatory Framework for ICM
Investor Education
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Comprehensive range of ICM products and services
Islamic unit
trusts
Islamic Exchange
Traded Fund
Islamic Real Estate Investment
Trusts
Sukuk Islamic
structured products
Shariah compliant securities
Islamic stapled
securities
Islamic fund management
Islamic Stockbroking
Commodity Trading
Platform
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Islamic Capital Market (ICM) Products & Services
Regulatory Framework for ICM
Investor Education
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No requirements for separate regulation in developing ICM
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“The conventional securities regulation framework and principles equally apply to the ICM, with the addition of some form of a Shariah approval or certification process - no need to formulate separate regulatory principles for the for the Islamic capital market. By extension, IOSCO’s objectives and principles of securities regulation can be applied to the Islamic capital market”
How to promote the development of ICM while ensuring that the objectives and principles of securities regulation are achieved
Report of the ICM Task Force of the IOSCO (July 2004) – to assess the extent of the development from a regulatory perspective And potential regulatory issues relating to ICM
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Regulation of ICM is part of the overall capital market regulations
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ICM business and transactions accord same level of investor protection as in conventional market, e.g. process of regulation, supervision and enforcement;
Common regulatory approach to regulating ICM products – same liability on the part of the intermediaries, e.g. due diligence and representation; and
Disclosure, transparency and governance apply equally to both conventional and Islamic products, hence same legal and regulatory protection.
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A two-tier regulator framework
• Bonds/Sukuk – trust deed, mandatory rating, eligible person
• Unit trust/Islamic unit trust – management company, trustee, investment committee
• REITs/Islamic REITs – at least 50% investment in real estate
General Regulatory
Requirements
• Sukuk – Approved Shariah principles, Shariah adviser, utilisation of proceeds
• Islamic unit trust – Shariah adviser, investments, annual certification by the Shariah adviser
• Islamic REITs – tenants’ activities and rental income must comply with Shariah requirements
Shariah – specific requirements
Tier 1
Tier 2
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Applicable to both
conventional and Islamic
products
Applicable to Islamic products
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Robust Shariah governance framework is fundamental for ICM
• SAC recognised as the central authority for the ascertainment of Shariah principles for Islamic finance
• Comprises prominent Shariah scholars, jurists and market practitioners
• Acts as a reference point for industry
• Publication of Resolutions of the SAC
National Shariah Advisory Council
at the SC
• Mandated by regulation
• To advise, review and endorse compliance of products/services with Shariah principles
• For Islamic capital market, must be registered with SC based on compliance with the Registration of Shariah Advisers Guidelines
• For Islamic banking, must adhere to the Shariah Governance framework issued by the central bank (Bank Negara Malaysia)
Shariah Advisers / Committee at the
Industry Level
Tier 1
Tier 2
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Islamic Capital Market (ICM) Products & Services
Regulatory Framework for ICM
Investor Education
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SC Malaysia’s approach to Investor Education
Investor Education initiatives
Conventional
Islamic
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• SC’s Islamic investor education initiatives are done as part of our overall investor education initiatives
• In line with recommendations of IOSCO’s ICM Task Force in 2004
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Investor Education approach to ICM products
Shariah Investment
Product
Basic Shariah compliance
Muslim investors seeking
permissible investments
All investors seeking “ethical”-type investments
Understanding of Shariah concepts
Shariah professionals,
scholars
Risk / return profile
All investors
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SC Malaysia’s Investor Education Strategy
Objective: To increase informed participation in the capital market
Schools
Rural/ Blue Collar/ Housewives
Universities/ Workplace/ Professional
Retail Investors (new and
active, existing)
Connectivity of education & conduct: •Product development & delivery •Effective and responsible product disclosure
and sales practices •Responsible post-sale care and disclosure
Financial literacy/capability Investment literacy and capability
Empowered Investor Responsible Industry
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Through
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Delivery of IE Initiatives by SC (2008 – June 2013)
SC Reach
Exhibitions & roadshows
Talk/ Focus group
Nationwide Reach
Media
Interviews/
articles
Edumercials
Nationwide Reach
Development/
distribution
- collaterals
Website SC/Investor
Affairs Section
Potential/Current Investors
Channel
Mass Target Specific Programme
(i) IAC (Direct)
(ii) SIDC (SC’s training and development arm)
(iii) Strategic partners
Nationwide
Reach
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How ICM fits into overall IE initiatives
• Participating in Halal exhibitions
• Malaysia International Halal Showcase (MIHAS)
• Halal Malaysia
• Outreach programmes and roadshows
Exhibitions and outreach programmes
• ICM is incorporated into financial capability programmes. Examples :
• Be Money Wise
• National Smart Investor Campaign
Seimnars for general public
• Making list of Shariah-compliant securities publicly available
• Islamic unit trust funds, Islamic ETFs, etc
Websites and publications
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Observations on ICM education
• List of Shariah-compliant stocks
• Types of Shariah-compliant collective investment schemes
“Education” on Shariah-compliant products through information
• Scammers take advantage of “Shariah compliant” label
• Product must not only be Shariah-compliant but legally compliant
Addressing scams
• 60.4% of Malaysian population are Muslim
• Muslims accept certification by national Shariah body, SAC
• Non-muslims persuaded by commercial considerations (if lower cost, higher returns) or ethical element
• Regulators ensure level of protection for conventional and Islamic is the same
Level of acceptance by investors
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IE for ICM products: Lessons Learnt
• Tenets of smart investing must be inculcated whether conventional or Islamic
• Regulators ensure parity of safeguards
Risk and return are key considerations
• National-level SAC instrumental in ensuring general acceptance of Shariah-compliant products
• Regular dissemination of list of Shariah-compliant products
• Important factor in encouraging financial participation in the (largely Muslim) rural heartland
Shariah certification
• Transparency to ensure acceptance
• Of interest mainly to scholars and professionals
Shariah concepts and methodologies
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Thank You
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