Monday, August 6, 2012

SAC revises Shariah screening methodology

By Farah Saad

The Shariah Advisory Council (SAC) of the Securities Commission Malaysia (SC) has adopted a revised screening methodology to determine the Shariah-compliant status of listed companies.

Consisting of Shariah scholars, jurists and market practitioners, the council is responsible for ascertaining and issuing rulings on the application of Shariah principles on matters pertaining to the Islamic capital market (ICM).

“In view of the developments and growing sophistication of the Islamic finance industry since the introduction of the current screening methodology in 1995, the SAC has revised the methodology by adopting a two-tier quantitative approach which applies the business activity benchmarks and the newlyintroduced financial ratio benchmarks,” said the SC in a recent statement.

The outcome of the revised methodology will be reflected in the list of Shariah-compliant securities by the SAC effective November 2013. In addition to the above two-tier quantitative assessment, the existing qualitative assessment will continue to be applicable while the release of the list of Shariahcompliant securities will remain twice a year.

“The revision to the screening methodology will further facilitate the orderly development of the Islamic equity market and fund management industry at both domestic and international levels, in line with the growth strategies outlined under the Capital Market Masterplan 2,” said SC ICM executive director Zainal Izlan Zainal Abidin.

The SC will engage with relevant stakeholders and a set of frequently asked questions, will be determined in respect of details and operationalisation of the revised methodology, it said.

(The Malaysian Reserve, 25 June 2012)