A question just popped into my head. According to the code and standards charterholders must adhere to the most strict laws and regulations applicable to their business. In most islamic countries the sharia dictates rules of commerce and does not allow speculation or the imposition of interest. In essence this would bar charterholders from being involved in any classical stock, bond or derivatives contract issued in such countries. I know islamic banks and funds do find their ways around sharia either by ignoring it or creating sharia-compliant products, but participating in the former would be a breach of standard I and thus many people should lose their charter…
In many of those countries, I would be more concerned with losing my hands in such a transaction, never mind my charter.
For me it is simple. So long as such places stay isolated in such an extreme way, Westerners with any questions at all should steer clear altogether.
What about Dubai and Malaysia, those are huge capital centers under sharia law.
Good point raised! I think CFAI did a seminar on Islamic banking. If the law forbids charging explicit interest, then one can not charge interest and be complaint with the law! I guess the work around would be implicit interest?
…not to mention that sharia is not bound by geographic borders. Whenever a muslim engages in commerce, sharia applies to him/her regardless of the laws of the country in whicht the contract is signed. Anyone dealing with muslims and not being sharia compliant is in violation of stanard I.a and III.c
No, it is bound by geographic border. There is a difference between Sharia, and a state that adopts Sharia as law. CFA only cares about the latter.
So according to your logic muslims are allowed to eat pork when residing in a non-muslim country… You forget that sharia is not only formal law that requires a legal system to enforce it.
No . . . according to his logic muslims who eat pork in non-muslim countries won’t be arrested for doing so.
Last Saturday I taught Level I Ethics at UC, Irvine.
Your first objective is . . . don’t go to jail.
If you violate local law, you can go to jail; if you violate only the CFA Code and Standards, you don’t go to jail.
Sure, but we can agree that sharia has a much a larger say in the daily life of muslims than christian religious norms (lent, etc.) and certainly much more than investment specific norms such as SRI.
You could compare it to selling sweet candy to a person with diabetes. The persons doctor forbid the consumption of sweets, but it’s not illegal for the person to violate that norm and neither is it for you, but that does not mean you should do it either.
And even so, your reply does not answer my initial question concerning countries explicity under sharia law.
The institute has bigger fish to fry than worrying about Sharia law. Like taking down the guy who got caught during the exam with writing on his pencil.
It wasn’t intended to answer your initial question. It was intended to address your incorrect inference.
Again, it’s not about Sharia, it’s about whether a country has adopted sharia. If a country adopts sharia, and you’re in that nation’s jurisdiction, it is important, if not, it is irrelevant. It’s about where the laws apply, not what these laws might be.
The above dude is spot on. Shariah is a law given to us by religion. The actual law of a Muslim country can be other than Shariah.
Many Shariah compliant products (Islamic banking) are not exactly according to the rules of the Shariah. In essence, they are the same as the conventional products-only the mode of transactions is different.
Moreover, many Islamic countries don’t exactly enforce the Islamic laws by book even if they are following Shariah.
And lastly, many Muslim societies are “Muslim” just on the paper. They lie, cheat, steal, murder, use interest based products and derivatives etc. which are in no way acceptable in Islam.
Hahahahaha
You obviously do not know much about Dubai…
You obviously do not know much about Arab SWFs…
I am not sure how it works in Dubai and other countries practicing Sharia finance but in Malaysia, Sharia finance and conventional finance are two distinct categories in their own right. Products that claim Sharia compliance must, as you mentioned, adhere to the applicable Sharia laws (determined by the Regulatory Authority). They should be able to be involved in conventional products as long as it complies with the tenets of Sharia Finance (again, determined by the Regulatory Authority). Charterholders working with conventional finance (which constitutes the larger part of the financial services industry in Malaysia) need not comply with the Sharia-related standards.
However, if your fiduciary specifically requests that you comply with the relevant Sharia regulations, yes, you will be in violation of the investment mandate (i.e.: the IPS) and hence the Standards, if you participate in speculative activities, investment in vice industries, etc. CFA candidates may recognise this as part of fulfiling the “Unique Preference” of the client.
I would not go into too much detail into the specifics of Sharia financing as I am not really familiar with them myself but to my understanding, you can participate in the equities market subject to some restriction (while interest is forbidden, I believe that “profits” should be kosher). These restrictions tend to look at the industries (investing in a brewery is a no-no) and the financial structure (investing in highly leveraged companies would definitely be frowned upon and probably prohibited). Feel free to correct me if I am wrong here.
TL;DR: Like say, GIPS, you are free to claim Sharia Compliance or otherwise. However, if you do claim Sharia Compliance, do make sure that you are actually "Sharia Compliant). If you are operating in conventional finance, some of these Sharia-related restrictions need not apply unless your mandate says so.
Dubai does not follow sharia law, it derives tiny bits and pieces of it to be incorporated in its judicial system.
Saying that UAE, or for that matter Dubai, applies sharia law is absolutely false and misleading.