ISLAMABAD: In a stride towards enhancing the regulatory landscape of Islamic finance, the Securities and Exchange Commission of Pakistan (SECP) has unveiled the Shariah Governance Regulations, 2023. These regulations mark a major overhaul, amalgamating and superseding the prior Shariah Governance Regulations of 2018 and the Shariah Advisors Regulations of 2017.
Under the authority granted by Section 512(1) in conjunction with Section 451 of the Companies Act, 2017, the new framework introduces several pivotal changes. A notable highlight is the introduction of voluntary Shariah supervisory boards, providing organizations with the option to establish dedicated bodies for overseeing compliance with Shariah principles. This innovative approach is poised to foster a more robust adherence to Islamic finance principles.
Furthermore, the Shariah Governance Regulations, 2023, now encompass a comprehensive framework for Shariah stock screening of listed securities, ensuring that Islamic ethical standards are upheld throughout the financial markets. Importantly, the jurisdiction of Section 451 of the Companies Act has been reinstated, extending its reach to encompass all securities.
One of the key enhancements is the elimination of the need for periodic renewal of Shariah-compliant securities. This simplifies compliance procedures for market participants, streamlining their operations. Additionally, the qualifications and experience prerequisites for Shariah advisors have been bolstered to ensure that these experts possess the necessary expertise to guide organizations effectively.
Moreover, the regulations have redefined the powers and functions of Shariah advisors, granting them the authority to offer their services across all regulated sectors. This change paves the way for a more cohesive approach to Shariah compliance, regardless of the sector in question.
Another noteworthy feature is the introduction of a standardized format for independent assurance reports by external Shariah auditors, aligning with guidelines established by the Institute of Chartered Accountants of Pakistan (ICAP). This ensures transparency and consistency in Shariah compliance assessments.
The formulation of these pioneering regulations was a result of extensive public consultation, with input from various stakeholders, including representatives from listed companies, brokers, asset management companies, mutual funds, and Shariah advisors. This collaborative approach ensures that the regulations are reflective of industry needs and best practices.
The unveiling of the Shariah Governance Regulations, 2023, is poised to have a transformative impact on the Islamic finance sector in Pakistan. This comprehensive framework is expected to instill confidence in Islamic finance, attracting both local and international investors. Additionally, it will contribute to financial stability and foster innovation within the sector, aligning with SECP’s strategic priorities.
Furthermore, these regulations are anticipated to stimulate growth in sectors that adhere to Islamic principles, further reinforcing Pakistan’s commitment to Islamic finance.
The Shariah Governance Framework 2023 represents a milestone in the evolution of Islamic finance regulation in Pakistan, setting the stage for a more transparent, compliant, and investor-friendly financial ecosystem.