SECP Re-Assess Shariah Governance Framework for IFIs

September 21, 2023

The Securities and Exchange Commission of Pakistan (SECP) has announced the Shariah Governance Regulations, 2023, signaling a significant overhaul of the regulatory framework. These new regulations, issued in accordance with Sections 512(1) and 451 of the Companies Act, 2017, consolidate and replace the previous Shariah Governance Regulations of 2018 and Shariah Advisors Regulations of 2017.

Key highlights of these regulations include the introduction of voluntary Shariah supervisory boards and specific criteria for Shariah stock screening of listed securities. Moreover, Section 451 of the Act now covers all securities.

To enhance the integrity of Shariah compliance, the need for renewing Shariah-compliant securities and the qualifications and experience requirements for Shariah advisors have been reinforced. Additionally, the roles and responsibilities of Shariah advisors have been redefined, enabling them to offer their services across all regulated sectors.

These regulations also introduce a standardized format for independent assurance reports issued by external Shariah auditors, aligning with guidelines set by ICAP.

These measures have been developed through extensive public consultations involving stakeholders from listed companies, brokers, asset management firms, mutual funds, and Shariah advisors.

The SECP anticipates that these regulations will instill confidence in Islamic finance, attract investors, foster financial stability, encourage innovation, and promote growth in sectors aligned with Islamic principles, aligning with the SECP’s strategic priorities.