Resolutions of the Securities Commission Shariah Advisory Council

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Shariah Criteria for Listed Securities the heaviest penalty should he or she be found guilty. Allah s.w.t. decrees: Meaning: “Nor come high to adultery: for it is a shameful (deed) and an evil, opening the road (to other evils).” (Surah al-Isra’: 32) Similarly, with a company which carries out immoral activities like selling alcoholic drinks, running pubs and discos, prostitution, etc. because such activities encourage vice. Fourth Criterion The primary activity of the company is gharar 333 (uncertainty) such as conventional insurance trading. The basis of the prohibition on gharar is a hadith of the Prophet s.a.w.: Meaning: “Verily, the Prophet s.a.w. prohibits gharar transactions.” 334 333 For further details please refer to the SAC resolution on gharar. 334 Hadith narrated by Muslim. 149
Resolutions of the Securities Commission Shariah Advisory Council RESOLUTION The SAC, at its 2nd meeting on 21 August 1996, discussed the status of companies running a mix of permissible and prohibited activies. The SAC resolved that such companies, with a certain degree of prohibited elements which do not exceed the benchmark set by the SAC, can be included in the List of Shariah-compliant Securities by the Shariah Advisory Council of the Securities Commission. The SAC also resolved that the subject of ’umum balwa and gharar yasir need to be taken into account when justifying a company with a mix of permissible and prohibited elements, whereby its core activity is permissible. At its 9th meeting on 27 August 1997, the SAC decided on a benchmark in relation to the image factor of a company. INTRODUCTION A mixed company is one where its core activities are permitted by Shariah, although there are some other activities that may contain a small extent of prohibited elements. For mixed companies, the SAC carries out an analysis with additional considerations before including these companies in the list of Shariah-compliant securities. These considerations are– (a) the core activities of the company must be activities which are not against the Shariah principles as outlined in the four primary criteria (that were explained earlier). Furthermore the haram element must be very small compared to the main activities; (b) public perception of the image of the company must be good; and 150 MIXED COMPANIES
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Resolutions of the Securities Commission Shariah Advisory Council

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