Entire Section

  • IFR 6 IFR 6 Islamic Collective Investment Funds

    • IFR 6 Guidance

      This chapter contains additional requirements that apply to a Collective Investment Fund operated or held out as being operated as an Islamic Fund. A Collective Investment Fund is defined in Article 11 of the Collective Investment Law 2010 (the Law). The definition in Article 11 of the Law is very wide and can capture some Islamic financial activities. However, under Article 12 of the Law, the DFSA can make Rules excluding certain arrangements or types of arrangements from constituting a Fund. Certain types of Islamic Financial Business are not regulated as Collective Investment Funds due to express exclusions provided. Key Islamic Financial Business related exclusions under the collective investment regime are Managing Insurance, participation rights evidenced by Sukuk certificates and managing PSIAs.

      Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
      [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.1 IFR 6.1 Application

      • IFR 6.1.1 IFR 6.1.1

        (1) This section applies in the case of a Domestic Fund:
        (a) which is an Islamic Fund, to its Fund Manager and where appointed, its Trustee;
        (b) which is an Umbrella Fund with one or more Islamic Sub-Funds, to its Fund Manager and where appointed, its Trustee in respect of those Sub-Funds; or
        (c) which is an Islamic Fund on a Fund Platform, to the Fund Manager using the Fund Platform, in respect of that Fund.
        (2) The requirements that apply to a conventional Fund under the Collective Investment Law 2010 and CIR apply equally to an Islamic Fund, except as otherwise provided in this chapter.
        (3) The requirements in MKT chapter 6 that apply to a conventional Listed Fund apply equally to an Islamic Fund, if it is or is to be a Listed Fund, except as otherwise provided in this chapter.
        (4) In this chapter, except where otherwise provided, any reference to a Fund is to an Islamic Fund, to an Islamic Sub-Fund of an Umbrella Fund, or to an Islamic Fund on a Fund Platform, as the case may be and any reference to a Fund Manager is a reference to a Fund Manager of such a Fund.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM272/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM220/2018 (Made 22nd February 2018). [VER13/12-18]
        [Amended] DFSA RMI249/2019 (Made 18th December 2019). [VER14/12-19]

        • IFR 6.1.1 Guidance

          1. While the CIR module contains the key requirements relating to the management and operation of conventional Collective Investment Funds, this module sets out the additional requirements that apply where such a Fund is managed or held out as being managed as an Islamic Fund. There are other requirements that applying to such firms which are found in other modules of the DFSA rulebook, such as the GEN module, COB module and PIB module.
          2. While section 3 contains the requirements that apply to Authorised Firms which are Fund Managers of Collective Investment Funds, the requirements in this section mainly focuses on Shari'a compliance related requirements that apply at the Fund level. For example, while the systems and controls required under IFR section 3.3 relate to the systems and controls that a firm must have in order to comply with its Shari'a obligations, IFR Rule 6.1.3 sets out systems and controls that must be established and maintained at the Fund level.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • Systems and Controls

        • IFR 6.1.2 IFR 6.1.2

          (1) The Fund Manager of a Fund must establish and maintain systems and controls which ensure that its management of the Fund and the Fund Property is Shari'a compliant.
          (2) A Fund Manager may, where it is practicable to do so, include the systems and controls required under (1) within those it is required to establish and maintain pursuant to IFR Rule 3.3.1.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

          • IFR 6.1.2 Guidance

            1. Article 38 of the Collective Investment Law 2010 requires the Fund Manager to establish and maintain systems and controls, including, but not limited, to financial and risk controls to ensure sound management of the Fund in accordance with the Fund's Constitution and its most recent Prospectus, taking due account of the nature, scale and complexity of the Fund's investments and operations.
            2. IFR Rule 3.3.1 requires a Fund Manager of Islamic Funds to establish and maintain systems and controls to ensure its Shari'a compliance.
            [Added] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • Fund's Constitutional Documents

        • IFR 6.1.3 IFR 6.1.3

          (1) The Fund Manager of a Domestic Fund that is a Public Fund must ensure that its Fund's Constitution and Prospectus are, and remain, approved by the Fund's Shari'a Supervisory Board.
          (2) The Fund Manager of an Exempt Fund must ensure that the Fund's Constitution and Prospectus are, and remain, approved by the Fund Manager's Shari'a Supervisory Board.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • Islamic Financial Business Policy and Procedures Manual

        • Guidance

          A Fund Manager may, instead of having a separate Islamic Financial Business policy and procedures manual both at the firm level and at the Fund level, maintain a single Islamic Financial Business policy and procedures manual for the firm and the Funds it manages.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.1.4

          The Fund Manager of a Fund must implement and maintain an Islamic Financial Business policy and procedures manual for the Fund which addresses the following matters:

          (a) the manner in which the compliance function will be undertaken, in respect of Shari'a compliance;
          (b) the manner in which the Shari'a Supervisory Board will oversee and advise in regard to the Islamic Financial Business conducted by the Fund Manager;
          (c) the manner in which Shari'a Supervisory Board fatwas, rulings and guidelines will be recorded, disseminated and implemented and the internal Shari'a review undertaken;
          (d) the manner in which disputes between the Shari'a Supervisory Board and the Fund Manager in respect of Shari'a compliance will be addressed;
          (e) the process for approving those internal systems and controls which are in place to ensure not only that the Islamic Financial Business is carried out in compliance with Shari'a, but that information is disseminated to Unitholders in an appropriate manner; and
          (f) the manner in which conflicts of interest will be identified and managed, including as prescribed in IFR Rule 6.2.4.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.2 IFR 6.2 Shari'a Supervisory Board for an Islamic Fund

      • IFR 6.2.1 IFR 6.2.1

        (1) A Fund Manager of a Domestic Fund that is a Public Fund must, subject to (3), appoint a Shari a Supervisory Board to its Fund that meets the following requirements:
        (a) the Shari a Supervisory Board has at least three members;
        (b) the members appointed to the Shari a Supervisory Board are competent to perform their functions as Shari a Supervisory Board members of the Fund;
        (c) any appointments, dismissals or changes in respect of members of the Shari a Supervisory Board are approved by the Governing Body of the Fund Manager; and
        (d) no member of the Shari a Supervisory Board is a director or Controller of the Fund or its Fund Manager.
        (2) A Fund Manager may comply with the requirement in (1) by appointing to the Fund the same Shari a Supervisory Board as it has appointed to the firm in accordance with IFR Rule 3.5.1, provided the requirements in (1) are also met.
        (3) A Fund Manager is not required to comply with the requirement in (1) where it relies, for the purposes of making investments for the Fund, on a widely accepted Shari a screening process such as investing in securities included in, or recognised by reference to, an Islamic index, sukuk, or treasury instruments issued by a Shari a compliant financial services provider regulated by a Financial Services Regulator.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.2.1 Guidance

          1. In appointing a Shari'a Supervisory Board for the purposes of IFR Rule 6.2.1(1), the Fund Manager should consider the previous experience and qualifications of the proposed Shari'a Supervisory Board members to assess whether the proposed Shari'a Supervisory Board member is competent to advise on the activities undertaken by the Islamic Fund. If the Fund Manager is appointing the same Shari'a Supervisory Board as it has appointed to the firm pursuant to IFR Rule 6.2.1(2), the Fund Manager should still consider whether the requirements in both Rule IFR 3.5.1(1) and IFR 6.2.1(1) are met in respect of that board.
          2. If the Fund Manager is relying on Shari'a screening methodologies such as the Dow Jones Shari'a index, such screening is generally regarded as widely accepted and accessible. However, if less widely known methodologies are used, the Fund Manager should be able, upon request by the DFSA, to demonstrate to the satisfaction of the DFSA the grounds on which it considers the particular methodology used to be acceptable and reliable.
          3. Although the Fund Managers of Exempt Funds and Qualified Investor Funds are not subject to the requirement for the appointment of a Shari'a Supervisory Board for such a Fund, they would need to ensure that the Exempt Funds or Qualified Investor Funds they manage continue to meet the applicable Shari'a requirements applicable to the Fund. They may use a member of the Shari'a Supervisory Board appointed at the firm level for the purposes of ascertaining compliance with the Shari'a requirements. The manner in which they demonstrate to the Unitholder of the Exempt Fund or Qualified Investor Fund as to how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the Unitholders and the Fund Manager.
          4. An External Fund Manager may not be able to take advantage of IFR 6.2.1(2), unless it has a Shari'a Supervisory Board appointed at the firm level. In contrast the Fund Manager of an External Fund will be able to use its Shari'a Supervisory Board to meet the Shari'a Supervisory Board requirement relating to the Fund as set out in IFR 6.2.1(2).
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.2.2

        (1) Subject to (2), the Fund Manager of a Fund must document the Fund's policy in relation to:
        (a) how appointments, dismissals or changes will be made to the Shari'a Supervisory Board;
        (b) the process through which the suitability of Shari'a Supervisory Board members will be considered; and
        (c) the remuneration of the members of the Shari'a Supervisory Board.
        (2) If the Fund Manager, pursuant to IFR Rule 6.2.1(2), appoints to the Fund the same Shari'a Supervisory Board it has appointed to the firm, the documents required under IFR Rule 6.2.2(1) must be included in or otherwise form part of the records required under IFR Rule 3.5.2.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.2.3 IFR 6.2.3

        (1) Subject to (2), the Fund Manager of a Fund must establish and retain, for six years, records of:
        (a) its assessment of the competency of the Shari'a Supervisory Board members;
        (b) the agreed terms of engagement of each member of the Shari'a Supervisory Board; and
        (c) the matters in Rules IFR 6.2.1(1)(c) and IFR 6.2.2.
        (2) If the Fund Manager, pursuant to IFR Rule 6.2.1(2), appoints to the Fund the same Shari'a Supervisory Board it has appointed to the firm, the records required under IFR Rule 6.2.3(1) must be included in or otherwise form part of the records required under IFR Rule 3.5.3.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.2.3 Guidance

          1. The records of the assessment of competency of Shari'a Supervisory Board members should clearly indicate, at least:
          a. the factors that have been taken into account when making the assessment of competency;
          b. the qualifications and experience of the Shari'a Supervisory Board members;
          c. the basis upon which the Fund Manager has deemed that the proposed Shari'a Supervisory Board member is suitable; and
          d. details of any other Shari'a Supervisory Boards of which the proposed Shari'a Supervisory Board member is, or has been, a member.
          2. If the Fund Manager is relying on IFR Rule 6.2.1(2), then the due diligence process, and the records maintained under Rules IFR 3.5.2 and IFR 3.5.3, should be augmented with the matters specified under IFR Rule 6.2.1(1).
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.2.4

        (1) The Islamic Financial Business policy and procedures manual must provide that:
        (a) a member of the Shari'a Supervisory Board is obliged to notify the Fund Manager of any conflict of interest that such member may have with respect to the Fund or the Fund Manager, and if appointed, or in the case of an Investment Trust, the Trustee; and
        (b) the Fund Manager will take appropriate steps to manage any such conflict of interest so that the Islamic Financial Business is carried out appropriately and in compliance with Shari'a, the interest of a Unitholder is not adversely affected and all Unitholders are fairly treated and not prejudiced by any such interests.
        (2) If a Fund Manager is unable to manage a conflict of interest as provided above, it must dismiss or replace the member as appropriate.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.2.5

        The Fund Manager of a Fund must provide the DFSA at its request with information on the qualifications, skills, experience and independence of the individuals who are appointed or proposed to be approved as members of the Shari'a Supervisory Board.

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.2.6

        (1) The Fund Manager of a Fund must take reasonable steps to ensure that the Fund Manager and the Fund's Employees:
        (a) provide such assistance as the Shari'a Supervisory Board reasonably requires to discharge its duties;
        (b) give the Shari'a Supervisory Board right of access at all reasonable times to relevant records and information;
        (c) do not interfere with the Shari'a Supervisory Board's ability to discharge its duties; and
        (d) do not provide false or misleading information to the Shari'a Supervisory Board.
        (2) If appointed, the Trustee must also take reasonable steps to ensure that its Employees comply with (1)(a)–(d).
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.3 IFR 6.3 External Shari'a reviews and periodic reports

      • IFR 6.3.1

        A Fund Manager of a Domestic Fund that is a Public Fund, other than a Fund relying on the exemption in IFR Rule 6.2.1(3), must ensure that all Shari'a reviews of the Fund are undertaken by the Shari'a Supervisory Board in accordance with AAOIFI GSIFI No 2.

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.3.2 IFR 6.3.2

        (1) In the case of a Domestic Fund that is a Public Fund other than a Fund relying on the exemptions in IFR Rule 6.2.1(3), the Fund Manager must commission an interim and an annual report relating to the Fund operations from the Shari'a Supervisory Board which complies with AAOIFI GSIFI No 1.
        (2) The Fund Manager must deliver a copy of the annual interim report referred to in (1) to the Unitholders in accordance with CIR Rule 9.4.4 and must include the report of the Shari'a Supervisory Board in the annual report required under CIR Rule 9.4.5.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        Amended in accordance with Notice of Amendments to Legislation April 2011 [VER3/02-11]
        [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.3.2 Guidance

          Although the Fund Managers of Exempt Funds and Qualified Investor Funds are not subject to the Shari'a review process required under IFR section 6.3, they would need to ensure that the Exempt Fund or Qualified Investor Fund continues to meet the Shari'a requirements, particularly for the purposes of their annual and interim reports, which are required to be prepared under CIR section 9.4. However, the manner in which they demonstrate to the Unitholders of the Fund how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the Unitholders and the Fund Manager.

          [Added] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

    • IFR 6.4 IFR 6.4 Internal Shari'a Review

      • IFR 6.4.1 IFR 6.4.1

        (1) The Fund Manager of a Domestic Fund that is a Public Fund must perform an internal Shari'a review to assess the extent to which the Fund complies with fatwas, rulings and guidelines issued by the Fund's Shari'a Supervisory Board.
        (2) The Fund Manager must perform the internal Shari'a review in accordance with AAOIFI GSIFI No. 3.
        (3) The Fund Manager of an Umbrella Fund which has an Islamic Sub-Fund must, to the extent possible, perform the internal Shari'a review in accordance with AAOIFI GSIFI No. 3 and must document the manner in which it will conduct that part of the internal Shari'a review that is not conducted in accordance with AAOIFI GSIFI No. 3.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.4.1 Guidance

          1. Although the Fund Managers of Exempt Funds and Qualified Investor Funds are not subject to the specific internal Shari'a requirements under section 6.4, they would need to ensure that the Exempt Fund or Qualified Investor Fund continues to meet the applicable Shari'a requirements. However, the manner in which they demonstrate to the Unitholders of the Fund how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the Unitholders and the Fund Manager.
          2. GSIFI No. (3) (Internal Shari'a Review) establishes standards and provides guidance on the internal Shari'a review in institutions that conduct business in conformity with Shari'a. The standard covers the following:
          a. objectives;
          b. internal Shari'a Review;
          c. independence and objectivity;
          d. professional proficiency;
          e. scope of work;
          f. performance of the internal Shari'a Review work;
          g. management of the internal Shari'a Review;
          h. quality assurance; and
          i. elements of an effective internal Shari'a Review control system.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.4.2 IFR 6.4.2

        The Fund Manager must ensure that the internal Shari'a review referred to in this section is performed by the internal audit function of the Fund or the compliance function of the Fund and that the individuals or departments involved in performing the review are competent and sufficiently independent to assess compliance with Shari'a.

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.4.2 Guidance

          For the purposes of assessing competency of personnel or departments which perform the internal Shari'a review, Fund Manager should consult AAOIFI GSIFI No. 3 paragraphs 9 to 16 inclusive.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.4.2 [Deleted]

        [Deleted] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.4.3 [Deleted]

        [Deleted] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.5 IFR 6.5 Additional Disclosure in a Prospectus of an Islamic Fund which is a Public Fund

      Amended in accordance with Notice of Amendments to Legislation April 2011 [VER3/02-11]

      • IFR 6.5 Guidance

        Chapter 14 and in particular Rule 14.3.1 of the CIR module set out the Public Fund Prospectus requirements. In addition to complying with those requirements as applicable to the particular Fund, the Fund Manager of an Islamic Fund that is a Public Fund must comply with the additional requirements set out in this section. If an Islamic Fund is to be a Listed Fund, it must comply with chapter 6 of MKT and also comply with the additional requirements in this chapter.

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM220/2018 (Made 22nd February 2018). [VER13/12-18]

      • IFR 6.5.1 IFR 6.5.1

        A Fund Manager of an Islamic Fund which is a Public Fund must state in the Fund's Prospectus:

        (a) that all the operations in relation to the Fund will be conducted in accordance with Shari'a;
        (b) if the Fund has a Shari'a Supervisory Board appointed to it, the names of the members of the Shari'a Supervisory Board and their qualifications and experience and, whether or not the Fund Manager's Shari'a Supervisory Board is appointed to the Fund pursuant to IFR Rule 6.2.1(2);
        (c) if the Fund does not have a Shari'a Supervisory Board appointed to it pursuant to IFR Rule 6.2.1(3), what widely acceptable screening methodologies are used by the Fund to ensure Shari'a compliance with respect to investments made for the Fund, and the board that has approved them;
        (d) if applicable, the manner and frequency of Shari'a reviews;
        (e) how earnings prohibited by Shari'a will be disposed of;
        (f) whether Zakah is the responsibility of the Fund or the responsibility of the Unitholders;
        (g) the additional disclosure, if applicable, prescribed under IFR section A1.1 of App 1; and
        (h) in place of the disclaimer required under CIR App 7 for conventional Funds, a prominent disclaimer in bold, on the front page of the Prospectus, as follows:

        "The DFSA does not accept responsibility for the content of the information included in the Prospectus, including the accuracy or completeness of such information. The liability for the content of the Prospectus lies with the Issuer of the Prospectus and other Persons, such as Experts, whose opinions are included in the Prospectus with their consent. The DFSA has also not assessed the suitability of the Securities to which the Prospectus relates to any particular investor or type of investor and has not determined whether they are Shari'a compliant. If you do not understand the contents of this Prospectus or are unsure whether the Securities to which the Prospectus relates are suitable for your individual investment objectives and circumstances, you should consult an authorised financial advisor."
        (i) If the Islamic Fund is not a Listed Fund, in addition to the disclaimer specified in (h), an additional statement that:

        "The Securities to which this Prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of such Securities should conduct their own due diligence."
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]
        [Amended] DFSA RM220/2018 (Made 22nd February 2018). [VER13/12-18]

        • IFR 6.5.1 Guidance

          1. A Fund Manager should consider providing additional information to support the statement under IFR Rule 6.5.1 (a) as indicated in 2 and 3 below.
          2. The Fund Manager should provide sufficient details setting out the basis upon which the Fund has been approved and certified as Shari'a compliant by its Shari'a Supervisory Board. Such details should include the basis of the underlying principles, i.e. the Fatwas or rulings, including reference to any relevant Ijtihad, Ijma, Qiyas or other. Where applicable, reference should be made to any Islamic indices to be used. In addition, where applicable, the screening process and any filters used should be identified.
          3. The Fund Manager should set out each of the key features of the Fund and explain the rationale for determining why each of these features are considered Shari'a compliant by the Fund's Shari'a Supervisory Board.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

    • IFR 6.6 IFR 6.6 [Deleted]

      [Deleted] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.6 [Deleted]

        [Deleted] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.6.1 [Deleted]

        [Deleted] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

    • IFR 6.7 IFR 6.7 Investments in Other Funds

      • IFR 6.7.1

        (1) An Islamic Fund which is a Public Fund may invest in Units of another Fund only where the Fund Manager has taken reasonable care to determine that:
        (a) the other Fund is the subject of an independent annual audit conducted in accordance with relevant IFRS or other standards as applicable;
        (b) the other Fund has mechanisms in place to enable Unitholders to redeem their Units within a reasonable time; and
        (c) the other Fund is prohibited from having more than 20% of its value in the Units of Funds.
        (2) The Fund Manager must also have ascertained that there is a proper and disclosed basis for asset valuation and the pricing before investing in Units in the other Fund.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

    • IFR 6.8 IFR 6.8 [Deleted]

      [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 6.8.1 IFR 6.8.1 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

    • IFR 6.9 IFR 6.9 [Deleted]

      [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 6.9.1 IFR 6.9.1 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

    • IFR 6.10 IFR 6.10 Periodic Reports of an Islamic Fund

      • IFR 6.10 Guidance

        CIR Chapter 9 of CIR sets out the periodic reports and related requirements. These are additional requirements that apply to Islamic Funds.

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 6.10.1

        In addition to the matters specified in CIR section 9.4, an annual report of an Islamic Fund, other than a Fund which is an Umbrella Fund, must contain the report specified in IFR Rule 6.3.2(2).

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.11 IFR 6.11 Islamic Real Estate Investment Trusts (Islamic REITs)

      • IFR 6.11.1

        (1) A Fund Manager must ensure that it does not call, or otherwise hold out, a Fund as being an Islamic Real Estate Investment Trust or as being an Islamic REIT unless it is a Public Property Fund which is constituted in accordance with (2).
        (2) An Islamic REIT is a Public Property Fund which:
        (a) is constituted either as an Investment Company or as an Investment Trust;
        (b) is primarily aimed at investments in income generating Real Property which complies with Shari'a principles; and
        (c) distributes to the Unitholders at least 80% of its audited annual net income.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.11.2

        (1) A Fund Manager of an Islamic REIT must ensure that it distributes to the Unitholders as dividends each year an amount not less than 80% of its audited annual net income.
        (2) The Persons providing oversight functions in respect of the Fund must determine if any;
        (a) revaluation surplus credited to income, or
        (b) gains on disposal of Real Property,
        shall form part of net income for distribution to Unitholders.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.11.3

        Where an Islamic REIT holds any Real Property via one or more Special Purpose Vehicles, the Fund Manager must ensure that each Special Purpose Vehicle distributes to the Fund all of its income as permitted by the laws and regulations of the jurisdiction where the Special Purpose Vehicle is established.

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.11.4 IFR 6.11.4

        (1) A Fund Manager of an Islamic REIT must ensure, subject to (2), that any investment made in respect of property under development whether on its own or in a joint venture is undertaken only where the REIT intends to hold the developed property upon completion.
        (2) The total contract value of the property under development in (1) must not exceed 30% of the net asset value of the Fund Property of the Islamic REIT.
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.11.4 Guidance

          For the purposes of this Rule, the DFSA would not consider property development activities to include refurbishment, retrofitting and renovation.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 6.11.5 IFR 6.11.5

        A Fund Manager of an Islamic REIT may borrow either directly or through its Special Purpose Vehicle up to 65% of the gross asset value of the Fund provided that such borrowings are Shari'a compliant.

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] RM160/2015 (Made 9th December 2015). [VER9/02-16]
        [Amended] DFSA RMI274/2020 (Made 26th February 2020). [VER15/04-20]

        • IFR 6.11.5 Guidance

          1. The gross asset value of a Fund should be calculated as the total value of the Fund Property based on the most recent valuation under CIR Rule 8.4.1(1), but without making the deductions provided for in the other paragraphs of that Rule.
          2. As there are no specific risks that arise by virtue of a Fund being an Islamic Fund, the prudential requirements that apply to a Category 3 firm as set out in the PIB module apply to such Fund Managers. However, if the underlying assets of the Fund are invested in financial products or instruments that are Islamic and have certain features which would raise any prudential risks, it is the responsibility of the Fund Manager to address such risks. The DFSA would provide any additional clarifications regarding such matters upon request.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] RM160/2015 (Made 9th December 2015). [VER9/02-16]

    • IFR 6.12 IFR 6.12 Islamic Money Market Funds

      • IFR 6.12.1 IFR 6.12.1

        CIR Rules 13.8.1(2) and (3) and 13.8.2 apply to a Fund Manager of an Islamic Fund that is a Money Market Fund as if a reference to:

        (a) a Deposit or a Debenture includes an Islamic financial instrument or product with similar economic characteristics to a Deposit or a Debenture; and
        (b) an interest rate reset date is, in relation to an Islamic financial instrument or product, a reference to the date on which the rate of profit of return for that instrument or product is reset.
        [Added] RM160/2015 (Made 9th December 2015). [VER9/02-16]

        • IFR 6.12.1 Guidance

          A Fund Manager of an Islamic Money Market Fund must comply with the overriding obligation in CIR Rule 13.8.1 to ensure that the Fund's investment strategy is consistent with the investment objectives of a Money Market Fund as set out in CIR Rule 3.1.11. It must also comply with other applicable requirements for Money Market Funds such as the requirement to include a warning in the Fund Prospectus under CIR Rule 14.4.7.

          [Added] RM160/2015 (Made 9th December 2015). [VER9/02-16]

    • IFR 6.13 IFR 6.13 Islamic Exchange Traded Funds ("ETFs")

      • IFR 6.13.1 IFR 6.13.1

        (1) A Fund is an Islamic Exchange Traded Fund or Islamic ETF if it:

        (a) is constituted as an Open-ended Public Fund;
        (b) has its Units available for trading throughout the day on an exchange that meets the criteria in (2);
        (c) has at least one market maker (Authorised Participant) who:
        (i) purchases and redeems 'creation Units' of the Fund from the Fund Manager; and
        (ii) is prepared to buy and sell Units of the Fund throughout the day on the relevant exchange; and
        (d) meets the Shari'a related requirements in this chapter.

        (2) An exchange meets the requirement in (1)(b) if it is:

        (a) operated by an Authorised Market Institution;
        (b) regulated by a Financial Services Regulator in a jurisdiction that is a signatory to the IOSCO Multilateral Memorandum of Understanding for sharing information; or
        (c) regulated by a Financial Services Regulator in a jurisdiction which has entered into a bilateral memorandum of understanding with the DFSA for sharing information.

        (3) A Fund Manager, or any Person making an Offer of a Unit of Fund or otherwise marketing a Fund, must not describe the Fund in its offer document or marketing material as an "Exchange Traded Fund" (or "ETF") or otherwise hold out the Fund as being an Exchange Traded Fund or ETF, unless the Fund meets the criteria in (2).

        (4) The Fund Manager of an Islamic ETF must ensure that the Fund has an investment objective and strategy, which is to track the performance of a specified index or benchmark as specified in its Prospectus.

        Derived from DFSA RM220/2018 (Made 22nd February 2018). [VER13/12-18]

        • IFR 6.13.1 Guidance

          A Fund Manager of an Islamic ETF is required to comply with the requirements applicable to a conventional Fund so far as they apply to that ETF – see IFR Rule 6.1.1.(2).

          Derived from DFSA RM220/2018 (Made 22nd February 2018). [VER13/12-18]