Entire Section
IFR 6.2 IFR 6.2 Shari'a Supervisory Board for an Islamic Fund
IFR 6.2.1 IFR 6.2.1
(1) AFund Manager of aDomestic Fund that is aPublic Fund must, subject to (3), appoint aShari a Supervisory Board to itsFund that meets the following requirements:(a) theShari a Supervisory Board has at least three members;(b) the members appointed to theShari a Supervisory Board are competent to perform their functions asShari a Supervisory Board members of theFund ;(c) any appointments, dismissals or changes in respect of members of theShari a Supervisory Board are approved by theGoverning Body of theFund Manager ; and(d) no member of theShari a Supervisory Board is a director orController of the Fund or itsFund Manager .(2) AFund Manager may comply with the requirement in (1) by appointing to theFund the sameShari 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) AFund Manager is not required to comply with the requirement in (1) where it relies, for the purposes of making investments for theFund , 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 aFinancial 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 aShari'a Supervisory Board for the purposes of IFR Rule 6.2.1(1), theFund Manager should consider the previous experience and qualifications of the proposedShari'a Supervisory Board members to assess whether the proposedShari'a Supervisory Board member is competent to advise on the activities undertaken by theIslamic Fund . If theFund Manager is appointing the sameShari'a Supervisory Board as it has appointed to the firm pursuant to IFR Rule 6.2.1(2), theFund 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 theFund 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, theFund Manager should be able, upon request by theDFSA , to demonstrate to the satisfaction of theDFSA the grounds on which it considers the particular methodology used to be acceptable and reliable.3. Although theFund Managers ofExempt Funds andQualified Investor Funds are not subject to the requirement for the appointment of aShari'a Supervisory Board for such a Fund, they would need to ensure that theExempt Funds orQualified Investor Funds they manage continue to meet the applicable Shari'a requirements applicable to theFund . They may use a member of theShari'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 theUnitholder of theExempt Fund orQualified Investor Fund as to how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between theUnitholders and theFund 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 itsShari'a Supervisory Board to meet theShari'a Supervisory Board requirement relating to theFund 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), theFund Manager of aFund must document theFund's policy in relation to:(a) how appointments, dismissals or changes will be made to theShari'a Supervisory Board ;(b) the process through which the suitability ofShari'a Supervisory Board members will be considered; and(c) the remuneration of the members of theShari'a Supervisory Board .(2) If theFund Manager , pursuant to IFR Rule 6.2.1(2), appoints to theFund 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), theFund Manager of aFund must establish and retain, for six years, records of:(a) its assessment of the competency of theShari'a Supervisory Board members;(b) the agreed terms of engagement of each member of theShari'a Supervisory Board ; and(2) If theFund Manager , pursuant to IFR Rule 6.2.1(2), appoints to theFund the sameShari'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 ofShari'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 theShari'a Supervisory Board members;c. the basis upon which theFund Manager has deemed that the proposedShari'a Supervisory Board member is suitable; andd. details of any otherShari'a Supervisory Boards of which the proposedShari'a Supervisory Board member is, or has been, a member.2. If theFund 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) TheIslamic Financial Business policy and procedures manual must provide that:(a) a member of theShari'a Supervisory Board is obliged to notify theFund Manager of any conflict of interest that such member may have with respect to theFund or theFund Manager , and if appointed, or in the case of anInvestment Trust , theTrustee ; and(b) theFund Manager will take appropriate steps to manage any such conflict of interest so that theIslamic Financial Business is carried out appropriately and in compliance with Shari'a, the interest of aUnitholder is not adversely affected and allUnitholders are fairly treated and not prejudiced by any such interests.(2) If aFund 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 aFund must provide theDFSA 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 theShari'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) TheFund Manager of aFund must take reasonable steps to ensure that theFund Manager and theFund's Employees :(a) provide such assistance as theShari'a Supervisory Board reasonably requires to discharge its duties;(b) give theShari'a Supervisory Board right of access at all reasonable times to relevant records and information;(c) do not interfere with theShari'a Supervisory Board's ability to discharge its duties; and(d) do not provide false or misleading information to theShari'a Supervisory Board .(2) If appointed, theTrustee must also take reasonable steps to ensure that itsEmployees 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]