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 Managerof a Domestic Fundthat is a Public Fundmust, subject to (3), appoint a Shari a Supervisory Boardto its Fundthat meets the following requirements:(a) the Shari a Supervisory Boardhas at least three members;(b) the members appointed to the Shari a Supervisory Boardare competent to perform their functions as Shari a Supervisory Boardmembers of the Fund;(c) any appointments, dismissals or changes in respect of members of the Shari a Supervisory Boardare approved by the Governing Bodyof the Fund Manager; and(d) no member of the Shari a Supervisory Boardis a director or Controller of the Fundor its Fund Manager.(2) A Fund Managermay comply with the requirement in (1) by appointing to the Fundthe same Shari a Supervisory Boardas 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 Manageris 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.
IFR 6.2.1 Guidance1. In appointing a
Shari'a Supervisory Boardfor the purposes of IFR Rule 6.2.1(1), the Fund Managershould consider the previous experience and qualifications of the proposed Shari'a Supervisory Boardmembers to assess whether the proposed Shari'a Supervisory Boardmember is competent to advise on the activities undertaken by the Islamic Fund. If the Fund Manageris appointing the same Shari'a Supervisory Boardas it has appointed to the firm pursuant to IFR Rule 6.2.1(2), the Fund Managershould 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 Manageris 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 Managershould be able, upon request by the DFSA, to demonstrate to the satisfaction of the DFSAthe grounds on which it considers the particular methodology used to be acceptable and reliable.3. Although the Fund Managersof Exempt Fundsand Qualified Investor Fundsare not subject to the requirement for the appointment of a Shari'a Supervisory Boardfor such a Fund, they would need to ensure that the Exempt Fundsor Qualified Investor Fundsthey manage continue to meet the applicable Shari'a requirements applicable to the Fund. They may use a member of the Shari'a Supervisory Boardappointed at the firm level for the purposes of ascertaining compliance with the Shari'a requirements. The manner in which they demonstrate to the Unitholderof the Exempt Fundor Qualified Investor Fundas to how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the Unitholdersand 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 Boardto meet the Shari'a Supervisory Boardrequirement relating to the Fundas 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 Managerof a Fundmust document the Fund'spolicy 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 Boardmembers 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 Fundthe 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.
IFR 6.2.3 IFR 6.2.3(1) Subject to (2), the
Fund Managerof a Fundmust establish and retain, for six years, records of:(a) its assessment of the competency of the Shari'a Supervisory Boardmembers;(b) the agreed terms of engagement of each member of the Shari'a Supervisory Board; and(2) If the Fund Manager, pursuant to IFR Rule 6.2.1(2), appoints to the Fundthe same Shari'a Supervisory Boardit 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.
IFR 6.2.3 Guidance1. The records of the assessment of competency of
Shari'a Supervisory Boardmembers 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 Boardmembers;c. the basis upon which the Fund Managerhas deemed that the proposed Shari'a Supervisory Boardmember is suitable; andd. details of any other Shari'a Supervisory Boardsof which the proposed Shari'a Supervisory Boardmember is, or has been, a member.2. If the Fund Manageris 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).
IFR 6.2.4(1) The
Islamic Financial Businesspolicy and procedures manual must provide that:(a) a member of the Shari'a Supervisory Boardis obliged to notify the Fund Managerof any conflict of interest that such member may have with respect to the Fundor the Fund Manager, and if appointed, or in the case of an Investment Trust, the Trustee; and(b) the Fund Managerwill take appropriate steps to manage any such conflict of interest so that the Islamic Financial Businessis carried out appropriately and in compliance with Shari'a, the interest of a Unitholderis not adversely affected and all Unitholdersare fairly treated and not prejudiced by any such interests.(2) If a Fund Manageris unable to manage a conflict of interest as provided above, it must dismiss or replace the member as appropriate.
Fund Managerof a Fundmust provide the DFSAat 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.
IFR 6.2.6(1) The
Fund Managerof a Fundmust take reasonable steps to ensure that the Fund Managerand the Fund's Employees:(a) provide such assistance as the Shari'a Supervisory Boardreasonably requires to discharge its duties;(b) give the Shari'a Supervisory Boardright of access at all reasonable times to relevant records and information;(c) do not interfere with the Shari'a Supervisory Board'sability to discharge its duties; and(d) do not provide false or misleading information to the Shari'a Supervisory Board.(2) If appointed, the Trusteemust also take reasonable steps to ensure that its Employeescomply with (1)(a)–(d).