27 March 2007 — DFSA enters into mutual recognition agreement with Malaysian Securities Commission to facilitate cross-border flows of Islamic Investment Funds
Putrajaya, Malaysia, 27 March 2007: The Dubai Financial Services Authority (DFSA) has entered into a mutual recognition agreement to facilitate cross border distribution of Islamic investment products with the Securities Commission of Malaysia (SC). The agreement was signed today by Dato’ Zarinah Anwar, Chairman of the SC, and Mr. David Knott, Chief Executive of the DFSA at a ceremony in Kuala Lumpur, witnessed by the Second Finance Minister of Malaysia, Yang Berhormat Tan Sri Nor Mohamed Yakcop.
David Knott said: "The DFSA is delighted that, as a result of this joint initiative, DIFC domestic Funds will be the first foreign funds permitted to be sold into Malaysia. This arrangement is a positive step for both jurisdictions, and is intended to facilitate the cross border flow of Islamic capital market products, as envisaged when this initiative was first announced in August 2006.”
“The DFSA is committed to assisting both the Dubai International Financial Centre (DIFC) and the Dubai International Financial Exchange (DIFX) in their objective to promote innovation and growth of Islamic capital markets in the Middle East,” he added.
This is the first mutual recognition agreement entered into by both regulators, and is a significant milestone for both the SC and the DFSA in the area of cross-border regulation of Islamic investment funds and the development of deeper and broader investment markets. Under the mutual recognition framework, Islamic funds that have been approved by the SC may be marketed and distributed in the DIFC with minimal regulatory intervention, following the entry of Malaysia onto the DFSA’s list of Recognised Jurisdictions. Similarly, Islamic funds which have been registered or notified with the DFSA will be able to have access to Malaysian investors. Supported by a bilateral memorandum of understanding, both regulators will work closely in the areas of supervision and enforcement of securities laws to ensure adequate protection for investors.
This follows an earlier announcement, on 15 August 2006, of a joint initiative on regulatory alignment to facilitate Islamic finance transactions between the DIFC and Malaysia, which is now complete. The agreement today marks a significant liberalisation effort on the part of the SC and DFSA to encourage the bilateral flow of Islamic funds between the two jurisdictions.
Dato’ Zarinah said, “By entering into a mutual recognition arrangement with the DFSA, it demonstrates our mutual intention to accelerate the growth of our respective investment management industries through the trading in each other’s markets of mutually recognised investment products that are acceptable to both authorities. The mutual recognition framework will provide many benefits to market participants including lower regulatory cost as well as an enlarged investor base. It will also provide investors in each jurisdiction with greater choice of Islamic investment products. This arrangement with the DFSA is also in line with the Malaysia’s aspiration to evolve its role as an international Islamic financial centre”.