Malta Shariah Funds – Highwire Extensions

The MFSA issued guidance notes to assist promoters establishing PIFs to be shariah-compliant in terms of the local regulations and the act.

For further details on the law and regulations and license conditions and Guidance Notes, click here.

PIFs may generally be structured as either:

Shariah-compliant equity fund;
Shariah-compliant equity fund;
Murabaha fund.

Other structures may also be considered by the MFSA provided that such structures are compliant with Shariah law.

Shariah-compliant funds are generally subject to the same rules and regulations applicable to all of the PIFs established in Malta.

Additional requirements apply, including:

Risk-spreading principles need to be followed unless this is waived or is not a requirement in terms of the proviso to the definition of “collective investment scheme” in the Act;
The managing body of the PIF (e.g., board of directors) is responsible to ensure that the relevant Shariah principles and requirements as disclosed in all information provided to investors are adhered by the PIF;
Extra-financial criteria will comply, which are mainly any additional Shariah guidelines which the PIF will adopt; and
In addition to the key service providers, a Shariah advisory board must be appointed.

The purpose of the Board is to ensure that transactions and/or activities carried out on behalf of the CIS are in compliance with Shariah principles and guidelines.

The Board needs to be composed of at least two “internationally recognized Islamic Shariah scholars. Members of the Shariah advisory board are to be independent from the asset manager (or the portfolio management function in a “internally managed” PIF). A legal entity may be appointed as Shariah advisor, which in turn would appoint a Shariah advisory board.