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Learn about Islamic markets. You can find useful information such as the definition and paying of zakat on shares.

Treatment of Shariah Non-Compliant Securities

Treatment of Shariah Non-Compliant Securities

Frequently Asked Questions

  1. How should I treat Shariah non-compliant securities that I currently hold?

    For investors who invest based on Shariah principles, the Shariah Advisory Council (SAC) of the Securities Commission Malaysia (SC) advise to dispose of any Shariah non-compliant securities which they presently hold, within a month of knowing the status of the securities.

  2. Can the return from the disposal of Shariah non-compliant securities be kept?

    Any return, either in the form of capital gain or dividend, received during or after the disposal of the securities has to be donated to charity. The investors nonetheless have a right to retain the original investment costs.

  3. Can Shariah compliant securities be reclassified as Shariah non-compliant?

    Securities can indeed lost their Shariah compliant status due to reasons such as changes in business operation. Takeover and merger and acquisition (M&A) can also cause securities to become Shariah non-compliant.

  4. How should I treat securities that have been reclassified as Shariah non-compliant?

    For securities that have lost their Shariah compliant status, investors must liquidate them promptly. Any capital gain arising from the disposal of these Shariah non-compliant securities made at the time of the change-in-Shariah-status announcement can be kept by the investors.

  5. Can the disposal of Shariah non-compliant securities be done after the announcement day?

    For disposal after the announcement day, any excess capital gain derived from market price higher than the closing price on the announcement day should be donated to charitable bodies.

    Nonetheless, investors are allowed to hold their investment in the Shariah non-compliant securities if the market price of the said securities is below the original investment costs. It is also permissible to keep the dividends received during the holding period. Once the total amount of dividends received and the market value of the Shariah non-compliant securities is equal to the original investment costs, investors are advised to dispose of their holdings.

    Treatment of Shariah Non-Compliant Securities
    Disposal Price Disposal Date Capital Gain
    Higher than original investment costs On announcement day Permissible
    Higher than announcement day's closing price After announcement day Impermissible
  6. How do I determine the original investment costs?

    Original investment costs may include brokerage cost or other related transaction costs.

Guidance on treatment of Shariah non-compliant securities is included in the list of Shariah compliant securities issued every May and November by the SAC of SC.