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ISLAMABAD: The Securi­ties and Exchange Commission of Pakistan (SECP) has notified draft Sharia Governance Regulations 2018.

Theres regulations are for governance of Sharia-compliant companies and entities including the Sharia-compliant securities and Islamic financial institutions.

The regulations are the first-ever holistic Sharia governance framework introduced by the corporate sector regulator as all the earlier frameworks were only related to limited products or sectors.

The concept of a Sharia-compliant company and security was introduced through provisions incorporated in the Companies Act, 2017 empowering SECP to implement the scheme of certification of Sharia-compliant companies and securities.

The provision enabled SECP to regulate almost every aspect of Sharia-compliant products, services and businesses, which had become imperative given the growth of Islamic finance.

The SECP regulates highly important segments of the Islamic financial services industry, including modarabas, takaful, Islamic NBFIs, Islamic mutual funds, pension funds, real estate investment trusts, Sharia-compliant companies and securities.

In order to bring harmonisation, standardisation and transparency in the practices of these businesses, the SECP’s Islamic Finance Department (IFD) reviewed Sharia governance frameworks and Islamic finance provisions of several international jurisdictions.

Keeping in mind the domestic Islamic financial and socio-economic environs, IFD drafted regulations on a range of Sharia-related areas such as certification of companies and securities, screening criteria, functions and responsibilities of advisor, external and internal audit, compliance, disclosure requirements, systems and controls, accounting, auditing and governance standards.

These regulations will lead to the development of long-term, sustainable Islamic financial market, corporate sector and capital markets in Pakistan.

Considering the need for such an extensive framework, IFD conducted consultation sessions with Sharia advisors, State Bank, Pakistan Stock Exchange, Institute of Chartered Accountants Pakistan, takaful companies, modaraba and NBFI Association.

The Sharia governance framework was also presented to the Implementation Committee’s subcommittee on Islamic capital market and to the SECP’s Sharia Advisory Board (SAB).

The regulations are now open to public consultation and stakeholders have the opportunity to share their comments and suggestions within two weeks.

Published in Dawn, March 2nd, 2018