The Securities and Exchange Commission of Pakistan (SECP) has announced the Shariah Governance Regulations, 2023, as part of an effort to enhance the regulatory framework. These new regulations combine and replace the earlier Shariah Governance Regulations, 2018, and the Shariah Advisors Regulations, 2017.
Under Section 512(1) of the Companies Act, 2017, these regulations introduce the concept of voluntary Shariah supervisory boards and establish specific requirements for Shariah stock screening of listed securities. Additionally, Section 451 of the Act’s jurisdiction now covers all securities.
The new regulations eliminate the need for the renewal of Shariah-compliant securities and strengthen the qualifications and experience requirements for Shariah advisors. They also redefine the powers and functions of Shariah advisors, allowing them to offer services in all regulated sectors. Furthermore, the format of the independent assurance report by the external Shariah auditor, as agreed with by ICAP, has been added.
These regulations were developed through extensive public consultation involving representatives from various sectors, including listed companies, brokers, asset management companies, mutual funds, and Shariah advisors.
The SECP anticipates that this framework will increase confidence in Islamic finance, attract investors, promote financial stability, stimulate innovation, and encourage growth in sectors aligned with Islamic principles, which aligns with SECP’s priorities. The full Shariah Governance Regulations, 2023, are available on the SECP’s official website.