By MICHAEL EBOH & RITA OBODOECHINA
The International Organization of Securities Commissions, IOSCO, has disclosed that it is considering setting up a regulatory standard for global capital markets, stipulating the proper disclosure requirements for Islamic capital market products.
This, according to a statement by IOSCO, is in view of the growing recognition of the increasing significance of Islamic capital market, especially in view of rising cross-border transactions.
The Nigerian Stock Exchange, NSE, had a couple of weeks ago partnered Lotus Capital to launch the NSE Lotus Islamic Index, NSE LII, designed to track the performance of Shari’ah compliant equities on the floor of the NSE.
According to IOSCO, the growing recognition of the increasing significance of the Islamic capital market, especially in view of rising cross-border transactions, has triggered the need for stronger oversight, greater transparency and more robust disclosure requirements.
Commenting on the proposed regulation, Datuk Ranjit Ajit Singh, Chairman of the Securities Commission of Malaysia, SC, who is also an IOSCO Board member and the Vice-Chair of the IOSCO Emerging Markets Committee, said, “As the Islamic capital market expands and becomes more global, it is increasingly important that issues surrounding investor protection and market integrity are addressed from a cross-jurisdictional perspective.
“It is therefore critical for regulators and standard-setters such as the Islamic Financial Services Board, IFSB, and IOSCO to further examine disclosure regimes for Islamic capital market products, with a view to allowing more informed investment decision-making and to promote the further growth of the Islamic capital market.”
Also speaking, Mr Jaseem Ahmed, Secretary General of IFSB, explained that promoting cross-border financing and investment through Islamic finance is critical to attaining the depth and scale in Islamic capital markets needed to be competitive.
He said, “This will require the adoption of robust regulatory and disclosure practices that give confidence to investors and consumers alike. IFSB hopes that this collaboration with IOSCO will facilitate a process leading to a set of practices that could be harmonised or mutually agreed upon.”
Mr David Wright, Secretary General of IOSCO, also said “The recent financial crises highlighted the importance of sound disclosure regimes in mitigating systemic risk and building confidence in the financial markets.
“Given the tremendous growth of the Islamic Finance industry – an increasingly important segment of the global financial markets – it is essential to achieve greater harmonization in disclosure requirements across jurisdictions where Islamic capital market products are offered.”