1) PURIFICATION OF TAINTED INCOME BY INVESTORS
Background
The Shariah Advisory Council (the SAC) of the Securities Commission Malaysia has, at its 188th meeting held on 25th August 2016, deliberated on a proposal by the industry pertaining to the purification of dividends received and excess capital gained from the disposal of Shariah non-compliant securities after the date of announcement, as well as capital gained and dividends received from the disposal of Shariah non-compliant securities which were mistakenly invested (“Tainted Income”) to be undertaken by the investors.
Issue
The issue under deliberation was related to the permissibility of the purification of the Tainted Income to be undertaken by investors of the Islamic funds themselves instead of the fund manager of the Islamic funds.
Resolution
After due deliberation, the SAC has resolved that it had no objection to the proposal for the purification of the Tainted Income to be undertaken by the investors subject to the following conditions
(i) Upon receipt of the Tainted Income, the fund manager shall deposit the Tainted Income into a separate account which is segregated from the account of the Islamic fund;
(ii) The fund manager shall distribute the Tainted Income to the investors as soon as practically possible which shall be advised by the Shariah adviser of the Islamic fund;
 (iii) The fund manager shall inform/notify the investors of their obligations to purify the Tainted Income in accordance with Shariah principles upon distribution of the Tainted Income to the investors; and
  (iv) The processes and procedures for the purification of the Tainted Income by the investors shall be clearly disclosed in the prospectus/offering document.
 
The SAC also resolved that it had no objection for the fund manager to utilise a portion of the Tainted Income to pay all cost associated with the distribution of the Tainted Income.
 2) COLLATERAL FOR ISLAMIC SHARE MARGIN FINANCING
Background
The Shariah Advisory Council (the SAC) of the Securities Commission Malaysia has, at its 188th meeting held on 25 August 2016, deliberated on an enquiry from the industry in relation to collateral for Islamic share margin financing (SMF) for Islamic stockbroking services.

The current practice by Islamic Participating Organisations (POs) is to accept only Shariah-compliant securities as collateral for SMF. However, when such securities are subsequently reclassified as Shariah non-compliant securities (SNCS) by the Council in its bi-annual review, the Islamic POs would automatically exclude such securities as collateral resulting in margin call and/or forced selling of such securities.

Issues
The issue under deliberation was on the permissibility for the Islamic POs to maintain Shariah-compliant securities, which have been reclassified to SNCS, as collaterals for Islamic SMF.
Resolution
After due deliberation, the SAC has resolved that it is permissible for the Islamic POs to maintain Shariah-compliant securities, which have been reclassified to SNCS, as collaterals until the end of the Islamic SMF tenure.