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  • Islamic Finance Rules (IFR) [VER12/01-18]

    • IFR 1 Introduction

      • IFR 1.1 Application

        • IFR 1.1.1

          This module (IFR) applies to:

          (a) every PersonG who carries on, or holds itself out as carrying on, a Financial ServiceG in or from the DIFCG as in accordance with Shari'a;
          (b) a Domestic FundG which is operated or held out as being operated as an Islamic FundG ; and
          (c) a PersonG making an OfferG in or from the DIFCG relating to an InvestmentG which is held out as Islamic or Shari'a compliant.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 1.1.1 Guidance

            1. Most of the requirements that apply to PersonsG conducting Financial ServicesG or distributing SecuritiesG as Islamic or Shari'a compliant are included in this module. There are other more generic requirements relating to such Financial ServicesG or activities that are included in other modules of the DFSA Rulebook.
            2. To enable PersonsG carrying on or proposing to carry on Islamic finance activities to easily access the Islamic finance related requirements applicable to their activities, the DFSA has created a web-based Islamic Finance Handbook. This handbook allows electronic navigation to reach the relevant provisions in the IFR and other DFSA Rulebook modules where Islamic finance related requirements applicable to specific Islamic finance activities are located. The handbook is accessible from the DFSA web-site.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 1.2 Overview of the IFR Module

        • IFR 1.2 Guidance

          1. Rules in this module are made under or for the purposes of a number of laws, including the Regulatory Law 2004, the Law Regulating Islamic Financial Business 2004 and the Collective Investment Law 2010. Guidance may indicate the relevant legislation.
          2. Chapters IFR 2 and IFR 3 contain the general requirements and obligations that apply to an Authorised PersonG who carries on any Financial ServiceG as Islamic Financial BusinessG . IFR Chapter 4 contains the accounting and audit requirements that apply to such Persons.
          3. IFR Chapter 5 contains additional requirements that apply to an Authorised FirmG that carries on the Financial ServiceG of Managing Profit Sharing AccountsG .
          4. IFR Chapter 6 contains the additional requirements that apply to a Fund ManagerG of an Islamic FundG .
          5. IFR Chapter 7 contains specific requirements that apply to Reporting EntitiesG which Offer SecuritiesG as Shari'a compliant. However, the general requirements that apply to such Offers with which the Reporting EntitiesG must comply continue to be in the Market Rules (MKT module).
          6. IFR Chapter 8 contains the additional requirements applying to PersonsG who carry on Insurance BusinessG or Insurance IntermediationG as Takaful InsuranceG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM94/2012 (Made 14th June 2012). [VER4/06-12]

    • IFR 2 Islamic Finance

      • IFR 2.1 Application

        • IFR 2.1.1

          This chapter applies to every PersonG to whom this module applies in accordance with IFR Section 1.1.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 2.2 Activities that Constitute Islamic Financial Business

        • IFR 2.2 Guidance

          1. Article 10 of the Law Regulating Islamic Financial Business 2004 prescribes what constitutes Islamic Financial Business.G In essence, where a PersonG engages in any activity that constitutes a Financial ServiceG and carries on or holds out the activity as being conducted in accordance with Shari'a, that activity constitutes Islamic Financial BusinessG .
          2. GEN section 2.2 sets out the activities that constitute a Financial ServiceG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 2.3 Conducting Islamic Financial Business

        • IFR 2.3 Guidance

          1. Article 9 of the Law Regulating Islamic Financial Business 2004 provides that in order to conduct Islamic Financial BusinessG , the Authorised PersonG must have an endorsed Licence authorising it to conduct such business:
          a. as an Islamic Financial InstitutionG ; or
          b. by operating an Islamic WindowG .
          2. Article 11 of the Law Regulating Islamic Financial Business 2004 governs the making of an application for an endorsement to conduct Islamic Financial BusinessG .
          3. Article 11(5) of the Law Regulating Islamic Financial Business 2004 governs the grant of an endorsement to conduct Islamic Financial BusinessG as either an Islamic Financial InstitutionG or by operating an Islamic WindowG . A PersonG must obtain the relevant endorsement before carrying on Islamic Finance BusinessG as an Islamic Financial InstitutionG or through an Islamic WindowG .
          4. An Authorised PersonG with an endorsement to operate an Islamic WindowG may conduct some of its activities as a conventional Financial ServiceG while conducting its Islamic Financial BusinessG through the Islamic WindowG .
          5. If Islamic Financial BusinessG (whether through an Islamic Financial InstitutionG or Islamic WindowG ) is provided to Retail ClientsG , the Authorised PersonG must also have a Retail EndorsementG on its LicenceG .
          6. A PersonG may, subject to any restrictions in the DFSA Rules, carry on more than one Financial ServiceG , provided that PersonG has the relevant authorisations or endorsements on its LicenceG as are applicable.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 2.4 Islamic Financial Instruments and Products

        • IFR 2.4 Guidance

          1. The DFSA regulatory regime applies to a PersonG carrying on any Islamic financial activities in or from the DIFC if the activity:
          a. relates to a financial instrument or product of the kind described in Guidance Notes 3 (Profit Sharing Investment AccountsG ), 5 (Investments), and 7 (Takaful insurance) below; and
          b. is conducted by way of business and not expressly excluded from regulation as a Financial ServiceG . Note there are a number of such exclusions in GEN chapter 2.
          2. The DFSAG will, when considering the treatment of Islamic Financial BusinessG arrangements, take a "substance over form" approach.
          3. The issue of financial products which are SecuritiesG such as SharesG , DebenturesG or UnitsG as defined in GEN A2.1.2 (which are a subset of the definition of Investments — see Guidance Note 5), attracts product specific disclosure requirements such as ProspectusG or Exempt Disclosure StatementsG . Where such products are included on an Official List of SecuritiesG or made available to the public in the DIFC, there are initial and ongoing disclosure and other obligations that apply to the Reporting EntityG (generally the issuer) under the MKT module. These MKT obligations are quite distinct from the obligations that apply to PersonsG carrying on Financial ServicesG in respect of such financial products.

          Profit Sharing Investment Accounts (PSIAs)

          4. PSIAsG do not fall within the GEN definitions of InvestmentsG . They are contractual arrangements under which Authorised FirmsG invest clients' funds, often (though not always) on a pooled basis, and are generally treated by the firm as off balance sheet. They are sometimes structured under MudarabaG , so that the investor in principle bears the full investment risk. Although PSIAsG have the characteristics of a Collective Investment FundG , under an express exclusion provided under CIR Rule 2.1.13, they are not treated as such. Instead, Managing a PSIAG is a distinct Financial ServiceG as defined in Rules GEN 2.2.2(r) and GEN 2.21.
          5. As Managing a PSIAG is a Financial ServiceG , the DFSA regulatory regime that applies to PersonsG carrying on Financial ServicesG in or from the DIFC applies to Authorised FirmsG that manage PSIAsG . As PSIAsG are not InvestmentsG , the offer of PSIAsG , does not attract prospectus-like disclosure. Instead, it attracts a tailored regulatory regime that applies to the entity, i.e. an Authorised FirmG , that manages the PSIAsG (see IFR chapter 5 for these Rules). The Financial Service of AdvisingG on Financial ProductsG will apply to a PersonG giving advice on the merits of investing in a PSIAG (as a PSIAG is defined as a 'financial product' for the purposes of that activity). However, other activities such as dealing and arranging and COB requirements relating to those activities do not apply to a PSIAG (as it is not an InvestmentG as defined in GEN).

          Investments

          6. InvestmentsG comprise two types of products; SecuritiesG and DerivativesG . These products are defined in GEN App2. Most of the conventional Investments defined in GEN App2 can be offered as Islamic financial products, provided the relevant requirements including Shari'a principles are adhered to and in accordance with any Shari'a Supervisory BoardG rulings as applicable. While not an exhaustive list, conventional Investments that are commonly used as Islamic financial products include SharesG , SukuksG , Units of Islamic FundsG and also Structured ProductsG . Increasingly, DerivativesG are also being developed in accordance with Shari'a, such as a contract where the rights and liabilities of the parties are determined by reference to an underlying factor such as property of any description, currency rate or index, provided that the underlying factor in itself is Shari'a compliant and the contract does not involve any fundamental uncertainty (Gharar).
          7. The DFSA regulatory regime applies to PersonsG who carry on in or from the DIFC any Financial ServicesG activity in relation to any Islamic financial products that fall within the definition of InvestmentsG . However, particular products or instruments such as Profit Sharing Investment AccountsG (PSIAs), TakafulG and Islamic FundsG attract product/instrument specific additional conduct and other requirements, which are included in this module.

          Takaful insurance

          8. Takaful insurance generally refers to an arrangement where an insurer establishes a Shari'a compliant fund, predicated for mutual protection, where participants donate a part of their contributions to the common fund which will be used to meet claims payments and any participation rights. The TakafulG insurer's role is generally confined to managing the insurance activities and investing the fund assets in accordance with Shari'a.
          9. Persons conducting TakafulG insurance are conducting Insurance BusinessG . There are two types of Financial ServicesG that comprise Insurance BusinessG , ie, Effecting Contracts of InsuranceG or Carrying out Contracts of InsuranceG . Accordingly, any PersonG carrying on these Financial ServicesG activities is subject to the DFSA regime for regulating Financial ServicesG . Where such activities are carried out as TakafulG insurance, there are additional TakafulG specific requirements that apply to such an insurer, which are set out in this module (see IFR chapter 8). In addition, there are certain activities relating to insurance, such as advising and arranging, which are regulated as Insurance IntermediationG (see GEN section 2.19). PersonsG conducting those activities in relation to TakafulG insurance are regulated in the same way as PersonsG conducting such activities in relation to conventional insurance.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          Amended in accordance with Notice of Amendments to Legislation April 2011 [VER3/02-11]
          [Amended] DFSA RM94/2012 (Made 14th June 2012). [VER4/06-12]
          [Amended] RM192/2016 (Made 7th December 2016). [VER11/02-17]

    • IFR 3 General Obligations

      • IFR 3.1 Application

        • IFR 3.1.1

          This chapter applies to an Authorised PersonG which carries on Islamic Financial BusinessG in or from the DIFC.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.1.1 Guidance

            "Authorised Person" is defined in the GLO module as an Authorised FirmG or Authorised Market InstitutionG .

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 3.2 Constitution of an Islamic Financial Institution

        • IFR 3.2.1

          An Authorised PersonG which is an Islamic Financial InstitutionG must ensure that its constitutional documents state that its entire business will be conducted in accordance with Shari'a.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.2.1 Guidance

            Article 10 of the Law Regulating Islamic Financial Business 2004 provides that an Islamic Financial InstitutionG is an Authorised PersonG whose entire business is conducted in accordance with Shari'a.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 3.3 Systems and Controls

        • IFR 3.3.1

          An Authorised FirmG conducting Islamic Finance BusinessG must establish and maintain systems and controls which enable it to comply with the applicable Shari'a requirements.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.3.1 Guidance

            1. This Chapter should be read in conjunction with Chapter 5 of the GEN Module.
            2. Responsibility for ensuring that an Authorised PersonG complies with Shari'a ultimately rests with its senior management. The systems and controls required by Rule 3.3.1 will assist senior management to ensure that there is such compliance.
            3. The Governing BodyG should, when setting the business objectives and strategies of the firm and on an on-going basis, make use of the expertise of the firm's Shari'a Supervisory Board as appropriate.
            4. Similarly, Persons Undertaking Risk Control FunctionsG of the firm, particularly compliance and internal audit, should have easy access to the Shari'a Supervisory BoardG in relation to matters involving Shari'a compliance.
            5. The members of the SSB should also have adequate access to the Governing BodyG , senior management and the Persons Undertaking Key Control FunctionsG as appropriate to ensure that their roles can be effectively discharged.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 3.4 Policy and Procedures Manual

        • IFR 3.4.1

          An Authorised PersonG undertaking Islamic Financial BusinessG must implement and maintain an Islamic Financial BusinessG policy and procedures manual which addresses the following matters:

          (a) the manner in which the compliance function will be undertaken, in respect of Shari'a compliance;
          (b) the manner in which the Shari'a Supervisory BoardG will oversee and advise in regard to the Islamic Financial BusinessG conducted by the Authorised PersonG ;
          (c) the manner in which Shari'a Supervisory BoardG fatwas, rulings and guidelines will be recorded, disseminated and implemented and the internal Shari'a review undertaken;
          (d) the manner in which disputes between the Shari'a Supervisory BoardG and the Authorised PersonG in respect of Shari'a compliance will be addressed;
          (e) the process for approving those internal systems and controls which are in place to ensure not only that the Islamic Financial BusinessG is carried out in compliance with Shari'a, but that information is disseminated, using an appropriate method and manner, to investors and, in the case of an Authorised Market InstitutionG , PersonsG to whom access to its facilities are provided;
          (f) the manner in which conflicts of interest will be identified and managed including where prescribed; and
          (g) in respect of an Authorised PersonG operating an Islamic WindowG , the systems and controls in place to ensure the appropriate separation of the Islamic Financial BusinessG of the Authorised PersonG from its conventional business.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 3.5 Shari'a Supervisory Board

        • IFR 3.5 Guidance

          Article 13 of the Law Regulating Islamic Financial Business 2004 requires an Authorised PersonG undertaking Islamic Financial BusinessG to appoint a Shari'a Supervisory BoardG .

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.5.1

          When an Authorised PersonG appoints a Shari'a Supervisory BoardG , it must ensure that:

          (a) the Shari'a Supervisory BoardG has at least three members;
          (b) the members appointed to the Shari'a Supervisory BoardG are competent to perform their functions as Shari'a Supervisory BoardG members;
          (c) any appointments, dismissals or changes in respect of members of the Shari'a Supervisory BoardG are approved by the Governing BodyG of the Authorised PersonG ; and
          (d) no member of the Shari'a Supervisory BoardG is a director or ControllerG of the Authorised PersonG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.5.1 Guidance

            For the purposes of IFR Rule 3.5.1, an Authorised PersonG should consider the previous experience and qualifications of the proposed Shari'a Supervisory BoardG members to assess whether the proposed Shari'a Supervisory BoardG member is competent to advise on the Islamic Financial BusinessG to be undertaken by the Authorised PersonG .

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.5.2

          An Authorised PersonG must document its policy in relation to:

          (a) how appointments, dismissals or changes will be made to the Shari'a Supervisory BoardG ;
          (b) the process through which the suitability of Shari'a Supervisory BoardG members will be considered; and
          (c) the remuneration of the members of the Shari'a Supervisory BoardG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.5.3

          An Authorised PersonG must establish and maintain, for six years, records of:

          (a) its assessment of the competency of the Shari'a Supervisory BoardG members;
          (b) the agreed terms of engagement of each member of the Shari'a Supervisory BoardG ; and
          (c) the matters in Rules IFR 3.5.1(c) and IFR 3.5.2.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.5.3 Guidance

            The records of the assessment of competency of Shari'a Supervisory BoardG members should clearly indicate; at least:

            a. the factors that have been taken into account when making the assessment of competency;
            b. the qualifications and experience of the Shari'a Supervisory BoardG members;
            c. the basis upon which the Authorised PersonG has deemed that the proposed Shari'a Supervisory BoardG member is suitable; and
            d. details of any other Shari'a Supervisory BoardsG of which the proposed Shari'a Supervisory BoardG member is, or has been, a member.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.5.4

          (1) The Authorised PersonG must ensure that the Islamic Financial BusinessG policy and procedures manual it is required to maintain under IFR Rule 3.4.1 provides that:
          (a) a member of the Shari'a Supervisory BoardG is obliged to notify the Authorised PersonG of any conflict of interest that such member may have with respect to the Authorised PersonG or, in the case of an Investment TrustG , the TrusteeG ; and
          (b) the Authorised PersonG will take appropriate steps to manage any such conflict of interest so that the Islamic Financial BusinessG is carried out appropriately and in compliance with Shari'a, the interest of a ClientG is not adversely affected and all ClientsG are fairly treated and not prejudiced by any such interests.
          (2) If an Authorised PersonG is unable to manage a conflict of interest as provided above, it must dismiss or replace the member as appropriate.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.5.5

          If requested by the DFSA, an Authorised PersonG must provide the DFSA with information on its appointed or proposed Shari'a Supervisory BoardG members with regard to the qualifications, skills, experience and independence of the Shari'a Supervisory BoardG members.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.5.6

          An Authorised PersonG must take reasonable steps to ensure that it and its EmployeesG :

          (a) provide such assistance as the Shari'a Supervisory BoardG reasonably requires to discharge its duties;
          (b) give the Shari'a Supervisory BoardG right of access at all reasonable times to relevant records and information;
          (c) do not interfere with the Shari'a Supervisory Board'sG ability to discharge its duties; and
          (d) do not provide false or misleading information to the Shari'a Supervisory BoardG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 3.6 Shari'a Reviews

        • IFR 3.6.1

          An Authorised PersonG must ensure that all Shari'a reviews are undertaken by the Shari'a Supervisory Board in accordance with AAOIFI GSIFI No 2.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.6.2

          (1) An Authorised PersonG must commission an annual report from the Shari'a Supervisory BoardG which complies with AAOIFI GSIFI No 1.
          (2) An Authorised PersonG must deliver a copy of the annual report of the Shari'a Supervisory BoardG to the DFSA within 14 days of having received it.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 3.7 Internal Shari'a Review

        • IFR 3.7.1

          An Authorised PersonG must perform an internal Shari'a review to assess the extent to which the Authorised PersonG complies with fatwas, rulings and guidelines issued by its Shari'a Supervisory BoardG .

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.7.2

          An Islamic Financial InstitutionG must perform the internal Shari'a review in accordance with AAOIFI GSIFI No. 3.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.7.3

          An Authorised PersonG which operates an Islamic WindowG must, to the extent possible, perform the internal Shari'a review in accordance with AAOIFI GSIFI No. 3 and must document the manner in which it will conduct that part of the internal Shari'a review that is not conducted in accordance with AAOIFI GSIFI No. 3.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.7.3 Guidance

            GSIFI No. (3) (Internal Shari'a Review) establishes standards and provides guidance on the internal Shari'a review in institutions that conduct business in accordance with Shari'a. The standard covers the following:

            a. objectives;
            b. internal Shari'a ReviewG ;
            c. independence and objectivity;
            d. professional proficiency;
            e. scope of work;
            f. performance of the internal Shari'a ReviewG work;
            g. management of the internal Shari'a ReviewG ;
            h. quality assurance; and
            i. elements of an effective internal Shari'a ReviewG control system.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 3.7.4

          An Authorised PersonG must ensure that the internal Shari'a review is performed by the internal audit function or the compliance function of the Authorised PersonG and that the individuals or departments involved in performing the review are competent and sufficiently independent to assess compliance with Shari'a.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.7.4 Guidance

            For the purposes of assessing competency of personnel or departments which perform the internal Shari'a review, an Authorised PersonG should consult AAOIFI GSIFI No. 3 paragraphs 9 to 16 inclusive.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 3.8 Additional Conduct Requirements

        • IFR 3.8 Guidance

          The COB module contains conduct of business requirements that apply to Authorised FirmsG conducting Financial ServicesG . The AMI module contains additional conduct standards that apply to Authorised Market InstitutionsG . Set out below are additional conduct requirements that apply to an Authorised PersonG carrying out any Financial ServiceG in accordance with Shari'a.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • Disclosure Relating to Shari'a Supervisory Board

          • IFR 3.8.1

            (1) An Authorised FirmG , subject to (2), must disclose to each ClientG :
            (a) at the outset of the relationship and thereafter at any time on request, details of the members of the Authorised Firm'sG Shari'a Supervisory BoardG ; and
            (b) at any time on request, details of the manner and frequency of Shari'a reviews.
            (2) An Authorised FirmG does not have to make the disclosure required under (1) if it is a Fund ManagerG of a FundG and is making an OfferG of UnitsG of that FundG in accordance with the disclosure requirements in the Collective Investment Law 2010, the CIR module and this module.
            (3) An Authorised Market InstitutionG must disclose the following information to each PersonG granted access to its facilities at the outset of the relationship, and thereafter whenever the information changes:
            (a) the members of the Authorised Market Institution'sG Shari'a Supervisory BoardG ; and
            (b) if the PersonG granted access to its facilities requests, the manner and frequency of Shari'a reviews.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

            • IFR 3.8.1 Guidance

              1. An Authorised FirmG may make the initial disclosures required under IFR Rule 3.8.1(a) by including such information in the Client AgreementG provided under COB chapter 3.
              2. An Authorised FirmG Managing a PSIAG may make additional disclosure required to be made relating to PSIAG by including such information in the Client AgreementG . See IFR chapter 5 for additional disclosure for PSIAsG .
              3. A Fund ManagerG making an OfferG of a UnitG of a FundG it manages is required under Rules CIR 14.3.1(b) and CIR 14.3.2(b) to include information specified in IFR Rule 3.8.1(1) in the ProspectusG which it must prepare and make available to ClientsG , hence the exemption in IFR Rule 3.8.1(2). A similar exemption is available to Fund ManagersG with regard to key information that must be provided to a Client under COB Rule 3.3.1(e).
              Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
              [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • Marketing Material

          • IFR 3.8.2

            In addition to information required by COB 3.2, any marketing material communicated by an Authorised FirmG to a PersonG must state which Shari'a Supervisory BoardG has reviewed the products or services to which the material relates.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

            • IFR 3.8.2 Guidance

              1. COB section 3.2.4 sets out the meaning of "marketing material".
              2. An Authorised FirmG may be able to rely on the Transitional RulesG in GEN chapter 10 for the purposes of complying with some of the provisions in this module. See for example GEN Rule 10.5.1 which provides transitional relief for marketing material.
              Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • Islamic Window

          • IFR 3.8.3

            (1) An Authorised FirmG which operates an Islamic WindowG must, subject to (3), disclose to its ClientsG whether or not it commingles funds attributable to its Islamic Financial BusinessG with funds attributable to conventional financial business.
            (2) An Authorised Market InstitutionG which operates an Islamic WindowG must disclose to any PersonG granted access to its facilities whether or not it commingles funds attributable to its Islamic Financial BusinessG with funds attributable to conventional financial business.
            (3) An Authorised FirmG does not have to make the disclosure required under (1) if it is a Fund ManagerG of a FundG and is making an OfferG of UnitsG of that FundG in accordance with the disclosure requirements in the Collective Investment Law 2010, the CIR module and this module.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

            • IFR 3.8.3 Guidance

              See Guidance 3 for the type of information required to be included in a Prospectus. The disclosures required under Rule 3.8.3(1) and (2) should initially be made in writing at the beginning of the relationship with a ClientG or with a person granted access to an Authorised Market Institution'sG facilities. Additional disclosure should also be made if the Authorised FirmG changes its policy relating to commingling of funds attributable to its Islamic Financial BusinessG with funds attributable to conventional financial business.

              [Added] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
              [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • Disclosure Relating to Client Money Provisions

          • IFR 3.8.4

            An Authorised FirmG must disclose to its ClientsG details about how any Client MoneyG arising out of Islamic Financial BusinessG is or will be held.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 3.9 Prudential Requirements

        • IFR 3.9.1

          An Authorised FirmG in Prudential Category 1, 2, 3 or 5 which invests in or holds Islamic ContractsG for purposes other than managing PSIAsG must calculate its Credit RiskG or Market RiskG in respect of those contracts in the same way as a firm holding or investing in Islamic ContractsG for the purposes of managing PSIAsG as set out in IFR section 4.4.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 3.9.1 Guidance

            Substantive prudential requirements in PIB which apply to conduct of Investment BusinessG continue to apply in the same way to firms conducting Islamic Financial BusinessG , except to the extent added to or otherwise provided in this module.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

    • IFR 4 Accounting and Auditing

      • IFR 4.1 Application

        • IFR 4.1.1

          This chapter applies to every Authorised PersonG carrying on Islamic Financial BusinessG .

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • IFR 4.1.1 Guidance

            GEN chapter 8 contains the general accounting and audit requirements applying to Authorised PersonsG .

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]
            [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 4.1.2 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 4.2 Financial statements — specific disclosures

        • IFR 4.2.1

          An Authorised PersonG carrying on Islamic Financial BusinessG must ensure that its financial statements required under GEN chapter 8 contain the following disclosures:

          (a) the role and authority of the Shari'a Supervisory BoardG in overseeing the Authorised Person'sG Islamic Financial BusinessG ;
          (b) the method used in the calculation of the Zakah base;
          (c) whether Zakah has been paid by the Authorised PersonG ;
          (d) where Zakah has been paid by the Authorised PersonG , the amount which has been paid; and
          (e) where Zakah has not been paid by the Authorised PersonG , sufficient information to allow a shareholder or other investor to compute the amount of his own liability to Zakah.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • [Deleted]

            [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.2.2

          An Authorised PersonG who operates an Islamic WindowG must ensure that its financial statements required under GEN chapter 8 contain the following disclosures:

          (a) a detailed statement of the funds mobilised according to Shari'a rules and principles and the assets financed by those funds;
          (b) a detailed statement of the income and expenditure attributable to its Islamic Financial BusinessG ; and
          (c) whether funds attributable to Islamic Financial BusinessG are commingled with funds attributable to conventional financial services.
          [Added] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.2.3

          An Authorised FirmG which is a Takaful InsurerG must ensure that the financial statements required under GEN chapter 8 for each Insurance FundG contain the following disclosures:

          (a) income from contributions to the Insurance FundG ;
          (b) revenues and gains from the Insurance Fund'sG investments;
          (c) amounts paid to the Takaful operator;
          (d) amounts paid for reinsurance cover, net of any commissions;
          (e) amounts paid to Takaful contributors as a distribution of surplus;
          (f) amount of any loan received from, or repaid to the Takaful operator;
          (g) changes in the actuarial reserves of the Insurance FundG ; and
          (h) the position of the Insurance FundG at the end of the period, including actuarial reserves, policyholders' surplus and any loans outstanding.
          [Added] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.2.4

          An Authorised FirmG which Manages a Profit Sharing Investment AccountG ("PSIA") must ensure that its financial statements required under GEN chapter 8 contain the following disclosures:

          (a) an analysis of income according to types of investments and their financing by customers;
          (b) the basis for the allocation of profits between owners' equity and PSIA holders;
          (c) the equity of PSIA holders at the end of the reporting period;
          (d) the bases used to determine any Profit Equalisation ReserveG or Investment Risk ReserveG ;
          (e) the changes which have occurred in such reserves during the reporting period;
          (f) any deductions made by the Authorised FirmG from its share of income, and any expenses borne by the Authorised FirmG on behalf of PSIA holders, as a contribution to increase the income of PSIA holders, if such contribution was material; and
          (g) the identity of any person to whom any remaining balances of any Profit Equalisation ReserveG or Investment Risk ReserveG is attributable in the event of liquidation.
          [Added] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 4.3 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.3.1 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.3.4 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • IFR 4.3.5 [Deleted]

            [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • IFR 4.3.6 [Deleted]

            [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 4.4 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.4.1 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.4.2 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.4.3 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.4.4 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • [Deleted]

            [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.4.5 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.4.6 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 4.5 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.5.1 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 4.6 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.6.1 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.6.2 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 4.6.3 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

    • IFR 5 Managing Profit Sharing Investment Accounts

      • IFR 5.1 Application

        • IFR 5.1.1

          This chapter applies to an Authorised FirmG which conducts the Financial ServiceG of Managing Profit Sharing Investment AccountsG (PSIAs).

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 5.1.1 Guidance

            1. A PSIAG does not constitute a DepositG , because a PSIAG is managed in relation to property of any kind, and the risk of loss of capital, to the extent of the Client'sG contribution, remains with the ClientG . Accordingly, an Authorised FirmG should take great care to ensure that a PSIAG is not represented as a DepositG , either directly or indirectly. The DFSA may conclude that the Authorised FirmG is Accepting a DepositG instead of Managing a PSIAG in certain circumstances, for example, where the Authorised FirmG attaches to the investment account characteristics or facilities that are generally regarded to be those of a DepositG or current account such as providing:
            a. an explicit or implicit guarantee to the ClientG against the risk of loss of capital; or
            b. a cheque book, an ATM card or a debit card.
            2. The prudential CategoryG for Islamic Financial InstitutionsG and other Authorised FirmsG Managing PSIAsG is determined in accordance with the Rules in PIB. Prudential Category 5G firms are Islamic Financial InstitutionsG whose entire business is conducted according to Shari'aG and are authorised to manage Profit Sharing Investment AccountsG . An Authorised FirmG which manages PSIAsG , whether as an Islamic Financial InstitutionG or through an Islamic WindowG , must also comply with the requirements in PIB in relation to specific prudential requirements relating to Trading BookG and Non-Trading BookG activities, including Credit RiskG , Market RiskG , Liquidity RiskG and Group RiskG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

        • IFR 5.1.2 [Deleted]

          [Deleted] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

          • [Deleted]

            [Deleted] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

      • IFR 5.2 Additional Disclosure Requirements for PSIAs

        • IFR 5.2.1

          An Authorised FirmG must, prior to Managing a PSIAG , provide written notice to the ClientG that the ClientG alone will bear any losses arising from the PSIAG , which are limited to the amount of his contribution, unless there is negligence, misconduct or breach of contract on the part of the Authorised FirmG .

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • Client Agreement

          • IFR 5.2.2

            In addition to matters referred to in COB section 3.3, an Authorised FirmG must ensure that the following information is included in the Client AgreementG relating to a PSIAG :

            (a) how and by whom the funds of the ClientG will be managed and invested including details of its policy on diversification of the portfolio;
            (b) the basis for the allocation of profit between the Authorised FirmG and the ClientG ;
            (c) confirmation of the Client'sG investment objectives including details of any restrictions requested by the ClientG , as agreed between the ClientG and the Authorised FirmG ;
            (d) a summary of the policies and procedures for valuation of assets or portfolio;
            (e) a summary of policies and procedures for the transfer of funds to and from the Profit Equalisation ReserveG or Investment Risk ReserveG accounts, if applicable;
            (f) particulars of the management of the PSIAG and of any third party to whom the Authorised FirmG has or will delegate or outsource the management of the PSIAG , including:
            (i) the name of the third party;
            (ii) the regulatory status of the third party; and
            (iii) details of the arrangement.
            (g) details of early withdrawal , redemption or other exit arrangement and any costs to a ClientG as a result thereof;
            (h) details of segregation of the funds of the ClientG from the funds of the Authorised FirmG and from any claims by the creditors of the Authorised FirmG ;
            (i) details of whether funds from one PSIAG will be commingled with the funds of another PSIAG ; and
            (j) details of any applicable charges and the basis upon which such charges will be calculated including, any deductions of fees that may be made by the Authorised FirmG from the profits of the PSIAG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • Periodic Statements

          • IFR 5.2.3

            (1) COB section 6.10 applies to an Authorised FirmG as if the Authorised FirmG is an investment manager in respect of those ClientsG who are PSIAG holders.
            (2) In addition to the requirements of COB section 6.10, an Authorised Firm must ensure that a periodic statement provided to a ClientG contains the following information:
            (a) details of the performance of the Client'sG investment;
            (b) the allocation of profit between the Authorised FirmG and the ClientG ; and (c) where applicable, details of changes to the investment strategies that may affect the Client'sG account or portfolio
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • Additional Matters to be Included in the Policy and Procedures Manual

          • IFR 5.2.4

            Where an Authorised FirmG Manages a PSIAG , its Islamic Financial BusinessG policy and procedures manual must address the following additional matters:

            (a) the basis upon which a PSIAG will be deemed restricted or unrestricted;
            (b) the basis for allocation of profit or loss to the PSIAG ;
            (c) the basis for allocation of expenses to the PSIAG ;
            (d) the manner in which an Authorised Firm'sG own funds, funds of restricted PSIAsG and funds from unrestricted PSIAsG are to be controlled;
            (e) the manner in which the funds of each type of investment account holder will be managed;
            (f) the manner in which it will determine priority for investment of own funds and those of holders of unrestricted PSIAsG ;
            (g) how provisions and reserves against equity and assets are to be applied; and
            (h) the manner in which losses incurred as a result of the misconduct or negligence for which the Authorised FirmG is responsible will be dealt with.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

            • IFR 5.2.4 Guidance

              For the purposes of IFR Rule 5.2.4, the policy and procedures manual should include procedures to ensure that the Authorised FirmG manages the accounts of Profit Sharing Investment AccountG holders in accordance with their instructions.

              Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
              [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 5.3 Funds of PSIA Holders

        • IFR 5.3.1

          Unless clearly expressed in the contract between an Authorised FirmG and a PSIAG holder, the Authorised FirmG may not use funds provided by a PSIAG holder to fund its own corporate activities.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 5.4 Prudential Requirements

        • Application and Interpretation

          • IFR 5.4.1

            (1) This section applies when calculating Credit RiskG or Market RiskG in respect of Islamic ContractsG invested in or held by an Authorised FirmG Managing a PSIAG , which is an Unrestricted PSIAG .
            (2) In (1), the Islamic ContractsG referred to are contracts which are funded by the PSIAG .
            (3) In this section, the term "investing in or holding Islamic Contracts" means investing in or holding as a principal.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

        • Initial and Ongoing Capital Requirements

          • IFR 5.4.1 Guidance

            1. An Authorised FirmG undertaking Islamic Financial BusinessG is required to maintain initial and ongoing Capital RequirementsG in accordance with Rules in part 2 of Chapter 3 of PIB.
            2. In accordance with Rules in part 3 of chapter 3 of PIB, an Authorised FirmG undertaking Islamic Financial BusinessG is required to ensure that only the eligible components of capital are included in the calculation of capital.
            3. In accordance with PIB Rule 3.15.9, an Authorised FirmG undertaking Islamic Financial BusinessG is required to exclude from T2 CapitalG any amount by which the total of the Profit Equalisation ReserveG and the Investment Risk ReserveG exceeds the Displaced Commercial Risk Capital RequirementG .
            4. For the purpose of calculating Capital RequirementsG , an Authorised FirmG undertaking Islamic Financial BusinessG or otherwise investing in or holding Islamic ContractsG should give due importance to the economic substance of the transaction, in addition to the legal form of the Islamic ContractsG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

        • Systems and Controls in Relation to PSIAs

        • IFR 5.4.2

          In addition to Rule PIB 3.2.4, PIB 3.2.5, GEN Rule 5.3.1 and this module, an Authorised FirmG Managing a PSIAG must ensure that its senior management establishes and maintains systems and controls that ensure that the Authorised FirmG is financially sound and able at all times to satisfy the specific prudential requirements arising out of such business.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

        • IFR 5.4.3

          (1) In addition to Rules in IFR 5.2.4, an Authorised FirmG Managing a PSIAG must set out in a written policy how it proposes to organise and control the activities that arise from such business and ensure that its activities are conducted in accordance with Shari'a.
          (2) The policy must as a minimum address, where appropriate, the following matters:
          (a) how the interests of shareholders and PSIAG holders are safeguarded;
          (b) how the Authorised FirmG will limit exposures of PSIAG holders to the Authorised FirmG ;
          (c) a description of the controls to ensure that the funds of the PSIAG are invested in accordance with the investment guidelines agreed in the investment contract;
          (d) the basis for allocating profits and losses to the PSIAG holders;
          (e) the policy for making provisions and reserves and, in respect of PSIAsG , to whom these provisions and reserves revert in the event of a write-off or recovery;
          (f) the Authorised Firm'sG policy on the prioritisation of investment of own funds and those of Unrestricted PSIAG holders;
          (g) how liquidity mismatch will be monitored;
          (h) the basis for allocating expenses to PSIAG holders; and
          (i) how the Authorised FirmG will monitor the value of its assets.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • [Deleted]

            [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • Displaced Commercial Risk

          • IFR 5.4.4

            An Authorised FirmG Managing a PSIAG , which is an Unrestricted PSIAG , must calculate a Displaced Commercial Risk Capital RequirementG in respect of its PSIAG business.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

            • IFR 5.4.4 Guidance

              1. An Authorised FirmsG Managing a PSIAG , on an unrestricted basis is subject to a unique type of risk referred to as Displaced Commercial RiskG . This risk reflects the fact that an Authorised FirmG may be liable to find itself under commercial pressure to pay a rate of return to its PSIAG holders which is sufficient to induce those investors to maintain their funds with the Authorised FirmG , rather than withdrawing them and investing them elsewhere. If this "required" rate of return is higher than that which would be payable under the normal terms of the investment contract, the Authorised FirmG may be under pressure to forgo some of the share of profit which would normally have been attributed to its shareholders (e.g., part of the Mudarib's share). Failure to do this might result in a volume of withdrawals of funds by investors large enough to jeopardise the Authorised Firm'sG commercial position (or, in an extreme case, its solvency). Thus, part of the commercial risk attaching to the returns attributable to the PSIAG is, in effect, transferred to the shareholders' funds or the Authorised Firm'sG own capital. It also reflects situations whereby an investor may be permitted to exit from an asset pool at par while the fair value of such assets may be lower than their carrying amounts and where the Authorised FirmG in certain circumstances may provide for the shortfalls.
              2. In an Unrestricted PSIAG , the account holder authorises the Authorised FirmG to invest the account holder's funds in a manner which the Authorised FirmG deems appropriate without specifying any restrictions as to where, how or for what purpose the funds should be invested, provided that they are Shari'a compliant. Under this arrangement, the Authorised FirmG can commingle the investment account holder's funds with its own funds or with other funds which the Authorised FirmG has the right to use. The investment account holders and the Authorised FirmG generally participate in the returns on the invested funds.
              3. In a Restricted PSIAG , the account holder imposes certain restrictions as to where, how and for what purpose the funds are to be invested. Further, the Authorised FirmG may be restricted from commingling its own funds with the restricted investment account funds for purposes of investment. In addition, there may be other restrictions that the investment account holders may impose. In other words, the funds provided by holders of Restricted PSIAsG are managed by the Authorised FirmG which does not have the right to use or dispose of the investments except within the conditions of the contract.
              4. An Authorised FirmsG undertaking Islamic Financial BusinessG is also exposed to fiduciary risk which arises where the terms of the contract between the Authorised FirmG and the investor are breached and where the Authorised FirmG does not act in compliance with Shari'a.
              5. An Authorised FirmG is required to apply the Capital RequirementsG specified in chapters PIB 4 and PIB 5 to any other business it carries on.
              Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
              [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

          • IFR 5.4.5

            (1) An Authorised Firm'sG Displaced Commercial Risk Capital RequirementG is based on 35% of the CRCOMG and Market RiskG capital requirement of assets funded by Unrestricted PSIAG holders, and is calculated using the following formula:

            PSIACOM = [PSIACOMcredit + PSIACOMmarket] × 35%.
            (2) PSIACOM is the Displaced Commercial Risk Capital RequirementG ;
            (3) PSIACOMcredit is the Credit RiskG capital requirement for assets funded by Unrestricted PSIAG holders and is calculated in accordance with Rules in part 3 of chapter 4 of PIB; and
            (4) PSIACOMmarket is the Market RiskG capital requirement for assets funded by Unrestricted PSIAG holders and is calculated in accordance with Rules in PIB chapter 5.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

        • Credit Risk and Counterparty Risk for Islamic Contracts

          • IFR 5.4.6

            (1) An Authorised FirmG Managing a PSIAG , which is an Unrestricted PSIAG , must calculate its PSIAComcredit in relation to all Islamic ContractsG financed by Unrestricted PSIAsG in the manner prescribed in this section.
            (2) An Authorised FirmG must, when undertaking the calculation in (1), apply an appropriate risk weighting for the relevant Islamic ContractG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

          • IFR 5.4.7

            (1) In this section:
            (a) "E" represents the ExposureG determined by an Authorised FirmG as applicable to an Islamic ContractG ; and
            (b) "CRW represents the risk weighting or capital charge assessed by an Authorised FirmG as appropriate to that Islamic ContractG .
            (2) Where an Islamic ContractG is in the Non-Trading BookG , an Authorised FirmG must determine the PSIACOMcredit for that contract by applying the following formula:
            E × CRW × 8%.
            (3) Where an Islamic ContractG is in the Trading BookG , an Authorised FirmG must determine the PSIACOMcredit for that contract in accordance with the methodology in PIB A4.7 and PIB A4.8 as appropriate.
            (4) An Authorised FirmG must calculate its PSIACOMcredit of all contracts by:
            (a) identifying all Islamic ContractsG to which this section applies;
            (b) valuing the underlying investment or asset of each contract and reducing the value of any such investment or asset in the manner stipulated in Section 4.9 of chapter 4 of PIB, the result of which constitutes E for that contract;
            (c) determining the risk weighting or capital charge appropriate to each contract, which will constitute the CRW for that contract in accordance with Rules in Sections 4.10, 4.11 and 4.12 of chapter 4 of PIB;
            (d) applying the respective formula in IFR Rule 5.4.7(2) or (3) to determine of PSIACOMcredit in respect of each contract; and
            (e) summing the PSIACOMcredit of each contract to determine the PSIACOMcredit applicable to the Authorised FirmG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]
            [Amended] DFSA RM210/2017 (Made 25 October 2017). [VER12/01-18]

            • IFR 5.4.7 Guidance

              1. The DFSA considers that this GuidanceG will assist an Authorised FirmG in applying the appropriate risk weighting or capital charge to each Islamic ContractG for the purpose of IFR Rule 5.4.7. Accordingly, the DFSA expects an Authorised FirmG managing PSIAsG , which are Unrestricted PSIAsG to pay due regard to this GuidanceG .
              2. The Rules in this section and this GuidanceG are also relevant to an Authorised FirmG which invests in or holds Islamic ContractsG , when calculating CRCOMG for Islamic ContractsG under PIB chapter 4.
              3. Table 2 contains Guidance on how an Authorised FirmG Managing a PSIAG , which is an Unrestricted PSIAG should apply risk weightings for Islamic ContractsG in respect of calculating relevant E and CRW for its PSIACOMcredit component of the PSIACOM.

              Table 2

              1.
              Islamic Contract type
              2.
              Underlying investment or asset
              3.
              CRW
              Binding Murabaha for the Purchase Orderer (MPO) Asset with an Authorised FirmG before purchase by the CounterpartyG Apply the appropriate percentage from the second column in the table in PIB Rule A4.6.5
              Accounts receivable for the contract, i.e. amounts due from the CounterpartyG less any provision for doubtful debts CRWG in accordance with PIB chapter 4
              Murabaha and Non-binding Murabaha for the Purchase Orderer (MPO) Accounts receivable for the contract, i.e. amounts due from the CounterpartyG less any provision for doubtful debts CRWG in accordance with PIB chapter 4
              Mudaraba and Musharaka Where the underlying investment meets the requirements for inclusion in the Trading BookG Market Risk Capital RequirementG for the exposure associated with the underlying investment determined in accordance with PIB chapter 5
              Investment in commercial enterprise to undertake business ventures other than trading activities (or other than those which meet the requirements for inclusion in the Trading BookG ) CRW of 400% on the exposure
              Investment in real estate assets and other movable assets, using underlying IjarahG and MurabahaG contracts CRW of the lessee for the underlying Ijarah contracts or the CRW of the counterparty of the underlying MurabahaG contract, in accordance with PIB App4
              Ijarah/Ijarah Muntahia Bittamleek Asset with an Authorised FirmG available for lease before purchase by the CounterpartyG — for both contracts with both binding or non-binding promise to lease Apply the appropriate percentage from the second column in the table in PIB Rule A4.6.5
              Residential real estate where the lessee has the right to purchase property at the end of the lease and the lessor has a legally enforceable first charge over the property Apply the appropriate percentage in accordance with PIB Rule 4.12.17.
              Total estimated value of lease receivables for the whole duration of the Ijarah, less any recovery value of the leased asset CRW of IjarahG lessee, in accordance with PIB Section 4.12
              Full recourse Istisna'aG — with or without parallel Istisna'aG and limited / non-recourse
              Istisna'a with/without parallel Istisna'a
              Net balance of the work-in-progress CRW of the Istisna'aG buyer, in accordance with PIB Section 4.12
              Total amount receivable from the counterparty, pursuant to contract billings CRW of Istisna'aG buyer, in accordance with PIB Section 4.12
              Salam and parallel Salam Value of the underlying asset receivable for the SalamG contract CRW in accordance with PIB Section 4.12
              Assets acquired 100%
              Balance in relevant accounts receivable CRW in accordance with PIB Section 4.12
              Kefala The amount of the guarantee CRW in accordance with PIB Section 4.12
              SukukG held in the Non-Trading BookG Receivables from the SukukG structure, including the principal and any returns associated with it, arising from any of the following as underlying contracts:

              SalamG
              Istisna'aG
              IjarahG
              MurabahaG
              MudarabaG
              MusharakaG
              CRW applicable to underlying IjarahG , SalamG or MurabahaG contracts, in accordance with PIB Section 4.12

              If the SukukG provides recourse to the issuer, CRW applicable to the issuer or CRW applicable to underlying contracts of the SukukG is in accordance with PIB Section 4.12, whichever is higher
                Usufructs/services CRW applicable to underlying service provider or usufruct owner, in accordance with PIB Section 4.12. If the SukukG provides recourse to the issuer, CRW applicable to the issuer or CRW applicable to underlying service provider or usufruct owner in accordance with PIB App 4, whichever is higher
                Leased assets The higher of CRW of the underlying leased assets and that of the issuer
                Investment agency The higher of CRW of the underlying assets and that of the issuer
                Muzara'aG (share of produce of the land) MusaqaG (share of produce of the trees) MugarasaG (share in the land and the trees) 100%
                Mixture of tangible and intangible assets The higher of CRW of the underlying assets and that of the issuer
                Where the underlying investment meets the requirements for inclusion in the Trading BookG Market Risk Capital RequirementG for the exposure associated with the underlying investment determined in accordance with PIB chapter 5
              Bai' Bithaman Ajil Residential and commercial properties
              Plant and equipment
              Motor vehicles
              Shares
              Land
              CRW in accordance with PIB chapter 4
              Arboun Where an Authorised FirmG has made the purchase deposit CRW in accordance with PIB chapter 4
                Where an Authorised FirmG has received the purchase deposit No CRW is applicable
                Where the contract would meet the requirements for inclusion in the Trading BookG Market Risk Capital RequirementG for the exposure associated with the underlying investment determined in accordance with PIB chapter 5
              4. Where an Islamic ContractG is not listed in Table 2, an Authorised FirmG should consult with the DFSA, on a case-by-case basis, to determine the:
              a. contract type and the underlying investments or assets to calculate the E; and
              b. appropriate risk weighting or the capital charge for such contract to calculate the CRW.
              5. In some cases, as stipulated in the relevant parts of column 3 of Table 2, the calculation of capital requirement should be carried out as prescribed in PIB Rule A4.6.5 and in accordance with PIB chapter 5.
              6. In determining the E of a Binding MurabahaG for the Purchase OrdererG (MPO), as per PIB Rule A4.6.5, E should equal the total acquisition cost of the asset (purchase price and other direct costs) less market value of the asset (net of any haircut) less any security deposit provided.
              7. In determining the E of IjarahG / Ijarah Munthia BittamleekG contract, as per PIB Rule A4.6.5, E should equal the total acquisition cost of the asset (purchase price and other direct costs) less the market value of the asset (net of any haircut), less any ArbounG (earnest money deposit received from the potential lessee).
              8. In addition to paragraph 7 above, in the case of an Ijarah Muntahia BittamleekG contract, the exposure may be reduced by the recovery value of the leased asset, only in cases where there is a reasonable basis to conclude that the leased asset can be repossessed and effectively redeployed as a leased asset to another CounterpartyG . This is important because the asset leased under the Ijarah Muntahia BittamleekG contract is usually customised equipment or large pieces of equipment which are integrated with other assets of the lessee and hence are unsuitable for repossession and releasing to another lessee.
              9. In determining the E of an Istisna'aG contract, the exposures arising from such a contract should not be netted off against exposures arising from a Parallel Istisna'aG contract entered into by an Authorised FirmG for procuring the underlying investment for the Istisna'aG contract.
              10. In determining the E of a SalamG contract, the exposures arising from such a contract should not be netted off against exposures arising from a Parallel SalamG contract entered into by an Authorised FirmG for procuring the underlying asset for the SalamG contract.
              11. Off-balance sheet exposures for import or export financing contracts based on MurabahaG , where the underlying goods or shipment are collateralised and insured, should attract a 20% CCF to an Authorised FirmG that issues or confirms the letter of credit.
              12. Where MudarabaG and MusharakaG contracts are used to invest in commercial enterprise to undertake business ventures other than trading activities (or other than those which meet the requirements for inclusion in the Trading BookG ), the E is measured as the amount invested in the commercial enterprise less any specific provisions. If there is a guarantee and such guarantor is not connected to the commercial enterprise, then the CRW for the guarantor will be applied for risk weighting for the amount of any such guarantee.
              13. In addition to the relevant RulesG prescribed in PIB chapter 4 and PIB App4, an Authorised FirmG may consider the following types of collateral as eligible collateral for Credit RiskG management:
              a. Hamish JiddiyyahG (security deposit) only for agreements to purchase or lease preceded by a binding promise;
              b. ArbounG where earnest money deposit held after a contract is established as collateral to guarantee contract performance; and
              c. in MudarabaG investment in project finance, an Authorised FirmG may use the collateralisation of the progress payments made by the ultimate customers to mitigate the exposures of unsatisfactory performance by the MudaribG .
              14. Where an Authorised FirmG places funds under a MudarabaG contract, subject to a Shari'a compliant guarantee from a third party and such a guarantee relates only to the MudarabaG capital, the capital amount should be risk-weighted at CRW of the guarantor provided that the CRW of that guarantor is lower than the CRW of the MudaribG (as a CounterpartyG ). Otherwise, the CRW of the MudaribG will apply.
              15. An Authorised FirmG placing liquid funds with a central bank or another financial institution on a short-term MudarabaG basis in order to obtain a return on those funds, may apply the CRW applicable to the MudaribG (as a CounterpartyG ), provided the MudaribG effectively treats the liquid funds placement as its liability, although normally such placements are not treated as liabilities of the MudaribG .
              Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
              [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

        • Market Risk

          • IFR 5.4.8

            An Authorised FirmG Managing a PSIAG , which is an Unrestricted PSIAG , must calculate its PSIACOMmarket in relation to all underlying Islamic ContractsG in the manner prescribed in PIB chapter 5, except as may be provided in Rules IFR 5.4.8 to IFR 5.4.17.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

          • IFR 5.4.9

            An Authorised FirmG must treat SukukG held in its Trading BookG as equity for the purpose of calculating its Equity Risk Capital RequirementG and determine the same in accordance with PIB Rule 5.5.2.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 5.4.10

            Where investments are made using MusharakaG or MudarabaG contracts with commodities as the underlying assets, an Authorised FirmG must calculate its Commodities Risk Capital RequirementG in accordance with PIB Rule 5.7.2.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 5.4.11

            An Authorised FirmG which is exposed to the risk of foreign currencies and gold under any Islamic ContractG , must calculate its Foreign Exchange Risk Capital RequirementG in accordance with PIB Rule 5.6.2.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 5.4.12

            An Authorised FirmG which is exposed to commodities including precious metals but excluding gold under any Islamic ContractG , must calculate its Commodities Risk Capital RequirementG in accordance with PIB Rule 5.7.2.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 5.4.13

            (1) Commodities held by an Authorised FirmG for selling or leasing when executing a MurabahaG , non-binding MPO, SalamG or Parallel Salam ContractG must be included in the calculation of its Commodities Risk Capital RequirementG .
            (2) Where an Authorised FirmG executes SalamG and parallel SalamG contracts, the resultant long and short positions may be set off for calculating the net open position, provided that the positions are in the same commodity, regardless of how its Commodities Risk Capital RequirementG is calculated.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 5.4.14

            Where an Authorised FirmG executes MusharakaG or MudarabaG contracts for investing in entities or investment vehicles that trade in foreign exchange, equities or commodities, it must include the relevant underlying assets in the calculation of its Market Risk Capital RequirementG in accordance with PIB chapter 5.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • Concentration Risk

          • IFR 5.4.14 Guidance

            1. This section sets specific Large ExposureG limits for assets financed by PSIAsG , which are Unrestricted PSIAsG . The DFSA uses these limits to provide constraints on the amount of Concentration RiskG to which an Authorised FirmG is subject in respect of its PSIAG holdings. In assessing PSIAG Large ExposuresG , an Authorised FirmsG may take advantage of the exemptions and partial exemptions set out in PIB section A4.11.
            2. An Authorised FirmG has a Large ExposureG where its PSIAG holders' credit ExposureG to a single CounterpartyG or issuer, or group of Closely RelatedG or Connected CounterpartiesG , is large in relation to the Authorised Firm'sG Capital ResourcesG . Where ExposureG to a CounterpartyG or issuer is large, PSIAG holders risk a large loss should the CounterpartyG default.
            3. ExposuresG arising from assets that are financed by an Authorised Firm'sG own funds are dealt with in PIB section 4.15.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

        • Exposure Limits

          • IFR 5.4.15

            An Authorised FirmG Managing a PSIAG , which is an Unrestricted PSIAG , must not have an ExposureG to a CounterpartyG or to a group of Closely Related CounterpartiesG or to a group of Connected CounterpartiesG that exceeds any one of the following percentages of its Capital ResourcesG :

            (a) 25% if financed by its Capital ResourcesG or Unrestricted PSIAsG ; or
            (b) 40% if financed by the total of its own Capital ResourcesG and, Unrestricted PSIAsG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

            • IFR 5.4.15 Guidance

              In accordance with PIB section 4.15, the aggregate of an Authorised Firm'sG ExposureG to a CounterpartyG or to a group of Closely Related CounterpartiesG may not exceed 25% of the Authorised Firm'sG Capital ResourcesG .

              Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
              [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

          • IFR 5.4.16

            The sum of an Authorised Firm'sG non-exempt Large ExposuresG must not exceed 800% of its Capital Resources for ExposuresG funded by the Authorised Firm'sG Capital ResourcesG and Unrestricted PSIAsG .

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

          • IFR 5.4.17

            An Authorised FirmG must:

            (a) monitor and control its ExposuresG funded by PSIAsG , which are Unrestricted PSIAsG , on a daily basis to ensure they remain within the concentration risk limits specified in IFR Rule 5.4.15; and
            (b) if a breach occurs, notify the DFSA immediately and confirm it in writing.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM115/2012 (Made 15th October 2012). [VER5/12-12]

    • IFR 6 Islamic Collective Investment Funds

      • IFR 6 Guidance

        This chapter contains additional requirements that apply to a Collective Investment FundG operated or held out as being operated as an Islamic FundG . A Collective Investment FundG is defined in Article 11 of the Collective Investment Law 2010 (the Law). The definition in Article 11 of the Law is very wide and can capture some Islamic financial activities. However, under Article 12 of the Law, the DFSA can make Rules excluding certain arrangements or types of arrangements from constituting a FundG . Certain types of Islamic Financial BusinessG are not regulated as Collective Investment FundsG due to express exclusions provided. Key Islamic Financial BusinessG related exclusions under the collective investment regime are Managing InsuranceG , participation rights evidenced by SukukG certificates and managing PSIAsG .

        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.1 Application

        • IFR 6.1.1

          (1) This section applies in the case of a Domestic FundG :
          (a) which is an Islamic FundG , to its Fund ManagerG and where appointed, its TrusteeG ; or
          (b) which is an Umbrella FundG with one or more Islamic Sub-FundsG , to its Fund ManagerG and where appointed, its TrusteeG in respect of those Sub-FundsG .
          (2) The requirements that apply to a conventional FundG apply equally to an Islamic FundG , except as otherwise provided in this chapter.
          (3) In this chapter, except where otherwise provided, any reference to a FundG is to an Islamic FundG or to an Islamic Sub-FundG of an Umbrella FundG as the case may be and any reference to a Fund ManagerG is a reference to a Fund ManagerG of such a FundG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

          • IFR 6.1.1 Guidance

            1. While the CIR module contains the key requirements relating to the management and operation of conventional Collective Investment FundsG , this module sets out the additional requirements that apply where such a FundG is managed or held out as being managed as an Islamic FundG . There are other requirements that applying to such firms which are found in other modules of the DFSA rulebook, such as the GEN module, COB module and PIB module.
            2. While section 3 contains the requirements that apply to Authorised FirmsG which are Fund ManagersG of Collective Investment FundsG , the requirements in this section mainly focuses on Shari'a compliance related requirements that apply at the FundG level. For example, while the systems and controls required under IFR section 3.3 relate to the systems and controls that a firm must have in order to comply with its Shari'a obligations, IFR Rule 6.1.3 sets out systems and controls that must be established and maintained at the FundG level.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • Systems and Controls

          • IFR 6.1.2

            (1) The Fund ManagerG of a FundG must establish and maintain systems and controls which ensure that its management of the FundG and the Fund PropertyG is Shari'a compliant.
            (2) A Fund ManagerG may, where it is practicable to do so, include the systems and controls required under (1) within those it is required to establish and maintain pursuant to IFR Rule 3.3.1.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

            • IFR 6.1.2 Guidance

              1. Article 38 of the Collective Investment Law 2010 requires the Fund ManagerG to establish and maintain systems and controls, including, but not limited, to financial and risk controls to ensure sound management of the FundG in accordance with the Fund'sG ConstitutionG and its most recent ProspectusG , taking due account of the nature, scale and complexity of the Fund'sG investments and operations.
              2. IFR Rule 3.3.1 requires a Fund ManagerG of Islamic FundsG to establish and maintain systems and controls to ensure its Shari'a compliance.
              [Added] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • Fund's Constitutional Documents

          • IFR 6.1.3

            (1) The Fund ManagerG of a Domestic FundG that is a Public FundG must ensure that its Fund'sG ConstitutionG and ProspectusG are, and remain, approved by the Fund'sG Shari'a Supervisory BoardG .
            (2) The Fund ManagerG of an Exempt FundG must ensure that the FundG 's ConstitutionG and ProspectusG are, and remain, approved by the Fund ManagerG 's Shari'a Supervisory BoardG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • Islamic Financial Business Policy and Procedures Manual

          • Guidance

            A Fund ManagerG may, instead of having a separate Islamic Financial BusinessG policy and procedures manual both at the firm level and at the FundG level, maintain a single Islamic Financial BusinessG policy and procedures manual for the firm and the FundsG it manages.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

          • IFR 6.1.4

            The Fund ManagerG of a FundG must implement and maintain an Islamic Financial BusinessG policy and procedures manual for the FundG which addresses the following matters:

            (a) the manner in which the compliance function will be undertaken, in respect of Shari'a compliance;
            (b) the manner in which the Shari'a Supervisory BoardG will oversee and advise in regard to the Islamic Financial BusinessG conducted by the Fund ManagerG ;
            (c) the manner in which Shari'a Supervisory BoardG fatwas, rulings and guidelines will be recorded, disseminated and implemented and the internal Shari'a review undertaken;
            (d) the manner in which disputes between the Shari'a Supervisory BoardG and the Fund ManagerG in respect of Shari'a compliance will be addressed;
            (e) the process for approving those internal systems and controls which are in place to ensure not only that the Islamic Financial BusinessG is carried out in compliance with Shari'a, but that information is disseminated to UnitholdersG in an appropriate manner; and
            (f) the manner in which conflicts of interest will be identified and managed, including as prescribed in IFR Rule 6.2.4.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.2 Shari'a Supervisory Board for an Islamic Fund

        • IFR 6.2.1

          (1) A Fund ManagerG of a Domestic FundG that is a Public FundG  must, subject to (3), appoint a Shari'a Supervisory BoardG to its FundG that meets the following requirements:
          (a) the Shari'a Supervisory BoardG has at least three members;
          (b) the members appointed to the Shari'a Supervisory BoardG are competent to perform their functions as Shari'a Supervisory BoardG members of the FundG ;
          (c) any appointments, dismissals or changes in respect of members of the Shari'a Supervisory BoardG are approved by the Governing BodyG of the Fund ManagerG ; and
          (d) no member of the Shari'a Supervisory BoardG is a director or Controller of the FundG or its Fund ManagerG .
          (2) A Fund ManagerG may comply with the requirement in (1) by appointing to the FundG the same Shari'a Supervisory BoardG as it has appointed to the firm in accordance with IFR Rule 3.5.1, provided the requirements in (1) are also met.
          (3) A Fund ManagerG is not required to comply with the requirement in (1) where it relies, for the purposes of making investments for the FundG , on a widely accepted Shari'a screening process such as investing in securities included in, or recognised by reference to, an Islamic index, sukuk, or treasury instruments issued by a Shari'a compliant financial services provider regulated by a Financial Services RegulatorG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

          • IFR 6.2.1 Guidance

            1. In appointing a Shari'a Supervisory BoardG for the purposes of IFR Rule 6.2.1(1), the Fund ManagerG should consider the previous experience and qualifications of the proposed Shari'a Supervisory BoardG members to assess whether the proposed Shari'a Supervisory BoardG member is competent to advise on the activities undertaken by the Islamic FundG . If the Fund ManagerG is appointing the same Shari'a Supervisory BoardG as it has appointed to the firm pursuant to IFR Rule 6.2.1(2), the Fund ManagerG should still consider whether the requirements in both Rule IFR 3.5.1(1) and IFR 6.2.1(1) are met in respect of that board.
            2. If the Fund ManagerG is relying on Shari'a screening methodologies such as the Dow Jones Shari'a index, such screening is generally regarded as widely accepted and accessible. However, if less widely known methodologies are used, the Fund ManagerG should be able, upon request by the DFSAG , to demonstrate to the satisfaction of the DFSAG the grounds on which it considers the particular methodology used to be acceptable and reliable.
            3. Although the Fund ManagersG of Exempt FundsG and Qualified Investor FundsG are not subject to the requirement for the appointment of a Shari'a Supervisory BoardG for such a Fund, they would need to ensure that the Exempt FundsG or Qualified Investor FundsG they manage continue to meet the applicable Shari'a requirements applicable to the FundG . They may use a member of the Shari'a Supervisory BoardG appointed at the firm level for the purposes of ascertaining compliance with the Shari'a requirements. The manner in which they demonstrate to the UnitholderG of the Exempt FundG or Qualified Investor FundG as to how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the UnitholdersG and the Fund ManagerG .
            4. An External Fund Manager may not be able to take advantage of IFR 6.2.1(2), unless it has a Shari'a Supervisory Board appointed at the firm level. In contrast the Fund Manager of an External Fund will be able to use its Shari'a Supervisory BoardG to meet the Shari'a Supervisory BoardG requirement relating to the FundG as set out in IFR 6.2.1(2).
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.2.2

          (1) Subject to (2), the Fund ManagerG of a FundG must document the Fund'sG policy in relation to:
          (a) how appointments, dismissals or changes will be made to the Shari'a Supervisory BoardG ;
          (b) the process through which the suitability of Shari'a Supervisory BoardG members will be considered; and
          (c) the remuneration of the members of the Shari'a Supervisory BoardG .
          (2) If the Fund ManagerG , pursuant to IFR Rule 6.2.1(2), appoints to the FundG the same Shari'a Supervisory Board it has appointed to the firm, the documents required under IFR Rule 6.2.2(1) must be included in or otherwise form part of the records required under IFR Rule 3.5.2.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.2.3

          (1) Subject to (2), the Fund ManagerG of a FundG must establish and retain, for six years, records of:
          (a) its assessment of the competency of the Shari'a Supervisory BoardG members;
          (b) the agreed terms of engagement of each member of the Shari'a Supervisory BoardG ; and
          (c) the matters in Rules IFR 6.2.1(1)(c) and IFR 6.2.2.
          (2) If the Fund ManagerG , pursuant to IFR Rule 6.2.1(2), appoints to the FundG the same Shari'a Supervisory BoardG it has appointed to the firm, the records required under IFR Rule 6.2.3(1) must be included in or otherwise form part of the records required under IFR Rule 3.5.3.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

          • IFR 6.2.3 Guidance

            1. The records of the assessment of competency of Shari'a Supervisory BoardG members should clearly indicate, at least:
            a. the factors that have been taken into account when making the assessment of competency;
            b. the qualifications and experience of the Shari'a Supervisory BoardG members;
            c. the basis upon which the Fund ManagerG has deemed that the proposed Shari'a Supervisory BoardG member is suitable; and
            d. details of any other Shari'a Supervisory BoardsG of which the proposed Shari'a Supervisory BoardG member is, or has been, a member.
            2. If the Fund ManagerG is relying on IFR Rule 6.2.1(2), then the due diligence process, and the records maintained under Rules IFR 3.5.2 and IFR 3.5.3, should be augmented with the matters specified under IFR Rule 6.2.1(1).
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.2.4

          (1) The Islamic Financial BusinessG policy and procedures manual must provide that:
          (a) a member of the Shari'a Supervisory BoardG is obliged to notify the Fund ManagerG of any conflict of interest that such member may have with respect to the FundG or the Fund ManagerG , and if appointed, or in the case of an Investment TrustG , the TrusteeG ; and
          (b) the Fund ManagerG will take appropriate steps to manage any such conflict of interest so that the Islamic Financial BusinessG is carried out appropriately and in compliance with Shari'a, the interest of a UnitholderG is not adversely affected and all UnitholdersG are fairly treated and not prejudiced by any such interests.
          (2) If a Fund ManagerG is unable to manage a conflict of interest as provided above, it must dismiss or replace the member as appropriate.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.2.5

          The Fund ManagerG of a FundG must provide the DFSAG at its request with information on the qualifications, skills, experience and independence of the individuals who are appointed or proposed to be approved as members of the Shari'a Supervisory BoardG .

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.2.6

          (1) The Fund ManagerG of a FundG must take reasonable steps to ensure that the Fund ManagerG and the Fund'sG EmployeesG :
          (a) provide such assistance as the Shari'a Supervisory BoardG reasonably requires to discharge its duties;
          (b) give the Shari'a Supervisory BoardG right of access at all reasonable times to relevant records and information;
          (c) do not interfere with the Shari'a Supervisory Board'sG ability to discharge its duties; and
          (d) do not provide false or misleading information to the Shari'a Supervisory BoardG .
          (2) If appointed, the TrusteeG must also take reasonable steps to ensure that its EmployeesG comply with (1)(a)–(d).
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.3 External Shari'a reviews and periodic reports

        • IFR 6.3.1

          A Fund ManagerG of a Domestic FundG that is a Public FundG , other than a FundG relying on the exemption in IFR Rule 6.2.1(3), must ensure that all Shari'a reviews of the FundG are undertaken by the Shari'a Supervisory BoardG in accordance with AAOIFI GSIFI No 2.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.3.2

          (1) In the case of a Domestic FundG that is a Public FundG other than a FundG relying on the exemptions in IFR Rule 6.2.1(3), the Fund ManagerG must commission an interim and an annual report relating to the FundG operations from the Shari'a Supervisory BoardG which complies with AAOIFI GSIFI No 1.
          (2) The Fund ManagerG must deliver a copy of the annual interim report referred to in (1) to the UnitholdersG in accordance with CIR Rule 9.4.4 and must include the report of the Shari'a Supervisory BoardG in the annual report required under CIR Rule 9.4.5.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          Amended in accordance with Notice of Amendments to Legislation April 2011 [VER3/02-11]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

          • IFR 6.3.2 Guidance

            Although the Fund ManagersG of Exempt FundsG and Qualified Investor FundsG are not subject to the Shari'a review process required under IFR section 6.3, they would need to ensure that the Exempt FundG or Qualified Investor FundG continues to meet the Shari'a requirements, particularly for the purposes of their annual and interim reports, which are required to be prepared under CIR section 9.4. However, the manner in which they demonstrate to the UnitholdersG of the FundG how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the UnitholdersG and the Fund ManagerG .

            [Added] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.4 Internal Shari'a Review

        • IFR 6.4.1

          (1) The Fund ManagerG of a Domestic FundG that is a Public FundG must perform an internal Shari'a review to assess the extent to which the FundG complies with fatwas, rulings and guidelines issued by the Fund'sG Shari'a Supervisory BoardG .
          (2) The Fund ManagerG must perform the internal Shari'a review in accordance with AAOIFI GSIFI No. 3.
          (3) The Fund ManagerG of an Umbrella FundG which has an Islamic Sub-FundG must, to the extent possible, perform the internal Shari'a review in accordance with AAOIFI GSIFI No. 3 and must document the manner in which it will conduct that part of the internal Shari'a review that is not conducted in accordance with AAOIFI GSIFI No. 3.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

          • IFR 6.4.1 Guidance

            1. Although the Fund ManagersG of Exempt FundsG and Qualified Investor FundsG are not subject to the specific internal Shari'a requirements under section 6.4, they would need to ensure that the Exempt FundG or Qualified Investor FundG continues to meet the applicable Shari'a requirements. However, the manner in which they demonstrate to the UnitholdersG of the FundG how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the UnitholdersG and the Fund ManagerG .
            2. GSIFI No. (3) (Internal Shari'a Review) establishes standards and provides guidance on the internal Shari'a review in institutions that conduct business in conformity with Shari'a. The standard covers the following:
            a. objectives;
            b. internal Shari'a ReviewG ;
            c. independence and objectivity;
            d. professional proficiency;
            e. scope of work;
            f. performance of the internal Shari'a ReviewG work;
            g. management of the internal Shari'a ReviewG ;
            h. quality assurance; and
            i. elements of an effective internal Shari'a ReviewG control system.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.4.2

          The Fund ManagerG must ensure that the internal Shari'a review referred to in this section is performed by the internal audit function of the FundG or the compliance function of the FundG and that the individuals or departments involved in performing the review are competent and sufficiently independent to assess compliance with Shari'a.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

          • IFR 6.4.2 Guidance

            For the purposes of assessing competency of personnel or departments which perform the internal Shari'a review, Fund ManagerG should consult AAOIFI GSIFI No. 3 paragraphs 9 to 16 inclusive.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.4.2 [Deleted]

          [Deleted] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.4.3 [Deleted]

          [Deleted] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.5 Additional Disclosure in a Prospectus of an Islamic Fund which is a Public Fund

        Amended in accordance with Notice of Amendments to Legislation April 2011 [VER3/02-11]

        • IFR 6.5 Guidance

          CIR Chapter 14 and in particular CIR Rule 14.3.1 of the CIR module set out the Public Fund ProspectusG requirements. In addition to complying with those requirements as applicable to the particular FundG , the Fund ManagerG of an Islamic FundG that is a Public FundG must comply with the additional requirements set out in this section.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.5.1

          A Fund ManagerG of an Islamic FundG which is a Public FundG must state in the Fund'sG ProspectusG :

          (a) that all the operations in relation to the FundG will be conducted in accordance with Shari'a;
          (b) if the Fund has a Shari'a Supervisory BoardG appointed to it, the names of the members of the Shari'a Supervisory BoardG and their qualifications and experience and, whether or not the Fund Manager'sG Shari'a Supervisory BoardG is appointed to the FundG pursuant to IFR Rule 6.2.1(2);
          (c) if the FundG does not have a Shari'a Supervisory BoardG appointed to it pursuant to IFR Rule 6.2.1(3), what widely acceptable screening methodologies are used by the FundG to ensure Shari'a compliance with respect to investments made for the FundG , and the board that has approved them;
          (d) if applicable, the manner and frequency of Shari'a reviews;
          (e) how earnings prohibited by Shari'a will be disposed of;
          (f) whether Zakah is the responsibility of the FundG or the responsibility of the UnitholdersG ; and
          (g) the additional disclosure, if applicable, prescribed under IFR section A1.1 of App 1.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • IFR 6.5.1 Guidance

            1. A Fund ManagerG should consider providing additional information to support the statement under IFR Rule 6.5.1 (a) as indicated in 2 and 3 below.
            2. The Fund ManagerG should provide sufficient details setting out the basis upon which the FundG has been approved and certified as Shari'a compliant by its Shari'a Supervisory BoardG . Such details should include the basis of the underlying principles, i.e. the Fatwas or rulings, including reference to any relevant Ijtihad, Ijma, Qiyas or other. Where applicable, reference should be made to any Islamic indices to be used. In addition, where applicable, the screening process and any filters used should be identified.
            3. The Fund ManagerG should set out each of the key features of the FundG and explain the rationale for determining why each of these features are considered Shari'a compliant by the Fund'sG Shari'a Supervisory BoardG .
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 6.6 [Deleted]

        [Deleted] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.6 [Deleted]

          [Deleted] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

        • IFR 6.6.1 [Deleted]

          [Deleted] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.7 Investments in Other Funds

        • IFR 6.7.1

          (1) An Islamic FundG which is a Public FundG may invest in UnitsG of another FundG only where the Fund ManagerG has taken reasonable care to determine that:
          (a) the other FundG is the subject of an independent annual audit conducted in accordance with relevant IFRS or other standards as applicable;
          (b) the other FundG has mechanisms in place to enable UnitholdersG to redeem their UnitsG within a reasonable time; and
          (c) the other FundG is prohibited from having more than 20% of its value in the UnitsG of FundsG .
          (2) The Fund ManagerG must also have ascertained that there is a proper and disclosed basis for asset valuation and the pricing before investing in UnitsG in the other FundG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 6.8 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 6.8.1 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • [Deleted]

            [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 6.9 [Deleted]

        [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 6.9.1 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • [Deleted]

            [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 6.10 Periodic Reports of an Islamic Fund

        • IFR 6.10 Guidance

          CIR Chapter 9 of CIR sets out the periodic reports and related requirements. These are additional requirements that apply to Islamic FundsG .

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 6.10.1

          In addition to the matters specified in CIR section 9.4, an annual report of an Islamic FundG , other than a FundG which is an Umbrella FundG , must contain the report specified in IFR Rule 6.3.2(2).

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.11 Islamic Real Estate Investment Trusts (Islamic REITs)

        • IFR 6.11.1

          (1) A Fund ManagerG must ensure that it does not call, or otherwise hold out, a FundG as being an Islamic Real Estate Investment TrustG or as being an Islamic REITG unless it is a Public Property FundG which is constituted in accordance with (2).
          (2) An Islamic REITG is a Public Property FundG which:
          (a) is constituted either as an Investment CompanyG or as an Investment TrustG ;
          (b) is primarily aimed at investments in income generating Real PropertyG which complies with Shari'a principles; and
          (c) distributes to the UnitholdersG at least 80% of its audited annual net income.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.11.2

          (1) A Fund ManagerG of an Islamic REITG must ensure that it distributes to the UnitholdersG as dividends each year an amount not less than 80% of its audited annual net income.
          (2) The PersonsG providing oversight functions in respect of the FundG must determine if any;
          (a) revaluation surplus credited to income, or
          (b) gains on disposal of Real PropertyG ,
          shall form part of net income for distribution to UnitholdersG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.11.3

          Where an Islamic REITG holds any Real PropertyG via one or more Special Purpose VehiclesG , the Fund ManagerG must ensure that each Special Purpose VehicleG distributes to the FundG all of its income as permitted by the laws and regulations of the jurisdiction where the Special Purpose VehicleG is established.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

        • IFR 6.11.4

          (1) A Fund ManagerG of an Islamic REITG must ensure, subject to (2), that any investment made in respect of property under development whether on its own or in a joint venture is undertaken only where the REITG intends to hold the developed property upon completion.
          (2) The total contract value of the property under development in (1) must not exceed 30% of the net asset value of the Fund PropertyG of the Islamic REITG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

          • IFR 6.11.4 Guidance

            For the purposes of this Rule, the DFSA would not consider property development activities to include refurbishment, retrofitting and renovation.

            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 6.11.5

          A Fund ManagerG of an Islamic REITG may borrow either directly or through its Special Purpose VehicleG up to 50% of the gross asset value of the FundG provided that such borrowings are Shari'a compliant.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
          [Amended] RM160/2015 (Made 9th December 2015). [VER9/02-16]

          • IFR 6.11.5 Guidance

            1. The gross asset value of a FundG should be calculated as the total value of the Fund PropertyG based on the most recent valuation under CIR Rule 8.4.1(1), but without making the deductions provided for in the other paragraphs of that Rule.
            2. As there are no specific risks that arise by virtue of a FundG being an Islamic FundG , the prudential requirements that apply to a Category 3 firm as set out in the PIB module apply to such Fund ManagersG . However, if the underlying assets of the FundG are invested in financial products or instruments that are Islamic and have certain features which would raise any prudential risks, it is the responsibility of the Fund ManagerG to address such risks. The DFSA would provide any additional clarifications regarding such matters upon request.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] RM160/2015 (Made 9th December 2015). [VER9/02-16]

      • IFR 6.12 Islamic Money Market Funds

        • IFR 6.12.1

          CIRG Rules 13.8.1(2) and (3) and 13.8.2 apply to a Fund ManagerG of an Islamic FundG that is a Money Market FundG as if a reference to:

          (a) a DepositG or a DebentureG includes an Islamic financial instrument or product with similar economic characteristics to a DepositG or a DebentureG ; and
          (b) an interest rate reset date is, in relation to an Islamic financial instrument or product, a reference to the date on which the rate of profit of return for that instrument or product is reset.
          [Added] RM160/2015 (Made 9th December 2015). [VER9/02-16]

          • IFR 6.12.1 Guidance

            A Fund ManagerG of an Islamic Money Market FundG must comply with the overriding obligation in CIR Rule 13.8.1 to ensure that the Fund'sG investment strategy is consistent with the investment objectives of a Money Market FundG as set out in CIR Rule 3.1.11. It must also comply with other applicable requirements for Money Market FundsG such as the requirement to include a warning in the Fund Prospectus under CIR Rule 14.4.7.

            [Added] RM160/2015 (Made 9th December 2015). [VER9/02-16]

    • IFR 7 Offers of Islamic Securities

      • IFR 7.1 Application

        • IFR 7.1.1

          (1) Subject to (2), this chapter applies to any PersonG who Offers Islamic SecuritiesG in or from the DIFC.
          (2) A PersonG making Offers of Islamic SecuritiesG in or from the DIFC must comply with the requirements in the Markets Law 2012 and the MKT module except to the extent otherwise provided in this chapter.
          (3) Islamic SecuritiesG , for the purposes of this chapter, do not include UnitsG of an Islamic FundG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM94/2012 (Made 14th June 2012). [VER4/06-12]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

          • IFR 7.1.1 Guidance

            1. The issue of SecuritiesG is not an activity that constitutes a Financial ServiceG . Therefore, the activities such as the issue of SharesG , DebenturesG (SukuksG ) or WarrantsG do not attract the Financial ServicesG prohibitions in the Regulatory Law 2004. However, the OfferG of SecuritiesG is an activity to which the Markets Law 2012 and the MKT module apply. Under the Markets Law 2012, a PersonG making an OfferG of SecuritiesG in or from the DIFC is subject to numerous disclosure requirements, unless exempt.
            2. Offers of Islamic SecuritiesG which are Units of a Fund are not subject to the requirements in this section because the Collective Investment Law 2010 and CIR module provide for such activities to be regulated. IFR Chapter 6 of this module sets out additional requirements that apply to the Fund ManagerG when Offering Units of an Islamic FundG .
            3. The definition of the term Islamic SecuritiesG is in the GLO module.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
            [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
            [Amended] DFSA RM94/2012 (Made 14th June 2012). [VER4/06-12]
            [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 7.2 Contents of a Prospectus for Islamic Securities

        • IFR 7.2.1 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 7.2.2 [Deleted]

          [Deleted] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

        • IFR 7.2.3

          Where the relevant SecuritiesG are held out as being in accordance with Shari'a, the ProspectusG relating to those SecuritiesG must include:

          (a) details of the members of the Shari'a Supervisory BoardG appointed by the IssuerG who have undertaken the review of the relevant SecuritiesG ;
          (b) details of the qualifications and experience of each of those Shari'a Supervisory BoardG members;
          (c) in the case of issuance of SukuksG :
          (i) the opinion of the Shari'a Supervisory BoardG in respect of whether the SecuritiesG are Shari'a compliant;
          (ii) a description of the structure of the underlying transaction and an explanation of the flow of funds; and
          (iii) where applicable, the disclosures required by the Shari'a StandardsG published from time to time by AAOIFI in respect of investment SukuksG ; and
          (d) instead of the statement required under MKT Rule 2.5.1(3)(d), a prominent disclaimer in bold, on the front page of this ProspectusG as follows:

          "The DFSAG does not accept any responsibility for the content of the information included in the ProspectusG , including the accuracy or completeness of such information. The liability for the content of the ProspectusG lies with the issuer of the ProspectusG and other Persons, such as Experts, whose opinions are included in the ProspectusG with their consent. The DFSAG has also not assessed the suitability of the Securities to which the ProspectusG relates to any particular investor or type of investor and has not determined whether they are Shari'a compliant. If you do not understand the contents of this ProspectusG or are unsure whether the Securities to which the ProspectusG relates are suitable for your individual investment objectives and circumstances, you should consult an authorised financial advisor."
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM94/2012 (Made 14th June 2012). [VER4/06-12]
          [Amended] DFSA RM106/2012 (Made 23rd December 2012). [VER6/12-12]

      • IFR 7.3 Continuing Disclosure Relating to Islamic Securities

        • IFR 7.3.1

          The Reporting EntityG responsible for Islamic SecuritiesG must, without delay, disclose to the markets and the DFSA details of any changes to the membership of its Shari'a Supervisory BoardG , the identity, qualifications and experience of any new Shari'a Supervisory BoardG members and the identity of any Shari'a Supervisory BoardG members who resign or are dismissed.

          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

        • IFR 7.3.2

          A Listed EntityG with Islamic SecuritiesG admitted to the Official List of SecuritiesG must make the required market disclosures in accordance with the requirements under section A2.1 and comply with the other continuing obligations under section A2.2.

          Derived from DFSA RM119/2013 (Made 13th June 2013). [VER7/07-13]

      • IFR 7.4 [Deleted]

        [Deleted] DFSA RM169/2016 (Made 10th February 2016). [VER10/04-16]

        • IFR 7.4.1 [Deleted]

          [Deleted] DFSA RM169/2016 (Made 10th February 2016). [VER10/04-16]

    • IFR 8 Takaful Insurance

      • IFR 8.1 Application

        • IFR 8.1.1

          (1) This chapter applies to a PersonG who carries on or holds out as carrying on Insurance BusinessG or Insurance IntermediationG as Takaful InsuranceG .
          (2) In addition to the requirements in this chapter, the requirements that apply to conventional Insurance BusinessG or Insurance IntermediationG continue to apply to such a PersonG .
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

      • IFR 8.2 Specific Disclosure for Takaful Insurance

        • IFR 8.2.1

          Where an InsurerG or an Insurance IntermediaryG conducts Takaful InsuranceG with a Retail ClientG , the disclosure for the purposes of COB section 7.7 must include:

          (a) the nature of the contracts between the TakafulG fund and the operator;
          (b) the method of calculation of any fees or share of profits paid from the TakafulG fund to the operator;
          (c) the basis on which any surpluses in the TakafulG fund will be shared; and
          (d) any circumstances in which additional contributions to the TakafulG fund may be required.
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

          • IFR 8.2.1 Guidance

            1. Firms conducting Insurance BusinessG comprising TakafulG must comply with the requirements in PIN. TakafulG related prudential requirements are not included in this module because of the closely integrated nature of such requirements with the requirements that apply to conventional insurance.
            2. Note that structures of Takaful InsurersG (including reinsurers) vary, as do the Islamic contracts governing their business. As the DFSA has not as yet thought it appropriate to limit the permissible structures and contracts, the DFSA is willing to consider modifications to its Rules to apply the most appropriate prudential regime to a TakafulG entity. For many TakafulG companies, this is likely to involve capital tests at the level of the Takaful participants' fund or funds, and for the firm as a whole.
            Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

    • IFR App 1 Prospectus Disclosures for Islamic Funds

      • IFR A1.1 Shari'a Approval Process Statement for Offers of Domestic Funds from the DIFC

        • IFR A1.1.1

          In respect of the UnitsG of an Islamic FundG which are to be offered to prospective UnitholdersG in Malaysia, a Fund ManagerG must ensure that the ProspectusG set out in a prominent position the following statement:

          "The Shari'a approval process which relates to this Fund has been carried out in accordance with the legislation applicable in the Dubai International Finance Centre (DIFC)".
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
          [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR A1.2 Shari'a Approval Process Statement for Offers of Foreign Funds in or from the DIFC

        • IFR A1.2.1

          In respect of an Islamic FundG which is a FundG domiciled in Malaysia and which is a Designated FundG , an Authorised FirmG must ensure that the ProspectusG contains in a prominent position or has attached to it the following statement:

          "This Prospectus relates to an Islamic Fund, the Shari'a approval process of which is regulated by the Securities Commission of Malaysia."
          Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]

    • IFR App 2 Continuing Obligations

      • IFR A2.1 Continuing obligations — Market disclosures for listed entities

        • IFR A2.1.1

          This table forms part of Rule 7.3.2.

          [Added] DFSA RM125/2013 (Made 13th June 2013) [VER7/07-13]

        • IFR A2.1.2

          A Listed EntityG must, on the occurrence of an event specified in column 1, make the required disclosure detailed in column 2, within the time specified in column 3, in respect of the SecuritiesG identified with a “√” in column 4, of this TableG .


            A2.1.1
            EVENT GIVING RISE TO DISCLOSURE OBLIGATION DISCLOSURE REQUIRED TIME OF DISCLOSURE Structured Products Shares Warrants over Shares Warrants over Debentures Debentures Certificates over Shares Certificates over Debentures Units
          ISLAMIC SECURITIES
          1. Any material change in the Shari'aG nature of its Listed SecuritiesG as determined by the Shari'a Supervisory BoardG Market disclosure of the material change As soon as possible
          2. Where there are any material changes to the structure of the Listed SecuritiesG , or the use of proceeds, then the Listed EntityG must obtain and disclose a new Shari'aG opinion Market disclosure of the new Shari'aG opinion As soon as possible

          [Added] DFSA RM125/2013 (Made 13th June 2013) [VER7/07-13]

      • IFR A2.2 Other continuing obligations for listed entities

        • IFR A2.2.1

          This table forms part of Rule 7.3.2.

          [Added] DFSA RM125/2013 (Made 13th June 2013) [VER7/07-13]

        • IFR A2.2.2

          A Listed EntityG must, on the occurrence of an event specified in column 1, make the required disclosure detailed in column 2, within the time specified in column 3, in respect of the SecuritiesG identified with a “√” in column 4, of this TableG .


            A2.2.1
            EVENT REQUIREMENTS TIME Structured Products Shares Warrants over Shares Warrants over Debentures Debentures Certificates over Shares Certificates over Debentures Units
          REGISTRATION
          1. Appointment of an independent Shari'a Supervisory BoardG to evaluate the Shari'aG compliance of the IslamicG equity SecuritiesG on an annual basis Notify the DFSAG Annually          
          2. Any proposed decision with regard to any change in its board of directors or Shari'a Supervisory BoardG . Consult with the DFSAG In advance

          [Added] DFSA RM125/2013 (Made 13th June 2013) [VER7/07-13]