PD-1.3.32
Past version: Effective from 01 Oct 2010 to 31 Mar 2011
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The following qualitative disclosures should be made when the concerned Islamic bank has unrestricted investment accounts:
a) Written procedures and policies applicable to the investment accounts, including a synopsis of the following:
• General applicable investment objectives;
• Range of investment products available;
• Characteristics of investors for whom various investment accounts may be appropriate;
• Purchase, redemption and distribution procedures, including IAH's rights to withdraw funds during the term of the Mudarabah contract, and any penalties, such as forfeited shares of profits, that will be incurred by doing so;
• Experience of portfolio managers, investment advisors and trustees;
• Governance arrangements for the IAH funds; and
• Strategy for trading and organization of assets.
b) Disclosure that IAH funds are invested and managed in accordance with Shari'a requirements;
c) Product information and the manner in which the products are made available to investors;
d) Basis and method of allocation of assets, expenses and profit in relation to IAH funds, including, with particular reference to unrestricted IAH, the co-mingling of their funds with other funds managed by the bank, the balance between shareholders' and IAH's interests in terms of allocating investment funds and the risk-return characteristics of investments;
e) Disclosures on the policies governing the management of IAH funds, which covers the approaches to the management of investment portfolio, establishment of prudential reserves, and the calculation, allocation and distribution of profits, including the extent of management's right to appropriate IAH's share of investment profit in order to build up PER and or IRR, to use these reserves to smooth profit payouts to IAH, the rules governing the transfer of funds to or from PER and IRR, including contractual or regulatory limits on management's discretion in the matter and the disposition of unused balances on these accounts at the end of the relevant Mudarabah contract;
f) The availability of "personal banking" and investment advisory and financial planning services for the benefit of IAH, and the degree of independence of such advisors in recommending products offered by other banks;
g) Complaints procedures available to dissatisfied IAH;
h) The extent of any sharing of profits from the bank's provision of fee-based banking;
i) The extent to which the bank is committed to paying a competitive rate of return by accepting DCR;
j) The major changes in the investment strategies that affect the investment accounts (including commingling of funds);
k) Bases applied for charging expenses to unrestricted IAH; and
l) Description of total administrative expenses charged to unrestricted IAH.
Amended October 2010
April 2008
April 2008