Regulators call for greater oversight of Islamic markets

Disclosure regimes to be examined as Islamic capital market grows

By: James Langton
September 18, 2012 September 18, 2012
09:20

Global securities regulators say that the growing Islamic capital markets need more oversight and enhanced disclosure requirements.

Following a high-level roundtable in Kuala Lumpur, the International Organization of Securities Commissions (IOSCO) and the Islamic Financial Services Board (IFSB), which sets prudential standards for Islamic markets, said that the increasing significance of the Islamic capital market, and increasing cross-border transaction volumes, “has triggered the need for stronger oversight, greater transparency and more robust disclosure requirements.”

The meeting, which was organized along with the Securities Commission Malaysia and attended by senior regulators, academics and market players, represents “a significant step” towards the development of international regulatory standards and best practices relating to disclosure requirements for Islamic capital market products, the groups said.

“As the Islamic capital market expands and becomes more global, it is increasingly important that issues surrounding investor protection and market integrity are addressed from a cross-jurisdictional perspective. It is therefore critical for regulators and standard-setters such as the IFSB and IOSCO to further examine disclosure regimes for Islamic capital market products, with a view to allowing more informed investment decision-making and to promote the further growth of the Islamic capital market,” said Datuk Ranjit Ajit Singh, chairman of the Malaysian commission, who is also an IOSCO board member and vice-chair of the IOSCO Emerging Markets Committee.

David Wright, secretary general of IOSCO said, “The recent financial crises highlighted the importance of sound disclosure regimes in mitigating systemic risk and building confidence in the financial markets. Given the tremendous growth of the Islamic Finance industry – an increasingly important segment of the global financial markets – it is essential to achieve greater harmonization in disclosure requirements across jurisdictions where Islamic capital market products are offered.”