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The Malta Financial Services Authority (MFSA) has published a Guidance Note for Shariah Compliant Funds.

The document explains how the legal and regulatory framework established under the Investment
Services Act would apply to Shariah-compliant funds established under Maltese law.
The MFSA stated that Malta’s principles-based regulatory regime lays emphasis on the
disclosure of all information that the investor needs to know before taking the investment
decision and on the transparency of investment management process itself. This allows a
high degree of freedom on the choice of investment strategies and asset allocation
policies adopted by investment funds, subject to conditions that vary according to the
level of experience and investment expertise of the target investor.

On this basis, the Guidance Note establishes that, whether set up as Professional Investor
Funds, UCITS or non-UCITS Retail Funds, Shariah Funds may be regulated in the same
manner as non-Shariah Funds. The level of disclosure and the applicable conditions
would be the same as those that are applicable to the respective category of retail or
professional funds. The Guidance Note therefore requires that funds presenting
themselves as Shariah compliant are required to disclose all the relevant details in this
respect in the fund prospectus or offering document as well as in their financial
statements as part of their ongoing obligations.

The Guidance Note also explains the role of the Shariah Advisory Board in relation to
that of the fund manager to ensure that the financial soundness of the manager’s decisions
is not conditioned by non-financial considerations. It is however also the manager’s
responsibility to ensure that the fund actually does satisfy the relevant Shariah principles
and requirements as disclosed in the offering document.

The Guidance Note may be downloaded from the MFSA website , http://www.mfsa.com.mt
under Securities/Guide to Regulation.