The Securities and Exchange Commission (SEC) has issued draft guidelines for sukuk issuances as part of government efforts to develop the Islamic capital market and broaden investment options for investors.
The draft rules aim to establish a regulatory framework that ensures Shari’ah compliance and investor protection by introducing enhanced disclosure standards, clearer Shari’ah governance mechanisms and strengthened investor safeguards aligned with international sukuk practices, the SEC said in a statement Thursday.
Sukuk are certificates of equal value that represent undivided investment or rights to underlying assets, usufructs, services or projects undertaken in accordance with Shari’ah principles.
The draft rules will apply to all sukuk issuances not exempt under Section 9 of the Securities Regulation Code. Sukuk intended for public offering should be registered with the SEC and may be listed, traded and settled on an SEC-registered exchange, fixed-income market or other organized market.
Eligible issuers include publicly-listed and non-listed stock corporations; the national government, its agencies and instrumentalities; local government units; government-owned and -controlled corporations; banks supervised by the Bangko Sentral ng Pilipinas, including Islamic banks; and special purpose entities formed by these issuers.
Special purpose entities may be created specifically for sukuk issuances, provided they are separately incorporated from the originator, registered with the SEC and compliant with its regulations.
These entities should also follow international standards for sukuk issuance, including Shari’ah principles. Their primary purpose will be the issuance of sukuk and the holding of assets for sukuk holders.
Sukuk may be issued using several Shari’ah-compliant structures, including Sukuk Ijarah or lease-based sukuk; Sukuk Murabahah or cost-plus financing sukuk; and Sukuk Istisna, used to raise funds for manufacturing or construction projects.
Issuers should either form a Shari’ah committee or appoint a Shari’ah adviser to certify that the sukuk structure and underlying assets comply with Shari’ah principles.
The adviser or committee will provide oversight from issuance to maturity and will monitor and audit Shari’ah compliance.
The SEC said the measures are intended to ensure transparent sukuk structures, safeguard investor interests and align local issuances with global Islamic finance standards.
