HM Treasury and FSA have issued a joint document on ‘alternative finance investment bonds’ (‘AFIBs’).
These are a subset of the sukuk market, which in turn are financial instruments that conform to the principles of Islamic law (Shariah).
The structure of some sukuk instruments means that they will be regarded as collective investment schemes. This was felt to place an additional regulatory burden on AFIBs when compared to conventional bonds or asset backed securities.
In order to remove this issue there are proposed changes to various Statutory Instruments including the Regulated Activities Order and FSMA 2000 (Collective Investment Schemes) Order 2001.
The report stresses that in doing so the Government is not extending special favours to the Islamic finance sector but rather ensuring that economically equivalent financial instruments are afforded equivalent regulatory treatment.
Although there has already been one consultation period, the paper welcomes further comments by 6th November. It is intended that the legislation and the necessary changes to the FSA handbook will come into force by early 2010.
