5.1. Appointment of SSB

(1) An Islamic Financial Institution must appoint a Shari’ah Supervisory Board (SSB).

(2) An Islamic Financial Institution must ensure that:

(a) its SSB consists of at least 3 members; and

(b) the members appointed to the SSB are competent to perform their functions as SSB members taking into account their qualifications and previous experience;

and

(c) any appointments, dismissals or changes in respect of members of the SSB are approved by the Governing Body of the Islamic Financial Institution; and

(d) no member of the SSB is a director or controller of the Islamic Financial Institution.

Guidance:

The AFSA may request the AIFC Central Shari’ah Board to provide guidance or advice on Shari’ah matters.

5.2. Policy in relation to SSB

An Islamic Financial Institution must document its policy in relation to:

• (a) how appointments, dismissals or changes will be made to the SSB; and
• (b) the process through which the suitability of SSB members will be considered; and
• (c) the remuneration of the members of SSB

5.3. Independence of SSB

(1) An Islamic Financial Institution must take reasonable steps to ensure that the members of the SSB are independent of and not subject to any conflict of interest with respect to the firm.

(2) An Authorised Firm conducting Islamic Financial Business must ensure that the systems and controls it is required to maintain under Rule 4.1 provides that:

(a) a member of the SSB is obliged to notify that Authorised Firm of any conflict of interest that such member may have with respect to the Authorised Firm or, in the case of an Investment Trust, the Trustee;

(b) the Authorised Firm will take appropriate steps to manage any such conflict of interest so that the Islamic Financial Business activities are conducted appropriately and in compliance with Shari’ah, the interest of a Client is not adversely affected, and all Clients are fairly treated and not prejudiced by any such interests; and

(c) If the Authorised Firm is unable to manage a conflict of interest as provided above, it must dismiss or replace the member as appropriate.

5.3. Independence of SSB

(1) An Islamic Financial Institution must take reasonable steps to ensure that the members of the SSB are independent of and not subject to any conflict of interest with respect to the firm.

(2) An Authorised Firm conducting Islamic Financial Business must ensure that the systems and controls it is required to maintain under Rule 4.1 provides that:

(a) a member of the SSB is obliged to notify that Authorised Firm of any conflict of interest that such member may have with respect to the Authorised Firm or, in the case of an Investment Trust, the Trustee;

(b) the Authorised Firm will take appropriate steps to manage any such conflict of interest so that the Islamic Financial Business activities are conducted appropriately and in compliance with Shari’ah, the interest of a Client is not adversely affected, and all Clients are fairly treated and not prejudiced by any such interests; and

(c) If the Authorised Firm is unable to manage a conflict of interest as provided above, it must dismiss or replace the member as appropriate.

5.5. Obligation to assist SSB

An Islamic Financial Institution must take reasonable steps to ensure that it and its employees:

• (a) provide such assistance as the SSB reasonably requires to fulfil its duties; and
• (b) give the SSB right of access at all reasonable times to relevant records and information; and
• (c) do not interfere with the SSB’s ability to discharge its duties; and
• (d) do not provide false or misleading information to the SSB.

5.6. Record-keeping

An Islamic Financial Institution must establish and retain records of:

(a) its assessment of the competence of the SSB members; and

(b) the agreed terms of engagement of each member of the SSB; for at least 6 years following the date on which the individual ceased to be a member of the SSB.

5.7. Records of assessment of competency of SSB

The records of the assessment of competence of SSB members in Rule 5.6 above, where applicable, must include at a minimum:

• (a) the factors that have been considered when making the assessment of competence; and
• (b) the qualifications and experience of the SSB members; and
• (c) the basis upon which the Islamic Financial Institution considers that the proposed SSB member is suitable; and
• (d) details of any other SSBs of which the proposed SSB member is, or has been, a member.

5.8. Shari’ah reviews to be undertaken

An Islamic Financial Institution must ensure that all Shari’ah reviews are undertaken by the SSB in accordance with the AAOIFI Standards on Governance (GSIFI No 2).

5.9. Annual Shari’ah report

(1) An Islamic Financial Institution must commission an annual report from the SSB which complies with the AAOIFI Standards on Governance (GSIFI No 1).

(2) An Islamic Financial Institution must give the AFSA, a copy of each annual report of the institution’s SSB within 3 months after the day the relevant financial year of the institution ends.

5.10. Financial promotions and communications

(1) Before an Islamic Financial Institution issues or approves a financial promotion or communication, it must ensure that the communication material discloses the identity of the SSB which has reviewed the relevant products or services. These disclosures are in addition to the information required to be disclosed in financial promotions, by the AIFC COB Rules.

(2) Financial communication means any communication (made through any medium including brochures, telephone calls and presentations) the purpose or effect of which is:

(a) to promote or advertise specified products;

(b) to promote or advertise any regulated activity (or any activity that would be a regulated activity if it was carried on in or from the AIFC); or

(c) to invite or induce any person to enter into an agreement with any person in relation to a specified product; or

(d) to invite or induce any person to engage in any regulated activity (or an activity that would be a regulated activity if it was carried on in or from the AIFC).

5.11. Internal Shari’ah reviews

(1) An Islamic Financial Institution must perform an internal Shari’ah review to assess the extent to which the institution complies with fatwas, rulings and guidelines issued by its SSB.

(2) An Islamic Financial Institution must perform the internal Shari’ah review in accordance with the AAOIFI Standards on Governance (GSIFI No. 3).

(3) An Islamic Financial Institution must ensure that:

(a) the internal Shari’ah review is performed by its internal audit function or compliance oversight function; and

(b) the individuals or departments involved in performing the review are competent and sufficiently independent to assess compliance with Shari’ah.

Guidance

For the purposes of assessing competency of personnel or departments which perform the internal Shari’ah review, Islamic Financial Institutions should consult the AAOIFI Standards on Governance (GSIFI No. 3).