The UK Government has proposed new regulations to support Islamic finance and the issuance of corporate sukuk within this country.
The regulations have four main aims: (1) to level the playing field for corporate sukuk within the UK; (2) provide clarity on the regulatory treatment of corporate sukuk; (3) reduce the legal costs for these types of investments; & (4) remove unnecessary obstacles to their issuance.
Sukuk are a broad class of financial instruments designed to replicate the economic function of bonds, but with a structure which complies with Islamic principles. Although there is an obvious appeal to the Muslim community, sukuk can be issued and bought by everyone.
Announcing the regulations, Exchequer Secretary Sarah McCarthy-Fry said:
"The Government's objectives on Islamic finance are to enhance the UK's competitiveness in financial services by maintaining the UK's position as a Western leader for international Islamic finance; and to ensure that everybody, irrespective of their religious beliefs, has access to competitively priced financial products.
"This measure is another important step in the development of the Islamic finance sector in the UK and will help to provide a level playing field for Islamic financial products in this country. It is good news for the UK economy and for our Islamic finance industry."
The regulations explicitly exempt alternative finance investment bonds (AFIBs) - a class of debt-like security, which includes sukuk - from Collective Investment Scheme regulations. It also introduces a unique regulatory definition of an AFIB, removing uncertainty about the regulatory treatment of corporate sukuk.
For further information on the consultation which instructed this legislation, visit HM Treasury website.