Shariah-compliant securities may be re-classified as Shariah non-compliant securities upon review by the SAC of the SC due to various reason such as changes in the companies' business operations and financial positions.
Following the re-classification, investors are responsible to undertake the exercise to determine wehther the market price of the affected securities exceeds, is equal to or is less than the investment cost.
As a quick guide:
- If the market price of the re-classified securities exceeds or is equal to the investment cost, an investor should dispose of them. Any dividends received up to the date of re-classification and capital gains arising from the disposal may be kept by the investor. Any dividends and/or capital gain received from disposal of the re-classified securities after the date of announcement should be channelled to approved charitable bodies.
- If the market price of the re-classified securities is below the investment cost, investors are allowed to hold their investments in said security. Dividends received during the holding period is allowed to be kept until the total amount of dividends received and the market value of the re-classified securities is equal to the investment cost. Once the market value is equal to the investment cost, the investor has to dispose of the securities.
For a more in-depth explanation, please refer to the Best Practices for Shariah Investing in the resource link below:
Best Practices for Shariah Investing |