The CMA issues the new Sukuk Regulation.

 

The Capital Market Authority, Sultanate of Oman (“CMA”) has issued the new Sukuk Regulation which is effective from 11 April 2016.

 

This dedicated Sukuk Regulation is being issued subsequent to the amendments made to the Capital Market Law under Royal Decree No. 59/2014 on 10 December 2014, which provides the CMA the authority to regulate all Sukuk issuances in Oman and any Special Purpose Vehicle or Company (“SPV”) being incorporated for the issuance of a Sukuk, including the tax and fee exemption status provided for the SPV.

 

This Sukuk Regulation would complement the existing bond regulatory framework which are currently in place in the Commercial Companies Law and Executive Regulation of the Capital Market Law.

 

It is to be noted that not all jurisdictions have specific and separate Sukuk regulations, particularly in the GCC, with many just having a conventional bond regulatory framework with some additions made on the Shariah requirements.

 

This new Sukuk Regulation will provide clarity and transparency to the market players, while providing protection to investors in a Sukuk transaction. In addition, it has been drafted to provide flexibilities and spur innovation for the market players as follows, amongst others:

1. Introduction of a trust structure.
2. Incorporation of an LLC as the SPV.
3. Allowing the issuance of a Sukuk programme.
4. No restriction on the structure of the Sukuk subject to the approval of the respective Shariah Supervisory Board (“SSB”) of the issuer.
5. The choice of the SSB is left to the issuer.
6. Optional rating requirement.
7. No restriction on the Sukuk amount to be raised based on the company’s capital.

 

His Excellency Abdullah Salim Al Salmi, the Executive President of the CMA said, “The issuance of this new Sukuk Regulation forms an integral part of the overall strategy of the CMA to enable the capital market to play its vital role as a fundraising platform for companies in the economic development of Oman, particularly in the fixed-income market, where Sukuk forms an important element to further develop Oman’s Islamic capital market.”

 

His Excellency Abdullah Salim Al Salmi also added, “In addition, this new Sukuk Regulation will form a key milestone in the evolution of the Sukuk market in Oman and hopefully spur further Sukuk issuances particularly from the private sector players in order to meet their development and funding needs, while diversifying the financing base and risk away from the traditional banking sector. Further Sukuk issuances will also provide an essential liquidity management instrument and investment avenue for both Islamic and conventional financial institutions, investment funds and Takaful/insurance operators in Oman. Hence, not only providing a wider investor base of both conventional and Shariah-compliant investors, but also attracting the required foreign investments into the country via the foreign investors. We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy.”

 

In a short span of 3 years since the issuance of the Islamic Banking Regulatory Framework in December 2012, besides the establishment of 2 Islamic banks and 6 Islamic windows, the Islamic financial market in Oman has seen the launch of the new Muscat Securities Market (“MSM”) Shariah Index with 30 Shariah-compliant listed companies on the MSM, 3 Shariah-compliant investment funds, the 1^st Oman sovereign Sukuk and also the 1^st corporate Sukuk, and the establishment of 2 Takaful operators including the issuance of the new Takaful Law. 

 

The arabic version of the Sukuk Regulation can be downloaded from the CMA’s website at www.cma.gov.om. The english translation will be available soon.