Council of Ulema bans Russian Muslims from margin trading and short positions

The Ulema Council of the Spiritual Administration of Muslims (DUM) of Russia named the types of transactions with securities permitted and prohibited for Muslims. In particular, Russian Muslims are prohibited from dealing in short positions and margin trading. The corresponding decision was published on DUM website.

The Ulema Council also prohibited Muslims from: conducting transactions with shares of companies whose purpose is to carry out activities prohibited by Shariah (for example, the production of alcohol and pig farming); enter into futures contracts for shares; provide shares of companies in loans and leases.

Muslims are allowed to trade in the shares of companies that engage in Shariah-sanctioned activities without placing or raising funds at usurious interest; spot transactions and transactions for long positions.

At the same time, Muslims can trade shares of companies with a permitted type of activity, but placing or raising funds at interest, subject to a number of conditions. Among them, in particular, are the following: in the charter of the company among the goals should not be indicated the conduct of usurious transactions; the share of funds raised through interest-bearing loans should not exceed 30% of the total capital of the company; a trader needs to get rid of the forbidden share of income from shares, transferring them to charity.

In addition, the council advised Muslims not to do business with companies that do not publish financial statements or for which they are not fully presented. The believing shareholders are also obligated to pay obligatory zakat (the annual tax of Muslims in favor of the needy) on the security upon reaching the minimum income (nisab) on which tax can be paid.

The Council of Ulema also recommended that Muslims, in particular, not conduct transactions with shares of foreign companies due to international sanctions and take note of the government decree of November 24, 2022, which allows companies not to disclose corporate information in full until July 1, 2023.

December 29 last year Ulema Council published fatwa, according to which the purchase and sale of securities is not contrary to Sharia law. At the same time, Muslims were allowed to trade in shares only of those companies whose activities are permitted by Sharia.

Religious norms require Muslims to be especially sensitive when choosing companies to invest funds or lending instruments. For the followers of Islam, there are special stock indices that do not include shares of companies whose activities are contrary to Muslim norms. For example, S&P 500 Shariah Index or Dow Jones Islamic Market Index.

Erdni Kagaltynov