Sharia compliant note
Email to client (Ref. Tel. & Email w/ Remko): I have discussed with our cooperation partner a Sharia-Equity-Tracker solution on Trisyntec LLC, which would hold further interests in the “Devices” corporation and the “AI” corporation. This is not an AMC, which would require licensing, but a note on a holding company, which would also require an annual valuation from an acceptable valuation provider. We have been informed that they can implement such a solution without capital calls, but some elements would require some preparatory work from you.
There would be additional costs associated with a required placement memorandum of indicative USD 10,000 and unknown costs of the Shariah board to review and approve the note.
You will need to check with the Shariah board whether the note needs to hold the shares directly (true sales) or if a performance agreement (synthetic) between the Luxembourg compartment and Trisyntec LLC is acceptable. Furthermore, you'll need to check the tax situation depending on whether it is a true sale or synthetic (e.g. tax blocker required or any other related tax aspects).
It is best to contact the Sharia board to ensure a workable solution. There are various boards, and in Asia they are generally more restrictive than in the Middle East.
As mentioned in our last conversation, you should not launch the product first, but at least have an anchor investor in place (e.g. via LOI) before starting the whole process, taking into consideration the various upfront cost factors explained above.
Please also consider that the running costs of the Luxembourg solution, according to the indicative fact sheet in the appendix, would most likely be invoiced monthly by the solution provider to Trisyntec LLC.
I hope this clarifies the overall situation and would be delighted to assist you once you have all this lined up.
Earlier Email by Remko:
in relation to your request of a sharia compliant AMC, there are some questions, we might have.
Generally speaking, setting up a product is not too complicated, but we need to coordinate this with the respective sharia board, which will need to be appointed, based on the needs of the investors.
Pls remember, there is a difference, if the investor is coming from middle east vs Singapore, unfortunately, they have different approaches.
Even though, that you asked for an AMC, I would like to add some words:#
A distinction is made for Shara-compliant products between
Tangible assets (e.g. real estate)
and active securities trading (AMC).
The tangible assets are checked once (during set-up) by the Sharia Board, whereas during active trading each investment or security and the company behind it must be checked. For this purpose, there are third-party providers who already filter and check securities (NOT included in the pricing).
Each issue receives a fatwa (permission/approval) from the Sharia Board and is thus classified as Sharia-compliant.
For Sharia bonds, it must apply that there is no interest and no guarantee.
In general, 'Sharia compliance' requires attention to what one is not allowed to do. Sharia is based on the 'exclusion principle'.
One should not focus on the permissions but create solutions for the prohibitions.
Interest income, for example, must be packaged as profit sharing in these structures. Economically comparable, but a different approach.
To make the long story short: All depends on the needs of the investors, especially in relation to the sharia board.
Setting something up is not really a problem, and we are able to find databases, where the equity is being captured, fulfilling the sharia approach.
With this in hand can you cauge the client his interest.
Basically pricing wise it would change with sharia boards and special docs when needed as well as some checks.
To go thru the whole exercise we would need to understand a bit more what's going on.