Inquiries related to equity/stock trading

1. Margin trading is a combination of a number of transactions in one. In%0D%0Aorder for it to be classified as permissible each of these transaction must%0D%0Afall into one of modes of transacting permitted by Shariah and the entire%0D%0Acombination must also adhere to the Islamic laws of business. Some of the%0D%0Atransactions in Margin Trading however do not fall into any of these%0D%0Apermitted categories , thus it would not be possible to classify it as%0D%0AHalaal. The South African Board of Muftis will shortly be discussing a%0D%0Asimilar mode of Business and an attempt would be made to see if margin%0D%0Atrading could also be given a clear ruling.%0D%0A%0D%0A2. To the best of our knowledge, carry-over transactions (COT) in simple%0D%0Aterms are when a trader on the stock market does not clear up his debts (by%0D%0Aclosing his transactions), but instead carries them over for a few more days%0D%0A(normally up to 3). In order for him to do this, he has to pay a charge%0D%0A(interest) on the borrowed funds or on the securities borrowed. It is in%0D%0Aessence interest and would not be permissible in its normal form. There%0D%0Ahave been some modifications made to certain transactions in an attempt to%0D%0Arender them shariah compliant, however each new product would have to be%0D%0Aindependently analysed.%0D%0A%0D%0A3. There is no minimum time for share to be kept in your possession. When%0D%0Adealing on the stock exchange, you should bear in mind the conditions laid%0D%0Adown for such trading to be permissible viz.%0D%0AA. The main business of the company must be Halaal (permissible) according%0D%0Ato Shariah. So, a Muslim cannot invest in a company whose main business is%0D%0AHaraam, like the traditional banks, insurance companies, companies dealing%0D%0Ain wines, etc.%0D%0AB. If the main business is Halaal, but it is involved in borrowing money on%0D%0AInterest or placing its funds in an Interest bearing account a Muslim%0D%0Ashare-holder should raise his voice against this practice in the annual%0D%0Ageneral meeting of the company.%0D%0AC. When a Muslim share-holder receives a dividend he must ascertain that%0D%0Aproportion of the profit of the company which has accrued on its%0D%0Ainterest-bearing accounts. Then a similar proportion from his own dividend%0D%0Amust be given by him to a person or persons entitled to receive Zakaat.%0D%0AD. If all the assets of a company are in a liquid form and the company has%0D%0Anot yet acquired any fixed assets or any stock for trade, then the sale and%0D%0Apurchase of shares must be on their par value only.%0D%0AIf anyone of these conditions is contravened, the investment in a company is%0D%0Anot permissible in the Shari'ah.%0D%0A%0D%0Aand Allah Ta'ala Knows Best%0D%0A%0D%0AMufti Ebrahim Desai