Product & Services
Domain focus
Product & Services tests capital-market products and the governance issues they create for issuers and intermediaries. Expect coverage of equities, bonds and sukuk, collective investment schemes, derivatives, REITs and exchange-traded funds, plus the disclosure, suitability and conflict issues around distributing them.
Core rules and concepts
- Product features drive risk: equity confers ownership and voting rights; bonds and sukuk create payment obligations; derivatives create leverage and counterparty exposure; collective investment schemes pool investor money.
- Issuers must disclose material terms, risks and related-party arrangements accurately; marketing material cannot cure a misleading prospectus or offering document.
- Intermediaries must manage suitability, know-your-client and conflicts when advising or distributing products.
- Sukuk requires Shariah-compliance review as well as conventional credit and disclosure analysis.
- Valuation, liquidity and redemption terms are governance-relevant because they affect investor protection.
Worked example
A listed issuer plans a sukuk issuance and wants a director-affiliated investor to subscribe. Management argues that because sukuk is “not equity,” shareholder approval is unnecessary and the director need not be recused.
Reasoning: the product label does not decide the process. The board must assess the sukuk terms, Shariah compliance, use of proceeds, investor protection and whether the director’s participation is a related-party transaction. The director must disclose the interest and be recused where required. Independent advice and shareholder approval may be needed under the applicable rules. The board should also test whether the pricing is arm’s length.
Traps that cost marks
Treating sukuk as “just debt” and ignoring Shariah governance. Assuming a licensed intermediary may sell any product without suitability checks. Confusing disclosure with approval. Ignoring conflicts created by director-affiliated subscribers.