Islamic Law

Stock Law in Islam and How It Works

The term stock is no stranger to the public. This economic term is, of course, often discussed from various perspectives. Often people know the word stock and do not know the meaning of the stock itself. For this reason, it is necessary to discuss what the stocks mean.

In addition, stocks also become things that need to be studied in an Islamic perspective. The term stock has never existed before in Islam in historical times. But along with economic development, the development of the times, and the development of science, of course, this has become commonly discussed.

As a human being who has a function to run the economy, it is necessary to discuss and know how the stock law is in accordance with the basic values ​​of the pillars of Islam. For this reason, it is important to know how the law of the shares according to Islam.

Definition and Terms Regarding Shares

The term stock is in the Republic of Indonesia Presidential Decree No. 60 of 1988. The stocks in the presidential decree are in the theme of the capital market. By definition, it means that securities represent a sign of equity participation in a limited liability company, as stipulated in the KUHD (Commercial Law or Staatbald No. 23 of 1847).

The definition of the bond itself is proof of the recognition of debt from a Company (Issuer) to the relevant bondholders. Whereas the capital market itself is a place for capital to be traded between parties who have excess capital (investors) and people who need capital (issuers).

Actors in Stock Activities

It is important to know who the perpetrators are in the stock activities. This is to find out the process and how this activity be carried out. The actors of the Capital Market and Stock Activities are as follows:

  • Issuer

In general, an issuer means a business entity with the nature of a limited liability company that issues a share as an attempt to increase capital or issue bonds and to obtain debt from investors on the stock exchange in the country.

  • Intermediary Emissions

Emission brokers are called underwriters, public accountants, and valuing companies. The underwriter means the intermediary company that serves as the guarantor of sales of emissions.

A public accountant is a business that has the function of examining the financial condition of the issuer and which gives an opinion whether the financial statements issued are fair issuers or not in the process while the appraisal company is a company whose function is to provide an assessment of the issuer whether the issuer’s assets are fair or not.

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  • Capital Market Executing Agency

This agency has the task and regulates the operation of the capital market, removing issuers from the stock exchange floor and giving sanctions to businesses that violate capital market regulations.

  • Stock Exchange

The stock exchange is a place for capital market securities trading activities established by the business entity. This has become the center of stock trading in business actors.

  • Securities Trading Intermediary

This subject is also a brokerage commissioner who only passes on securities institutions in the exchange may be transacted. Brokers are companies that can make purchases and sales for the benefit of other people by obtaining compensation. Commissioner is a party that makes purchases and sales of securities for their own or other people’s interests through the benefits received.

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  • Investor

Investors are those who invest capital in the form of securities on the exchange by buying or reselling the existing securities by them.

Stock Law According to Scholar’s Opinion

We can see stock law in Islam from various scholars who review and discuss it. They all say that the law of stock is haram.

According to Khalid Abdul Rahman

According to the cleric who came from Saudi Arabia, shares in the traded stock exchanges are not justified in Islamic economic shari’a. This was revealed by the reason that the difference between the stock price and the existing nominal price is unknown and not taken into account when the company’s profit sharing is made to shareholders. For this reason, according to Khalid Abdul Rahman, this is a major element of fraud.

In addition, companies that sell their shares are no longer established only through the activities of other shareholders. For this reason, as arranged in Muammalah Islamic jurisprudence, this has changed into a hoarding company of wealth.

Likewise, regarding the deadline for ending the owner association, it is also unclear about this. For this reason, the problem of obscurity in any transaction in Islamic law or muammalah or Islamic economic fiqh is not justified.

In addition, the problem of profits and losses that befall the company does not affect the stock price in the existing capital market so that shareholders will continue to make a profit. Commissioners, directors who manage the company always benefit. According to Islamic teachings, wages or salaries received from someone must be calculated from the profit or loss of the company’s activities.

Further reading:

According to the Kuwait Sharia Fatwa Council

The Kuwait sharia fatwa council also explained that transactions on the stock exchange were illegal. It is explained that the elements in Islamic jurisprudence are unknown on the stock exchange. In addition, this activity is very visible as an element of fraud.

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Scholar and Law Enthusiasts in Indonesia

Dr. H. Peunoh Dalyh once explained that buying and selling of shares on the stock exchange contained gurur which means that it is strictly prohibited by Islam. As a leader of Islamic scholars and enthusiasts in Islamic law in Indonesia, he explained that the stock exchange is the same as buying and selling fish in ponds whose numbers are not known. Or another example of selling fruits on trees that have not yet seen maturity. For that speculation is very large, and the effect can be a major accident or loss to others.

According to him, this attitude is called by condition, which is detrimental. For this reason, according to him, the activity of buying and selling shares in Islam is lawless.

According to UIN Islamic Fiqh Lecturers

According to Islamic fiqh lecturers from the Syarif Hidayatullah State Islamic University in Jakarta, there are several opinions on this matter:

  • Stock sale and purchase transactions have the possibility of a large amount of fahisy, namely a large amount of money that lose. This was stated by Dr. H. Satria Effendi.
  • The stock exchange is illegitimate because it has high speculation. The law is almost the same as gambling. This was stated by KH Ali Ya’fie.
  • In the activity of buying and selling stocks, there are elements of gambling, speculation, and the desire to get rich quick through these activities. For this reason, profits are only with the owners of the company, not shareholders.
Widiya

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