The possible offer of Islamic financial products, both by Italian institutions and Islamic windows in Italy, is a real perspective that has to be taken into consideration in order to expand the chances for Italy to gain new investments and grant investors the diversification of their investments.
First of all, it is necessary to examine if the expression ‘financial product’ is the same in Islamic finance and Italian conventional finance and, in hindsight, it is worth noting that Islamic shares, Islamic mutual funds and Sukuk are all instruments that can be considered in the category of conventional financial instruments as specifically defined in the Italian Consolidated Law on Finance (Testo Unico della Finanza) — Legislative Decree n 58 of the 24th February 1998.
The second important aspect that must be considered is the set of rules that oversee the issuance of Islamic financial products in Italy. The aforementioned Consolidated Law on Finance states that, in case of a public offer sponsored by an institution whose registered office is located in Italy or in another European country, it must publish a prospectus that will differ according to the fact that the financial instrument being offered may be considered as “European financial instruments” (in which category are included Islamic shares, Islamic mutual funds and Sukuk) or “non-European financial instruments”.
If European financial instruments are issued, the prospectus must be drawn up according to European Regulation No 809 of the 29th April 2004 that sets up different models of prospectuses depending on the nature of the issuer’s entity, the type of financial instrument that has to be issued and other technical requirements.
The same regulation also requires the distinction between the issuance of financial instruments that are “equal but not identical” to European financial instruments and the issuance of brand-new financial instruments. In the first hypothesis, the prospectus must contain additional requirements compared to the information usually requested in the case of a public offer dealing with the issue of conventional financial instruments; the same regulation No 809 describes these further requirements. In the second hypothesis, CONSOB (the regulatory body for the Italian stock exchange) will decide which requirements have to be included into the prospectus.
If the financial instrument is issued by an entity whose registered office is located in a non-European country, the prospectus may be alternatively drawn up according to the aforementioned European Regulation No 809/2004, or according to the law of the non-EU country of reference.
In the latter case, two conditions must be met: 1) the prospectus must in any case comply with the international standards set by international securities commission organizations, including the IOSCO disclosure standards; and 2) the information required by the law of the non-EU country is equivalent to the requirements contained in European regulations.
Stefano Loconte is the managing partner at Loconte & Partners. He can be contacted at [email protected].