Insider Dealing: From an Islamic Perspective

Abstract

Insider dealing has attracted considerable attention, both scholarly and popular. Studies on market abuse show the importance of combating insider dealing in order to protect market integrity on a global scale. However, researchers in Islamic economic thought (IET) have not treated such conduct in much detail. No known empirical research has focused on exploring the positions of Ifta institutions toward insider dealing.
The aim of this thesis is to present a detailed theoretical analysis of insider dealing within IET. It seeks to portray the different ways in which IET perceives the topic not only through its amalgam of values but also via the economic and logical perspectives. The research involves an empirical study of rulings (fatwas) from Ifta institutions which are considered to be the epicentre of Islamic social organization. It adopts an epistemological approach that involves the interpretation of fatwas. It uncovers the reasons for the various opinions on insider dealing via comparative jurisprudence (Ikhtilaf).
I argue that insider dealing in IET is perceived as an ethical failure. IET promotes the notion of preventing damage during transactions through its notion of Maqasid al-shariʿa (religious aims). Traditionally, it focuses on individual practice rather than the concept of artificial entities which unfolds philosophical scepticism to the perception of artificial constructs within the Islamic thought. I claim that IET concentrates on the moral virtues of human interactions, reflecting a general trust responsibility (Amanah) among market participants (investors) which encourages them to be candid and to disclose inside information on an equal access basis. In IET, inside information is considered to be a substantial element in the transaction of shares and the parties have an equal right to be aware of such information. Islamic religion aims to avoid ignorance (Jahl) and to ensure that the transaction is based on a just price for both parties. The correlational analysis of the fatwas thesis strengthens the idea that IET has a robust moral posture towards insider dealing through its amalgam of values. The findings contribute to a better understanding of the topic in IET. The study should, therefore, be of much value to the academic field and religious institutions as well as the Islamic financial sector in Islamic countries.