Shariah’s Black Box

[131] No analysis of the current SCF industry in the U.S. would be complete without an examination of the Investment Company Act of 1940 and the Investment Advisors Act of 1940. This is because much of the SCF investments are being propelled by mutual funds tracking the DJII and the S&P’s version of the same thing. In addition, with the huge sovereign wealth in the GCC looking for sophisticated investment strategies, Shariah compliant hedge funds are right around the corner. The analysis which follows will examine these two acts to the extent they implicate these types of SCF investments and require a different analysis of the liability exposure for securities fraud.

[132] H.R. Rep. No. 73-85, at 3 (1933); see 1934 Act, 15 U.S.C. § 78b (stating that one purpose of securities law is “to insure the maintenance of fair and honest markets”).

[133] See generally Loss & Seligman, supra note 10 at Chapter 9-B-6.

[134] 17 C.F.R. § 240.10b-5 (1997); see Herman & Maclean v. Huddleston, 459U.S. 375, 380 (1983) (“The existence of this implied remedy is simply beyond peradventure.”).

[135] 15 U.S.C. § 78j.

[136] See generally Loss & Seligman, supra note 10, at 910, 1273-1301 (implied right of action under Rule 10(b)-5).

[137] 15. U.S.C. § 78ff(a) (criminal penalties); see Loss & Seligman, supra note 10, at 1418-1425. For a general survey of criminal liability under the securities acts, see Nic Heuer, Les Reese & Winston Sale, Securities Fraud, 44 Am. Crim. L. Rev. 956 (2007).

[138] See Jeffrey T. Cook, Recrafting The Jurisdictional Framework For Private Rights Of Action Under The Federal Securities Laws, 55 Am. U.L. Rev. 621 (2006).

[139] Supra note 126.

[140] 15 U.S.C. §§ 41-58.