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.

About David Yerushalmi

Mr. Yerushalmi is a lawyer specializing in litigation and risk analysis, especially as it relates to geo-strategic policy, national security, international business relations, securities law, disclosure and due diligence requirements for domestic and international concerns. David Yerushalmi has been involved in international legal and constitutional matters for over 25 years. David Yerushalmi is today considered an expert on Islamic law and its intersection with Islamic terrorism and national security. In this capacity, he has published widely on the subject including the principle critical scholarship on Shariah-compliant finance published in the Utah Law Review (2008, Issue 3). This work and the empirical investigation known as the Mapping Shariah project in America was the focus of a recent monograph published by the McCormack Foundation and the Center for Security Policy.