Proposed Model
National Monetary policies are usually notified in form of a pack of regulatory policies by the Central Bank of the Islamic Republic of Iran and by which the maximum profit rate for bank deposits and securities are introduced. The profit rate for Musharakah sukuk (participation certificate) and other types of sukuk are usually affected by these policies and as there is a difference between introduced rates and the expected rate of return, consequences of the above decisions would be reflected in subscription and transaction prices. However, securities are sometimes traded at premium or at discount; so, sharia board has investigated the different aspects of subscription of securities at market price (premium or discount).
Shariah Board Resolution
Type 1: Subscription of standard Parallel Salam Sukuk at premium or at discount
As in standard parallel Salam sukuk the issuer presents the Salam contract to the market at basic price, market may determine the price and purchase the underlying commodity of Salam contract at premium or at discount to the basic price proportional to the Salam expected profit.

Sharia Board’s Opinion
1- The mechanism for issuance of standard parallel Salam sukuk and transactions of which in the secondary market has already been approved.
2- As in standard Salam sukuk the issuer is the owner of promised commodity asset and offers at basic price. The price of transaction would be confirmed after price discovery. Selling standard Salam sukuk at premium or at discount means the selling of goods at a price higher or lower than the basic price and would be permissible.

Type 2: Subscription of Musharakah sukuk (participation certificate) at premium or at discount
Although in Musharakah (participation) contract the principal and all profits out of which are divided between participants, proportional to the amount of their capitals, participants may agree on dividing the final asset and investment activity profit by other proportions. For example, the issuer of Musharakah sukuk introduces a project of 1000 billion, then offers 800 billion of Musharakah sukuk and informs that the remaining would be financed by the originator at whatever price the securities are sold, and undertakes to divide the final asset and profit at 80/20 percent ratio; e.g., originator undertakes to finance 150 billion (or 250 billion) and divide the principal and profit at 80/20 percent ratio if the whole selling of securities is equal to 850 billion (or 750 billion).

Sharia Board’s Opinion
Sharia board believes that the solution of issuing musharakah sukuk at premium or at discount complies with musharakah rules. It means that if the originator and investors are agree with investment by a certain ratio on a particular project, and divide the principal and profit at other ratios (at preferential ratios in favor of originator or investors), the whole process complies with Musharakah rules and is permissible.

Type 3: Selling of Ijarah sukuk at premium or at discount
It means that the SPV has collected a larger (or smaller) amount of capital for buying the asset from originator; so, the underlying asset of Ijarah sukuk would be bought at a price higher (or lower) than the par value. In other words, the originator offers the underlying asset to the market at his own suggested price and purchasers buy the securities (the underlying asset) at a price higher or lower than the suggested price, upon the profit rate expectations.

Sharia Board’s Opinion
A) Ijarah sukuk with same originator an seller: Since in this kind of Ijara sukuk the originator offers his own asset by a suggested price (par value) and purchasers buy the securities at premium or at discount upon their own expectations, transaction (asset sale) would be effective on final price which is correct and permissible.
B) Ijarah sukuk with originator different from the seller: In this kind of Ijarah sukuk, the SPV comes to an agreement (reconciliation) with originator on behalf of security holders to; first, originator spends the funds pooled from the selling of Ijarah sukuk to buy the underlying asset; second, originator takes the possession of any surplus and compensates any insufficiency by his own resources.

Type 4: Subscription of murabaha sukuk at premium or at discount
It means that security holders have paid a higher or lower price for buying the underlying asset. In Murabaha sukuk, the SPV buys the commodity in cash and sell it to the originator by installments on behalf of security holders. Now, the jurisprudential questions are:
1- What is the religious precept on premium or discount to the securities par value?
2- What is the jurisprudential reason for transferring of premium or discount?

Sharia Board’s Opinion
In Murabaha sukuk, the SPV comes to an agreement with originator on behalf of security holders to, first, buy the underlying commodity(s) by using the pooled funds and sell it to him; second, take the possession of the excess funds or compensate the insufficiency by his own resources.

Type 5: Subscription of Mortgage sukuk at premium or at discount
In debt-based Mortgage sukuk, the bank sells at discount a part of claims due to non-salam transactional facilities which are of debt nature, such as facilities of selling by installments, hire-purchase, and Juala , to security holders via the SPV. At the time of subscription, the investors’ expected rate of return (expected discount rate) may be compatible with the nominal profit rate of securities and investors buy the securities at premium or at discount.

Sharia Board’s Opinion
1- Issuance of facilities-based mortgage sukuk via non-salam transactional contracts has already been approved by the board. Also, the issuance of such securities via re-investment of received installments is approved by the board.
2- Jurisprudential nature of the primary and secondary markets of debt-based mortgage sukuk is debt discount which is deemed as sharia-compatible by the majority of Imamia jurisprudents and the Guardian Council.
3- Subscription of mortgage securities at market price (at premium or at discount) is indeed the adjustment of discount rate by security purchasers; so, although the originator offers the securities at par value, the sale contract shall only be effective after price discovery and debt sale shall be executed following price discovery at the market.

Sessions
Session Number Session Date Description
130 Aug 10 2016
131 Aug 31 2016
132 Sep 14 2016

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