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Seeking to understand the legal and regulatory concepts in islamic finance

• What is the difference between law and regulation?
• What is the legal definition of money in terms of property? (What about electronic money?)
• Which laws affect the activities that financial institutions can undertake?
• Should laws govern morality and ethics?
• Can regulations be used to induce ethical behavior?
• Is Islamic society defined only by Islamic law or it is more than that?
• Is there any difference between a conventional contract from Islamic contract?
• What are the legal and accounting implications of transfer of property and possession during contemporary times?
• Can the principle of permissibility be applied to adopting contemporary Western commercial laws?
• Are the traditional nominate contracts sufficient to satisfy contemporary financial needs or there is a need to re-define fundamental concepts in Islamic contract law?
• Is the legal culture for Islamic law different from the Western legal culture?
- What are the implications of adopting a legal system with a different legal culture?
• Is having an Islamic banking law a necessary condition for the growth of Islamic finance?
- Is it different for a common law and civil law country?
• Can Islamic banking law be considered Islamic commercial law (Fiqh Al-muamulat, i.e. or Islamic jurisprudence of transactions)?
• What issues can arise in application of Islamic finance in any Middle Eastern country's jurisdictions?

Solution Preview

What is the difference between law and regulation?

The primary difference between laws and regulation are that only legislatures such as the American Congress can create laws. Regulations are written by federal executive departments and administrative agencies for implementation of the authority of the laws passed by Congress. Laws are superior to regulations but both can be enforced. Quintessentially, it's the legislative branch that is responsible for creating laws that must be implemented by the executive branch through regulations. .

• What is the legal definition of money in terms of property? (What about electronic money?)

Money in terms of property would be the distinction of "Personal property", which entails any movable property that is other than land such as money, patents, electronic money, stocks, bonds, and other intangible property.

• Which laws affect the activities that financial institutions can undertake?

The Financial Institutions Act and the Banking Act of 1994

• Should laws govern morality and ethics?

Yes, because unethical behavior typically hurts people. If morality or ethics had been displayed in Wall Street prior to the Great recession in 2008, the entire WORLD would have possibly been sparred a financial disaster. Laws punishing unethical behavior could have possibly prevented the collapse of the world's economy.

• Can regulations be used to induce ethical behavior?

Regulations cannot be used to induce ethical behavior as this must be induced by the person displaying the behavior. Regulations can only provide guidelines and suggestions on what type of behavior should be engaged in by the people responsible for any behavior.

• Is Islamic society defined only by Islamic law or it is more than that?

In Islamic society Islam is more than a religion as it defines the society representing its code of life on how to deal with each important factor of life including social, economic, and political. Therefore, Islamic law or more specifically Sharia is the code that every Muslim is expected to live by. The society is DEFINED by Islamic law.

• Is there any difference between a conventional ...

Solution Summary

The solution assists with understanding the legal and regulatory concepts in Islamic finance.

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