Question

Assalamo Aleykom Wa Rahmatullahi Wa Barakatho

In Norway there is a broker named “Nordnet”. They offer different types of accounts when buying stocks. One of them is called “Investeringskonto Zero”. When i read about this account, it says for example:

“General Meetings: Nordnet formally owns the shares you have in an investment account. You therefore do not have the right to vote at general meetings. We do not attend general meetings or exercise our shareholder role.”

According to the first sentence where it says that i don’t own the shares formally and it is the broker who owns it. Will this type of account be permissible for me to use when buying and selling shares, with the information given above?

Answer

When a person becomes a partner in a company they would have the right to involve themselves in the business of the company, however, when buying shares a person forfeits this right. This leaves them with a beneficial ownership.

If the broker formally owns the shares on paper, leaving the buyer with a beneficial ownership this would not impact the permissibility of buying and selling shares using that broker. From an Islamic perspective the ownership will still be established with the buyer not the broker. It is the buyer who pays for the shares, is exposed to the price risks, and will receive the payments at the time of sale. This indicates that the ownership is established with buyer, though the broker may have the title in their name for practical and administrative purposes.

This is all provided that the broker is allocating the share exclusively to the buyer. If they are selling the same share to multiple buyers, this will not be permissible.

Fiqh al-Buyu 1:380

Shariah Standards: 573

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel