money. The foundation of the RF banking and finance system (riba-free and
gharar-free) is based on the moral andethical values and behavior of its
bankers and employees. It is a system based on:
&Riba-free financing and banking procedures, which means not renting
money, but establishing the prudence of investing money in the clients’
assets and services and that the rental of those assets/services produces
attractive returns on investment
&Gharar-free, which means that itis free from deception and/or mis-
representation of facts and the use of ‘‘tricks’’ or ruses (heelah)to
circumvent the spirit and substance of Shari’aa and the spirit of Judeo-
Christian-Islamic values
&Delivering services that are focused on the substance of the transaction,
and not only on its form and its mechanics
&Compliance with the tenets of Shari’aa while not violating the laws of
the landU.S. Banking Regulations and Bank Regulators
The U.S. banking regulations represent the most sophisticated and up-to-
date documentation of rules and regulations defining the relationship
between the financial institution and the customer. These regulations repre-
sent the integration of all accumulated human efforts designed over time to
prevent, to the best of our abilities, the illegal, fraudulent, and unfair prac-
tices some people attempted to use to enrich themselves over the years by
misleading and defrauding the average consumer, investor, and depositor.
These regulations are the latest efforts of humanity to ascertain that finan-
cial institutions are fair, transparent, and truthful to the unsophisticated
and less financially educated customers and communities. In studying these
regulations, it can be testified that they are the best tools developed, and
they are still being developed. Many of these regulations were discussed in
Chapter 7.
U.S. Securities Laws and Regulations
The U.S. securities laws, in general,prohibit the solicitation of funds for
investment purposes and/or the sale of securities to the public without full
disclosure and proper registration with the SEC. In some cases, funds can
be solicited without registration with the SEC, as in the case of aprivate
offering. These are allowed to be offered exclusively toaccredited investors,
who are wealthy and sophisticated enough—as defined clearly by SEC
rules—to be able to understand the risks involved.
320 THE ART OF ISLAMIC BANKING AND FINANCE