Penny stock trading is an online stock market. There are few programmes where a guide isntructs us when to buy or sell the stocks. We are also allowed to deal with a variety of stocks.
If this is allowed,
What are the type of stocks that are compliant to shariah.
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Generally speaking, penny stock trading refers to trading stocks that are priced at relatively low prices[1] with a maximum stock price ranging between $1 to $5.[2] These stocks, also referred to as “micro-cap stocks,”[3] are usually traded outside of the major market exchanges such as the NASDAQ or the NYSE[4] and are considered to be high risk and highly speculative[5] due to many factors such as low liquidity, lack of information on the stocks (as they are not restricted to stringent requirements like those in major market exchanges[6]), and no minimum standards.[7]
In principle, those `Ulamā’ who allow trading in stocks permit so on the following conditions:
1) The main business of the company must be halal according to Sharī’ah.[8] Therefore, a person may not invest in a company whose main business is haram, such as the traditional banks, insurance companies, companies dealing in wines, etc.
2) If the main business is halal, but the company is involved in borrowing money on interest or placing its funds in an interest bearing account, a Muslim shareholder must raise his voice against this practice in the AGM (annual general meeting) of the company.
3) When the shareholder receives a dividend he must calculate that proportion of the profit of the company which has accrued on its interest bearing accounts. Thereafter, a similar proportion from his own dividend must be given by him to a person or persons entitled to receive Zakah.
4) If all the assets of a company are in a liquid form and the company has not yet acquired any fixed assets or any stock for trade, then the sale and purchase of shares must be on their par value only.[9]
5) The shareholder may not conduct Future Sales, Forward Sales, or Short Sales with these shares.[10]
6) If one in engages in intraday trading, then it is necessary to ensure that the delivery of the stock has been made before selling it off to another buyer.[11]
Based on the abovementioned conditions, the type of stocks that are compliant to Sharī`ah depend on each individual company and trading market. If you would like us to comment on the compliancy of a specific stock portfolio, you may forward us the details of the portfolio along with any relevant documents and/or contracts so that we can provide a more concrete answer.
Please note that we are also unable to comment on these stock trading programmes without sufficient details of the programme itself and the stocks that are traded within the programme.
And Allah Ta’āla Knows Best
Bilal Mohammad
Student Darul Iftaa
New Jersey, USA
Checked and Approved by,
Mufti Ebrahim Desai.
[1] “Penny Stock”, Investopedia, accessed April 13, 2015, http://www.investopedia.com/terms/p/pennystock.asp
[2] “The Lowdown on Penny Stocks”, Investopedia, accessed April 13, 2015, http://www.investopedia.com/articles/03/050803.asp
[3] Ibid.
[4] Rieman, Maxime, “The Best Online Brokers for Penny Stock Trading”, accessed April 13, 2015, http://www.nerdwallet.com/blog/investing/best-online-brokers/penny-stock-trading-accounts/
[5] “Penny Stock”, Investopedia, accessed April 13, 2015, http://www.investopedia.com/terms/p/pennystock.asp
[6] Rieman, Maxime, “The Best Online Brokers for Penny Stock Trading”, accessed April 13, 2015, http://www.nerdwallet.com/blog/investing/best-online-brokers/penny-stock-trading-accounts/
[7] “The Lowdown on Penny Stocks”, Investopedia, accessed April 13, 2015, http://www.investopedia.com/articles/03/050803.asp
[8] Fatawa Mahmudiyyah, vol. 16, pg. 191, Darul Iftaa Jami’ah Faruqiyyah;
Fatawa Darul Uloom Zakariyya, vol. 5, pg. 225, Zam Zam Publishers;
Islam Aur Jadeed Ma’aashi Masaail, vol. 3, pg. 17;
Aap Ke Masaail Aur Unka Hal (2011 Edition), vol. 7, pg. 119, Maktabah Ludhanwiyyah;
Fatawa Uthmani, vol. 3, pg. 177, Maktabah Ma’ariful Quran
[9] Islam Aur Jadeed Ma’aashi Masaail, vol. 3, pg. 23
[10] Fatawa Uthmani, vol. 3, pg. 186-187, Maktabah Ma’ariful Quran
Fatawa Darul Uloom Zakariyya, vol. 5, pg. 226-227, Zam Zam Publishers;
[11] Fatawa Uthmani, vol. 3, pg. 185, Maktabah Ma’ariful Quran Karachi;
وَإِذا بَاعَ مَتَاع غَيره ثمَّ اشْتَرَاهُ أَو وَرثهُ فَإِن البيع الَّذِي كَانَ قبل ذَلِك لَا يجوز لِأَنَّهُ بَاعَ مَا لَا يملك…وَإِذا بَاعَ الرجل بيعا قد كَانَ اشْتَرَاهُ قبل أَن يقبضهُ أَو اشْترك فِيهِ أَو ولاه فَإِن هَذَا مَرْدُود لَا يجوز
(الأصل، ج ٢، ص ٤٣٦، دار ابن حزم)
(وَمِنْهَا) أَنْ يَكُونَ مَقْدُورَ التَّسْلِيمِ عِنْدَ الْعَقْدِ، فَإِنْ كَانَ مَعْجُوزَ التَّسْلِيمِ عِنْدَهُ لَا يَنْعَقِدْ، وَإِنْ كَانَ مَمْلُوكًا لَهُ كَبَيْعِ الْآبِقِ فِي جَوَابِ ظَاهِرِ الرِّوَايَاتِ حَتَّى لَوْ ظَهَرَ يَحْتَاجُ إلَى تَجْدِيدِ الْإِيجَابِ وَالْقَبُولِ إلَّا إذَا تَرَاضَيَا فَيَكُونُ بَيْعًا مُبْتَدَأً بِالتَّعَاطِي فَإِنْ لَمْ يَتَرَاضَيَا وَامْتَنَعَ الْبَائِعُ مِنْ التَّسْلِيمِ لَا يُجْبَرُ عَلَى التَّسْلِيمِ، وَلَوْ سَلَّمَ وَامْتَنَعَ الْمُشْتَرِي مِنْ الْقَبْضِ لَا يُجْبَرُ عَلَى الْقَبْضِ
(بدائع الصنائع، ج ٦، ص ٥٧٣-٥٧٤)
(وَلَا يَجُوزُ بَيْعُ السَّمَكِ فِي الْمَاءِ قَبْلَ أَنْ يَصْطَادَهُ) بَيْعُ السَّمَكِ قَبْلَ الِاصْطِيَادِ بَيْعُ مَا لَا يَمْلِكُهُ الْبَائِعُ فَلَا يَجُوزُ، وَإِذَا اصْطَادَهُ ثُمَّ أَلْقَاهُ فِي الْحَظِيرَةِ فَلَا يَخْلُو إمَّا أَنْ تَكُونَ صَغِيرَةً أَوْ كَبِيرَةً لَا يُمْكِنُ الْأَخْذُ مِنْهَا إلَّا بِتَكَلُّفٍ وَاحْتِيَالٍ، فَإِنْ كَانَتْ كَبِيرَةً لَا يَجُوزُ لِأَنَّهُ غَيْرُ مَقْدُورِ التَّسْلِيمِ… وَلَا) يَجُوزُ (بَيْعُ الطَّيْرِ فِي الْهَوَاءِ) بَيْعُ الطَّيْرِ عَلَى ثَلَاثَةِ أَوْجُهٍ: الْأَوَّلُ بَيْعُهُ فِي الْهَوَاءِ قَبْلَ أَنْ يَصْطَادَهُ وَهُوَ لَا يَجُوزُ لِعَدَمِ الْمِلْكِ. وَالثَّانِي بَيْعُهُ بَعْدَ أَنْ أَخَذَهُ وَأَرْسَلَهُ مِنْ يَدِهِ وَهُوَ أَيْضًا لَا يَجُوزُ لِأَنَّهُ غَيْرُ مَقْدُورِ التَّسْلِيمِ. وَالثَّالِثُ بَيْعُ طَيْرٍ يَذْهَبُ وَيَجِيءُ كَالْحَمَامِ وَهُوَ أَيْضًا لَا يَجُوزُ فِي الظَّاهِرِ.
(العناية، ج ٦، ص ٤١٠، دار الفكر)