Home » Hanafi Fiqh » Askimam.org » Penny Stock Trading

Penny Stock Trading

Answered as per Hanafi Fiqh by Askimam.org

Penny stock trading is an online stock market. There are few programmes where a guide isntructs us when to buy or sell the stocks. ย 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.

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salฤmu โ€˜alaykum wa-rahmatullฤhi wa-barakฤtuh. ย 

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 โ€œmicro-cap stocks,โ€[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 `Ulamฤโ€™ who allow trading in stocks permit so on the following conditions:

1)ย ย ย ย ย  The main business of the company must be halal according to Sharฤซ’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)ย ย ย ย ย  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)ย ย ย ย ย  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)ย ย ย ย ย  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)ย ย ย ย ย  The shareholder may not conduct Future Sales, Forward Sales, or Short Sales with these shares.[10]

6)ย ย ย ย ย  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 Sharฤซ`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 Taโ€™ฤla Knows Best

Bilal Mohammad

Student Darul Iftaa
New Jersey, USA

Checked and Approved by,
Mufti Ebrahim Desai.

www.daruliftaa.net


[1] โ€œPenny Stockโ€, Investopedia, accessed April 13, 2015, http://www.investopedia.com/terms/p/pennystock.asp

[2] โ€œThe Lowdown on Penny Stocksโ€, Investopedia, accessed April 13, 2015, http://www.investopedia.com/articles/03/050803.asp

[3] Ibid.

[4] Rieman, Maxime, โ€œThe Best Online Brokers for Penny Stock Tradingโ€, accessed April 13, 2015, http://www.nerdwallet.com/blog/investing/best-online-brokers/penny-stock-trading-accounts/

[5] โ€œPenny Stockโ€, Investopedia, accessed April 13, 2015, http://www.investopedia.com/terms/p/pennystock.asp

[6] Rieman, Maxime, โ€œThe Best Online Brokers for Penny Stock Tradingโ€, accessed April 13, 2015, http://www.nerdwallet.com/blog/investing/best-online-brokers/penny-stock-trading-accounts/

[7] โ€œThe Lowdown on Penny Stocksโ€, 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;

ูˆูŽุฅูุฐุง ุจูŽุงุนูŽ ู…ูŽุชูŽุงุน ุบูŽูŠุฑู‡ ุซู…ู‘ูŽ ุงุดู’ุชูŽุฑูŽุงู‡ู ุฃูŽูˆ ูˆูŽุฑุซู‡ู ููŽุฅูู† ุงู„ุจูŠุน ุงู„ู‘ูŽุฐููŠ ูƒูŽุงู†ูŽ ู‚ุจู„ ุฐูŽู„ููƒ ู„ูŽุง ูŠุฌูˆุฒ ู„ูุฃูŽู†ู‘ูŽู‡ู ุจูŽุงุนูŽ ู…ูŽุง ู„ูŽุง ูŠู…ู„ูƒูˆูŽุฅูุฐุง ุจูŽุงุนูŽ ุงู„ุฑุฌู„ ุจูŠุนุง ู‚ุฏ ูƒูŽุงู†ูŽ ุงุดู’ุชูŽุฑูŽุงู‡ู ู‚ุจู„ ุฃูŽู† ูŠู‚ุจุถู‡ู ุฃูŽูˆ ุงุดู’ุชุฑูƒ ูููŠู‡ู ุฃูŽูˆ ูˆู„ุงู‡ ููŽุฅูู† ู‡ูŽุฐูŽุง ู…ูŽุฑู’ุฏููˆุฏ ู„ูŽุง ูŠุฌูˆุฒ

(ุงู„ุฃุตู„ุŒ ุฌ ูขุŒ ุต ูคูฃูฆุŒ ุฏุงุฑ ุงุจู† ุญุฒู…)

(ูˆูŽู…ูู†ู’ู‡ูŽุง) ุฃูŽู†ู’ ูŠูŽูƒููˆู†ูŽ ู…ูŽู‚ู’ุฏููˆุฑูŽ ุงู„ุชู‘ูŽุณู’ู„ููŠู…ู ุนูู†ู’ุฏูŽ ุงู„ู’ุนูŽู‚ู’ุฏูุŒ ููŽุฅูู†ู’ ูƒูŽุงู†ูŽ ู…ูŽุนู’ุฌููˆุฒูŽ ุงู„ุชู‘ูŽุณู’ู„ููŠู…ู ุนูู†ู’ุฏูŽู‡ู ู„ูŽุง ูŠูŽู†ู’ุนูŽู‚ูุฏู’ุŒ ูˆูŽุฅูู†ู’ ูƒูŽุงู†ูŽ ู…ูŽู…ู’ู„ููˆูƒู‹ุง ู„ูŽู‡ู ูƒูŽุจูŽูŠู’ุนู ุงู„ู’ุขุจูู‚ู ูููŠ ุฌูŽูˆูŽุงุจู ุธูŽุงู‡ูุฑู ุงู„ุฑู‘ููˆูŽุงูŠูŽุงุชู ุญูŽุชู‘ูŽู‰ ู„ูŽูˆู’ ุธูŽู‡ูŽุฑูŽ ูŠูŽุญู’ุชูŽุงุฌู ุฅู„ูŽู‰ ุชูŽุฌู’ุฏููŠุฏู ุงู„ู’ุฅููŠุฌูŽุงุจู ูˆูŽุงู„ู’ู‚ูŽุจููˆู„ู ุฅู„ู‘ูŽุง ุฅุฐูŽุง ุชูŽุฑูŽุงุถูŽูŠูŽุง ููŽูŠูŽูƒููˆู†ู ุจูŽูŠู’ุนู‹ุง ู…ูุจู’ุชูŽุฏูŽุฃู‹ ุจูุงู„ุชู‘ูŽุนูŽุงุทููŠ ููŽุฅูู†ู’ ู„ูŽู…ู’ ูŠูŽุชูŽุฑูŽุงุถูŽูŠูŽุง ูˆูŽุงู…ู’ุชูŽู†ูŽุนูŽ ุงู„ู’ุจูŽุงุฆูุนู ู…ูู†ู’ ุงู„ุชู‘ูŽุณู’ู„ููŠู…ู ู„ูŽุง ูŠูุฌู’ุจูŽุฑู ุนูŽู„ูŽู‰ ุงู„ุชู‘ูŽุณู’ู„ููŠู…ูุŒ ูˆูŽู„ูŽูˆู’ ุณูŽู„ู‘ูŽู…ูŽ ูˆูŽุงู…ู’ุชูŽู†ูŽุนูŽ ุงู„ู’ู…ูุดู’ุชูŽุฑููŠ ู…ูู†ู’ ุงู„ู’ู‚ูŽุจู’ุถู ู„ูŽุง ูŠูุฌู’ุจูŽุฑู ุนูŽู„ูŽู‰ ุงู„ู’ู‚ูŽุจู’ุถู

(ุจุฏุงุฆุน ุงู„ุตู†ุงุฆุนุŒ ุฌ ูฆุŒ ุต ูฅูงูฃ-ูฅูงูค)

(ูˆูŽู„ูŽุง ูŠูŽุฌููˆุฒู ุจูŽูŠู’ุนู ุงู„ุณู‘ูŽู…ูŽูƒู ูููŠ ุงู„ู’ู…ูŽุงุกู ู‚ูŽุจู’ู„ูŽ ุฃูŽู†ู’ ูŠูŽุตู’ุทูŽุงุฏูŽู‡ู) ุจูŽูŠู’ุนู ุงู„ุณู‘ูŽู…ูŽูƒู ู‚ูŽุจู’ู„ูŽ ุงู„ูุงุตู’ุทููŠูŽุงุฏู ุจูŽูŠู’ุนู ู…ูŽุง ู„ูŽุง ูŠูŽู…ู’ู„ููƒูู‡ู ุงู„ู’ุจูŽุงุฆูุนู ููŽู„ูŽุง ูŠูŽุฌููˆุฒูุŒ ูˆูŽุฅูุฐูŽุง ุงุตู’ุทูŽุงุฏูŽู‡ู ุซูู…ู‘ูŽ ุฃูŽู„ู’ู‚ูŽุงู‡ู ูููŠ ุงู„ู’ุญูŽุธููŠุฑูŽุฉู ููŽู„ูŽุง ูŠูŽุฎู’ู„ููˆ ุฅู…ู‘ูŽุง ุฃูŽู†ู’ ุชูŽูƒููˆู†ูŽ ุตูŽุบููŠุฑูŽุฉู‹ ุฃูŽูˆู’ ูƒูŽุจููŠุฑูŽุฉู‹ ู„ูŽุง ูŠูู…ู’ูƒูู†ู ุงู„ู’ุฃูŽุฎู’ุฐู ู…ูู†ู’ู‡ูŽุง ุฅู„ู‘ูŽุง ุจูุชูŽูƒูŽู„ู‘ููู ูˆูŽุงุญู’ุชููŠูŽุงู„ูุŒ ููŽุฅูู†ู’ ูƒูŽุงู†ูŽุชู’ ูƒูŽุจููŠุฑูŽุฉู‹ ู„ูŽุง ูŠูŽุฌููˆุฒู ู„ูุฃูŽู†ู‘ูŽู‡ู ุบูŽูŠู’ุฑู ู…ูŽู‚ู’ุฏููˆุฑู ุงู„ุชู‘ูŽุณู’ู„ููŠู…ู… ูˆูŽู„ูŽุง) ูŠูŽุฌููˆุฒู (ุจูŽูŠู’ุนู ุงู„ุทู‘ูŽูŠู’ุฑู ูููŠ ุงู„ู’ู‡ูŽูˆูŽุงุกู) ุจูŽูŠู’ุนู ุงู„ุทู‘ูŽูŠู’ุฑู ุนูŽู„ูŽู‰ ุซูŽู„ูŽุงุซูŽุฉู ุฃูŽูˆู’ุฌูู‡ู: ุงู„ู’ุฃูŽูˆู‘ูŽู„ู ุจูŽูŠู’ุนูู‡ู ูููŠ ุงู„ู’ู‡ูŽูˆูŽุงุกู ู‚ูŽุจู’ู„ูŽ ุฃูŽู†ู’ ูŠูŽุตู’ุทูŽุงุฏูŽู‡ู ูˆูŽู‡ููˆูŽ ู„ูŽุง ูŠูŽุฌููˆุฒู ู„ูุนูŽุฏูŽู…ู ุงู„ู’ู…ูู„ู’ูƒู. ูˆูŽุงู„ุซู‘ูŽุงู†ููŠ ุจูŽูŠู’ุนูู‡ู ุจูŽุนู’ุฏูŽ ุฃูŽู†ู’ ุฃูŽุฎูŽุฐูŽู‡ู ูˆูŽุฃูŽุฑู’ุณูŽู„ูŽู‡ู ู…ูู†ู’ ูŠูŽุฏูู‡ู ูˆูŽู‡ููˆูŽ ุฃูŽูŠู’ุถู‹ุง ู„ูŽุง ูŠูŽุฌููˆุฒู ู„ูุฃูŽู†ู‘ูŽู‡ู ุบูŽูŠู’ุฑู ู…ูŽู‚ู’ุฏููˆุฑู ุงู„ุชู‘ูŽุณู’ู„ููŠู…ู. ูˆูŽุงู„ุซู‘ูŽุงู„ูุซู ุจูŽูŠู’ุนู ุทูŽูŠู’ุฑู ูŠูŽุฐู’ู‡ูŽุจู ูˆูŽูŠูŽุฌููŠุกู ูƒูŽุงู„ู’ุญูŽู…ูŽุงู…ู ูˆูŽู‡ููˆูŽ ุฃูŽูŠู’ุถู‹ุง ู„ูŽุง ูŠูŽุฌููˆุฒู ูููŠ ุงู„ุธู‘ูŽุงู‡ูุฑู.

ย (ุงู„ุนู†ุงูŠุฉุŒ ุฌ ูฆุŒ ุต ูคูกู ุŒ ุฏุงุฑ ุงู„ููƒุฑ)

This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

Read answers with similar topics: