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Forwarding Advice on Stock Market Investment

Answered according to Hanafi Fiqh by Daruliftaa.com

I have read quite a bit about purchasing and trading shares and stocks as investments or for “day trading” and I understand that many scholars consider it acceptable under certain conditions, and that others consider it unlawful because one is sanctioning transactions with riba (unlawful interest).

I personally prefer to stay away from purchasing and trading shares, but considering that, would it be permissible to offer analysis and investment counsel (and profit from it) to those who do invest or trade shares in a stock market?

Generally speaking, can one advise another in making transactions that are unlawful and profit from it?

ANSWER

In the name of Allah, Most Compassionate, Most Merciful,

In general, it is not permitted to advise others on interest-based transactions or help customers be involved in Riba. Likewise, it is unlawful to advise others in making unlawful transactions, as this would all fall into the ambit of assisting another in sin.

Allah Most High says:

“Help you one another in righteousness and piety, but help you not one another in sin and rancour.” (Surah al-Ma’ida, V: 2)

Imam Ibn Abidin (Allah have mercy on him) states:

“If one is a direct cause for another’s sin, then this action will be unlawful (haram)”. (Radd al-Muhtar)

Counselling others and advising them on interest-based and/or unlawful transactions is considered “direct” assistance to a sinful act, hence unlawful. The profit made on such a job will be considered unlawful and filthy.

As regards to the specific question of trading in shares, most contemporary scholars permit trading in company-shares, provided certain conditions are met. The company whose shares one intends to purchase must be involved in Halal trade. There are also other conditions, for which you may refer to a previous answer.

If these conditions are met, it would be permitted to offer analysis and investment-counselling to those wishing to invest or trade shares in a stock market. The profit made on such a job would also be Halal.

One must, however, be wary of the fact that there are many other transactions taking place in the stock market that are unlawful. Transactions such as futures, hedging, etc, are prohibited due to the fact that they violate more than one of the many well-established principles of Shariah. At times people become involved in gambling when trading in shares. Thus, you must avoid giving advice on such transactions. If a client requires general advice on stock market investment, it will be permitted for you to offer this service, provided you avoid giving advice on unlawful transactions.

And Allah knows best

[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK

This answer was collected from Daruliftaa.com, which is headed by Mufti Muhammad ibn Adam Al-Kawthari. He’s based in the United Kingdom.

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