Jurisprudential-Legal Examination of Profit Derived from Participation in Iran's Stock Exchange Market

Abstract

This study aims to undertake a jurisprudential and legal analysis of the profits derived from transactions in the stock exchange market and to delineate the legal and religious boundaries governing them. Participation in the stock exchange market as a profit-generating platform has consistently attracted the attention of shareholders. In fact, the capital market serves as a space for generating returns, and the participation of shareholders in this market is primarily motivated by the pursuit of profit. This issue has prompted Islamic jurists and legal scholars to examine the capital market and the profit derived from stock market participation from both jurisprudential and legal perspectives. From the standpoint of Islamic jurists, there are two opposing views regarding access to the capital market and profit-sharing therein. Opponents consider profit from the stock market to be akl māl al-bāṭil (illegitimate gain) due to the lack of tangible effort involved, with some scholars declaring such profits as religiously impermissible. On the other hand, proponents argue that access to such profits is legitimate based on the jurisprudential principle of bayʿ mā lam yuqbaḍ (sale of unreceived property), emphasizing its permissibility. From a legal perspective, jurists regard access to these profits through brokerage services as permissible and consider it a legitimate form of economic activity. Transactions in the stock exchange are categorized as commercial transactions, for which the traditional regulations of civil law fail to provide adequate legal solutions. These transactions are exclusively executed through brokers, who act as representatives of the parties and facilitate transactions on their behalf. Stock exchange transactions are governed by fundamental principles, including the principle of competition, the principle of information transparency, the prohibition of insider trading, and the principle of regulatory oversight. The distinctive features of stock exchange transactions and markets have rendered general rules of civil law and other existing regulations insufficient for regulating such transactions. In other words, the significant differences between stock exchange transactions and conventional contracts necessitate the establishment of specific rules and principles to govern the former. Securities trading in the over-the-counter (OTC) market is classified as a formal and binding contract. However, the application of contract termination options (khiar) in these transactions has been subject to debate due to the unique execution and settlement procedures of securities compared to traditional transactions. Risk-hedging methods are mainly implemented either through specific transactions or through proper capital management. Simultaneously, the overarching presence of jurisprudential and legal considerations in the capital market underscores the necessity of closely examining the nature of these contracts.