The legitimacy of US stocks (Halal US stocks)
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Many investors, especially those who are keen to respect Sharia controls while investing their money for the purpose of its development, wonder about legitimate and halal US stocks and the filter that can be relied upon to determine them and what the Al-Rajhi Commission says about them. Determining halal and legitimate American shares requires doing a lot of research and scrutiny about the company’s activities and how its money and other matters are going. Therefore, electronic filters came to help investors determine the legitimacy of US stocks and whether they are halal for investment or not, such as our filter program and other services.
In this article, we will help you to develop a comprehensive understanding of these matters through four main axes:
- The legitimacy of US stocks.
- Halal US stocks.
- Legitimate US stock filter.
- The legitimacy of US stocks Al Rajhi.
- The legitimacy of US stocks
Some Sharia-compliant investors in the Gulf countries, especially Saudi Arabia, seek to search for legitimate US companies in which they can invest their money in a manner that complies with the provisions of Sharia and avoid any suspicions.
Standards of legitimacy of US stocks
The legality of these shares is determined by looking at several basic criteria for evaluating the commercial work of the share from the point of view of Sharia and its provisions. Here are some of those criteria:
Company activities
Here, the company’s commercial activities, from which it realizes its profits and gains, must be permissible according to Sharia and not conflict with Sharia.
The amount borrowed on interest
In order for an American share to be considered one of the legitimate shares, the total amount that the company borrows on interest, whether it is a long or short-term loan, must not exceed 30 percent of the company’s market value.
Income from forbidden activity
The amount of revenue generated from an activity that contradicts what is analyzed in Sharia law should not exceed 5 percent of the total revenue, whether the revenue is generated from interest-earning investment, from practicing a prohibited activity, from owning a prohibited asset, or from other possibilities.
The proportions that make up the forbidden money acquired for the company are determined accurately. In the event that the US company to be invested in does not exceed these percentages, then these US shares are considered legitimate and halal. However, despite this, the investor or trader must purify his profits from this investment by taking out a specific amount of the profits achieved from this investment in return for the company’s revenue that violates the provisions of Sharia.
There are many electronic calculators that help investors and traders to calculate and determine the clearance ratio. We will get to know some of them in the following from this article quickly.
Types of US stocks according to legitimacy
With regard to the issue of the legality of US stocks, you should differentiate between three classes of stocks:
Halal shares: They are pure and pure shares that are based on 100 percent permissible commercial activity according to Sharia and do not borrow any usurious debts. Investors are allowed to invest in and trade in them without worrying about anything or taking out any amount of profits because the money earned from them does not need to be purged.
Prohibited Shares: These are the US shares that are absolutely illegal and that are based on commercial activity that is absolutely not permitted according to Sharia. As an example of these illegal US stocks, tobacco or alcohol companies can be mentioned as an example.
Mixed stocks: These are US stocks that are based on permissible commercial activity, but despite the fact that they carry out some activities that are not legally permissible, they do not exceed a certain percentage. Investors in these stocks must purify their money by taking out a specific percentage of the profits.
Halal US stocks
There are many halal and legal stocks that Arab Muslims who want to avoid suspicions while investing can put their money in. Here are some of these legitimate shares, which include mixed and pure companies:
- Shares of Air Products & Chemicals
- Rio Tinto shares
- Texas Instruments stock
- Shares of Merck & Co
- Sanofi shares
- Shares of Intel Corp
- Dupont shares
- Magna International shares
- Abbott Labs stock
- Shares of Saputo Inc
- Pembina shares
- Canadian National Railway shares
- Pfizer shares
- Shares of BHP Group Limited BHP Group Limited
- Shares of Gildan Activewear
- Johnson & Johnson shares
- Shares of Adobe Inc. specialized in graphic design software
- Canon shares
- Shares of Prologis Inc
- Exxon Mobil shares
- Salesforce stocks
- Shares of Chevron Corp
- Novartis shares
Legitimate US stock filter
The Sharia Filter is an online program that helps investors determine the legitimacy of shares and whether they are pure, mixed or prohibited. The legitimate US stock filter does this by examining the financial companies’ data and determining their compliance with the Sharia-accepted controls.
The investor or trader can, with one click of a button, after placing the stock symbol or the name of the company, know whether that stock is considered one of the legitimate and halal US stocks or not. In addition to this, the US legitimate stock filter helps investors determine the amount of clearance they should take out of earnings if investing in mixed stocks.
Below we will give you an example of a legitimate US stock filter, with pictures showing how the results appear:
Our filter program to identify legitimate US stocks
How does our filter program for legitimate US stocks work?
Our filter program works by examining the data of the financial statements of companies issuing traded US shares and determining their compatibility with the Sharia controls set forth in Decision No. (485) issued by the Sharia Board of Al-Rajhi Banking Private Investment Company regarding investment and trading controls in shares of mixed companies, and the amendment attached to it.
What is the source of the data that our filter program relies on?
Our filter obtains companies’ data and financial statements from a major and approved source in the market in real time and with a paid subscription. This is to avoid any delay in changes to the financial statements of the examined companies.
How does the Filterna program deal with legitimate US stocks?
Company activities
This legitimate US stock filter software scans the company’s sector and activity and checks for illegal activities.
The amount borrowed on interest
This US stock filter deals with all the company’s debts as debt borrowed on interest and calculates their percentage of the company’s total market capitalization.
Income from forbidden activity
Our filter program deals with all other non-operating revenues as revenues resulting from forbidden activity, because they are often in the form of bank deposits, and it also calculates their percentage of the total revenues.
How is the disinfection percentage calculated?
The Purification Calculator will do what must be done, all you have to do is determine the number of shares that you owned in your investment, and determine the profit achieved from it, and the Purification Calculator will determine for you the value of the amount that you must take out in order to purify the forbidden things that have been mixed in the target company. The investor must take out the amount of that purification with the intention of disposing of it in various aspects of charity, and he does not consider it charity and he should not benefit from it in any way.
The legitimacy of US stocks, according to Al-Rajhi
The Al-Rajhi Sharia Board says regarding American stocks that US stocks can be divided according to Sharia into three types:
The first type: joint-stock companies with permissible purposes and activities.
These companies may be invested and traded in their shares in accordance with the terms and conditions of the sale.
The second type: Shareholding companies with prohibited purposes and activities, such as alcohol, tobacco, and pork companies, gambling companies, usurious banks, lewd companies, lewd films, investment funds in usurious bonds, and companies specialized in debt trading and dealing with them. These companies may not be invested or traded in their shares at all.
The third type: joint-stock companies whose objectives and activities are permissible, but prohibited matters may occur in some of their dealings, such as dealing with usury by borrowing or depositing. This type of company has approved the permissibility of investing and trading in its shares with certain controls that it clarified in its resolutions with numbers (53) dated 4/2/1411 AH, (182) dated 10/7/1414 AH, and (310) dated 4/6/1419 AH, It was based on the permissibility of this on the generality of the affliction and the removal of embarrassment, and the general need.
The Al-Rajhi Shari’a Board has elaborated more on the legality of the third type of American stocks to reach a set of controls that investors must respect while investing in this type:
First: In investing and trading in the shares of this type of joint-stock company, the following controls must be observed:
Second: If the conditions of companies change so that the previous controls do not apply to them, it is necessary to take the initiative to get rid of them by selling their shares as possible, provided that the waiting period does not exceed ninety days from the date of knowledge of its change.
Third: In order to know the company’s activities and the percentages determined for the permissibility of entering into investment and trading in it, one should refer to the nearest issued financial statements that are indicated for the purpose. Annually, quarterly or monthly, whether audited or not.
Fourth: It is not permissible to participate in the establishment of companies whose statutes provide for prohibited dealings in their activities or purposes.
Fifth: The company applies the aforementioned controls in investing and trading in shares, – and investment means: acquiring a share with the intention of its revenue, i.e. its annual profit, and trading means: buying and selling with the intention of profiting from the difference between the two prices – whether the company itself does that or through others, and whether it is a transaction The company is for itself, or is it for others by way of mediation (brokerage) as in the case of mediation in trading, or by way of managing the money of others, as in investment funds, whether it was lease or speculation, or by way of agency on behalf of others, as in the management of investment portfolios.
Sixth: The forbidden element that mixed with these companies must be eliminated.
You can view the investment and trading controls in the shares of companies mixed with Muharram and get rid of the Muharram in them for the Sharia Board of Al-Rajhi Banking Investment Company.
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