One who works for a company and knows its secrets: is it permissible for him to buy its shares if he knows what will raise their value?
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Fatwa number ( 21273 )
Q: When a person receives information from inside the company he works for, or from one of his relatives who may be the chairman, a member of the board of directors, the general manager, the financial manager, a secretary, or any employee with access to internal information before the public, and you know, Your Eminence, that no matter how high an employee's income is, it is limited, and nine-tenths of sustenance is in trade, and no person in a responsible position in a company follows the prices of its shares in the market and trades in search of sustenance to secure the future of himself and his children. Suppose he comes to know a piece of information (before it is announced), such as that the company's profits for this year will be several times those of the previous year, or that the losses this year will consume most of the capital, or that there is a lawsuit the company won for hundreds of millions (and naturally this will increase the company's net profits and the price of its shares in the market), and he proceeds to conduct selling or buying operations in the stock market by taking advantage of this information, which he obtained by virtue of his position in the company, or through someone who is a partner with him in interest, or who gave him the information due to a relationship
of kinship or trade between them— is this earnings lawful or forbidden? And if it is forbidden, and a person has previously made a profession of this work and has partners or collaborators, and now they have a wealth that was realized during the past period: what should he do with this money, given his ignorance of the prohibition of this practice? Because some people see this as a lawful earning, since it is a reward for the effort of obtaining the information, while others deny it and analogize it to selling (to passing travelers) or consider it as such, and deem it forbidden, requiring purification from all its gains. Incidentally, the laws in foreign countries consider these transactions invalid and regard them as a major crime, for which the perpetrator is tried in constitutional courts, with penalties that may reach life imprisonment; because it is a crime against society, in addition to being clear deception and unfairness, and a cause of corruption in the market and the national economy. We want the ruling of the noble Shari'ah as seen by Your Eminence. May Allah guide you and protect you.
A: First: If the shares are fixed shares intended to obtain the yield, such as shares in a factory that produces and sells its output, like shares in a cement factory or an electricity company, transport companies, agricultural companies, or other fixed companies where the partner's capital does not return to him, but only the yield of his shares returns to him— then there is no harm in selling and buying this type of shares. And if the shares are not fixed;
such as shares in commercial speculation companies, where the partner's capital and his share of the profit return to him if the company is dissolved, and the capital may be destroyed and nothing returns to him, or his capital or part of it returns to him— then this type of shares is not permissible to sell or buy; because it is the sale of an unknown item and involves risk, and because it is selling dirhams for absent dirhams, so it is riba al-nasi'ah (usury of deferment), and it may be riba al-fadl (usury of excess) if the amount differs, and both types of riba and the sale of the unknown are also forbidden. Second: If the company prevents the employee from buying its shares and from accessing its secrets, then it is not permissible for the employee to violate its regulations, due to the saying of the Prophet (peace and blessings be upon him) , and this condition takes into account the interest of the company and the prevention of harm to it, so it is a valid condition. Third: The money you obtained through this transaction is considered forbidden earnings, and you must dispose of it by placing it in a general charitable project, or paying it to the poor and needy, with the intention of disposing of it, not with the intention of charity, along with repentance to Allah and not returning to such work. And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his companions.
Q: When a person receives information from inside the company he works for, or from one of his relatives who may be the chairman, a member of the board of directors, the general manager, the financial manager, a secretary, or any employee with access to internal information before the public, and you know, Your Eminence, that no matter how high an employee's income is, it is limited, and nine-tenths of sustenance is in trade, and no person in a responsible position in a company follows the prices of its shares in the market and trades in search of sustenance to secure the future of himself and his children. Suppose he comes to know a piece of information (before it is announced), such as that the company's profits for this year will be several times those of the previous year, or that the losses this year will consume most of the capital, or that there is a lawsuit the company won for hundreds of millions (and naturally this will increase the company's net profits and the price of its shares in the market), and he proceeds to conduct selling or buying operations in the stock market by taking advantage of this information, which he obtained by virtue of his position in the company, or through someone who is a partner with him in interest, or who gave him the information due to a relationship
of kinship or trade between them— is this earnings lawful or forbidden? And if it is forbidden, and a person has previously made a profession of this work and has partners or collaborators, and now they have a wealth that was realized during the past period: what should he do with this money, given his ignorance of the prohibition of this practice? Because some people see this as a lawful earning, since it is a reward for the effort of obtaining the information, while others deny it and analogize it to selling (to passing travelers) or consider it as such, and deem it forbidden, requiring purification from all its gains. Incidentally, the laws in foreign countries consider these transactions invalid and regard them as a major crime, for which the perpetrator is tried in constitutional courts, with penalties that may reach life imprisonment; because it is a crime against society, in addition to being clear deception and unfairness, and a cause of corruption in the market and the national economy. We want the ruling of the noble Shari'ah as seen by Your Eminence. May Allah guide you and protect you.
A: First: If the shares are fixed shares intended to obtain the yield, such as shares in a factory that produces and sells its output, like shares in a cement factory or an electricity company, transport companies, agricultural companies, or other fixed companies where the partner's capital does not return to him, but only the yield of his shares returns to him— then there is no harm in selling and buying this type of shares. And if the shares are not fixed;
such as shares in commercial speculation companies, where the partner's capital and his share of the profit return to him if the company is dissolved, and the capital may be destroyed and nothing returns to him, or his capital or part of it returns to him— then this type of shares is not permissible to sell or buy; because it is the sale of an unknown item and involves risk, and because it is selling dirhams for absent dirhams, so it is riba al-nasi'ah (usury of deferment), and it may be riba al-fadl (usury of excess) if the amount differs, and both types of riba and the sale of the unknown are also forbidden. Second: If the company prevents the employee from buying its shares and from accessing its secrets, then it is not permissible for the employee to violate its regulations, due to the saying of the Prophet (peace and blessings be upon him)
The Muslims are bound by their conditions, except a condition that makes the forbidden lawful or the lawful forbidden
المسلمون على شروطهم إلا شرطًا أحل حرامًا أو حرم حلالاً
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.