Is BullionVault Shari'ah compliant?
Information for investors and advisers assessing Islamic finance requirements
BullionVault is a digital platform enabling private investors to buy, own and sell securely stored physical precious metals at low cost. We have not sought formal approval of its Shari'ah status. Discussions with Muslim investors who have chosen to use our service highlight:
- No interest is paid to users on any bullion or cash balance they hold;
- Settlement of all buy/sell trades on the live Order Board is instant;
- Your bullion is held as grams of metal within the client-owned pool of large, wholesale-market bars;
- No "virtualisation" or "tokenisation". You own the physical asset directly;
- Your bullion is never used for any other purpose, and is never lent or leased or loaned.
The information below expands on these points so that Muslim investors and Islamic advisers can assess for themselves whether the service meets their requirements.
1. No interest paid
Physical bullion pays no interest, income, dividends or yield. Nor does any cash balance you hold in your account.
There is no credit or lending on BullionVault. To make a purchase, you must first fund your account with the full quantity of money you wish to invest.
Cash is deposited by customers making a bank-to-bank transfer. It is then held in designated client bank accounts, and it appears as a cash balance within the customer's BullionVault account.
The banks holding the pooled Client Bank Accounts may pay interest to BullionVault at the institutional-account level. But any such interest is retained solely by BullionVault and is never paid to customers, regardless of how long the user leaves money uninvested.
2. Instant settlement on Order Board
Buyers can only bid with cash funds which they already hold in the Clients Bank Account, and sellers can only offer metal which they already own inside the vault.
Using the live Order Board, your trade is settled instantly the moment that your order is matched against another user's order. BullionVault's system immediately updates its records of cash and metal ownership.
Alternatively, but without instant settlement, BullionVault users can place a Daily Price order to buy or sell at the globally-recognized London bullion benchmarking auctions. You submit your order before the auction begins, and the price you pay is determined after the auction concludes. Daily Price trades typically settle two working days later (known as 'T+2').
3. Form and ownership
Fine gold is 100% fungible, and BullionVault clients hold their property within the gold-bar bulk in their chosen vault. That pool of metal consists only of large market-accredited bars.
In English law (under which BullionVault and its users operate), the Sale of Goods Act 1979, as amended by the Sale of Goods (Amendment) Act 1995, confirms ownership in this situation. Each BullionVault user owns his/her metal directly, with no mediation whatsoever through any financial security, certificate or token. Nor does your ownership rely in any way on anyone else's solvency.
BullionVault makes it clear that client bullion is the client's outright property in each of:
- its formally filed Balance Sheet, where client property does not feature;
- its Storage Agreement with the custodians, who acknowledge that they are caring for our clients' property;
- throughout our freely published Terms and Conditions online; and
- through your regular payment of a commercial custody fee (which has previously proven decisive in proving the custodial relationship in law).
4. Custody and insurance
BullionVault charges users a monthly fee for the safe custody of their bullion holdings.
BullionVault's vault operators maintain commercial insurance and liability arrangements appropriate to professional bullion custody.
If metal were lost or damaged in circumstances covered by those arrangements, a claim would ordinarily be handled through BullionVault and the relevant vault operator or insurer. Depending on the circumstances and applicable contractual terms, compensation could be provided by reference to the value of the lost metal rather than by returning the same physical bar.
The user is not a direct party to the vault operator's insurance policy.
5. Payment of custody charges
Custody charges are normally deducted from the customer's available cash balance.
Users can maintain a small cash balance in their account to cover future charges.
If insufficient cash is available, BullionVault may sell the minimum necessary quantity of the customer's metal to recover the outstanding amount. Such sales are processed through BullionVault's Daily Price mechanism.
This means that a user who wishes to avoid any automatic sale of metal, or any use of the Daily Price facility, should maintain enough cleared cash to cover future custody charges.
The applicable minimum monthly custody charges and percentage rates vary by metal as set out in our Tariff.
6. Daily reconciliation and public audit
Full allocation of all client bullion is proven, every working day, by the Daily Audit. It reconciles the total holdings of each and every BullionVault user with the quantity of metal recorded on formal Bar Lists issued by the independent third-party vault operators we use to care for your property.
Your individual holdings of both cash and metal are shown in public against an anonymous 'nickname' known only to you. Each year, the Daily Audit is subject to a detailed study by BullionVault's independent financial auditors, who publish their findings on their own website.
Independent professional assayers are also sent into the vault once a year to inspect every single bar and ensure each one is fully accounted for and accurately recorded on the vault’s bar lists. The inspectors also check that the form and markings of each bar are consistent with ‘Good Delivery’ standards, as specified by the London Bullion Market Association.
The assayers then send their inspection reports to our financial auditors, who publish them on their own website for your scrutiny.
Disclaimer
BullionVault does not represent or guarantee that its platform satisfies any particular interpretation of Islamic law.
Interpretations and requirements may differ between scholars, schools of jurisprudence, institutions and jurisdictions. The suitability of the service may also depend on how an individual user uses the available features.
Customers should therefore make their own assessment and, where appropriate, obtain advice from a suitably qualified scholar or Islamic finance adviser before opening an account or placing a trade.
This information is provided solely to explain BullionVault's operational arrangements. It is not a fatwa and does not constitute religious, legal, tax, financial or investment advice.