5.1 IBs must clearly demonstrate, in IA related contracts and agreements to IAH, any equalization practices that are employed by the IB, including the approach towards allocating a portion of income which is appropriated for building up reserves such as PER and IRR.

5.2 IBs must explicitly disclose the following requirements within IA contracts entered with IAH:

- the rights and liabilities of both parties - in particular, with respect to the circumstances where losses are to be borne by the IAH and the implications on contractual rights of the IAHs with regard to early withdrawal and early redemption;

- the extent of management’s right to appropriate IAH’s share of investment profits in order to build up PER and/or IRR, to use these reserves to equalize profit payouts to IAH, and the deployment of unused balances on these accounts when the relevant Mudarabah contract matures;

- the accountability and responsibility of the IB to disclose accurate, relevant and timely information to the IAH on the investment of their funds, including its performance, investment policies, valuation, and frequency of valuation of the IAH funded assets; and

- the rights of IAH in the event that the IB fails to perform its fiduciary obligations in accordance with the applicable IA contract, that is, in the event of proven negligence or misconduct or breach of contract by the IBs whereby the IBs will have to compensate the IAH for any loss.

5.3 IBs must make adequate and timely public disclosures in their annual report, website and any other means used by the IBs, of any material changes to their policies regarding profit calculation, asset allocation, investment strategies and mechanics of equalization of the returns (if any) in respect of the IAs that they manage. The IB must allocate appropriate time between the announcement and the changes being effective.

5.4 The utilization of PER for equalizing the returns to IAH and shareholders, as well as the use of IRR for covering losses (if any), is an issue of public interest and must be publicized via the usual means used by the IB as well as in the annual report of the IB.

5.5 IBs must disclose information on policies, procedures, product design/type, profit allocation basis and differences between restricted and unrestricted IAH in addition to the clarity and transparency regarding the rates of return and associated risks that are applicable to IA.

5.6 Disclosures on the IBs’ websites and notice boards in branches / client-facing offices must include:

1. Percentage of Mudarib Share for the concerned period and at least two previous financial periods in each category of IA.
2. Weightages assigned to each category of IAs for the concerned period and at least two previous financial periods.
3. The actual monthly/periodic profit/loss distributed to each category of IA during the last 2 years.
4. Key highlights of PER and IRR policies.

5.7 IAH disclosures must contain information to reflect, with the appropriate level of detail, the direct and indirect fees, expenses, taxes deducted and the net amount received by the IAH based on the profit calculation and allocation methods adopted by the IB.

5.8 The IB shall be encouraged to provide simplified disclosures, using simple language, and easy- to-understand measures of risk and risk-sharing.