Guidelines on Advertising and Public Announcements for Collective Investment Schemes
BC/23/99 Collective Investment Schemes
BC/23/99
27th October, 1999
The General Manager
All FCBs, OBUs, IBs and Representative Offices
Manama
BahrainDear Sir,
Collective Investment Schemes
The Agency refers to Circulars No. 356/92, 318/95 and 121/99 dated 18th November, 1992, 4th November, 1995 and 19th April, 1999 respectively, and specifically to Paragraphs 49-5 3 (inclusive) of the second Circular referred to above. The Agency has decided that, with effect from the date of this Circular, banks and financial institutions engaged in the marketing and/or establishment of Collective Investment Schemes in/from Bahrain may advertise Schemes in accordance with the attached Guidelines. Terms used in the Guidelines shall have the same meaning as set out in the above Circulars.
Agency officials will, during the course of their normal inspection of Licensees' activities, undertake a review of advertisements used by Licensees for Collective Investment Schemes. It should be noted that the Guidelines apply to all forms of advertising, regardless of the media used.
Banks and financial institutions seeking clarification on any point referred to therein should contact Mr. Anwar Khalifa A1-Sadah, Director of Financial Institutions Supervision Directorate, at the Agency on Tel: 529444/529445.
Yours faithfully,
Dr. Khalid Abdulla Ateeq
Executive Director - Banking ControlGuidelines on Advertising and Public Announcements for Collective Investment Schemes
1. General Matters
(i) Steps must be taken to ensure that advertisements are fair and not misleading.(ii) The purpose of advertisements must be clear and self-explanatory.(iii) The nature or type of schemes to which advertisements relate must be clear.(iv) Any assumptions on which statements in advertisements are based must be stated.(v) Advertisements must not provide any false or misleading indications.(vi) The design and presentation of advertisements should allow them to be easily and clearly understood.(vii) Any risk warnings used in advertisements must he prominently presented and not be obscured or disguised.(viii) Advertisements must not seek to take improper advantage of any circumstance that may make investors/potential investors vulnerable.(ix) Advertisements should not mislead investors/potential investors about any matter likely to influence their attitudes to the scheme in question.(x) Advertisements should be prepared with the aim of ensuring that investors/potential investors fully grasp the nature of the scheme in question.2. Guarantees
Advertisements must not describe schemes as "guaranteed" unless there is a legally enforceable guarantee in place and full details of guarantees, sufficient for a fair assessment to be made about the value of such guarantees, are given.
3. Comparisons
Comparisons (or contrasts) must be based either on verified facts or on stated assumptions. Comparisons must not be misleading and must be presented in a fair and balanced way and not omit anything material.
4. Past Performance
Any information in the advertisement about the past performance of the scheme in question must be relevant, complete, not exaggerate the success (or disguise the lack of success) of the scheme in question, based on actual performance, and contain a warning that neither past experience nor the current situation is necessarily a guide to future performance.
5. Taxation
Advertisements must contain information on all applicable taxes and the impact of taxation for investors/potential investors.
6. Unusual Risks
Advertisements must adequately explain any unusual risks involved in the scheme in question.
7. Fluctuations
Where the scheme unit price or value can fluctuate, a statement must be made that prices or values may fall or rise.
8. High Volatility
Where appropriate, advertisements must state that sudden and large falls in value may occur and detail the effect of such falls.
9. Investment Income
Where a scheme is described as being likely to yield income or as being suitable for an investor/potential investor particularly seeking income, the investor/potential investor must be warned, if it is the case, that such income may fluctuate.
10. Foreign Currency
Where a scheme is denominated in a currency other than that of the country in which an advertisement is issued, the investor/potential investor must be warned that changes in rates of exchange may have an adverse effect on the value, price or income of his holding in the scheme in question.
11. Schemes carrying Contingent Liability
Where an advertisement relates to a scheme in which investors/potential investors may not only lose all of the amount originally invested, but may also have to pay more later, the advertisement must state this fact.
12. Cancellation
Where cancellation rights apply, all rights and liabilities on cancellation should be disclosed.
13. Forecasts or Projections
Where an advertisement contains any forecast or projection, it should make clear the basis upon which that forecast or projection is made.
