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  • C4-2.1 C4-2.1 Board and Management Structure

    • C4-2.1.1

      Category 4 investment firms must be headed by an effective, collegial and informed Board of Directors.

      Added: January 2022

    • Board Role and Responsibilities

      • C4-2.1.2

        All directors should understand the Board’s role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:

        (a) The Board’s role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and
        (b) The Board’s fiduciary duties of care and loyalty to the category 4 investment firm and the shareholders.
        Added: January 2022

      • C4-2.1.3

        The Board’s role and responsibilities include but are not limited to:

        (a) The overall business performance and strategy for the category 4 investment firm;
        (b) Causing financial statements to be prepared which accurately disclose the category 4 investment firm’s financial position;
        (c) Monitoring management performance;
        (d) Convening and preparing the agenda for shareholder meetings;
        (e) Monitoring conflicts of interest and preventing abusive related party transactions; and
        (e) Assuring equitable treatment of shareholders including minority shareholders.
        Added: January 2022

      • C4-2.1.4

        The directors are responsible both individually and collectively for performing these responsibilities. Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place.

        Added: January 2022

      • C4-2.1.5

        The category 4 investment firm should have a written appointment agreement with each director which recites the directors’ powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

        Added: January 2022

      • C4-2.1.6

        The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.

        Added: January 2022

    • Board Composition

      • C4-2.1.7

        The Board should regularly review its size and composition to ensure that it is small enough for efficient decision-making yet large enough to have members who can contribute from different specialties and viewpoints. Category 4 investment firms may appoint non-executive directors or a separate advisory board to obtain expert guidance.

        Added: January 2022

    • Directors’ Communication with Management

      • C4-2.1.8

        The Board must encourage participation by management regarding matters the Board is considering. Non-executive directors or where applicable advisory board members should have free access to the category 4 investment firm’s management beyond that provided in Board meetings.

        Added: January 2022

    • Management Structure

      • C4-2.1.9

        The Board must appoint senior management whose authority must include management and operation of current activities of the category 4 investment firm, reporting to and under the direction of the Board. The Board must make adequate arrangements, at a minimum for the below functions/positions:

        (a) A CEO, General Manager (or CO-CEO, Managing Partner etc.);
        (b) Financial control;
        (c) Compliance;
        (d) Risk management;
        (e) Asset management;
        (f) Internal audit; and
        (g) Anti-Money Laundering (AML).
        Added: January 2022

      • C4-2.1.10

        For the purposes of Paragraph C4-2.1.9 and as per Paragraph C4-1.1.4, the Board is required to appoint at least two senior executives that are resident in Bahrain, one of who is the CEO, but the category 4 investment firm, with the approval of the CBB, may outsource other functions provided the following conditions are met:

        (a) The Board and senior management take responsibility for the outsourced activities and maintain oversight and control over the operations of the outsourced service provider;
        (b) The licensee satisfies the CBB that adequate arrangements are in place to fulfill the role’s responsibilities;
        (c) The core business of asset management is carried out internally although the firm may utilise third-parties for managing the related processes; and
        (d) Compliance and AML functions (which may be combined) must have on-site presence (either in-house or on a secondment basis).
        Added: January 2022

      • C4-2.1.11

        The Board and CEO should prescribe each senior manager’s title, authorities, duties and internal reporting responsibilities. The Board may also specify any limits on the authority of the CEO or other senior managers, such as monetary maximums for transactions which they may authorise without separate Board approval.

        Added: January 2022

      • C4-2.1.12

        At least annually, the Board should review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEO, both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEO.

        Added: January 2022

    • Approved Persons Accountability

      • C4-2.1.13

        Each approved person should understand that under the Law he is personally accountable to the category 4 investment firm and the shareholders and if he violates his legal duty of loyalty to the licensee, and that he can be personally sued by the licensee or the shareholders for such violations.

        Added: January 2022

    • Conflicts of Interest

      • C4-2.1.14

        Each approved person should make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the category 4 investment firm. This includes not using licensee’s information it for his personal profit, not to take business opportunities of the licensee for himself, and not to compete in business with the category 4 investment firm. The Board should also have in place a policy on the employment of relatives of the approved persons.

        Added: January 2022

      • C4-2.1.15

        Approved persons must inform the Board of conflicts of interest as they arise and abstain from voting on the matter in accordance with the relevant provisions of the Law.

        Added: January 2022

    • Communication between Board and Shareholders

      • C4-2.1.16

        The category 4 investment firm should communicate with shareholders, encourage their participation, and respect their rights. The Board should observe both the letter and the intent of the Commercial Company Law’s requirements for shareholder meetings.

        Added: January 2022

    • Remuneration of Approved Persons

      • C4-2.1.17

        The category 4 investment firm must remunerate approved persons fairly and responsibly.

        Added: January 2022

      • C4-2.1.18

        Remuneration of approved persons should be sufficient enough to attract, retain and motivate persons of the quality needed to run the category 4 investment firm successfully, but the licensee should avoid paying more than is necessary for that purpose.

        Added: January 2022