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  • CFP-1 CFP-1 Operating Requirements

    • CFP-1.1 CFP-1.1 Platform Offers & Disclosures

      • CFP-1.1.1

        Crowdfunding platform operators must prominently display on their website the following:

        (a) A general risk warning;
        (b) Details of how and by whom the operator is remunerated for the service it provides, including fees and charges it imposes on lenders/investors and borrowers/issuers;
        (c) For financing-based crowdfunding: the actual default rates as a percentage of loans entered into on the platform and the number and aggregate value of loans in default; and
        (d) For equity-based crowdfunding: the actual failure rate of issuers who use the platform.
        (e) The offering statement for each crowdfunding offer which must disclose any conflicts of interest (as required by Chapter 2); and
        (f) Information on rights of clients relating to participation in crowdfunding offer, including right to withdraw commitments, lodging complaints and any voting rights.
        Added: April 2022

      • CFP-1.1.2

        A crowdfunding offer is open from the time when it is first published on the platform and must be closed on the closing date or at the earliest of the following:

        (a) Three months after the offer is made, unless a specific approval has obtained from the CBB;
        (b) When the offer is fully subscribed (unless over-subscription is allowed); and
        (c) When the borrower/issuer making the offer withdraws the offer;
        Added: April 2022

      • CFP-1.1.3

        A crowdfunding offer must be withdrawn by the crowdfunding platform operator if it has material concerns regarding the crowdfunding borrower/issuer or it becomes aware of any information that indicates the offer is misleading, fraudulent, deceptive.

        Added: April 2022

      • CFP-1.1.4

        A crowdfunding borrower/issuer is subject to the following limits in respect of crowdfunding:

        (a) Financing-based crowdfunding offers must be less than or equal to BD 500,000 in aggregate, per borrower, within a 12-month period, except where the funding raised is to be used for a Government of Bahrain led initiative/project. Additionally, the tenor of loans must not exceed 5 years; and
        (b) Equity-based crowdfunding offers must be less than or equal to BD 250,000, per issuer, (or BD 500,000 in respect of equity crowdfunding issuers who qualify as entities engaged in real estate projects) within a 12-month period.
        Added: April 2022

      • CFP-1.1.5

        The minimum subscription to be received in a crowdfunding offer must not be less than 80% of the crowdfunding offer size.

        Added: April 2022

      • CFP-1.1.6

        Crowdfunding platform operators must provide users the following information upon on-boarding:

        (a) The process for the offering of loans or equity through the platform and the risks associated with lending or investing in crowdfunding offers;
        (b) The limits on raising funds applicable on borrowers/issuers;
        (c) The right of retail clients to withdraw their commitments within 5 working days from the time the commitment is made;
        (d) The existence or non-existence of a secondary market;
        (e) The due-diligence process of the platform for hosting a borrower/issuer; and
        (f) Whether there will be an ongoing relationship between the platform and the borrower/issuer following the closing of an offer.
        Added: April 2022

      • CFP-1.1.7

        Crowdfunding platform operators must additionally display on their website key information on how their platform operates, including:

        (a) The eligibility criteria for borrowers/lenders and issuers/investors that use the platform;
        (b) Arrangements and safeguards for client money held or controlled by the operator, including details of any legal arrangements (such as nominee accounts) that may be used to hold client money;
        (c) What will happen if loans sought by a borrower or funds sought by an issuer either fail to meet, or exceed, the target level;
        (d) Steps the operator will take and the rights of the relevant parties if there is a material change in a borrower’s or an issuer’s circumstances;
        (e) How the operator will deal with overdue payments or a default by a borrower or failure of an issuer; and
        (f) Which jurisdiction’s laws will govern the financing agreement.
        Added: April 2022

      • CFP-1.1.8

        Crowdfunding platform operators must provide on their platform a user-friendly facility to allow investors/lenders to make their bid to crowdfunding offers. Such bids may only be made during the period a crowdfunding offer is available for investment/lending. Licensees must also provide on their platform a facility for communication among the investors/lenders, borrowers/issuers and the crowdfunding platform operator (e.g. an online forum).

        Added: April 2022

      • CFP-1.1.9

        Crowdfunding platform operators must allot/allocate shares, in accordance with the allotment basis stipulated in the equity crowdfunding offering statement, within 7 working days from closing date.

        Added: April 2022

      • CFP-1.1.10

        Crowdfunding platform operators must not advertise a specific crowdfunding offer hosted on its platform or make any public statements that are reasonably likely to induce people to fund a particular crowdfunding offer. This requirement does not prevent an operator from generally promoting its platform to potential clients, provided it does not advertise a specific offer.

        Added: April 2022

      • CFP-1.1.11

        Crowdfunding platform operators must have in place effective and transparent procedures for the prompt, fair and consistent handling of complaints received from clients in accordance with Section GR-10 of GR Module and publish the procedures on their websites.

        Added: April 2022

      • CFP-1.1.12

        For the purposes of this module, commercial entities incorporated in the Kingdom of Bahrain or incorporated in an overseas jurisdiction that is not a UN sanctioned, non-cooperative or high-risk jurisdiction are eligible to be hosted on crowdfunding platform operator, except the following:

        (a) Financial institutions;
        (b) Public-listed companies; and
        (c) Holding company structures and non-operative special purposes vehicles (SPVs).
        Added: April 2022

      • Offers to Retail Clients

        • CFP-1.1.13

          Crowdfunding platform operators, upon onboarding retail clients, must undertake a suitability and appropriateness assessment to gauge the client’s knowledge, experience, financial situation (including the client’s ability to bear losses) and the client’s understanding of risks associated with crowdfunding by seeking information from the lender/investor.

          Added: April 2022

        • CFP-1.1.14

          Crowdfunding platform operators must ensure that each retail client completes a self-declaration form before the client is allowed to use the platform which must include the following acknowledgements:

          (a) that the client understands the risks involved in crowdfunding;
          (b) that the client will only commit money that the client can afford to lose;
          (c) that the client understands the potential to lose part or all of his investment made on the platform;
          (d) that the client may face difficulties in exiting his investments made on the platform; and
          (e) that the client is aware that the crowdfunding offer has neither been reviewed nor approved by the CBB.
          Added: April 2022

        • CFP-1.1.15

          Crowdfunding platform operators must provide retail clients unconditional right to withdraw their commitment to lend or invest in a crowdfunding offer within 5 working days from the time the commitment is made. No fee or penalty must be charged to such persons if a commitment is withdrawn.

          Added: April 2022

    • CFP-1.2 CFP-1.2 Managing Conflicts of Interest

      • CFP-1.2.1

        Crowdfunding platform operators must not participate in any crowdfunding offer hosted on their platform.

        Added: April 2022

      • CFP-1.2.2

        Crowdfunding platform operators must maintain and operate effective internal rules to prevent conflicts of interest. Licensees must take appropriate steps to prevent, identify, and manage conflicts of interest between their shareholders, their managers or employees, or any natural or legal person linked to them by control and their clients, or between one client and another client. Licensees must disclose to their clients the general nature and sources of conflicts of interest and the steps taken to mitigate them.

        Added: April 2022

      • CFP-1.2.3

        Crowdfunding platform operators must not accept the following persons as borrowers/issuers on their crowdfunding platform:

        (a) Shareholders that hold 20% or more of share capital or voting rights of the platform;
        (b) Managers or employees of the platform; and
        (c) Any natural or legal persons linked to those shareholders, managers or employees by control.
        Added: April 2022

      • CFP-1.2.4

        Crowdfunding platform operators that accept as investors/lenders any of the persons referred to in Subparagraphs CFP-1.2.3 (a), (b) and (c) in their crowdfunding offers must fully disclose on their website the fact that they accept such persons as investors/lenders and information on the specific crowdfunding projects invested in. Licensees must ensure that such crowdfunding offers are funded under the same conditions as those of other investors/lenders and that persons under (a), (b) and (c) do not enjoy any preferential treatment or privileged access to information.

        Added: April 2022

      • CFP-1.2.5

        Crowdfunding platform operators must not provide direct or indirect financial assistance to lenders/investors to lend or invest in a crowdfunding borrower/issuer hosted on its platform.

        Added: April 2022

      • CFP-1.2.6

        Crowdfunding platform operators must not provide advice on the crowdfunding offers hosted on their platform. The existence of filtering tools on the platform is not regarded as advice if such tools provide information to clients in an objective and neutral manner that does not constitute a recommendation. Such tools include those that display results based on criteria relating to purely objective product features. Objective product features in this context could be pre-defined project criteria such as the economic sector, the instrument used and the interest rate, or the risk category where sufficient information regarding the calculation method is disclosed. Similarly, key financial figures calculated without any scope for discretion are also considered to be objective criteria.

        Added: April 2022

    • CFP-1.3 CFP-1.3 Due-diligence of crowdfunding borrowers/issuers

      • CFP-1.3.1

        Crowdfunding platform operators must conduct due-diligence of crowdfunding borrowers/issuers which includes at minimum procedures to confirm the following:

        (a) The identity of the company through its commercial registration (or Legal Entity Identifier where relevant) and its registered office and principal place of business;
        (b) The identity and place of domicile of the company’s owners and key management personnel;
        (c) That the borrower/issuer and its key personnel have no criminal record in respect of local laws in the fields of commercial law, insolvency law, financial services law, anti-money laundering law, fraud law or professional liability obligations;
        (d) That the borrower/issuer is not established in a UN sanctioned or non-cooperative jurisdiction or in a high-risk country;
        (e) The borrower/issuer’s current state and past performance, credit history and business valuation (where relevant);
        (f) That the business is being operated in accordance with applicable laws (in the case of overseas crowdfunding borrowers/issuers a confirmation that the overseas jurisdiction allows hosting of businesses on crowdfunding platforms of other jurisdictions); and
        (g) That the crowdfunding offering statement provided by the borrower/issuer is complete and not misleading.
        Added: April 2022

      • CFP-1.3.2

        Crowdfunding platform operators that allow real estate crowdfunding on their platforms must undertake the following due-diligence prior to hosting a real estate crowdfunding offer:

        (a) Confirm that the offer is for an income producing property and not a new development or construction project;
        (b) Confirm the identity of the seller, including, if it is a body corporate, details of its incorporation and business registration;
        (c) Ensure that the seller holds valid legal title to the property; and
        (d) This Subparagraph was deleted in July 2022;
        (e) Obtain a valuation report from the crowdfunding borrower/issuer provided by an independent, professional and reputable valuer.
        Amended: July 2022
        Added: April 2022

    • CFP-1.4 CFP-1.4 Client Money

      • CFP-1.4.1

        Crowdfunding platform operators must hold client money, securities or other client assets, separate from its own and are not subject to any lien or other restrictions. Client money must be kept in a client bank account with a retail bank in the Kingdom of Bahrain. Licensees must designate a separate bank account (or sub-account) for each crowdfunding offer. Licensees must establish systems and controls for handling of securities, money or other assets, including maintaining up-to-date records of client assets held.

        Added: April 2022

      • CFP-1.4.2

        Crowdfunding platform operators must appoint their external auditors or independent third-party audit firm to perform an audit on client assets and the licensee’s procedures for handling client assets. The objectives of the audit must include:

        (a) Ensuring that client assets are properly segregated and not comingled with the licensee’s own assets (as per Paragraph CFP-1.4.1);
        (b) The licensee has established and implemented adequate internal control procedures and systems to ensure client assets are always segregated;
        (c) Client assets are not used for purposes other than for crowdfunding arrangements; and
        (d) Fraud risks are adequately controlled and mitigated.
        Added: April 2022

      • CFP-1.4.3

        Funds raised must be released to the issuer within one business day of registering the shares in the share register. In case of financing-based crowdfunding, the money must be released to the borrower within one business day of the completion of fund raising. In all cases, client money may only be released if the criteria for raising the funds has been met i.e. the minimum amount required in the offering statements has been met and there has not been any material adverse change to the crowdfunding offer.

        Added: April 2022

      • CFP-1.4.4

        Crowdfunding platform operators must have mechanisms in place to refund the money to lenders/investors within 7 working days if:

        (a) due to any reason the crowdfunding offer is withdrawn by the platform;
        (b) the subscription amount is less than the minimum required in accordance with the offering statement; or
        (c) the offer is oversubscribed, and the platform does not allow oversubscription.
        Added: April 2022

    • CFP-1.5 CFP-1.5 Secondary Market

      • CFP-1.5.1

        Crowdfunding platform operators that operate a secondary over-the-counter market to facilitate transfers of client’s holdings of financings/shares must ensure that only crowdfunding offers hosted and successfully funded through their platforms are permitted to be hosted on the secondary market.

        Added: April 2022

      • CFP-1.5.2

        The secondary market must not consist of an internal matching system which executes client orders on a multilateral basis unless the licensee has obtained approval from the CBB.

        Added: April 2022

      • CFP-1.5.3

        Crowdfunding platform operators that operate a secondary market must ensure that financings or equity securities hosted on the secondary market include all the information that was required to be disclosed in the initial crowdfunding offer and include up to date information on the performance of the borrowers and issuers.

        Added: April 2022

      • CFP-1.5.4

        Crowdfunding platform operators must have in place mechanisms to transfer ownership of issuer shares in a timely manner through the use of third-party registrars where relevant.

        Added: April 2022

    • CFP-1.6 CFP-1.6 Other Operating Requirements

      • CFP-1.6.1

        A financing-based crowdfunding platform operator must become a member of the Bahrain Credit Reference Bureau.

        Added: April 2022

      • CFP-1.6.2

        Crowdfunding platform operators must ensure that the terms and conditions for the arrangements between the relevant parties to the crowdfunding offer are legally enforceable. Such terms must include the following details:

        (a) For financing-based crowdfunding offers, details of the borrowing, tenor, terms of repayment, the nature and frequency of reporting of performance by the borrower to the lender;
        (b) For equity-based crowdfunding offers, the amount of shares offered, the nature of the shares, and the price;
        (c) The duties, rights and obligations of the crowdfunding platform operator, borrower/issuer and lender/investor, including legal remedies.
        Added: April 2022

      • CFP-1.6.3

        A financing-based crowdfunding platform operator that hosts sharia-compliant financing offers, must ensure that such facilities are based on Sharia-compliant financing contracts such as Murabaha, Ijarah, Salam, Istisna’a, etc. Licensees hosting sharia-compliant facilities must make an arrangement with one independent Sharia Scholar to monitor, review and verify that the crowdfunding transactions, including documentation and structuring are in full compliance with Sharia rules and principles. The Sharia Scholar to be appointed must fulfil the eligibility criteria outlined in the CBB’s Sharia Governance Module of Volume 2.

        Added: April 2022

      • CFP-1.6.4

        Crowdfunding platform operators must not host a crowdfunding borrower/issuer that is concurrently hosted on other crowdfunding platforms.

        Added: April 2022