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  • HC-4: Group Structures

    • HC-4.1 Governance of Group Structures

      • HC-4.1.1

        The Board of a Bahraini investment firm licensee which acts as a parent must:

        (a) Have the overall responsibility for the group and exercise adequate oversight over subsidiaries and overseas branches while respecting the independent legal and governance responsibilities that might apply to subsidiary Boards;
        (b) Establish, subject to CBB’s approval, a group structure (including the legal entity and business structure) and a group corporate governance framework with clearly defined roles and responsibilities at both the parent licensee’s and the subsidiaries’ level as may be appropriate based on the complexity, risks and significance of the subsidiaries;
        (c) Set adequate and comprehensive criteria for composing Boards at subsidiaries’ level;
        (d) Have a clear strategy and group policy for establishing new structures and legal entities, and ensure that they are consistent with the policies and interests of the group;
        (e) Have sufficient resources at group and subsidiaries levels to monitor risks and compliance at the level of the group and its subsidiaries;
        (f) Pay special attention and due care to any significant subsidiary based on its risk profile or systemic importance or due to its size relative to the parent licensee;
        (g) Assess and discuss material risks and issues that might affect the group and its subsidiaries and overseas branches;
        (h) Establish effective group functions at the parent licensee, including but not limited to, internal audit, compliance, risk management and financial controls to whom the relevant subsidiaries’ functions must report;
        (i) Maintain an effective relationship, through the subsidiary Board or direct contact, with the regulators of all subsidiaries and overseas branches; and
        (j) ensure that:
        i. The group has appropriate policies and controls to identify and address potential intragroup conflicts of interest, such as those arising from intragroup transactions;
        ii. The group is governed and operating under clear group strategies, business policies and specific set of group policies on risk management, internal audit, compliance and financial controls;
        iii. There are no barriers to exchanging information between the subsidiaries and the parent licensee and that there are robust systems in place to facilitate the exchange of information to enable the parent licensee to effectively supervise the group and manage its risks; and
        iv. Adequate authority is available to each subsidiary pursuant to local legislations.
        Added: July 2023

      • Subsidiaries’ Boards

        • HC-4.1.2

          Boards and senior management of subsidiaries of Bahraini investment firm licensees must remain responsible for developing effective governance and risk management framework for their entities and must clearly understand the reporting obligations they have to the parent licensee.

          Added: July 2023

        • HC-4.1.4

          Material risk-bearing subsidiaries and overseas branches must be captured by the licensee-wide risk management system and must be part of the overall risk governance framework.

          Added: July 2023

          • HC-4.1.3

            The strategy, business plan, policies, risk governance framework, corporate values and corporate governance framework of each subsidiary must align with group strategy and policies, and the subsidiary Board must make necessary adjustments where a group policy conflicts with an applicable legal or regulatory provision or prudential rule or would be detrimental to the sound and prudent management of the subsidiary.

            Added: July 2023