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  • Investment Firm License Categories

    • AU-1.1.12

      For the purposes of Volume 4 (Investment Business), regulated investment services may be undertaken under three categories of investment firms as follows:

      Amended: July 2007

    • Category 1

      • AU-1.1.13

        For the purposes of Volume 4 (Investment Business), Category 1 investment firms may undertake (subject to Rule AU-1.1.19) any regulated investment service, as listed below:

        (a) Dealing in financial instruments as principal;
        (b) Dealing in financial instruments as agent;
        (c) Arranging deals in financial instruments;
        (d) Managing financial instruments;
        (e) Safeguarding financial instruments (i.e. a custodian;
        (f) Advising on financial instruments;
        (ff) Arranging Credit and Advising on Credit; and
        (g) Operating a collective investment undertaking (i.e. an operator).
        Amended: July 2020
        Added: July 2007

      • AU-1.1.13A

        [This Paragraph has been moved to AU-1.1.24].

        Amended: January 2022
        Added: October 2020

      • AU-1.1.14

        [This Paragraph was moved and amended to Paragraph AU-1.4.11A in January 2012].

        Amended: January 2012
        Amended: July 2007

    • Category 2

      • AU-1.1.15

        For the purposes of Volume 4 (Investment Business), Category 2 investment firms may undertake (subject to Rule AU-1.1.19) any regulated investment service (as listed in Rule AU-1.1.13), except that of 'dealing in financial instruments as principal'.

      • AU-1.1.16

        A Category 2 investment firm cannot, therefore, trade in financial instruments for its own account ('dealing in financial instruments as principal'), but it may conduct all other types of regulated investment services, including holding client assets.

        Amended: July 2007

    • Category 3

      • AU-1.1.17

        For the purposes of Volume 4 (Investment Business), Category 3 investment firms may undertake (subject to Rules AU-1.1.18 and AU-1.1.19) the following regulated investment services only:

        (a) Arranging deals in financial instruments;
        (b) Advising on financial instruments; and
        (c) Arranging Credit and Advising on Credit.
        Amended: July 2020
        Added: July 2007

      • AU-1.1.18

        When undertaking either of the regulated investment services listed under Rule AU-1.1.17, Category 3 investment firms:

        a) Must be independent;
        b) May not hold any client assets;
        c) Must refrain from receiving any fees or commissions from any party other than the client; and
        (d) Must not have an 'agency' relationship (tied agent) with an investment provider.
        Amended: October 2016
        Amended: October 2009
        April 2008
        Amended: July 2007

      • AU-1.1.18A

        In assessing the independence of a Category 3 investment firm, the CBB will take into account the regulated investment services offered in relation to financial instruments of a related party.

        Amended: October 2016
        Adopted: April 2008

      • AU-1.1.18B

        For the purpose of Paragraph AU-1.1.18A, a related party of a Category 3 investment firm includes:

        (a) A controller of the Category 3 investment firm as defined in Module GR;
        (b) A close link of the Category 3 investment firm as defined in Module GR;
        (c) An associate of a controller as defined in Module GR;
        (d) The extended family of a controller including a father, mother, father-in-law, mother-in-law, brother, sister, brother-in-law, sister-in-law, or grandparent;
        (e) A corporate entity, whether or not licensed or incorporated in Bahrain, where any of the persons identified in Sub-Paragraphs (c) and (d) is a Director or would be considered a controller were the definition of controller set out in Paragraph GR-5.2.1 applied to that corporate entity; and
        (f) [This Subparagraph has been deleted].
        Amended: October 2016
        Adopted: April 2008

    • Category 4

      • AU-1.1.18C

        For the purposes of Volume 4 (Investment Business), category 4 investment firms are permitted to provide the following regulated investment services to accredited investors:

        a) Operating a collective investment undertaking (CIU); and
        b) In respect of venture capital CIUs that the category 4 investment firm operates/manages, act as custodian (i.e. safeguarding financial instruments).
        Added: January 2022

      • AU-1.1.18D

        While category 1 investment firms and category 2 investment firms can operate/manage all types of CIUs, targeting retail clients, expert investors and accredited investors, category 4 investment firm license caters to the business models of specialist fund managers who operate/manage CIUs targeted at accredited investors only. Examples of such CIUs are private equity funds, hedge funds, structured funds, real estate funds, venture capital funds and other alternative investment funds. An operator of CIUs who markets or manages a CIU targeted at retail clients or expert investors would not be eligible to obtain a category 4 investment firm license. Category 4 investment firms also act as placement agents of overseas domiciled CIUs they operate/manage.

        Added: January 2022

      • AU-1.1.18E

        Category 4 investment firms must appoint independent custodians to safeguard client assets. However, in accordance with Sub-paragraph AU-1.1.18C(b), category 4 investment firms may be authorised by the CBB to act as custodians of the venture capital CIUs they operate/manage provided they meet the requirements stipulated in Section C4-3.3 of the CBB Rulebook, Volume 4 regarding the safeguarding of client assets and client money. This entails that category 4 investment firms can safeguard the illiquid assets of the venture capital CIUs, but client money must be kept in a client bank account.

        Added: January 2022

      • AU-1.1.18F

        Category 4 investment firms are only subject to Sections AU-1.1, AU-1.4, AU-1.5 and the provisions of Modules PB, C4, FC and EN. Category 4 investment firms must also comply with CBB Rulebook Volume 7 requirements for authorisation/registration/filing of CIUs to be offered to accredited investors.

        Added: January 2022