Category 1 and 2 Investment Firms

Category 3 Investment Firms

AU-2.2.1

Investment firm licensees with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom. Overseas investment firm licensees must maintain a local management presence and premises in the Kingdom appropriate to the nature and scale of their activities.

AU-2.2.2

In assessing the location of an investment firm licensee's Head Office, the CBB will take into account the residency of its Directors and senior management.

AU-2.2.3

The CBB requires that all approved persons occupying controlled functions outlined in Paragraph AU-1.2.2, except for Subparagraph (a) director, be resident in Bahrain.

AU-2.3.1

Investment firm licensees must satisfy the CBB that their controllers are suitable and pose no undue risks to the licensee. Investment firm licensees must also satisfy the CBB that their close links do not prevent the effective supervision of the investment firm licensee by the CBB and otherwise pose no undue risks to the licensee.

AU-2.3.2

For Category 1 and Category 2 investment firm licensees, at least one of the controllers of an investment firm licensee must be a reputable financial institution of financial soundness, operating within a regulated jurisdiction, with a legal structure, all of which must be acceptable to the CBB.

AU-2.3.3

Chapters GR-5 and GR-6 contain the CBB's requirements and definitions regarding controllers and close links.

AU-2.3.4

In summary, controllers are persons who directly or indirectly are significant shareholders in an investment firm licensee, or who are otherwise able to exert significant influence on the investment firm licensee. The CBB seeks to ensure that controllers pose no significant risks to the licensee. In general terms, controllers are assessed in terms of their financial standing, their judicial and regulatory record, and standards of business and (where relevant) personal probity.

AU-2.3.5

An investment firm licensee has close links with its subsidiaries, with its parent undertakings, and with subsidiaries of its parent undertakings. It also has close links with any entity in which the licensee, its subsidiaries, its parent undertakings, and the subsidiaries of its parent undertakings has an equity interest of more than 20% (either in terms of capital or voting rights). The CBB seeks to ensure that these closely linked entities do not pose any material financial, reputational or other risks to the licensee. The CBB also seeks to ensure that the structure and geographical spread of the group is such that it is subject to adequate scrutiny at group level.

AU-2.3.6

In all cases, when judging applications from existing groups, the CBB will have regard to the reputation and financial standing of the group as a whole. Where relevant, the CBB will also take into account the extent and quality of supervision applied to overseas members of the group and take into account any information provided by other supervisors in relation to any member of the group.

AU-2.4.1

Those nominated to carry out controlled functions must satisfy CBB's approved person's requirements.

AU-2.4.2

The definition of controlled functions is contained in AU-1.2, whilst AU-3 sets out CBB's approved persons requirements. Applications for approved person status must be submitted using the prescribed approved persons form.

AU-2.4.3

The investment firm licensee's staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licensee in a sound and prudent manner. Investment firm licensees must ensure their employees meet any training and competency requirements specified by the CBB.

AU-2.4.4

The CBB's training and competency requirements are contained in Module TC (Training and Competency).

AU-2.5.1

Investment firm licensees must maintain a level of financial resources, as agreed with the CBB, adequate for the level of business proposed. The level of financial resources held must exceed at all times the minimum requirements contained in Module CA (Capital Adequacy), as specified for the category of investment license held.

AU-2.5.2

[This Paragraph deleted 07/2010.]

AU-2.5.3

Overseas applicants are required to provide written confirmation from their head office that the head office will provide financial support to the branch sufficient to enable it to meet its obligations as and when they fall due. Overseas applicants must also demonstrate that the company as a whole is adequately resourced for the amount of risks undertaken.

AU-2.6.1

Investment firm licensees must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities. These systems and controls must meet the minimum requirements contained in Modules HC (High Level Controls) and RM (Risk Management), as specified for the category of investment firm license held.

AU-2.6.2

Investment firm licensees must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. Such segregation should ensure that no single individual has control over all stages of a transaction.

AU-2.6.3

Investment firm licensees must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of financial crime occurring in the licensee. These systems and controls must meet the minimum requirements contained in Module FC (Financial Crime), as specified for the category of investment firm license held.

AU-2.6.4

As part of the licensing approval process, applicants must demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may also be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB.

AU-2.6.5

Investment firm licensees must, in connection with any client assets received in the course of their business, establish and maintain separate client accounts, segregated from those used for their own funds, as required in Module CL.

AU-2.7.1

Investment firm licensees must appoint external auditors, subject to prior CBB approval. The minimum requirements regarding auditors contained in Module AA (Auditors and Accounting Standards) must be met.

AU-2.7.2

[This Paragraph deleted 07/2010.]

Books and Records

Provision of Information

General Conduct

License Fees

Additional Conditions