Executive Summary

Legal Basis

Evolution of Module

Superseded Requirements

GR-B.1.1

The requirements in Module GR (General Requirements) apply to all investment firm licensees, with the exception of Chapter GR-3, which applies to Category 1 investment firms and Category 2 investment firms and Chapter GR-9, which applies to Category 2 investment firms and Category 3 investment firms only.

GR-B.1.2

The scope of application of Module GR (General Requirements) is as follows:

GR-B.1.3

In the case of Bahraini investment firm licensees, certain requirements apply to the whole firm, irrespective of the location of its business; other requirements apply only in respect to business booked in Bahrain. In the case of overseas investment firm licensees, the requirements of Module GR mostly only apply to business booked in the Bahrain branch.

GR-1.1.1

In accordance with Articles 59 of the CBB Law, all investment firm licensees must maintain books and records (whether in electronic or hard copy form) sufficient to produce financial statements and show a complete record of the business undertaken by a licensee. These records must be retained for at least ten years according to Article 60 of the CBB Law.

GR-1.1.2

GR-1.1.1 includes accounts, books, files and other records (e.g. trial balance, general ledger, nostro/vostro statements, reconciliations, list of counterparties). It also includes records that substantiate the value of the assets, liabilities and off-balance sheet activities of the licensee (e.g. client activity files and valuation documentation).

GR-1.1.3

Separately, Bahrain Law currently requires other transaction records to be retained for at least five years (see Ministerial Order No. 23 of 2002, Article 5(2), made pursuant to the Amiri Decree Law No. 4 of 2001).

GR-1.1.4

Unless otherwise agreed to by the CBB in writing, records must be kept in either English or Arabic. Any records kept in languages other than English or Arabic must be accompanied by a certified English or Arabic translation. Records must be kept current. The records must be sufficient to allow an audit of the licensee's business or an on-site examination of the licensee by the CBB.

GR-1.1.5

Translations produced in compliance with Rule GR-1.1.4 may be undertaken in-house, by an employee or contractor of the licensee, providing they are certified by an appropriate officer of the licensee.

Location of Books and Records

GR-1.2.1

Investment firm licensees must keep completed transaction records for as long as they are relevant for the purposes for which they were made (with a minimum period in all cases of five years from the date when the transaction was terminated). Records of terminated transactions must be kept whether in hard copy or electronic format as per the Legislative Decree No. (54) of 2018 with respect to Electronic Transactions “The Electronic Communications and Transactions Law”and its amendments.

GR-1.2.2

[This Paragraph has been deleted in July 2017].

GR-1.2.3

Rule GR-1.2.1 applies only to transactions relating to business booked in Bahrain by the licensee. It does not relate to transactions relating to business booked in overseas branches or subsidiaries of the licensee.

GR-1.2.4

In the case of overseas investment firm licensees, Rule GR-1.2.1 therefore only applies to business booked in the Bahrain branch, not in the rest of the company.

Corporate Records

Customer Records

GR-2.1.1

Investment firm licensees must obtain CBB’s prior written approval for any change in their legal name. Licensees must notify the CBB of any change in their corporate name at least one week prior to effecting the proposed change.

GR-2.1.2

GR-2.1.1 applies to overseas investment firm licensees only with respect to their Bahrain branch.

GR-2.1.3

In approving a change in a legal name, the CBB seeks to ensure that it is sufficiently distinct as to reduce possible confusion with other unconnected businesses, particularly those operating in the financial services sector. The CBB also seeks to ensure that names used by unregulated subsidiaries do not suggest those subsidiaries are in fact regulated.

GR-2.2.1

Any written communication, including website, email, stationery, business cards or other business documentation published by the licensee, or used by its employees must include a statement that the licensee is regulated by the Central Bank of Bahrain, the type and category of license and the legal status. Additionally, written communication (stationery) should state the authorised and paid up capital of the licensee. All licensees should comply with this requirement by 31st December 2010 at the latest.

GR-3.1.1

Bahraini investment firm licensees must obtain a letter of no-objection from the CBB to pay any dividend proposed, before announcing the proposed dividend by way of press announcement or any other means of communication and prior to submitting a proposal for a distribution of profits to a shareholder vote.

GR-3.1.2

The CBB will grant a no-objection letter where it is satisfied that the level of dividend proposed is unlikely to leave the licensee vulnerable — for the foreseeable future — to breaching the CBB's financial resources requirements, taking into account (as appropriate) trends in the licensee's business volumes, expenses, trend performance and investment environment.

GR-3.1.3

To facilitate the prior approval required under Paragraph GR-3.1.1, investment firm licensees subject to Paragraph GR-3.1.1 must provide the CBB with:

GR-4.1.1

An investment firm licensee must seek prior written approval from the CBB before transferring any of its business to a third party.

GR-4.1.2

Rule GR-4.1.1 is intended to apply to circumstances where an investment firm licensee wishes to sell all or part of its business to a third party. It does not apply where an investment firm licensee is simply transferring client assets to a third party, on instruction from the client concerned.

GR-4.1.3

In the case of a Bahraini investment firm licensee, Chapter GR-4 applies both to its business booked in Bahrain and in the firm's overseas branches. In the case of an overseas investment firm licensee, Chapter GR-4 applies only to business booked in the firm's Bahrain branch.

GR-4.1.4

In all cases, CBB approval to transfer business will only be given where:

GR-4.1.5

In assessing the criteria outlined in Paragraph GR-4.1.4, the CBB will, amongst other factors, take into account the financial strength of the transferee; its capacity to manage the business being transferred; its track record in complying with applicable regulatory requirements; and (where applicable) its track record in treating customers fairly. The CBB will also take into account the impact of the transfer on the transferor, and any consequences this may have for the transferor's remaining customers.

GR-4.1.6

Investment firm licensees seeking to obtain the CBB's permission to transfer business must apply to the CBB in writing, in the form of a covering letter together with supporting attachments. Unless otherwise directed by the CBB, the application must provide:

GR-4.1.7

Firms intending to apply to transfer business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-4.1.6 may be varied by the CBB, depending on the nature of the proposed transfer, such as the materiality of the business concerned and its impact on customers.

GR-4.1.8

The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

GR-4.1.9

At its discretion, the CBB may require that a notice of proposed transfer of business be published in the Official Gazette, and/or in at least two local daily newspapers (one in Arabic, the other in English), in order to give affected customers the right to comment on the proposed transfer. Where such a requirement has been imposed, the CBB's decision on the application will also be published in the Official Gazette and in at least two local daily newspapers. In all such cases, the costs of publication must be met by the transferor.

GR-4.1.10

Publication under paragraph GR-4.1.9 will generally only be required where a proposed transfer involves a large number of customers or is otherwise deemed necessary in order to protect customer interests.

GR-4.1.11

Investment firm licensees are also reminded of the requirements regarding client assets contained in Module CL (Client Assets).

GR-4.1.12

The requirements in this Chapter are based on the powers available to the CBB in Article 68 of the CBB Law.

GR-5.1.1

Bahraini investment firm licensees must obtain prior approval from the CBB for any of the following changes to their controllers (as defined in Section GR-5.2):

GR-5.1.1A

Licensees must not incur or otherwise have an exposure (either directly or indirectly) to their controllers, including subsidiaries and associated companies of such controllers.

GR-5.1.1B

For the purpose of Paragraph GR-5.1.1A, licensees that already have an exposure to controllers must have an action plan agreed with the CBB's supervisory point of contact to address such exposures within a timeline agreed with the CBB.

GR-5.1.2

Articles 52 to 56 of the CBB Law require notification to the CBB of all controllers of licensees and of listed companies; it further gives the CBB the right to refuse approval of controllers if deemed damaging to the interests of the market, customers, or in contravention of the criteria set by the CBB.

GR-5.1.3 [This Paragraph deleted 07/2007.]

GR-5.1.4

Requests for approval under Paragraph GR-5.1.1 must be made by submitting a duly completed Form 2 (Application for Authorisation of Controller) to the CBB.

GR-5.1.4A

Where the direct controller of a Bahraini investment firm licensee is not the ultimate parent undertaking of the licensee, the CBB will require that Form 2 be completed by the ultimate parent undertaking and that the details be provided of the structure of the group, clearly detailing the relationship between the licensee and the ultimate parent undertaking (e.g. by providing an organisational structure of the group).

GR-5.1.4B

Bahraini investment firm licensees must immediately notify the CBB in case of any material change to the information provided in a Form 2 submitted for a controller.

GR-5.1.4C

Where a controller is a legal person, any change in its shareholding must be notified to the CBB at the earlier of:

GR-5.1.5

If, as a result of circumstances outside the Bahraini investment firm licensee's knowledge and/or control, one of the changes specified in Paragraph GR-5.1.1 is triggered prior to CBB approval being sought or obtained, the Bahraini investment firm licensee must notify the CBB no later than 15 calendar days from the date on which those changes have occurred (see Paragraph BR-2.2.23).

GR-5.1.6

For approval under Rule GR-5.1.1 to be granted, the applicant must satisfy the CBB that the proposed change in controller poses no undue risks to the licensee or its customers, and is not damaging to the interests of the market, as defined in the suitability criteria for controllers, contained in Section GR-5.3.

GR-5.1.7

An approval of controller is valid for the period specified in the approval letter issued by the CBB. The CBB may impose any restrictions that it considers necessary to be observed when granting its approval.

GR-5.1.7A

The approval process is specified in Section GR-5.4.

GR-5.1.8

Bahraini investment firm licensees must submit, within 3 months of their financial year-end, a report on their controllers. This report must identify all controllers of the licensee, as defined in Section GR-5.2 (see Paragraph BR-1.4.1).

GR-5.2.1

A controller of a Bahraini investment firm licensee is a natural or legal person who, either alone or with his associates:

GR-5.2.2

For the purposes of Paragraph GR-5.2.1, 'associate' includes:

GR-5.2.3

In addition to the provisions of this Chapter, listed companies and their controllers shall be bound by the CBB s regulatory requirements for capital markets stipulated in the CBB s Rulebook related to changes in the ownership of shares in listed companies. For overseas investment firm licensees, Section GR-5.5 shall apply.

GR-5.2.4

The restrictions set forth in this Chapter shall apply to any changes in the legality of the shares ownership of the controllers in the licensees, or to the voting powers the controllers are entitled to in the licensees. Failure to comply with such restrictions shall result in the imposition of penalties as indicated in Module EN (Enforcement) of the CBB Rulebook. The imposition of such penalties shall not affect the CBB s right to impose other penalties and to take any other administrative measures against the controller in accordance with the provisions of the Law including preventing the controller from exercising his voting right or transferring of shares.

GR-5.3.1

Bahraini investment firm licensees must satisfy the CBB of the suitability of their proposed controllers.

GR-5.3.1A

[This Paragraph was deleted in October 2015.]

Natural Persons

Unregulated Legal Persons

Regulated Legal Persons

GR-5.4.1

Within 3 months of receipt of an approval request under Paragraph GR-5.1.1, with the complete documentation requirements to the satisfaction of the CBB, the CBB will issue a written notice of approval or of refusal by registered mail, to the Bahraini investment firm licensee and the applicant. Where an approval notice is given, it will specify the period for which it is valid and any conditions that may be applied.

GR-5.4.1A

The CBB may refuse an application for approval if the applicant does not meet the criteria set forth in Section GR-5.3. The notice of refusal will specify the reasons for the objection and specify the applicant s right of appeal.

GR-5.4.2

Article 53 of the CBB Law allows the CBB up to 3 months in which to respond to an application, although the CBB normally aims to respond within 30 calendar days. Notices of refusal have to be approved by the concerned Executive Director of the CBB.

Appeal Process

GR-5.5.1

In the case of overseas investment firm licensees, the licensee must notify the CBB of any new significant ownership in excess of 50% of the issued and paid up capital of the concerned licensee s direct parent undertaking as soon as the licensee becomes aware of the change (see Paragraph BR-2.2.23A). The overseas investment firm licensee must provide a copy of the relevant approval by the home supervisor of the parent. The CBB will take the appropriate action in such case.

GR-5.5.2

In assessing the suitability of a controller of the parent of an overseas investment firm licensee, the CBB will take into regard that the change in control poses no undue risks to the licensee or its customers, and is not damaging to the interests of the market.

GR-5.5.3

Overseas investment firm licensees must submit, within 3 months of their financial year-end, a report on their controllers. This report must identify all controllers of the branch, and details of the type of control (See BR-1.4.1).

GR-5.5.4

For overseas investment firm licensees, the controller is the direct parent undertaking. Any material changes as outlined in Paragraph GR-5.5.1, to the control of the direct parent undertaking must be filed through submission of an updated Form 2 to the CBB.

GR-6.1.1

Condition 3 of the CBB's licensing conditions specifies, amongst other things, that investment firm licensees must satisfy the CBB that their close links do not prevent the effective supervision of the licensee and otherwise pose no undue risks to the licensee. (See Paragraph AU-2.3.1).

GR-6.1.2

Applicants for an investment firm license must provide details of their close links, as provided for under Form 1 (Application for a License). (See Paragraph AU-5.1.1).

GR-6.1.3

Investment firm licensees must submit to the CBB, within 3 months of their financial year-end, a report on their close links. The report must identify all undertakings closely linked to the licensee, as defined in Section GR-6.2.

GR-6.1.4

Investment firm licensees may satisfy the requirement in Paragraph GR-6.1.3 by submitting a corporate structure chart, identifying all undertakings closely linked to the licensee.

GR-6.1.5

Investment firm licensees must provide information on undertakings with which they are closely linked, as requested by the CBB.

GR-6.2.1

An investment firm licensee ('L') has close links with another undertaking ('U'), if:

GR-6.3.1

In assessing whether an investment firm licensee's close links may prevent the effective supervision of the firm, or otherwise poses no undue risks to the investment firm licensee, the CBB takes into account the following:

GR-7.1.1

As specified in Article 50 of the CBB Law, an investment firm licensee wishing to cease to provide or suspend all or any of its licensed regulated services, completely or at any of its branches, must obtain prior written approval from the CBB.

GR-7.1.2

If the investment firm licensee wishes to transfer client assets to a third party, it must also comply with the requirements contained in Chapter GR-4.

GR-7.1.2A

If the investment firm licensee wishes to liquidate its business, the CBB will revise its license to restrict the firm from entering into new business. The licensee must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged and that it may surrender its license.

GR-7.1.3

In the case of a Bahraini investment firm licensee, Chapter GR-7 applies both to its business booked in Bahrain and in the firm's overseas branches. In the case of an overseas investment firm licensee, Chapter GR-7 applies only to business booked in the firm's Bahrain branch.

GR-7.1.4

Investment firm licensees seeking to obtain the CBB's permission to cease business must apply to the CBB in writing, in the form of a formal request together with supporting documents. Unless otherwise directed by the CBB, the following requirements must be provided in support of the request:

GR-7.1.5

Licensees intending to apply to cease business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-7.1.4 may be varied by the CBB, depending on the nature of the proposed cessation, such as the materiality of the business concerned and its impact on customers.

GR-7.1.6

Approval to cease business will generally be given where adequate arrangements have been made to offer alternative arrangements to any affected customers. The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

GR-7.1.7 [Deleted]

GR-7.1.7

The notice referred to in Subparagraph GR-7.1.4(i) must include a statement that written representations concerning the liquidation may be submitted to the CBB before a specified day, which shall not be later than thirty calendar days after the day of the first publication of the notice. The CBB will not decide on the application until after considering any representations made to the CBB before the specified day.

GR-7.1.8

Upon satisfactorily meeting the requirements set out in GR-7.1.4, the investment firm licensee must surrender the original license certificate issued by the Licensing Directorate at the time of establishment, and submit confirmation of the cancellation of its commercial registration from the Ministry of Industry and Commerce.

GR-7.1.9

Where the CBB has given its approval to cancel or amend a license, then it will also publish its decision in the Official Gazette, as well as in two local daily newspapers (one in Arabic, the other in English), once this decision has been implemented.

GR-7.1.9A

The publication cost of these notices mentioned in Paragraph GR-7.1.9 is to be met by the investment firm licensee concerned.

GR-7.1.10

The investment firm licensee must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged.

GR-7.1.11

An investment firm licensee in liquidation must continue to meet its contractual and regulatory obligations to customers and creditors.

GR-7.1.11A

If no objections to the liquidation are upheld by the CBB, the CBB may then issue a written notice of approval for the surrender of the license.

GR-7.1.12

If a Category 2 investment firm or a Category 3 investment firm applies to the CBB for voluntary surrender of its authorisation, it must ensure that suitable arrangements are in place for professional indemnity coverage, to continue in respect of any unreported claims arising from past sales or advice, in accordance with Rule GR-9.1.8.

GR-7.1.5

Once the investment firm licensee believes that it has discharged all its remaining contractual obligations to clients and creditors, it must publish a notice in two national newspapers in Bahrain approved by the BMA (one being in English and one in Arabic), stating that is has settled all its dues and wishes to leave the market.

GR-7.1.6

The notice referred to in Paragraph GR-7.1.5 must include a statement that written representations concerning the liquidation may be sent to the BMA before a specified day, which shall not be earlier than sixty days after the day of the first publication of the notice. The BMA will not decide on the application until after considering any representations made to the BMA before the specified day.

GR-7.1.7

If no objections to the liquidation are upheld by the BMA, then the BMA may issue a written notice of approval for the surrender of the license.

GR-8.1.1

[This Paragraph was deleted in October 2013].

GR-8.1.2

[This Paragraph was deleted in October 2013].

GR-8.1.3

[This Paragraph was deleted in October 2013].

GR-8.1.4

[This Paragraph was deleted in October 2013].

GR-8.1.5

[This Paragraph was deleted in October 2013].

GR-8.1.6

[This Paragraph was deleted in October 2013].

GR-8.1.7

[This Paragraph was deleted in October 2013].

GR-8.1.8

[This Paragraph was deleted in October 2013].

GR-8.1.9

[This Paragraph was deleted in October 2013].

GR-8.1.10

[This Paragraph was deleted in October 2013].

GR-8.1.11

[This Paragraph was deleted in October 2013].

GR-8.1.12

[This Paragraph was deleted in October 2013].

GR-8.1.13

[This Paragraph was deleted in October 2013].

GR-9.1.1

Category 2 investment firms and Category 3 investment firms must maintain professional indemnity coverage. The professional indemnity coverage must be obtained from an insurance firm acceptable to the CBB and licensed in the Kingdom of Bahrain. Category 2 investment firms and Category 3 investment firms must submit a Professional Indemnity Insurance Return (Form PIIR) on a quarterly basis as part of the Quarterly Prudential Return Form (ref. BR-1.1). Additionally, they must provide, upon request, evidence to the CBB of the coverage in force.

GR-9.1.1A

In accordance with Paragraph EN-B.3.1, investment firm licensees may not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the financial penalties provided for in Module EN.

GR-9.1.2

The requirement to maintain professional indemnity coverage will normally be met by the investment firm licensee concerned obtaining an insurance policy from an insurance firm. The CBB may also accept an insurance indemnity policy issued at group level, e.g. issued with respect to the parent of the investment firm licensee, provided the terms of the policy explicitly provide indemnity coverage with respect to the investment firm licensee. Similarly, overseas investment firm licensees may provide evidence of professional indemnity coverage maintained by their head office, providing that the coverage of the professional indemnity extends to the operations of the branch operating in Bahrain.

GR-9.1.3

Upon written application to the CBB, the requirement in Rule GR-9.1.1 may instead be met by the investment firm licensee depositing with a retail bank licensed to operate in the Kingdom of Bahrain, an amount, specified by the CBB, to be held in escrow against future claims. This amount will not be less than the minimum required policy limit.

GR-9.1.4

An investment firm licensee must assess its insurance needs with respect to professional indemnity to ensure its adequacy to the level of business undertaken, notwithstanding the minimum limit of indemnity.

GR-9.1.5

The minimum limit of indemnity is BD 100,000 for Category 2 investment firms and BD 75,000 for Category 3 investment firms.

GR-9.1.6

The maximum excess or deductible allowable under the policy shall be BD 15,000.

GR-9.1.7

Unless otherwise agreed in writing with the CBB, the policy must contain a clause that it may not be cancelled or lapsed without the prior notification of the CBB. The policy must also contain a provision for an automatic extended reporting period in the event that the policy is cancelled or lapsed, such that claims relating to the period during which the policy was in force may subsequently still be reported.

GR-9.1.8

If a Category 2 investment firm or Category 3 investment firm applies to the CBB for a voluntary surrender of its authorisation, it must ensure that suitable arrangements are in place for professional indemnity coverage to continue in respect of any unreported claims arising from past sales or advice.

GR-9.1.9

The CBB will not allow a voluntary surrender of authorisation to take effect until the investment firm licensee, in the opinion of the CBB, has discharged all its regulatory responsibilities to its clients. See also Section AU-5.5, on the cancellation of authorisation.

GR-9.1.10

As provided for in Module ES, professional indemnity coverage requirements must be met by Category 2 investment firms and Category 3 investment firms, which were licensed prior to the introduction of Volume 4 (Investment Business) in April 2006, by December 31, 2006. Category 2 investment firms and Category 3 investment firms licensed after April 2006 are required to comply with the CBB's professional indemnity coverage requirements, from the point they are given a license.

GR-9.1.11

Category 2 investment firms and Category 3 investment firms must prominently display in their premises a notice stating that they have in place professional indemnity coverage that meets the minimum requirements of the CBB and the period of coverage, such that claims relating to the period during which the policy was in force may subsequently still be reported.

GR-9.1.12

The above notice may either be issued by the insurance company on behalf of the investment firm licensee, or by the licensee itself. The notice should specify the main features of the coverage maintained (or, where relevant, the amount of funds placed in escrow, in accordance with Rule GR-9.1.3). It should also specify the procedures for submitting a claim under the coverage maintained.

GR-10.1.1

Investment firm licensees must pay the relevant annual license fee to the BMA, upon the issuance of their license and thereafter on 1 January each year. The annual license fee charged upon issuance of a license is charged on a pro-rata basis, proportionate to the period remaining between the issuance of the license and the end of the calendar year in question.

GR-10.1.2

The annual license fee payable is as follows:

GR-10.1.3

The above fee structure is temporary, pending the development of an integrated license fee structure covering all BMA licensees. Such a system, which will be the subject of consultation prior to implementation, is to be finalized for implementation in January 2007. The guiding principles of the new system will be (i) to remain internationally competitive in terms of direct costs imposed on licensees; (ii) to be relatively simple and straightforward to calculate and apply; and (iii) to align more closely the level of fees charged with the scale and likely complexity of a licensee.

GR-10.1.1

As specified in Articles 51 and 57 of the CBB Law, a Bahraini investment firm licensee incorporated in Bahrain must seek CBB approval and give reasonable advance notice of its intention to:

GR-10.1.1A

The Rules in this Section apply to all Bahraini investment firm licensees proposing to establish a new subsidiary undertaking, either directly by way of holding majority shareholding or having majority voting control by virtue of direct ownership or indirectly, by proxy/nominee arrangements, or through a management agreement.

GR-10.1.2

Rule GR-10.1.1 applies whether or not the Bahraini investment firm licensee is required to be regulated locally in the jurisdiction where it proposes to undertake the investment business.

GR-10.1.3

The CBB will consider as one of its criteria to approve, impose additional requirements on the Bahraini investment firm licensee or refuse an application under Paragraph GR-10.1.1, the information related to Paragraph GR-10.1.2.

GR-10.1.4

Bahraini investment firm licensees will also need to consider the implications of a merger, acquisition, disposal or establishment of a new subsidiary undertaking in the context of the controllers and close links rules set out in Sections GR-5 and GR-6.

GR-10.1.5

[This Paragraph was deleted in July 2013]

Establishment of a Subsidiary

Establishment of a Branch or Representative Office