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  • GR-5 GR-5 Controllers

    • GR-5.1 GR-5.1 Key Provisions for Bahraini Investment Firm Licensees

      • 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):

        (a) A new controller;
        (b) An existing controller increasing its holding from 10% to 20%;
        (c) An existing controller increasing its holding from below 20% to 30%;
        (d) An existing controller increasing its holding from below 30% to 40%;
        (e) An existing controller increasing its holding to above 40% for licensees not listed on any exchange in Bahrain or abroad; and
        (f) An existing controller reducing its holding to below 10%.
        Amended: October 2015
        Amended: July 2007

      • 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.

        Added: April 2019

      • 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.

        Added: April 2019

      • 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.

        Amended: July 2007

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

        Deleted: July 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.

        Amended: October 2015
        Amended: July 2007

      • 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).

        Added: October 2015

      • 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.

        Added: October 2015

      • 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:

        (a) When the change takes effect; and
        (b) When the controller becomes aware of the proposed change.
        Amended: October 2015
        Adopted: January 2011

      • 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).

        Amended: January 2017
        Amended: October 2015
        Amended: January 2011
        Amended: July 2007

      • 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.

        Adopted: July 2007

      • 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.

        Amended: October 2015
        Amended: July 2007

      • GR-5.1.7A

        The approval process is specified in Section GR-5.4.

        Adopted: July 2007

      • 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).

        Amended: October 2015
        Amended: July 2007

    • GR-5.2 GR-5.2 Definition of Controller of a Bahraini Investment Firm Licensee

      • 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:

        (a) Holds 10% or more of the issued and paid up capital in the licensee or parent undertaking; or
        (b) Is able to exercise more than 10% of the voting power over the licensee or the parent undertaking.
        Amended: October 2015
        Amended: July 2007

      • GR-5.2.2

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

        (a) In the case of natural persons, a member of the controller's family;
        (b) An undertaking of which a controller is a Director;
        (c) A person who is an employee or partner of the controller;
        (d) If the controller is a legal person, a Director of the controller, a subsidiary of the controller, or a Director of any subsidiary undertaking of the controller; and
        (e) Any other person or undertaking with which the controller has entered into an agreement or arrangement as to the acquisition, holding or disposal of shares or other interests in the investment firm licensee, or under which they undertake to act together in exercising their voting power in relation to the investment firm licensee.
        Amended: October 2015
        Amended: July 2007

      • 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.

        Amended: October 2015
        Amended: July 2007

      • 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.

        Added: October 2015

    • GR-5.3 GR-5.3 Suitability of Controllers for Bahraini Investment Firm Licensees

      • GR-5.3.1

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

        Amended: October 2015
        Amended: October 2011
        Amended: July 2007

      • GR-5.3.1A

        [This Paragraph was deleted in October 2015.]

        Deleted: October 2015
        Adopted: October 2011

      • Natural Persons

        • GR-5.3.2

          The percentage of direct or indirect control of a natural person in a Bahraini investment firm licensee must not exceed 30% of the issued and paid up capital. This limit does not apply to category 3 investment firms.

          Added: October 2015

        • GR-5.3.3

          In assessing the suitability of controllers who are natural persons, the CBB will consider the following:

          (a) Whether the approval or refusal of a controller is or could be detrimental to the licensee, Bahrain's financial sector and the national interest of the Kingdom of Bahrain;
          (b) The legitimate interests of clients, creditors, non-controlling interests, and all other stakeholders of the licensee;
          (c) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
          (d) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
          (e) Whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;
          (f) The contravention of any financial services legislation or regulation;
          (g) Whether the person has ever been refused an authorisation as controller, a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;
          (h) Dismissal or a request to resign from any office or employment;
          (i) Disqualification by a court, regulator or other competent body, as a Director or as a manager of a corporation;
          (j) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or declared bankrupt or one or more of its partners or managers have been declared bankrupt;
          (k) The extent to which the person has been truthful and open with regulators;
          (l) Whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order or has defaulted on any debts;
          (m) The track record as a controller in another company or investor in a financial institution, whether in the Kingdom of Bahrain or abroad;
          (n) The financial resources of the person and the stability of their shareholding;
          (o) Existing Directorships or ownership of more than 20% of the issued or paid up capital in any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interest that such Directorships or ownership may imply;
          (p) The ability of the person to deal with existing shareholders and the Board in a constructive and co-operative manner; and
          (q) The propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings.
          Amended: October 2015
          Amended: July 2007

      • Unregulated Legal Persons

        • GR-5.3.3A

          The percentage of direct or indirect control of an unregulated legal person in a Bahraini investment firm licensee must not exceed 30% of the issued and paid up capital.

          Added: October 2015

        • GR-5.3.4

          In assessing the suitability of controllers who are unregulated legal persons, the CBB will consider the following:

          (a) Whether their approval or refusal of a controller is or could be detrimental to the licensee, Bahrain's financial sector and the national interest of the Kingdom of Bahrain;
          (b) The legitimate interests of investors, creditors, non-controlling interests and all other stakeholders of the licensee;
          (c) The financial strength of the controller, its parent(s) and its subsidiaries, its implications for the investment firm licensee and the likely stability of the controller's shareholding in the investment firm licensee;
          (d) Whether the unregulated legal person or any of its subsidiaries or any of its shareholders have ever been adjudged bankrupt, or failed to satisfy a judgement debt under a court order, or have defaulted on any debts, or entered into any arrangement with creditors in relation to the inability to pay due debts;
          (e) The controller's jurisdiction of incorporation, location of Head Office, group structure and close links, and the implications for the investment firm licensee as regards effective supervision of the investment firm licensee and potential conflicts of interest;
          (f) The controller's (and other subsidiaries') propriety and general standards of business conduct, including the contravention of any laws or regulations related to financial services, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;
          (g) Any conviction related to fraud, misfeasance or other misconduct;
          (h) Whether the unregulated legal person or any of its subsidiaries has been subject to any disciplinary proceeding whether by court order any proceeding by a specialised body, and whether the unregulated legal person is sued in any court;
          (i) The extent to which the controller or its subsidiaries have been truthful and open with regulators and supervisors;
          (j) Whether the unregulated legal person has ever been refused an authorisation as controller, a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;
          (k) The track record as a controller or investor in financial institutions;
          (l) The ability of the unregulated legal person to deal with existing shareholders and the Board in a constructive and co-operative manner;
          (m) Directorships in the Kingdom of Bahrain or elsewhere or ownership of more than 20% of the capital or voting rights of any financial institution, and the potential for conflicts of interest that such directorships or ownership may imply; and
          (n) Whether the unregulated legal person or any of its subsidiaries have ever entered into any arrangement with creditors in relation to the inability to pay due debts.
          Amended: October 2015
          Amended: July 2007

      • Regulated Legal Persons

        • GR-5.3.5

          The percentage of direct or indirect control of a regulated legal person in a Bahraini investment firm licensee must not exceed 40% of the issued and paid up capital.

          Added: October 2015

        • GR-5.3.6

          The 40% limit referred to in Paragraph GR-5.3.5 does not apply to Bahraini investment firm licensees not listed on a licensed exchange or an exchange abroad, or to mergers or acquisitions which have been approved by the CBB.

          Added: October 2015

        • GR-5.3.7

          Subject to the discretion of the CBB, regulated financial institutions may be allowed to own or control holdings of voting capital of listed licensees in excess of the abovementioned 40% level, if such control is not detrimental to the licensee, Bahrain s financial sector and the national interest of the Kingdom of Bahrain.

          Added: October 2015

        • GR-5.3.8

          Regulated financial institutions wishing to acquire more than 40% of the voting capital of a Bahraini investment firm licensee must observe the criteria set forth in Guidance GR-5.3.4 related to unregulated legal persons, in addition to the conditions set forth under Guidance GR-5.3.9.

          Added: October 2015

        • GR-5.3.9

          In assessing the suitability of controllers who are regulated legal persons, the CBB will consider the following:

          (a) The person must be subject to effective consolidated supervision by a supervisory authority which effectively implements the Basel Committee on Banking Supervision Core Principles, or the IOSCO Core Principles or the IAIS Core Principles as well as the FATF Recommendations on Money Laundering and the financing of terrorism & proliferation;
          (b) The home supervisor of the person must give its formal written prior approval for (or otherwise raise no objection to) the proposed acquisition of the Bahraini investment firm licensee;
          (c) The home supervisor of the person must confirm to the CBB that it will require the person to consolidate the activities of the concerned Bahraini investment firm licensee for regulatory and accounting purposes if the case so requires;
          (d) The home supervisor of the person must formally agree to the exchange of customer information between the person and its prospective Bahraini subsidiary/acquisition for AML/CFT purposes and for Large Exposures monitoring purposes;
          (e) The home supervisor of the person and the CBB must conclude a Memorandum of Understanding in respect of supervisory responsibilities, exchange of information and mutual inspection visits; and
          (f) The person must provide an acceptably worded letter of guarantee to the CBB in respect of its obligation to support the licensee, should such letter be requested.
          Added: October 2015

    • GR-5.4 GR-5.4 Approval Process for Bahraini Investment Firm Licensees

      • 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.

        Amended: October 2015
        Amended: July 2007

      • 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.

        Added: October 2015

      • 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.

        Amended: October 2015
        Amended: October 2009
        Adopted: July 2007

      • Appeal Process

        • GR-5.4.2A

          The applicant has 30 calendar days from the date of a notice in which to appeal a decision to refuse the application or any conditions imposed as a condition of approval. The CBB then has 30 calendar days from the date of the appeal in which to consider any mitigating evidence submitted and make a final determination.

          Added: October 2015

        • GR-5.4.3

          Where a person has become a controller by virtue of their shareholding in contravention of Paragraph GR-5.1.1, or a notice of refusal has been served on them under Paragraph GR-5.4.1 and the period of appeal has expired, the CBB may, by notice in writing served on the person concerned, instruct the person concerned to transfer such shares, or refrain from exercising voting rights in respect of such shares.

          Amended: July 2007

        • GR-5.4.4

          If the person concerned fails to take the action specified under Paragraph GR-5.4.3, then the CBB may seek a court order to take appropriate measures: these may include forcing the person to sell their shares.

          Adopted: July 2007

        • GR-5.4.5

          [This Paragraph was deleted in October 2015.]

          Deleted: October 2015
          Adopted: July 2007

        • GR-5.4.6

          In addition to the above requirements, Bahraini investment firm licensees are encouraged to notify the CBB as soon as they become aware of events that are likely to lead to major changes in their controllers. Any supervisory implications of such changes can then be discussed prior to the filing of a formal approval request.

          Amended: October 2015
          Adopted: July 2007

        • GR-5.4.7

          The CBB may contact references and supervisory bodies in connection with any information provided to support an application for controller. The CBB may also ask for further information, in addition to that provided in the Form 2, if required to satisfy itself as to the suitability of the applicant.

          Added: October 2015

        • GR-5.4.8

          In accordance with Paragraph EN-8.2.6, and where a controller is a natural person, the CBB may, depending on the seriousness of a situation, impose enforcement measures, which may include disqualification from being a controller of any licensed firm.

          Added: October 2015

    • GR-5.5 GR-5.5 Key Provisions for Overseas Investment Firm Licensees

      • 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.

        Added: October 2015

      • 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.

        Added: October 2015

      • 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).

        Added: October 2015

      • 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.

        Added: October 2015