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  • BC-2.7 BC-2.7 Dealing and Managing

    • BC-2.7.1

      Investment firm licensees must apply the requirements contained in this Section to all client categories.

    • Best and Timely Execution

      • BC-2.7.2

        Investment firm licensees must take all reasonable steps to obtain, when executing orders, the best possible result for clients taking into account price, costs, speed, likelihood of execution and settlement, and any other consideration relevant to the execution of the order.

      • BC-2.7.3

        Investment firm licensees must establish and implement effective arrangements for complying with Rule BC-2.7.2:

        a) Execution policies for each class of financial instrument;
        b) Maintenance and disclosure to clients of information regarding execution venues and arrangements for disclosure to clients if orders are to be executed outside regulated markets;
        c) Monitoring of effectiveness of the order execution arrangements and execution policies in order to identify and, where appropriate, correct any deficiencies; and
        d) Maintenance of audit trails to demonstrate to their clients that orders were executed in accordance with the relevant execution policy.
        Amended: January 2007

      • BC-2.7.4

        Investment firm licensees are not required to provide best execution where they have agreed with the client in writing that they will not provide best execution.

      • BC-2.7.5

        In determining whether an investment firm licensee has taken reasonable care to provide the best overall price for a client in accordance with Rules BC-2.7.2 to BC-2.7.4, the CBB will take into account whether an investment firm licensee has:

        (a) Executed orders promptly and sequentially;
        (b) Discounted any fees and charges previously disclosed to the client;
        (c) Disclosed the price at which an order is executed; and
        (d) Taken into account the available range of price sources for the execution of its clients' transactions. In the case where the investment firm licensee has access to prices of different regulated financial markets or alternative trading systems, it must execute the transaction at the best overall price available having considered other relevant factors.
        Amended: January 2007

      • BC-2.7.6

        Investment firm licensees may only postpone the execution of a transaction if it is in the best interests of the client, and the prior consent of the client has been given, or when circumstances are beyond its control. The investment firm licensee must maintain a record of all postponements together with the reasons for the postponement.

        Amended: January 2007

      • BC-2.7.7

        Factors relevant to whether the postponement of an existing client order may be in the best interests of the client include where:

        (a) The client order is received outside of normal trading hours;
        (b) A foreseeable improvement in the level of liquidity in the financial instrument is likely to enhance the terms on which the investment firm licensee can execute the order; or
        (c) Executing the order as a series of partial executions over a period of time is likely to improve the terms on which the order as a whole is executed.
        Amended: January 2007

    • Non-market Price Transactions

      • BC-2.7.8

        Investment firm licensees must not enter into a non-market price transaction in any capacity, with or for a client, if it has reasonable grounds to suspect that the client is entering into the transaction for an illegal or improper purpose.

      • BC-2.7.9

        For the purposes of Paragraph BC-2.7.8, a non-market price transaction is one where the price paid by the investment firm licensee, or its client, differs from the prevailing market price. With respect to transactions in financial instruments traded on the Bahrain Stock Exchange, licensees are reminded that in Bahrain the law prohibits off-market transactions.

        Amended: January 2007

      • BC-2.7.10

        For the purposes of Paragraph BC-2.7.8, examples of improper purposes for transactions include:

        (a) The perpetration of a fraud;
        (b) The disguising or concealment of the nature of a transaction or of profits, losses or cash flows;
        (c) Transactions which amount to market abuse;
        (d) High-risk transactions under the Anti Money Laundering Regulations; and
        (e) "Window dressing", in particular around the year end, to disguise the true financial position of the person concerned.
        Amended: January 2007

      • BC-2.7.11

        Rule BC-2.7.8 does not apply to a non-market-price transaction if it is subject to the rules of a recognised investment exchange.

    • Aggregation and Allocation

      • BC-2.7.12

        Investment firm licensees may only aggregate an order for a client with an order for other clients, or with an order for its own account, where:

        (a) It is unlikely that the aggregation will disadvantage the clients whose orders have been aggregated; and
        (b) It has disclosed to each client concerned in writing that it may aggregate orders, where these work to the client's advantage.
        Amended: January 2007

      • BC-2.7.13

        If an investment firm licensee has aggregated orders of clients, it must make a record of the intended basis of allocation and the identity of each client before the order is effected.

      • BC-2.7.14

        Where an allocation takes place, prices must not be marked up or marked down, so that no customer, broker or the investment firm licensee is advantaged over any change.

        Amended: July 2013

      • BC-2.7.15

        Investment firm licensees must have written policies on aggregation and allocation which are consistently applied; these must include the policy that will be adopted when only part of the aggregated order has been filled.

      • BC-2.7.16

        Where an investment firm licensee has aggregated a client order with an order for other clients or with an order for its own account, and part or all of the aggregated order has been filled, it must:

        (a) Promptly allocate the financial instruments concerned;
        (b) Allocate the financial instruments in accordance with its stated policy;
        (c) Ensure the allocation is done fairly and uniformly by not giving undue preference to itself or to any of those for whom it dealt;
        (d) Give priority to satisfying client orders where the aggregation order combines a client order and an own account order, if the aggregate total of all orders cannot be satisfied, unless it can demonstrate on reasonable grounds that without its own participation it would not have been able to execute those orders on such favourable terms, or at all; and
        (e) Make and maintain a record of:
        (i) The date and time of the allocation;
        (ii) The relevant financial instruments;
        (iii) The identity of each client concerned;
        (iv) The amount allocated to each client and to the investment firm licensee; and
        (v) The price of each financial instrument and allocation.
        Amended: July 2013
        Amended: January 2007

    • Excessive Dealing

      • BC-2.7.17

        Investment firm licensees must not advise any client to transact with a frequency or in amounts that might result in those transactions being deemed excessive in light of historical volumes, market capitalisation, client portfolio size and related factors. This Rule does not apply to clients classified as accredited investors.

        Amended: October 2009
        Amended: January 2007

    • Right to Realise a Retail Client's Assets

      • BC-2.7.18

        Investment firm licensees must not realise a retail client's assets, unless it is legally entitled to do so, and has either:

        (a) Set out in the terms of business:
        (i) The action it may take to realise any assets of the retail client;
        (ii) The circumstances in which it may do so;
        (iii) The asset (if relevant) or type or class of asset over which it may exercise the right; or
        (b) Given the retail client written or oral notice of its intention to exercise its rights before it does so.
        Amended: January 2007

    • Lending to Retail Clients

      • BC-2.7.19

        Investment firm licensees providing credit pursuant to Paragraph AU-1.4.15, must not lend money or grant credit to a retail client (or arrange for any other person to do so) unless:

        (a) They have made and recorded an assessment of the retail client's financial standing, based on information disclosed by the retail client;
        (b) They have taken reasonable steps to ensure that the arrangements for the loan or credit and the amount concerned are suitable, based on the information disclosed by the retail client, for the type of investment agreement proposed or which the retail client is likely to enter into; and
        (c) The retail client has given his prior written consent to both the maximum amount of the loan or credit and the amount or basis of any interest or fees to be levied in connection with the loan or credit.
        Amended: January 2007

    • Margin Requirements

      • BC-2.7.20

        Before conducting a transaction with or for a retail client, investment firm licensees must notify the client of:

        (a) The circumstances in which the client may be required to provide any margin;
        (b) The form in which the margin may be provided;
        (c) The steps the investment firm licensee may be required or entitled to take if the client fails to provide the required margin, including:
        (i) The fact that the client's failure to provide margin may lead to the investment firm licensee closing out his position after a time limit specified by the firm;
        (ii) The circumstances in which the investment firm licensee will have the right or duty to close out the client's position; and
        (d) The circumstances, other than failure to provide the required margin, that may lead to the investment firm licensee closing out the client's position without prior reference to him.
        Amended: January 2007

      • BC-2.7.21

        Investment firm licensees must close out a retail client's open position if that client has failed to meet a margin call within five business days following the date on which the obligation to meet the call accrues, unless:

        (i) The investment firm licensee has received confirmation from a relevant third party (such as a clearing firm) that the retail client has given instructions to pay in full; or
        (ii) The investment firm licensee has taken reasonable care to establish that the delay is owing to circumstances beyond the retail client's control.
        Amended: January 2007

      • BC-2.7.22

        For the purposes of Rule BC-2.7.21, investment firm licensees may require the closing of a retail client's open position in less than five business days, for their own risk management purposes.

    • Programme Trading

      • BC-2.7.23

        Before an investment firm licensee executes a programme trade, it must disclose to its client whether it will be acting as a principal or agent. An investment firm licensee must not subsequently act in a different capacity from that which is disclosed without the prior consent of the client.

      • BC-2.7.24

        The term "programme trade" describes a single transaction or series of transactions executed for the purpose of acquiring or disposing, for a client, of all or part of a portfolio or a large basket of financial instruments.

      • BC-2.7.25

        Investment firm licensees must ensure that neither they, nor an associate, execute an own account transaction in any financial instrument included in a programme trade, unless they have notified the client in advance that they may do this, or can otherwise demonstrate that they have provided fair treatment to the client concerned.

    • Records

      • BC-2.7.26

        Investment firm licensees must keep a record of each step they undertake in relation to each transaction to demonstrate to the CBB compliance with Section BC-2.7.

        Amended: January 2007