EN-B EN-B Scope of Application
EN-B.1 EN-B.1 Scope
EN-B.1.1
The contents of this Module mostly consist of Guidance material, explaining the different measures that CBB can employ to ensure compliance with Volume 4 (Investment Business). Certain Rules, applicable to
investment firm licensees , are however contained in Paragraphs EN-B.3.1, EN-B.4.5, EN-2.2.4, EN-2.2.10, and EN-8.2.4.Amended: January 2007EN-B.1.2
With the exception of Chapter EN-9, Chapters EN-1 to EN-10 of this Module are generally relevant to
investment firm licensees . In the case ofoverseas investment firm licensees , the CBB's enforcement powers apply only to the branch operating in the Kingdom of Bahrain.Amended: January 2007EN-B.1.3
In addition, Chapters EN-8 and EN-10 of this Module are relevant to
approved persons , whilst Chapter EN-9 is relevant toregistered persons .Amended: January 2007EN-B.1.4
Section EN-5 dealing with financial penalties is applicable to
investment firm licensees as well as to persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law.Added: April 2016EN-B.2 EN-B.2 The CBB's Approach
EN-B.2.1
The CBB favours an open, pragmatic and collaborative relationship with
authorised persons , within the boundaries set by the CBB Law and Rulebook. Whilst the CBB wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective and timely enforcement of its requirements. Shouldauthorised persons fail to cooperate, then the CBB will use the means described in this Module to achieve compliance.Amended: January 2007EN-B.2.2
In the CBB's view, it is generally neither practical nor effective to prescribe in detail the exact regulatory response for each and every potential contravention. There are a large number of potential contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.
Amended: January 2007EN-B.2.3
In deciding any given supervisory response, the CBB will nonetheless consistently assess the individual circumstance of each contravention against the principles described in this Module. The CBB's overall approach is to take into account:
(a) The seriousness of the contravention concerned (including the risks posed to customers and other market participants);(b) The compliance track record of theauthorised person concerned (including the extent to which the contravention reflects systemic weaknesses or reckless behaviour); and(c) Which measures are most likely to achieve the desired result of remedying the contravention.Amended: January 2007EN-B.2.4
Such an approach reduces the risk of inappropriate enforcement actions, by allowing regulatory measures to be tailored to individual circumstances. By taking into account an
authorised person's compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the CBB also aims to achieve an overall consistency in its regulatory actions.Amended: January 2007EN-B.2.5
Underlying the CBB's approach outlined in paragraph EN-B.2.3 is the fundamental principle of proportionality. The enforcement measures contained in this Module are of varying severity, and will be used accordingly in keeping with the CBB's assessment of the contravention. Thus, the CBB will reserve its most serious enforcement measures — such as cancellation of license or withdrawal of "fit and proper" status — for the most serious contraventions.
Amended: January 2007EN-B.2.6
In keeping with the proportionality principle, and to the extent consistent with the CBB's enforcement approach in paragraph EN-B.2.3, the CBB will usually opt for the least severe of appropriate enforcement measures. In most cases, the CBB expects to use a Formal Warning before resorting to more severe measures; the need for further measures will then usually be dependent on the response of the
authorised person concerned.Amended: January 2007EN-B.2.7
Where a significant element of judgement is required to assess compliance with a requirement, the CBB will usually discuss the matter with the
authorised person concerned, before using one of this Module's enforcement mechanisms. This is likely to be the case, for example, with respect to requirements for adequate systems and controls. Conversely, where there are clear-cut contraventions of CBB requirements, then the CBB will usually move immediately to one or more of the enforcement mechanisms outlined in this Module. This is more likely to occur in cases where quantitative requirements — such as those relating to capital and/or large exposures — are concerned. In most such cases, though, the CBB also expects to continue an active dialogue with theauthorised person concerned, aimed at remedying the contravention.Amended: January 2007EN-B.2.8
Except in the limited circumstances outlined below, the CBB will usually only apply an enforcement measure after the
authorised person concerned has been given a suitable opportunity to make representations. In the case of measures described in Chapters EN-6 and EN-7, certain procedures are set out in the CBB Law.Amended: January 2007EN-B.2.9
In extreme circumstances, where the CBB believes that immediate action is required to prevent real damage to Bahrain's financial markets, its users or to
customers of the licensee concerned, it may amend or cancel a license, place a licensee under administration, or suspend a license (cf. Articles 48(g), 130(b) and 131 of the CBB Law).Added: April 2019EN-B.3 EN-B.3 Prohibition on Insurance
EN-B.3.1
To help the CBB achieve the purpose of this Module,
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 this Module.Amended: January 2007EN-B.4 EN-B.4 Publicity
EN-B.4.1
The CBB will not as a matter of general policy publicise individual cases when it uses the measures described in Chapters EN-2 to EN-5, and EN-8. However, in such cases the CBB may inform (where relevant) an
authorised person's external auditors and — in the case of licensees with overseas operations — relevant overseas regulators.Amended: January 2007EN-B.4.2
In exceptional circumstances, the CBB may decide to publicise individual cases when the measures set out in Chapters EN-2 to EN-5 and EN-8 are used, where there is a strong case that doing so would help achieve the CBB's supervisory objectives. In such instances, the CBB will usually allow the licensee or person concerned the opportunity to make representations to the CBB before a public statement is issued.
Amended: January 2007EN-B.4.3
Without prejudice to the above policy, the CBB may from time to time publish aggregate information on its use of enforcement measures, without identifying the licensees or persons concerned.
Amended: January 2007EN-B.4.4
By their nature, the penalties in Chapters EN-6, EN-7, and EN-9 are public acts, once applied. The CBB will in these instances generally issue a public statement explaining the circumstances of the case.
Amended: January 2007EN-B.4.5
Investment firm licensees subject to a CBB enforcement measure (with the exception of formal requests for information) must inform their external auditor of the fact.Amended: October 2012
Amended: January 2007EN-B.4.6
Investment firm licensees must disclose in their annual audited financial statements any financial penalties served on them, together with a factual description of the reasons given by the Central Bank for applying the penalty. In addition, the CBB may publicise the issuance of a financial penalty notice, where there is a strong case that doing so would help achieve the CBB's supervisory objectives, as mentioned in Article 132 of the pre-mentioned Law.Added: October 2019
