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  • Chapter BR-2 Chapter BR-2 Notifications and Approvals

    • BR-2.1 BR-2.1 Introduction

      • BR-2.1.1

        All notifications and approvals required in this Chapter are to be submitted by investment firm licensees in writing.

        Adopted: July 2007

      • BR-2.1.2

        In this Module, the term 'in writing' includes electronic communication capable of being reproduced in paper form.

        Adopted: July 2007

      • BR-2.1.3

        An investment firm licensee must make the notifications and approvals required in Chapter BR-2 immediately it becomes aware, or has information which reasonably suggests, that any of the matters in Chapter BR-2 have occurred, may have occurred or may occur in the near future.

        Amended: October 2009
        Adopted: July 2007

      • BR-2.1.4

        The requirements imposed on investment firm licensees under this Chapter apply whether the event relates to a matter that has occurred in Bahrain or in any other jurisdiction.

        Adopted: July 2007

      • BR-2.1.5

        Investment firm licensees are required to provide the CBB with a range of information to enable it to monitor the investment firm licensee's compliance with Volume 4 of the CBB Rulebook. Some of this information is provided through regular reports, whereas others are in response to the occurrence of a particular event (such as a change in name or address). The following lists the commonly occurring reports for which an investment firm licensee will be required to notify the CBB or seek its approval.

        Adopted: July 2007

    • BR-2.2 BR-2.2 Notification Requirements

      • Matters Having a Serious Supervisory Impact

        • BR-2.2.1

          An investment firm licensee must notify the CBB if any of the following has occurred, may have occurred or may occur in the near future:

          (a) The investment firm licensee failing to satisfy one or more of the Principles of Business referred to in Module PB;
          (b) Any matter which could have a significant adverse impact on the investment firm licensee's reputation;
          (c) Any matter which could affect the investment firm licensee's ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of the investment firm licensee; or
          (d) Any matter in respect of the investment firm licensee that could result in material financial consequences to the financial system or to other investment firm licensees.
          (e) Any breach of any provision of the Rulebook (including a Principle);
          (f) A breach of any requirement imposed by the relevant law or by regulations or an order made under any relevant law by the CBB; or
          (g) If an investment firm licensee becomes aware, or has information that reasonably suggests that it has or may have provided the CBB with information that was or may have been false, misleading, incomplete or inaccurate, or has or may have changed in a material way, it must notify the CBB immediately (ref. BR-3.3.2).
          Amended: July 2010
          Amended: October 2009
          Adopted: July 2007

        • BR-2.2.2

          The circumstances that may give rise to any of the events in Paragraph BR-2.2.1 are wide-ranging and the probability of any matter resulting in such an outcome, and the severity of the outcome, may be difficult to determine. However, the CBB expects investment firm licensees to consider properly all potential consequences of events.

          Adopted: July 2007

        • BR-2.2.3

          In determining whether an event that may occur in the near future should be notified to the CBB, an investment firm licensee should consider both the probability of the event happening and the severity of the outcome should it happen. Matters having a supervisory impact could also include matters relating to a parent undertaking or controller that may indirectly have an effect on the investment firm licensee.

          Adopted: July 2007

        • BR-2.2.4 [Deleted]

          Deleted: October 2009

      • Legal, Professional, Administrative or other Proceedings Against an Investment Firm Licensee

        • BR-2.2.4

          An investment firm licensee must notify the CBB immediately of any legal, professional or administrative or other proceedings instituted against the investment firm licensee, controller or a close link including a parent undertaking of the investment firm licensee that is known to the investment firm licensee and is significant in relation to the investment firm licensee's financial resources or its reputation.

          Amended: October 2009
          Adopted: July 2007

        • BR-2.2.5

          An investment firm licensee must notify the CBB of the bringing of a prosecution for, or conviction of, any offence under any relevant law against the investment firm licensee that would prevent the investment firm licensee from meeting the Principles or Business (Module PB) or any of its Directors, officers or approved persons from meeting the fit and proper requirements of Module AU.

          Amended: October 2013
          Adopted: October 2009

      • Fraud, Errors and other Irregularities

        • BR-2.2.6

          An investment firm licensee must notify its supervisory point of contact, and in cases of fraud the Compliance Directorate at the CBB immediately if one of the following events arises and the event is significant:

          (a) It becomes aware that an employee may have committed a fraud against one of its customers;
          (b) It becomes aware that a person, whether or not employed by it, is acting with intent to commit fraud against it;
          (c) It identifies irregularities in its accounting or other records, whether or not there is evidence of fraud;
          (d) It suspects that one of its employees may be guilty of serious misconduct concerning his honesty or integrity and which is connected with the investment firm licensee's regulated or ancillary activities; or
          (e) Significant conflicts of interest.
          Amended: April 2016
          Amended: October 2009
          Adopted: July 2007

      • Meaning of the Term "significant"

        • BR-2.2.7

          For the purposes of this chapter, in determining whether a matter is significant, an investment firm licensee should have regard to:

          (a) The size of any monetary loss or potential monetary loss to itself or its customers (either in terms of a single incident or group of similar or related incidents);
          (b) The risk of reputational loss to the investment firm licensee; and
          (c) Whether the incident or a pattern of incidents reflects weaknesses in the investment firm licensee's internal controls.
          Adopted: July 2007

        • BR-2.2.8

          In addition, if the investment firm licensee may have suffered significant financial losses as a result of the incident, or may suffer reputational loss, the CBB will wish to consider this and whether the incident suggests weaknesses in the investment firm licensee's internal controls.

          Adopted: July 2007

      • Insolvency, Bankruptcy and Winding Up

        • BR-2.2.9

          Except in instances where the CBB has initiated the following actions, an investment firm licensee must notify the CBB immediately of any of the following events:

          (a) The calling of a meeting to consider a resolution for winding up the investment firm licensee, a controller or close link, including a parent undertaking of the investment firm licensee;
          (b) An application to dissolve a controller or close link, including a parent undertaking of the investment firm licensee or to strike the investment firm licensee off the Register of Investment Business Companies;
          (c) The presentation of a petition for the winding up of a controller or close link, including a parent undertaking of the investment firm licensee;
          (d) The making of any proposals, or the making of, a composition or arrangement with any one or more of the investment firm licensee's creditors, for material amounts of debt;
          (e) An application for the appointment of an administrator or trustee in bankruptcy to a controller or close link, including a parent undertaking of the investment firm licensee;
          (f) The appointment of a receiver to a controller or close link, including a parent undertaking of the investment firm licensee (whether an administrative receiver or a receiver appointed over particular property); or
          (g) An application for an interim order against the investment firm licensee, a controller or close link, including a parent undertaking of the investment firm licensee under the Bankruptcy and Composition Law of 1987 or similar legislation in another jurisdiction.
          Amended: January 2011
          Amended: October 2009
          Adopted: July 2007

      • Other Supervisors

        • BR-2.2.10

          An investment firm licensee must notify the CBB immediately if it becomes subject to or ceases to be subject to the supervision of any overseas supervisor (including a home supervisor).

          Adopted: July 2007

        • BR-2.2.11

          The supervisory regime and any legislative or foreign provisions to which that investment firm licensee, including its branches, is subject, influence the CBB's approach to the supervision of the investment firm licensee.

          Adopted: July 2007

      • Carrying out Business in Another Jurisdiction

        • BR-2.2.12

          Where another jurisdiction's laws or regulations prevent a licensee (or any of its foreign branches or subsidiaries) from applying the same standards contained in Module FC (Financial Crime) or higher, the licensee must immediately inform the CBB in writing (ref. FC-B.2.2).

          Amended: October 2009
          Adopted: July 2007

        • BR-2.2.13

          Where conduct of business standards applied by overseas branches and subsidiaries of an investment firm licensee fall below the standards set out in Module BC (Business Conduct), the investment firm licensee must notify the CBB of the fact (ref. BC-B. 1.5).

          Amended: October 2009
          Adopted: July 2007

        • BR-2.2.14

          Where client asset rules applied by overseas branches and subsidiaries of an investment firm licensee fall below the standards set out in Module CL (Client Assets), the investment firm licensee must notify the CBB of the fact (ref. CL-B.2.2).

          Amended: October 2009
          Adopted: July 2007

      • External Auditor

        • BR-2.2.15

          An investment firm licensee must notify the CBB of the following:

          (a) Removal or resignation of auditor (ref. AA-1.2.1); or
          (b) Change in audit partner (ref. AA-1.3.2).
          Amended: October 2009
          Adopted: July 2007

      • Approved Persons

        • BR-2.2.16

          An investment firm licensee must notify the CBB of the termination of employment of approved persons, including particulars of reasons for the termination and arrangements with regard to replacement (ref. AU-5.2.8 and AU-5.5.5).

          Amended: January 2016
          Amended: October 2009
          Adopted: July 2007

      • Capital Adequacy

        • BR-2.2.17

          In the event that an investment firm licensee fails to meet any of the requirements specified in Module CA (Capital Adequacy), it must, on becoming aware that it has breached the requirements, immediately notify the CBB in writing (ref. CA-1.1.5).

          Amended: April 2017
          Adopted: October 2009

        • BR-2.2.18

          Category 1 investment firms and Category 2 investment firms must notify the CBB if:

          (a) The ratio of Regulatory Capital to their Regulatory Capital Requirement falls below 110%;
          (b) Any single probable contingency, financial commitment or large exposure exceeds 25% of their Regulatory Capital; and
          (c) Any instrument, transaction or situation does not appear to be catered for under Module CA (ref. CA-1.2.9).
          Amended: July 2012
          Adopted: October 2009

        • BR-2.2.19

          An investment firm licensee shall notify the CBB if it has counterparty exposures in repurchase and reverse repo transactions, including sale and buy back and securities lending (ref. CA-3.3.1). This requirement is applicable to Category 1 investment firms and Category 2 investment firm licensees only.

          Amended: July 2012
          Adopted: October 2009

        • BR-2.2.20

          An investment firm licensee shall notify the CBB if it has counterparty exposures in swaps, forward contracts, over the counter options, contracts for differences and off-exchange futures (ref. CA-3.3.1). This requirement is applicable to Category 1 investment firms and Category 2 investment firm licensees only.

          Amended: July 2012
          Adopted: October 2009

        • BR-2.2.21

          As specified in Article 58 of the CBB Law, an investment firm licensee must notify the CBB immediately of any matter that may affect its financial position, currently or in the future, or limit its ability to meet its obligations.

          Adopted: October 2009

      • Outsourcing Arrangements

        • BR-2.2.22

          Investment firm licensees must immediately inform their direct supervisory contact at the CBB of any material problems encountered with an outsourcing provider.

          Amended: January 2023
          Amended: January 2016
          Amended: January 2011
          Adopted: October 2009

      • Controllers

        • BR-2.2.23

          If, as a result of circumstances outside the Bahraini investment firm licensee's knowledge and/or control, one of the changes to their controllers 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 occurred (ref. GR-5.1.5).

          Amended: January 2017
          Amended: October 2015
          Adopted: October 2009

        • BR-2.2.23A

          Overseas investment firm licensees 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 GR-5.5.1).

          Adopted: October 2015

        • BR-2.2.24

          As specified in Article 52 of the CBB Law, an investment firm licensee must notify the CBB of the following events:

          (a) If effective control over a licensee takes place indirectly whetherby way of inheritance or otherwise.
          (b) Gaining control directly as a result of any action leading to it.
          (c) The intention to take any of the actions that would lead to control.
          Adopted: October 2009

      • Registered Address

        • BR-2.2.25

          An investment firm licensee must notify the CBB of a change in the address of its registered office (or its head office in the case of a branch of an overseas investment firm licensee).

          Adopted: October 2009

      • Appointed Representatives

        • BR-2.2.26

          [This Paragraph was deleted in October 2013]

          Deleted: October 2013

      • Business Strategy

        • BR-2.2.27

          Bahraini investment firm licensees must notify the CBB when there is a major change to its strategy by introducing a new line of business within the scope of its existing licensed activities.

          Added: July 2023

    • BR-2.3 BR-2.3 Approval Requirements

      • Change in Name

        • BR-2.3.1

          In accordance with Paragraph GR-2.1.1, an investment firm licensee must seek prior written approval from the CBB and give reasonable advance notice of a change in:

          (a) The investment firm licensee's name (which is the registered name if the investment firm licensee is a body corporate); or
          (b) The investment firm licensee's trade name, and that of its subsidiaries located in Bahrain (ref. GR-2.1.1).
          Amended: October 2009
          Adopted: July 2007

        • BR-2.3.2

          The request under Paragraph BR-2.3.1 must include the details of the proposed new name and the date on which the investment firm licensee intends to implement the change of name.

          Adopted: July 2007

      • Change of Address

        • BR-2.3.3

          As specified in Article 51 of the CBB Law, an investment firm licensee must seek approval from the CBB and give reasonable advance notice of a change in the address of the investment firm licensee's principal place of business in Bahrain.

          Amended: October 2009
          Adopted: July 2007

        • BR-2.3.4

          The request under Paragraph BR-2.3.3 must include the details of the proposed new address and the date on which the investment firm licensee intends to implement the change of address.

          Adopted: July 2007

        • BR-2.3.5

          As specified in Article 51 of the CBB Law, an investment firm licensee must seek approval from the CBB for its intention to carry on its business from new premises in Bahrain. This requirement applies whether or not the premises are to be used for the purposes of transacting business with customers, administration of the business or as the head office in Bahrain of the investment firm licensee.

          Amended: January 2011
          Adopted: October 2009

        • BR-2.3.6

          [This Paragraph was deleted in October 2013]

          Deleted: October 2013

      • Change in Legal Status

        • BR-2.3.7

          An investment firm licensee must seek CBB approval and give reasonable advance notice of a change in its legal status that may, in any way, affect its relationship with or limit its liability to its customers.

          Amended: October 2009
          Adopted: July 2007

      • Change in Authorised or Issued Capital

        • BR-2.3.8

          As specified in Article 57(3) of the CBB Law, an investment firm licensee must seek CBB approval before making any modification to its authorised or issued capital. In the case that an investment firm licensee has been granted approval to increase its paid-up capital, confirmation from the external auditor stating that the amount has been deposited in the licensee's bank account or otherwise reflected in the licensee's accounts will subsequently be required.

          Amended: January 2011
          Adopted: October 2009

      • Client Asset Transfers

        • BR-2.3.9

          In accordance with Chapter GR-4, investment firm licensees must seek prior written approval from the CBB before transferring client assets to a third party, in circumstances other than when acting on instruction from the client concerned. This requirement is applicable to Category 1 investment firm and Category 2 investment firm licensees only.

          Amended: July 2012
          Amended: October 2009
          Adopted: July 2007

      • Controllers and Close Links

        • BR-2.3.10

          In accordance with Chapter GR-5, Bahraini investment firm licensees must seek CBB approval and give reasonable advance notice of any of the following events concerning the investment firm licensee:

          (a) A person acquiring control or ceasing to have control;
          (b) An existing controller acquiring an additional type of control (such as ownership or significant influence) or ceasing to have a type of control;
          (c) An existing controller increasing his or her percentage in the issued and paid up capital or voting power beyond 10%, 20%, 30% or 40%; and
          (d) An existing controller becoming or ceasing to be a parent undertaking.
          Amended: October 2015
          Amended: October 2009
          Adopted: July 2007

        • BR-2.3.11

          Every investment firm licensee authorised in Bahrain is required to submit an annual report on its controllers, as per Paragraphs GR-5.1.8 and GR-5.5.3, and close links as set out in Paragraph GR-6.1.3.

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

      • Carrying out Business in Another Jurisdiction

        • BR-2.3.12

          An investment firm licensee must seek CBB approval and give three months' notice of its intention to undertake investment business activities in a jurisdiction other than Bahrain prior to commencing that business and where the effect of commencing that business may have a significant impact on:

          (a) The investment firm licensee's business in Bahrain; or
          (b) The capital resources of the investment firm licensee.
          Amended: January 2020
          Amended: January 2011
          Amended: October 2009
          Adopted: July 2007

        • BR-2.3.13

          Rule BR-2.3.12 applies whether or not the investment firm licensee is required to be regulated locally in the jurisdiction where it proposes to undertake the investment business.

          Amended: July 2010
          Amended: October 2009
          Adopted: July 2007

        • BR-2.3.14

          The CBB will use this information to consider whether or not it should refuse its approval or impose additional requirements on the licensee.

          Amended: October 2009
          Adopted: July 2007

      • Mergers, Acquisitions, Disposals and Establishment of New Subsidiaries

        • BR-2.3.15

          A Bahraini investment firm licensee incorporated in Bahrain must seek CBB approval and give reasonable advance notice of its intention to:

          (a) Enter into a merger with another undertaking;
          (b) Enter into a proposed acquisition, disposal or establishment of a new subsidiary undertaking; or
          (c) Open a new place of business as a subsidiary undertaking, a branch or a representative office within the Kingdom of Bahrain or other jurisdiction.
          Amended: January 2020
          Amended: April 2011
          Amended: October 2009
          Adopted: July 2007

        • BR-2.3.16

          In order to comply with requirements of Paragraph BR-2.3.15, investment firm licensees should refer to the requirements of Chapter GR-10.

          Amended: April 2011
          Amended: October 2009
          Adopted: July 2007

        • BR-2.3.17

          [This Paragraph was moved to GR-10.1.5].

          Amended: April 2011
          Amended: October 2009
          Adopted: July 2007

      • Share Option Schemes

        • BR-2.3.18

          An investment firm licensee must seek prior approval from the CBB for any share option schemes it proposes to offer to its employees.

          Amended: January 2011
          Amended: October 2009
          Adopted: July 2007

      • BR-2.3.16 [Deleted]

        Deleted: October 2009

      • Outsourcing Arrangements

        • BR-2.3.19

          [This Paragraph was deleted in January 2023].

          Deleted: January 2023
          Amended: April 2013
          Adopted: October 2009

      • Matters Having a Serious Supervisory Impact

        • BR-2.3.20

          An investment firm licensee must seek prior approval from the CBB for any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs after authorisation has been granted.

          Adopted: October 2009

        • BR-2.3.21

          Any licensee that wishes, intends or has been requested to do anything that might contravene, in its reasonable opinion, the provisions of UNSCR 1373 (and in particular Article 1, Paragraphs c) and d) of UNSCR 1373) must seek, in writing, the prior written opinion of the CBB on the matter (ref. FC-7.2.2).

          Adopted: October 2009

        • BR-2.3.22

          As specified in Article 57 of the CBB Law, an investment firm licensee wishing to modify its Memorandum or Articles of Association, must obtain prior written approval from the CBB.

          Adopted: October 2009

        • BR-2.3.23

          As specified in Article 57 of the CBB Law, an investment firm licensee wishing to transfer all or a major part of its assets or liabilities inside or outside the Kingdom, must obtain prior written approval from the CBB.

          Adopted: October 2009

      • Capital Adequacy

        • BR-2.3.24

          Bahraini investment firm licensees, must obtain a letter of no-objection from the CBB to any dividend proposed, before submitting a proposal for a distribution of profits to a shareholder vote (ref. GR-3.1.1). This requirement is applicable to Category 1 investment firm and Category 2 investment firm licensees only.

          Amended: July 2012
          Adopted: October 2009

        • BR-2.3.25

          An investment firm licensee must not redeem any Tier 1 instrument that it has included in its Regulatory Capital for the purpose of satisfying its Regulatory Capital Requirement without the prior written approval of the CBB (ref. CA-2.1.7).

          Adopted: October 2009

        • BR-2.3.26

          No value, for Regulatory Capital purposes, may be attributed to any other instrument or resource, without the CBB's written consent (ref. CA-2.1.12).

          Adopted: October 2009

        • BR-2.3.27

          Exceptional items of expenditure may also be excluded from relevant annual expenditure, as defined in Rule CA-3.1.2, subject to prior CBB written approval (ref. CA-3.1.2). This requirement is applicable to Category 1 investment firm and Category 2 investment firm licensees only.

          Amended: July 2012
          Adopted: October 2009

        • BR-2.3.27A

          Should an investment firm licensee need to inject additional working capital and does so by way of a subordinated loan from its shareholders, it must receive CBB's prior approval to do so (ref. CA-1.1.5A).

          Adopted: July 2012

        • BR-2.3.27B

          Investment firm licensees must seek the CBB's prior written approval before settling a subordinated loan made by its shareholders, either fully or partially, prior to the end of its term (see Paragraph CA-1.1.5A).

          Added: January 2013

      • Licensed Regulated Services

        • BR-2.3.28

          Investment firm licensees must seek prior CBB approval before undertaking new activities (ref. Article 48 of the CBB Law and AU-5.4.1).

          Adopted: October 2009

        • BR-2.3.29

          As specified in Article 50 of the CBB Law, an investment firm licensee wishing to cease to provide all or any of its licensed regulated services, completely or at any of its branches, must obtain prior written approval from the CBB (ref. AU-5.5.1 and Section GR-7.1).

          Amended: July 2010
          Adopted: October 2009

        • BR-2.3.30

          Investment firm licensees must seek prior CBB approval before starting to undertake derivative transactions (ref. RM-6.1.1). This requirement is applicable to Category 1 investment firm and Category 2 investment firm licensees only.

          Amended: July 2012
          Adopted: October 2009

        • BR-2.3.31

          An investment firm licensee must not undertake or otherwise engage in stock lending activity with or for a client unless the investment firm licensee has obtained the consent of the CBB and the client (ref. CL-1.2.1). This requirement is applicable to Category 1 investment firm and Category 2 investment firm licensees only.

          Amended: July 2012
          Adopted: October 2009

      • Private Placement of Securities

        • BR-2.3.32

          All Private Placement Memorandums (PPMs) relating to the issue of financial instruments by investment firm licensees, with the exception of those made under Collective Investment Undertakings arrangements (which are covered under Volume 7 (CIU) of the CBB Rulebook), must obtain the CBB's prior approval before distributing the offering document. This requirement is applicable to Category 1 investment firm and Category 2 investment firm licensees only.

          Amended: October 2012
          Amended: July 2012
          Adopted: October 2009

        • BR-2.3.33

          Investment firm licensees are required to obtain the approval required under Rule BR-2.3.32 above from the Capital Markets Supervision Directorate at the CBB and simultaneously notify the Financial Institutions Supervision Directorate of the same. The request must be supported by a draft proposal for private placements and addressed to the Director of Capital Markets Supervision Directorate and must be in line with the requirements of Module OFS (Offering of Securities) under Volume 6 of the CBB Rulebook.

          Amended: October 2014
          Amended: January 2012
          Adopted: October 2009

      • External Auditor

        • BR-2.3.34

          An investment firm licensee must seek prior approval from the CBB for the appointment or re-appointment of its external auditor (ref. AU-2.7.1 and AA-1.1.1).

          Adopted: October 2009

      • Approved Persons

        • BR-2.3.35

          An investment firm licensee must seek prior approval from the CBB for the appointment of persons undertaking a controlled function in an investment firm licensee (ref. Article 65 of the CBB Law, AU-1.2 and AU-5.2.1).

          Adopted: October 2009

        • BR-2.3.36

          Investment firm licensees must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee (ref. AU-5.4.5).

          Adopted: October 2009

        • BR-2.3.37

          If a controlled function falls vacant, an investment firm licensee making immediate interim arrangements for the controlled function affected, must obtain approval from the CBB for such arrangement (ref. AU-5.5.5).

          Adopted: October 2009