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  • 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