Executive Summary

Retaining Authorised Status

Legal Basis

Evolution of Module

AU-B.1.1

The content of this Module applies to all administrators licensees authorised in the Kingdom of Bahrain, thereafter referred to in this Module as licensees.

AU-B.1.2

Two types of authorisation are prescribed:

AU-B.2.1

Various requirements in Chapters AU-2 to AU-3 inclusive also apply to persons once they have been authorised by the CBB (whether as licensees or approved persons).

AU-B.2.2

Chapter AU-2 applies to licensees (not just applicants), since licensing conditions have to be met on a continuous basis by licensees. Similarly, Chapter AU-3 applies to approved persons on a continuous basis; it also applies to licensees seeking an approved person authorisation. Chapter AU-4 contains requirements applicable to licensees, with respect to the starting up of their operations, as well as to licensees and approved persons, with respect to the amendment or cancellation of their authorised status. Finally, Section AU-5.2 imposes annual fees on licensees.

AU-1.1.1

No person may:

AU-1.1.2

For the purposes of Rule AU-1.1.1(a), please refer to Paragraphs AU-1.1.11 and AU-1.1.12 for the definition of 'regulated administration services' and Paragraph AU-1.1.13 for the definition of 'by way of business'. Such activities will be deemed to be undertaken within or from the Kingdom of Bahrain if, for example, the person concerned:

AU-1.1.3

For the purposes of Rule AU-1.1.1(b), persons would be considered in breach of this requirement if they were to trade as, or incorporate a company in Bahrain with a name containing the words (or the equivalents in any language) 'fund administration', without holding the appropriate CBB license or the prior approval of the CBB.

AU-1.1.3A

In accordance with Resolution No.(16) for the year 2012 and for the purpose of Subparagraph AU-1.1.1(c), the word market refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial services in return for monetary payment or some other form of valuable consideration.

AU-1.1.3B

Persons in breach of Subparagraph AU-1.1.1(c) are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law (see also Section EN-9.3).

AU-1.1.4

Where a person is licensed under Volumes 1 or 2, i.e. as a bank, or under Volume 4 as a Category 1 or Category 2 investment firm licensee, then a separate license under Volume 5 is not required in order to undertake activities of the kind specified under Paragraph AU-1.1.11, subject to the licensee meeting all the requirements of Volumes 1, 2 or 4.

AU-1.1.5

Persons licensed by the CBB may also undertake the specific activities covered by the definition of regulated administration services, since these specific activities also form part of the definition of regulated banking services (or regulated Islamic banking services in the case of Islamic banks) or regulated investment services. In such cases, licensees are not required to hold a separate administrators license.

AU-1.1.6

Persons wishing to be licensed to undertake regulated administration services within or from the Kingdom of Bahrain must apply in writing to the CBB.

AU-1.1.7

An application for a license must be in the form prescribed by the CBB and must contain, inter alia:

AU-1.1.8

The CBB will review the application and duly advise the applicant in writing when it has:

AU-1.1.9

Detailed rules and guidance regarding information requirements and processes for licenses can be found in Section AU-5.1. As specified in Paragraph AU-5.1.12, the CBB will provide a formal decision on a license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB.

AU-1.1.10

All applicants seeking an administrator license must satisfy the CBB that they meet, by the date of authorisation, the minimum criteria for licensing, as contained in Chapter AU-2. Once licensed, fund administration licensees must maintain these criteria on an on-going basis.

AU-1.1.11

For the purposes of Volume 5 (Specialised Licensees), regulated administration services, in relation to financial instruments administered by the fund administrator, include:

AU-1.1.12

For the purposes of Volume 5 (Specialised Licensees), regulated administration services, in relation to a registrar, include:

AU-1.1.13

For the purposes of Volume 5 (Specialised Licensees), carrying on a regulated administration services by way of business means:

General Requirement

Basis for Approval

Definitions

AU-2.1.1

The legal status of a licensee must be:

AU-2.2.1

Licensees with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom and must conduct their business from their Head Office.

AU-2.2.2

In assessing the location of a licensee's Head Office, the CBB will take into account the residency of its Directors and senior management. The CBB requires the majority of key decision makers in executive management — including the Chief Executive - to be resident in Bahrain.

AU-2.3.1

Licensees must satisfy the CBB that their controllers are suitable and pose no undue risks to the licensee. Licensees must also satisfy the CBB that their close links do not prevent the effective supervision of the licensee by the CBB and otherwise pose no undue risks to the licensee.

AU-2.4.1

In accordance with Article 65(a) of the CBB law, those nominated to carry out controlled functions must satisfy CBB's approved person's requirements.

AU-2.4.2

The definition of controlled functions is contained in Paragraph AU-1.2.2, whilst Chapter AU-3 sets out CBB's approved persons requirements. Applications for approved person status must be submitted using the prescribed approved persons form.

AU-2.4.3

The licensee's staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licensee in a sound and prudent manner. Licensees must ensure their employees meet any training and competency requirements specified by the CBB.

AU-2.4.4

[This Paragraph was deleted in January 2016.]

AU-2.5.1

Licensees must maintain a level of financial resources, as agreed with the CBB, adequate for the level of business proposed. The level of financial resources held must exceed at all times the minimum requirements contained in Module CA (Capital Adequacy).

AU-2.6.1

Licensees must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities.

AU-2.6.2

Licensees must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. Such segregation should ensure that no single individual has control over all stages of a transaction.

AU-2.6.3

Licensees must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of financial crime occurring in the licensee. These systems and controls must meet the minimum requirements contained in Module FC (Financial Crime), as specified for the license held.

AU-2.6.4

As part of the licensing approval process, applicants must demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may also be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB.

AU-2.7.1

Licensees must appoint an external auditor, subject to prior CBB approval. The minimum requirements regarding external auditors contained in Module AA (Auditors and Accounting Standards) must be met.

Books and Records

Provision of Information

General Conduct

License Fees

Additional Conditions

AU-3.1.1

Licensees seeking an approved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled function in question.

AU-3.1.2

The authorisation requirement for persons nominated to carry out controlled functions is contained in Section AU-1.2. The authorisation process is described in Section AU-4.2.

AU-3.1.3

Each applicant applying for approved person status and those individuals occupying approved person positions must comply with the following conditions:

AU-3.1.4

In assessing the conditions prescribed in Rule AU-3.1.3, the CBB will take into account the criteria contained in Paragraph AU-3.1.5. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled function but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled function in one licensee may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger licensee.

AU-3.1.5

In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

AU-3.1.6

With respect to Paragraph AU-3.1.5, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

AU-3.1.7

Approved persons undertaking a controlled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid conflicts of interest arising whilst undertaking a controlled function.

AU-3.1.8

In determining where there may be a conflict of interest arising, factors that may be considered will include whether:

AU-3.1.9

Further guidance on the process for assessing a person's 'fit and proper' status is given in Module EN (Enforcement): see Chapter EN-8.

AU-3.2.1

[This Paragraph was deleted in January 2016.]

AU-3.2.2

[This Paragraph was deleted in January 2016.]

AU-3.2.3

[This Paragraph was moved to Paragraph AU-3.1.9 in January 2016.]

Application Form and Documents

Licensing Process and Timelines

Granting or Refusal of License

Starting Operations

Prior Approval Requirements and Process

Assessment of Application

Appeal Process

Notification Requirements and Process

Change in Controlled Function

Voluntary Surrender of a License or Closure of a Branch

Cancellation of a License by the CBB

Cancellation of Approved Person Status

AU-4.4.1

In accordance with Articles 47 and 49 of the CBB Law, the CBB will publish its decision to grant, cancel or amend a license in the Official Gazette and in two local newspapers, one in Arabic and the other in English.

AU-4.4.2

For the purposes of Paragraph AU-4.4.1, the cost of publication must be borne by the Licensee.

AU-4.4.3

The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

AU-5.1.1

Applicants seeking an administrator license from the CBB must pay a non-refundable license application fee of BD 100 at the time of submitting their formal application to the CBB.

AU-5.1.2

There are no application fees for those seeking approved person status.

AU-5.2.1

Licensees must pay a flat annual license fee of BD500 to the CBB, on 1st December of the preceding year for which the fee is due.

AU-5.2.2

For new licensees, their first annual license fee is payable when their license is issued by the CBB. The amount payable is the flat amount specified for their type of license.

AU-5.2.3

Where a license is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question.

AU-5.2.4

[This Paragraph was deleted in July 2013].

AU-5.2.5

All licensees are subject to direct debit for the payment of the annual fee and must complete and submit to the CBB a Direct Debit Authorisation Form by 15th September available under Part B of Volume 5 (Specialised Licensees) CBB Rulebook on the CBB Website.

AU-5.2.6

Licensees failing to comply with this Section may be subject to financial penalties for date sensitive requirements as outlined in Section EN-5.3A or may have their licenses withdrawn by the CBB.

Executive Summary

Structure of this Module

The Comply or Explain Principle

Monitoring and Enforcement of Module HC

Legal Basis

Evolution of the Module

HC-B.1.1

The content of this Module applies to all administrator licensees authorised in the Kingdom of Bahrain, thereafter referred to in this Module as licensees.

HC-1.1.1

All licensees must be headed by an effective, collegial and informed Board of Directors ('the Board').

HC-1.2.1

All directors must understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:

HC-1.2.2

The Board's role and responsibilities include but are not limited to:

HC-1.2.3

When a new director is inducted, the chairman of the Board, assisted by company legal counsel or compliance officer, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC.

HC-1.2.4

The licensee should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

HC-1.2.5

The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.

HC-1.3.1

The Board should have no more than 15 members, and should regularly review its size and composition to assure that it is small enough for efficient decision-making yet large enough to have members who can contribute from different specialties and viewpoints. The Board should recommend changes in Board size to the shareholders when a needed change requires amendment of the licensee's Memorandum of Association.

HC-1.3.2

Potential non-executive directors should be made aware of their duties before their nomination, particularly as to the time commitment required. The Board should regularly review the time commitment required from each non-executive director and should require each non-executive director to inform the Board before he accepts any Board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board should not propose the election or reelection of any director who does.

HC-1.4.1

The Board should be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.

HC-1.4.2

The chairman should take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.

HC-1.4.3

The Board must meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.

HC-1.4.4

Individual board members must attend at least 75% of all Board meetings in a given financial year to enable the Board to discharge its responsibilities effectively (see table below). Voting and attendance proxies for Board meetings are prohibited at all times.

HC-1.4.5

The absence of Board members at Board and committee meetings must be noted in the meeting minutes. In addition, Board attendance percentage must be reported during any general assembly meeting when board members stand for re-election (e.g. Board member XYZ attended 95% of scheduled meetings this year).

HC-1.4.6

In the event that a Board member has not attended at least 75% of Board meetings in any given financial year, the licensee must immediately notify the CBB indicating which member has failed to satisfy this requirement, his level of attendance and any mitigating circumstances affecting his non-attendance. The CBB shall then consider the matter and determine whether disciplinary action, including disqualification of that Board member pursuant to Article 65 of the CBB Law, is appropriate. Unless there are exceptional circumstances, it is likely that the CBB will take disciplinary action.

HC-1.4.7

The chairman should ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors should receive the same Board information. At the same time, directors have a legal duty to inform themselves and they should ensure that they receive adequate and timely information and should study it carefully.

HC-1.5.1

The Board should encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.

HC-1.5.2

Non-executive directors should have free access to the licensee's management beyond that provided in Board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The Board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.

HC-2.1.1

The approved persons must have full loyalty to the licensee.

HC-2.2.1

Each member of the board should understand that under the Company Law he is personally accountable to the licensee and the shareholders if he violates his legal duty of loyalty to the licensee, and that he can be personally sued by the licensee or the shareholders for such violations.

HC-2.2.2

The duty of loyalty includes a duty not to use property of the licensee for his personal needs as though it was his own property, not to disclose confidential information of the licensee or use it for his personal profit, not to take business opportunities of the licensee for himself, not to compete in business with the licensee, and to serve the licensee's interest in any transactions with the company in which he has a personal interest.

HC-2.2.3

For purposes of Paragraph HC-2.2.2, an approved person is considered to have a "personal interest" in a transaction with the company if:

is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)

HC-2.3.1

Each approved person should make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the licensee.

HC-2.4.1

Each approved person must inform the entire Board of conflicts of interest as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure must include all material facts in the case of a contract or transaction involving the approved person. The approved persons should understand that any approval of a conflict transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.

HC-2.4.2

The Board must establish formal procedures for:

HC-3.1.1.

The Board must have rigorous controls for financial audit and reporting, internal control, and compliance with law.

HC-3.2.1

To encourage management accountability for the financial statements required by the directors, the licensee's CEO and chief financial officer must state in writing to the Board that the licensee's interim and annual financial statements present a true and fair view, in all material respects, of the licensee's financial condition and results of operations in accordance with applicable accounting standards.

HC-4.1.1.

The licensee should have rigorous procedures for appointment, training and evaluation of the Board.

HC-4.2.1

The chairman of the Board should ensure that each new director receives a formal and tailored induction to ensure his contribution to the Board from the beginning of his term. The induction should include meetings with senior management, visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programs, its internal and external auditors and legal counsel.

HC-4.2.2

All continuing directors should be invited to attend orientation meetings and all directors should continually educate themselves as to the licensee's business and corporate governance.

HC-4.2.3

Management, in consultation with the chairman of the Board, should hold programs and presentations to directors respecting the licensee's business and industry, which may include periodic attendance at conferences and management meetings. The Board shall oversee directors' corporate governance educational activities.

HC-5.1.1

The Board should establish a clear and efficient management structure.

HC-5.2.1

The Board should appoint senior management whose authority must include management and operation of current activities of the licensee, reporting to and under the direction of the Board. The senior managers should include at a minimum:

and should also include such other approved persons as the Board considers appropriate and as a minimum must include persons occupying controlled functions as outlined in Paragraph AU-1.2.2.

HC-5.3.1

The Board should adopt by-laws prescribing each senior manager's title, authorities, duties and internal reporting responsibilities. This should be done in consultation with the CEO, to whom the other senior managers should normally report.

HC-5.3.2

These provisions should include but should not be limited to the following:

HC-5.3.3

The Board should also specify any limits which it wishes to set on the authority of the CEO or other senior managers, such as monetary maximums for transactions which they may authorise without separate Board approval.

HC-5.3.4

The corporate secretary should be given general responsibility for reviewing the licensee's procedures and advising the Board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training

HC-5.3.5

At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEO, both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEO.

Executive Summary

Legal Basis

Evolution of Module

GR-B.1.1

The requirements in Module GR (General Requirements) apply to all administrators licensees authorised in the Kingdom of Bahrain, thereafter referred to in this Module as licensees.

GR-C.1.1

Administrators licensees must ensure that all regulated financial services are provided without any discrimination based on gender, nationality, origin, language, faith, religion, physical ability or social standing.

GR-1.1.1

In accordance with Articles 59 of the CBB Law, all licensees must maintain books and records (whether in electronic or hard copy form) sufficient to produce financial statements and show a complete record of the business undertaken by a licensee. These records must be retained for at least ten years according to Article 60 of the CBB Law.

GR-1.1.2

GR-1.1.1 includes accounts, books, files and other records (e.g. trial balance, general ledger, nostro/vostro statements, reconciliations, list of counterparties). It also includes records that substantiate the value of the assets, liabilities and off-balance sheet activities of the licensee (e.g. client activity files and valuation documentation).

Corporate Records

Language of Records

Location of Records

Transaction Records

Customer Records

GR-2.1.1

Licensees must obtain CBB’s prior written approval for any change in their legal name. Licensees must notify the CBB of any change in their corporate name at least one week prior to effecting the proposed change.

GR-2.1.2

In approving a change in a legal name, the CBB seeks to ensure that it is sufficiently distinct as to reduce possible confusion with other unconnected businesses, particularly those operating in the financial services sector.

GR-2.2.1

Any written communication, including stationery, business cards or other business documentation published by the licensee, or used by its employees (agents, representatives, financial advisers or introducers) must include a statement that the licensee is regulated by the CBB and the type of license (administrator).

GR-3.1.1

Licensees must obtain a letter of no-objection from the CBB to any dividend proposed and prior to submitting a proposal for a distribution of profits to a shareholder vote.

GR-3.1.2

The CBB will grant a no-objection letter where it is satisfied that the level of dividend proposed is unlikely to leave the licensee vulnerable — for the foreseeable future — to breaching the CBB's financial resources requirements, taking into account (as appropriate) trends in the licensee's business volumes, expenses, trend performance and investment environment.

GR-3.1.3

To facilitate the prior approval required under Paragraph GR-3.1.1, licensees subject to Paragraph GR-3.1.1 must provide the CBB with:

GR-4.1.1

Licensee must seek prior written approval from the CBB before transferring any of its business to a third party.

GR-4.1.2

Rule GR-4.1.1 is intended to apply to circumstances where a licensee wishes to sell all or part of its business to a third party. It does not apply where a licensee is simply transferring client assets to a third party, on instruction from the client concerned.

GR-4.1.3

In all cases, CBB approval to transfer business will only be given where:

GR-4.1.4

In assessing the criteria outlined in Paragraph GR-4.1.3, the CBB will, amongst other factors, take into account the financial strength of the transferee; its capacity to manage the business being transferred; its track record in complying with applicable regulatory requirements; and (where applicable) its track record in treating customers fairly. The CBB will also take into account the impact of the transfer on the transferor, and any consequences this may have for the transferor‟s remaining customers.

GR-4.1.5

Licensees seeking to obtain the CBB's permission to transfer business must apply to the CBB in writing, in the form of a covering letter together with supporting attachments. Unless otherwise directed by the CBB, the application must provide:

GR-4.1.6

Licensees intending to apply to transfer business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-4.1.6 may be varied by the CBB, depending on the nature of the proposed transfer, such as the materiality of the business concerned and its impact on customers.

GR-4.1.7

The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

GR-4.1.8

At its discretion, the CBB may require that a notice of proposed transfer of business be published in the Official Gazette, and/or in at least two local daily newspapers (one in Arabic, the other in English), in order to give affected customers the right to comment on the proposed transfer. Where such a requirement has been imposed, the CBB's decision on the application will also be published in the Official Gazette and in at least two local daily newspapers. In all such cases, the costs of publication must be met by the transferor.

GR-4.1.9

Publication under paragraph GR-4.1.8 will generally only be required where a proposed transfer involves a large number of customers or is otherwise deemed necessary in order to protect customer interests.

GR-4.1.10

The requirements in this Chapter are based on the powers available to the CBB in Article 68 of the CBB Law.

GR-5.1.1

Whenever they are aware of such cases, licensees must obtain prior approval from the CBB, as required under Paragraph BR-2.3.8, for any changes in the percentage holding of a controller or a new controller (as defined in Section GR-5.2).

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.

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.

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.

GR-5.1.3

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. Notification must be made by the controller or intended controller, and by the licensee where it is aware of the change.

GR-5.1.4

If, as a result of circumstances outside the licensee's knowledge and/or control, changes specified in Paragraph GR-5.1.1 are triggered prior to CBB approval being sought or obtained, the licensee must notify the CBB no later than 15 calendar days on which those changes have occurred.

GR-5.1.5

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.

GR-5.1.6

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.

GR-5.1.7

The approval process is specified in Section GR-5.4.

GR-5.1.8

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.

GR-5.2.1

A controller of a licensee is a natural or legal person who, either alone or with his associates:

GR-5.2.2

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

GR-5.2.3

Associate also includes 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 licensee, or under which they undertake to act together in exercising their voting power in relation to the licensee.

GR-5.3.1

All new controllers or prospective controllers (as defined in Section GR-5.2) of a Bahraini specialised licensee must obtain the approval of the CBB. Any increases to existing controllers' holdings or voting control (as outlined under Paragraph BR-2.3.8) must also be approved by the CBB and are subject to the conditions outlined in this Section. Such changes in existing controllers (as defined in the Section GR-5.2) or new/prospective controllers of a licensee must satisfy the CBB of their suitability and appropriateness according to the criteria outlined in Paragraphs GR-5.3.2 to GR-5.3.5. The CBB will issue an approval notice or notice of refusal of a controller according to the approval process outlined in Section GR-5.4 and Paragraph GR-5.1.6.

GR-5.3.1A

In line with Resolution No.(43) of 2011, the CBB may require, on a case-by-case basis, and at its sole discretion that at least one of the controllers is a regulated financial institution holding at least 20% of the licensee's shares.

GR-5.3.2

In assessing the suitability of controllers who are natural persons, the CBB has regard to their professional and personal conduct, including, but not limited to, the following:

GR-5.3.3

Natural persons who intend to take a stake of 20% or more in a licensee are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licensees. The level of scrutiny and the expected compliance with the above standards become more onerous as the level of proposed ownership increases. Natural persons will not normally be approved to take majority control (i.e. a stake of 50% or more of either the capital or voting rights) of a licensee.

GR-5.3.4

In assessing the suitability of controllers who are legal persons, CBB has regard to their financial standing, judicial and regulatory record, and standards of business practice and reputation, including, but not limited to, the following:

GR-5.3.5

Legal persons who intend to take a stake of 20% or more in a licensee are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licensees. The level of scrutiny and of expected compliance with the above standards becomes more onerous as the level of proposed ownership increases. In particular, unregulated legal persons will not normally be approved to take majority control (i.e. a stake of 50% or more of either the capital or voting rights of a licensee, unless the proposed parent is a well-established business (that satisfies the above conditions), and its ownership would not pose undue conflicts of interest. Regulated legal persons will normally only be approved to take majority control where — in addition to the above conditions — the resulting group would be subject to effective consolidated supervision in accordance with relevant international standards; and the home supervisor of the parent entity has agreed to the proposed acquisition, as well as to the sharing of relevant prudential information for supervisory purposes (expressed, if necessary, through the signing of a Memorandum of Understanding between the CBB and the home supervisor, setting out their respective supervisory responsibilities).

GR-5.3.6

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.

GR-5.4.1

Within 3 months of receipt of an approval request under Paragraph GR-5.1.1, the CBB will issue a written notice of approval (or of refusal, if it is not satisfied that the person concerned is suitable to become a controller of the licensee). The notice of refusal will specify the reasons for the objection and specify the applicant's right of appeal. Where an approval notice is given, it will specify the period for which it is valid and any conditions that may be applied.

GR-5.4.2

Article 53 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 an Executive Director of the CBB. 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. See Module EN (Enforcement).

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.

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.

GR-5.4.5

The powers available to the CBB that are described in Paragraphs GR-5.4.3 and GR-5.4.4 are specified in Article 56 of the CBB Law.

GR-5.4.6

In addition to the above requirements, 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.

GR-6.1.1

Condition 3 of the CBB‟s licensing conditions specifies, amongst other things, that licensees must satisfy the CBB that their close links do not prevent the effective supervision of the licensee and otherwise pose no undue risks to the licensee. (See Paragraph AU-2.3.1).

GR-6.1.2

Applicants for a license must provide details of their close links, as provided for under Form 1 (Application for a License). (See Paragraph AU-5.1.1).

GR-6.1.3

Licensees must submit to the CBB, within 3 months of their financial year-end, a report on their close links. The report must identify all undertakings closely linked to the licensee, as defined in Section GR-6.2.

GR-6.2.1

A licensee ('L') has close links with another undertaking ('U'), if:

GR-6.3.1

In assessing whether a licensee's close links may prevent the effective supervision of the firm, or otherwise poses no undue risks to the licensee, the CBB takes into account the following:

GR-7.1.1

As specified in Article 50 of the CBB Law, a licensee wishing to cease to provide or suspend all or any of its licensed regulated services, completely or at any of its branches, must obtain prior written approval from the CBB.

GR-7.1.2

If the licensee wishes to transfer client assets to a third party, it must also comply with the requirements contained in Chapter GR-4.

GR-7.1.2A

If the licensee wishes to liquidate its business, the CBB will revise its license to restrict the firm from entering into new business. The licensee must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged and that it may surrender its license.

GR-7.1.3

Licensees seeking to obtain the CBB's permission to cease business must apply to the CBB in writing, in the form of a formal request together with supporting documents. Unless otherwise directed by the CBB, the following requirements must be provided in support of the request:

GR-7.1.4

Licensees intending to apply to cease business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-7.1.3 may be varied by the CBB, depending on the nature of the proposed cessation, such as the materiality of the business concerned and its impact on customers.

GR-7.1.5

Approval to cease business will generally be given where adequate arrangements have been made to offer alternative arrangements to any affected customers. The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

GR-7.1.6

The notice referred to in Subparagraph GR-7.1.3 (i) must include a statement that written representations concerning the liquidation may be submitted to the CBB before a specified day, which shall not be later than thirty calendar days after the day of the first publication of the notice. The CBB will not decide on the application until after considering any representations made to the CBB before the specified day.

GR-7.1.7

Upon satisfactorily meeting the requirements set out in GR-7.1.3, the licensee must surrender the original license certificate issued by the Licensing Directorate at the time of establishment, and submit confirmation of the cancellation of its Commercial Registration from the Ministry of Industry and Commerce.

GR-7.1.8

Where the CBB has given its approval to cancel or amend a license, then it will also publish its decision in the Official Gazette, as well as in two local daily newspapers (one in Arabic, the other in English), once this decision has been implemented.

GR-7.1.8A

The publication cost of the notices referred to in Paragraph GR-7.1.8 is to be met by the licensee concerned.

GR-7.1.9

The licensee must continue to comply with all applicable CBB requirements, until such time as it is formally notified by the CBB that its obligations have been discharged.

GR-7.1.10

A licensee in liquidation must continue to meet its contractual and regulatory obligations to customers and creditors.

GR-7.1.11

If no objections to the liquidation are upheld by the CBB, the CBB may then issue a written notice of approval for the surrender of the license.

GR-7.1.12

Upon satisfactorily meeting the requirements set out in GR-7.1.3, the licensees must surrender the original license certificate issued by the Licensing Directorate at the time of establishment, and submit confirmation of the cancellation of its commercial registration from the Ministry of Industry, Commerce and Tourism.

GR-8.1.1

Licensees must maintain professional indemnity coverage. The professional indemnity coverage must be obtained from an insurance firm acceptable to the CBB and licensed in the Kingdom of Bahrain.

GR-8.1.2

Upon request, licensees must provide to the CBB evidence of the coverage in force required under Paragraph GR-8.1.1.

GR-8.1.3

A licensee is encouraged to assess its insurance needs, through professional advice, to ensure its adequacy to the level of business undertaken, notwithstanding the minimum limit of indemnity.

GR-8.1.4

The minimum limit of indemnity is BD 75,000.

GR-8.1.5

The maximum excess or deductible allowable under the policy shall be BD 15,000.

GR-8.1.6

In accordance with Paragraph EN-B.3.1, 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 Module EN.

GR-8.1.7

The requirement to maintain insurance coverage will normally be met by the licensee concerned obtaining an insurance policy from an insurance firm. The CBB may also accept an insurance policy issued at group level, e.g. issued with respect to the parent of the licensee, provided the terms of the policy explicitly provide coverage with respect to the licensee.

GR-8.1.8

Unless otherwise agreed in writing with the CBB, the policy must contain a clause that it may not be cancelled or lapsed without the prior approval of the CBB. The policy must also contain a provision for an automatic extended reporting period in the event that the policy is cancelled or lapsed, such that claims relating to the period during which the policy was in force may subsequently still be reported.

GR-9.1.1

This Chapter sets out the CBB’s approach to outsourcing by licensees. It also sets out various requirements that licensees must address when considering outsourcing an activity or function.

GR-9.1.2

In the context of this Chapter, ‘outsourcing’ means an arrangement whereby a third party performs on behalf of a licensee an activity which commonly would have been performed internally by the licensee. Examples of services that are typically outsourced include data processing, cloud services, customer call centres and back-office related activities.

GR-9.1.3

In the case of branches of foreign entities, the CBB may consider a third-party outsourcing arrangement entered into by the licensee’s head office/regional office or other offices of the foreign entity as an intragroup outsourcing, provided that the head office/regional office submits to the CBB a letter of comfort which includes, but is not limited to, the following conditions:

GR-9.1.4

The licensee must not outsource the following functions:

GR-9.1.5

For the purposes of Paragraph GR-9.1.4, certain support activities, processes and systems under these functions may be outsourced (e.g. call centres, data processing, credit recoveries, cyber security, e-KYC solutions) subject to compliance with Paragraph GR-9.1.7. However, strategic decision-making and managing and bearing the principal risks related to these functions must remain with the licensee.

GR-9.1.6

Branches of foreign entities may be allowed to outsource to their head office, the risk management function stipulated in Subparagraph GR-9.1.4 (iv), subject to CBB’s prior approval.

GR-9.1.7

Licensees must comply with the following requirements:

GR-9.1.8

For the purpose of Subparagraph GR-9.1.7 (iv), licensees as part of their assessments may use the following:

When conducting on-site examinations, licensees should ensure that the data of the outsourcing service provider’s other clients is not negatively impacted, including impact on service levels, availability of data and confidentiality.

GR-9.1.9

For the purpose of Subparagraph GR-9.1.7 (i), the CBB will provide a definitive response to any prior approval request for outsourcing within 10 working days of receiving the request complete with all the required information and documents.

Executive Summary

Legal Basis

Evolution of Module

CA-B.1.1

The content of this Module applies to all administrators licensees authorised in the Kingdom of Bahrain, thereafter referred to in this Module as licensees.

Obligation to Maintain Adequate Capital and Liquidity

Key Requirements

Capital Requirements

Liquidity Requirements

Executive Summary

Legal Basis

Evolution of Module

BR-B.1.1

The content of this Module applies to all administrators licensees authorised in the Kingdom of Bahrain, thereafter referred to in this Module as licensees.

Audited Financial Statements

Suspicious Transaction Reports (STR)

Reports Prepared by the MLRO

Report of Fraud or Attempted Fraud

Reports Required as per Volume 7 (CIU)

Reports Prepared by the External Auditor

Terrorist Financing

Annual License Fee

Institutional Information System (IIS)

Report on Controllers

Report on Close Links

BR-2.1.1

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

BR-2.1.2

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

BR-2.1.3

A 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.

BR-2.1.4

Licensees are required to provide the CBB with a range of information to enable it to monitor the licensee's compliance with Volume 5 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 sections list the commonly occurring reports for which a licensee will be required to notify the CBB or seek its approval.

Matters Having a Serious Supervisory Impact

Legal, Professional, Administrative or other Proceedings Against a Fund Administration Licensee

Fraud, Errors and other Irregularities

Insolvency, Bankruptcy and Winding Up

Other Supervisors

External Auditor

Approved Persons

Capital Adequacy

Outsourcing Arrangements

Controllers

Other Notification Requirements

Change in Name

Change of Address

Change in Legal Status

Change in Authorised or Paid-up Capital

Controllers and Close Links

Carrying out Business in Another Jurisdiction

Mergers, Acquisitions, Disposals and Establishment of New Subsidiaries

Share Option Schemes

Outsourcing Arrangements

Matters Having a Serious Supervisory Impact

Dividends

External Auditor

Approved Persons

BR-3.1.1

Licensees must provide all information that the CBB may reasonably request in order to discharge its regulatory obligations.

BR-3.1.1A

Licensees must provide all relevant information and assistance to the CBB inspectors and appointed experts on demand as required by Articles 111 and 114 of the CBB Law. Failure by licensees to cooperate fully with the CBB's inspectors or appointed experts, or to respond to their examination reports within the time limits specified, will be treated as demonstrating a material lack of cooperation with the CBB which will result in other enforcement measures being considered, as described elsewhere in Module EN. This rule is supported by Article 114(a) of the CBB Law.

BR-3.1.1B

Article 163 of the CBB Law provides for criminal sanctions where false or misleading statements are made to the CBB or any person/appointed expert appointed by the CBB to conduct an inspection or investigation on the business of the licensee or the listed licensee.

Information Requested on Behalf of other Supervisors

BR-3.2.1

A licensee must permit representatives of the CBB, or persons appointed for the purpose by the CBB to have access, with or without notice, during reasonable business hours to any of its business premises in relation to the discharge of the CBB's functions under the relevant law.

BR-3.2.2

A licensee must take reasonable steps to ensure that each of its providers under material outsourcing arrangements deals in an open and cooperative way with the CBB in the discharge of its functions in relation to the licensee.

BR-3.2.3

The cooperation that licensees are expected to procure from such providers is similar to that expected of licensees themselves.

BR-3.3.1

Licensees must take reasonable steps to ensure that all information they give to the CBB is:

BR-3.3.2

If a 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. The notification must include:

BR-3.3.3

If the information in Paragraph BR-3.3.2 cannot be submitted with the notification (because it is not immediately available), it must instead be submitted as soon as possible afterwards.

BR-3.4.1

The CBB uses various methods of information gathering on its own initiative which require the cooperation of licensees:

BR-3.4.2

When seeking meetings with a licensee or access to the licensee's premises, the CBB or the CBB appointee needs to have access to a licensee's documents and personnel. Such requests will be made during reasonable business hours and with proper notice. There may be instances where the CBB may seek access to the licensee's premises without prior notice. While such visits are not common, the prospect of unannounced visits is intended to encourage licensees to comply at all times with the requirements and standards imposed by the CBB as per legislation and Volume 4 of the CBB Rulebook.

BR-3.4.3

The CBB considers that a licensee should:

BR-3.4.4

The CBB considers that a licensee should take reasonable steps to ensure that the following persons act in the manner set out in Paragraph BR-3.4.3:

BR-3.4.5

In gathering information to fulfill its supervisory duties, the CBB acts in a professional manner and with due regard to maintaining confidential information obtained during the course of its information gathering activities.

Introduction

The Required Report

Other Notifications to the CBB

Permitted Disclosure by the CBB

Trilateral Meeting