AA-5.1.1

In accordance with Articles 114 and 121 of the CBB Law, the CBB may appoint appointed experts to undertake on-site examinations or report by way of investigations on specific aspects of a licensee's business. External auditors may be called upon to be appointed experts and should be aware of their role in that capacity by referring to Section BR-3.5 for money changers and administrators or Module GR for representative office licensees.

[The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

AA-5.1.2

The purpose of the contents of this chapter is to set out the roles and responsibilities of Appointed Experts when appointed pursuant to Article 114 or 121 of the CBB Law (see EN-7.1.1). These Articles empower the CBB to assign some of its officials or others to inspect or conduct investigations of licensees.

AA-5.1.3

The CBB uses its own inspectors to undertake on-site examinations of licensees as an integral part of its regular supervisory efforts. In addition, the CBB may commission reports on matters relating to the business of licensees in order to help it assess their compliance with CBB requirements. Inspections may be carried out either by the CBB's own officials, by duly qualified "Appointed Experts" appointed for the purpose by the CBB, or a combination of the two.

AA-5.1.4

Specialised 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.

AA-5.1.5

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.

AA-5.1.6

The CBB will not, as a matter of general policy, publicise the appointment of an Appointed Expert, although it reserves the right to do so where this would help achieve its supervisory objectives. Both the Appointed Expert and the CBB are bound to confidentiality provisions restricting the disclosure of confidential information with regards to any such information obtained in the course of the investigation.

AA-5.1.7

Unless the CBB otherwise permits, Appointed Experts should not be the same firm appointed as external auditor of the specialised licensee.

AA-5.1.8

Appointed Experts will be appointed in writing, through an appointment letter, by the CBB. In each case, the CBB will decide on the range, scope and frequency of work to be carried out by Appointed Experts.

AA-5.1.9

Appointed Experts will report directly to and be responsible to the CBB in this context and will specify in their report any limitations placed on them in completing their work (for example due to the relevant specialised licensees' group structure). The report produced by the Appointed Experts is the property of the CBB (but is usually shared by the CBB with the firm concerned).

AA-5.1.10

Compliance by Appointed Experts with the contents of this Chapter will not, of itself, constitute a breach of any other duty owed by them to a particular specialised licensee (i.e. create a conflict of interest).

AA-5.1.11

The CBB may appoint one or more of its officials to work on the Appointed Experts' team for a particular specialised licensee.

AA-5.2.1

Commissioned Appointed Experts would normally be required to report on one or more of the following aspects of a specialised licensee's business:

AA-5.2.2

Appointed Experts will be required to form an opinion on whether, during the period examined, the specialised licensee is in compliance with the relevant provisions of the CBB Law and the CBB's relevant requirements, as well as other requirements of Bahrain Law and, where relevant, industry best practice locally and/or internationally.

AA-5.2.3

The Appointed Experts' report should follow the format set out in Appendix AA-1, in part B of the CBB Rulebook.

AA-5.2.4

Unless otherwise directed by the CBB or unless the circumstances described in Section AA-5.3 apply, the report must be discussed with the Board of directors and/or senior management in advance of its being sent to the CBB.

AA-5.2.5

Where the report is qualified by exception, the report must clearly set out the risks which the specialised licensee runs by not correcting the weakness, with an indication of the severity of the weakness should it not be corrected. Appointed Experts will be expected to report on the type, nature and extent of any weaknesses found during their work, as well as the implications of a failure to address and resolve such weaknesses.

AA-5.2.6

If the Appointed Experts conclude, after discussing the matter with the specialised licensee, that they will give a negative opinion (as opposed to one qualified by exception) or that the issue of the report will be delayed, they must immediately inform the CBB in writing giving an explanation in this regard.

AA-5.2.7

The report must be completed, dated and submitted, together with any comments by directors or management (including any proposed timeframe within which the specialised licensee has committed to resolving any issues highlighted by the report), to the CBB within the timeframe applicable.

AA-5.3.1

Appointed Experts must communicate to the CBB, during the conduct of their duties, any reasonable belief or concern they may have that any of the requirements of the CBB, including the criteria for licensing a specialised licensee (see Module AU), are not or have not been fulfilled, or that there has been a material loss or there exists a significant risk of material loss in the concerned specialised licensee, or that the interests of customers are at risk because of adverse changes in the financial position or in the management or other resources of a specialised licensee. Notwithstanding the above, it is primarily the specialised licensee's responsibility to report such matters to the CBB.

AA-5.3.2

The CBB recognises that Appointed Experts cannot be expected to be aware of all circumstances which, had they known of them, would have led them to make a communication to the CBB as outlined above. It is only when Appointed Experts, in carrying out their duties, become aware of such a circumstance that they should make detailed inquiries with the above specific duty in mind.

AA-5.3.3

If Appointed Experts decide to communicate directly with the CBB in the circumstances set out in Paragraph AA-5.3.1 above, they may wish to consider whether the matter should be reported at an appropriate senior level in the specialised licensee at the same time and whether an appropriate senior representative of the specialised licensee should be invited to attend the meeting with the CBB.

AA-5.4.1

Information which is confidential and has been obtained under, or for the purposes of, this chapter or the CBB Law may only be disclosed by the CBB in the circumstances permitted under the Law. This will allow the CBB to disclose information to Appointed Experts to fulfil their duties. It should be noted, however, that Appointed Experts must keep this information confidential and not divulge it to a third party except with the CBB's permission and/or unless required by Bahrain Law.

AA-5.5.1

The CBB may, at its discretion, call for a trilateral meeting(s) to be held between the CBB and representatives of the relevant specialised licensee and the Appointed Experts. This meeting will provide an opportunity to discuss the Appointed Experts' examination of, and report on, the specialised licensee.