AU-1.1.1

No person may:

AU-1.1.2

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-1.1.3

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

Licensees are prohibited from taking deposits or any similar liabilities and Shari'a compliant investment accounts.

AU-1.1.5

Only persons licensed to undertake regulated financing services (or regulated Islamic financing services), may use the term 'financing company' in their corporate or trading names, or otherwise hold themselves out to be a financing company.

AU-1.1.6

Licensees are not obliged to include the word 'financing company' in their corporate or trading names; however, they may be required to make clear their regulatory status in their letter heads, customer communications, website and so on (See Paragraph GR-2.2.1).

AU-1.1.7

For the purposes of Rule AU-1.1.2, persons will be considered in breach of this requirement if they attempt to operate as, or incorporate a financing company in Bahrain with a name containing the word "financing company" (or the equivalents in any language), without holding the appropriate CBB license or obtaining the prior approval of the CBB.

AU-1.1.8

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

AU-1.1.9

An application for a license must fill in the Application form (Form 1) online, available on the CBB website under E-services/online Forms and must contain:

AU-1.1.10

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

AU-1.1.11

Detailed rules and guidance regarding information requirements and processes for license applications can be found in Section AU-4.1. As specified in Paragraph AU-4.1.14, the CBB will provide a formal decision on license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB.

AU-1.1.12

In granting new licenses, the CBB will specify the specific types of regulated financing company service for which a license has been granted.

AU-1.1.13

All applicants for financing company licenses must satisfy the CBB that they meet, by the date of their license, the minimum conditions for licensing, as specified in Chapter AU-2. Once licensed, licensees must maintain these criteria on an on-going basis.

AU-1.1.14

Licensees must not carry on any commercial business in the Kingdom of Bahrain or elsewhere other than financing business and activities directly arising from or incidental to that business.

AU-1.1.15

Rule AU-1.1.14 is intended to restrict licensees from undertaking any material non-financial business activities. The Rule does not prevent a financing company undertaking commercial activities if these directly arise from their financing business: for instance, in the context of Islamic contracts, such as murabaha, ijara and musharaka, where the company may hold the physical assets being financed or leased. Nor does it restrict a licensee from undertaking commercial activities if, in the judgment of the CBB, they are incidental and do not detract from the financial nature of the financing companies operations.

AU-1.1.16

Rule AU-1.1.14 applies to the legal entity holding the financing company license. A licensee may thus own subsidiaries that undertake non-financial activities, although the CBB generally does not support the development of significant commercial activities within a licensee's group.

AU-1.2.1

Licensees must obtain the CBB's prior written approval for any person wishing to undertake a controlled function at a licensee. The approval from the CBB must be obtained prior to their appointment.

AU-1.2.2

Controlled functions are those functions occupied by board members and persons in executive positions and include:

AU-1.2.3

Prior approval is required for controlled functions (a), (b), (c), (d) and (e). Controlled functions (d) and (e) may be combined, however (see also FC-4.1, regarding the MLRO function). Controlled function (f) does not require prior approval instead, notification only is required, once the person concerned has accepted to undertake that function.

AU-1.2.4

Approval under Paragraph AU-1.2.1 is only granted by the CBB, if it is satisfied that the person is fit and proper to hold the particular position in the licensee concerned. 'Fit and proper' is determined by the CBB on a case-by-case basis. The definition of 'fit and proper' and associated guidance is provided in Sections AU-3.1 and AU-3.2 respectively.

AU-1.2.5

Director is any person who occupies the position of a Director, as defined in Article 173 of the Commercial Companies Law (Legislative Decree No. 21 of 2001).

AU-1.2.6

The fact that a person may have 'Director' in their job title does not of itself make them a Director within the meaning of the definition noted in Paragraph AU-1.5.5. For example, a 'Director of IT', is not necessarily a member of the Board of Directors and therefore may not fall under the definition of Paragraph AU-1.5.5.

AU-1.2.7

The Chief Executive or General Manager means a person who is responsible for the conduct of the licensee (regardless of actual title). The Chief Executive or General Manager must be resident in Bahrain. This person is responsible for the conduct of the whole of the firm.

AU-1.2.8

Head of function means a person who exercises major managerial responsibilities, is responsible for a significant business or operating unit, or has senior managerial responsibility for maintaining accounts or other records of the licensee.

AU-1.2.9

Whether a person is a head of function will depend on the facts in each case and is not determined by the presence or absence of the word in their job title. Examples of head of function might include, depending on the scale, nature and complexity of the business, a deputy Chief Executive; heads of departments such as Risk Management, Compliance or Internal Audit; or any front office functions or the Chief Financial Officer.

AU-1.2.10

Where a licensee is in doubt as to whether a function should be considered a controlled function it must discuss the case with the CBB.

AU-1.2.11

The controlled function of compliance officer is defined in accordance with the compliance function under Section HC-6.4. The controlled functions of Money Laundering Reporting Officer is defined under Chapter FC-4.

AU-1.2.12

All licensees must designate an employee, of appropriate standing and resident in Bahrain, as compliance officer. The duties of the compliance officer include:

AU-1.3.1A

Where licensees are undertaking regulated activities in accordance with Shari'a, all transactions and contracts concluded by regulated financing company services must comply with Sharia standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The validity of the contract or transaction is not impacted, if at a later date, the relevant AAOIFI Sharia standards are amended.

AU-1.3.1B

A financing company licensee may choose to offer a limited range of financing activity as determined by its business plan provided that such activity includes short term instalment credits only.

AU-1.3.3

For the purposes of Rule AU-1.3.1, carrying on a regulated financing company service by way of business means:

AU-1.3.4

Licensees are allowed to transact with both residents and non-residents of the Kingdom of Bahrain, and in both Bahrain Dinar and foreign currencies.

AU-1.3.5

Licensees may undertake transactions with both Bahraini residents and non-residents.

AU-1.3.6

Licensees should note that the same legal entity cannot combine regulated financing company services with other regulated services, such as regulated insurance services and regulated ancillary services.

General Exclusions

Providing Credit

Offering Shari'a Financing Contracts

Issuing Means of Payment

AU-1.4.1

Conventional financing company licensees may not hold themselves out as an Islamic financing company. Conventional financing company licensees are allowed to enter into activities (a) to (c) listed in Rule AU-1.3.1 under the conditions outlined in the remainder of this Section, subject to conditions outlined in Section AU-1.2 (concerning facilities offered to Bahrain residents and facilities in Bahrain Dinar in particular).

AU-1.4.2

When offering any of the Shari'a compliant activities listed in Rule AU-1.3.1, conventional licensees must have staff trained in Shari'a compliant financing business. The licensee must also disclose in the notes to its Annual Report/Financial Statement all quantitative and qualitative disclosures on its Shari'a compliant business as required by AAOIFI accounting and auditing standards.

AU-1.4.3

Conventional licensees may provide Shari'a compliant activities (b) and (c) listed in Rule AU-1.3.1 in any amount and in any currency to Bahrain-resident individuals subject to the following conditions: