Part A
Introduction
UG — User's Guide
UG-A UG-A Introduction
UG-A.1 UG-A.1 Purpose
Executive Summary
UG-A.1.1
The Central Bank of Bahrain ('the CBB'), in its capacity as the regulatory and supervisory authority for Bahrain's financial markets, issues regulatory instruments that
CBB licensees and other specified persons are legally obliged to comply with. These regulatory instruments are contained in the CBB Rulebook. Much of the Rulebook's substantive content was previously issued by the Bahrain Monetary Agency ('the BMA'), and was carried forward when the CBB replaced the BMA in September 2006.UG-A.1.2
The Rulebook is divided into 7 Volumes, covering different areas of financial services activity. These Volumes are being progressively issued. Volumes 1 and 2, covering
conventional bank licensees andIslamic bank licensees respectively, were issued in July 2004 and January 2005; Volume 3, coveringinsurance licensees , was issued in April 2005; and Volume 4 (coveringinvestment firm licensees ), issued in April 2006. Volume 5 (coveringspecialised licensees ) and Volume 6 (capital markets) are being issued progressively. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.Amended: April 2013UG-A.1.3
This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 6 (Capital Markets); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.
UG-A.1.4
Volume 6 (Capital Markets) covers the regulation and supervision of Bahrain's capital markets. When complete, it will include requirements dealing with (i) the offering and listing of securities; (ii) the authorisation and supervision of exchanges (notably the Bahrain Bourse); and (iii) capital market behaviour (such as insider dealing and market abuse, and the conduct of mergers and acquisitions of listed companies). Collectively, these requirements aim to ensure transparent and orderly markets, which help protect the rights of investors and shareholders, whilst enabling an attractive environment for those seeking to raise capital.
Amended: April 2013UG-A.1.5
Capital market participants should note that the requirements contained in Volume 6 of the CBB Rulebook are additional to those contained in other Rulebook Volumes. Thus, market participants licensed as investment firms (for example) are required to comply with their license requirements contained in Volume 4, in addition to requirements contained in Volume 6 that apply to their capital markets activities.
Legal Basis
UG-A.1.6
This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 6 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all
CBB licensees (including theirapproved persons ) that undertake relevant capital markets activity (as specified in the Scope of Application Chapters contained in each Volume 6 Module).Amended: April 2013UG-A.1.7
The contents of this Module are also included in Regulations, to be issued by the CBB, by virtue of which they are applicable to non-
CBB licensees that also undertake relevant capital markets activity (as specified in the Scope of Application Chapters contained in each Volume 6 Module).UG-A.1.8
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
UG-A.2 UG-A.2 Module History
UG-A.2.1
This Module was first issued in April 2007, as part of the first phase of Volume 6 (Capital Markets) to be released. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
UG-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes UG-A.1 and UG-2.1 04/2013 Various amendments to update evolution of CBB Rulebook. UG-1.1.3 04/2013 Updated reference to membership rules of exchanges. UG-3.2 and Annex 04/2013 Amended as CBB Rulebook only now available on CBB Website. UG-3.2.2 04/2020 Amended Paragraph. UG-A.2.3
Guidance on the implementation and transition to Volume 6 (Capital Markets) is given in Module ES (Executive Summary).
UG-1 UG-1 Rulebook Status and Application
UG-1.1 UG-1.1 Legal Basis
General
UG-1.1.1
Volume 6 (Capital Markets) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 ('the CBB Law'). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Articles 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).
UG-1.1.2
The Purpose Section of each Module specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module's requirements.
UG-1.1.3
CBB licensees that are members of a Self Regulatory Organisation (SRO) such as licensed exchanges and licensed clearing houses are reminded that they are also subject to the membership and operating rules of such SRO. These rules are additional to the requirements contained in the CBB Rulebook.Amended: April 2013CBB's Rulemaking Instruments
UG-1.1.4
Regulations are made pursuant to Article 37 of the CBB Law. These instruments have general application throughout the Kingdom and bind all persons ordinarily affected by Bahraini legislative measures (i.e. residents and/or Bahraini persons wherever situated, and non-residents wishing to undertake activities in Bahrain).
UG-1.1.5
Because Regulations have wide general application, they are subject to two important safeguards: (i) the CBB is under a duty to consult with interested parties and to review and consider their comments; and (ii) the finalised Regulations only become effective after they are published in the Official Gazette.
UG-1.1.6
Directives are made pursuant to Article 38 of the CBB Law. These instruments do not have general application in the Kingdom, but are rather addressed to specific
CBB licensees (or categories ofCBB licensees ),approved persons orregistered persons . Directives are binding on those to whom they are addressed.UG-1.1.7
Unlike Regulations, there is no duty on the CBB to either consult with addressees or publicise a Directive by publishing it in the Official Gazette (save that an addressee must obviously have actual or constructive notice of a Directive). However, as a matter of general policy, the CBB also consults on Rulebook content issued by way of a Directive.
UG-1.1.8
All of the content of the CBB Rulebook has the legal status of at least a Directive, issued pursuant to Article 38 of the CBB Law. Certain of the requirements contained in the CBB Rulebook may also have the status of a Regulation, in which case they are also separately issued pursuant to Article 37 of the CBB Law and published in the Official Gazette. Where this is the case, then the Rulebook cross-refers to the Regulation in question and specifies the requirements concerned.
UG-1.1.9
In keeping with the nature of these regulatory instruments, Regulations are used to supplement the CBB Rulebook, either where explicitly required under the CBB Law, or where a particular requirement needs to have general applicability, in addition to being applied to
CBB licensees ,approved persons orregistered persons .UG-1.2 UG-1.2 Status of Provisions
UG-1.2.1
The contents of the CBB Rulebook are categorised either as Rules or as Guidance. Rules have a binding effect. Guidance is not binding: rather, it is material that helps inform a particular Rule or set of Rules, or provides other general information.
UG-1.2.2
Where relevant, compliance with Guidance will generally lead the CBB to assess that the rule(s) to which the Guidance relates has been complied with. Conversely, failure to comply with Guidance will generally be viewed by the CBB as tending to suggest breach of a Rule.
UG-1.2.3
The categorisation of each Paragraph within the Rulebook is identified by its text format, as follows:
• Rules are in bold, font size 12. The Paragraph reference number is also highlighted in a coloured box.• Guidance is in normal type, font size 11.UG-1.2.4
Where there are differences of interpretation over the meaning of a Rule or Guidance, the CBB reserves the right to apply its own interpretation.
UG-1.2.5
Rule UG-1.2.4 does not prejudice the rights of an authorised person to make a judicial appeal, should it believe that the CBB is acting unreasonably or beyond its legal powers.
UG-1.2.6
All Rulebook content has the formal status of at least a Directive. Some Rulebook content may also have the status of Regulations. Rulebook content that is categorised as a Rule is therefore legally mandatory and must be complied with by those to whom the content is addressed.
UG-1.2.7
Breaches of Rules constitute breaches of the CBB Law. If a
CBB licensee or person breaches a Rule to which they are subject, they are liable to enforcement action by the CBB and, in certain cases, criminal proceedings by the Office of the Public Prosecutor.UG-1.2.8
The CBB's enforcement powers and processes are set out in Module EN.
UG-1.3 UG-1.3 Application
UG-1.3.1
Volume 6 of the CBB Rulebook applies to a wide range of persons, i.e. all those involved as participants in Bahrain's capital markets, for instance by issuing or trading securities, or operating a regulated exchange or collective investment undertaking. As a consequence, much of the content of Volume 6, in addition to having the status of a Directive, is also issued by way of Regulation.
UG-1.3.2
The precise scope of application of Volume 6 is specified in the Scope of Application Chapter contained in each Module (except those listed in the 'Introduction' part of Volume 6): these specify the particular activities (and associated persons) to which the requirements in the Module concerned apply. In addition, each Rule (or Section containing a series of Rules) is drafted such that its application is clearly highlighted for the user. Finally, each Module, in its Purpose Section, specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module's requirements.
UG-1.3.3
All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.
Added: October 2016UG-1.4 UG-1.4 Effective Date
UG-1.4.1
Volume 6 (Capital Markets) of the CBB Rulebook was first issued in April 2007. Its contents have immediate effect, subject to any specific transition arrangements that may be specified.
UG-1.4.2
Module ES (Executive Summary) contains details of the implementation and transition arrangements for Volume 6 (Capital Markets).
UG-2 UG-2 Rulebook Structure and Format
UG-2.1 UG-2.1 Rulebook Structure
Rulebook Volumes
UG-2.1.1
The Rulebook is divided into 7 Volumes, covering different areas of financial services activity, as follows:
Volume 1 Conventional Banks Volume 2 Islamic Banks Volume 3 Insurance Volume 4 Investment Business Volume 5 Specialised Activities Volume 6 Capital Markets Volume 7 Collective Investment Undertakings Amended: April 2013UG-2.1.2
Volume 5 (Specialised Activities), covers money changers; financing companies; representative offices; administrators; trust services providers, microfinance institutions and providers of ancillary services to the financial sector.
Amended: April 2013Rulebook Contents (Overview)
UG-2.1.3
Except for Volume 5, 6 and 7, the basic structure of each Rulebook is the same. Each Volume starts with a contents page and an introduction containing a User's Guide and Executive Summary. Subsequent material is organised underneath the following headings:
(a) High-level Standards;(b) Business Standards;(c) Prudential requirements;(d) Reporting Requirements;(e) Enforcement and Redress; and, where appropriate,(f) Sector Guides.Amended: April 2013UG-2.1.4
Volume 5 is organised by the Category of specialised firm concerned, whilst Volume 6 by subject area (authorised exchanges; the offering of securities etc).
UG-2.1.5
The material in Volumes 1–4 is contained in Modules, each covering a specific area of requirements (e.g. capital). In turn, each Module is divided into Chapters, Sections and Paragraphs, as detailed below.
Amended: April 2013UG-2.1.6
Each Volume has its own appendix Volume containing relevant reporting and authorisation forms; a glossary; and any supplementary information. In all cases, the main Volume is called 'Part A' and the appendix Volume is called 'Part B'.
UG-2.2 UG-2.2 Volume Structure
Modules
UG-2.2.1
Rulebook Volumes are subdivided into Modules, arranged in groups according to their subject matter, underneath headings (such as those listed in Paragraph UG-2.1.3 above).
UG-2.2.2
Each Module in a Volume is referenced using a two or three-letter code, which is usually a contraction or abbreviation of its title. These codes are used for cross-referencing within the text.
Chapters
UG-2.2.3
Each Module consists of Chapters, categorised into two types:
• Standard introductory Chapters (referenced with a letter: e.g. UG-A); and• Chapters containing the substantive content of the Module (referenced with a number: e.g. CA-1, ML-2, etc.)UG-2.2.4
The introductory Chapters summarise the purpose of the Module, its history (in terms of changes made to its contents) and, where relevant, lists previously issued circulars and regulations that were replaced by the Rulebook Module. A separate introductory Chapter also prescribes the scope of application of the Module's requirements.
Sections and Paragraphs
UG-2.2.5
Chapters are further sub-divided into Sections: these extend the Chapter numbering (e.g. FC-1.1, FC-1.2, FC-1.3 etc). In turn, Sections are sub-divided into Paragraphs; these extend the Chapter and Section numbering (e.g. FC-1.1.1, FC-1.1.2, FC-1.1.3 etc.). Where appropriate, sub-Section headings may be used, to guide the reader through a Section; sub-Section headings are italicised and unnumbered, and act purely as an indicator (without limitation) as to the contents of the Paragraphs that follow.
Table of Contents
UG-2.2.6
Each Volume's contents page lists all the Modules contained within it (Part A) and the information contained in the relevant appendix Volume (Part B).
UG-2.2.7
The contents page of each Module lists the Chapters and Sections it contains, and the latest version date of each Section in issue.
UG-2.3 UG-2.3 Format and Page Layout
Headers
UG-2.3.1
The top of each page in the Rulebook identifies the Volume, Module and Chapter in question.
Footers
UG-2.3.2
The bottom of each page in the Rulebook (on the left hand side) identifies the Module in question, its Section and page number. Page numbering starts afresh for each Section: the total number of pages in each Section is shown as well as the individual page number. The bottom right hand side shows an end-calendar quarter issue date. The contents page for each Module, and each Section in a Module, are each given their own issue date. In addition, the Module contents page lists the latest issue date for each Section in that Module. The contents page thus acts as a summary checklist of the current issue date in force for each Section. Further explanation is provided in Section UG-3.1 below.
Defined Terms
UG-2.3.3
Defined terms used in the Rulebook are underlined. Each Volume has its own glossary listing defined terms and giving their meaning. Definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.
Cross-references
UG-2.3.4
Any cross-references given in a text state the Module code, followed (where appropriate) by the numbering convention for any particular Chapter, Section or Paragraph being referred to. For example, the cross-reference FC-1.2.3 refers to the third Paragraph in the second Section of the first Chapter of the Financial Crime Module. Many references will be quite general, referring simply to a particular Module, Chapter or Section, rather than a specific Paragraph.
Text Format
UG-2.3.5
Each Paragraph is assigned a complete reference to the Module, Chapter, and Section, as well as its own Paragraph number, as explained in Paragraph UG-2.3.4 above. The format of the Paragraph reference and text indicates its status as either a Rule or Guidance, as explained in Paragraph UG-1.2.4 above.
UG-2.3.6
When cross-referring to specific Paragraphs, and it is important to make clear the status of the Paragraph in question as a Rule or Guidance, then the words 'Rule' or 'Guidance' may be used instead of 'Paragraph', followed by the reference number (e.g. 'As required by Rule FC-1.1.1, licensees must...').
UG-3 UG-3 Rulebook Maintenance and Access
UG-3.1 UG-3.1 Rulebook Maintenance
Quarterly Updates
UG-3.1.1
If changes to the Rulebook are required, these will usually only be made every quarter, in early January, April, July and October (the only exceptions being when changes are urgently required). This way, users are generally aware when to expect any changes. Not every quarter will necessarily see changes being made, however.
UG-3.1.2
When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page. The contents page for each amended Module is also updated: the table of contents is changed to show the new version date for each amended Section (in the 'Date Last Changed' column), and the contents page itself is also given its own new version date in the bottom right-had corner. The Module contents pages thus act as a checklist for hard-copy users to verify the current version dates for each Section in that Module.
UG-3.1.3
A summary of any changes made to a Module is included in the Module History Section of each Module. The table summarises the nature of the change made, the date of the change, and the Module components and relevant pages affected. The Module History can thus be used to identify which pages were updated within individual Sections.
UG-3.1.4
The website version of the Rulebook acts at all times as the definitive version of the Rulebook. Any changes are automatically posted to the CBB website, together with a summary of those changes. Licensees are in addition e-mailed every quarter, to notify them of any changes (if any). Hard-copy users are invited to print off the updated pages from the website to incorporate in their Rulebook in order to keep it current.
UG-3.1.5
Capital market participants should note that the requirements contained in Volume 6 of the CBB Rulebook are additional to those contained in other Rulebook Volumes. Thus, market participants licensed as investment firms (for example) are required to comply with their license requirements contained in Volume 4, in addition to requirements contained in Volume 6 that apply to their capital markets activities.
Changes to Numbering
UG-3.1.6
In order to limit the knock-on impact of inserting or deleting text on the numbering of text that follows the change, the following conventions apply:
(a) Where a new Paragraph is to be included in a Section, such that it would impact the numbering of existing text that would follow it, the Paragraph retains the numbering of the existing Paragraph immediately preceding it, but with the addition of an "A"; a second inserted Paragraph that follows immediately afterwards would be numbered with a "B", and so on.(b) For example, if a new Paragraph needs to be inserted after UG-3.1.6, it would be numbered UG-3.1.6A; a second new Paragraph would be numbered UG-3.1.6B, and so on. This convention avoids the need for renumbering existing text that follows an insertion. The same principle is applied where a new Section or a new Chapter needs to be inserted: for example, UG-3.1A (for a new Section), and UG-3A (for a new Chapter)(c) Where a Paragraph is deleted, then the numbering of the old Paragraph is retained, and the following inserted in square brackets: 'This Paragraph was deleted in [April 2007].' (The date given being the actual calendar quarter date of the deletion.) The same principle is applied with respect to Sections and Chapters.UG-3.1.7
Where many such changes have built up over time, then the CBB may reissue the whole Section, Paragraph, Chapter or even Module concerned, consolidating all these changes.
UG-3.2 UG-3.2 Rulebook Access
Availability
UG-3.2.1
The Rulebook is available on the CBB website, on CD-ROM and in hard copy. Order forms for CD-ROMs and hard copies are available on the CBB website or from the Licensing & Policy Directorate of the CBB; a copy is also attached to this Section. Contact details are as follows:
Rulebook Section
Licensing & Policy Directorate
Central Bank of Bahrain
P.O. Box 27
Manama
Kingdom of Bahrain
Tel: +973-17 547 413
Fax: +973-17 530 228
E-mail: rulebook@cbb.gov.bh
Web: www.cbb.gov.bhQueries
UG-3.2.2
Questions regarding the administration of the Rulebook (e.g. ordering additional copies, website availability, the updating of material etc.) should be addressed to the Rulebook Section of the Regulatory Policy Unit:
Rulebook Section
Regulatory Policy Unit
Central Bank of Bahrain
P.O. Box 27
Manama
Kingdom of BahrainTel: +973-17 547 413
Fax: +973-17 530 228
E-mail: rulebook@cbb.gov.bh
Web: www.cbb.gov.bhQuestions regarding interpretation of the policy and requirements contained in the Rulebook should be addressed to the licensee's regular supervisory point of contact within the CBB.
Amended: April 2020
Amended: April 2013ANNEX CBB Rulebook Order Form [This form was deleted in April 2013]
Deleted: April 2013ES — Executive Summary
(to be issued)
Institutions
MAE — Markets and Exchanges
MAE-A MAE-A Introduction
MAE-A.1 MAE-A.1 Purpose
Executive Summary
MAE-A.1.1
Module MAE sets out the Central Bank of Bahrain's regulatory framework governing
licensed exchanges andlicensed market operators (other trading instruments platforms) operating in or from the Kingdom of Bahrain.MAE-A.1.2
The MAE Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of
licensed exchanges andlicensed market operators in the Kingdom of Bahrain. It sets out the CBB requirements for their authorisation, the initial as well as ongoing compliance requirements.MAE-A.1.3
The key principles underlying the approach of the CBB in this Module aim:
(a) To promote fair, orderly and transparentmarkets ;(b) To facilitate efficientmarkets for the allocation of capital and the transfer of risks;(c) To reduce systemic risk;(d) To detect and deter manipulation and other unfair trading practices; and(e) To maintain integrity of trading through fair and equitable rules that strike an appropriate balance between the demands of differentmarket participants .MAE-A.1.4
Persons or entities undertaking functions falling within the meaning oflicensed exchanges andlicensed market operators require prior CBB approval. MAE-B.2 provides the definitions forlicensed exchanges andlicensed market operators which are impacted by this Module. These include entities providing the services including those:(a) That provide a platform through which the exchange ofsecurities takes place;(b) Which provide listings ofsecurities for trading;(c) Which provide trade matching services, as these services may result in a transaction between investors; and(d) Which provide a service which leads an investor to the reasonable expectation that they may trade insecurities .MAE-A.1.4A
[This Parapgraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Legal Basis
MAE-A.1.5
Article 4(4) and Part 2 of the CBB Law provides the power of the CBB to license and exercise regulatory control over financial institutions providing regulated services stated in Article 39, including
markets and exchanges.MAE-A.1.6
As per Article 39(b) of the CBB Law, the CBB shall issue regulations specifying the regulated services. The operation of a
licensed market operator or alicensed exchange is hereby specified as one of the regulated services which require licensing pursuant to Article 40 and Article 44 of the CBB Law.MAE-A.1.7
This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.
Added: April 2016MAE-A.1.8
This Module contains Resolution No (1) of 2007 (issued under Article 180 of the CBB Law) amended by Resolution No (26) of 2010 and further amended by Resolution No (1) of 2016 with respect to determining fees categories due for licensees and services provided by the CBB.
Added: April 2016MAE-A.2 MAE-A.2 Module History
Evolution of Module
MAE-A.2.1
This Module was first issued in October 2008. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: April 2013MAE-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes MAE-1.1.4 to MAE-1.1.6 04/2013 References added to requirements under Resolution No.(16) for the year 2012. MAE-1.2.4 04/2013 Updated name change to Form 3. MAE-1.9.1 and MAE-1.9.1A 04/2013 Provided details of annual fee due to the CBB. MAE-2.4.3 and MAE-2.4.4 04/2013 Added reference to report institutional information (IIS) to the CBB. MAE-5.3.12 04/2013 Added reference to Form 3: Application for Approved Person Status MAE-5.3 04/2013 Expanded the scope of this Section to include all approved persons occupying controlled functions and the various related Rules and Guidance. MAE-1.9 04/2014 Clarified Rules and guidance on annual license fees. Module MAE 04/2016 Various minor corrections to clarify language and link defined terms to glossary. MAE-A.1.7 04/2016 Legal basis updated to reflect Resolution No (23) of 2015. MAE-2.1.1 and MAE-2.1.1A 04/2016 Added requirements dealing with shareholders' meetings. MAE-5.3 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons. MAE-5.3.2A 04/2016 New Paragraph added to ensure segregation of responsibilities in licensees' staffing arrangements. MAE-B.2 07/2016 Section deleted and moved to Glossary. MAE-1.8.4 07/2016 Corrected cross reference. MAE-1.8.6, MAE-4.3.3, MAE-5.4.5, MAE-5.4.7, MAE-6.1.4, MAE-6.1.8, 07/2016 Changed from Rule to Guidance. MAE-1.9.1 07/2016 Deleted legal reference as already included under MAE-A.1.8 MAE-2.1.1 07/2016 Corrected wording of Subparagraphs. MAE-2.3.10 07/2016 Added due date for publication requirement. MAE-2.3.11 07/2016 Clarified accounting standards to be used. MAE-1.10.2 07/2017 Added Paragraph to clarify the cost of publication. MAE-1.10.3 07/2017 Added Paragraph on means of publication. MAE-A.1.4A 10/2017 Added a new Paragraph on Crowd funding platform operators. MAE-A.4.3 10/2017 Amended Paragraph to include crowdfunding platform operator. MAE-B.1.3 10/2017 Added a new Paragraph. MAE-2-11 10/2017 Added a new Section to Introduce new rules for licensed equity crowdfunding platform operators. MAE-2-12 10/2017 Added a new Section on new rules for licensed equity crowdfunding platform operators. MAE-5.3.7B 04/2018 Amended Paragraph. MAE-2.11.17 10/2018 Amended Paragraph to further clarify the scope of exemption. MAE-A.3.9 01/2019 Added a new Paragraph on market making. MAE-2.11.19 01/2019 Deleted Paragraph. MAE-2.11.29A 01/2019 Added a new Paragraph on Cooling-off Period for the Crowd Funding. MAE-2.12.3 01/2019 Amended Paragraph. MAE-4.6 01/2019 Added a new Section on registration of market makers. MAE-1.10.1 10/2019 Amended Paragraph and changed from Rule to Guidance. MAE-2.1.1A 10/2020 Added a new Paragraph on Provision of Financial Services on a Non-discriminatory Basis. MAE-A.1.4A 04/2022 Deleted Paragraph. MAE-A.4.3 04/2022 Deleted Paragraph. MAE-B.1.3 04/2022 Deleted Paragraph. MAE-2.11 & MAE-2.12 04/2022 Deleted Sections and replaced with Module CFP requirements in Volume 5 Ancillary Service Providers. Superseded Requirements
MAE-A.2.3
This Module supersedes the following provisions contained in Circulars, or any other regulatory instruments:
Circular/Other Ref. Provisions Subject MOU between CBB and BSE All Supervision of BSE BSE Internal Regulation Article 5(4) Registration of Brokers and Market Makers and Listing of Companies. Article 5(4) will be superseded only in so far as the board acts not " in accordance with a resolution to be issued by the Minister", but rather "in accordance with the requirements of Module MAE". Article 5(16) Determination of Brokers' Commission
BSE may determine its own fees and commissions, but this will be done by The Board and not through the Minister, and shall be included in the rules of the BSE to be approved by the CBB in terms of this Module.Articles 46 & 49 Final accounts and auditing. The first sentence of Article 46 and the whole of Article 49 is superseded by MAE-2.3 MAE-A.3 MAE-A.3 Interaction with Other Modules
MAE-A.3.1
Persons wishing to act as aClearing House or aDepository should refer to Module CSD (Clearing, Settlement and Central Depository) which sets forth the CBB requirements for the operating of and licensing requirements of aClearing House and/orDepository , as well as Module MIR (Market Intermediaries and Representatives).Amended: April 2016MAE-A.3.2
Issuers wishing to seek approval to list
securities on exchanges licensed under this Module should refer to Resolution No (17) of 2012 regarding the Listing and Trading of Securities and Financial Instruments in a Licensed Exchange issued pursuant to Article 86 of the CBB Law which sets forth the CBB requirements for the listing ofsecurities onlicensed exchanges .Amended: April 2016MAE-A.3.3
Persons wishing to list or trade in securities on exchanges licensed under this Module should refer to Resolution No. (1) of 2004 with Respect to Directives Relating to the Prevention and Prohibition of Money Laundering at the Bahrain Stock Exchange.MAE-A.3.4
Licensed exchanges must in addition to complying with the business standards in this Module, refer to and comply with Module HC (High-level Controls) outlining corporate governance requirements.Amended: April 2016MAE-A.3.5
Licensed exchanges andlicensed market operators must comply with the provisions of Module MIE (Market Surveillance, Investigation and Enforcement), Module MAM (Prohibition of Market Abuse and Manipulation), Module DRA (Dispute Resolution, Arbitration and Disciplinary Proceedings) and Module AML (Anti-Money Laundering & Combating Financial Crime).Amended: April 2016MAE-A.3.6
[This Paragraph was deleted in April 2016.]
Deleted: April 2016MAE-A.3.7
[This Paragraph was deleted in April 2016.]
Deleted: April 2016MAE-A.3.8
Licensed exchanges must in addition implement and comply with the Disclosure Standards issued on 3rd December 2003 and available on the CBB Website.Added: April 2016MAE-A.3.9
Licensed exchanges ,licensed market operators ,market makers andissuers must in addition to complying with themarket making provision under this Module refer to and comply with Module MIR (Market Intermediaries and Representatives) which sets forth the CBB requirements formarket making .Added: January 2019MAE-A.4 MAE-A.4 Division of Responsibilities
MAE-A.4.1
A clear division of responsibilities between CBB as the regulator and the
licensed exchanges or thelicensed market operators as a self regulatory organisation (SRO) is required:(a) To maximise the regulatory effectiveness;(b) To permit flexibility to thelicensed exchanges or thelicensed market operators in their functioning;(c) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations; and(d) To minimise the regulatory cost.Amended: April 2016MAE-A.4.2
As a regulator, CBB's role is as follows:
(a) Regulatory supervision;(b) Maintaining and promoting fairness, efficiency and transparency within the capitalmarket ;(c) Acting as an enforcement agency with powers to investigate and take administrative, civil or criminal actions as it may deem appropriate;(d) Approving the rules, by-laws and regulations of thelicensed exchanges or thelicensed market operators , whereby any change in the rules, by-laws and regulations of thelicensed exchange or thelicensed market operator would need prior approval of CBB; and(e) Licensing, supervision, inspection, investigation and enforcement.Amended: April 2016MAE-A.4.3
The
licensed exchange or thelicensed market operator established as an SRO must comply with the requirements laid down under law as well as by the CBB Law, this Module and the other applicable laws and regulations.Amended: April 2022
Amended: October 2017
Amended: April 2016MAE-A.4.4
As an SRO, the main objective of the exchange or the operator is to promote:
(a) Fairness and investor protection;(b) Fair access tomarket facilities and information;(c) The provision of timely and accessible relevantmarket data; and(d) The efficient regulation of its members.Amended: April 2016MAE-B MAE-B Purpose
MAE-B.1 MAE-B.1 Scope
MAE-B.1.1
This Module shall apply to
markets operated by alicensed exchange orlicensed market operator in or from the Kingdom of Bahrain for the trading ofsecurities , including commodities and/orfutures contracts .Amended: April 2016MAE-B.1.2
Article 186 of the CBB Law states that the Bahrain Bourse (previously referred to as the Bahrain Stock Exchange (BSE)) is to be regarded as a
licensee of the CBB. Accordingly all rules and regulations applicable tomarkets and exchanges will be applicable to the Bahrain Bourse.Amended: April 2016MAE-B.1.3
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-B.2 Definitions
[This Section was deleted and moved to the Glossary under Part B in July 2016.]
Deleted: July 2016MAE-1 MAE-1 Licensing
MAE-1.1 MAE-1.1 Requirement to be Licensed
MAE-1.1.1
No
person shall establish or operate amarket , or hold himself out as operating amarket in or from the Kingdom of Bahrain, unless theperson is:(a) Alicensed exchange ;(b) Alicensed market operator ; or(c) Anexempt exchange ormarket operator.Amended: April 2016MAE-1.1.2
No
person in the Kingdom of Bahrain shall hold himself out:(a) As alicensed exchange unless he is alicensed exchange ; or(b) As alicensed market operator unless he is alicensed market operator .MAE-1.1.3
Except with the written approval of the CBB, no
person other than a licensed orexempt exchange shall take or use, or have attached to or exhibited at any place:(a) The title or description "securities exchange", "stock exchange", "futures exchange" or "derivatives exchange" in any language; or(b) Any title or description which resembles a title or description referred to in Subparagraph MAE-1.1.3 (a).Amended: April 2016MAE-1.1.4
No
person may market anyfinancial services in the Kingdom of Bahrain unless:(a) Allowed to do by the terms of a license issued by the CBB;(b) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or(c) Has obtained the express written permission of the CBB to offerfinancial services .Added: April 2013MAE-1.1.5
In accordance with Resolution No.(16) for the year 2012 and for the purpose of Paragraph MAE-1.1.4, 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.Added: April 2013MAE-1.2 MAE-1.2 Application for License
MAE-1.2.1
A
person may apply to the CBB to be:(a) Licensed as alicensed exchange ;(b) Licensed as alicensed market operator ; or(c) Anexempt exchange orexempt market operator .MAE-1.2.2
Unless otherwise approved by the CBB, the exchange shall be established as a joint stock company subject to the Commercial Company Law 2001.
MAE-1.2.3
Where the entity is not a joint stock company, the CBB may impose other structural and disclosure requirements.
MAE-1.2.4
An application for approval as a
licensed exchange orlicensed market operator under Article 39 of the CBB Law shall be made in Form 1 (Application for Approval as alicensed exchange orlicensed market operator ) and shall be lodged with the CBB together with:(a) Form 2 (Information on Shareholders and Subsidiaries) and Form 3 (Application for Approved Person Status);(b) Any relevant annex and information specified in those forms;(c) A non-refundable prescribed application fee of BD100;(d) A business plan setting forth the internal controlling procedures of the enterprise;(e) A business plan containing a budgeted accounting plan for the first three business years;(f) Memorandum and Articles of Association of the corporation, copies of the by-laws, its constitution and powers of management and the manner in which its business is proposed to be transacted;(g) Policies and procedures for all the exchange andmarket operations;(h) The proposed organisation structure and the powers and duties of the officials of the exchange ormarket operator;(i) The criteria for admission into thelicensed exchange or the operator of various classes ofmembers , the qualifications for membership, and the exclusion, suspension, expulsion and readmission ofmembers therefrom or thereto;(j) A description of the proposed trading and settlement system;(k) Arrangements for risk management, compliance and internal controls;(l) Where activities would be outsourced, copies of contracts and arrangements for oversight of their activities; and(m)Business rules covering membership including capital requirements, instruments to be admitted to trading and listing, trading and execution rules, conflicts of interest requirements, professional standards,clearing and depository rules , data transmission,market conduct including avoidance ofmarket abuse, compliance arrangements, and such other rules as may be required by the CBB.Amended: April 2013MAE-1.2.5
The applications must include evidence that:
(a) Any trading conducted will operate in an orderly, transparent and fair manner;(b) Thelicensed exchange orlicensed market operator will be subject to regulation by the CBB;(c) Thelicensed exchange orlicensed market operator has taken adequate measure to prudently manage any risks associated with its business and operations;(d) Thelicensed exchange orlicensed market operator , in discharging its obligations, will not act contrary to the interests of the public, the investing public, or to the requirements of the CBB;(e) Thelicensed exchange orlicensed market operator will enforce compliance by itsmembers with itsbusiness rules andlisting rules ;(f) Thebusiness rules andlisting rules of thelicensed exchange orlicensed market operator make satisfactory provisions for: an orderly, transparent and fairmarket trading through its facilities; and the proper rules and supervision of itsmembers ; and(g) Thelicensed exchange orlicensed market operator has sufficient financial, human, and technical resources to establish and operate a fair and efficient system formarket trading; meet contingencies or disasters criteria; and provide adequate trading instruments arrangements.MAE-1.2.6
The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.
MAE-1.2.7
The CBB may refuse to accept any application if:
(a) It is not completed in accordance with this Module; or(b) It is not accompanied by the relevant fee.MAE-1.2.8
Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner as the CBB deems fit.
Amended: April 2016MAE-1.2.9
The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.
MAE-1.3 MAE-1.3 Licensing of Exchanges and Market Operators
MAE-1.3.1
The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.
MAE-1.3.2
The CBB may grant an 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.
Amended: April 2016MAE-1.3.2A
An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Industry and Commerce unless it receives the final approval from the CBB.
Added: April 2016MAE-1.3.3
The operations of the
licensed exchange orlicensed market operator may only commence after the CBB grants the license to the applicant.Amended: April 2016MAE-1.3.4
The CBB may license a
person as alicensed exchange or license anoverseas exchange as alicensed market operator , subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing, including conditions or restrictions relating to:(a) The activities that theperson may undertake;(b) Thesecurities orfutures contracts that may be traded on anymarket established or operated by theperson ; and(c) The nature of the investors orparticipants who may use, invest in or participate in thesecurities orfutures contracts traded on anymarket established or operated by theperson .Amended: April 2016MAE-1.3.5
The CBB may, at any time, by notice in writing to the
person , vary any condition or restriction or impose such further condition or restriction as it may deem fit.Amended: April 2016MAE-1.3.6
A
licensed exchange or alicensed market operator shall, for the duration of the license, satisfy all conditions and restrictions that may be imposed on it.MAE-1.3.7
Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.
MAE-1.4 MAE-1.4 Exemption of Exchanges and Market Operators
MAE-1.4.1
The CBB may:
(a) Exempt anyperson operating anymarket from the requirement under MAE-1.1 to be alicensed exchange or alicensed market operator ;(b) Declare thatperson to be anexempt market operator , by order published in the Gazette; and(c) Impose such conditions or restrictions relating to the exemption as the CBB may deem fit, by notice in writing to thatperson .Amended: April 2016MAE-1.4.2
An application to be exempted from the requirement under MAE-1.2 to be a
licensed exchange or alicensed market operator shall be made in Form 4.MAE-1.4.3
The CBB may exempt an applicant referred to in MAE-1.4.1 from the requirement under MAE-1.2 if, in the opinion of the CBB, the objectives specified in MAE-1.2.5 can be achieved without regulating the applicant as a
licensed exchange or alicensed market operator .MAE-1.4.4
An application made under MAE-1.4.1 shall be accompanied by a non-refundable prescribed application fee of BD100, which shall be paid in the manner specified by the CBB.
Amended: April 2016MAE-1.4.5
The CBB may require an applicant to furnish it with such information or document as the CBB considers necessary in relation to the application.
MAE-1.4.6
The CBB may, by notice in writing, impose on a
person exempted under MAE-1.4.3 such conditions or restrictions relating to the exemption as the CBB may deem fit, including conditions or restrictions relating to:(a) The activities that theperson may undertake;(b) Thesecurities orfutures contracts that may be traded on anymarket established or operated by theperson ; and(c) The nature of the investors orparticipants who may use, participate or invest in thesecurities orfutures contracts traded on anymarket established or operated by theperson .Amended: April 2016MAE-1.4.7
The CBB may, at any time, by notice in writing to a
person exempted under MAE-1.4.3, vary any condition or restriction referred to in MAE-1.4.6 or impose such further condition or restriction relating to the exemption as the CBB may think fit.MAE-1.4.8
The CBB shall give notice in the Gazette of any
person exempted under MAE-1.4.3, and such notice may include the conditions or restrictions imposed by the CBB on theperson under MAE-1.4.6 in relation to thesecurities orfutures contracts that may be traded on anymarket established or operated by theperson .Amended: April 2016MAE-1.5 MAE-1.5 Power of CBB to Revoke Exemption
MAE-1.5.1
The CBB may revoke any exemption granted to a
person under MAE-1.4.3 if:(a) Theperson does not commence operating itsmarket or, where it operates more than onemarket , all of itsmarkets , within 6 months from the date on which it was granted the exemption;(b) Theperson ceases to operate itsmarket or, where it operates more than onemarket , all of itsmarkets ;(c) Theperson contravenes:-(i) Any condition or restriction relating to the exemption;(ii) Any direction issued to it by the CBB; or(iii) Any provision of the CBB Law or Regulations;(d) The CBB is of the opinion that theperson has operated in a manner that is contrary to the interests of the public;(e) Theperson is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;(f) A receiver, a receiver and manager or an equivalentperson has been appointed, whether in Bahrain or elsewhere, in relation to, or in respect of, any property of theperson ;(g) Theperson has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly;(h) The CBB is of the opinion that theperson would be more appropriately regulated as alicensed exchange or alicensed market operator ; or(i) Any information or document provided by theperson to the CBB is false or misleading.Amended: April 2013MAE-1.5.2
Subject to MAE-1.5.3, the CBB shall not revoke under MAE-1.5.1 any exemption granted to a
person without giving theperson an opportunity to be heard.MAE-1.5.3
The CBB may revoke any exemption granted to a
person on any of the following grounds without giving theperson an opportunity to be heard:(a) Theperson is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;(b) A receiver, a receiver and manager or an equivalentperson has been appointed, whether in Bahrain or elsewhere, in relation to, or in respect of any property of theperson ; or(c) Theperson has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud and dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.MAE-1.5.4
For the purposes of MAE-1.5.1(b), a
person shall be deemed to have ceased to operate itsmarket if:(a) It has ceased to operate themarket for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or(b) It has ceased to operate themarket under a direction issued by the CBB.MAE-1.5.5
Any revocation under MAE-1.5.1 of an exemption granted to a
person shall not operate so as to:(a) Avoid or affect any agreement, transaction or arrangement entered into on amarket operated by theperson , whether the agreement, transaction or arrangement was entered into before or after the revocation of the exemption; or(b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.Amended: April 2013MAE-1.5.6
The CBB shall give notice in the Gazette of any revocation of an exemption referred to in MAE-1.5.1.
MAE-1.6 MAE-1.6 Criteria for Granting License
MAE-1.6.1
The CBB may license a
person as alicensed exchange orlicensed market operator if:(a) The CBB is satisfied that the establishment of amarket or exchange to be operated by aperson will;(i) Develop the financial sector and enhance confidence therein; and(ii) Protect the interests of investors in themarket and exchanges and enhance the Kingdom's credibility as an international financial centre; and(b) The CBB is satisfied that theperson , having applied to be alicensed exchange orlicensed market operator under this Module, is able to comply with the obligations or requirements imposed onlicensed exchanges orlicensed market operators .Amended: April 2013MAE-1.6.2
The CBB may have regard to the following matters in determining whether a
licensed exchange orlicensed market operator has satisfied the criteria referred to in Subparagraphs MAE-1.6.1 (a) or (b):(a) The size and structure, or proposed size and structure, of themarket to be operated by the applicant;(b) The nature of the services provided, or to be provided, by themarket to be operated by the applicant;(c) The nature of thesecurities orfutures contracts traded, or to be traded, on themarket to be operated by the applicant;(d) The nature of the investors orparticipants , or proposed investors orparticipants , who may use or have an interest in themarket to be operated by the applicant;(e) Whether the applicant is regulated by the CBB under this Module or any other law;(f) That the rules and by-laws of an applicant are in conformity with such conditions as may be prescribed with a view to ensure fair dealing and to protect investors;(g) That the applicant is willing to comply with any other conditions (including conditions as to the number ofmembers ) which the CBB, having regard to the the nature of thesecurities dealt with by it, may impose;(h) The proposed trading and settlement systems comply with up-to-date industry standards;(i) Thepersons who may be affected in the event that the applicant, or themarket to be operated by the applicant, runs into difficulties;(j) Where the head office or principal place of business of the applicant is outside Bahrain, whether the applicant in the country or territory in which the head office or principal place of business of the applicant is situated, is subject to requirements and supervision comparable to those in the Kingdom of Bahrain;(k) The interests of the public; and(l) Any other circumstances that the CBB may consider relevant.Amended: April 2016MAE-1.6.3
The applicant must additionally be able to demonstrate to the CBB and the CBB must be satisfied that it has:
(a) The financial resources, and the management and human resources with appropriate experience, necessary for the operation of amarket or exchange;(b) Made arrangements for the proper supervision of all transactions effected through themarket or exchange so as to ensure compliance with its rules;(c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the records of transactions effected through themarket or exchange;(d) Insurance, a guarantee or compensation fund or other warranty plans in place to enable it to provide compensation, subject to thebusiness rules , to clients; and(e) Made provisions, to the satisfaction of the CBB, for the clearing and settlement of transactions effected through themarket or exchange and for the management of trade and settlement risk.MAE-1.6.4
In addition, the CBB may, for the purposes of licensing an
overseas exchange as alicensed market operator , have regard in addition to any criteria prescribed under Paragraph MAE-1.6.1 whether adequate arrangements exist for cooperation between the CBB and the financial services regulator responsible for the supervision of the operator in the country or territory in which the head office or principal place of business of the operator is situated.MAE-1.6.5
In considering whether it is satisfied that an
overseas exchange has met the requirements mentioned in Paragraph MAE-1.6.1, the CBB may have regard to:(a) The relevant laws and practices of the country or territory in which the head office or principal place of business of the operator is situated; and(b) The rules and practices of the operator.MAE-1.7 MAE-1.7 Surrender of License or Cessation of Business
MAE-1.7.1
A
licensed exchange orlicensed market operator which intends to cease operating itsmarket or, where it operates more than onemarket , all of itsmarkets , must apply to the CBB to surrender its approval as alicensed exchange orlicensed market operator , as the case may be.Amended: April 2016MAE-1.7.2
The CBB may, subject to MAE-1.8.1 cancel the license if it is satisfied that the
licensed exchange orlicensed market operator referred to in MAE-1.7.1 has ceased operating itsmarket or all of itsmarkets , as the case may be and that there are no pending obligations of thelicensed exchange orlicensed market operator or contracts traded.MAE-1.7.3
The
licensed exchange orlicensed market operator shall publish a notice of its intention to cease to operate itsmarket in 2 daily newspapers, one in Arabic and the other in English, in Bahrain.MAE-1.7.4
Any objections received from any
member ,user orparticipant of thelicensed exchange orlicensed market operator shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the exchange or the operator.MAE-1.7.5
The notice referred to in Paragraph MAE-1.7.3 shall be subject to the approval of the CBB and shall be published at least 30 days prior to the cessation taking effect.
MAE-1.8 MAE-1.8 Cancellation or Amendment of License
MAE-1.8.1
The CBB may cancel any license of a
person as alicensed exchange orlicensed market operator if:(a) There exists criteria under MAE-1.2 that thelicensed exchange orlicensed market operator does not meet and on which grounds the CBB would refuse an application;(b) Thelicensed exchange orlicensed market operator does not commence operating itsmarket or, where it operates more than onemarket , all of itsmarkets within 6 months from the date on which it was granted the license.(c) Thelicensed exchange orlicensed market operator ceases to operate itsmarket or, where it operates more than onemarket , all of itsmarkets .(d) Thelicensed exchange orlicensed market operator contravenes:(i) Any condition or restriction applicable in respect of its license;(ii) Any direction issued to it by the CBB;(iii) Any provision in this Module; or(iv) Any other CBB law, rule or regulation;(e) Thelicensed exchange orlicensed market operator operates in a manner that is in the opinion of the CBB, contrary to the interests of the public oruser ; and(f) Any information or document knowingly or willingly provided by thelicensed exchange orlicensed market operator to the CBB is false or misleading.Amended: April 2013MAE-1.8.2
The CBB may not, subject to MAE-1.8.3, cancel any license that was granted to a
licensed exchange orlicensed market operator without giving the opportunity to be heard.MAE-1.8.3
The CBB may cancel a license that was granted to a
licensed exchange orlicensed market operator on any of the following grounds without giving an opportunity to be heard:(a) Thelicensed exchange orlicensed market operator is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;(b) A receiver, a receiver and manager, or an equivalentperson has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of thelicensed exchange orlicensed market operator ; and(c) Thelicensed exchange orlicensed market operator has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.MAE-1.8.4
For the purposes of Subparagraph MAE-1.8.1(c), a
licensed exchange orlicensed market operator shall be deemed to have ceased to operate itsmarket if:(a) It has ceased to operate themarket for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or(b) It has ceased to operate themarket under a direction issued by the CBB.Amended: July 2016
Amended: April 2016MAE-1.8.5
Any cancellation of a license of a
licensed exchange orlicensed market operator referred to in Paragraph MAE-1.8.1 shall not operate so as to:(a) Avoid or affect any agreement, transaction or arrangement entered into amarket operated by the corporation, whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or(b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.MAE-1.8.6
Where the CBB cancels or amends a license of a
licensed exchange orlicensed market operator , notification to thelicensed exchange and an appeal against such a decision shall be governed by Article 48 of the CBB Law.Amended: July 2016MAE-1.9 MAE-1.9 Annual Fees Payable by Licensed Exchange and Licensed Market Operator
MAE-1.9.1
Every
licensed exchange andlicensed market operator must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.Amended: July 2016
Amended: April 2016
Amended: April 2014
Amended: April 2013MAE-1.9.1A
The following fee is currently prescribed for
licensed exchanges andlicensed market operators :Managing and operating markets and systems for trading in securities and financial instruments (fixed) BD15,000 Amended: April 2016
Added: April 2013MAE-1.9.1B
For new
licensees , their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license is granted, is prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.Added: April 2014
MAE-1.9.2
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, should a fee have been paid for that year.
Amended: April 2014
MAE-1.9.3
A
licensed exchange orlicensed market operator failing to comply with Paragraph MAE-1.9.1 may be subject to financial penalties as prescribed by the CBB.Added: April 2016MAE-1.10 MAE-1.10 Publication of the Decision to Grant, Cancel or Amend a License
MAE-1.10.1
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.
Amended: October 2019MAE-1.10.2
For the purpose of Paragraph MAE-1.10.1, the cost of publication of this notice must be borne by the Licensee.
Added: July 2017MAE-1.10.3
The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.
Added: July 2017MAE-1.11 MAE-1.11 Place of Business
MAE-1.11.1
No
licensed exchange orlicensed market operator must, without a prior written approval of the CBB:(a) Open a new place of business in the Kingdom;(b) Close or change an existing place of business in the Kingdom;(c) Open a new place of business abroad if thelicensed exchange orlicensed market operator is not anoverseas exchange ; and(d) The CBB may restrict its approval stipulated in MAE-1.6.1, subject to any other conditions, as it may deem necessary.Amended: April 2016MAE-2 MAE-2 Obligation of Licensed Exchanges and Market Operators
MAE-2.1 MAE-2.1 General Obligations
Licensing Requirements
MAE-2.1.1
A
licensed exchange orlicensed market operator shall, in respect of everymarket it operates:(a) As far as is reasonably practicable, ensure that themarket is fair, orderly and transparent;(b) Manage any risks associated with its business and operations prudently;(c) Not act contrary to the interests of the public, having particular regard to the interests of the investing public;(d) Ensure that access for participation in its facilities is subject to criteria that are fair and objective, and that are designed to ensure the orderly functioning of themarket and to protect the interests of the investing public;(e) Maintainbusiness rules and, where appropriate,listing rules that make satisfactory provision for:(i) A fair, orderly and transparentmarket insecurities and futures contracts that are traded through its facilities; and(ii) The proper regulation and supervision of itsmembers ;(f) Enforce compliance with itsbusiness rules and, where appropriate, itslisting rules ;(g) Have sufficient financial, human and system resources:(i) To operate a fair, orderly and transparentmarket ;(ii) To meet contingencies or disasters; and(iii) To provide adequate security arrangements;(h) Ensure that it appoints or employs fit and properpersons as its chairman, chief executive officer, directors and key management officers;(i) Have a well designed Disaster Recovery Plan in place and the same shall be submitted to the CBB in accordance with Section MAE-2.10;(j) Have the capacity, authority, expertise and resources to enforce compliance by itsmembers , shareholders,users andparticipants with laws, regulations and rules;(k) Ensure that the rules and regulations of the stock exchange are clearly expressed, understandable and readily available to anyone who needs to use them;(l) Ensure that the rules are applied equally to allparticipants without favour or discrimination;(m) Ensure that there is a system in place to record all trades and capture order entry data for surveillance purposes;(n) Ensure that it has a complaints and whistleblowing procedure; and(o) Have an operating manual, including the structure of the licensed exchange or licensed market operator;(p) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders meetings referred to in Subparagraph MAE-2.1.1(r);(q) Ensure that any agenda items to be discussed or presented during the course of meetings which require the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;(r) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and(s) Within a maximum of 15 calendar days of any shareholders' meetings referred to in Subparagraph MAE-2.1.1(r), provide to the CBB a copy of the minutes of the meeting.Amended: July 2016
Amended: April 2016MAE-2.1.1A
Licensed exchanges andlicensed market operators 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.Added: October 2020Notification Requirements
MAE-2.1.2
A
licensed exchange orlicensed market operator shall, as soon as practicable after the occurrence of any of the following circumstances, notify the CBB of the circumstance:(a) Any material change to the information provided by thelicensed exchange orlicensed market operator in its application under MAE-1.2;(b) The carrying on of any business by thelicensed exchange orlicensed market operator other than:(i) The business of operating amarket ;(ii) A business incidental to operating amarket ; or(iii) Such business or class of businesses as the CBB may prescribe;(c) The acquisition by thelicensed exchange orlicensed market operator of a substantial shareholding in a corporation which does not carry on:(i) The business of operating amarket ;(ii) A business incidental to operating amarket ; or(iii) Such business or class of businesses as the CBB may prescribe;(d) Thelicensed exchange orlicensed market operator becoming aware of a financial irregularity or other matter which in its opinion:(i) May affect its ability to discharge its financial obligations; or(ii) May affect the ability of amember of thelicensed exchange orlicensed market operator to meet its financial obligations to thelicensed exchange orlicensed market operator ;(e) Thelicensed exchange orlicensed market operator reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against amember of thelicensed exchange orlicensed market operator ;(f) The licensed exchange or licensed market operator reprimands, suspends, dismisses or otherwise takes disciplinary action against any of its directors, or key management officers or if any director or key management officer is subject to an order or petition of bankruptcy or criminal prosecution;(g) Any civil or criminal legal proceeding instituted against thelicensed exchange orlicensed market operator , whether in Bahrain or elsewhere;(h) Any disciplinary action taken against thelicensed exchange orlicensed market operator by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;(i) Any significant change to the regulatory requirements imposed on thelicensed exchange orlicensed market operator by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;(j) A failure by thelicensed exchange orlicensed market operator to adhere to the trading days, hours or sessions of thelicensed exchange orlicensed market operator ;(k) Any disruption of, delay in, suspension of, or termination in any trading procedure or trading practice of thelicensed exchange orlicensed market operator including those resulting from any system failure;(l) Any other matter that the CBB may specify by notice in writing to thelicensed exchange orlicensed market operator .Amended: April 2013MAE-2.1.3
The CBB may, at any time after receiving a notification referred to in Paragraph MAE-2.1.2 and after providing the
licensed exchange andlicensed market operator an opportunity to be heard, issue directions to thelicensed exchange orlicensed market operator :(a) Where the notification relates to a matter referred to in Subparagraph MAE-2.1.1 (b):(i) To cease carrying on the first-mentioned business referred to in Subparagraph MAE-2.1.1 (b); or(ii) To carry on the first-mentioned business referred to in Subparagraph MAE-2.1.1 (b) subject to such conditions or restrictions as the CBB may impose; or(b) Where the notification relates to a matter referred to in Subparagraph MAE-2.1.1 (c):(i) To dispose of the shareholding referred to in Subparagraph MAE-2.1.1 (c); or(ii) To exercise its rights relating to such shareholding subject to such conditions or restrictions as the CBB may impose, and thelicensed exchange orlicensed market operator shall comply with such directions.Amended: April 2016
Amended: April 2013MAE-2.1.4
Where a circumstance referred to in MAE-2.1.2 has occurred, the
licensed exchange orlicensed market operator shall, in addition to the notification required under Paragraph MAE-2.1.2, within 14 days of the occurrence of the circumstance or such longer period as the CBB may permit, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken at the time of the occurrence, and the subsequent follow-up actions that thelicensed exchange orlicensed market operator has taken or intends to take.Amended: April 2016
MAE-2.1.5
An exchange may levy on its
members ,participants andusers such fees as it may deem necessary in the form of:(a) Membership fees; and/or(b) Listing feesAmended: April 2013MAE-2.1.6
The fees shall be paid quarterly, semi-annually or annually at the discretion of the exchange.
MAE-2.1.7
A
licensed exchange orlicensed market operator shall, within a reasonable period of time prior to entering into negotiations to establish a trading linkage, clearing arrangement or cooperative arrangement with theperson establishing or operating an overseasmarket or clearing facility, notify the CBB of such intent to enter into negotiations.MAE-2.1.8
In Paragraph MAE-2.1.7, "cooperative arrangement" shall not include:
(a) Any joint development of products and services;(b) Any joint marketing efforts between thelicensed exchange and theperson operating an overseasmarket or clearing facility in promoting the services of either entity; or(c) Any memoranda of understanding for the exchange of information.MAE-2.2 MAE-2.2 Obligation to Maintain Proper Records
MAE-2.2.1
Every
licensed exchange orlicensed market operator shall ensure that all relevant books and other information, as may be required by the CBB for the purposes of this Module, be kept for a minimum of 10 years.MAE-2.3 MAE-2.3 Final Accounts and Auditing
MAE-2.3.1
Every
licensed exchange orlicensed market operator shall appoint one or more qualified and experienced external auditors for its accounts for every financial year. A prior written approval by the CBB will be required before appointing an auditor.MAE-2.3.2
If a
licensed exchange orlicensed market operator fails to appoint an auditor within 4 months from the beginning of the financial year, the CBB shall appoint such auditor.MAE-2.3.3
The
licensed exchange orlicensed market operator shall pay the fees of the auditor regardless of the manner in which such auditor is appointed.MAE-2.3.4
An auditor shall not be the chairman or a director in the
licensed exchange orlicensed market operator's board or a managing director, agent, representative or taking up any administrative work therein, or supervising its accounts, or a next of kin to someone who is responsible for the administration or accounts of alicensed exchange orlicensed market operator , or having an extraordinary interest in alicensed exchange orlicensed market operator as the CBB may determine.MAE-2.3.5
If any of the circumstances referred to in Paragraph MAE-2.3.4 occurs after the appointment of the auditor, the
licensed exchange orlicensed market operator must appoint another auditor.Amended: April 2016
MAE-2.3.6
The
licensed exchange orlicensed market operator shall provide the external auditor with all information and assistance necessary for carrying out his duties.MAE-2.3.7
The duties of the auditor shall include the preparation of a report on the final accounts. The report shall contain a statement on whether the
licensed exchange orlicensed market operator's accounts are correct and reflect the actual state of affairs of thelicensed exchange orlicensed market operator according to the auditing standards prescribed by the CBB and whether thelicensed exchange orlicensed market operator has provided the auditor with any required information and clarifications.MAE-2.3.8
The final audited accounts shall be presented to the general meeting of the
licensed exchange orlicensed market operator together with the auditor's report. A copy of these documents shall be sent to the CBB at least 15 days before the date of the general meeting.MAE-2.3.9
If the
licensed exchange orlicensed market operator is a foreign company, a copy of its final audited accounts together with the auditor's report shall be sent to its main office abroad.MAE-2.3.10
Every
licensed exchange orlicensed market operator must, within 3 months following every financial year, send to the CBB and make public its final audited accounts, for all the transactions carried out until year end as well as any other financial statements required by the CBB. Extracts of the final audited accounts shall be published in 2 local daily newspapers, one in Arabic and the other in English, within 60 calendar days from the end of the financial year.Amended: July 2016MAE-2.3.11
Audited financial statements must comply with International Financial Reporting Standards (IFRS)/International Accounting Standards (IAS). For Islamic institutions, audited financial statements must comply with AAOIFI standards or where AAOIFI standards do not cover a subject, IFRS must be followed.
Amended: July 2016MAE-2.4 MAE-2.4 Obligation to Submit Periodic Reports
MAE-2.4.1
A
licensed exchange orlicensed market operator shall submit to the CBB:(a) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a copy of its:(i) Annual report and directors' report; and(ii) Auditor's report;(b) Within 45 days after the end of each of the first 3 quarters of its financial year or such longer period as the CBB may permit, or the preceding quarter, in such form as may be approved by the CBB, a copy of its:(i) Profit and loss accounts; and(ii) Balance sheet;(c) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a report on how thelicensed exchange orlicensed market operator has discharged its responsibilities under the CBB Law and these Rules during that financial year;(d) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a copy of the balance sheet of any fidelity fund of thelicensed exchange prepared in such form as may be approved by the CBB;(e) The following reports relating to the business of thelicensed exchange orlicensed market operator :(i) Prescribed monthly statistics in Form 5 within 10 business days from the end of the month;(ii) Prescribed quarterly statistics in Form 6 within 10 business days from the end of each quarter; and(iii) Where thelicensed exchange is operating a futuresmarket , Form 7 within 10 business days from the end of each month;(f) Such other report as the CBB may require for the proper administration of this Module, at such time or on such periodic basis as may be required by the CBB.Amended: April 2013MAE-2.4.2
The auditor's report referred to in Paragraph MAE-2.4.1 (a)1 shall unless otherwise provided to the CBB by way of a management letter, include the findings and recommendations of the auditors, if any, on the internal controls of the
licensed exchange orlicensed market operator ; and(a) Any provision of this Module;(b) Any direction issued by the CBB under this Module; or(c) Any other relevant laws or regulations.Amended: April 2013IIS Reporting Requirements
MAE-2.4.3
A
licensed exchange orlicensed market operator is required to complete online non-financial information related to its institution by accessing the CBB's institutional information system (IIS). Licensees must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, the licensee must still access the IIS quarterly and confirm the information contained in the IIS. Licensees must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.Added: April 2013MAE-2.4.4
Licensees failing to comply with the requirements of Paragraph MAE-2.4.3 or reporting inaccurate information are subject to financial penalties or other enforcement actions.
Added: April 2013MAE-2.5 MAE-2.5 Obligation to Assist CBB
MAE-2.5.1
A
licensed exchange andlicensed market operator shall provide such assistance to the CBB as the CBB may require for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provisions of:(a) Such books and information:(i) Relating to the business of thelicensed exchange orlicensed market operator ; or(ii) In respect of such dealings insecurities or trading in futures contracts; and(b) Such other information, as the CBB may require for the proper administration of this Module.Amended: April 2013MAE-2.5.2
The CBB may at is discretion:
(a) Call for the provision of additional information about the affairs of the exchange or the operator;(b) Carry out inspections of the office of the exchanges and inspect the books of accounts and other relevant books of the exchange or the operator; and(c) Appoint one or moreperson to inquire into the affairs of the exchange or operator.MAE-2.6 MAE-2.6 Obligation to Maintain Confidentiality
MAE-2.6.1
Subject to Paragraph MAE-2.6.2, a
licensed exchange andlicensed market operator and its officers and employees must maintain, and aid in maintaining the confidentiality of alluser information that:(a) Comes to the knowledge of thelicensed exchange orlicensed market operator , or any of its officers or employees; and(b) Is in possession of thelicensed exchange orlicensed market operator , or any of its officers or employees.Amended: April 2016
MAE-2.6.2
Paragraph MAE-2.6.1 does not apply to:
(a) The disclosure ofuser information for such purposes, or in such circumstances as the CBB may prescribe;(b) Any disclosure ofuser information which is authorised by the CBB to be disclosed or furnished; or(c) The disclosure ofuser information pursuant to any requirement imposed under any law or order of court in the Kingdom of Bahrain.Amended: April 2016
MAE-2.6.3
For the avoidance of doubt, nothing in this Section shall be construed as preventing a
licensed exchange orlicensed market operator from entering into a written agreement with auser which obliges thelicensed exchange orlicensed market operator to maintain a higher degree of confidentiality than that specified in this Section.Amended: April 2016
MAE-2.7 MAE-2.7 Exceptions to Obligation to Maintain Confidentiality
MAE-2.7.1
The obligation to maintain confidentiality shall not apply to the disclosure of
user information by alicensed exchange orlicensed market operator , or its officers or employees for the following purposes or in the following circumstances:(a) The disclosure ofuser information is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;(b) The disclosure ofuser information is permitted for such purpose specified in writing by theuser or, where theuser is deceased, by his appointed personal representative;(c) The disclosure ofuser information is necessary for the execution by thelicensed exchange orlicensed market operator of a transaction in anysecurities or futures contracts or clearing or settlement of a transaction and such disclosure is made only to anotheruser which is:(i) A party to the transaction; or(ii) Amember of alicensed exchange orlicensed market operator , or a designatedclearing house through which that transaction is executed, cleared or settled;(d) The disclosure ofuser information is necessary:(i) In any disciplinary proceedings of thelicensed exchange orlicensed market operator , provided that reasonable steps are taken to ensure thatuser information disclosed to any thirdperson is used strictly for the purpose for which theuser information is disclosed; or(ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;(e) Theuser information disclosed is already in the public domain;(f) The disclosure ofuser information is made in connection with:(i) The outsourcing or proposed outsourcing of any function of thelicensed exchange orlicensed market operator to a third party;(ii) The engagement or potential engagement of a third party by thelicensed exchange orlicensed market operator to create, install or maintain systems of thelicensed exchange orlicensed market operator ; or(iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by thelicensed exchange orlicensed market operator under a contract for service;(g) The disclosure ofuser information is necessary in:(i) An application for a grant of probate or letters of administration or the resealing thereof in relation to the estate of a deceaseduser ; or(ii) The administration of the estate of a deceaseduser , including such disclosure as may be required for this purpose by the relevant authority; or(h) The disclosure ofuser information is made in connection with:(i) In the case where theuser is an individual, the bankruptcy of auser ; or(ii) In the case where theuser is a body corporate, the winding up or receivership of auser .Amended: April 2013MAE-2.7.2
Where
user information is disclosed under MAE-2.7.1 (f), thelicensed exchange orlicensed market operator shall:(a) Maintain a record of the circumstances relating to the disclosure ofuser information referred to in MAE-2.7.1 (f); and the particulars of:(i) In the case of the disclosure of information under MAE-2.7.1 (f), the outsourcing of the function of thelicensed exchange ;(ii) In the case of the disclosure of information under MAE-2.7.1 (f), the engagement of the third party; and(iii) In the case of the disclosure of information under MAE-2.7.1 (f), the appointment or engagement of the auditor, lawyer, consultant or other professional and make that record available for inspection by the CBB;(b) Disclose theuser information only insofar as this is necessary for the relevant purpose; and(c) Take reasonable steps to ensure that theuser information disclosed is used by theperson to whom the disclosure is made strictly for the relevant purpose, and that theuser information is not disclosed by thatperson to any otherperson except with the consent of thelicensed exchange orlicensed market operator .Amended: April 2013MAE-2.7.3
Where disclosure of
user information is permitted to be made for any purpose or in any circumstance under Paragraph MAE-2.7.1 to a body corporate, theuser information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.MAE-2.7.4
In Paragraphs MAE-2.7.2 and MAE-2.7.3, "relevant purpose" means:
(a) In the case of the disclosure of information under Paragraph MAE-2.7.1 (f), facilitating the outsourcing of the function of thelicensed exchange orlicensed market operator ;(b) In the case of the disclosure of information under Paragraph MAE-2.7.1 (f), facilitating the engagement of the third party; and(c) In the case of the disclosure of information under Paragraph MAE-2.7.1 (f), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.MAE-2.8 MAE-2.8 Provision of Information to Investors
MAE-2.8.1
A
licensed exchange orlicensed market operator shall:(a) Make available upon request by; or(b) Publish in a manner that is accessible to, any investor who accesses or potential investor who may access, anymarket that thelicensed exchange orlicensed market operator operates information on:(i) All services of thelicensed exchange orlicensed market operator ;(ii) All products available on themarket operated by thelicensed exchange orlicensed market operator ;(iii) Applicable fees and charges;(iv) Applicable margin requirements; and(v) Any arrangement that may be in place to compensate an investor who suffers pecuniary loss as a result of these activities or insolvency of aparticipant of thelicensed exchange orlicensed market operator .Amended: April 2013MAE-2.8.2
In Paragraph MAE-2.8.1 "investor" means:
(a) In the case where thelicensed exchange is incorporated in Bahrain, any investor, whether in Bahrain or elsewhere; and(b) In the case oflicensed market operators , any investor in Bahrain.MAE-2.9 MAE-2.9 Transmission and Storage of User Information
MAE-2.9.1
A
licensed exchange orlicensed market operator shall take all reasonable measures to maintain the integrity and security of the transmission and storage ofuser information .MAE-2.10 MAE-2.10 Business Continuity Plan
MAE-2.10.1
A
licensed exchange orlicensed market operator shall maintain at all times a plan of action (referred to in this regulation as a business continuity plan) setting out the procedures and establishing the systems necessary to restore fair, orderly and transparent operations of anymarket it operates, in the event of any disruption to the operations of themarket .MAE-2.10.2
A
licensed exchange orlicensed market operator shall review the procedures and systems referred to in MAE-2.10.1 on such regular basis as may be specified in the business continuity plan.MAE-2.10.3
A
licensed exchange orlicensed market operator shall immediately notify the CBB of any activation of its business continuity plan and of any action taken or intended to be taken to restore fair, orderly and transparent operations of anymarket it operates.MAE-2.10.4
A
licensed exchange orlicensed market operator shall, within 14 days or such longer period as the CBB may permit, inform the CBB of any material change to the business continuity plan, and shall submit at the request of the CBB, a copy of the new plan to the CBB.MAE-2.11 MAE-2.11 [This Section has been deleted in April 2022 and replaced with Module CFP requirements in Volume 5 Ancillary Service Providers]
MAE-2.11.1
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.2
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.3
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.4 MAE-2.11.4
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Appointment of Shari'a Advisor
MAE-2.11.5
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.6
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.7
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.8
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.9
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Type of Securities Eligible for Hosting
MAE-2.11.10
[This Paragraph was deleted in April 2022]..
Deleted: April 2022
Added: October 2017MAE-2.11.11
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Permitted Equity Crowdfunding Issuers
MAE-2.11.12
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.13
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.14
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Overseas Equity Crowdfunding Issuers
MAE-2.11.15
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.16
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Limits to Funds Raised
MAE-2.11.17
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Amended: October 2018
Added: October 2017Eligible Investors and Investment Limits
MAE-2.11.18
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.19
[This Paragraph was deleted in January 2019].
Deleted: January 2019
Added: October 2017MAE-2.11.20
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.21
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Disclosure Requirements
MAE-2.11.22
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.23
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Warning Statement
MAE-2.11.24
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.25
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Investor Agreement
MAE-2.11.26
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.27
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Investor Money
MAE-2.11.28
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.29
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Cooling-off Period
MAE-2.11.29A
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: January 2019Segregation of Client Assets
MAE-2.11.30
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.31
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Client Money
MAE-2.11.32
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Record-keeping
MAE-2.11.33
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Compliance
MAE-2.11.34
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.35
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Share Register
MAE-2.11.36
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.37
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.38
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.11.39
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12 MAE-2.12 [This Section has been deleted in April 2022 and replaced with Module CFP requirements in Volume 5 Ancillary Service Providers]
MAE-2.12.1
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.2
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.3 MAE-2.12.3
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Amended: January 2019
Added: October 2017Equity Crowdfunding Offering Statement Disclosure
MAE-2.12.4
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.5
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Offer Period
MAE-2.12.6
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Minimum Subscription
MAE-2.12.7
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.8
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Investment Commitment
MAE-2.12.9
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.10
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.11
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Oversubscription
MAE-2.12.12
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Allotment, Dispatch and Refund
MAE-2.12.13
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.14
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Reporting Requirements
MAE-2.12.15
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.16
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.17
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017Limits on Advertising
MAE-2.12.18
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.19
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-2.12.20
[This Paragraph was deleted in April 2022].
Deleted: April 2022
Added: October 2017MAE-3 MAE-3 Rules of Licensed Exchanges
MAE-3.1 MAE-3.1 General Obligations
MAE-3.1.1
The CBB may prescribe the matters that a
licensed exchange orlicensed market operator shall make provision for in thebusiness rules orlisting rules of thelicensed exchange orlicensed market operator and thelicensed exchange orlicensed market operator shall make provision for those matters in itsbusiness rules orlisting rules , as the case may be.MAE-3.1.2
A
licensed exchange orlicensed market operator shall provide thebusiness rules andlisting rules in conformity with law and relevant CBB regulations or directives.MAE-3.1.3
Any reference to an amendment to a
business rule orlisting rule shall be construed as a reference to a change to the scope of or to any requirement, obligation or restriction under thebusiness rule orlisting rule , as the case may be, whether the change is made by an alteration to the text of the rule or by any other notice issued by or on behalf of thelicensed exchange orlicensed market operator .MAE-3.2 MAE-3.2 Content of Rules of Licensed Exchanges
MAE-3.2.1
For the purposes of MAE-3.1.2, a
licensed exchange orlicensed market operator shall in itsbusiness rules or in itslisting rules as the case may be, make provision to the satisfaction of the CBB for:(a) The criteria that it would use to determine the admission, or denial of admission, ofpersons to or from membership;(b) Continuing requirements for eachmember , including requirements:(i) That prohibit or prevent themember from engaging in improper conduct when dealing as an agent for the customers of themember on anymarket operated by thelicensed exchange orlicensed market operator ;(ii) That prohibit or prevent themember from engaging in improper conduct when participating in anymarket operated by thelicensed exchange orlicensed market operator ;(iii) On the financial condition of themember such as to provide reasonable assurance that all obligations arising out of the activities of themember in anymarket operated by thelicensed exchange orlicensed market operator will be met;(iv) That facilitate the monitoring by thelicensed exchange orlicensed market operator of the compliance of themember with thebusiness rules of thelicensed exchange orlicensed market operator ; and(v) That provide for the expulsion, suspension or disciplining ofmember s for conduct inconsistent with just and equitable principles in the transaction of business, or for a contravention of thebusiness rules of thelicensed exchange orlicensed market operator ;(c) The class or classes ofsecurities orfutures contracts that may be traded on anymarket operated by thelicensed exchange orlicensed market operator ;(d) The terms and conditions under whichsecurities may be listed for quotation by thelicensed exchange ;(e) The terms and conditions relating to the calculation of the final settlement price, the daily price limits and the accumulation ofpositions offutures contracts traded on anymarket operated by thelicensed exchange orlicensed market operator ;(f) The manner in which trades insecurities orfutures contracts are effected on anymarket operated by thelicensed exchange orlicensed market operator ;(g) Where thelicensed exchange orlicensed market operator operates a trading floor, fair and properly supervised floor trading practices;(h) The measures to prevent and deal with manipulation, market rigging and artificialmarket conditions in anymarket operated by thelicensed exchange orlicensed market operator ;(i) The arrangements for the safe and efficient clearing and settlement of trades concluded on anymarket operated by thelicensed exchange orlicensed market operator ;(j) The establishment of any compensation arrangement, or any other scheme or system accepted by the CBB, which would compensate any customer who suffers pecuniary loss through the defalcation of amember , or any of its directors, officers, employees or representatives, in respect of any money or other property:(i) That was entrusted to or received by amember , or any of its directors, officers, employees, or representatives, for or on behalf of the customer; or(ii) In respect of which themember was a trustee;(k) The dissemination of announcements by companies listed on anymarket operated by thelicensed exchange orlicensed market operator through a single and central facility; and(l) The carrying on of business of thelicensed exchange orlicensed market operator with due regard to the interests and protection of the investing public.Amended: April 2016
Amended: April 2013MAE-3.3 MAE-3.3 Amendment of Business Rules and Listing Rules
MAE-3.3.1
A
licensed exchange orlicensed market operator which intends to amend itsbusiness rules orlisting rules shall, prior to making the amendment, notify the CBB of:(a) The proposed amendment;(b) The purpose of the proposed amendment; and(c) The date on which the proposed amendment is intended to come into force.MAE-3.3.2
The
licensed exchange shall, prior to notifying the CBB under MAE-3.3.1, consult itsusers andparticipants on the proposed amendment, unless the proposed amendment would have limited impact on itsusers andparticipants .MAE-3.3.3
Provided however that on receipt of the notification, if CBB is of the opinion that the
users and theparticipants would be impacted by the amendments, it may require thelicensed exchange to consult itsusers andparticipants .MAE-3.3.4
Subject to Paragraphs MAE-3.3.5 and MAE-3.3.7, an amendment shall not come into force unless the notification referred to in Paragraph MAE-3.3.1 is submitted at least 21 days before the date on which the amendment is proposed to come into force.
MAE-3.3.5
The CBB may, on its own initiative or on the application of the
licensed exchange orlicensed market operator , by notice in writing to thelicensed exchange orlicensed market operator , make or allow an amendment to come into force before the expiry of the period of 21 days referred to in Paragraph MAE-3.3.2.MAE-3.3.6
The CBB may, subject to Paragraph MAE-3.3.7, within 21 days after the receipt of the notification referred to in Paragraph MAE-3.3.1, by notice in writing to the
licensed exchange , disallow, alter or supplement the whole or any part of the proposed amendment and, thereupon such whole or part of the proposed amendment as the case may be:(a) Where it is disallowed, shall not come into force; or(b) Where it is altered or supplemented, shall come into force as altered or supplemented accordingly.MAE-3.3.7
The CBB, may on its own initiative, by notice in writing to the
licensed exchange orlicensed market operator , vary the period specified in Paragraph MAE-3.3.6, and where the period in that paragraph is extended, the amendment shall not come into force before the expiry of the extended period.MAE-3.4 MAE-3.4 Business Rules of Licensed Exchanges and Licensed Market Operators have Effect as Contract
MAE-3.4.1
The
business rules of alicensed exchange orlicensed market operator shall be deemed to be, and shall operate as, a binding contract:(a) Between thelicensed exchange orlicensed market operator and eachmember ; and(b) Between eachmember and every othermember .MAE-3.4.2
The
licensed exchange orlicensed market operator and eachmember shall be deemed to have agreed to observe and perform the provisions of thebusiness rules that are in force for the time being, so far as those provisions are applicable to thelicensed exchange orlicensed market operator , or thatmember , as the case may be.MAE-3.5 MAE-3.5 Determination of Position and Trading Limits
MAE-3.5.1
The
position and trading limits in respect of any security or contract including futures and options contracts traded by, through or with amember of alicensed exchange orlicensed market operator which holds an appropriate license to trade such contracts, shall be determined from time-to-time by thelicensed exchange orlicensed market operator using such criteria or methodology as may be established by thelicensed exchange orlicensed market operator with the approval of the CBB.MAE-3.5.2
The
position and trading limits under Paragraph MAE-3.5.1 may include limits on aperson holding or controllingpositions , separately or in combination, net long or net short, for the purchase or sale of anysecurities or contracts, including futures or options contracts.MAE-3.5.3
The
licensed exchange orlicensed market operator :(a) Shall require aperson or anyperson acting for him pursuant to an express or implied agreement or understanding, who holds or controls net long or net shortpositions in any contract in excess of theposition limits determined under Paragraph MAE-3.5.1, to trade under such conditions and restrictions as thelicensed exchange orlicensed market operator considers necessary to ensure compliance with theposition limits determined under that Paragraph; and(b) May require theperson referred to in MAE-3.5.3 (a) to do one or more of the following actions:(i) Cease any further increase in hisposition ;(ii) Liquidate hisposition to comply with theposition limits determined under Paragraph MAE-3.5.1 within such time as may be determined by thelicensed exchange orlicensed market operator ; and(iii) Be subject to higher margin requirements in respect of hisposition .Amended: April 2013MAE-3.6 MAE-3.6 Non-Compliance with Business Rules or Listing Rules not to Substantially Affect Rights of Person
MAE-3.6.1
Any failure by a
licensed exchange orlicensed market operator to comply with:(a) This Module;(b) Itsbusiness rules ; or(c) Where applicable, itslisting rules ;in relation to a matter shall not prevent the matter from being treated, for the purposes of this Module as done in accordance with the
business rules orlisting rules , so long as the failure does not substantially affect the rights of theperson entitled to require compliance with thebusiness rules orlisting rules .Amended: April 2016MAE-3.7 MAE-3.7 Requirements to Register Trading Personnel
MAE-3.7.1
The exchange shall make provision for the registration with the CBB of personnel having access to trading facilities or trading terminals and restricting access only to such registered personnel of the
members .MAE-3.8 MAE-3.8 Compliance Officer
MAE-3.8.1
Every
licensed exchange orlicensed market operator must appoint a Compliance Officer. The Compliance Officer is responsible for discharging the obligations of thelicensed exchange or thelicensed market operator .MAE-3.8.2
In accordance with MAE-3.8.1:
(a) The Compliance Officer should be competent and knowledgeable regarding the CBB Laws, rules and regulations of thesecurities market and the various applicable modules;(b) The Compliance Officer shall:(i) Monitor the transactions undertaken by theirmembers orparticipants ;(ii) Identify disorderly trading conditions or conduct that may involvemarket abuse;(iii) Identify and monitor transactions undertaken by insiders;(iv) Identify any breach of CBB Law, rules and regulations;(c) Thelicensed exchange or thelicensed market operator shall on the identification of any breach referred to in MAE-3.8.2 (b) report such breach to the CBB without delay for the investigation and prosecution ofmarket abuse and shall provide full assistance to the latter in investigating and prosecutingmarket abuse occurring on or through the systems of thelicensed exchange orlicensed market operator .Amended: April 2013MAE-3.9 MAE-3.9 Outsourcing
MAE-3.9.1
The
licensed exchange or thelicensed market operator seeking to outsource functions or activities should have the following in place:(a) Comprehensive policy to guide the assessment of whether and how these functions or activities can be appropriately outsourced;(b) The Board shall have the responsibility for the outsourcing policy and related overall responsibility for activities undertaken under that policy;(c) Thelicensed exchange or thelicensed market operator retains the ultimate responsibility for the functions or activities that are outsourced;(d) Thelicensed exchange or thelicensed market operator must notify the CBB and seek its approval before committing to an outsourcing arrangement;(e) Thelicensed exchange or thelicensed market operator must maintain and regularly review contingency plans to enable them to set-up alternative arrangements should the outsourcing provider fail;(f) The exchange must nominate amember of senior management with day-to-day responsibility for handling the relationship with the outsourcing provider and ensuring that relevant risks are addressed;(g) All the outsourcing contract must be legally enforceable;(h) A notice period of at least three months shall be required from the outsourcing party to terminate the contract; and(i) On termination all data pertaining to thelicensed exchange or thelicensed market operator shall be returned by the outsource provider to thelicensed exchange or thelicensed market operator .MAE-4 MAE-4 Instruments, Transactions and Contracts
MAE-4.1 MAE-4.1 Listing of Contracts and Instruments
MAE-4.1.1
No
licensed exchange orlicensed market operator shall without the approval of the CBB, list, delist, or permit the trading of:(a) Any securities, contracts, instruments or transactions;(b) Any right, option or derivative in respect of any debentures, stocks or shares;(c) Any right under a contract for differences or under any other contract the purpose or purported purpose of which is to secure a profit or avoid a loss by reference to fluctuations in:(i) The value or price of any debentures, stocks or shares;(ii) The value or price of any group of debentures, stocks or shares; or(iii) An index of any debentures, stocks, or shares.Amended: April 2013MAE-4.1.2
The CBB may grant approval for a
licensed exchange orlicensed market operator to list, delist or permit the trading of any contract or instrument, or any class of contracts or instruments referred to in Paragraph MAE-4.1.1, subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing to thelicensed exchange orlicensed market operator .Amended: April 2016MAE-4.2 MAE-4.2 Listing of Licensed Exchanges on Securities Market
MAE-4.2.1
The
securities of alicensed exchange shall not be listed for quotation on asecurities market that is operated by thelicensed exchange or any of its related companies unless thelicensed exchange and the operator of thesecurities market have entered into such arrangements as the CBB may require:(a) For dealing with possible conflicts of interest that may arise from such listing; and(b) For the purpose of ensuring the integrity of the trading of thesecurities of thelicensed exchange on thesecurities market .MAE-4.2.2
Where the
securities of alicensed exchange are listed for quotation on asecurities market operated by thelicensed exchange or any of its related companies, thelisting rules of thesecurities market shall be deemed to allow the CBB to act in place of the operator of thesecurities market in making decisions and taking action, or to require the operator of thesecurities market to make decisions and to take action on behalf of the CBB on:(a) The admission or removal of thelicensed exchange to or from the official list of thesecurities market ; and(b) Granting approval for thesecurities of thelicensed exchange to be or stopping or suspending thesecurities of thelicensed exchange from being listed for quotation or quoted on thesecurities market .MAE-4.2.3
The CBB may, by notice in writing to the operator of the
securities market :(a) Modify thelisting rules of thesecurities market for the purpose of their application to the listing for quotation or trading of thesecurities of thelicensed exchange ; or(b) Waive the application of anylisting rule of thesecurities market to thelicensed exchange .MAE-4.3 MAE-4.3 Suspension of Securities
MAE-4.3.1
Where the CBB is of the opinion that it is necessary to prohibit trading in particular
securities or contracts listed or traded on alicensed exchange orlicensed market operator , as the case may be;(a) In order to protectpersons buying or selling thesecurities or contracts; or(b) In the interests of the public;the CBB may give notice in writing to the
licensed exchange orlicensed market operator stating that it is of that opinion and setting out the reasons for its opinion.MAE-4.3.2
If after the receipt of the notice given under Paragraph MAE-4.3.1, the
licensed exchange orlicensed market operator fails to take any action in relation to thosesecurities or contracts on thatmarket and the CBB continues to be of the opinion that it is necessary to prohibit trading in thosesecurities or contracts on thatmarket , the CBB may by notice in writing to thelicensed exchange orlicensed market operator , prohibit trading in thosesecurities or contracts on thatmarket for such period, as is specified in the notice.MAE-4.3.3
Where the CBB gives a notice to a
licensed exchange orlicensed market operator under Paragraph MAE-4.3.2, the CBB shall:(a) At the same time send a copy of the notice to the issuer of such security orparticipant , as the case may be; and(b) As soon as practicable, furnish to thelicensed exchange orlicensed market operator a written report setting out the reasons for giving the notice.Amended: July 2016MAE-4.4 MAE-4.4 Emergency Powers of the CBB
MAE-4.4.1
Where the CBB has reason to believe that an emergency exists, or thinks that it is necessary or expedient in the interests of the public or a section of the public or for the protection of investors, the CBB may direct by notice in writing a
licensed exchange orlicensed market operator to take such action as it considers necessary to maintain or restore orderly trading insecurities or futures contracts or any class ofsecurities or futures contracts.MAE-4.4.2
Without prejudice to MAE-4.4.1, these activities which the CBB may direct a
licensed exchange orlicensed market operator to take shall include:(a) Terminating or suspending trading on thelicensed exchange orlicensed market operator ;(b) Confining trading to liquidation ofsecurities or futures contractspositions ;(c) Ordering the liquidation of allpositions or any part thereof or the reduction in suchpositions ;(d) Limiting trading to a specific price range;(e) Modifying trading days or hours;(f) Altering conditions of delivery;(g) Fixing the settlement price at whichpositions are to be liquidated;(h) Requiring anyperson to act in a specified manner in relation to trading insecurities or futures contracts or any class ofsecurities or futures contracts;(i) Requiring margins or additional margins for anysecurities or futures contracts; and(j) Modifying or suspending any of thebusiness rules of thelicensed exchange orlicensed market operator .MAE-4.4.3
Where the
licensed exchange orlicensed market operator fails to comply with any direction of the CBB under Paragraph MAE-4.4.1 within such time as is specified by the CBB, the CBB may:(a) Set margin levels in anysecurities or futures contract or class ofsecurities or futures contracts to cater for the emergency;(b) Set limits that may apply tomarket positions acquired in good faith prior to the date of the notice issued by the CBB; or(c) Take such action as the CBB may deem fit to maintain or restore orderly trading in anysecurities or futures contracts or class ofsecurities or futures contracts, or liquidation of anyposition in respect of anysecurities or futures contract or class ofsecurities or futures contracts.Amended: April 2016MAE-4.4.4
In this section "emergency" means any threatened or actual
market manipulation or cornering, and includes:(a) Any act of any government affecting a commodity orsecurities ;(b) Any majormarket disturbance which prevents themarket from accurately reflecting the forces of supply and demand for such commodity orsecurities ; or(c) Any undesirable situation or practice which in the opinion of the CBB, constitutes an emergency.MAE-4.4.5
The CBB may modify any action taken by a
licensed exchange under Paragraph MAE-4.4.1, including the setting aside of that action.MAE-4.5 MAE-4.5 Additional Powers of the CBB in Respect of Auditors
MAE-4.5.1
If an auditor of a
licensed exchange orlicensed market operator in the course of the performance of his duties becomes aware of:(a) Any matter which in his opinion, adversely affects or may adversely affect the financialposition of thelicensed exchange orlicensed market operator to a material extent;(b) Any matter which in his opinion, constitutes or may constitute a breach of the CBB Law and regulations or an offence involving fraud or dishonesty; or(c) Any irregularity that has or may have a material effect upon the accounts of thelicensed exchange orlicensed market operator , including any irregularity that affects or jeopardises or may affect or jeopardise, the funds or property of investors insecurities orfutures contracts ,the auditor shall immediately send to the CBB a written report of the matter or the irregularity.
Amended: April 2016MAE-4.5.2
An auditor of a
licensed exchange orlicensed market operator shall not be, in the absence of malice on his part, liable to any action for defamation at the suit of anyperson in respect of any statement made in his report under Paragraph MAE-4.5.1.MAE-4.5.3
Paragraph MAE-4.5.2 shall not restrict or affect any right, privilege or immunity that the auditor of a
licensed exchange orlicensed market operator may have as a defendant in an action for defamation.MAE-4.5.4
The CBB may impose all or any of the following duties on an auditor of a
licensed exchange orlicensed market operator :(a) A duty to submit such additional information and reports in relation to his audit as the CBB considers necessary;(b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of thelicensed exchange orlicensed market operator ;(c) A duty to carry out any other examination or establish any procedure in any particular case;(d) A duty to submit a report on any matter arising out of his audit, examination or establishment of procedure referred to in Paragraph MAE-4.5.4 (b) or (c), and the auditor shall carry out such duties.MAE-4.5.5
The
licensed exchange orlicensed market operator shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in Paragraph MAE-4.5.4.MAE-4.6 MAE-4.6 Registration of Market Maker
Eligibility
MAE-4.6.1
A
licensed exchange orlicensed market operator must ensure that alicensee meets the following requirements prior to being registered as amarket maker :(a) Thelicensee is incorporated in the Kingdom of Bahrain;(b) Thelicensee must be licensed by the CBB as a Bank or as an Investment Firm(Category 1 or Category 2) or as aBroker-Dealer under CBB Rulebook Volume 6; and(c) Thelicensee is a member of thelicensed exchange orlicensed market operator .Added: January 2019MAE-4.6.2
A
licensed exchange orlicensed market operator must formulate its own objective eligibility criteria for registration ofmarket maker . The criteria, at the minimum, must include;(a) Capital requirement;(b) Infrastructure requirements;(c) Trading andmarket making experience;(d) Business continuity arrangements;(e) Risk management policy including settlement guarantee mechanism;(f) Rights and obligations of themarket maker including quoting obligations, inventory size, order type and minimum order size; and(g) Terms and conditions under which market making may be terminated;Added: January 2019MAE-4.6.3
A
licensed exchange orlicensed market operator may have regard to the following matters in determining whether an applicant has satisfied the eligibility criteria:(a) Adequate financial capital and qualified technical and administrative staff to practicemarket making ;(b) Separation betweenmarket making and any other activities that themember is licensed to practice in terms of organisational, technical, financial and administrative arrangements. Evidence thereof may be submitted by themember through the following;(i) The adopted mechanism to separate themarket making from other licensed activities;(ii) The staff assigned to performmarket making activities;(iii) Experience and qualification of technical and administrative staff assigned to performmarket making activities;(c) Details of risk management systems and internal control procedures.Added: January 2019MAE-4.6.4
A
licensee , as specified in Paragraph MAE-4.6.1, desirous of undertakingmarket making activity must apply to thelicensed exchange orlicensed market operator for registration as amarket maker .Added: January 2019MAE-4.6.5
A
licensee must demonstrate to the satisfaction of thelicensed exchange orlicensed market operator that it is suitably qualified to undertakemarket making activity.Added: January 2019MAE-4.6.6
A
licensed exchange orlicensed market operator may, prior to issuing its consent for registration of amember as amarket maker , may conduct on-site inspection of themember to ensure the availability of requisite systems, processes and infrastructure for undertakingmarket making activity.Added: January 2019MAE-4.6.7
If the
licensed exchange orlicensed market operator is satisfied that themember is eligible to carryoutmarket making activities, thelicensed exchange orlicensed market operator may appoint themember as amarket maker and enter into amarket maker agreement with themember specifying the date of commencement of its term asmarket maker .Added: January 2019MAE-4.6.8
The
market maker agreement referred to in Paragraph MAE-4.6.7 may at the minimum, include the following terms and conditions:(a) Rights and obligations of themarket maker ;(b) Duration of themarket maker agreement ;(c) Conditions under whichmarket maker agreement may be terminated;(d) Time window during trading hours that themarket maker should be obliged to ensure presence on the order book;(e) The maximum spread between the bid and offer price thatmarket maker should maintain; and(f) Minimum, maximum and normal order size with agreed specifications.Added: January 2019Market Making Scheme
MAE-4.6.9
A
licensed exchange orlicensed market operator must ensure that:(a) Themarket making scheme is objective, transparent, non-discretionary and non-discriminatory and must not give rise to disorderlymarket conditions ormarket abuse;(b) The transactions carried out under themarket making scheme are solely for the purpose of enhancing liquidity and regularity of trading in illiquidsecurities ;(c) The scheme does not compromise onmarket integrity and risk management;(d) All necessary systems and processes are in place to monitormarket abuse and manipulation including collusion betweenmembers indulging in trades with an objective to enhance liquidity artificially;(e) The activities of amarket maker is continuously monitored for effective compliance with applicable law, rules and regulations;(f) Orderly trading conditions are maintained and the minimum set of requirements to be met by themarket maker in terms of presence, size and spread under normal trading conditions are adhered to;(g) The number ofmarket makers in amarket making scheme is not restricted; and(h) The CBB is informed of any violations of the provisions of applicable law, rules and regulations.Added: January 2019MAE-4.6.10
A
licensed exchange orlicensed market operator must put in place the internal procedures and controls to regulate the activity ofmarket making . Such procedures and controls, at the minimum, must include:(a) The technical requirements;(b) The trading and settlement mechanism relating to the orders of amarket maker ;(c) The type and amount of settlement guarantees required for practising the activity ofmarket making ;(d) The obligations of amarket maker in connection with providing liquidity;(e) Determine the list ofsecurities eligible for market making;(f) Mechanism to identify themarket maker's orders/trades in order to ensure separation between brokerage andmarket making activities performed by themember ;(g) Reporting requirements bymarket makers andissuers ; and(h) Disclosure requirements bymarket makers andissuers .Added: January 2019MAE-4.6.11
A
licensed exchange orlicensed market operator must review and approve themarket making agreement entered between anissuer of listed security and amarket maker . While assessing themarket making agreement , thelicensed exchange orlicensed market operator must take into account the requirements contained in Section MIR-4.19.Added: January 2019MAE-4.6.12
A
licensed exchange orlicensed market operator must at all times ensure that amarket maker maintains a level of financial resources, risk management, compliance and internal control requirements that are commensurate with the scale and complexity of their business activities.Added: January 2019MAE-4.6.13
A
licensed exchange orlicensed market operator may lay down additional criteria formarket makers as risk containment measure.Added: January 2019Temporary Suspension of Market Making Activity
MAE-4.6.14
A
licensed exchange or licensedmarket operator must specify the exceptional circumstances wherein amarket maker's obligation to provide liquidity on a regular and predictable basis does not apply.Added: January 2019MAE-4.6.15
A
licensed exchange orlicensed market operator may have regards to the following situations in determining exceptional circumstances referred to under Paragraph MAE-4.6.14:(a) A situation of extreme volatility;(b) Disorderly trading conditions where the maintenance of fair, orderly and transparent execution of trades is compromised, and evidence of any of the following is provided;(i) the performance of thelicensed exchange orlicensed market operator system being significantly affected by delays and interruptions;(ii) force majeure or cyber sabotage.(c) Where themarket maker's ability to maintain prudent risk management practices is prevented by any one of the following;(i) technological issues, including problems with the data feed or other systems to carry out market making; and(ii) risk management issues in relation to capital requirement, margining and access to clearing.Added: January 2019MAE-4.6.16
A
licensed exchange orlicensed market operator must set out clear procedures for resumption of normal trading after the exceptional circumstance have ceased to exist and must make those procedures publicly available.Added: January 2019MAE-4.6.17
A
licensed exchange orlicensed market operator must make public the occurrence of the exceptional circumstances referred to under Paragraph-4.6.14 and, as soon as technically possible, the resumption of their normal trading after the exceptional circumstances have ceased to exist.Added: January 2019Deregistration of Market Maker
MAE-4.6.18
A
licensed exchange orlicensed market operator must set out the requirements for deregistration of amarket maker .Added: January 2019MAE-4.6.19
A
market maker intending to surrender its registration, must submit a written request and seek prior written approval from thelicensed exchange orlicensed market operator in the manner prescribed by the rules and regulations of thelicensed exchange orlicensed market operator .Added: January 2019Suspension and Cancellation of Registration
MAE-4.6.20
A
licensed exchange orlicensed market operator must restrict or suspend activities ofmarket maker or cancel its registration where themarket maker ;(a) Is found involved in activities that are not commensurate with the responsibilities assigned to themarket maker or are detrimental to the interest ofmarkets and investors;(b) Fails to perform its duties in accordance with the applicable rules and regulations of thelicensed exchange orlicensed market operator ; and(c) Fails to comply with any of the eligibility criteria and/or the conditions set out at the time of registration;Added: January 2019MAE-4.6.21
Where the CBB is satisfied that a
market maker has contravened the CBB Law, rules and regulations, the CBB may if it thinks it is necessary in the interest of themarkets or for the protection of investors, by notice in writing direct thelicensed exchange orlicensed market operator to restrict, suspend or cancel the registration of themarket maker .Added: January 2019MAE-4.6.22
A
licensed exchange orlicensed market operator must disseminate to themarkets as soon as possible the information relating to imposition of restriction, suspension or cancellation of registration on amarket maker .Added: January 2019Disclosure, Notification and Reporting
MAE-4.6.23
A
licensed exchange orlicensed market operator must publish on its website themarket making rules, the name of the members that have been registered asmarket makers , name of theissuer andmarket maker who have entered intomarket making agreement and thesecurity in which themarket maker undertakesmarket making .Added: January 2019MAE-4.6.24
A
licensed exchange orlicensed market operator must notify the CBB immediately in the following events:(a) Whenever amarket maker agreement is entered into between amember and thelicensed exchange orlicensed market operator along with a copy of the agreement and details of the trading account number which themember uses for the purpose ofmarket making ;(b) Where amember has surrendered its registration as amarket maker ; and(c) Thelicensed exchange orlicensed market operator takes disciplinary action, suspend activities or revokes the registration of amarket maker .Added: January 2019MAE-4.6.25
A
licensed exchange orlicensed market operator must submit a monthly report, within 10 business days from the end of the month, summarizing themarket making activities undertaken bymarket makers , in the format specified by the CBB.Added: January 2019MAE-5 MAE-5 Matters Requiring Approval of CBB
MAE-5.1 MAE-5.1 Control of Substantial Shareholding in Licensed Exchanges
MAE-5.1.1
No
person shall enter into any agreement to acquire shares in alicensed exchange by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of thelicensed exchange without first obtaining the approval of the CBB to enter into the agreement.MAE-5.1.2
In Paragraph MAE-5.1.1 "substantial shareholder" means a
person who alone or together with his associates:(a) Holds not less than 5% of the shares in thelicensed exchange ; or(b) Is in a position to control not less than 5% of the votes in thelicensed exchange .MAE-5.1.3
In this Section:
(a) Aperson holds a share if:(i) He is deemed to have an interest in that share in terms of the Commercial Companies Law (CCL); or(ii) He otherwise has a legal or a beneficial interest in that share, except such interest as is to be disregarded in the terms of the CCL;(b) A reference to the control of a percentage of the votes in alicensed exchange shall be construed as a reference to the control, whether direct or indirect, of that percentage of the total number of votes that might be cast in a general meeting of thelicensed exchange ; and(c) An associate of anotherperson means in respect of individuals, a direct familymember and in the case of a company, means the company is bound to follow the directives of the substantial shareholder, or the company in which the substantial shareholder has 20% of the votes of that company.Amended: April 2016
Amended: April 2013MAE-5.2 MAE-5.2 Application and Criteria for Approval to Acquire Substantial Shareholding
MAE-5.2.1
Any
person applying for approval under MAE-5.1.1 shall submit to the CBB a written application that sets out:(a) The name of the applicant;(b) In the case where the applicant is a company:(i) Its place of incorporation;(ii) Its substantial shareholders;(iii) Its directors and chief executive officer; and(iv) Its principal business.(c) In the case where the applicant is a naturalperson :(i) His nationality;(ii) His principal occupation; and(iii) His directorships;(d) All the companies in which the applicant has a substantial shareholding;(e) The percentage of shareholding and voting power that the applicant has in thelicensed exchange ;(f) The percentage of shareholding and voting power the applicant is seeking to have in thelicensed exchange ;(g) The reasons for making the application;(h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;(i) Whether the applicant will seek representation on the board of directors of thelicensed exchange ; and(j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and properperson for the purposes of Paragraph MAE-5.2.3 (a).Amended: April 2013MAE-5.2.2
The CBB may require the applicant to furnish it with such information or documents as the CBB considers necessary in relation to the application and the applicant shall furnish such additional information or documents as required by the CBB.
MAE-5.2.3
The CBB may approve an application made under Paragraph MAE-5.2.1 of this Module if the CBB is satisfied that:
(a) The applicant is a fit and properperson to be a substantial shareholder;(b) Having regard to the applicant's likely influence, thelicensed exchange will or will continue to conduct its business prudently and in compliance with the provisions of this Module; and(c) It would not be contrary to the interests of the public to do so.Amended: April 2016MAE-5.2.4
The CBB may, for the purposes of securing compliance with Paragraphs MAE-5.1.1 or MAE-5.2.2, or any condition or restriction imposed under Paragraph MAE-5.2.5, by notice in writing direct the transfer or disposal of all or any of the shares of a
licensed exchange in which a substantial shareholder of thelicensed exchange has an interest.MAE-5.2.5
Until a
person to whom a direction has been issued under Paragraph MAE-5.2.4 transfers or disposes of the shares which are subject to the direction and notwithstanding anything to the contrary, the Memorandum or Articles of Association or other constituent document or documents of thelicensed exchange :(a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;(b) Thelicensed exchange shall not offer or issue any shares (whether by way of rights, bonus, share dividend or otherwise) in respect of the shares which are the subject of the direction; and(c) Except in liquidation of thelicensed exchange , thelicensed exchange shall not make any payment (whether by way of cash dividend, dividend in kind or otherwise) in respect of the shares which are the subject of the direction.MAE-5.2.6
Any issue of shares by a
licensed exchange in contravention of Paragraph MAE-5.2.5 (b) shall be deemed to be null and void, and aperson to whom a direction has been issued under Paragraph MAE-5.2.4 shall immediately return those shares to thelicensed exchange , upon which thelicensed exchange shall return to theperson any payment received from him in respect of those shares.MAE-5.3 MAE-5.3 Authorisation of Approved Persons
Prior Approval Requirements and Process
Contents:
MAE-5.3.1
Licensees must obtain the CBB's prior written approval for any person wishing to undertake acontrolled function in alicensee . The approval from the CBB must be obtained prior to their appointment.Amended: April 2016
Amended: April 2013MAE-5.3.2
Controlled functions are those functions occupied by board members and persons in executive positions and include:(a) Board members;(b)Chief Executive orGeneral Manager ;(c)Head of function ;(d) Compliance Officer; and(e) Money Laundering Reporting Officer (MLRO).Amended: April 2016
Amended: April 2013MAE-5.3.2A
For the purpose of this Module, the following positions are considered as
head of function :(a) Head of listing;(b) Head of trading;(c) Head of market control;(d) Head of member affairs;(e) Head of risk management; and(g) Head of other functions.Added: April 2016MAE-5.3.2B
Whether a person is
head of function will depend on the nature, scale and complexity of the function and is not determined by the presence or absence of the word in their job title.Added: April 2016MAE-5.3.2C
Licensees must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. The segregation of responsibilities must ensure avoidance of any conflict of interest and maintain a Chinese Wall such criticalcontrolled functions .Added: April 2016MAE-5.3.3
The Chief Executive Officer or General Manager, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.
Amended: April 2013MAE-5.3.4
All
persons wishing to undertake any of the controlled functions shall be subject to the fit and proper requirements in this Section.Amended: April 2016
Amended: April 2013MAE-5.3.5
In accordance with Subparagraph MAE-5.3.2(d), every
licensed exchange must appoint a compliance officer. The compliance officer is responsible for discharging the obligations of the licensee.Amended: April 2013MAE-5.3.6
In accordance with Paragraph MAE-5.3.5:
(a) The Compliance Officer should be competent and knowledgeable regarding the CBB Law, rules and regulations, as well as the various applicable Volume 6 Modules;(b) The Compliance Officer shall: ;(i) Monitor the transactions undertaken by themember , its representatives, orparticipants ;(ii) Identify disorderly transactions or conduct that may involve market abuse or disruption;(iii) Identify and monitor transactions undertaken by insiders dealing through or with themember ;(iv) Identify any breach of CBB Law, rules and regulations; and(v) Identify any breach of the rules of theSRO .Added: April 2013MAE-5.3.7
The Compliance Officer shall on the identification of any breach referred to in Paragraph MAE-5.3.6(b), report such breach to the CBB without delay for the investigation and prosecution of
market abuse and shall provide full assistance to the latter in investigating and prosecuting market abuse occurring on or through thelicensed exchange .Amended: April 2013MAE-5.3.7A
The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in the Form 3, including previous experience, is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms MAE Forms of the CBB Rulebook.
Added: April 2016MAE-5.3.7B
When the request for
approved person status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake acontrolled function is in relation to an existinglicensee , the Form 3 must be marked for the attention of the Director, Capital Markets Supervision. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.Amended: April 2018
Added: April 2016MAE-5.3.7C
When submitting Form 3,
licensees must ensure that the Form 3 is:(a) Submitted to the CBB with a covering letter signed by an authorised representative of thelicensee , seeking approval for the proposedcontrolled function ;(b) Submitted in original form;(c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and(d) Signed by an authorised representative of thelicensee and all pages stamped on with thelicensee's seal.Added: April 2016MAE-5.3.7D
For existing
licensees applying for the appointment of a BoardDirector or theChief Executive /General Manager , the authorised representative should be the Chairman of the Board or aDirector signing on behalf of the Board. For all othercontrolled functions , the authorised representative should be theChief Executive /General Manager .Added: April 2016Fit and Proper Requirements
MAE-5.3.8
Licensees seeking anapproved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake thecontrolled function in question.Amended: April 2016
Added: April 2013MAE-5.3.8A
Each applicant applying for
approved person status and those individuals occupyingapproved person positions must comply with the following conditions:(a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;(b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;(c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;(d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;(e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;(f) Must have personal integrity, good conduct and reputation;(g) Has appropriate professional and other qualifications for thecontrolled function in question, including qualifications such as the Securities Market Regulation Certification Programme (Series 7), the General Securities Representative Qualification (Series 79), and/or any other relevant examinations and qualifications recognised by the CBB that are appropriate to capital market functions, as the case may be. However the CBB reserves the right to impose a higher level of qualifications as it deems necessary; and(h) Has sufficient experience to perform the duties of thecontrolled function .Added: April 2016MAE-5.3.8B
In assessing the conditions prescribed in Rule MAE-5.3.8A, the CBB will take into account the criteria contained in Paragraph MAE-5.3.8C. 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 acontrolled function in onelicensee may not be considered to have sufficient expertise and experience to undertake nominally the samecontrolled function but in a much biggerlicensee .Added: April 2016MAE-5.3.8C
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:
(a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;(b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;(c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;(d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;(e) The contravention of any financial services legislation;(f) Whether the person has ever been refused a license, authorisation, registration or other authority;(g) Dismissal or a request to resign from any office or employment;(h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;(i) The extent to which the person has been truthful and open with supervisors; and(j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.Added: April 2016MAE-5.3.8D
With respect to Paragraph MAE-5.3.8C, 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.
Added: April 2016MAE-5.3.9
Approved persons undertaking acontrolled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking acontrolled function and shall be subject, among all accepted market conducts, to the insider trading rules.Added: April 2013MAE-5.3.10
In determining where there may be a conflict of interest arising, factors that may be considered will include whether:
(a) Aperson has breached any fiduciary obligations to thelicensed exchange or terms of employment;(b) Aperson has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of thelicensed exchange ; and(c) Aperson has failed to declare a personal interest that has a material impact in terms of theperson's relationship with thelicensed exchange in general, and interest in holding any listedsecurities or futures contracts in particular.Added: April 2013MAE-5.3.11
[This Paragraph was deleted in April 2016.]
Deleted: April 2016
Added: April 2013MAE-5.3.12
[This Paragraph was deleted in April 2016.]
Deleted: April 2016
Added: April 2013MAE-5.3.13
[This Paragraph was moved to Paragraph MAE-5.3.7B in April 2016.]
Amended: April 2016
Added: April 2013Assessment of Application
Contents:
MAE-5.3.14
The CBB shall review and assess the application for
approved person status to ensure that it satisfies all the conditions required in Paragraph MAE-5.3.8A and the criteria outlined in Paragraph MAE-5.3.8C.Amended: April 2016
Added: April 2013MAE-5.3.14A
For purposes of Paragraph MAE-5.3.14,
licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.Added: April 2016MAE-5.3.15
The CBB reserves the right to refuse an application for
approved person status if it does not satisfy the conditions provided for in Paragraph MAE-5.3.8A and the criteria outlined in Paragraph MAE-5.3.8C. A notice of such refusal is issued by registered mail to thelicensee concerned, setting out the basis for the decision.Amended: April 2016
Added: April 2013Appeal Process
MAE-5.3.16
Licensees or the nominatedapproved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application forapproved person status. The CBB shall decide on the appeal and notify thelicensee of its decision within 30 calendar days from submitting the appeal.Amended: April 2016
Added: April 2013MAE-5.3.17
Where notification of the CBB's decision to grant a person
approved person status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents,licensees or the nominatedapproved persons may appeal to the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify thelicensee of its decision within 30 calendar days from the date of submitting the appeal.Amended: April 2016
Amended: April 2013Notification Requirements and Process
Contents:
MAE-5.3.18
A
licensed exchange must immediately notify the CBB when anapproved person ceases to hold acontrolled function together with an explanation as to the reasons why. In such cases, theirapproved person status is automatically withdrawn by the CBB.Amended: April 2013MAE-5.3.18A
Licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for anapproved person .Added: April 2016MAE-5.3.19
The
licensed exchange shall provide for the composition and duties of the board of directors or any committee of alicensed exchange after obtaining CBB approval.Amended: April 2013MAE-5.3.20
In this section "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a
member of alicensed exchange .Amended: April 2013Amendment of Authorisation
MAE-5.3.21
A
licensed exchange must seek prior CBB approval before anapproved person may move from onecontrolled function to another within the samelicensee .Added: April 2013MAE-5.3.22
In such instances, a new application should be completed and submitted to the CBB. Note that a
person may be considered 'fit and proper' for onecontrolled function , but not for another, if for instance the new role requires a different set of skills and experience. Where anapproved person is moving to acontrolled function in anotherlicensed exchange , the firstlicensee should notify the CBB of thatperson's departure, and the newlicensee should submit a request for approval under this Section.Added: April 2013Cancellation of Authorisation and Power of CBB to Remove Approved Person
MAE-5.3.23
Where the CBB is satisfied that an
approved person :(a) Has wilfully contravened or wilfully caused thatlicensed exchange to contravene the CBB Law, rules and regulations;(b) Has without reasonable excuse, failed to ensure compliance by thelicensed exchange , or aperson associated with thatlicensee with the CBB Law rules and regulations;(c) Has failed to discharge the duties or functions of his office or employment;(d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;(e) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;the CBB may if it thinks it is necessary in the interests of or for the protection of investors, by notice in writing direct that a
licensee remove theapproved person from his office or employment, and thatlicensee shall comply with such notice.Added: April 2013MAE-5.3.24
Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an
approved person has failed to discharge the duties or functions of his office or employment for the purposes of paragraph MAE-5.3.23 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing, after consultation with thelicensed exchange and/orlicensed clearing house , as the case may be.Added: April 2013MAE-5.3.25
Subject to Paragraph MAE-5.3.26, the CBB shall not direct a
licensee to remove anapproved person from his office or employment without giving the approved person an opportunity to be heard.Added: April 2013MAE-5.3.26
The CBB may direct a
licensee to remove anapproved person from his office or employment under Paragraph MAE-5.3.23 on any of the following grounds, without giving theapproved person an opportunity to be heard:(a) Theapproved person is an undischarged bankrupt whether in Bahrain or elsewhere;(b) Theapproved person has been convicted whether in Bahrain or elsewhere, of an offence:(i) Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and(ii) Punishable with imprisonment for a term of 3 months or more.Added: April 2013Criteria to Determine Failure to Discharge Duties or Functions by Approved Persons
MAE-5.3.27
The CBB may, in determining whether
approved persons have taken reasonable steps to discharge their duties, have regard to whether or not the approved person:(a) Ensured the proper functioning of thelicensed exchange ;(b) Ensured the compliance of thelicensed exchange with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides itsregulated activities ;(c) Set out and ensured compliance with written policies on all operational areas of thelicensed exchange , including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of thelicensed exchange in general;(d) Identified, monitored and addressed the risks associated with the business of thelicensed exchange ;(e) Ensured that theregulated activities of thelicensed exchange were subject to adequate internal audit;(f) Oversaw the financial undertakings or exposure of thelicensed exchange to risks of any nature by setting out proper delegation limits and risk management controls; and(g) Ensured:(i) That thelicensed exchange maintained written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and provided relevant procedures; and(ii) That every report, return or statement submitted by thelicensed exchange to the CBB was complete and accurate.Added: April 2013MAE-5.4 MAE-5.4 Business Transfer
MAE-5.4.1
A
licensed exchange orlicensed market operator shall not transfer all or any part of its business to others without the prior written approval from the CBB.Amended: April 2016MAE-5.4.2
A
licensed exchange orlicensed market operator who desires to transfer all or any part of its business referred to in Paragraph MAE-5.4.1 shall make an application to the CBB in Form 8.MAE-5.4.3
A Transfer of Business application shall be published by the CBB in the Official Gazette and also in 2 daily newspapers, one in Arabic and one in English in Bahrain. The publication should include a call to the concerned parties to submit any objections to the CBB within 3 months from the date of publication.
MAE-5.4.4
The CBB shall consider the objections referred to in the preceding Paragraph before taking any action on the application for transfer.
MAE-5.4.5
The CBB shall determine the procedure of processing applications for business transfer.
Amended: July 2016MAE-5.4.6
The following shall apply in order to approve a business transfer:
(a) The business, subject of transfer, shall not be prohibited by the CBB;(b) The Transfer of Business shall not cause damages to the interests of thelicensed exchange orlicensed market operator's users ;(c) The transferee must be licensed to carry out the business in the place to which it is to be transferred;(d) The transferee company should fulfil all the eligibility criteria laid down in this module to operate as alicensed exchange ; and(e) The CBB must be satisfied that the Transfer of Business is appropriate under relevant regulations issued in this respect.MAE-5.4.7
The CBB shall give its approval to a Transfer of Business if the application satisfies the requirements set in Paragraph MAE-5.4.6. Such approval may be given subject to any conditions deemed appropriate by the CBB.
Amended: July 2016MAE-5.4.8
The decision of the CBB on a Transfer of Business shall be published in the Official Gazette as well as in 2 daily newspapers, one in Arabic and one in English in Bahrain. The decision shall be effective from the date set therein.
MAE-5.4.9
An applicant whose application has been turned down or who faces restrictions regarding the transfer of his business may appeal to a competent court within 30 days from the date of publishing of such decision on the Official Gazette.
MAE-6 MAE-6 Control of Licensed Exchanges
MAE-6.1 MAE-6.1 Control of Licensed Exchanges
MAE-6.1.1
The CBB must be notified in any of the following cases:
(a) If effective control over alicensed exchange orlicensed market operator takes place indirectly whether by 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;The controller or the
person intending to take control over thelicensed exchange orlicensed market operator , as the case may be and by thelicensed exchange orlicensed market operator itself if it is aware of such case.Amended: April 2013MAE-6.1.2
For the purposes of Paragraph MAE-6.1.1, "control" means the right to appoint majority of the directors or to control the management or policy decisions exercisable by a
person orpersons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.MAE-6.1.3
Notice of control shall contain a request for the CBB's approval for taking control over a
licensed exchange orlicensed market operator or taking any action that may lead to control by submitting Form 6 and shall also contain such particulars and information and be accompanied by such documents as the CBB may specify. In the cases referred to in items (a) and (b) of Paragraph MAE-6.1.1, the notice shall be made within 15 days from the date of control. In the case referred to in item (c) of Paragraph MAE-6.1.1, the notice shall be made before taking any of the actions that would lead to control.MAE-6.1.4
The CBB must, within 3 months from the date of receipt of the notice referred to above, notify the controller or the
person intending to take control over alicensed exchange orlicensed market operator , as the case may be, of its approval of control, any of the actions which would lead to a control, or the refusal thereof as the CBB may determine at its own discretion.Amended: July 2016MAE-6.1.5
The CBB may impose any restrictions that it considers necessary to be observed in case of its approval of a control or any of the actions that would lead to a control.
MAE-6.1.6
If the period specified in Paragraph MAE-6.1.4 lapses without a decision being taken on the application seeking approval of a control or any intended actions that would lead to a control, the application shall be considered as accepted.
MAE-6.1.7
The controller or the
person intending to take control over alicensed exchange orlicensed market operator , may within 30 days of the notification, lodge a grievance against the CBB's decision to refuse the control or any conditions imposed in respect of such control.MAE-6.1.8
The CBB shall decide on the grievance and notify the
person intending to take control over thelicensed exchange orlicensed market operator of its decision within 30 days from the date of submitting the grievance.Amended: July 2016MAE-6.1.9
An appeal against a decision on control may be submitted within 30 days from the date when the concerned
person was aware of such decision.MAE-6.1.10
The CBB may refuse to give approval to a control if it will affect the legitimate interests of the
users , or if it is detrimental to the relevant sector, or if the CBB decides, according to its own discretion that it would be inappropriate to control alicensed exchange orlicensed market operator according to the criteria set by the CBB.MAE-6.1.11
Any
person who acquires control or shares in breach of the provisions of this Module shall carry out any instructions issued to him by the CBB to transfer such control or shares or refrain from exercising control or voting rights according to the procedures prescribed in such instructions.MAE-6.1.12
The CBB may seek a court order to take appropriate precautionary measures or sell such shares if the
licensed exchange orlicensed market operator fails to carry out the order referred to above. The value of the shares sold shall be paid to the party who has rights therein after the deduction of expenses.MAE-6.1.13
A
licensed exchange orlicensed market operator incorporated in the Kingdom shall not perform any of the following without a prior written approval of the CBB:(a) Merge, amalgamate or enter into a partnership with anyperson outside the Kingdom, except in the ordinary course of business;(b) Transfer all or a major part of its assets or liabilities inside or outside the Kingdom, without prejudice to the provisions of Chapter 6 of the CBB Law;(c) Make any modification to its issued or paid-up share capital;(d) Modify its Memorandum and Articles of Association; or(e) Engage in major acquisition or investment operations as determined by the CBB.Amended: April 2016MAE-6.1.14
The CBB, in granting any approval under the preceding Paragraph, may impose such conditions as it considers appropriate.
MAE-7 MAE-7 Immunity from Criminal or Civil Liability
MAE-7.1 MAE-7.1 Immunity from Criminal or Civil Liability
MAE-7.1.1
No criminal or civil liability shall be incurred by:
(a) Alicensed exchange ;(b) Anyperson acting on behalf of alicensed exchange ; including:(i) Any director of thelicensed exchange ; or(ii) Anymember of any committee established in thelicensed exchange ;for anything done (including any statement made) or omitted to be done with reasonable care and in good faith in the course of or in connection with the discharge or purported discharge of its obligations under this Module, or the
business rules or where appropriate,listing rules of thelicensed exchange orlicensed market operator .Amended: April 2013MAE-8 MAE-8 General Powers of the CBB
MAE-8.1 MAE-8.1 Power of CBB to Remove Officers
MAE-8.1.1
Where the CBB is satisfied that an officer of a
licensed exchange orlicensed market operator :(a) Has wilfully contravened or wilfully caused thatlicensed exchange orlicensed market operator to contravene:(i) The CBB Law or Module MAE;(ii) Where applicable, itsbusiness rules ; or(iii) Where applicable, itslisting rules ;(b) Has without reasonable excuse, failed to ensure compliance by thatlicensed exchange orlicensed market operator , amember of thatlicensed exchange orlicensed market operator , or aperson associated with thatmember with:(i) The CBB Law or Module MAE;(ii) Where applicable thebusiness rules of thatlicensed exchange orlicensed market operator ; or(iii) Where applicable, thelisting rules of thatlicensed exchange orlicensed market operator ;(c) Has failed to discharge the duties or functions of his office or employment;(d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;(e) Has had execution against him in respect of a judgement debt returned unsatisfied in whole or in part;(f) Has whether in Bahrain or elsewhere, made a compromise or scheme of arrangement with his creditors, being a compromise or scheme of arrangement that is still in operation; or(g) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;the CBB may if it thinks it is necessary in the interests of the public or a section of the public, or for the protection of investors, by notice in writing direct that a
licensed exchange orlicensed market operator remove the officer from his office or employment, and thatlicensed exchange orlicensed market operator shall comply with such notice.Amended: April 2016
Amended: April 2013MAE-8.1.2
Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an officer of a
licensed exchange orlicensed market operator has failed to discharge the duties or functions of his office or employment for the purposes of Paragraph MAE-8.1.1 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing.MAE-8.1.3
Subject to Paragraph MAE-8.1.4, the CBB shall not direct a
licensed exchange orlicensed market operator to remove an officer from his office or employment without giving thelicensed exchange orlicensed market operator an opportunity to be heard.MAE-8.1.4
The CBB may direct a
licensed exchange orlicensed market operator to remove an officer from his office or employment under Paragraph MAE-8.1.1 on any of the following grounds without giving thelicensed exchange orlicensed market operator an opportunity to be heard:(a) The officer is an undischarged bankrupt whether in Bahrain or elsewhere; or(b) The officer has been convicted whether in Bahrain or elsewhere, of an offence:(i) Involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and(ii) Punishable with imprisonment for a term of 3 months or more.Amended: April 2016
Amended: April 2013MAE-8.1.5
Where the CBB directs a
licensed exchange orlicensed market operator to remove an officer from his office or employment under Paragraph MAE-8.1.4, the CBB need not give that officer an opportunity to be heard.MAE-8.2 MAE-8.2 Criteria to Determine Failure to Discharge Duties or Functions by Officers
MAE-8.2.1
The CBB may, in determining whether the Chief Executive Officer, directors and officers of a
licensed exchange orlicensed market operator , as the case may be, has taken reasonable steps to discharge their duties, have regard to the following:(a) Ensure the proper functioning of thelicensed exchange orlicensed market operator , as the case may be;(b) Ensure the compliance of thelicensed exchange orlicensed market operator , as the case may be, with any relevant laws or regulations of any jurisdiction in which it is incorporated or in which it operates;(c) Set out and ensure compliance with written policies on all operational areas of thelicensed exchange orlicensed market operator , as the case may be, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of thelicensed exchange orlicensed market operator ;(d) Identify, monitor and address the risks associated with the business activities of thelicensed exchange orlicensed market operator , as the case may be;(e) Ensure that the business activities of thelicensed exchange orlicensed market operator , as the case may be, are subject to adequate internal audit;(f) Oversee the financial undertakings or exposure of thelicensed exchange orlicensed market operator , as the case may be, to risks of any nature by setting out proper delegation limits and risk management controls; and(g) Ensure:(i) That thelicensed exchange orlicensed market operator , as the case may be, maintains written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and operating procedures; and(ii) That every report, return or statement submitted by thelicensed exchange or thelicensed market operator as the case may be, to the CBB is complete and accurate.Amended: April 2013CSD — Clearing, Settlement and Depository
CSD-A CSD-A Introduction
CSD-A.1 CSD-A.1 Purpose
Executive Summary
CSD-A.1.1
Module CSD sets out the Central Bank of Bahrain's regulatory framework governing licensing of
clearing houses andcentral depositories operating in or from the Kingdom of Bahrain.CSD-A.1.2
The CSD Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of licensed
clearing houses andcentral depositories in the Kingdom of Bahrain. It sets out the CBB requirements for their licensing and authorisation, and the initial as well as ongoing compliance requirements.CSD-A.1.3
The key principles underlying the approach of the CBB in this Module aim:
(a) To promote the safety and efficiency of clearing andsettlement facilities that support systemically-important markets or form an integral part of the financial infrastructure;(b) To reduce systemic risk;(c) To reduce direct counterparty risk insecurities transactions by use of contributions fromdepository participants' members, as well as by imposing adequate risk management techniques, including the requirement of cash cover and collateral;(d) To ensure finality ofsettlement; (e) To reduce cost of clearing andsettlement of transactions; and(f) To ensure that the ownership and rights of investors are protected.Legal Basis
CSD-A.1.4
Article 1 of the CBB Law defines "Financial Sector Support Institutions" and "Financial Institutions" and the definition includes institutions licensed for operating clearance houses, settlement of payments, cheques and financial papers, and institutions which are wholly or partly set-up by financial institutions licensed by the Central Bank in order to provide services of a pure financial nature to the financial services industry. Articles 38 and 39 of the CBB Law provides the Governor of the CBB with the power to issue Directives or regulations in respect of regulated services.
CSD-A.1.5
Article 40 of the CBB Law states that no financial institution should be established or carry out any regulated services without the prior approval of the CBB.
CSD-A.1.6
Article 80 (4) includes depository, clearance and settlement of securities as regulated activities of companies in the securities market.
CSD-A.1.7
Article 94 of the CBB Law provides the CBB with the power to authorise registration of ownership of the
securities of a depositor in the name of a depository under asecurities deposit agreement in accordance with the form issued for this purpose by a depository.CSD-A.1.8
Subject to the rules and laws of evidence and electronic transactions, Article 96 specifies that computer data, electronic files, recorded telephone calls, telex and facsimile correspondance may be considered as forms of evidence of ownership of
securities when disputes relating tosecurities occur.CSD-A.1.9
Articles 108 and 109 provides the CBB with the power to issue regulations regarding procedures for clearing and netting of transactions and related exceptions.
CSD-A.1.10
Article 110 provides that the Central Bank shall issue terms and conditions for the provision of any pledge, insurance, collateral or title transfer collateral to beneficiaries according to a
market contract . Such terms and conditions are stipulated in detail under Resolution No (59) of 2011 in respect of Procedures Related to Pledging and Lien of Securities and the Discharge and Lifting of such Pledge and Liens, later amended as per Resolution No (30) of 2015.Amended: April 2016CSD-A.1.11
Article 178 provides the CBB with the power to issue regulations for enabling title to
securities to be evidenced and transferred without the need to produce a written instrument.CSD-A.1.12
Article 95 states that the CBB shall by regulation specify the procedures to be followed for the registration of pledges and liens on
securities and the discharge and lifting of such pledges and liens.CSD-A.1.13
Licensed clearing houses andcentral depositories shall be subject to Part 10 (Articles from 133 to 159) of the CBB Law with regards to cases of insolvency, the consequences of such insolvency and violation of the insolvency law bylicensees , and compulsory liquidation. The CBB is entitled to place alicensee under administration in the event of insolvency, cancellation or amendment of the license of theclearing house orcentral depository , and when it is in the best interests of the public to do so. Rules and regulations for placing alicensee under administration are set out in Articles 136–143 of the CBB Law.CSD-A.1.14
Article 161 of the CBB Law stipulates a penalty for contravention of Article 40 of the CBB Law.
CSD-A.1.15
This Module recognises Decree Law No (50) of 2014 regarding amendments to the provision of the Commercial Companies Law No (21) of 2001, particularly Articles 119 and 358A with respect to promulgating the CBB Law No (64) of 2006 related to the capital market regulated activities.
Added: April 2016CSD-A.1.16
This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.
Added: April 2016CSD-A.1.17
This Module contains Resolution No (1) of 2007 (issued under Article 180 of the CBB Law) amended by Resolution No (26) of 2010 and further amended by Resolution No (1) of 2016 with respect to determining fees categories due for licensees and services provided by the CBB.
Added: April 2016CSD-A.1.18
This Module contains Resolution No. (30) of 2015 in respect of amending Resolution No. (59) of 2011 for the purpose of extending the requirements related to the pledging and lien of securities and the discharge and lifting of such pledge and liens on securities issued by closed joint stock companies.
Added: April 2016CSD-A.1.19
This Module contains Resolution No. (44) of 2014 with respect to promulgating a Regulation for Close-Out Netting under a Market Contract.
Added: April 2016CSD-A.2 CSD-A.2 Module History
Evolution of Module
CSD-A.2.1
This Module was first issued in April 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Amended: April 2013CSD-A.2.1A
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes CSD-1.1.1A to CSD-1.1.1C 04/2013 References added to requirements under Resolution No.(16) for the year 2012. CSD-1.2.3 04/2013 Updated name change to Form 3. CSD-1.4.1 and CSD-1.4.1A 04/2013 Provided details of annual fee due to the CBB. CSD-3.1.9A and CSD-3.1.9B 04/2013 Added reference to report institutional information (IIS) to the CBB. CSD-5.3.12 04/2013 Added reference to Form 3: Application for Approved Person Status CSD-5.3 04/2013 Expanded the scope of this Section to include all approved persons occupying controlled functions and the various related Rules and Guidance. CSD-1.4 04/2014 Clarified Rules and guidance on annual license fees. Module CSD 04/2016 Various minor corrections to clarify language and link defined terms to the glossary. CSD-A.1 04/2016 Legal basis updated to reflect various Resolutions. CSD-3.1.1 and CSD-3.1.1A 04/2016 Added requirements dealing with shareholders' meetings. CSD-5.3 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons. CSD-5.3.2A 04/2016 New Paragraph added to ensure segregation of responsibilities in licensees' staffing arrangements. CSD-B.2 07/2016 Section deleted and moved to Glossary. CSD-1.2.1 07/2016 Deleted duplicate type of license. CSD-1.3.3, CSD-1.3.11, CSD-3.5.3 and CSD-6.4.3 07/2016 Changed from Rule to Guidance. CSD-1.4.1 07/2016 Deleted legal reference as already included under CSD-A.1.17. CSD-2.16 and CSD-2.17 07/2016 CSD-2.1.7 deleted and content moved to CSD-2.1.6 as Rule. CSD-2.6.11 07/2016 Corrected cross reference. CSD-3.1.1 07/2016 Corrected wording of Subparagraphs. CSD-3.1.18 07/2016 Amended requirement to be applicable to all approved persons. CSD-1.3.12 07/2017 Amended wording of paragraph. CSD-1.3.13 07/2017 Added Paragraph to clarify the cost of publication. CSD-1.3.14 07/2017 Added Paragraph on means of publication. CSD-5.3.7B 04/2018 Amended Paragraph. CSD-3.1.1A 10/2020 Added a new Paragraph on Provision of Financial Services on a Non-discriminatory Basis. CSD-3.7.7 01/2022 Amended Paragraph on submission of report by auditors with regards to verification of money and assets placed with Licensed Clearing House. Superseded Requirements
CSD-A.2.2
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/ other references Provision Subject BSE Clearing, Settlement & Central Depository & Registry Rules Rules that are contradictory to the provisions in this Module Rules and regulations relating to registry, clearing, settlement & central depository. BSE Clearing, Settlement and Central Depository Procedures Procedures that are contradictory to the provisions in this Module Scope of procedures to be carried out by clearance and settlement facilities and central depository. BSE Brokers & Custodians Resolutions Resolutions that are contradictory to the provisions in this Module Provisions for custodial services and services provided by brokerage companies at the BSE. CSD-A.3 CSD-A.3 Interaction with other Modules
CSD-A.3.1
All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.
CSD-A.3.2
Licensed clearing houses andlicensed central depositories must comply with Decree Law No. 4 of 2001 with respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 7 of 2001 with respect to Obligations Governing Institutions Concerning the Prohibition and Combating of Money Laundering; Ministerial Order No. 18 of 2002 Specifying the Powers of the Enforcement Unit in Implementing the Provisions of the Decree Law Promulgated with Respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 23 of 2002 with Respect to Procedures of Money Laundering Prevention and Prohibition; and Module AML (Anti-Money Laundering & Combating Financial Crime).Amended: April 2016CSD-A.3.3
Licensed clearing houses must also comply with the CBB's Real Time Gross Settlement System (Membership) Regulations 2007 and other related rules, regulations and guidelines.CSD-A.4 CSD-A.4 Division of Responsibilities
CSD-A.4.1
SROs should be subject to the oversight of the regulator, and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.
CSD-A.4.2
SROs shall:
(a) Have the capacity to carry out the purposes of governing laws, regulations and SRO rules, and to enforce compliance by its members and associated persons with those laws, regulations, and rules;(b) Treat all members of the SRO and applicants for membership in a fair and consistent manner;(c) Develop rules that are designed to set standards of behaviour for its members and to promote investor protection;(d) Submit to the regulator its rules for review and/or approval as the regulator deems appropriate, and ensure that the rules of the SRO are consistent with the public policy directives established by the regulator;(e) Cooperate with the regulator and other SROs to investigate and enforce applicable laws and regulations;(f) Enforce its own rules and impose appropriate sanctions for non-compliance;(g) Assure a fair representation of members in selection of its directors and administration of its affairs;(h) Avoid rules that may create uncompetitive situations; and(i) Avoid using the oversight role to allow any market participant to gain unfair advantage in the market.CSD-A.4.3
Regardless of the extent to which self-regulation is used, the CBB retains the authority to enquire into matters affecting investors or the market.
CSD-A.4.4
Where the powers of an SRO are inadequate for enquiring into or addressing particular misconduct, or where a conflict of interest necessitates it, the CBB shall take over the responsibility for an enquiry from an SRO. It is important therefore, to ensure that the information provided by the SRO to the regulator allows these matters to be identified at an early stage.
CSD-A.4.5
SRO's should follow similar professional standards of behaviour on matters such as confidentiality and procedural fairness as would be expected of the CBB.
CSD-B CSD-B Scope of Application
CSD-B.1 CSD-B.1 Scope
CSD-B.1.1
This Module shall apply to:
(a) Clearing andsettlement services provided by alicensed clearing house in or from the Kingdom of Bahrain for theclearing and settlement ofsecurities transactions; and(b) Custodial services forsecurities offered by acentral depository in or from the Kingdom of Bahrain.CSD-B.2 Definitions
[This Section was deleted and moved to the Glossary under Part B in July 2016.]
Deleted: July 2016CSD-1 CSD-1 Establishment of Clearing House and Central Depository Facilities
CSD-1.1 CSD-1.1 Licensing Conditions
Requirement to be Licensed
CSD-1.1.1
As per Article 40 of the CBB Law, no
person shall operate or hold himself out as alicensed clearing house orlicensed central depository in the Kingdom of Bahrain, unless he has been licensed by the CBB under this section.Amended: April 2016CSD-1.1.1A
No
person may market anyfinancial services in the Kingdom of Bahrain unless:(a) Allowed to do by the terms of a license issued by the CBB;(b) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or(c) Has obtained the express written permission of the CBB to offerfinancial services .Added: April 2013CSD-1.1.1B
In accordance with Resolution No.(16) for the year 2012 and for the purpose of Paragraph CSD-1.1.1A, 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.Added: April 2013CSD-1.1.1C
Persons in breach of Paragraph CSD-1.1.1A 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.
Amended: April 2016
Added: April 2013CSD-1.1.2
No person shall establish, maintain, operate or hold himself out as intending to establish, maintain or operate a
clearing house orcentral depository , without notifying the CBB of such intention at least 90 days prior to the establishment or commencement of operations of theclearing house orcentral depository .CSD-1.1.3
A person may apply to the CBB to reduce the period referred to in rule CSD-1.1.2 and the CBB may substitute such other period at its discretion.
Amended: April 2016CSD-1.1.4
The CBB may require a person providing the notice period referred to in rule CSD-1.1.2 to furnish the CBB with such information or documents as the CBB considers necessary in relation to the notice.
Amended: April 2016Persons Operating Clearing or Depository Facilities
CSD-1.1.5
The CBB may license a person operating a clearing or depository facility as a
licensed clearing house orlicensed central depository for the purposes of this Module, if it has satisfied the criteria laid out in this Module. The CBB may, on application, give authorisation to overseas clearing houses, clearing corporations, or central depositories, particularly for facilitating the operations of the licensed market operators and cross-listings.Amended: April 2016CSD-1.1.6
The CBB shall give notice in the Official Gazette of any
person licensed under rule CSD-1.1.5.CSD-1.1.7
A license provided by the CBB under rule CSD-1.1.5 shall continue to have effect until it is withdrawn by the CBB.
CSD-1.1.8
The CBB may withdraw the license of any
licensed clearing house orlicensed central depository at any time, on its own initiative or on the application of thelicensed clearing house orlicensed central depository , if the CBB is of the opinion that the considerations in rule CSD-1.1.5 are no longer valid or satisfied.Amended: April 2016CSD-1.1.9
The CBB shall give notice in the Official Gazette of any withdrawal under paragraph CSD-1.1.8.
CSD-1.1.10
The CBB shall not withdraw on its own initiative the license of any
person operating a clearing facility or depository as alicensed clearing house orlicensed central depository , without giving theperson an opportunity to be heard.Amended: April 2016CSD-1.2 CSD-1.2 Licensing Process and Timeline
CSD-1.2.1
A person may apply to the CBB to be:
(a) Alicensed clearing house (including the function ofcentral depository ); and(b) Alicensed central depository .Amended: July 2016CSD-1.2.2
Unless otherwise approved, a person licensed as a
clearing house orcentral depository , or either alicensed clearing house orlicensed central depository is required to be registered as a joint stock company in Bahrain in accordance with the Commercial Companies Law (CCL) 2001.CSD-1.2.3
An application for a license to operate as a
clearing house orcentral depository under Article 39 of the CBB Law shall be made in Form 1 and shall be lodged with the CBB, together with the following:(a) Form 3 (Application for Approved Person Status) and Form 4 (Information on Shareholders and Subsidiaries);(b) Any relevant annexe and information specified in those forms;(c) A non-refundable prescribed application fee of BD100;(d) A business plan setting forth the internal controlling and risk management procedures of the enterprise; furthermore, the business plan must contain a budgeted accounting plan for the first three business years;(e) The memorandum and articles of association of the company or any of its constituent documents;(f) Three-year operational plans including the organisational structure, communication facilities and training programmes;(g) Draft business rules in respect of its operations as a licensed clearing house or central depository; and(h) The details of the proposed authorised and paid-up capital.Amended: April 2013CSD-1.2.4
The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.
CSD-1.2.5
Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner.
CSD-1.2.6
The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.
CSD-1.2.7
The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.
CSD-1.2.8
The CBB may grant an 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.
Amended: April 2016CSD-1.2.8A
An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Industry and Commerce unless it receives the final approval from the CBB.
Added: April 2016CSD-1.2.9
At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with rule CSD-1.2.3.
CSD-1.2.10
The CBB may call for further information if it is of the opinion that the information provided is incomplete or needs to be substantiated.
CSD-1.2.11
Where a clearing house applies to be licensed as a clearing house including the function of a
central depository , thelicensed clearing house shall apply for a single license as a clearing house and central depository, but must comply with the requirements of both a clearing house and central depository.CSD-1.2.12
A
clearing house orcentral depository shall confirm that, for the duration of the license, it shall satisfy all conditions and restrictions that may be imposed on it.General Criteria Applicable to a Clearing House and Central Depository
CSD-1.2.13
The applicant must also demonstrate to the satisfaction of the CBB that it has:
(a) The financial resources, and the management and human resources with appropriate experience, necessary for the operation of aclearing house orcentral depository ;(b) Made arrangements for the proper supervision of all transactions effected through theclearing house orcentral depository, so as to ensure compliance with theclearing house orcentral depository rules;(c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of therecords of transactions effected through theclearing house orcentral depository ;(d) IT infrastructure and necessary systems to perform its function and comply with its obligations, including business continuity and disaster recovery systems;(e) Procedures in place for compliance with obligations in respect of Anti-Money Laundering and the Combating of Financial Crime;(f) Rules and procedures in place for the disciplining of its members anddepository participants ;(g) The ability to avoid and manage any conflicts of interest;(h) The ability to maintain confidentiality as required in this Module.Criteria for Granting License of a Clearing House
CSD-1.2.14
The CBB may license a
person as aclearing house if:(a) The CBB is satisfied that the establishment of aclearing house to be operated by aperson will;(i) Contribute towards developing the financial sector and enhance confidence therein; and(ii) Protect the interests of investors;(b) The CBB is satisfied that theperson , having applied to be alicensed clearing house under this Module, is able/will be able to comply with the obligations or requirements imposed on theclearing house; and(c) If the CBB shall be satisfied that the rules of the applicant make satisfactory provision for:(i) The size and structure, or proposed size and structure, of the clearing facility;(ii) The nature of the services provided, or to be provided, by the clearing facility;(iii) The nature of the transactions cleared, or to be cleared, by the clearing facility;(iv) The clearing and settlement of transactions and for the management of trade and settlement risk;(v) The market where the transactions cleared through the clearing facility are traded or are to be traded;(vi) The nature of the investors or members, or proposed investors or members, who may use or have an interest in the clearing facility;(vii) Whether theperson operating the clearing facility is otherwise regulated by the CBB Law or any other law;(viii) Whether the clearing facility has the ability to perform its function as a central counterparty;(ix) Whether the clearing facility takes on counterparty risks, through novation or otherwise, in the clearing orsettlement of transactions;(x) The parties who may be affected in the event that the clearing facility runs into difficulties;(xi) The interests of the public;(xii) The ability to meet international standards and related protocols including IOSCO;(xiii) The ability to meet the International Securities Identification Number (ISIN) Standards and other international standards and protocols; and(xix) Any other circumstances that the CBB may deem relevant.CSD-1.2.15
This Paragraph has been left blank.
Added: April 2013Criteria for Granting License of a Central Depository
CSD-1.2.16
The CBB may license a
person as acentral depository if:(a) The CBB is satisfied that the establishment of acentral depository to be operated by aperson will;(i) Contribute towards developing the financial sector and enhance confidence therein; and(ii) Protect the interests of investors; and(b) The CBB is satisfied that theperson , having applied to be alicensed central depository under this Module, is able/will be able to comply with the obligations or requirements imposed on thecentral depository. (c) The CBB shall be satisfied that the rules of the applicant make satisfactory provision:(i) With respect to the conditions under which securities may be deposited with, held by, withdrawn from, or transferred within, the central depository;(ii) For the holding of securities deposited with the central depository or its nominee company;(iii) For the processing of dealings in deposited securities;(iv) For facilitating the settlement of deposited securities;(v) For the protection of the interests of depositors and the protection and control of information on deposited securities and dealings therein;(vi) For the monitoring of compliance with, and for the enforcement of, the rules of the central depository;(vii)With respect to the maintenance of a policy or policies of insurance, and the establishment and maintenance of compensation funds, for the purpose of settling claims by depositors against the central depository, its nominee companies and depository participants; and(viii) Adequate regulation and supervision of its depository participants.CSD-1.2.17
Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.
CSD-1.3 CSD-1.3 Withdrawal of License or Cessation of Business
Voluntary Surrender
CSD-1.3.1
A
clearing house orcentral depository which intends to cease operating must apply to the CBB to surrender its license.CSD-1.3.2
Any objections received from any user, member or depository participant of the
clearing house orcentral depository shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of thelicensee .CSD-1.3.3
The CBB may, subject to paragraph CSD-1.3.2, cancel the
license if it is satisfied that thelicensed clearing house orlicensed central depository has ceased operating and that there are no pending obligations of thelicensed clearing house orlicensed central depository or contracts traded.Amended: July 2016
Amended: April 2016CSD-1.3.4
The
licensed clearing house orlicensed central depository shall publish a notice of its intention to cease to operate its market in 2 daily newspapers, one in Arabic and the other in English, in Bahrain.Amended: April 2016CSD-1.3.5
The notice referred to in rule CSD-1.3.4 shall be subject to the approval of the CBB and shall be published at least 60 days prior to the cessation taking effect.
Cancellation of License
CSD-1.3.6
The CBB may cancel any license held by a
licensed clearing house orlicensed central depository if:(a) There exists a ground under which the CBB may refuse an application;(b) Thelicensed clearing house orlicensed central depository is in the course of being wound up or otherwise dissolved;(c) Thelicensed clearing house orlicensed central depository contravenes:(i) Any condition or restriction applicable in respect of itslicense ;(ii) Any direction issued to it by the CBB;(iii) Any provision in this Module; or(iv) Any other CBB law, rule or regulation;(d) Thelicensed clearing house orlicensed central depository operates in a manner that is in the opinion of the CBB, contrary to the interests of the public or user; or(e) Any information or document provided by thelicensed clearing house orlicensed central depository to the CBB is false or misleading.Amended: April 2016CSD-1.3.7
The CBB may not, subject to paragraph CSD-1.3.6, cancel any license that was granted to a
licensed clearing house orlicensed central depository without giving the opportunity to be heard.Amended: April 2016CSD-1.3.8
The CBB may cancel a license that was granted to a
licensed clearing house orlicensed central depository on any of the following grounds without giving an opportunity to be heard:(a) Thelicensed clearing house orlicensed central depository is in the course of being wound up or otherwise dissolved;(b) A receiver, a receiver and manager, or an equivalentperson has been appointed, in relation to or in respect of anyproperty of thelicensed clearing house orlicensed central depository ; or(c) Thelicensed clearing house orlicensed central depository has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.Amended: April 2016CSD-1.3.9
A
licensed clearing house orlicensed central depository shall be deemed to have ceased to operate if:(a) It has ceased to offer its services as alicensed clearing house orlicensed central depository for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or(b) It has ceased to offer alicensed clearing house orlicensed central depository services under a direction issued by the CBB.Amended: April 2016CSD-1.3.10
Any cancellation of a license of a
licensed clearing house orlicensed central depository shall not operate so as to:(a) Avoid or affect any agreement, transaction or arrangement entered into by alicensed clearing house orlicensed central depository , whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or(b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.Amended: April 2016CSD-1.3.11
Where the CBB cancels or amends a license of a
licensed clearing house orlicensed central depository , notification to thelicensed clearing house orlicensed central depository and an appeal against such a decision shall be governed by Article 48 of the CBB Law.Amended: July 2016
Amended: April 2016Publication of the Decision to Grant, Cancel or Amend a License
CSD-1.3.12
The CBB shall publish its decision to grant, cancel or amend a license in the Official Gazette as well as in 2 local newspapers, one published in Arabic and the other in English in Bahrain.
Amended: July 2017CSD-1.3.13
For the purpose of Paragraph CSD-1.3.12, the cost of publication of this notice must be borne by the
clearing house orcentral depository .Added: July 2017CSD-1.3.14
The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.
Added: July 2017CSD-1.4 CSD-1.4 Annual Fees
Annual Fees Payable by Clearing House and Central Depository
CSD-1.4.1
Every
licensed clearing house orcentral depository must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.Amended: July 2016
Amended: April 2016
Amended: April 2014
Amended: April 2013CSD-1.4.1A
The following fee is currently prescribed for
licensed clearing houses andlicensed central depositories :Managing and operating clearing, settlement and central depository systems (fixed) BD10,000 Amended: April 2016
Added: April 2013CSD-1.4.1B
For new
licensees , their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license is granted, is prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.Added: April 2014CSD-1.4.2
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, should a fee have been paid for that year.
Amended: April 2014CSD-1.4.3
A
licensed clearing house orlicensed central depository failing to comply with Paragraph CSD-1.4.1 may be subject to financial penalties as prescribed by the CBB.Added: April 2016CSD-1.5 CSD-1.5 Power to Stop Commencement or Order Cessation
CSD-1.5.1
The CBB may order a
person who has applied under rule CSD-1.1.1 not to establish or commence operation of a clearing or depository facility if:(a) Theperson did not furnish the CBB with such information or documents as required under rule CSD-1.2.3 of this Module;(b) Any information or document provided by theperson to the CBB is or proves to be false or misleading; or(c) The CBB is of the opinion that it is in the interests of the capital market or financial sector.CSD-1.5.2
The CBB may, by notice in writing, order a
licensed clearing house orcentral depository to cease operating its clearing or depository facility if:(a) It has contravened any provision of the CBB Law, or any other law or rule in the course of operating its clearing facility;(b) It has not complied with any of the licensing requirements contained in this Module;(c) It provided any information or document to the CBB that is false or misleading;(d) In the opinion of the CBB, it is operating the clearing or depository facility in a manner that is likely to pose systemic risk to the financial system of Bahrain;(e) It is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;(f) A receiver, a receiver and manager, or an equivalentperson has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of anyproperty of thelicensed clearing house orcentral depository ;(g) It has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly; or(h) The CBB is of the opinion that it is in the interests of the public to do so.CSD-1.5.3
The CBB shall give notice in the Official Gazette of any order made under rule CSD-1.5.2.
CSD-1.5.4
Subject to CSD-1.5.5, the CBB shall not make an order under rule CSD-1.5.1 or rule CSD-1.5.2 without giving the
person an opportunity to be heard.CSD-1.5.5
The CBB may order a
person not to establish or commence operation of a clearing or central depository facility under rule CSD-1.5.1, or to cease operating its clearing or central depository facility under rule CSD-1.5.2 on any of the following grounds without giving theperson an opportunity to be heard:(a) Theperson is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;(b) A receiver, a receiver and manager, or an equivalentperson has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of anyproperty of theperson ;(c) Theperson has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly.CSD-1.5.6
The CBB may direct, by notice in writing, a
licensed clearing house orlicensed central depository , to whom an order to cease operations of its clearing facility has been made by the CBB under rule CSD-1.5.2, to take such action as it considers necessary, including any of the following actions:(a) Ordering the liquidation of allpositions or part thereof, or the reduction in suchpositions ;(b) Altering conditions ofdelivery of transactionscleared orsettled, or to becleared orsettled through the clearing or depository facility;(c) Fixing thesettlement price at which transactions are to be liquidated;(d) Requiring margins or additional margins for transactionscleared orsettled or to becleared orsettled through the clearing or depository facility;(e) Modifying or suspending any of thebusiness rules of thelicensed clearing house orlicensed central depository ; or(f) Transferring the rights and obligations of thatlicensed clearing house orlicensed central depository to anotherlicensed clearing house andlicensed central depository ; andthe
licensed clearing house orlicensed central depository shall comply with that direction.Amended: April 2016CSD-1.5.7
The CBB may modify any action taken by a
licensed clearing house orlicensed central depository , including the setting aside of that action.Amended: April 2016CSD-1.5.8
Any order made under rule CSD-1.5.2 shall not operate so as to:
(a) Avoid or affect any agreement, transaction or arrangement entered into in connection with the use of a clearing facility operated by theperson , whether the agreement, transaction or arrangement was entered into before or after the order of the cessation; or(b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.CSD-1.6 CSD-1.6 Establishment of a Clearing House and Central Depository as an SRO
CSD-1.6.1
A
licensed clearing house orlicensed central depository shall be established as self-regulatory organisations (SROs) and must comply with the requirements laid down under the CBB Law, this Module, its approved business rules and the other applicable laws, rules and regulations.Amended: April 2016CSD-1.6.2
As an SRO, the objectives and functions of the
licensed clearing house andlicensed central depository will be to:(a) Promote fairness and investor protection;(b) Provide for admission, regulation, supervision and expulsion of participation or membership;(c) Promote fair access to its facilities and information;(d) Promote the provision of timely and accessible relevant data;(e) Treat all its members, depository participants, users and investors in a fair and transparent manner;(f) Promptly inform the CBB of any violations of the provision of this Module or any relevant act, laws or regulations by its members, depository participants, users or investors;(g) Act in good faith and avoid conflict of interest in the conduct of its functions;(h) Comply with the norms of corporate governance, as provided under Module HC (High-level Controls (Corporate Governance)); and(i) Provide adequate supervision and regulation over its members.Amended: April 2016CSD-2 CSD-2 Clearing House and Central Depository Function
CSD-2.1 CSD-2.1 Clearing House Function
CSD-2.1.1
A
licensed clearing house shall act as the central counterparty of the clearing members for clearing andsettlement of transactions and for deliveringsecurities to and receivingsecurities from clearing members and makingpayment to and receivingpayment from clearing members in connection with any transaction.Settlement Bank(s)
CSD-2.1.2
The
licensed clearing house may undertake thesettlement function directly, or from time-to-time appointsettlement bank(s) to act as thesettlement bank(s) for thesettlement of the transactions.Amended: April 2016CSD-2.1.3
The appointed
settlement bank(s) shall act as agent(s) of thelicensed clearing house for the collection andpayment for funds towardssettlement obligations, margins and other dues.Amended: April 2016Clearing Houses to Have Designated Accounts with Settlement Bank(s)
CSD-2.1.4
Every clearing member of the
licensed clearing house shall maintain a designated bank account with asettlement bank .Amended: April 2016CSD-2.1.5
The clearing members shall operate the designated bank accounts only for the purpose of
payment of their monetary obligations to thelicensed clearing house and/or thelicensed exchange and receipt of monetary entitlements from thelicensed clearing house orlicensed exchange .Amended: April 2016Settlement Bank to Act on Instructions of the Clearing House
CSD-2.1.6
The
licensed clearing house shall instruct thesettlement banks to debit or credit the account maintained by thelicensed clearing house and also the designated bank accounts of theclearing members . Thesettlement banks shall act on such instructions, which shall be deemed to be confirmed orders by theclearing members to debit and/or credit funds, as may be specified in the instructions from time-to-time.Amended: July 2016
Amended: April 2016CSD-2.1.7
[This Paragraph was merged with CSD-2.1.6 in July 2016.]
Amended: July 2016
Amended: April 2016CSD-2.1.8
Clearing members shall authorisesettlement banks to access their designated bank accounts for debiting and/or crediting their accounts electronically, on the instructions of thelicensed exchange orlicensed clearing house .Amended: April 2016Settlement Banks to Inform Status
CSD-2.1.9
If there is any shortage in meeting monetary obligations by a
clearing member relating to debits into a designated bank account, thesettlement bank shall forthwith report such instances of shortage to the officer of thelicensed clearing house andlicensed exchange designated for the purpose in a mutually agreed mode of communication.Amended: April 2016CSD-2.2 CSD-2.2 Settlement by Clearing House
CSD-2.2.1
All securities transactions shall be settled through the
licensed clearing house , bydelivery andpayment by theclearing members to thelicensed clearing house in accordance with the provisions contained in this Module, the rules of thelicensed clearing house and relevant directives or provisions that the CBB may from time-to-time prescribe.Amended: April 2016CSD-2.2.2
Arrangements for clearing and
settlement systems should provide for the prompt verification of a trade, as close as possible to real-time verification (including pre-validation).CSD-2.2.3
Information which records the transaction, allows it to be checked and provides the basis for
settlement should be available.Settlement Rules and Regulations Form Part of Contracts
CSD-2.2.4
All the clearance and
settlement rules and regulations in force from time-to-time relating to any procedure for the clearing andsettlement of transactions by or through thelicensed clearing house and the provisions of this Module shall be construed to be part of the contracts entered into by any trading member and/or clearing member with his clients and between trading members, inter-se, in anysecurity orsecurities .Settlement Procedure
CSD-2.2.5
The licensed exchange or
clearing house shall prescribe the procedure, schedule, manner and mode to be followed in respect ofsettlement of all transactions contracts entered into or to be entered into in anysecurity orsecurities by theclearing members through thelicensed clearing house .Amended: April 2016CSD-2.2.6
All the
clearing members , custodians, clearing banks,central depositories ,depository participants and otherpersons having beneficial interest insettlement shall comply with the provisions contained in the rules and regulations of thelicensed exchange and the rules of thelicensed clearing house from time-to-time.Amended: April 2016CSD-2.2.7
Key aspects of the
settlement process that the legal framework should support include the following:(a) Enforceability of transactions;(b) Protection of customer assets, particularly against loss upon the insolvency of a custodian;(c) Dematerialisation ofsecurities and the transfer ofsecurities by book entry;(d) Netting arrangements;(e)Securities lending, including repurchase agreements and other economically equivalent transactions;(f) Finality ofsettlement ;(g) Margin trading and securities lending and borrowing;(h) Arrangements for achievingdelivery versuspayment ;(i)Default rules addressing the consequences of a member's default;(j) Arrangement for registration of pledges and liens; and(k) Liquidation of assets pledged or transferred as collateral to support members' obligations.Amended: April 2016CSD-2.2.8
The
licensed clearing house shall maintain asettlement guarantee fund to guaranteesettlement obligations ofclearing members .Amended: April 2016CSD-2.2.9
The
licensed clearing house shall deliver, at its discretion,securities which it has received from aclearing member to any otherclearing member who is entitled to the same.Amended: April 2016CSD-2.2.10
The
licensed clearing house shall determine thesettlement obligations relating todelivery and receipt ofsecurities by and betweenclearing members to be exchanged electronically through the clearing andsettlement system of thelicensed clearing house .Amended: April 2016Timing of Settlement
CSD-2.2.11
Final
settlement should occur no later than the end of thesettlement day as approved by the CBB.CSD-2.2.12
The timing of
settlement finality should be defined clearly to all the members.Approval of Settlement System
CSD-2.2.13
The settlement system of a
licensed clearing house must be able to effect:(a)Settlement of transfer orders within the system itself; and(b) Be able to comply with the requirements stipulated in Paragraph CSD-2.2.7.Amended: April 2016CSD-2.2.14
If the CBB determines that the criteria specified in rule CSD-2.2.13 have been met as regards a designated system, it shall
issue in respect of the system a certificate certifying to that effect ("certificate of finality"), and specify a date and time from which the certificate shall have effect.CSD-2.2.15
If the CBB is unable to make a determination in the terms mentioned in rule CSD-2.2.13 as regards a designated system, it shall inform the system operator in writing accordingly, giving particulars of the criteria specified in paragraph CSD-2.2.7 which have not been met, or of the further information it requires in order to make a determination in relation to such criteria.
CSD-2.2.16
A certificate of finality in respect of a designated system remains in effect until it is revoked.
Finality of Settlement and Precedence Over Law of Insolvency
CSD-2.2.17
In line with Article 108 of the CBB Law:
(a) This Module shall be regarded as the requirements regarding conditions and controls to be incorporated in a Market Contract, as well as the procedures for carrying out clearing according to such contract;(b) Notwithstanding the provisions of any other law relating to clearing, bankruptcy or insolvency, any Close-out Netting shall be carried out according to the Market Contract in connection with debts, loans and dealings between the parties thereof that were originated or completed before any of the parties became insolvent or bankrupt. The same shall apply against the parties of the contract, their receivers in bankruptcy and their creditors; and(c) The previous paragraph shall not apply if one party knows or ought to have known that:(i) An application for the liquidation and winding up of the other party by reason of insolvency, is being considered by the concerned authority; or(ii) The other party has taken formal steps under any other applicable law to liquidate or wind up by reason of bankruptcy.CSD-2.2.18
In line with Article 109 of the CBB Law:
(a) Notwithstanding the provisions of any other law, no restriction or suspensions shall be applied to any provision related to clearance according to a Market Contract; and(b) Notwithstanding the provisions of any other law relating to clearance, bankruptcy or insolvency, the parties in a Market Contract may:(i) Agree to any system which will enable the parties to convert a non-financial obligation into a financial one of equivalent value and to valuate such an obligation for the purposes of any clearance or netting;(ii) Agree on the rate of exchange, or the method to be used to establish the rate of exchange to be applied in effecting any clearance or netting when the sums to be cleared or netted are in different currencies, and to establish the currency in which payment of the net sum is to be effected; or(iii) Agree that any transactions carried out pursuant to any Market Contract shall be treated as a single transaction for the purposes of the contract, whether such transactions were complete by the parties, a receiver in bankruptcy, a competent court, an officer representing the parties or that such transactions have been categorized or attributed to a certain type of trading.CSD-2.3 CSD-2.3 Arrangements for Depository Services
CSD-2.3.1
The
clearing house shall put in place necessary arrangements to avail of the services ofdepositories licensed by the CBB.CSD-2.3.2
A
clearing member shall be required to maintain a designated account with one or moredepositories .Amended: April 2016CSD-2.4 CSD-2.4 Central Depository Function
Securities Accounts and Records
CSD-2.4.1
No
person shall deal in deposited securities without first having asecurities account .CSD-2.4.2
A
depository participant which deals in depositedsecurities as principal shall, in relation to such dealing, open and maintain asecurities account with thecentral depository .Amended: April 2016CSD-2.4.3
A
central depository may establish different types ofsecurities accounts for different classes ofpersons .CSD-2.4.4
Every
securities account opened with acentral depository shall be in the name of thebeneficial owner of the deposited securities.CSD-2.4.5
The
person opening thesecurities account shall make a declaration in such manner as may be specified in the rules of thecentral depository that he is thebeneficial owner of depositedsecurities .Issuance of Statements of Accounts
CSD-2.4.6
A
central depository shall issue to all securities holders statements of accounts in respect of all depositedsecurities held in custody by, or registered in the name of thecentral depository for the securities holders at such time and in such manner as may be provided in the rules of thecentral depository .CSD-2.4.7
Notwithstanding rule CSD-2.4.6, a securities holder may, at any time, by written notice, require the
central depository to issue to him a statement of account in respect of all or any of the depositedsecurities for the time being held in custody by, or registered in the name of thecentral depository .Amended: April 2016CSD-2.4.8
A
central depository shall, on receipt of a written notice under paragraph CSD-2.4.7 and uponpayment of any charges which may be imposed under these rules, issue to the securities holder the statement so required.CSD-2.4.9
A statement of account issued under this rule shall be prima facie evidence of the truth of the matters specified in the statement.
CSD-2.5 CSD-2.5 Authorised Depository Participant
CSD-2.5.1
A
central depository must appoint any of thepersons referred to in Paragraph CSD-2.5.2 to be adepository participant for all or any of the following purposes:(a) To facilitate the deposit ofsecurities ;(b) To open, maintain and closesecurities accounts ;(c) To make entries insecurities accounts ;(d) To collect such fees and charges imposed by thecentral depository as may be provided under these rules; or(e) Such other incidental and ancillary purposes as may be specified by the rules of thecentral depository .Amended: April 2016CSD-2.5.2
A
central depository may appoint as adepository participant any of the following:(a) A stock exchange;(b) Aclearing house or depository;(c) A bank licensed by the CBB;(d) [This Subparagraph was deleted in April 2016]; or(e) Aninvestment firm licensee licensed by the CBB;and any
depository participant so appointed, in carrying out all or any of the purposes mentioned in rule CSD-2.5.1, shall, when so required by thecentral depository , in respect of such purposes, be authorised to give, divulge, reveal or disclose to thecentral depository any information or documents relating to asecurities account .Amended: April 2016Agreement Between Depository and Depository Participant
CSD-2.5.3
A
central depository shall enter into an agreement with one or moredepository participants as its agent.CSD-2.5.4
Every agreement shall be consistent with the provisions of this Module.
CSD-2.6 CSD-2.6 Provisions Relating to Immobilised Securities
CSD-2.6.1
A company or issuer must, in respect of
securities listed or quoted on alicensed exchange or market operator give notice to the public and its security holders of its intention to immobilise thesecurities .Amended: April 2016CSD-2.6.2
A listed company may from time-to-time after consultation with the
licensed exchange prescribe that anysecurity listed or quoted on thelicensed exchange , or proposed to be listed or quoted on thelicensed exchange or licensed market operator, be immobilised by depositing suchsecurity with thecentral depository .Amended: April 2016CSD-2.6.3
A
central depository or itsdepository participant , as the case may be shall, within the period prescribed in the rules, after the deposit by anyperson of a certificate and the instruments of transfer in respect thereof, if any, lodge the certificate and instrument with theissuer of thesecurity within two market days.Verification of Certificates and Transfer to a Central Depository
CSD-2.6.4
The
issuer shall, on receipt of the certificate and instrument, forthwith, do all such acts and things as may be necessary in order to register the transfer of thesecurity underlying such certificate in the name of thecentral depository .CSD-2.6.5
Where an
issuer refuses registration of a transfer, it shall serve on the transferor and thecentral depository , being the transferee, a written notice giving the reasons for such refusal, within 7 days.CSD-2.6.6
Without prejudice to the right of an
issuer to refuse to register a transfer under any written law, theissuer shall refuse registration of the transfer mentioned in rule CSD-2.6.8 if:(a) It ascertains that the certificate is not a genuine certificate, or is a certificate that was reported lost or destroyed; or(b) In relation to any suchsecurity , it discovers that:(i) There has been a duplication in the issuance of the certificate representing thesecurity ;(ii) Such certificate is a certificate issued in excess of the issued share capital of theissuer ; or(iii) It has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of thesecurity underlying such certificate.Amended: April 2016CSD-2.6.7
Within seven market days after a transfer is lodged with an
issuer or within such longer period as may be allowed in writing by acentral depository, theissuer shall complete and deliver the appropriate certificate to thecentral depository .The central depository may refuse entry of the certificates deposited where prima facie:
(a) There are discrepancies between the securities received and the transfer lodged; or(b) The securities are invalid, not genuine.CSD-2.6.7A
The
central depository may refuse entry of the certificates deposited where prima facie:(a) There are discrepancies between thesecurities received and the transfer lodged; or(b) Thesecurities are invalid, not genuine.Added: April 2016Issuance of Consolidated Statements
CSD-2.6.8
A
central depository may require anissuer of deposited securities toissue in the name of thecentral depository a consolidated statement for suchsecurities .CSD-2.6.9
The
issuer shall, upon receipt of a requirement as mentioned in Paragraph CSD-2.6.8 forthwith take such action as may be appropriate for the issuance of the consolidated statement to thecentral depository .Amended: April 2016Withdrawal of Immobilised Securities
CSD-2.6.10
A depositor may by an application to the
central depository withdraw an immobilisedsecurity standing to the credit of hissecurities account .Amended: April 2016CSD-2.6.11
Where an application is made under paragraph CSD-2.6.10 for the withdrawal of an immobilised
security which is registered in the name of acentral depository or itsdepository participant , thecentral depository shall forthwith place suchsecurity under suspense with theissuer including:(a) The certificate representing thesecurity ; and(b) The instrument of transfer duly executed by thecentral depository or itsdepository participant , as the case may be,for the purpose of effecting the transfer in favour of the depositor.
Amended: July 2016
Amended: April 2016CSD-2.6.12
An
issuer shall, within two weeks after the certificate and the instrument of transfer in respect thereof are lodged with it:(a) Complete and have ready fordelivery to the depositor, the appropriate certificate registered in the name of such depositor; and(b) Unless otherwise instructed by the depositor, send or deliver the completed certificate to the depositor.CSD-2.6.13
No
person shall trade anysecurity withdrawn from acentral depository on alicensed exchange, unless suchsecurity is redeposited in acentral depository .Central Depository Deemed a Bare Trustee
CSD-2.6.14
A
central depository shall, in relation to deposited securities which are registered in its name:(a) Not be deemed to have an interest in relation to the book-entrysecurities which are registered in its name; and(b) Be deemed to be a bare trustee.Central Depository and Depository Participant not Liable for Loss
CSD-2.6.15
A
central depository anddepository participant shall not, except in the case of any willful act, omission, neglect or default on the part of thecentral depository or its authoriseddepository participant , be liable for any loss, damage or liability suffered or incurred by anyperson in respect of dealing in anysecurity .Amended: April 2016CSD-2.7 CSD-2.7 Dematerialisation and Central Registry Function
Dematerialisation of Securities
CSD-2.7.1
A company shall, in respect of
securities listed or quoted on alicensed exchange give notice to the public and its shareholders of its intention to dematerialise thesecurities . Any issue of suchsecurities after this Module comes into effect shall be in dematerialised form.Amended: April 2016CSD-2.7.2
A listed company may from time-to-time after consultation with the
licensed exchange prescribe that anysecurity listed or quoted on thelicensed exchange, or proposed to be listed or quoted on thelicensed exchange, be dematerialised.Amended: April 2016CSD-2.7.3
On or after the
dematerialisation date, everyissuer of asecurity prescribed as a dematerialisedsecurity shall:(a) Surrender the physical register of securities holders to thecentral depository ; and(b) Provide or instruct its registrar to provide information to thecentral depository of any securities holder who appears in the appropriate register as a holder of a certificate not already dematerialised by thecentral depository .Amended: April 2016CSD-2.7.4
A
central depository shall maintain information of the holders ofsecurities in a computerisedrecord form, in accordance with the relevant provisions of Module AML (Anti-Money Laundering & Combating Financial Crime).Amended: April 2016CSD-2.7.5
No
issuer shall after thedematerialisation date issue any certificate in respect of a dematerialisedsecurity .Amended: April 2016CSD-2.7.6
With effect from the dematerialisation date, a reference in respect of a dematerialised
security , to:(a) A register of members or securities holders including branch registers, maintained by a company under the Commercial Companies Law, 2001, shall be deemed to be a reference to therecord of securities holders maintained by thecentral depository ;(b) A transfer ofsecurities from a transferee shall be deemed to be a reference to a book entry transfer performed by thecentral depository ; and(c) Any certificate, instrument of transfer or any movableproperty representing anysecurity which is used as prima facie evidence of ownership of thesecurity shall be deemed to be a reference to a statement of account issued by thecentral depository .Amended: April 2016Dealings Effected by Means of Electronic Process
CSD-2.7.7
A dealing by a
beneficial owner in respect of a dematerialisedsecurity shall be effected by means of an entry in thesecurities account of thebeneficial owner .Amended: April 2016CSD-2.7.8
Transfer of
securities shall be effected bybeneficial owners or their authorised nominees.CSD-2.8 CSD-2.8 Entries in Securities Accounts
CSD-2.8.1
An entry in a
securities account in respect of a dealing, shall:(a) In the case of asecurities account established and maintained directly by acentral depository , be deemed to have been made by, or with the authority of, thecentral depository ; and(b) In the case of asecurities account established through and maintained by adepository participant on behalf of acentral depository , be deemed to have been made by, or with the authority of, thedepository participant .Amended: April 2016Entries in Securities Accounts to Specify Date, Time and Person Making the Entries
CSD-2.8.2
An entry in a
securities account made under the rule CSD-2.8.1 shall specify the date and time of the making of such entry and, in the case of an entry made by aperson , the identity of theperson making the entry.Record of an Entry Prima Facie Evidence
CSD-2.8.3
A
record of an entry in asecurities account in respect of adealing in depositedsecurities shall be prima facie evidence of the truth of the matters so recorded.Record of Securities Holders Beneficial Owner to be Issued to an Issuer on Request
CSD-2.8.4
An
issuer of any depositedsecurity may, in the manner and period prescribed by the rules of thecentral depository , request thecentral depository to issue him arecord of the securities holders holding the aforementionedsecurities under theirsecurities accounts , as at the date of the notice or such other date as may be specified in the notice.CSD-2.8.5
The
record of securities holders referred to in Paragraph CSD-2.8.4 shall contain the names, addresses, number of the depositedsecurities acquired by each securities holder and such other information and particulars of the securities holders as may be required and prescribed by the rules of the depository.Amended: April 2016Charging or Pledging of Securities
CSD-2.8.6
The
central depository shall include in its Business Rules the rules and procedures in respect of the pledge ofsecurities , including the acceptance of a pledge by abeneficial owner and the responsibilities of the pledger in respect of effecting the pledge.Amended: April 2016CSD-2.8.7
Where a deposited security is charged or pledged by a securities holder (hereinafter referred to as "pledger") in favour of any
person ("pledgee"), acentral depository or adepository participant , with or through whom thesecurities account of the securities holder is maintained shall, on a request on the prescribed form made by the securities holder or pledger, create a pledge on the relevant securities within thesecurities account .Amended: April 2016CSD-2.8.8
Where a request is made by a securities holder as provided under Paragraph CSD-2.8.7, such request shall be supported by documents evidencing such charge or pledge.
Amended: April 2016CSD-2.8.9
Where a pledge over a deposited
security has been discharged or released, thecentral depository or itsdepository participant , as the case may be, shall, upon receipt of a notice in writing from the pledgee confirming the same, release the pledge within thesecurities account of the pledger.Amended: April 2016Securities in Suspense
CSD-2.8.10
A
central depository must specify that any deposited security in asecurities account as being in suspense in any of the following circumstances:(a) Where thesecurities have not been made fully paid-up;(b) Where thecentral depository has reason to believe or is satisfied that there is a breach of the rules of thecentral depository ,licensed exchange orlicensed clearing house ;(c) Where thecentral depository has been served with a notice by the CBB that the CBB suspects or has reason to believe that a provision of a related law has been contravened and thatsecurities account of a securities holder is relevant to its investigations regarding the contravention;(d) Where thecentral depository has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of a depositedsecurity ;(e) Where thesecurities or interim certificates are lost and no othersecurities or certificates are given in lieu; or(f) Such other circumstances as may be prescribed by the CBB.Amended: April 2016CSD-2.8.11
In the case of a
security that is specified in thesecurities account as being in suspense pursuant to rule CSD-2.8.10:(a) The rights, benefits, powers and privileges of a securities holder; and(b) The liabilities, duties and obligations of a securities holder, in respect of, or arising from, the suspension of such asecurity ,shall be as prescribed by the suspension order.
Amended: April 2016CSD-2.8.12
Where the
central depository specifies that any deposited security in asecurities account has been suspended, thecentral depository shall inform thesecurities account holder, issuer, the relevantdepository participants and the relevantlicensed exchange .Amended: April 2016CSD-2.9 CSD-2.9 Proceedings of Licensed Clearing House and Licensed Central Depository Take Precedence Over Law of Insolvency
CSD-2.9.1
In line with Articles 108 and 109 of the CBB Law and Resolution No (44) of 2014 with respect to promulgating a Regulation for Close-out Netting under a Market Contract, none of the following shall be regarded as to any extent invalid under the law on the grounds of inconsistency with the law relating to distribution of the assets of a
person on insolvency, bankruptcy or winding up, or on the appointment of a receiver over any of the assets of aperson :(a) Amarket contract ;(b) The rules of alicensed clearing house relating to thesettlement of amarket contract ;(c) Any proceeding or other action taken under the rules of alicensed clearing house relating to thesettlement of amarket contract ;(d) Amarket charge ;(e) Thedefault rules of alicensed clearing house orcentral depository ; and(f) Anydefault proceedings .Amended: April 2016CSD-2.9.2
The powers of a relevant office-holder in his capacity as such, and the powers of a court acting under the law of insolvency, shall not be exercised in such a way so as to prevent or interfere with:
(a) Thesettlement in accordance with the rules of alicensed clearing house orlicensed central depository of amarket contract ; or(b) Anydefault proceedings taken in pursuant todefault rules .Amended: April 2016CSD-3 CSD-3 Obligations of a Clearing House and Central Depository
CSD-3.1 CSD-3.1 General Obligations of a Clearing House and Central Depository
CSD-3.1.1
A
licensed clearing house andlicensed central depository shall:(a) As far as is reasonably practicable, operate a safe and efficient clearing orcentral depository facility;(b) Manage any risks associated with its business and operations prudently;(c) In discharging its obligations under this Module, not act contrary to the interests of the public, having particular regard to the interests of the investing public;(d) Ensure that access for participation in its clearing orcentral depository facility is subject to criteria that are fair and objective, and that are designed to ensure the safe and efficient functioning of its facility and to protect the interests of the investing public;(e) Maintainbusiness rules that make satisfactory provision for:(i) The clearing orcentral depository facility to be operated in a safe and efficient manner; and(ii) The proper regulation and supervision of its members and depository participants;(f) Enforce compliance by its members and depository participants with itsbusiness rules ;(g) Have sufficient financial, human and system resources:(i) To operate a safe and efficient clearing orcentral depository facility;(ii) To meet contingencies or disasters; and(iii) To provide adequatesecurity arrangements;(h) Ensure that it appoints or employs fit and properpersons as its chairman, chief executive officer, directors and key management officers;(i) Maintain efficient risk management and internal controls;(j) Maintain arecord of all transactions effected through its clearing orcentral depository facility in such form and manner as the CBB may prescribe, including:(i) The extent to which therecord includes details of each transaction in line with the applicable laws, rules and regulations related to the Know Your Client and the Prevention and Prohibition of Money Laundering; and(ii) The period of time that therecord is to be maintained.(k) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders meetings referred to in Subparagraph CSD-3.1.1(m);(l) Ensure that any agenda items to be discussed or presented during the course of meetings which require the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;(m) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and(n) Within a maximum of 15 calendar days of any shareholders' meetings referred to in Subparagraph CSD-3.1.1(m), provide to the CBB a copy of the minutes of the meeting.Amended: July 2016
Amended: April 2016CSD-3.1.1A
Licensed clearing houses andlicensed central depositories 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.Added: October 2020CSD-3.1.2
The CBB may by notice in writing, exempt any clearing or
central depository facility operated by alicensed clearing house orlicensed central depository from all or any of the provisions of this Module, if the CBB is satisfied that such exemption would not detract from the objectives specified in rule CSD-3.1.1.Amended: April 2016CSD-3.1.3
In rule CSD-3.1.1 (g), "contingencies or disasters" include technical disruptions occurring within automated systems.
CSD-3.1.4
A
licensed clearing house orlicensed central depository shall formulate and implement appropriate procedures for ensuring that its members or participants comply with the CBB Law, rules and regulations, and rules of thelicensed clearing house orcentral depository .Amended: April 2016CSD-3.1.5
A
licensed clearing house orlicensed central depository shall, for the conduct of its business, at all times provide and maintain:(a) Adequate and properly equipped premises;(b) Competent personnel; and(c) Automated systems with adequate capacity, facilities to meet contingencies or emergencies, security arrangements and technical support.Amended: April 2016CSD-3.1.6
Internal rules and procedures of a
licensed clearing house orcentral depository must be enforceable with a high degree of certainty, so as to ensure its effective operation.CSD-3.1.7
The rules and contracts related to the operation of the
clearing house orcentral depository should be enforceable in the event of the insolvency of a member ordepository participant .Amended: April 2016Obligation to Submit Periodic Financial Reports
CSD-3.1.8
A
licensed clearing house orcentral depository shall submit to the CBB such reports in such form, manner and frequency as the CBB may prescribe. Alicensed clearing house orcentral depository shall submit to the CBB for the preceding quarter, in such form as may be approved by the CBB:(a) Within 3 months after the end of its financial year, a copy of its:(i)Annual report and directors' report prepared in accordance with the provisions of the IFRS; and(ii) Auditors' long form report;(b) Within 45 days after the end of each of the first 3 quarters of its financial year, a copy of its:(i) Profit and loss accounts; and(ii) Balance-sheet;(c) Within 3 months after the end of its financial year, a report on how thelicensed clearing house orcentral depository has discharged its responsibilities under the CBB Law and this Module during that financial year;(d) A report reviewed by the internal auditor relating to the business of operating thelicensed clearing house orcentral depository , at such time or on such periodic basis as may be specified by the CBB; and(e) Such other report as the CBB may require at such time or on such periodic basis as may be specified by the CBB.CSD-3.1.9
The auditors' long form report referred to in rule CSD-3.1.8 (a) (ii) shall include the findings and recommendations of the auditors, if any, on:
(a) The risk management and internal controls of thelicensed clearing house orcentral depository ; and(b) The non-compliance with any:(i) Provision of the CBB Law;(ii) Direction issued by the CBB under the CBB Law and regulations; or(iii) Other relevant laws or regulations.IIS Reporting Requirements
CSD-3.1.9A
A
licensed clearing house orlicensed central depository is required to complete online non-financial information related to its institution by accessing the CBB's institutional information system (IIS).Licensees must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, the licensee must still access the IIS quarterly and confirm the information contained in the IIS.Licensees must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.Amended: April 2016
Added: April 2013CSD-3.1.9B
Licensees failing to comply with the requirements of Paragraph CSD-3.1.9A or reporting inaccurate information are subject to financial penalties or other enforcement actions.Amended: April 2016
Added: April 2013Obligation to Maintain Transparency
CSD-3.1.10
A
licensed clearing house orlicensed central depository must maintain complete transparency in relation to its operations, including clearing, settlement, depository and central registry with particular regard to:(a) Transaction execution;(b)Settlement arrangements;(c) Fees and charges;(d) Margin requirements, including lending and borrowing;(e) Operational requirements; and(f)Business rules .Amended: April 2016Obligation to Assist CBB
CSD-3.1.11
A
person operating a clearing or depository facility shall provide such assistance to the CBB as the CBB may require for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provision of:(a) Such books and other information:(i) Relating to the business of the clearing or depository facility; and(ii) In respect of any transaction or class of transactions cleared or settled by the clearing facility, or accepted for deposit by a depository; and(b) Such other information or assistance, as the CBB may require for the proper administration of the CBB Law and regulations.Amended: April 2016Obligation to Notify CBB of Certain Matters
CSD-3.1.12
A
person operating a clearing or depository facility shall (including where a clearing facility carries on business or acquires a substantial shareholding in a central depository, or vice-versa), notify the CBB in the event of the following:(a) The carrying on of any business by thelicensed clearing house orlicensed central depository other than:(i) The business of operating a clearing facility and/or depository;(ii) A business incidental to operating a clearing facility or depository; or(iii) Such business or class of businesses as the CBB may prescribe;(b) The acquisition by thelicensed clearing house orlicensed central depository of a substantial shareholding in a corporation which does not carry on:(i) The business of operating a clearing facility or central depository;(ii) A business incidental to operating a clearing facility or central depository; or(iii) Such business or class of businesses as the CBB may prescribe;(c) Thelicensed clearing house orlicensed central depository becoming aware of a financial irregularity or other matter which in its opinion:(i) May affect its ability to discharge its financial obligations; or(ii) May affect the ability of a member or participant of thelicensed clearing house orlicensed central depository to meet its financial obligations to thelicensed clearing house orlicensed central depository ;(d) Thelicensed clearing house orlicensed central depository reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against a member or depository participant of thelicensed clearing house orlicensed central depository ; and(e) Any other matter that the CBB may prescribe by regulations or specify by notice in writing to thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-3.1.13
A
licensed clearing house orlicensed central depository shall, immediately after becoming aware of the occurrence of any of the following circumstances, notify the CBB in writing of:(a) Any civil or criminal legal proceeding instituted against thelicensed clearing house orlicensed central depository , or any of its members ordepository participants , whether in Bahrain or elsewhere;(b) Any disciplinary action taken against thelicensed clearing house orlicensed central depository , or any of its members ordepository participants by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;(c) Any significant change to the regulatory requirements imposed on thelicensed clearing house orlicensed central depository by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;(d) Any admission or cessation of a bank to act as asettlement bank for thelicensed clearing house ;(e) Any failure by any party to debit or credit the relevant accounts for the purpose of thesettlement of transactions, including thesettlement of moneys,securities or physically delivered futures contracts; and(f) Any disruption of or delay in any clearing,settlement or central depository procedures of thelicensed clearing house orlicensed central depository , including those resulting from any system failure.Amended: April 2016CSD-3.1.14
Where a circumstance under Subparagraphs CSD-3.1.13 (a), (b), (e) or (f) has occurred, the
licensed clearing house orlicensed central depository shall, in addition to the notification required under Paragraph CSD-3.1.13, within 7 days of the occurrence of the circumstance, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken at the time of the occurrence, and the subsequent follow-up actions that thelicensed clearing house orlicensed central depository has taken, or intends to take.Amended: April 2016CSD-3.1.15
A
licensed clearing house orlicensed central depository shall, within a reasonable period of time prior to entering into negotiations to establish a clearing linkage, clearing arrangement, depository arrangement or co-operative arrangement with aperson establishing or operating another clearing facility or depository, notify the CBB of such intent to enter into negotiations.Amended: April 2016CSD-3.1.16
In rule CSD-3.1.15, ''co-operative arrangement'' shall not include:
(a) Any joint development of products and services;(b) Any joint marketing efforts between thelicensed clearing house orlicensed central depository and theperson operating an overseas market, or clearing or depository facility, in promoting the services of either entity; or(c) Any memorandum of understanding for the exchange of information.Amended: April 2016CSD-3.1.17
A
licensed clearing house orlicensed central depository shall seek the approval of the CBB prior to making any change to the financial resources that are available to thelicensed clearing house orlicensed central depository to support a default of its member; and(a) The CBB may grant its approval referred to above, subject to such conditions or restrictions as the CBB may deem fit.(b) For the purposes of this Paragraph, ''financial resources that are available to thelicensed clearing house to support a default of its member'' shall not include margin trading facilities held with thelicensed clearing house .Amended: April 2016CSD-3.1.18
A
person operating a clearing facility or depository shall, no laterthan 7 days after the occurrence of any of the following circumstances, notify the CBB of:(b) A change of the address of the principal place of business at which it carries on the business of operating a clearing facility or depository;(c) A material change in the business of the clearing facility or depository; or(d) Such other matter as the CBB may prescribe.Amended: July 2016
CSD-3.1.19
A
licensed clearing house orlicensed central depository shall seek the approval of the CBB prior to accepting any new type ofsecurities (e.g. equities or warrants) for clearing,settlement or deposit.Amended: April 2016CSD-3.1.20
The CBB may at its discretion, unless the timeframe is stipulated by law, decide on an application by the
licensed clearing house orlicensed central depository to vary the timeframe for compliance with the obligations in this Module and substitute such timeframe.Amended: April 2016CSD-3.1.21
Any application for an extension of the timeframe in which to comply with the obligations of this Chapter must be made in writing, stating the extraordinary reason for such request.
Amended: April 2016CSD-3.2 CSD-3.2 Obligation to Maintain Confidentiality
CSD-3.2.1
In line with Part 8 of the CBB Law, and except under circumstances specified in Paragraphs CSD-3.2.2 and CSD-3.2.3, a
licensed clearing house orlicensed central depository and its officers and employees shall maintain, and aid in maintaining, confidentiality of alluser information that:(a) Comes to the knowledge of thelicensed clearing house orlicensed central depository or any of its officers or employees; or(b) Is in the possession of thelicensed clearing house orlicensed central depository or any of its employees.Amended: April 2016Exemption of Obligation to Maintain Confidentiality
CSD-3.2.2
Rule CSD-3.2.1 shall not apply to:
(a) The disclosure ofuser information for such purposes, or in such circumstances, as the CBB may prescribe;(b) Any disclosure ofuser information which is authorised by the CBB to be disclosed or furnished; or(c) The disclosure ofuser information pursuant to any requirement imposed under any written law or order of court in Bahrain.Amended: April 2016CSD-3.2.3
Rule CSD-3.2.1 shall not apply to the disclosure of
user information by alicensed clearing house orlicensed central depository , or its officers or employees, for the following purposes or in the following circumstances:(a) The disclosure ofuser information is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;(b) The disclosure ofuser information is permitted for such purpose specified in writing by the user or, where the user is deceased, by his appointed personal representative;(c) Theuser information is disclosed to the approved holding company of thelicensed clearing house orlicensed central depository ;(d) The disclosure ofuser information is necessary for the execution by thelicensed clearing house orlicensed central depository of a transaction in any listedsecurities or futures contracts, or clearing orsettlement of a transaction on alicensed exchange and such disclosure is made only to another user which is:(i) A party to the transaction; or(ii) A member of alicensed exchange or alicensed clearing house through which that transaction is executed, cleared or settled;(e) The disclosure ofuser information is necessary:(i) In any disciplinary proceedings of thelicensed clearing house orlicensed central depository , provided that reasonable steps are taken to ensure thatuser information disclosed to any thirdperson is used strictly for the purpose for which theuser information is disclosed; or(ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;(f) Theuser information disclosed is already in the public domain;(g) The disclosure ofuser information is made in connection with an arrangement for protection against a default by a member or participant of thelicensed clearing house orlicensed central depository to another member or participant of thelicensed clearing house orlicensed central depository , who is identified by thelicensed clearing house orlicensed central depository for the purposes of carrying out or undertaking the obligations under the arrangement;(h) The disclosure is required in accordance with international and multilateral arrangements including, but not limited to the IOSCO MMoU;(i) The disclosure ofuser information is made to a member or depository participant of thelicensed clearing house orlicensed central depository in connection with an arrangement for the transfer to that member or depository participant of any contract orposition from another member of thelicensed clearing house orlicensed central depository who is in default;(j) The disclosure ofuser information is made in connection with:(i) The outsourcing or proposed outsourcing of any function of thelicensed clearing house orlicensed central depository to a third party after obtaining the approval of the CBB;(ii) The engagement or potential engagement of a third party by thelicensed clearing house orlicensed central depository to create, install or maintain systems of thelicensed clearing house orlicensed central depository ; or(iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by thelicensed clearing house orlicensed central depository under a contract for service;(k) The disclosure ofuser information is necessary in:(i) An application for a grant of probate or letters of administration, or the resealing thereof in relation to the estate of a deceased user; or(ii) The administration of the estate of a deceased user, including such disclosure as may be required by the applicable laws, rules and regulations; or(l) The disclosure ofuser information is made in connection with:(i) In the case where the user is an individual, the bankruptcy of a user; or(ii) In the case where the user is a body corporate, the winding up or receivership of a user.Amended: April 2016CSD-3.2.4
Where
user information is disclosed under Subparagraphs CSD-3.2.3 (g), (h) or (i), thelicensed clearing house orlicensed central depository shall:(a) Maintain arecord of:(i) The circumstances relating to the disclosure ofuser information referred to in that sub-paragraph; and(ii) In the case of disclosure of information, the particulars of:A. The arrangement for protection;B. The arrangement for transfer;C. The outsourcing of the function of thelicensed clearing house orlicensed central depository ;D. The engagement of the third party; andE. The appointment or engagement of an auditor, a lawyer, a consultant or other professional by thelicensed clearing house orlicensed central depository under a contract for service, and make therecord available for inspection by the CBB.(b) Disclose theuser information insofar as this is necessary for the relevant purpose; and(c) Take reasonable steps to ensure thatuser information disclosed is used by theperson to whom the disclosure is made strictly for the relevant purpose, and that theuser information is not disclosed by thatperson to any otherperson except with the consent of thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-3.2.5
Where disclosure of
user information is permitted to be made for any purpose or in any circumstance under Paragraph CSD-3.2.3 to a body corporate, theuser information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.Amended: April 2016CSD-3.2.6
In Paragraphs CSD-3.2.4 and CSD-3.2.5, ''relevant purpose'' means:
(a) In the case of the disclosure of information under Subparagraph CSD-3.2.3(g), the carrying out of the arrangement for protection;(b) In the case of the disclosure of information under Subparagraph CSD-3.2.3(h), the carrying out of the arrangement for transfer;(c) In the case of the disclosure of information under Subparagraphs CSD-3.2.3(j) and (i), facilitating the outsourcing of the function of thelicensed clearing house orlicensed central depository ;(d) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (ii), facilitating the engagement of the third party; and(e) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (iii), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.Amended: April 2016CSD-3.2.7
For the avoidance of doubt, nothing in this Section shall be construed as preventing a
licensed clearing house orlicensed central depository from entering into a written agreement with a user which obliges thelicensed clearing house orlicensed central depository to maintain a higher degree of confidentiality than that specified in this Section.Amended: April 2016CSD-3.3 CSD-3.3 Business Continuity Plan
CSD-3.3.1
A
licensed clearing house orlicensed central depository shall maintain at all times a plan of action (referred to in this Module as a business continuity plan), setting out the procedures and establishing the systems necessary to restore safe and efficient operations of any clearing facility or depository it operates, in the event of any disruption to the processes of its clearing facility or depository.Amended: April 2016CSD-3.3.2
As part of a business continuity plan the
licensed clearing house orlicensed central depository should provide for:(a) Recovery situations;(b) Recovery situations affecting the clients, members and depository participants;(c) The evacuation of the office premises; and(d) Back-uplicensed clearing house data centre.Amended: April 2016CSD-3.3.3
A
licensed clearing house orlicensed central depository shall review the procedures and systems referred to in rule CSD-3.3.1 on such regular basis as may be specified in the business continuity plan.Amended: April 2016CSD-3.3.4
A
licensed clearing house orlicensed central depository shall immediately notify the CBB of any activation of its business continuity plan and of any action taken, or intended to be taken, to restore safe and efficient operations of its clearing facility.Amended: April 2016CSD-3.3.5
A
licensed clearing house orlicensed central depository shall, within 7 days, inform the CBB of any material change to the business continuity plan and shall submit, at the request of the CBB, a copy of the new plan to the CBB.Amended: April 2016CSD-3.4 CSD-3.4 Transmission and Storage of User Information
CSD-3.4.1
A
licensed clearing house orlicensed central depository shall take all reasonable measures to maintain the integrity and security of the transmission and storage of itsuser information .Amended: April 2016CSD-3.5 CSD-3.5 Regulation of Clearing and Deposit Fees of Licensed Clearing Houses and Licensed Central Depositories
CSD-3.5.1
A
licensed clearing house orlicensed central depository shall not impose, modify, restructure or otherwise change any existing clearing or depository fee imposed on its members or depository participants, without the prior written approval of the CBB.Amended: April 2016CSD-3.5.2
The CBB may require the
licensed clearing house orlicensed central depository to furnish it with such information or documents as the CBB considers necessary in relation to the application referred to in rule CSD-3.5.1, and thelicensed clearing house orlicensed central depository shall furnish such information or documents as the CBB may require.Amended: April 2016CSD-3.5.3
The CBB shall, within 30 business days of receipt of a completed application referred to in paragraph CSD-3.5.2, by notice in writing to the
licensed clearing house orlicensed central depository , either grant the approval or notify thelicensed clearing house orlicensed central depository of its intention to refuse to grant the approval.Amended: July 2016
CSD-3.5.4
The CBB may, by notice in writing to the
licensed clearing house orlicensed central depository , extend the period referred to in rule CSD-3.5.3:(a) To a maximum of 45 business days from the day of receipt of a completed application referred to in rule CSD-3.5.1; or(b) For a further period of such duration as the CBB thinks fit upon the expiry of the 45 business days referred to in (a) above.Amended: April 2016CSD-3.5.5
The CBB may have regard to the following matters for the purposes of deciding whether to grant or to refuse to grant its approval:
(a) The effect of the proposed imposition of or change in the fee on:(i) Competition in the financial services industry of Bahrain; and(ii) Access to clearing,settlement or depository services in Bahrain;(b) The cost of providing the service for which such proposed imposition or change in fee is proposed;(c) The effect of such proposed imposition or change on the cost and efficiency of trading, clearing,settlement and depository in Bahrain ofsecurities or futures contracts; and(d) The effect of such proposed imposition or change in the objective of the CBB as specified in the CBB Law.CSD-3.5.6
The CBB may grant its approval subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing to the
licensed clearing house orlicensed central depository , including conditions or restrictions relating to:(a) The period for which the approval of the fee will be in force;(b) The circumstances under which, or date by which thelicensed clearing house orlicensed central depository will be required to submit another application for approval of the clearing or depository fee under rule CSD-3.5.1 upon the expiry of the period referred (a) above; and(c) The circumstances under which, or the changes in the fee for which, thelicensed clearing house orlicensed central depository will not be required to submit another application for approval of a change in the fee under rule CSD-3.5.1 upon the expiry of the period referred to in (a) above.Amended: April 2016CSD-3.5.7
The CBB shall not refuse to grant its approval without giving the
licensed clearing house orlicensed central depository an opportunity to be heard.Amended: April 2016CSD-3.5.8
The
licensed clearing house orlicensed central depository may only charge the fee approved by the CBB under rule CSD-3.5.1 for the service or services in respect of which it was approved.Amended: April 2016CSD-3.6 CSD-3.6 Inspection, Accounting and Internal Audit
CSD-3.6.1
Every member or depository participant must submit to the
licensed clearing house orlicensed central depository :(a) Audited financial reports; and(b) Quarterly internal audit reports.Amended: April 2016CSD-3.6.2
The
licensed clearing house orlicensed central depository shall carry out periodic visits to the offices of itsmembers ordepository participants and clearing or depository facilities to review the operating procedures, systems maintenance and compliance with the CBB Law, rules and regulations and its business rules.Amended: April 2016CSD-3.6.3
The board of directors of the
licensed clearing house orlicensed central depository may appoint a Disciplinary Action Committee (DAC) to deal with any matter relating to allegations of improper conduct from the clients of themembers ordepository participants and theissuers .Amended: April 2016CSD-3.6.4
The DAC is empowered to :
(a) Suspend or expel amember ordepository participant ;(b) Declare a security as ineligible on thecentral depository system;(c) Freeze amember ordepository participant account; and(d) Conduct inspections or call for records and issue notices.CSD-3.6.5
If a
member ordepository participant is aggrieved by the action of the DAC, it has the right to appeal directly to the CBB against the action of the DAC, within 30 days of the action of the DAC.CSD-3.6.6
The CBB shall hear the appeal within two months from the date of filing the appeal.
CSD-3.6.7
The orders passed by the DAC shall be binding on the
member ordepository participant and the clients.CSD-3.6.8
The information on all such actions under Paragraph CSD-3.6.4 shall be furnished to the CBB.
Amended: April 2016CSD-3.7 CSD-3.7 Specific Obligations of a Clearing House
Customers' Money and Assets Held by Licensed Clearing House
CSD-3.7.1
Every
licensed clearing house may accept money or assets deposited with or paid by its members in respect of or in relation to the market contracts of the customers of such members.CSD-3.7.2
A
licensed clearing house , which accepts assets or money deposited with or paid to it by its members in respect of or in relation to contracts of the customers of such members, shall require each of its members to notify it in such manner as it may determine:(a) Whether amarket contract is a contract of a customer of the member which has been cleared and settled by the member; and(b) Whether the money or assets being deposited with or paid to thelicensed clearing house is, or are deposited or paid in respect of, or in relation to, a contract of a customer of the member.CSD-3.7.3
Where a member has notified the
licensed clearing house under rule CSD-3.7.2 that the money or assets are deposited or paid in respect of, or in relation to a contract of a customer of the member, thelicensed clearing house shall:(a) Account for all such money and assets on an aggregated basis, separate from all other money and assets received by thelicensed clearing house from the member; and(b) Subject to Paragraphs CSD-3.8.1 and CSD-3.8.2, ensure that such money is deposited in a trust account, or such assets are deposited in a custody account, to be held for the benefit of the customers of the member and disposed of or used only in respect of or in relation to contracts of customers of the member.Amended: April 2016Daily Computation of Customers' Money and Assets
CSD-3.7.4
A
licensed clearing house shall, at such intervals as thelicensed clearing house determines appropriate, but no less frequently than once each business day, compute the total amount of customers' money and assets held by thelicensed clearing house, including money that has been kept by thelicensed clearing house .CSD-3.7.5
Any computation referred to in rule CSD-3.7.4 shall be completed no later than the commencement of the following trading session and shall be kept by the
licensed clearing house together with all supporting data.CSD-3.7.6
For the purpose of this Module, a "business day" refers to any day in which the
licensed clearing house is open for business.Verification of Money and Assets Placed with Licensed Clearing House
CSD-3.7.7
A
licensed clearing house shall require its auditors to submit to the CBB a report within 3 months of the financial year-end or such other time as the CBB may require:(a) Certifying that the money and assets deposited by a member with thelicensed clearing house in respect of, or in relation to, a contract of a customer of the member are:(i) Segregated from the other money and assets deposited by the member with the designatedclearing house ;(ii) Deposited in a trust account or custody account and are not combined with the money and assets of thelicensed clearing house ;(iii) Used as permitted under or in accordance with Section CSD-3.8; and(b) Setting out the amount, on an aggregated basis, of all money and assets deposited by the member with thelicensed clearing house :(i) In respect of, or in relation to, a contract of a customer of the member; and(ii) In respect of, or in relation to, any othermarket contract .Amended: January 2022
Amended: April 2016CSD-3.7.8
The business rules must support the segregation of customer assets or other arrangements for prioritizing claims in bankruptcy that serve to protect customers' holdings.
Amended: April 2016CSD-3.7.9
The
licensed central depository must enforce effective segregation of customer assets by custodians.Amended: April 2016CSD-3.8 CSD-3.8 Permissible Use of Customers' Money and Assets by Licensed Clearing House
CSD-3.8.1
Where a member of a
licensed clearing house fails to meet its obligations to thelicensed clearing house , thelicensed clearing house may use any money or assets deposited or paid in respect of or in relation to contracts of customers of the member and held by thelicensed clearing house , including any money deposited in the trust account and any assets deposited in the custody account referred to in rule CSD-3.7.3 (b), to meet the obligations of the member to thelicensed clearing house , if thelicensed clearing house has reasonable grounds for forming an opinion that:(a) The failure of the member to meet the member's obligations is directly attributable to the failure of any of the customers of the member to meet that customer's obligations under anymarket contract ; and(b) The failure to use the money or assets to meet the obligations of the member may jeopardize the financial integrity of thelicensed clearing house .CSD-3.8.2
A
licensed clearing house shall notify the CBB prior to using any such money or assets in the circumstances specified in Paragraph CSD-3.8.1.Amended: April 2016CSD-3.8.3
A
licensed clearing house shall, in so far as any money which has been deposited in a trust account, or any asset which has been deposited in a custody account, ensure that it is used only in respect of or in relation to contracts of a customer of the member; or in accordance with its business rules.CSD-3.8.4
Where a
licensed clearing house uses money and assets in contravention of Paragraph CSD-3.8.3, it shall:(a) In the case of money, repay the money to the trust account referred to in rule CSD-3.7.3 (b); or(b) In the case of assets:i. Return the asset to the custody account referred to in rule CSD-3.7.3 (b); orAmended: April 2016CSD-3.9 CSD-3.9 Permissible Investments of Customers' Money and Assets by Licensed Clearing House
CSD-3.9.1
Subject to Paragraph CSD-3.9.2, a
licensed clearing house may invest any money or assets deposited, or paid in respect of, or in relation to, contracts of customers of a member and held by thelicensed clearing house in the course of its clearing orsettlement activities, including any money deposited in the trust account in anysecurity , instrument or other form of investment arrangement as the CBB may prescribe, which are low risk and which are not otherwise restricted by the CBB.Amended: April 2016CSD-3.9.2
A
licensbed clearing house may invest the money deposited with or paid to it in the following classes:(a)Securities of the Government;(b) Bank deposits;(c) Transferrable negotiable certificates of deposit; and(d) Any other investment approved by the CBB.CSD-3.9.3
The
licensed clearing house shall seek the prior written approval of the CBB before investing any such money or assets under Paragraph CSD-3.9.2.Amended: April 2016CSD-3.9.4
The
licensed clearing house seeking the approval of the CBB under Paragraph CSD-3.9.2 shall satisfy the CBB:(a) That the management of the investments made by thelicensed clearing house is consistent with the principles of preserving principal and maintaining sufficient liquidity to meet the obligations of customers of members of thelicensed clearing house ;(b) That prudential measures have been adopted to manage the risks in respect of thelicensed clearing house's investment activities; and(c) Of any other matter which the CBB considers necessary for the sound management of the investments.Amended: April 2016CSD-3.9.5
The CBB may grant the approval referred to in Paragraph CSD-3.9.3, subject to such conditions or restrictions as the CBB may deem fit.
Amended: April 2016CSD-3.10 CSD-3.10 Specific Obligations of a Licensed Central Depository
Obligation to Maintain Certain Records
CSD-3.10.1
A
licensed central depository shall provide or cause to be provided all such facilities as may be necessary:(a) To facilitate efficient deposit ofsecurities ;(b) To facilitate registration ofdealings in deposited securities;(c) To ensure the safe custody of certificates and other documents representing deposited securities;(d) To guard against falsification of anyrecords or accounts required to be kept or maintained under the Module; and(e) To establish a proper and efficient system for the verification, inspection, identification and recording of allsecurities deposited with thecentral depository .Amended: April 2016CSD-3.10.2
Every
licensed central depository shall maintain the followingrecords and documents, mainly:(a)Records ofsecurities dematerialised and re-materialised;(b) The names of the transferor, transferee, and the dates of transfer ofsecurities ;(c) A register and an index ofbeneficial owners ;(d)Records of instructions received from and sent todepository participants ,issuers , issuers' agents andbeneficial owners ; and(e)Records of approval, notice, entry and cancellation of pledge or charge, as the case may be.Amended: April 2016CSD-3.10.3
A
licensed central depository shall also keep suchrecords and accounts, in sufficient detail, so as to show particulars of:(a) All monies received or paid by thelicensed central depository , including dividends received in respect of any deposited securities and the disbursement of such dividends to depositors;(b) All income received from commissions, fees, charges and other sources and all expenses, commissions and otherpayments made or paid by thelicensed central depository ;(c) All assets and liabilities (including contingent liabilities) of thelicensed central depository ;(d) All deposited securities and particulars showing for whom the certificates and the instruments of transfer in respect of such certificates are held;(e) All purchases and sales of deposited securities and particulars of other dealings made in respect thereof, the charges and credits arising therefrom, the identity of the buyer and seller of each of those deposited securities or, in the case of other dealings, the identity of thepersons executing such dealings and theperson in whose favour such dealings are executed as the case may be.Amended: April 2016CSD-3.10.4
An entry in the
records or accounts shall specify the date and time of making such entry and, in the case of an entry made by aperson , the identity of suchperson .CSD-3.10.5
All such
records to be maintained for a minimum period of 10 years as required under the CBB law.CSD-3.11 CSD-3.11 Duty Not to Acquire or Deal in Deposited Securities by a Licensed Central Depository
CSD-3.11.1
No
licensed central depository shall purchase, acquire, or otherwise deal in, any deposited security as principal other than for such purpose and in such manner as may be permitted by the CBB under this Module.Amended: April 2016CSD-3.11.2
A
licensed central depository which contravenes the aforesaid provision shall be guilty of an offence and shall be subject to such penalty as the CBB may choose to levy.Amended: April 2016CSD-4 CSD-4 Business Rules of a Licensed Clearing House and Licensed Central Depository
CSD-4.1 CSD-4.1 Business Rules of Licensed Clearing Houses and Licensed Central Depositories
CSD-4.1.1
The CBB may prescribe the matters that a
licensed clearing house orlicensed central depository shall make provision for in thebusiness rules of thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-4.1.2
A
licensed clearing house orlicensed central depository shall, in line with CBB Law, and to the satisfaction of the CBB, make provision in itsbusiness rules for continuing requirements for each member ordepository participant , including requirements that the member is a Category 1 Investment Firm licensed by the CBB.Amended: April 2016CSD-4.1.3
A
licensed clearing house orlicensed central depository shall, in line with CBB Law, make provision in its business rules and to the satisfaction of the CBB for continuing requirements for each member ordepository participant , including requirements relating to the terms and conditions under which transactions will be cleared, settled or deposited, including but not limited to:(a) The legal obligations and rights of thelicensed clearing house and members relating to the clearing and settlement of transactions;(b) The legal obligations and rights of thelicensed clearing house or central depository and members ordepository participants relating to payments, including netting of obligations, distribution of entitlements, assumption of obligations and method of payment.Amended: April 2016Business Rules of a Licensed Clearing House and Licensed Central Depository Have Effect as Contract
CSD-4.1.4
The
business rules of alicensed clearing house andlicensed central depository shall be deemed to be, and shall operate as, a binding contract:(a) Between thelicensed clearing house andlicensed central depository and eachissuer ofsecurities ;(b) Between thelicensed clearing house andlicensed central depository and each member ordepository participant ;(c) Between eachissuer ofsecurities and eachmember ordepository participant ; and(d) Between eachmember ordepository participant and every othermember ordepository participant .Amended: April 2016CSD-4.2 CSD-4.2 Content of Rules of Licensed Clearing Houses and Licensed Central Depositories
CSD-4.2.1
A
licensed clearing house andlicensed central depository shall, in line with CBB Law, make provision in itsbusiness rules and to the satisfaction of the CBB for:(a) Continuing requirements for each member, including requirements:(i) Relating to the proper conduct of the member or depository participant when participating in any clearing or central depository facility operated by thelicensed clearing house orlicensed central depository ;(ii) That the member has sufficient financial resources (capital adequacy) to reasonably fulfil all its financial obligations arising out of its activities of any clearing or central depository facility operated by thelicensed clearing house orlicensed central depository ;(iii) That facilitate the monitoring by thelicensed clearing house orlicensed central depository of the compliance of themember ordepository participant with thebusiness rules of thelicensed clearing house orlicensed central depository ; or(iv) That provide for the expulsion, suspension or disciplining of themember ordepository participant for a contravention of thebusiness rules of thelicensed clearing house orlicensed central depository ;(b) The class or classes of transactions that may be cleared, settled, or deposited on any facility that it operates;(c) Matters relating to risks in the operation of any clearing or central depository facility that it operates;(d) The handling of defaults, including the financial resources available to support the default of a member or depository participant, and the taking of proceedings or any other action against a member or depository participant which has failed, or appears to be unable, or is likely to become unable, to meet the member's or depository participant's obligations for all unsettled or openmarket contracts to which themember ordepository participant is a party;(e) The carrying on of business of thelicensed clearing house orlicensed central depository with due regard to the interests and protection of the investing public.(f) The granting of security interests to theclearing house orcentral depository or to othermembers ordepository participants pursuant to the business rules, including a decertification of the collateral charged and the obligations secured;(g) Thedefault rules which provide for the taking of proceeding or other action if amember ordepository participant appears to be unable, or likely to become unable to meet his obligations in respect of all unsettled or openmarket contracts to which he is a party;(h) The rules and procedures governing how losses will be shared in the event that a defaulting firm's collateral fails to cover its exposure, including the maintenance and utilization of the Settlement Guarantee Fund; and(i) The legal relationships between thecentral depository and eachdepository participant, and betweenmembers ordepository participants , inter se.Amended: April 2016CSD-4.2.2
A
licensed clearing house orlicensed central depository shall not make any amendment to itsbusiness rules, unless it complies with such requirements as the CBB may prescribe.Amended: April 2016CSD-4.3 CSD-4.3 Business Rules Specific to a Licensed Central Depository
CSD-4.3.1
The content of the rules of the
central depository must include:(a) The terms and conditions under which transactions will be conducted on acentral depository ;(b) The qualifications and standards for participation;(c) The process and criteria for the admission, suspension and termination ofdepository participants ;(d) A decertification of the structure of the services;(i) The legal obligations and rights of thecentral depository anddepository participants arising from the use of the services, including any indemnity;(ii) The legal obligations and rights of thecentral depository anddepository participants relating to the holding ofsecurities by the depository on behalf ofdepository participants , as recorded in accounts maintained by thecentral depository fordepository participants ;(iii) The decertification of the risk control mechanisms including system-operating caps, lines of credit, anddepository participant funds;(iv) The criteria for determining the type of collateral, and for calculating the amount of the collateral, to be charged by adepository participant with respect to a collateral pool or adepository participant fund;(v) The process to be followed in the event of adepository participant suspension, and the realisation under thesecurity interests and guarantees granted to thecentral depository ;(vi) The process for adopting and amending the business rules, and for prescribing and amending the procedures and user guides; and(vii) The legal obligations and rights of thecentral depository anddepository participants relating to confidentiality and use of information; and(e) The class or classes of transactions that may be conducted on acentral depository. Amended: April 2016CSD-4.4 CSD-4.4 Amendment of Business Rules
CSD-4.4.1
A
licensed clearing house orlicensed central depository which intends to amend itsbusiness rules shall, prior to making the amendment, notify the CBB of:(a) The proposed amendment;(b) The purpose of the proposed amendment; and(c) The date on which the amendment is proposed to come into force.Amended: April 2016CSD-4.4.2
The
licensed clearing house orlicensed central depository shall, prior to notifying the CBB under rule CSD-4.4.1, consult its members anddepository participants on the proposed amendment, unless the proposed amendment would have limited impact on its members ordepository participants .Amended: April 2016CSD-4.4.3
Subject to Paragraphs CSD-4.4.4 and CSD-4.4.6, an amendment shall not come into force unless the notification referred to in rule CSD-4.4.1 is submitted at least 21 days before the date on which the amendment is proposed to come into force.
Amended: April 2016CSD-4.4.4
The CBB may, on its own initiative or on the application of the
licensed clearing house orlicensed central depository , by notice in writing to thelicensed clearing house orlicensed central depository , allow an amendment to come into force before the expiry of the period of 21 days referred to in rule CSD-4.4.3.Amended: April 2016CSD-4.4.5
The CBB may, subject to Paragraph CSD-4.4.6, within 21 days after the receipt of the notification referred to in rule CSD-4.4.1, by notice in writing to the
licensed clearing house orlicensed central depository , disallow, alter or supplement the whole or any part of the proposed amendment and, thereupon, such whole or part of the proposed amendment, as the case may be:(a) Where it is disallowed, shall not come into force; or(b) Where it is altered or supplemented, shall come into force as altered or supplemented accordingly.Amended: April 2016CSD-4.4.6
The CBB may, in its discretion, by notice in writing to the
licensed clearing house orlicensed central depository , vary the period specified in Paragraph CSD-4.4.5, and where the period in that paragraph is extended, the amendment shall not come into force before the expiry of the extended period.Amended: April 2016CSD-4.4.7
This requirement shall not apply to any periodic amendment made by a
licensed clearing house orlicensed central depository to the initial margin requirement, or maintenance margin requirement of amarket contract which it imposes on its members or depository participants, where such amendment is made in response to a change in the historical or anticipated volatility or co-relation of anymarket contract .Amended: April 2016CSD-4.4.8
Any reference to an amendment to a business rule shall be construed as a reference to a change to the scope of, or to any requirement, obligation or restriction under the business rule, whether the change is made by an alteration to the text of the rule or by any other notice issued by, or on behalf of, the
licensed clearing house orlicensed central depository .Amended: April 2016CSD-4.5 CSD-4.5 Non-Compliance with Business Rules Not to Substantially Affect Rights of Person
CSD-4.5.1
Any failure by a
licensed clearing house orlicensed central depository to comply with this Module or itsbusiness rules in relation to a matter, shall not prevent the matter from being treated, for the purposes of this Module, as done in accordance with thebusiness rules, so long as the failure does not substantially affect the rights of anyperson entitled to require compliance with thebusiness rules .Amended: April 2016CSD-4.6 CSD-4.6 Determination of Position Limits
CSD-4.6.1
A
licensed clearing house shall determine, from time-to-time, based on such criteria or methodology as may be established by thelicensed clearing house with the approval of the CBB,position limits in respect of any futures contract cleared by a member of thelicensed clearing house .CSD-4.6.2
The
position limits under rule CSD-4.6.1 may include limits on aperson holding or controllingpositions , separately or in combination, net long or net short, for the purchase or sale of a futures contract or an option for the futures contract on a futures equivalent basis.CSD-4.6.3
The
licensed clearing house :(a) Shall require aperson , or anyperson acting for him pursuant to an express or implied agreement or understanding, who holds or controls net long or net shortpositions in any futures contract in excess of theposition limits determined under rule CSD-4.6.1 to trade under such conditions and restrictions as thelicensed clearing house considers necessary to ensure compliance with theposition limits determined under that paragraph; and(b) May require suchperson referred to in (a) above to do any one or more of the following actions:(i) Cease any further increase in hisposition ;(ii) Liquidate hisposition to comply with theposition limits determined under rule CSD-4.6.1, within such time as may be determined by thelicensed clearing house ; or(iii) Be subject to higher margin requirements in respect of hisposition .CSD-4.6.4
In Paragraph CSD-4.6.2, ''futures equivalent basis'' means the basis by which an option is adjusted by the risk factor or delta coefficient of that option, such risk factor or delta coefficient being calculated at the close of trading on the last day on which that option was traded, or at such other time as the CBB may determine.
Amended: April 2016CSD-4.6.5
The CBB may provide directions for changing the position limits imposed by a
licensed clearing house where market conditions or the interest of investors warrant such directions.CSD-5 CSD-5 Administrative Provisions Applicable to Clearing House or Central Depository
CSD-5.1 CSD-5.1 Control of Substantial Shareholding in Licensed Clearing Houses or Licensed Central Depositories
CSD-5.1.1
No
person shall enter into any agreement to acquire shares in alicensed clearing house orlicensed central depository by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of thelicensed clearing house orlicensed central depository without first obtaining the approval of the CBB to enter into the agreement.Amended: April 2016CSD-5.1.2
In rule CSD-5.1.1 "substantial shareholder" means a
person who alone or together with his associates:(a) Holds not less than 5% of the equity shares in thelicensed clearing house orlicensed central depository ; or(b) Is in a position to control not less than 5% of the votes in thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-5.1.3
In this section:
(a) Aperson holds a share if:1. He is deemed to have an interest in that share in terms of the Commercial Companies Law (CCL); or2. He otherwise has a legal or a beneficial interest in that share, except such interest as is to be disregarded in the terms of the CCL;(b) A reference to the control of a percentage of the votes in alicensed clearing house orlicensed central depository shall be construed as a reference to the control, whether direct or indirect, of that percentage of the total number of votes that might be cast in a general meeting of thelicensed clearing house orlicensed central depository ; and(c) An associate of anotherperson means in respect of individuals, a direct family member and in the case of a company, means the company is bound to follow the directives of the substantial shareholder, or the company in which the substantial shareholder has 20% of the votes of that company.Amended: April 2016CSD-5.1.4
The CBB may grant its approval in accordance with Paragraph CSD-5.1.1, subject to such conditions or restrictions as the CBB may deem fit.
Amended: April 2016CSD-5.2 CSD-5.2 Application and Criteria for Approval to Acquire Substantial Shareholding
CSD-5.2.1
Any
person applying for approval for acquiring substantial shareholding as defined hereunder shall submit to the CBB a written application that sets out:(a) The name of the applicant;(b) In the case where the applicant is a corporation:(i) Its place of incorporation;(ii) Its substantial shareholders;(iii) Its directors and chief executive officer; and(iv) Its principal business;(c) In the case where the applicant is a naturalperson :(i) His nationality;(ii) His principal occupation; and(iii) His directorships;(d) All the corporations in which the applicant has a substantial shareholding;(e) The percentage of shareholding and voting power that the applicant has in thelicensed clearing house or thelicensed central depository ;(f) The percentage of shareholding and voting power the applicant is seeking to have in thelicensed clearing house or thelicensed central depository ;(g) The reasons for making the application;(h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;(i) Whether the applicant will seek representation on the board of directors of thelicensed clearing house or thelicensed central depository ; and(j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and properperson for the purposes of Subparagraph CSD-5.2.3 (a).Amended: April 2016CSD-5.2.2
The CBB may require the applicant to furnish it with such information or documents as the CBB considers necessary in relation to the application, and the applicant shall furnish such information or documents as required by the CBB.
CSD-5.2.3
The CBB may approve an application made under rule CSD-5.2.1 if the CBB is satisfied that:
(a) The applicant is a fit and properperson to be a substantial shareholder;(b) Having regard to the applicant's likely influence, thelicensed clearing house orlicensed central depository will, or will continue to conduct its business prudently and in compliance with the provisions of this Module; and(c) It would not be contrary to the interests of the public to do so.Amended: April 2016CSD-5.2.4
The CBB may, for the purposes of securing compliance with rule CSD-5.2.1 or paragraph CSD-5.2.2, or any condition or restriction imposed under rule CSD-5.2.5, by notice in writing, direct the transfer or disposal of all or any of the shares of a
licensed clearing house orlicensed central depository in which a substantial shareholder of thelicensed clearing house orlicensed central depository has an interest.Amended: April 2016CSD-5.2.5
Until a
person to whom a direction has been issued under Paragraph CSD-5.2.6 transfers or disposes of the shares which are the subject of the direction, and notwithstanding anything to the contrary in the Commercial Companies Law or the memorandum or articles of association, or other constituent document or documents of thelicensed clearing house orlicensed central depository :(a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;(b) Thelicensed clearing house orlicensed central depository shall not offer or issue any shares, whether by way of rights, bonus, share dividend or otherwise, in respect of the shares which are the subject of the direction; and(c) Except in a liquidation of thelicensed clearing house orlicensed central depository ,the licensed clearing house orlicensed central depository shall not make anypayment , whether by way of cash dividend, dividend in kind, or otherwise, in respect of the shares which are the subject of the direction.Amended: April 2016CSD-5.2.6
Any issue of shares by a
licensed clearing house orlicensed central depository in contravention of Subparagraph CSD-5.2.5 (b) shall be deemed to be null and void, and aperson to whom a direction has been issued under this paragraph shall immediately return those shares to thelicensed clearing house orlicensed central depository , upon which thelicensed clearing house orlicensed central depository shall return to theperson anypayment received from him in respect of those shares.Amended: April 2016CSD-5.2.7
Any
payment made by alicensed clearing house orlicensed central depository in contravention of rule CSD-5.2.5 (c) shall be deemed to be null and void, and aperson to whom a direction has been issued under Paragraph CSD-5.2.6 shall immediately return thepayment he has received to thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-5.3 CSD-5.3 Authorisation of Approved Persons
Prior Approval Requirements and Process
Contents:
CSD-5.3.1
Licensees must obtain the CBB's prior written approval for any person wishing to undertake acontrolled function in alicensee . The approval from the CBB must be obtained prior to their appointment.Amended: April 2016
Amended: April 2013CSD-5.3.2
Controlled functions are those functions occupied by board members and persons in executive positions and include:(a) Board member;(b)Chief Executive orGeneral Manager ;(c)Head of function ;(d) Compliance Officer; and(e) Money Laundering Reporting Officer (MLRO).Amended: April 2016
Amended: April 2013CSD-5.3.2A
For the purpose of this Module, the following positions are considered as
head of function :(a) Head of clearing;(b) Head of settlement;(c) Head of netting;(d) Head of central depository;(e) Head of central registry;(f) Head of risk management; and(g) Head of other functions.Added: April 2016CSD-5.3.2B
Whether a person is
head of function will depend on the nature, scale and complexity of the function and is not determined by the presence or absence of the word in their job title.Added: April 2016CSD-5.3.2C
Licensees must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. The segregation of responsibilities must ensure avoidance of any conflict of interest and maintain a Chinese Wall between such critical controlled functions.Added: April 2016CSD-5.3.3
The Chief Executive Officer or General Manager, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.
Amended: April 2013CSD-5.3.4
All
persons wishing to undertake any of the controlled functions shall be subject to the fit and proper requirements.Amended: April 2013CSD-5.3.5
In accordance with Subparagraph CSD-5.3.2(d), every
licensed clearing house orlicensed central depository must appoint a compliance officer. The compliance officer is responsible for discharging the obligations of thelicensee .Amended: April 2016
Amended: April 2013CSD-5.3.6
In accordance with Paragraph CSD-5.3.5:
(a) The Compliance Officer should be competent and knowledgeable regarding the CBB Law, rules and regulations, as well as the various applicable Volume 6 Modules;(b) The Compliance Officer shall:(i) Monitor the transactions undertaken by themember , its representatives, orparticipants ;(ii) Identify disorderly transactions or conduct that may involve market abuse or disruption;(iii) Identify any breach of CBB Law, rules and regulations; and(iv) Identify any breach of the rules of theSRO .Amended: April 2013CSD-5.3.7
The Compliance Officer shall on the identification of any breach referred to in Subparagraph CSD-5.3.6(b), report such breach to the CBB without delay for the investigation and shall provide full assistance to the latter in investigating the conduct occurring on or through the
licensed clearing house orlicensed central depository .Amended: April 2016
Amended: April 2013CSD-5.3.7A
The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in the Form 3, including previous experience, is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms CSD Forms of the CBB Rulebook.
Added: April 2016CSD-5.3.7B
When the request for
approved person status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake acontrolled function is in relation to an existinglicensee , the Form 3 must be marked for the attention of the Director, Capital Markets Supervision. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.Amended: April 2018
Added: April 2016CSD-5.3.7C
When submitting Form 3,
licensees must ensure that the Form 3 is:(a) Submitted to the CBB with a covering letter signed by an authorised representative of thelicensee , seeking approval for the proposedcontrolled function ;(b) Submitted in original form;(c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and(d) Signed by an authorised representative of thelicensee and all pages stamped on with thelicensee's seal.Added: April 2016CSD-5.3.7D
For existing
licensees applying for the appointment of a BoardDirector or theChief Executive /General Manager , the authorised representative should be the Chairman of the Board or aDirector signing on behalf of the Board. For all othercontrolled functions , the authorised representative should be theChief Executive /General Manager .Added: April 2016Fit and Proper Requirements
CSD-5.3.8
Licensees seeking anapproved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake thecontrolled function in question.Amended: April 2016
Amended: April 2013CSD-5.3.8A
Each applicant applying for
approved person status and those individuals occupyingapproved person positions must comply with the following conditions:(a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;(b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;(c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;(d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;(e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;(f) Must have personal integrity, good conduct and reputation;(g) Has appropriate professional and other qualifications for thecontrolled function in question, including qualifications such as the Securities Market Regulation Certification Programme (Series 7), the General Securities Representative Qualification (Series 79), and/or any other relevant examinations and qualifications recognised by the CBB that are appropriate to capital market advisory services, as the case may be. However the CBB reserves the right to impose a higher level of qualifications as it deems necessary; and(h) Has sufficient experience to perform the duties of thecontrolled function .Added: April 2016CSD-5.3.8B
In assessing the conditions prescribed in Rule CSD-5.3.8A, the CBB will take into account the criteria contained in Paragraph CSD-5.3.8C. 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 acontrolled function in onelicensee may not be considered to have sufficient expertise and experience to undertake nominally the samecontrolled function but in a much biggerlicensee .Added: April 2016CSD-5.3.8C
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:
(a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;(b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;(c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;(d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;(e) The contravention of any financial services legislation;(f) Whether the person has ever been refused a license, authorisation, registration or other authority;(g) Dismissal or a request to resign from any office or employment;(h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;(i) The extent to which the person has been truthful and open with supervisors; and(j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.Added: April 2016CSD-5.3.8D
With respect to Paragraph CSD-5.3.8C, 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.
Added: April 2016CSD-5.3.9
Approved persons undertaking acontrolled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking acontrolled function and shall be subject, among all accepted market conducts, to the insider trading rules.Amended: April 2013CSD-5.3.10
In determining where there may be a conflict of interest arising, factors that may be considered will include whether:
(a) Aperson has breached any fiduciary obligations to thelicensed clearing house orlicensed central depository or terms of employment;(b) Aperson has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of thelicensed clearing house orlicensed central depository ; and(c) Aperson has failed to declare a personal interest that has a material impact in terms of theperson's relationship with thelicensed clearing house orlicensed central depository in general, and interest in holding any listedsecurities or futures contracts in particular.Amended: April 2013CSD-5.3.11
[This Paragraph was deleted in April 2016.]
Deleted: April 2016
Amended: April 2013CSD-5.3.12
[This Paragraph was deleted in April 2016.]
Deleted: April 2016
Amended: April 2013CSD-5.3.13
[This Paragraph was moved to Paragraph CSD-5.3.7B in April 2016.
Deleted: April 2016
Added: April 2013Assessment of Application
Contents:
CSD-5.3.14
The CBB shall review and assess the application for
approved person status to ensure that it satisfies all the conditions required in Paragraph CSD-5.3.8A and the criteria outlined in Paragraph CSD-5.3.8C.Amended: April 2016
Added: April 2013CSD-5.3.14A
For purposes of Paragraph CSD-5.3.14,
licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.Added: April 2016CSD-5.3.15
The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph CSD-5.3.8A and the criteria outlined in Paragraph CSD-5.3.8C. A notice of such refusal is issued by registered mail to the
licensee concerned, setting out the basis for the decision.Amended: April 2016
Added: April 2016Appeal Process
CSD-5.3.16
Licensees or the nominatedapproved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application forapproved person status. The CBB shall decide on the appeal and notify thelicensee of its decision within 30 calendar days from submitting the appeal.Amended: April 2016
Amended: April 2013CSD-5.3.17
Where notification of the CBB's decision to grant a person
approved person status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents,licensees or the nominatedapproved persons may appeal to the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify thelicensee of its decision within 30 calendar days from the date of submitting the appeal.Amended: April 2016
Amended: April 2013Notification Requirements and Process
Contents:
CSD-5.3.18
A
licensed clearing house orlicensed central depository must immediately notify the CBB when anapproved person ceases to hold acontrolled function together with an explanation as to the reasons why. In such cases, theirapproved person status is automatically withdrawn by the CBB.Amended: April 2016
Added: April 2013CSD-5.3.18A
Licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for anapproved person .Added: April 2016CSD-5.3.19
The CBB may impose regulations relating to the composition and duties of the board of directors or any committee of a
licensed clearing house orlicensed central depository .Amended: April 2016
Amended: April 2013CSD-5.3.20
In this section, "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a member or depository participant of a
licensed clearing house orlicensed central depository .Amended: April 2016
Amended: April 2013Amendment of Authorisation
CSD-5.3.21
A
licensed clearing house orlicensed central depository must seek prior CBB approval before anapproved person may move from onecontrolled function to another within the samelicensee .Amended: April 2016
Added: April 2013CSD-5.3.22
In such instances, a new application should be completed and submitted to the CBB. Note that a
person may be considered 'fit and proper' for onecontrolled function , but not for another, if for instance the new role requires a different set of skills and experience. Where anapproved person is moving to acontrolled function in anotherlicensee , the firstlicensee should notify the CBB of thatperson's departure, and the newlicensee should submit a request for approval under this Section.Added: April 2013Cancellation of Authorisation and Power of CBB to Remove Approved Person
CSD-5.3.23
Where the CBB is satisfied that an
approved person :(a) Has wilfully contravened or wilfully caused thatlicensee to contravene the CBB Law, rules and regulations;(b) Has without reasonable excuse, failed to ensure compliance by thelicensee , or aperson associated with thatlicensee with:1. The CBB Law rules and regulations;(c) Has failed to discharge the duties or functions of his office or employment;(d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;(e) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;the CBB may if it thinks it is necessary in the interests of or for the protection of investors, by notice in writing direct that a
licensee remove theapproved person from his office or employment, and thatlicensee shall comply with such notice.Added: April 2013CSD-5.3.24
Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an
approved person has failed to discharge the duties or functions of his office or employment for the purposes of Subparagraph CSD-5.3.23 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing, after consultation with thelicensed clearing house or orlicensed central depository , as the case may be.Amended: April 2016
Added: April 2013CSD-5.3.25
Subject to Paragraph CSD-5.3.26, the CBB shall not direct a
licensee to remove anapproved person from his office or employment without giving theapproved person an opportunity to be heard.Added: April 2013CSD-5.3.26
The CBB may direct a
licensee to remove anapproved person from his office or employment under Paragraph CSD-5.3.23 on any of the following grounds, without giving theapproved person an opportunity to be heard:(a) Theapproved person is an undischarged bankrupt whether in Bahrain or elsewhere;(b) Theapproved person has been convicted whether in Bahrain or elsewhere, of an offence:1. Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and2. Punishable with imprisonment for a term of 3 months or more.Added: April 2013Criteria to Determine Failure to Discharge Duties or Functions by Approved Persons
CSD-5.3.27
The CBB may, in determining whether
approved persons have taken reasonable steps to discharge their duties, have regard to whether or not theapproved person :(a) Ensured the proper functioning of thelicensed clearing house orcentral depository ;(b) Ensured the compliance of thelicensed clearing house orcentral depository with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides itsregulated activities ;(c) Set out and ensured compliance with written policies on all operational areas of thelicensed clearing house orcentral depository , including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of thelicensed clearing house orcentral depository in general;(d) Identified, monitored and addressed the risks associated with the business of thelicensed clearing house orcentral depository ;(e) Ensured that theregulated activities of thelicensed clearing house orcentral depository were subject to adequate internal audit;(f) Oversaw the financial undertakings or exposure of thelicensed clearing house orcentral depository to risks of any nature by setting out proper delegation limits and risk management controls; and(g) Ensured:1. That the licensed clearing house orcentral depository maintained written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and provided relevant procedures; and2. That every report, return or statement submitted by thelicensed clearing house orcentral depository to the CBB was complete and accurate.Added: April 2013CSD-5.4 CSD-5.4 Listing of Licensed Clearing House and Licensed Central Depository on Securities Market
CSD-5.4.1
The
securities of alicensed clearing house or alicensed central depository shall not be listed for quotation on asecurities market that is operated by any of its related corporations, unless thelicensed clearing house orlicensed central depository and the operator of thesecurities market have entered into such arrangements as the CBB may require:(a) For dealing with possible conflicts of interest that may arise from such listing; and(b) For the purpose of ensuring the integrity of the trading of thesecurities of thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-5.4.2
Where the
securities of alicensed clearing house orlicensed central depository are listed for quotation on asecurities market operated by any of its related corporations, the listing rules of thesecurities market shall be deemed to allow the CBB to act in place of the operator of thesecurities market in making decisions and taking action, or to require the operator of thesecurities market to make decisions and to take action on behalf of the CBB, on:(a) The admission or removal of thelicensed clearing house orlicensed central depository , to or from the official list of thesecurities market; and(b) Granting approval for thesecurities of alicensed clearing house orlicensed central depository to be, or stopping or suspending thesecurities of thelicensed clearing house orlicensed central depository from being listed for quotation or quoted on thesecurities market.Amended: April 2016CSD-5.4.3
The CBB may, by notice in writing to the operator of the
securities market:(a) Modify the listing rules of thesecurities market for the purpose of their application to the listing of thesecurities of thelicensed clearing house orlicensed central depository for quotation or trading; or(b) Waive the application of any listing rule of thesecurities market to thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-6: CSD-6: Powers of CBB
CSD-6.1 CSD-6.1 Power to Impose Conditions or Restrictions
CSD-6.1.1
The CBB may impose on a
licensed clearing house orlicensed central depository such conditions or restrictions as it deems fit by notice in writing, in addition to the obligations imposed on thelicensed clearing house orlicensed central depository under this Module, for the purposes of furthering the objectives specified in Section CSD-A.1.Amended: April 2016CSD-6.1.2
The CBB may, at any time, by notice in writing to the
licensed clearing house orlicensed central depository , vary any condition or restriction as it may deem fit.Amended: April 2016CSD-6.1.3
Without affecting the generality of Paragraphs CSD-6.1.1 or CSD-6.1.2, the conditions or restrictions that the CBB may impose include conditions or restrictions relating to:
(a) The activities that thelicensed clearing house orlicensed central depository may undertake;(b) The products that may be cleared by the clearing facility;(c) The securities that may be accepted for deposit by the depository; or(d) The nature of investors, members orparticipants who may use or participate in thelicensed clearing house facility andlicensed central depository .Amended: April 2016CSD-6.2 CSD-6.2 Power of CBB to Issue Directions
CSD-6.2.1
The CBB may issue directions by notice in writing either of a general or specific nature to a
licensed clearing house orlicensed central depository , and thelicensed clearing house orlicensed central depository shall comply with such directions, if the CBB considers it necessary or expedient:(a) For ensuring the safe and efficient clearing andsettlement of transactions through review of system mechanisms and establishment of operating standards;(b) For ensuring the integrity and stability of the capital markets or the financial system;(c) In the interests of the public or a section of the public, or for the protection of investors;(d) For the effective administration of the CBB Law and regulations; or(e) For ensuring compliance with any condition or restriction as may be imposed by the CBB.Amended: April 2016CSD-6.2.2
For the avoidance of doubt, a direction issued under Paragraph CSD-6.2.1 shall be deemed not to be subsidiary legislation, but any non-compliance with a directive shall be regarded as non-compliant with the rules of the CBB.
Amended: April 2016CSD-6.3 CSD-6.3 Emergency Powers of CBB
CSD-6.3.1
Where the CBB has reason to believe that an emergency exists, or considers that it is necessary or expedient in the interests of the public, or a section of the public, or for the protection of investors, the CBB may direct by notice in writing a
licensed clearing house orlicensed central depository to take such action as it considers necessary to maintain or restore safe and efficient operations of the clearing facilities operated by thelicensed clearing house and of the custodian services provided by thelicensed central depository .Amended: April 2016CSD-6.3.2
Without prejudice to Paragraph CSD-6.3.1, the actions which the CBB may direct a
licensed clearing house orlicensed central depository to take include:(a) Ordering the liquidation of allpositions or part thereof, or the reduction of suchpositions ;(b) Altering conditions ofdelivery of transactions cleared or settled, or to be cleared or settled through the clearing facility;(c) Fixing thesettlement price at which transactions are to be liquidated;(d) Requiring margins or additional margins for transactions cleared or settled, or to be cleared or settled through the clearing facility; and(e) Modifying or suspending any of thebusiness rules of thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-6.3.3
Where a
licensed clearing house orlicensed central depository fails to comply with any direction of the CBB under Paragraph CSD-6.3.1 within such time as is specified by the CBB, the CBB may:(a) Set margin levels for transactions cleared or settled, or to be cleared or settled through the clearing facility to cater for the emergency;(b) Set limits that may apply to marketpositions acquired in good faith prior to the date of the notice issued by the CBB; or(c) Take such other action as the CBB considers necessary to maintain or restore safe and efficient operations of the clearing facilities operated by thelicensed clearing house and the services offered by thelicensed central depository .Amended: April 2016CSD-6.3.4
In this section, "emergency" includes:
(a) Any threatened or actual market manipulation or cornering;(b) Any major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such commodity orsecurities ;(c) Any act of any government affecting a commodity orsecurities ; or(d) Any undesirable situation or practice which, in the opinion of the CBB, constitutes an emergency.CSD-6.3.5
The CBB may modify any action taken by a
licensed clearing house orlicensed central depository under Paragraph CSD-6.3.1, including the setting aside of that action.Amended: April 2016CSD-6.4 CSD-6.4 Power of CBB to Remove Officers
CSD-6.4.1
The CBB may, if it thinks it necessary in the interests of the public, or a section of the public, or for the protection of investors, by notice in writing direct that
licensed clearing house orlicensed central depository to remove the officer from his office or employment, where the CBB is satisfied that an officer of alicensed clearing house orlicensed central depository :(a) Has wilfully contravened or wilfully caused thatlicensed clearing house orlicensed central depository to contravene this Module or itsbusiness rules ;(b) Has, without reasonable excuse, failed to ensure compliance with this Module or thebusiness rules of thatlicensed clearing house orlicensed central depository , by thatlicensed clearing house orlicensed central depository , or a member of thatlicensed clearing house orlicensed central depository or aperson associated with that member;(c) Has failed to discharge the duties or functions of his office or employment;(d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;(e) Has had execution against him in respect of a judgment debt returned unsatisfied in whole or in part;(f) Has, whether in Bahrain or elsewhere, made a compromise or scheme of arrangement with his creditors, being a compromise or scheme of arrangement that is still in operation; or(g) Has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly.Amended: April 2016CSD-6.4.2
Without prejudice to any other matter that the CBB may consider relevant, the CBB may, in determining whether an officer of a
licensed clearing house orlicensed central depository has failed to discharge the duties or functions of his office or employment for the purposes of rule CSD-6.4.1 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing.Amended: April 2016CSD-6.4.3
Subject to Paragraph CSD-6.4.4, the CBB shall not direct a
licensed clearing house orlicensed central depository to remove an officer from his office or employment, without giving thelicensed clearing house orlicensed central depository an opportunity to be heard.Amended: July 2016
Amended: April 2016CSD-6.4.4
The CBB may direct a
licensed clearing house orlicensed central depository to remove an officer from his office or employment under rule CSD-6.4.1 on any of the following grounds, without giving thelicensed clearing house orlicensed central depository an opportunity to be heard:(a) The officer is an undischarged bankrupt, whether in Bahrain or elsewhere;(b) The officer has been convicted, whether in Bahrain or elsewhere, of an offence:(i) Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; or(ii) Punishable with imprisonment for a term of 3 months or more.Amended: April 2016CSD-6.4.5
Where the CBB directs a
licensed clearing house orlicensed central depository to remove an officer from his office or employment under rule CSD-6.4.1, the CBB need not give that officer an opportunity to be heard.Amended: April 2016CSD-6.4.6
No criminal or civil liability shall be incurred by a
licensed clearing house orlicensed central depository in respect of anything done or omitted to be done with reasonable care and in good faith in the discharge or purported discharge of its obligations under this Section.Amended: April 2016CSD-6.5 CSD-6.5 Criteria to Determine Failure to Discharge Duties or Functions by Officers
CSD-6.5.1
For the purposes of Paragraph CSD-6.4.2 of this Module, the CBB may, in determining whether a chairman, chief executive officer or director, or any officer who is a
person stated in a notice referred to in Paragraph CSD-6.3.2, of alicensed clearing house orlicensed central depository has failed to discharge the duties or functions of his office, take into consideration whether thatperson has taken reasonable steps to discharge the following duties:(a) Ensure the proper functioning of thelicensed clearing house orlicensed central depository ;(b) Ensure the compliance of thelicensed clearing house orlicensed central depository with any relevant laws or regulations of any jurisdication in which it is incorporated, or in which it operates;(c) Set out and ensure compliance with written policies on all operational areas of thelicensed clearing house orlicensed central depository , including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of thelicensed clearing house orlicensed central depository ;(d) Identify, monitor and address the risks associated with the business activities of thelicensed clearing house orlicensed central depository on an on-going basis;(e) Ensure that the business activities of thelicensed clearing house orlicensed central depository are subject to adequate internal audit;(f) Oversee the financial undertakings or exposure of thelicensed clearing house orlicensed central depository to risks of any nature, by setting out proper delegation limits and risk management controls; and(g) Ensure:(i) That thelicensed clearing house orlicensed central depository maintains writtenrecords of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and operating procedures; and(ii) That every report, return or statement submitted by thelicensed clearing house orlicensed central depository to the CBB is complete and accurate.Amended: April 2016CSD-6.6 CSD-6.6 Additional Powers of CBB in Respect of Auditors
CSD-6.6.1
The auditor shall immediately send to the CBB a written report of the matter or the irregularity, if an auditor of a
licensed clearing house orlicensed central depository in the course of the performance of his duties, becomes aware of:(a) Any matter which, in his opinion, adversely affects or may adversely affect the financial position of thelicensed clearing house orlicensed central depository to a material extent;(b) Any matter which, in his opinion, constitutes or may constitute a breach of any provision of this Module or an offence involving fraud or dishonesty; or(c) Any irregularity that has or may have a material effect upon the accounts of thelicensed clearing house orlicensed central depository , including any irregularity that affects or jeopardises, or may affect or jeopardise, the funds orproperty of investors.Amended: April 2016CSD-6.6.2
An auditor shall not, in the absence of malice on his part, be liable to any action for defamation at the suit of any
person in respect of any statement made in his report under rule CSD-6.6.1.CSD-6.6.3
Rule CSD-6.6.2 shall not restrict or affect any right, privilege or immunity that the auditor may have, apart from this section, as a defendant in an action for defamation.
CSD-6.6.4
The CBB may impose all or any of the following duties on an auditor of a
licensed clearing house orlicensed central depository :(a) A duty to submit such additional information and reports in relation to his audit, as the CBB considers necessary;(b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of thelicensed clearing house orlicensed central depository ;(c) A duty to carry out any other examination or establish any procedure in any particular case.Amended: April 2016CSD-6.6.5
The
licensed clearing house orlicensed central depository shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in Paragraph CSD-6.6.4.Amended: April 2016CSD-6.7 CSD-6.7 Power of Court to Order Observance or Enforcement of Business Rules
CSD-6.7.1
Where any
person who is under an obligation to comply, observe, enforce or give effect to thebusiness rules of alicensed clearing house , orlicensed central depository fails to do so, the Court may, on the application of the CBB, alicensed clearing house , orlicensed central depository , or aperson aggrieved by the failure, after giving the first-mentionedperson an opportunity to be heard, make an order directing the first-mentionedperson to comply, observe, enforce or give effect to thosebusiness rules .Amended: April 2016CSD-6.7.2
In this section, "
person " includes alicensed clearing house andlicensed central depository .Amended: April 2016CSD-6.7.3
This Section is in addition to, and not in derogation of, any other remedies available to the aggrieved
person referred to in rule CSD-6.7.1.Amended: April 2016CSD-6.8 CSD-6.8 Immunity
CSD-6.8.1
No civil liability, whether arising in contract, equity or otherwise, in respect of anything done or omitted to be done in good faith in the discharge or purported discharge of the duties of the
licensed clearing house orlicensed central depository , or in the performance or purported performance of its functions under its business rules, shall be incurred by:(a) Alicensed clearing house ;(b) Alicensed central depository ; or(c) Anyperson acting on behalf of alicensed clearing house orlicensed central depository , including any member of the board of directors of thelicensed clearing house orlicensed central depository .Amended: April 2016CSD-6.8.2
In respect of anything done or omitted to be done in good faith in the performance and purported performance of that function, no civil liability, whether arising in contract, tort, defamation, equity or otherwise, shall be incurred by:
(a) Anyperson performing, by virtue of a delegation under the business rules of alicensed clearing house orlicensed central depository , a function of thelicensed clearing house orlicensed central depository ;(b) Anyperson acting on behalf of aperson referred to hereinabove including a member of the board of directors of thatperson .Amended: April 2016MIR MIR Market Intermediaries and Representatives License
MIR-A MIR-A Introduction
MIR-A.1 MIR-A.1 Purpose
Executive Summary
MIR-A.1.1
Module MIR sets out the Central Bank of Bahrain's regulatory framework governing the licensing requirements of
members undertaking anyregulated activities in or from the Kingdom of Bahrain.Adopted January 2010MIR-A.1.2
The MIR Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of
members undertaking anyregulated activities in or from the Kingdom of Bahrain. It sets out the CBB requirements for authorisation of the controlled functions within themembers regarding the initial, as well as ongoing compliance requirements.Adopted January 2010MIR-A.1.3
The key principles underlying the approach of the CBB in this Module aim:
(a) To promote fair, orderly and transparent conduct or transactions on any regulated activity undertaken by a member;(b) To facilitate and promote best international practices and conduct while undertaking or providing any regulated activity in or from Bahrain;(c) To reduce systemic risk;(d) To detect and deter manipulation and other misconduct;(e) To maintain integrity of trading through fair and equitable rules that strike an appropriate balance between the demands of different participants;(f) To maximize the regulatory effectiveness;(g) To minimize the regulatory cost; and(h) To maintain market integrity and investor confidence.Adopted January 2010MIR-A.1.4
Persons or entities undertaking anyregulated activities or functions require prior CBB licensing and/or authorisation. MIR-B.2 provides the definitions formembers which are impacted by this Module. These include, but are not limited to entities providing the followingregulated activities :(a) Undertaking or providing services related to arranging or trading insecurities , whether as principal or as an agent;(b) Undertaking or providing any services related to the clearing, settlement ofsecurities transactions, whether as principal or agent;(c) Undertaking or providing services related to the depositing ofsecurities with a licensed depository.Adopted January 2010MIR-A.2 MIR-A.2 Module History
Evolution of Module
MIR-A.2.1
This Module was first issued in November 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Adopted January 2010MIR-A.2.2
The Bahrain Stock Exchange's Internal Regulation, issued on 24th December 1988 (particularly Chapter 4 Articles 15 to 35), stipulates the membership requirements for the Exchange.
Adopted January 2010MIR-A.2.3
Resolution No. (2) of 1990, in respect of Certain Conditions Relating to Securities Trading; Resolution No. (4) of 1999, on the Rules and Procedures of Automated Trading at the Bahrain Stock Exchange; and Resolution No. (6) of 2001, in respect of Provision of Remote Trading at the Bahrain Stock Exchange; provides detailed provisions and requirements regarding the rights and obligations of the BSE
members in respect ofsecurities trading through the automated trading system at the BSE.Adopted January 2010MIR-A.2.4
Resolution No. (3) for the Year 2000, issued by the Chairman of the Bahrain Stock Exchange's Board of
Directors , with Respect to the Clearing, Settlement, Depository and Registry Rules provides for "the Participant" which means a BSE member who is accepted and permitted by the BSE to effect transfer ofsecurities and other entries in relation tosecurities , by means of the CSDR System and provides detailed provision and requirements to be a participant in the CSDR System.Adopted January 2010MIR-A.2.5
A list of recent changes made to this Module is undertaken below:
Module Ref. Change Date Description of Changes MIR-B.2.7, MIR-B.2.8A, MIR-B.2.17A, MIR-B.2.20A 04/2013 Amended and added definitions. MIR-2.1.1 04/2013 Clarified licensing requirements. MIR-2.1.2 04/2013 Clarified Subparagraph (d). MIR-2.1.4A to MIR-2.1.4C 04/2013 References added to requirements under Resolution No.(16) for the year 2012. MIR-2.1.5 04/2013 Removed reference to conventional bank as Islamic banks are also covered since reference is made to Volumes 1 and 2. MIR-2.2.4 04/2013 Deleted dealers and exempt members from licensing categories. MIR-2.2.4A 04/2013 Included external and proprietary membership conditions. MIR-2.2.5 04/2013 Deleted reference to 'dealer' as discount brokers are not able to trade through dealers. MIR-2.2.7 04/2013 Deleted licensing conditions of dealers. MIR-2.2.8A and MIR-2.2.8B 04/2013 Included specific external membership requirements. MIR-2.2.8C 04/2013 Included the proprietary membership requirements. MIR-2.2.9 04/2013 Clarified general status of clearing member. MIR-2.2.11 04/2013 Updated name change to Form 3. MIR-2.2.11A and MIR-2.2.11B 04/2013 New criteria for external members. CBB to retain market conduct supervision powers. MIR-2.2.12 04/2013 Included specific reference to licensing. MIR-2.2.12A 04/2013 Included general requirements for licensing as requirements for authorisation by the exchange. MIR-2.2.12B 04/2013 Included provision for licensing amendment. MIR-2.3 and MIR-2.4 04/2013 These Sections were deleted as exempted member was deleted as a licensing category. MIR-2.8.1 and MIR-2.8.1A 04/2013 Provided details of annual fees due to the CBB. MIR-2.10.1 04/2013 Included specific Rules for place of business. MIR-3.1.6 to MIR-3.1.8 04/2013 Moved reference from Section MIR-4.17 on compliance officer and added reporting from compliance officer to the CBB. MIR-3.2.2 04/2013 Added new residency requirements. MIR-3.4.2 04/2013 Added reference to Form 3: Application for Approved Person Status. MIR-4.7.7 04/2013 Included market maker agreement content. MIR-4.7.7A 04/2013 Included criteria to be a market maker. MIR-4.9.3 and MIR-4.9.4 04/2013 Added reference to report institutional information (IIS) to the CBB. MIR-4.12.4(i) 04/2013 Added regulatory disclosure as exception from maintaining confidentiality. MIR-4.17 04/2013 This Section was deleted and requirements moved to Paragraphs MIR-3.1.6 and MIR-3.1.7. MIR-2.8 04/2014 Clarified Rules and guidance on annual license fees. MIR-2.5.4, MIR-2.5.5, MIR-3.1.3 and MIR-4.8.9 07/2014 Removed reference to exempted member as this category was deleted as a licensing category in April 2013. MIR-3.1.3 07/2014 Corrected reference to non-existent Subparagraph. MIR-4.8.2 07/2014 Correction made to align with the requirements of the CBB Law. MIR-1.1.7 04/2016 Legal basis updated to reflect Resolution No (23) of 2015. MIR-3.1, MIR-3.3 and MIR-3.4 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons. MIR-3.1.3 04/2016 Clarified that controlled function (d) Head of function cannot be combined with other functions. MIR-3.4.1 and MIR-3.4.2 04/2016 Paragraph MIR-3.4.1 was deleted and clarification was made to Paragraph MIR-3.4.2 that approval for controlled functions referred to under Paragraph MIR-3.1.2, must be made by submitting Form 3. MIR-A.4.3(d) 07/2016 Included reference to classification of SRO members and membership requirements. MIR-B.1.2 07/2016 Added reference to authorisation for external trading member and proprietary trading member in scope. MIR-B.2 07/2016 Section deleted and contents moved to Glossary. MIR-1.1.2 07/2016 Corrected reference to licensee. MIR-1.1.3 07/2016 Corrected wording MIR-1.1.8, MIR-1.1.9 and MIR-1.1.10 07/2016 Legal basis updated to reflect Resolution No (59) of 2011, Resolution No (30) of 2015 and Resolution No (1) of 2016. MIR-2.1.6 07/2016 Typographical error corrected. MIR-2.1.7 07/2016 Amended to make reference to categories in MIR-2.2.4 MIR-2.2.4 07/2016 Included authorised external trading member and authorised proprietary trading member as separate categories. MIR-2.2.4A 07/2016 Added cross reference. MIR-2.2.8A 07/2016 Deleted reference to dealer. Revised from licensed to authorised. MIR-2.2.8B and MIR-2.2.8C 07/2016 Revised from requirement to obtain license to authorisation. MIR-2.2.10, MIR-2.2.11A, MIR-3.6.1(a) 07/2016 Typographical errors corrected. MIR-2.8 07/2016 Amended to be in line with Resolution No. (1) of 2016 on annual licensing fees. MIR-3.1and MIR-3.3.1A(g) 07/2016 Amended to be in line Modules MAE and CSD. MIR-3.4.8 and MIR-3.4.11 07/2016 Deleted Paragraph MIR-3.4.8 and included under Paragraph MIR-3.4.11. MIR-4.1.1 07/2016 Introduced rules on invitation and attendance at AGM and EGM by CBB representative. MIR-4.2.3 07/2016 Clarified deadline. MIR-4.3.3 07/2016 Deleted reference to exempt member. MIR-4.8.10 07/2016 Added due date for publication requirement. MIR-4.8.11 07/2016 Clarified accounting standards to be used. MIR-2.9.2 07/2017 Added Paragraph to clarify the cost of publication. MIR-2.9.3 07/2017 Added Paragraph on means of publication. MIR-4.7.23 01/2018 Amended Paragraph. MIR-4.7.23A 01/2018 Added new guidance paragraph. MIR-A.3.2 01/2019 Added a new Paragraph on market makers. MIR-4.7.7(c)(iii) and MIR-4.7.7A 01/2019 Deleted client disclosure requirement and criteria to be a market maker. MIR-4.19 01/2019 Added a new Section on market making for liquidity enhancement. MIR-2.9.1 10/2019 Amended Paragraph and changed from Rule to Guidance. MIR-2.2.12B 04/2020 Amended Paragraph. MIR-3.4.3 04/2020 Amended Paragraph. MIR-4.1.1A 10/2020 Added a new Paragraph on Provision of Financial Services on a Non-discriminatory Basis. Superseded Requirements
MIR-A.2.6
This Module supersedes the following provisions contained in Circulars, or any other regulatory instruments:
Circular/Other Ref. Provisions Subject BSE Internal Regulation Article No. 17 Article 17 Brokers registered with the Ministry of Commerce shall apply to the BSE Management for a new license for undertaking brokerage in securities. Resolution No. (2) of 1995 Issued by the Chairman of the BSE All In respect of services provided by brokerage companies at the Bahrain Stock Exchange. Resolution No. (2) of 2002 Issued by the Chairman of the BSE All In respect of the provision of custodial services through the Central Depository System at the Bahrain Stock Exchange. Adopted January 2010MIR-A.3 MIR-A.3 Interaction with other Modules
MIR-A.3.1
All
members and their employees and representatives must comply with all other Modules in Volume 6, in addition to other applicable laws, rules and regulations.Adopted January 2010MIR-A.3.2
Market makers andissuers must in addition to complying with themarket making provision under this Module refer to and comply with Module MAE (Markets and Exchanges) which sets forth the CBB requirements for registration ofmarket maker .Added: January 2019MIR-A.4 MIR-A.4 Division of Responsibilities
MIR-A.4.1
A clear division of responsibilities between CBB as the regulator, the
SRO's and theirmembers is required:(a) To maximise the regulatory effectiveness;(b) To permit flexibility to theSRO's in their functioning;(c) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations;(d) To minimise the regulatory cost; and(e) To enforce the requirements related to the market conduct and good practices.Adopted January 2010MIR-A.4.2
As a regulator, CBB's role would be as follows:
(a) Regulatory supervision;(b) Maintaining and promoting fairness, efficiency and transparency within the capital market andsecurities businesses;(c) Acting as an enforcement agency with powers to investigate and take administrative, civil or criminal actions as it may deem appropriate;(d) Approving thebusiness rules and by-laws of theSRO's whereby any changes in suchbusiness rules and by-laws would need prior approval of CBB; and(e) Licensing, supervision, inspection, investigation and enforcement on theSRO's and theirmembers .Adopted January 2010MIR-A.4.3
As a CBB licensee, the main objective of the
SRO is to promote:(a) Fairness and investor protection;(b) Fair access to their systems, facilities and information;(c) The provision of timely and accessible relevant information and data; and(d) The efficient regulation of theirmembers , including classification of its membership and requirements for each class or category of membership.Amended: July 2016
Adopted January 2010MIR-A.4.4
As a CBB licensee, as well as a member, the main objectives of such entities are:
(a) Handling and execution of the investors orclients ' orders or transactions in accordance with the CBB Law, rules and regulations, as well as with thebusiness rules of thelicensed exchange ;(b) Clearing, settling and depositing of investors orclients' securities in accordance with thelicensed clearing house business rules ;(c) Handling and the protection of theirclient's securities , assets and money, in accordance with the applicable laws, rules and regulation and this Module;(d) Providing efficient and cost effective services to theirclients and enhancing the public investors' confidence in the market; and(e) Providing anyregulated activities undertaken by them in line with the industry standards and best international practices.Amended: July 2016
Adopted January 2010MIR-B MIR-B Scope
MIR-B.1 MIR-B.1 Scope
MIR-B.1.1
This Module shall apply to any
person undertaking anyregulated activities as a member of anSRO (licensed exchange and/orlicensed clearing house ) in or from the Kingdom of Bahrain.Adopted January 2010MIR-B.1.2
This Module covers the authorisation requirements pertaining to
external trading members andproprietary trading members as a separate category of membership under thelicensed exchange .Added: July 2016MIR-B.2 Definitions
[This Section was deleted and moved to the Glossary under Part B in July 2016.]
Deleted: July 2016MIR-1 MIR-1 Legal Basis and Regulated Activities
MIR-1.1 MIR-1.1 Legal Basis and Regulated Activities
MIR-1.1.1
Article (1) of the CBB Law defines "Financial Institutions" as: Banks, insurance companies, companies dealing in securities, portfolios and investment funds, financing companies, money exchange companies, money brokers and mediators, insurance brokers, mediators of the securities market, consultancy firms dealing in the financial service industry, credit rating firms, Bahrain securities market, capital markets, and precious metals and strategic commodities markets, financial sector support institutions, including institutions licensed to provide financial regulated activities according to Islamic Shari'a principles".
In addition, Article (1) defines "Financial Sector Support Institutions" as: "institutions licensed for operating clearance houses, settlement payments, cheques and financial papers, and institutions which are wholly or partly set up by financial institutions in cooperation with the Central Bank, in order to provide regulated activities of a purely financial nature to the financial regulated activities industry".
Article (1) defines "Market Maker" as: "Any person licensed by the Central Bank to sell and buy in the Stock Exchange to encourage trading in this market".
Adopted January 2010MIR-1.1.2
The CBB defines the
securities businesses in line with Article (80) of the CBB Law, which states that "Companies trading in securities are those companies whose objectives include one or more of the following activities:1. Promoting and underwritingsecurities or financing investments therein;2. Participating in incorporating ofsecurities companies or increasing the capitals thereof.3. Forming and managingsecurities portfolios.4. Depositing, clearance and settlement ofsecurities .5. Brokering insecurities transactions.6.Providing advisory services related tosecurities .7. Any otherregulated activities as approved by the Central Bank."For the purpose of this Module, the abovementioned
regulated activities that may be undertaken shall be only those activities within the parameters of the regulated business of theSRO , of which the licensee is a member and which may include, but not be limited to the activities below:"advising on corporate finance" means giving advice:
(a) To any entity concerning compliance with or in respect of laws or regulatory requirements (including thelisting rules of asecurities exchange) relating to the raising of funds by any entity;(b) To theperson making an offer or invitation to the public:(i) To subscribe for or purchasesecurities ; or(ii) To sell or otherwise dispose ofsecurities , concerning that offer or invitation; or(c) Concerning the arrangement, reconstruction, merger or takeover of a corporation or any of its assets or liabilities."agreement" includes arrangement;
"dealing in
securities " means (whether as principal or agent) making or offering to make with anyperson , or inducing or attempting to induce anyperson to enter into or to offer to enter into any agreement for or with a view to acquiring, disposing of, subscribing for, or underwritingsecurities ;"Portfolio management" means undertaking on behalf of a
client (whether on a discretionary authority granted by the customer or otherwise):(a) The management of a portfolio ofsecurities or futures contracts; or(b) Foreign exchange trading or leveraged foreign exchange trading for the purpose of managing theclient 's funds;"offer" or "offering" includes invitation;
"on a margin basis", means financial institutions entering into the contract or arrangement referred to therein by providing to the investor or his agent money,
securities , property or other collateral which represents only a part of the value of the contract or arrangement to be entered into by him;"providing depositing, clearance and settlement of
securities " means providing or agreeing to provide any service where theperson providing the service has, under an arrangement with anotherperson (theclient ), possession or control ofsecurities of theclient and carries out one or more of the following functions for theclient :(a) Settlement of transactions relating to thesecurities ;(b) Collecting or distributing dividends or other pecuniary benefits derived from ownership or possession of thesecurities ;(c) Paying tax or other costs associated with thesecurities ;(d) Exercising rights, including without limitation voting rights, attached to or derived from thesecurities ;(e) Any other function necessary or incidental to the safeguarding or administration of thesecurities , but does not include:-(i) Theregulated activities of a corporation which is a depository, as defined in Article (94) of the Law;(ii) The provision ofregulated activities to a related corporation or associatedperson , so long as none of thesecurities is:-(A) Held on trust for anotherperson by the related corporation or associatedperson ;(B) Held as a result of any custodialregulated activities undertaken by the related corporation or associatedperson to anotherperson ; or(C) Beneficially owned by anyperson other than the related corporation or associatedperson ;(iii) The provision ofregulated activities by a nominee corporation which are solely incidental to the business of a nominee corporation; or(iv) Any other conduct as the CBB may prescribe;"
securities financing" means to directly or indirectly facilitate, by providing any credit facility, advance or loan:(a) The subscription forsecurities or purchase of listed or to be listed on asecurities exchange or such othersecurities as the CBB may prescribe; and(b) Where applicable, the continued holding of thosesecurities , whether or not thosesecurities are pledged as security for the credit facility, advance or loan, but does not include the provision of any credit facility, advance or loan:-(i) That forms part of an arrangement to underwrite or sub-underwritesecurities ;(ii) To facilitate an acquisition ofsecurities in accordance with the terms of a prospectus, to offersecurities ;(iii) To a licensedmember undertakingregulated activities to deal insecurities or providesecurities financing, or a financial institution, to facilitate acquisitions or holdings ofsecurities ;(iv) By a listed company to itsdirector s or employees to facilitate acquisitions or holdings'of its ownsecurities ;(v) By a member of a group of listed companies to another member of the group to facilitate acquisitions or holdings ofsecurities by that other member; or(vi) By an individual to a company in which he holds 10% or more of its issued share capital to facilitate acquisitions or holdings ofsecurities ;"trading in futures contracts" means (whether as principal or agent):-
(a) Making or offering to make with anyperson , or inducing or attempting to induce anyperson to enter into or to offer to enter into any agreement for or with a view to the purchase or sale of a futures contract; or(b) Soliciting or accepting any order for, or otherwise dealing in, a futures contract.Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-1.1.3
The
regulated activities under sub-Articles 80 (1) and 80 (2) of the CBB Law is covered under the Offering of Securities Module (OFS) under this Volume.Amended: July 2016
Adopted January 2010MIR-1.1.4
The CBB Law Article (89) requires that "All trading in securities listed on the Exchange shall be conducted through a mediator who is licensed by the Central Bank and registered as a member of the Exchange".
Adopted January 2010MIR-1.1.5
The CBB Law Article (94) "Deposit of Securities" states that "No person may engage in depositing of securities without an authorisation from the Central Bank. "Deposit of Securities" means to register the ownership of the securities of a depositor in the name of a depository under a securities deposit agreement and in accordance with the form issued for this purpose by the depository. The Central Bank shall issue the rules governing the Deposit of Securities".
Adopted January 2010MIR-1.1.6
The CBB Law Article (113) states that:
"(a) The Central Bank may request in writing from any licensee's partner any reports that may be necessary under this law.(b) Theperson who prepares such reports referred to in the previous paragraph must be:1. Nominated, appointed or approved by the Central Bank.2. Duly qualified to prepare such reports".Amended: April 2013
Adopted January 2010MIR-1.1.7
This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.
Added: April 2016MIR-1.1.8
Article 110 provides that the Central Bank shall issue terms and conditions for the provision of any pledge, insurance, collateral or title transfer collateral to beneficiaries according to a market contract. Such terms and conditions is stipulated in detail under Resolution No. (59) of 2011 in respect of Procedures Related to Pledging and Lien of Securities and the Discharge and Lifting of Such Pledge and Liens.
Added: July 2016MIR-1.1.9
Resolution No. (30) of 2015 in respect of amending Resolution No. (59) of 2011 for the purpose of extending the requirements related to the pledging and lien of securities and the discharge and lifting of such pledge and liens on securities issued by closed joint stock companies.
Added: July 2016MIR-1.1.10
This Module contains Resolution No (1) of 2007 (issued under Article 180 of the CBB Law) amended by Resolution No (26) of 2010 and further amended by Resolution No (1) of 2016 with respect to determining fees categories due for licensees and services provided by the CBB.
Added: July 2016MIR-2 MIR-2 Licensing
MIR-2.1 MIR-2.1 Licensing Requirements
MIR-2.1.1
No
person shall undertake any of theregulated activities under section MIR-1.1, or hold himself out as undertaking anyregulated activities through alicensed exchange orlicensed clearing house in or from Bahrain, unless theperson is licensed by the CBB and accepted as a member of anSRO .Amended: April 2013
Adopted January 2010MIR-2.1.2
A
person will be deemed to be undertaking business within or from Bahrain, if for example:(a) Suchperson is incorporated in Bahrain;(b) Suchperson uses an address situated in Bahrain for the correspondence;(c) Suchperson directly solicitesclients who are resident within Bahrain; or(d) Suchperson utilises the services of alicensed exchange and/orlicensed clearing house .Amended: April 2013
Adopted January 2010MIR-2.1.3
Without prejudice to the generality of Article (89) of the CBB Law, no
person other than a licensedmember shall use, in any language a word or expression which may reasonably be understood to mean that suchperson is a licensedmember , or is carrying out a regulated activity unless he is a licensedperson .Amended: April 2013
Adopted January 2010MIR-2.1.4
Except with the written approval of the CBB, no
person other than a licensedmember shall take or use, or have attached to or exhibited at any place:(a) The title or description "licensed member " in any language; or(b) Any title or description which resembles a title or description referred to in (a).Amended: April 2013
Adopted January 2010MIR-2.1.4A
No
person may market anyfinancial services in the Kingdom of Bahrain unless:(a) Allowed to do by the terms of a license issued by the CBB;(b) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or(c) Has obtained the express written permission of the CBB to offerfinancial services .Added: April 2013MIR-2.1.4B
In accordance with Resolution No.(16) for the year 2012 and for the purpose of Paragraph MIR-2.1.4A, 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.Added: April 2013MIR-2.1.4C
Persons in breach of Paragraph MIR-2.1.4A are considered in breach of Resolution No.(16) for the year 2012 and could be subject to penalties under Articles 129 and 161 of the CBB Law.
Added: April 2013MIR-2.1.5
Where a
person is licensed under Volumes 1 or 2, then a separate license under Volume 6 is not required in order to undertakeregulated activities of the kind specified under section MIR-1.1. Suchperson shall obtain the membership of theSRO before undertaking suchregulated activities .Amended: April 2013
Adopted January 2010MIR-2.1.6
Where a
person is licensed under Volume 4 to undertakeregulated activities of the kind specified under section MIR-1.1, such license shall be regarded as being given under this Module of Volume 6 and the licensee shall abide by this Module and Volume 6 in respect of its undertaking of the aboveregulated activities .Amended: July 2016
Adopted January 2010MIR-2.1.7
Depending on the type of
regulated activities that aperson wishes to undertake, an applicant must seek to be licensed under different licensing categories as stipulated under Paragraph MIR-2.2.4.Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-2.2 MIR-2.2 Application for License
MIR-2.2.1
Persons wishing to be licensed to undertakeregulated activities within or from the Kingdom of Bahrain must apply in writing to the CBB.Adopted January 2010MIR-2.2.2
Unless otherwise approved by the CBB, the
person undertaking anyregulated activities shall be established as a corporation subject to the Commercial Companies Law 2001.Adopted January 2010MIR-2.2.3
Any applicant must be independent of the SRO to which it wishes to become a member. For the purpose of this section, a person will not be considered independent if:
(a) He owns an interest of 30% or more of equity securities of the SRO or any other company owned by the SRO. In the case of other securities, if he owns a significant interest in the securities of the SRO, or any other affiliated entity; or(b) He has a business relationship with, or financial interest in, the SRO or any other entity in the SRO's group that would give the SRO a material interest in the outcome of the application; or(c) He provides any service, assurance, or guidance in any event to the SRO, or to another entity in the SRO's group; or(d) A director, partner or employee of the applicant or another entity in the applicant's group has a material interest in the SRO or any other entity in the SRO's group.Added: April 2013MIR-2.2.4
Under this Module, a
person may apply to the CBB to be:(1) A licenseddiscount broker ;(2) A licensedbroker ;(3) [Deleted in April 2013];(4) A licensed broker-dealer;(5) A licensed clearingmember ;(6) [Deleted in April 2013];(7) [Deleted in April 2013];(8) An authorisedexternal trading member ; or(9) An authorisedproprietary trading member .Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-2.2.4A
In accordance with Subparagraphs MIR-2.2.4(8) and MIR-2.2.4(9), a person may apply to the
licensed exchange and the CBB to be anexternal trading member (provided it meets the requirements of Paragraph MIR-2.2.8A) or aproprietary trading member (as defined in the Glossary and provided it meets the requirements of Paragraph MIR-2.2.8C).Amended: July 2016
Added: April 2013MIR-2.2.5
The licensed
discount broker may undertake only collecting of the investors orclients order which is required to be executed on thelicensed exchange through a licensedbroker or broker-dealer.Amended: April 2013
Adopted January 2010MIR-2.2.6
The licensed
brokers may undertake:(a) Trading insecurities as agent;(b) Arranging transactions insecurities as an agent.Amended: April 2013
Adopted January 2010MIR-2.2.7
[This Paragraph was deleted in April 2013]
Deleted: April 2013MIR-2.2.8
The licensed broker-dealers may undertake:
(a) Trading insecurities as principal;(b) Trading insecurities as agent;(c) Arranging transactions insecurities as principal and agent;(d) Managing securities' portfolios;(e) Depositing ofsecurities ;(f) Advising on securities businesses;(g) Providing market research and analysis.Amended: April 2013
Adopted January 2010MIR-2.2.8A
An
external trading member accepted for membership by alicensed exchange and authorised by the CBB may undertake only the activities of a licensedbroker or broker-dealer outside the Kingdom of Bahrain. In order to be eligible, the external member must: be a member of an exchange or otherwise licensed and supervised in its home market by a securities regulator that is a signatory to the IOSCO MMOU or acceptable bilateral agreement. Anexternal trading member may not conduct any business within the Kingdom of Bahrain.Amended: July 2016
Added: April 2013MIR-2.2.8B
In order to be authorised by the CBB, an
external trading member must meet the requirements of Paragraph MIR-2.2.11A and submit the application made for membership of thelicensed exchange together with the approval of membership of such exchange. An external trading member's primary regulator and supervisor is thelicensed exchange , of which it is a member and it is not required to comply with the provisions of this Module unless directed to do so by the CBB.An
external trading member is required to conclude the necessary agreements for the clearing and settlement of its transactions conducted on alicensed exchange .External trading members are not eligible to be members of a licensed clearing house or central securities depository.Amended: July 2016
Added: April 2013MIR-2.2.8C
In order to be authorised by the CBB, a
proprietary trading member must submit the application made for membership of thelicensed exchange together with the approval of membership of such exchange. Aproprietary trading member's primary regulator and supervisor is thelicensed exchange , of which it is a member and it is not required to comply with the provisions of this Module unless directed to do so by the CBB.Amended: July 2016
Added: April 2013MIR-2.2.9
The licensed clearing
member (general) may undertake anyregulated activities stipulated under Module CSD in general, and in particular:(a) Facilitating the deposit ofsecurities ;(b) Clearing and settlement ofsecurities transactions as principal;(c) Clearing and settlement ofsecurities transactions as agent;(d) Facilitating registration of dealings in depositedsecurities; (e) Provide custody services to depositedsecurities ;(f) Facilitating netting of transactions in depositedsecurities ;(g) Facilitatingsecurities lending, including repurchase agreements and other economically equivalent transactions;(h) Finality of settlement;(i) Facilitating margin trading; or(j) Ensure achievement of Delivery versus Payment.The
licensed clearing house may restrict itsmembers from undertaking part of the abovementionedregulated activities .Amended: April 2013
Adopted January 2010MIR-2.2.10
The licensed
member may combine two or moreregulated activities , provided these fall within theregulated activities list for theirmember category, and such combinations are not restricted by the CBB orSRO .Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-2.2.11
With the exception of
external trading members andproprietary trading members , an application for a license as amember to undertake any regulated activity under Paragraph MIR-1.1.2 shall be made in Form 1 (Application for Approval as a LicensedMember ) and shall be lodged with the CBB together with:(a) Form 2 (Information on Shareholders and Subsidiaries) and Form 3 (Application for Approved Person Status);(b) Any relevant annex and information specified in those forms;(c) A non-refundable prescribed application fee of BD100 (One Hundred Bahraini Dinars);(d) A business plan setting forth the internal controlling procedures of the enterprise;(e) A business plan containing a budgeted accounting plan for the first three business years;(f) Memorandum and Articles of Association of the corporation, copies of the by-laws, its constitution and powers of management and the manner in which its business is proposed to be undertaken;(g) Policies and procedures forregulated activities undertaken;(h) The proposed organisation structure and the powers and duties of thepersons performing controlled functions of the licensedmember ;(i) A copy of the application submitted to thelicensed exchange orlicensed clearing house , as the case may be and the qualification for membership;(j) A description of the proposed trading, clearing and settlement arrangements;(k) Arrangements for risk management, compliance and internal controls;(l) Whereregulated activities would be outsourced, copies of contracts and arrangements for oversight of their activities; and(m) Arrangements for complying withbusiness rules of thelicensed exchange and/orlicensed clearing house .Amended: April 2013
Adopted January 2010MIR-2.2.11A
Any
licensed exchange , that accepts anexternal trading member , must together with the Final Membership and Commencement of Operation Checklist, provide the CBB with:(a) A copy of the application made to thelicensed exchange for membership as anexternal trading member ;(b) A description of the clearing and settlement arrangements including a copy of the signed contract with a licensed clearing member (general);(c) A copy of theexternal trading member's membership registration certificates with an exchange in its home and any other jurisdiction;(d) A copy of theexternal trading member's licensing or registration with its home market securities regulator (where required to be licensed or registered), which regulator must be a member of IOSCO and a signatory to the IOSCO MMOU or acceptable bilateral agreement; and(e) A letter of confirmation that the CBB Law and this Module are not in conflict with its market rules and legislation and where a conflict is determined, details must be provided for consideration and approval by the CBB.Amended: July 2016
Added: April 2013MIR-2.2.11B
The acceptance as a member of an
external trading member orproprietary trading member by alicensed exchange does not in any way remove the authority of the CBB to supervise and regulateexternal trading members orproprietary trading members in respect of market conduct or to require the provision of any information or records and the CBB reserves its right to compel anexternal trading member orproprietary trading member to comply with CBB rules and regulations at any stage should it deem it necessary.Added: April 2013MIR-2.2.12
The applications to be a licensed
member must include evidence that:(a) Any trading conducted will be provided in an orderly, transparent and fair manner;(b) The licensedmember will be subject to regulation by the CBB and thebusiness rules of theSRO ;(c) The licensedmember has taken adequate measures to prudently manage any risks associated with its business and operations;(d) The licensedmember , in discharging its obligations, will not act contrary to the interests of the investing public, or to the requirements of the CBB;(e) The licensedmember will enforce compliance by its employees or representatives with thebusiness rules of theSRO , as the case may be;(f) The licensedmember makes satisfactory provisions for an orderly, transparent and fair conduct of its business, the adherence to rules and the supervision of its employees or representatives; and(g) The licensedmember has sufficient financial, human, and technical resources to undertakeregulated activities in a fair, orderly, transparent manner and meet contingencies or disaster criteria.Amended: April 2013
Adopted January 2010MIR-2.2.12A
External trading members andproprietary trading members must provide the details in Paragraph MIR-2.2.12 to thelicensed exchange as part of its membership application.Added: April 2013MIR-2.2.12B
A licensed
member may apply to amend its licensing category by application to the CBB's Licensing Directorate by providing only the amended or additional information relevant to the change in regulated activities it intends to undertake.Amended: April 2020
Added: April 2013MIR-2.2.13
The CBB will review the application and duly advise the applicant in writing when it has:
(a) Granted the application without conditions;(b) Granted the application subject to conditions specified by the CBB; or(c) Refused the application, stating the grounds in which the application has been refused and the process for appealing against that decision, unless thelicensed exchange and/orlicensed clearing house refuses to grant its approval, as the case may be.Amended: April 2013
Adopted January 2010MIR-2.2.14
The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.
Amended: April 2013
Adopted January 2010MIR-2.2.15
The CBB may refuse to accept any application if:
(a) It is not completed in accordance with this Module;(b) It is not accompanied by the relevant fee;(c) Thelicensed exchange and/orlicensed clearing house refuse to grant the applicant membership, as the case may be.Amended: April 2013
Adopted January 2010MIR-2.2.16
Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner as the CBB thinks fit.
Amended: April 2013
Adopted January 2010MIR-2.2.17
The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.
Amended: April 2013
Adopted January 2010Licensing of Members
MIR-2.2.18
The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.
Amended: April 2013
Adopted January 2010MIR-2.2.19
The CBB may grant an in principle confirmation which does not amount to a license nor commit the CBB to issuing a license within 30 days from the date of the application, following which the applicant may take steps for employment of personnel to the company at his own risk.
Amended: April 2013
Adopted January 2010MIR-2.2.20
The
member shall not undertake anyregulated activities before the CBB grants the license to the applicant.Amended: April 2013
Adopted January 2010MIR-2.2.21
The CBB may license a
person as a licensedmember , subject to such conditions or restrictions as the CBB may think fit to impose by notice in writing, including conditions or restrictions relating to:(a) Theregulated activities that theperson may undertake;(b) Thesecurities or futures contracts or any other products or instruments that a member may undertake; and(c) The class or group of investors and location.Amended: April 2013
Adopted January 2010MIR-2.2.22
The CBB may, at any time, in consultation with the
licensed exchange and/orlicensed clearing house by notice in writing to theperson , vary any condition or restriction or impose such further condition or restriction as it may think fit.Amended: April 2013
Adopted January 2010MIR-2.2.23
A licensed
member shall, for the duration of the license, satisfy all conditions and restrictions that may be imposed on it.Amended: April 2013
Adopted January 2010MIR-2.2.24
Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.
Amended: April 2013
Adopted January 2010MIR 2.3 MIR 2.3 Exempted Broker-Dealer and Exempted Clearing Member [This Section was deleted in April 2013]
MIR-2.3.1
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.2
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.3
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.4
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.5
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.6
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.7
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.8
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.3.9
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR 2.4 MIR 2.4 Power of CBB to Revoke Exemption [This Section was deleted in April 2013].
MIR-2.4.1
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.4.2
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-2.4.3
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR 2.5 MIR 2.5 Criteria for Granting License
MIR-2.5.1
The CBB may license a
person as amember if:(a) The CBB is satisfied that the undertaking ofregulated activities by theperson will;1. Develop the capital market and enhance confidence therein;2. Develop thesecurities businesses or services and enhance the market liquidity; and3. Protect the interests of investors or users of theSRO (licensed exchange and/orlicensed clearing house) and enhance the Kingdom's credibility as an international financial centre; and(b) The CBB is satisfied that theperson , having applied to be amember under this Module, is able to comply with the obligations and requirements imposed on suchmember .Adopted January 2010MIR-2.5.2
The CBB may have regard to the following matters in determining whether a
member has satisfied the criteria referred to in paragraph MIR-2.5.1 (a) or (b):(a) The size and structure, or proposed size and structure, of theregulated activities to be undertaken by the applicant;(b) The nature of theregulated activities undertaking, or to be undertaken, by the applicant;(c) The nature of thesecurities, futures contracts, products or instruments that the applicant will be involved in;(d) The nature of the investors,clients orparticipants , or proposed investors,clients orparticipants , who may useregulated activities or services undertaken by the applicant;(e) Whether the applicant has been licensed by the CBB or any other regulator;(f) That the rules and by-laws of an applicant are in conformity with such conditions as may be prescribed with a view to ensure fair conduct of business and to protect investors;(g) That the applicant is willing to comply with any other conditions which the CBB, having regard to the nature of thesecurities, futures contracts, products or instruments dealt with by it, may impose;(h) The proposedsecurities businesses or services comply with up-to-datesecurities industry standards;(i) Thepersons who may be affected in the event that the applicant runs into difficulties;(j) Where the head office or principal place of business of the applicant is outside Bahrain, whether the applicant in the country or territory in which the head office or principal place of business of the applicant is situated, is subject to requirements and supervision comparable to those in the Kingdom of Bahrain;(k) The interests of the public;(l) Any other circumstances that the CBB may consider relevant;(m) Whether the applicant is satisfied or will satisfy theSRO's (licensed exchange and/or clearing house)business rules and related requirements.Adopted January 2010MIR-2.5.3
The applicant must additionally be able to demonstrate to the CBB and the CBB must be satisfied that it has:
(a) The financial resources, the management and human resources with appropriate experience necessary for undertakingregulated activities ;(b) Made arrangements for the proper supervision of all transactions effected through theSRO , so as to ensure compliance with the rules of theSRO ;(c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the records of transactions effected through theSRO ;(d) Insurance, a guarantee, or compensation fund, or other warranty plans placed by theSRO in respect of providing compensation, subject to thebusiness rules of theSRO , to itsclients ; and(e) Made provisions, to the satisfaction of the CBB, for the clearing and settlement of transactions effected through alicensed clearing house and for the management of trade and settlement risk.Adopted January 2010MIR-2.5.4
[This Paragraph was deleted in July 2014.]
Deleted: July 2014
Adopted January 2010MIR-2.5.5
[This Paragraph was deleted in July 2014.]
Deleted: July 2014
Adopted January 2010MIR 2.6 MIR 2.6 Surrender of License or Cessation of Activities or Services
MIR-2.6.1
Without prejudice to the CBB Law, a
member which intends to cease to undertake itsregulated activities may apply to the CBB to surrender its approval as amember .Adopted January 2010MIR-2.6.2
The CBB, after considering the requirement of the CBB Law Articles 108, 109 & 110, may, subject to paragraph MIR-2.6.1, cancel the license if it is satisfied that the
member referred to in paragraph MIR-2.6.1 has ceased undertaking itsregulated activities and that there are no pending obligations of themember orsecurities , contracts, products or instruments traded, cleared or settled.Adopted January 2010MIR-2.6.3
The licensed
member shall publish a notice of its intention to cease to provide itsregulated activities in anSRO and in 2 daily newspapers, one in Arabic and the other in English, in Bahrain at least 30 days before ceasing its operations.Amended: April 2013
Adopted January 2010MIR-2.6.4
Any objections received from the
SRO , investors orclients of the member shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the related member.Adopted January 2010MIR-2.6.5
The notice referred to in rule MIR-2.6.3 shall be subject to the approval of the CBB and shall be published at least 30 days prior to the cessation taking effect, after obtaining clearance from the relevant
SRO , as the case may be.Adopted January 2010MIR 2.7 MIR 2.7 Cancellation or Amendment of License
MIR-2.7.1
Without prejudice to the CBB Law Articles 108, 109 & 110, the CBB may cancel any license of a
person as a licensedmember , if:(a) There exists criteria under section MIR-2.5 that the member does not meet and on which grounds the CBB would refuse an application;(b) Themember does not commence undertaking itsregulated activities within 6 months from the date on which it was granted the license;(c) Themember ceases to undertake itsregulated activities ;(d) Themember contravenes:1. Any CBB Law, rules or regulations;2. Any condition or restriction applicable in respect of its license;3. Any direction issued to it by the CBB;4. Any provision in this Module; or5. Any provision or requirements of thebusiness rules and requirements of anSRO .(e) The licensedmember undertakingregulated activities in a manner that is in the opinion of the CBB contrary to the market integrity and the interests of the public orclients ;(f) Any information or document that is submitted to the CBB that themember knows is false or misleading; and(g) Any false or misleading information or document knowingly or willingly disseminated by themember to the market or itsclients .Amended: April 2013
Adopted January 2010MIR-2.7.2
The CBB may not, subject to paragraph MIR-2.7.3, cancel any license that was granted to a
member without giving the opportunity to be heard.Adopted January 2010MIR-2.7.3
The CBB may cancel a license that was granted to a
member on any of the following grounds without giving an opportunity to be heard:(a) Themember is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;(b) A receiver, a receiver and manager, or an equivalentperson has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of themember ;(c) Themember has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly; and(d) The implementation of a decision or an appeal of the Disciplinary Committee resolution, whether in Bahrain or elsewhere, for the cancellation of membership of themember .Adopted January 2010MIR-2.7.4
For the purposes of paragraph MIR-2.7.1 (c), a
member shall be deemed to have ceased to undertake itsregulated activities if:(a) It has ceased to undertake itsregulated activities for more than 30 days, unless it has obtained the prior approval of the CBB, orSRO to do so; or(b) It has ceased to undertake theregulated activities under a direction issued by the CBB, orSRO .Adopted January 2010MIR-2.7.5
In accordance with the CBB Law Articles 108, 109 & 110, any cancellation of a license of a
member referred to in paragraph MIR-2.7.1 shall not operate so as to:(a) Avoid or affect any agreement, transaction or arrangement entered into a market contract undertaken by themember , whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or(b) Affect any right, obligation or liability arising under suchmarket contracts , agreements, transactions or arrangements.Adopted January 2010MIR-2.7.6
Where the CBB cancels or amends a license of a
member , notification to themember and an appeal against such a decision shall be governed by Article 48 of the CBB Law.Adopted January 2010MIR 2.8 MIR 2.8 Annual Fees Payable by a Licensed Member
MIR-2.8.1
Every
member must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.Amended: July 2016
Amended: April 2014
Amended: April 2013
Adopted January 2010MIR-2.8.1A
Depending on the type of license, some licensees pay only a fixed annual fee while other licensees pay a fixed and a variable fee.
Amended: July 2016
Added: April 2013MIR-2.8.1B
The following fixed annual fees are applicable for licensed discount brokers and licensed clearing members:
Licensed discount broker (fixed)BD100 Licensed clearing member (fixed) BD300 Added: July 2016MIR-2.8.1C
Licensed brokers and licensed broker-dealers pay the following fixed and variable annual fees:
License Type Annual Licensing Fee Fixed (BD) (Minimum) Variable Fee Total Fee (BD) Securities Market Transactions Derivatives Market Transactions Licensed broker BD200 BD5/ for each BD 100,000 of trade value BD 0.004/lot BD 0.008 for every one lot Buy+Sell Fixed (Minimum) fee + Variable fee Licensed broker-dealer BD300 BD5/ for each BD 100,000 of trade value BD 0.004/lot BD 0.008 for every one lot Buy+Sell Fixed (Minimum) fee + Variable fee Added: July 2016MIR-2.8.1D
The variable fees due on 1st December are those due for the following calendar year, and are calculated on the basis of the firm's latest (full calendar year) value of securities market transactions and/or volume of derivatives market transactions for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example) is calculated using the total value of securities market transactions and/or total volume of derivatives market transactions for 2012.
Added: July 2016MIR-2.8.1E
A licensed broker or a licensed broker-dealer must submit the Annual Licensing Fee Form (Form ALF) duly certified by the
licensed exchange or thelicensed market operator . The Form ALF includes a declaration by thelicensed member confirming that the amount of fees and the total transaction value and/or volume as reported in the Form ALF are accurate. Licensed brokers and licensed broker-dealers must complete and submit the Form ALF to the CBB, no later than 15th October of the preceding year for which the fees are due.Added: July 2016MIR-2.8.2
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, should a fee have been paid for that year.
Amended: April 2014
Adopted January 2010MIR-2.8.3
A licensed member failing to comply with Paragraph MIR-2.8.1 may be subject to financial penalties as prescribed by the CBB.
Added: July 2016MIR 2.9 MIR 2.9 Publication of the Decision to Grant, Cancel or Amend a License
MIR-2.9.1
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, and such decision shall also be disseminated to the relevant
SRO .Amended: October 2019
Adopted January 2010MIR-2.9.2
For the purpose of Paragraph MIR-2.9.1, the cost of publication of this notice must be borne by the Licensee.
Added: July 2017MIR-2.9.3
The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.
Added: July 2017MIR 2.10 MIR 2.10 Place of Business
MIR-2.10.1
All licensed
members must have a designated place of business in Bahrain. A licensedmember may not, without prior written approval of the CBB:(a) Open a new place of business in Bahrain;(b) Close or change an existing place of business in Bahrain; or(c) Open a new place of business in a foreign jurisdiction.Amended: April 2013
Adopted January 2010MIR-2.10.2
The CBB may restrict its approval stipulated in rule MIR-2.10.1, subject to any other conditions, as it may deem necessary.
Adopted January 2010MIR-3 MIR-3 Authorisation
MIR-3.1 MIR-3.1 Authorisation of Approved Persons
MIR-3.1.1
Members must obtain the CBB's prior written approval for any person wishing to undertake acontrolled function in amember and be registered with theSRO , as the case may be, prior to their final appointment.Amended: July 2016
Amended: April 2016
Amended: April 2013
Adopted January 2010MIR-3.1.2
Controlled functions are those functions occupied by board members and persons in executive positions and include:(a)Board member ;(b)Chief Executive orGeneral Manager ;(c)Registered representative; (d)Head of function ;(e) Compliance Officer; and(f) Money Laundering Reporting Officer (MLRO).Amended: July 2016
Amended: April 2016
Amended: April 2013
Adopted January 2010MIR-3.1.2A
For the purpose of this Module, the following positions are considered as
head of function :(a) Chief operating officer;(b) Head of dealing;(c) Head of risk management;(d) Head of market research;(e) Head of client services; and(f) Head of reconciliation (back office).Added: July 2016MIR-3.1.2B
Whether a person is a head of function will depend on the nature, scale and complexity of the function and is not determined by the presence or absence of the word in their job title.
Added: July 2016MIR-3.1.3
The licensed
member must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. The segregation of responsibilities must also ensure avoidance of any conflict of interest and maintain a Chinese Wall between such criticalcontrolled functions .Amended: July 2016
Amended: April 2016
Amended: July 2014
Amended: April 2013
Adopted January 2010Fit and Proper Requirements
MIR-3.1.4
Licensees seeking anapproved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake thecontrolled function in question.Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-3.1.5
The CBB may, on being provided sufficient evidence of a
member's risk management system and internal controls commensurate with its scale of operations and business plan, exempt amember from any of the requirements of rules MIR-3.1.2 and MIR-3.1.3.Amended: July 2016
Adopted January 2010MIR-3.1.6
In accordance with Subparagraph MIR-3.1.2(e), every member must appoint a Compliance Officer. The Compliance Officer is responsible for discharging the legal and regulatory obligations of such member.
Added: April 2013MIR-3.1.7
In accordance with Paragraph MIR-3.1.6:
(a) The Compliance Officer should be competent and knowledgeable regarding the CBB Law, rules and regulations, as well as thebusiness rules of theSRO and the various applicable Volume 6 Modules;(b) The Compliance Officer shall:(i) Monitor the transactions undertaken by themember , its representatives, orparticipants ;(ii) Identify disorderly transactions or conduct that may involve market abuse or disruption;(iii) Identify and monitor transactions undertaken by insiders dealing through or with themember ;(iv) Identify any breach of CBB Law, rules and regulations; and(v) Identify any breach of the rules of theSRO .Added: April 2013MIR-3.1.8
The Compliance Officer shall on the identification of any breach referred to in Paragraph MIR-3.1.7 (b), report such breach to the CBB without delay for the investigation and prosecution of
market abuse and shall provide full assistance to the latter in investigating and prosecuting market abuse occurring on or through themember .Added: April 2013MIR-3.2 MIR-3.2 Basis for Approval
MIR-3.2.1
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.
Adopted January 2010MIR-3.2.2
The Chief Executive Officer or General Manager, Registered Representative, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.
Added: April 2013MIR-3.3 MIR-3.3 Fit and Proper
MIR-3.3.1
Members seeking anapproved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake thecontrolled function in question.Amended: April 2016
Adopted January 2010MIR-3.3.1A
Each applicant applying for
approved person status and those individuals occupyingapproved person positions must comply with the following conditions:(a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;(b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;(c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;(d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;(e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;(f) Must have personal integrity, good conduct and reputation;(g) Has appropriate professional and other qualifications for thecontrolled function in question. All persons proposed to undertake anycontrolled functions must meet the relevant examination and qualification requirements of the CBB, including qualifications such as the Securities Market Regulation Certification Programme (Series 7), the General Securities Representative Qualification (Series 79), and/or any other relevant examinations and qualifications recognised by the CBB that are appropriate to capital market functions, products and/or services, as the case may be. However, the CBB reserves the right to impose a higher level of qualifications as it deems necessary; and(h) Has sufficient experience to perform the duties of thecontrolled function .Amended: July 2016
Added: April 2016MIR-3.3.1B
In assessing the conditions prescribed in Rule MIR-3.3.1A, the CBB will take into account the criteria contained in Paragraph MAE-3.3.1C. 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 acontrolled function in onemember may not be considered to have sufficient expertise and experience to undertake nominally the samecontrolled function but in a much biggermember .Added: April 2016MIR-3.3.1C
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:
(a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;(b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;(c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;(d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;(e) The contravention of any financial services legislation;(f) Whether the person has ever been refused a license, authorisation, registration or other authority;(g) Dismissal or a request to resign from any office or employment;(h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;(i) The extent to which the person has been truthful and open with supervisors; and(j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.Added: April 2016MIR-3.3.1 D
With respect to Paragraph MIR-3.3.1C, 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.
Added: April 2016MIR-3.3.2
Approved persons undertaking acontrolled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking acontrolled function and shall be subject, among all accepted market conducts, to the insider trading rules.Adopted January 2010MIR-3.3.3
In determining where there may be a conflict of interest arising, factors that may be considered will include whether:
(a) Aperson has breached any fiduciary obligations to themember or terms of employment;(b) Aperson has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensedmember and itsclients ; and(c) Aperson has failed to declare a personal interest that has a material impact in terms of theperson's relationship with themember in general, and interest in holding any listedsecurities or futures contracts in particular.Amended: April 2013
Adopted January 2010General Guidance on 'Fit and Proper'
MIR-3.3.4
[This Paragraph was deleted in April 2016.]
Deleted: April 2016
Adopted January 2010MIR-3.4 MIR-3.4 Approved Persons
MIR-3.4.1
[This Paragraph was deleted in April 2016.]
Deleted: April 2016
Adopted January 2010Prior Approval Requirements and Process
Contents:
MIR-3.4.2
An application for approval for a person occupying a
controlled function under Paragraph MIR-3.1.2 must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person Status) and Curriculum Vitae after verifying that the information in the Form 3, including previous experience is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms MIR Forms of the CBB Rulebook.Amended: April 2016
Amended: April 2013
Adopted January 2010MIR-3.4.3
When the request for
approved person status forms part of a license application, it must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake acontrolled function is in relation to an existingmember , except if dealing with a MLRO, it must be marked for the attention of the Director, Capital Markets Supervision Directorate. In case of the MLRO, Form 3 must be marked for the attention of the Director, Compliance Directorate.Amended: April 2020
Amended: April 2016
Adopted January 2010MIR-3.4.3A
When submitting the Forms 3,
members must ensure that the Form 3 is:(a) Submitted to the CBB with a covering letter signed by an authorised representative of themember , seeking CBB approval;(b) Submitted in original form;(c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and(d) Signed by an authorised representative of the member and all pages stamped with themember's seal.Added: April 2016MIR-3.4.4
Members seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.Amended: April 2016
Adopted January 2010Assessment of Application
Contents:
MIR-3.4.4A
The CBB shall review and assess the application for
approved person status to ensure that it satisfies all the conditions required in Paragraph MIR-3.3.1A and the criteria outlined in Paragraph MIR-3.3.1C.Added: April 2016MIR-3.4.4B
For purposes of Paragraph MIR-3.4.4A,
members should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.Added: April 2016MIR-3.4.5
The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph MIR-3.3.1A and the criteria outlined in Paragraph MIR-3.3.1C. A notice of such refusal is issued by registered mail to the
member concerned, setting out the basis for the decision.Amended: April 2016
Adopted January 2010Appeal Process
MIR-3.4.6
Members or the nominatedapproved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application forapproved person status. The CBB shall decide on the appeal and notify themember of its decision within 30 calendar days from submitting the appeal.Amended: April 2016
Adopted January 2010MIR-3.4.7
Where notification of the CBB's decision to grant a person
approved person status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents,members or the nominatedapproved persons may appeal to the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify themember of its decision within 30 calendar days from the date of submitting the appeal.Amended: April 2016
Amended: April 2013
Adopted January 2010MIR-3.4.8
[This Paragraph was deleted in July 2016].
Deleted: July 2016
Amended: April 2016
Adopted January 2010MIR-3.4.9
The
member shall provide for the composition and duties of the board ofdirectors or any committee of amember after obtaining CBB approval.Adopted January 2010MIR-3.4.10
In this section "committee" includes any committee of
directors , audit committee, insider's committee, executive committee, or any committee established by the board for discharging its function.Adopted January 2010Notification Requirements and Process
Contents:
MIR-3.4.11
The
member must immediately notify the CBB,licensed exchange and/orlicensed clearing house when anapproved person ceases to hold acontrolled function together with an explanation as to the reasons why. In such cases, theirapproved person status is automatically withdrawn by the CBB.Amended: April 2016
Adopted January 2010MIR-3.4.12
Members must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for anapproved person Added: April 2016MIR-3.5 MIR-3.5 Amendment of Authorisation
MIR-3.5.1
A licensed
member must seek prior CBB approval before anapproved person may move from onecontrolled function to another within the samemember .Amended: April 2013
Adopted January 2010MIR-3.5.2
In such instances, a new application should be completed and submitted to the CBB. Note that a
person may be considered 'fit and proper' for onecontrolled function , but not for another, if for instance the new role requires a different set of skills and experience. Where anapproved person is moving to acontrolled function in anothermember , the firstmember should notify the CBB of thatpersons departure, and the newmember should submit a request for approval under section MIR-3.1.Adopted January 2010MIR-3.6 MIR-3.6 Cancellation of Authorisation and Power of CBB to Remove Approved Person
MIR-3.6.1
Where the CBB is satisfied that an
approved person :(a) Has wilfully contravened or wilfully caused thatmember to contravene the CBB Law, rules and regulations;1. Thebusiness rules of anSRO ; or2. Where applicable, thelisting rules , trading rules, and clearing, settlement and depository rules of anSRO , as the case may be;(b) Has without reasonable excuse, failed to ensure compliance by themember , or aperson associated with thatmember with:1. The CBB Law rules and regulations;2. Thebusiness rules of theSRO , or3. Where applicable, thelisting rules , trading rules, and clearing, settlement and depository rules of theSRO; (c) Has failed to discharge the duties or functions of his office or employment;(d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;(e) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;the CBB may if it thinks it is necessary in the interests of or for the protection of investors, by notice in writing direct that a
member remove the officer from his office or employment, and thatmember shall comply with such notice.Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-3.6.2
Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an officer of a
member has failed to discharge the duties or functions of his office or employment for the purposes of paragraph MIR-3.6.1 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing, after consultation with thelicensed exchange and/orlicensed clearing house , as the case may be.Adopted January 2010MIR-3.6.3
Subject to paragraph MIR-3.6.4, the CBB shall not direct a
member to remove an officer from his office or employment without giving themember an opportunity to be heard.Adopted January 2010MIR-3.6.4
The CBB may direct a
member to remove an officer from his office or employment under paragraph MIR-3.6.1 on any of the following grounds, without giving themember or that particularperson an opportunity to be heard:(a) The officer is an undischarged bankrupt whether in Bahrain or elsewhere;(b) The officer has been convicted whether in Bahrain or elsewhere, of an offence:1. Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and2. Punishable with imprisonment for a term of 3 months or more.Amended: April 2013
Adopted January 2010MIR-3.7 MIR-3.7 Criteria to Determine Failure to Discharge Duties or Functions by Approved Persons
MIR-3.7.1
The CBB may, in determining whether
approved persons have taken reasonable steps to discharge their duties, have regard to whether or not the approved person:(a) Ensured the proper functioning of themember ;(b) Ensured the compliance of themember with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides itsregulated activities ;(c) Set out and ensured compliance with written policies on all operational areas of themember , including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of themember in general, and rules of protection of itsclients assets in particular;(d) Identified, monitored and addressed the risks associated with the business of themember ;(e) Ensured that theregulated activities of themember were subject to adequate internal audit;(f) Oversaw the financial undertakings or exposure of themember to risks of any nature by setting out proper delegation limits and risk management controls; and(g) Ensured:1. That themember maintained written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and provided relevant procedures; and2. That every report, return or statement submitted by themember to the CBB was complete and accurate.Amended: April 2013
Adopted January 2010MIR-4 MIR-4 Business Standards and Ongoing Obligations
MIR-4.1 MIR-4.1 General Obligations
MIR-4.1.1
A
member shall, in respect of everyregulated activity it undertakes:(a) Ensure that theregulated activities are undertaken in a fair, orderly and transparent manner;(b) Manage any risks associated with its business and operations prudently;(c) Not act contrary to the interests of itsclients and the public investors;(d) Comply with thebusiness rules of anSRO and, where appropriate,listing rules and clearing, settlement, depository rules of thelicensed exchange and/orlicensed clearing house , as the case may be, that make satisfactory provision for:1. A fair, orderly and transparent market insecurities and futures contracts that are traded through thelicensed exchange and/orlicensed clearing house ; and2. The proper internal regulation and controls, and the supervision of its employees and/or representatives;(e) Maintain proper arrangements to enforce compliance with thebusiness rules of anSRO ,listing rules , and/or clearing, settlement and central depository rules of thelicensed exchange and/orlicensed clearing house , as the case may be;(f) Have sufficient financial and human resources and back-up systems:1. To maintain a fair, orderly and transparent market;2. To establish and maintain proper segregation between the controlled functions;3. To meet the requirement for handling, managing and maintaining theclients' assets safely and properly;4. To meet contingencies or disasters; and5. To provide adequate security arrangements;(g) Ensure that it appoints or employs fit and properpersons as approvedpersons to perform any controlled function;(h) Use or arrange to use a well-designed Business Continuity Plan and Disaster Recovery Procedure;(i) Ensure that all its employees or representatives are provided with the required education, qualifications and experience and they fully understand the rules and regulations of the CBB, and relevantSRO s;(j) Ensure that itsclients receive fair treatment without any unjustifiable favour or discrimination for each class ofclients ;(k) Ensure that there is sufficient and appropriate records, books and systems in place to record all transactions traded, cleared and settled through its system and maintain an audit trail;(l) Have an operating manual and internal policies;(m) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders' meetings referred to in Paragraph MIR-4.1.1 (o);(n) Ensure that any agenda items to be discussed or presented during the course of meetings which requires the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;(o) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and(p) Within one month of any shareholders' meetings referred to in Paragraph MIR-4.1.1(o), provide to the CBB a copy of the minutes of the meeting.Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-4.1.1A
Licensed
members 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.Added: October 2020MIR-4.2 MIR-4.2 Notification Requirements
MIR-4.2.1
A licensed
member shall, as soon as practicable after the occurrence of any of the following circumstances, notify the CBB of the circumstance:(a) Any material change to the information in its application under rule MIR-2.2.10;(b) The carrying on of any business other than:1. The business of undertaking aregulated activity ;2. A business incidental to undertaking aregulated activity ;(c) The acquisition of a substantial shareholding in a corporation which does not carry on:1. The business of undertaking aregulated activity, whether in Bahrain or elsewhere;2. A business incidental to undertaking aregulated activity , whether in Bahrain or elsewhere;3. Such business or class of businesses as the CBB may allow;(d) It becoming aware of a financial irregularity or other matter which in its opinion:1. May affect its ability to discharge its financial obligations towards itsclients ; or2. May affect the ability to meet its financial obligations to anSRO , as the case may be;3. May affect its ability to meet the minimum working capital requirement;(e) Where it reprimands, suspends, dismisses or otherwise takes disciplinary action against anypersons performing controlled functions or where suchpersons are subject to an order or petition of bankruptcy or criminal prosecution;(f) Any civil or criminal legal proceeding taken against themember or anyperson performing a controlled function, whether in Bahrain or elsewhere;(g) Any disciplinary action against themember or anyperson performing a controlled function taken by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;(h) Any significant change to the regulatory requirements imposed by any regulatory body other than the CBB, whether in Bahrain or elsewhere;(i) Any arrangements or involvement related to take-overs, mergers or acquisitions;(j) Involvement or possible involvement of any of itsclients in insider transactions or dealings;(k) Failure of any of itsclients to comply with the disclosure standards requirements and adhering to the ownership rules in particular;(l) A failure to adhere to the trading days, hours or sessions and settlement period of anSRO , as the case may be;(m) Any other matter that is required to be notified, that the CBB orSRO may specify by notice in writing.Amended: April 2013
Adopted January 2010MIR-4.2.2
The CBB may, at any time after receiving a notification referred to in rule MIR-4.2.1 and after providing the licensed
member with an opportunity to be heard, issue directions to the relevantSRO , and/or suchmember :(a) Where the notification relates to a matter referred to in rule MIR-4.2.1 (b):1. To cease carrying on the first-mentioned business referred to in rule MIR-4.2.1 (b); or2. To carry on such business referred to in rule MIR-4.2.1 (b) subject to such conditions or restrictions as the CBB may impose; or(b) Where the notification relates to a matter referred to in rule MIR-4.2.1 (c):1. To dispose of the shareholding referred to in rule MIR-4.2.1 (c); or2. To exercise its rights relating to such shareholding subject to such conditions or restrictions as the CBB may impose;and the
member shall comply with such directions.Amended: April 2013
Adopted January 2010MIR-4.2.3
Where a circumstance referred to in rule MIR-4.2.1 has occurred, the
member shall, in addition to the notification required under rule MIR-4.2.1, within 5 calendar days of the occurrence of the circumstance, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken or required to be taken at the time of the occurrence, and the subsequent follow-up actions that themember has taken or intends to take, whether as per CBB orSRO requirements.Amended: July 2016
Adopted January 2010MIR-4.2.4
A
member shall, within a reasonable period of time prior to entering into negotiations to provide trading, or clearing arrangement with theperson establishing or operating an overseasmarket or clearing facility, notify the CBB of such intent to enter into negotiations.Adopted January 2010MIR-4.3 MIR-4.3 Mind and Management
MIR-4.3.1
Members with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom.Adopted January 2010MIR-4.3.2
In assessing the location of a
member's Head Office, the CBB will take into account the residency of itspersons performing controlled functions. The CBB may require the majority of key decision-makers in executive management to be resident in Bahrain.Adopted January 2010MIR-4.3.3
[This Paragraph was deleted in July 2016].
Deleted: July 2016
Amended: April 2013
Adopted January 2010MIR-4.4 MIR-4.4 Financial Resources, Initial Paid-up Capital and Capital Adequacy Requirements
MIR-4.4.1
In order to maintain market integrity and meet all risks associated with its business, the
SRO is responsible for establishing the minimum required initial paid-up capital, ongoing capital adequacy requirements and other financial resources of itsmembers , which requirements shall be a part of their rulebook and which is approved by the CBB.Adopted January 2010MIR-4.4.2
The
member must at all times maintain a level of financial resources and capital adequacy requirement required by theSRO , adequate for the level of business undertaken, or proposed to be undertaken.Adopted January 2010MIR-4.4.3
The
SRO , as a part of its responsibility and accountability to manage all types of risks associated with its market, including the counterparty risk, must assume full responsibility for monitoring and adherence of itsmembers to the capital adequacy requirements and shall also be responsible for reporting any significant developments or actions taken in this regard to the CBB, whether such developments or actions relate to the whole market or to a particularmember .Adopted January 2010MIR-4.4.4
The
SRO shall put in place a clearing and settlement system that promptly isolates the problem of a failingmember by addressing its open proprietarypositions andpositions its holders on behalf of customers, or otherwise protects customers funds and assets from amember's default under the CBB Law, rules and regulations.Adopted January 2010MIR-4.4.5
The
SRO must have a mechanism in place that is intended to monitor and evaluate continuously the risk of openpositions or credit exposures that are sufficiently large to expose a risk to the market or to the clearing and settlement systems.Adopted January 2010MIR-4.4.6
The
SRO shall use or design the clearing and settlement ofsecurities systems to ensure that they are fair, effective and efficient and that they reduce systemic risk, large exposures risk, default risk and any other market disruption.Adopted January 2010MIR-4.5 MIR-4.5 Systems and Controls
MIR-4.5.1
The business rulebook of an
SRO shall provide sufficient provision and requirements that cover the minimum requirements for maintaining systems and controls that eachmember is required to meet.Adopted January 2010MIR-4.5.2
The
members must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities.Adopted January 2010MIR-4.5.3
The
members 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.Adopted January 2010MIR-4.5.4
The
members must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of money laundering and financial crime occurring in themember .Adopted January 2010MIR-4.5.5
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.
Adopted January 2010MIR-4.6 MIR-4.6 Obligation to Maintain Proper Records
MIR-4.6.1
The
member must maintain comprehensive books of accounts and other records, which must be available for inspection within the Kingdom of Bahrain by the CBB, orpersons appointed by the CBB, at any time.Members must comply with the minimum record keeping requirements contained in the rulebook of theSRO and must comply with IAS (and relevant AAOIFI) standards.Adopted January 2010MIR-4.6.2
Every
member shall ensure that all relevant books and other information, as may be required by the CBB and/orSRO for the purposes of this Module, be kept for a minimum of 10 years.Adopted January 2010MIR-4.6.3
The
members must prepare their financial statements and accounts in accordance with the international accounts standards committee requirements and IFRS for the whole financial year, as well as for the interim financial statements, which are required to be audited by an external independent auditor in accordance with the international auditing standards.Adopted January 2010MIR-4.6.4
The
members must prepare and submit quarterly prudential returns to be reviewed by themember's auditor before being submitted to the CBB.Adopted January 2010MIR-4.6.5
The
members are required to submit the quarterly prudential returns (QPR) in the due timeframe. Themembers may apply in writing to the CBB for exemption from the requirements that the QPR be reviewed by themember's external auditor. This exemption would normally only be given where themember has established a track record of accurate and timely reporting, and there were no other supervisory issues of concern.Adopted January 2010MIR-4.6.6
The CBB may, without prejudice to Articles 37, 38, 89, 92, 94 and 95 of the CBB Law make regulations or issue circulars, directives, or notices in writing in respect of all or any of the matters, including the establishment and maintenance of such books for the handling of money or other assets of the
member , for theirclients .Adopted January 2010MIR-4.7 MIR-4.7 Segregation and Handling of Clients' Assets
MIR-4.7.1
For the purpose of this Module, "
clients assets" meanssecurities , money and other assets received or retained by, or deposited with amember in the course of its business for which it is liable to account to its client, and anysecurities , money or other assets accruing therefrom.Adopted January 2010MIR-4.7.2
The
client assets are held or controlled by amember on behalf of aclient if they are:(a) Directly held by themember ;(b) Held in an account in the name of themember ;(c) Held by aperson , or in an account in the name of aperson , controlled by themember ; or(d) Held in an account with anotherperson , controlled by themember. Adopted January 2010MIR-4.7.3
The CBB would consider a
person to be controlled by amember if thatperson is inclined to act in accordance with the instructions of suchmembers .Adopted January 2010MIR-4.7.4
The CBB would consider an account to be controlled by a
member if that account is operated in accordance with the instructions of suchmembers .Adopted January 2010Segregation of Client Assets
MIR-4.7.5
The
member, or anyperson acting on its behalf, shall maintain sufficient systems and procedures in respect of the handling ofsecurities , money or other assets, including but not limited to the requirement of maintaining books and records, segregation of theclients 'securities , money and assets and the risk management and internal controls systems to address this requirement.Adopted January 2010MIR-4.7.6
A licensed
member must holdclient assets separate from its own at all times. The licensedmember must, in connection with anyclients 'securities and funds received in the course of their business, establish and maintain separate client accounts, segregated from those used for their own accounts.Amended: April 2013
Adopted January 2010MIR-4.7.7
A
member may only use aclient's assets for its own account, and/or for the account of any of its otherclients if:(a) Thatclient has given his express consent in writing;(b) The use of theclient assets is restricted to the terms and conditions stipulated on the agreement agreed and signed by it; and(c) The agreement in which thatclient's consent is requested by themember gives clear information to him on:(i) The rights, obligations and responsibilities of themember and/or of theclients for whose account themember has been allowed to use theclient's assets , with respect to the use of such assets; and(ii) The risks involved.Amended: January 2019
Amended: April 2013
Adopted January 2010MIR-4.7.7A
[This Paragraph was deleted in January 2019].
Deleted: January 2019
Added: April 2013MIR-4.7.8
A
member should communicate to itsclients in writing, at a minimum, the information regardingclient assets held. This information must be reported after the initial transaction date not later than the required date stipulated in the designated clearing, settlement and central depository system.Adopted January 2010MIR-4.7.9
The
member may maintain and hold theclients assets under the following agreements or arrangements:(a) Non discretionarysecurities account;(b) Discretionary accounts and portfolios;(c) Margin trading arrangements;(d) Depository and custody accounts;(e) Bank accounts related to thesecurities transactions (if applicable);(f)Securities lending and borrowing arrangements;(g) For the purpose of collateral arrangements;(h) Under specific mandates and arrangements approved by the CBB andSRO .All the abovementioned arrangements shall be entered into by and in a duly signed agreement between the
member and itsclients .Adopted January 2010Client Money
MIR-4.7.10
The
member must holdclient money in a separate client bank account designated for the purpose of settlement of the client's transaction.Adopted January 2010MIR-4.7.11
A
client bank account is an account maintained by the Settlement Bank or other designated licensed bank holdingclient money of one or moreclients in a bank account designated as such, in accordance with the terms of agreement with theclient /clients .Adopted January 2010MIR-4.7.12
Client bank accounts may only be opened with banks licensed by the CBB to do business in the Kingdom of Bahrain, after being subject to due diligence by themember. Adopted January 2010MIR-4.7.13
For the purpose of rule MIR-4.7.12 when undertaking due diligence, the
member should take reasonable steps to establish that the bank is appropriate considering, among other factors, the following:(a) Whether it is acceptable to theSRO ;(b) Whether it is a duly licensed bank in good regulatory standing;(c) The capital adequacy of the bank;(d) The amount ofclient money to be placed, as a proportion of the bank's capital and deposits; and(e) The credit rating of the bank, if available.Adopted January 2010MIR-4.7.14
If a
member holds or controlsclient assets which are not subject to theclient asset provisions in an arrangement with amarket counterparty , it must disclose to thatmarket counterparty in writing that:(a) The protections conferred by theclient asset protection rules do not apply to suchclient money ;(b) As a consequence of (a), suchclient assets may be mixed with money belonging to themember , and may be used by themember in the course of the clearing and settling of theclients 'securities transaction; and(c) In the event of insolvency, winding up of themember or other distribution event stipulated by the laws, rules and regulations, theclients assets shall not be considered as a part of the member's assets.Adopted January 2010Transfer of Money to Eligible Third Parties
MIR-4.7.15
The
member may only pay, or permit to be paid,clients money into an account of aperson who is a counterparty of thesecurities transaction, in accordance with the applicable clearing, settlement and central depository rules.Adopted January 2010MIR-4.7.16
The
member must not hold money other thanclient money in aclient bank account unless it is:(a) A minimum sum required to open the account or to keep it open;(b) Money temporarily held in the account in accordance with the mixed remittance requirements; or(c) Interest credited to the account which exceeds the amount due toclients as interest and which has not yet been withdrawn by theclient or themember .Adopted January 2010MIR-4.7.17
If a
member receives a mixed remittance (that is partclient money and part other money), it must:(a) Pay the full sum into aclient bank account ; and(b) Pay the money that is notclient money out of theclient bank account within the same business day or otherwise as per provision of the agreement under rule MIR-4.7.7 (b).Adopted January 2010Reconciliation
MIR-4.7.18
A
member must ensure that a system is implemented to perform reconciliations of bothclient securities account andclient bank accounts after each transaction is executed for the benefit of that particularclient. In addition, these reconciliations must be carried out on a regular basis, sufficient to ensure the accuracy of its records at least once a month on the last business day of each calendar month.Adopted January 2010MIR-4.7.19
A
member must perform the reconciliations required under rule MIR-4.7.18 within 10 calendar days from the end of each month.Adopted January 2010MIR-4.7.20
In respect of reconciliation, the
member must ensure that unresolved differences, shortfalls and excess balances are investigated and, where applicable, corrective action is taken as soon as is practicable. In such cases, themember must confirm such corrective action to the relatedclients and other counterparty's broker-dealers (if required).Amended: April 2013
Adopted January 2010Record-keeping
MIR-4.7.21
Members must ensure that proper records, sufficient to show and explain themember's transactions and commitments in respect of itsclient assets are kept. These records must be retained for a period of a minimum of 5 years after they were made, unless otherwise required by law.Adopted January 2010Auditor Reports
MIR-4.7.22
Members that hold or controlclient assets must arrange for their external auditor to report on themembers ' compliance with the requirements related to the holding and segregation of theclient's assets requirements.Adopted January 2010MIR-4.7.23
A
member must submit the report, referred to in Paragraph MIR-4.7.22, in the form agreed by the CBB within 3 months of its financial year end.Amended: January 2018
Adopted January 2010MIR-4.7.23A
The format of the Auditor's Report (Agreed Upon Procedure) is included in Part B of the Rulebook, as part of the supplementary information.
Added: January 2018Client Agreements and Statements
MIR-4.7.24
Before the
member undertakes anyregulated activities or services mentioned under paragraph MIR-1.1.2 they must notify theclient as to the appropriate terms and conditions which apply to each service or arrangement and sign the prescribed agreement(s). The agreement must cover, at a minimum, the following matters, wherever applicable:1. Representations and warranties by theclient ;2. Acknowledgements by theclient ;3.Clients ' orders and instructions;4. Settlement and clearing services;5. Commission and charges;6. Information and advice;7. Undertaking of theclient ;8.Members responsibilities;9. The right to object to withdrawal or transfer ofsecurities ;10. Correspondence and confirmation;11. Terms and termination;12. Joint liability;13. Force Majeure;14. Severability;15. Notices:client ;member ;16. Amendment of the agreement; and17. Law and jurisdiction.Adopted January 2010MIR-4.7.25
The specimen of the abovementioned agreement shall be provided in the
business rules of theSRO , as the case may be. The specimen shall contain the minimum requirements and information.Adopted January 2010MIR-4.8 MIR-4.8 Final Accounts and Auditing
MIR-4.8.1
Every
member shall appoint one or more qualified and experienced external auditors for its accounts for every financial year. Prior written approval by the CBB will be required before appointing an auditor.Adopted January 2010MIR-4.8.2
In accordance with Article 61(b) of the CBB Law, if a
member fails to appoint an auditor within four months from the beginning of the financial year, the CBB shall appoint such auditor.Amended: July 2014
Adopted January 2010MIR-4.8.3
The
member shall pay the fees of the auditor regardless of the manner in which such auditor is appointed.Adopted January 2010MIR-4.8.4
An auditor shall not be the chairman or a
director in themember's board or a managingdirector , agent, representative or taking up any administrative work therein, or supervising its accounts, or a next of kin to someone who is responsible for the administration or accounts of amember , or having an extraordinary interest in amember as theSRO and/or CBB may determine.Adopted January 2010MIR-4.8.5
If any of the circumstances referred to in rule MIR-4.8.4 occurs after the appointment of the auditor, the
member must appoint another auditor.Adopted January 2010MIR-4.8.6
The
member shall provide the external auditor with all information and assistance necessary for carrying out his duties.Adopted January 2010MIR-4.8.7
The duties of the auditor shall include the preparation of a report on the final accounts. The report shall contain a statement on whether the
member's accounts are correct and reflect the actual state of affairs of themember according to the auditing standards prescribed by theSRO and CBB, and whether themember has undertaken the auditor with any required information and clarification.Adopted January 2010MIR-4.8.8
The final audited accounts shall be presented to the general meeting of the
member together with the auditor's report. A copy of these documents shall be sent to the CBB at least 15 days before the date of the general meeting.Adopted January 2010MIR-4.8.9
[This Paragraph was deleted in July 2014.]
Deleted: July 2014
Adopted January 2010MIR-4.8.10
Every
member must, within 3 months following every financial year, send to the CBB its final audited accounts for all the transactions carried out until year end, as well as any other financial statements required by theSRO and CBB. Everymember must publish extracts of the final audited accounts within 60 calendar days from the end of its financial year in 2 local daily newspapers, one in Arabic and the other in English.Amended: July 2016
Amended: April 2013
Adopted January 2010MIR-4.8.11
Audited financial statements must comply with International Financial Reporting Standards (IFRS)/ International Accounting Standards (IAS). For Islamic institutions, audited financial statements must comply with AAOIFI standards or where AAOIFI standards do not cover a subject, IFRS must be followed.
Amended: July 2016
Adopted January 2010MIR-4.9 MIR-4.9 Obligation to Submit Periodic Reports
MIR-4.9.1
A
licensed member shall submit to the CBB andSRO :(a) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a copy of its:1. Annual report anddirectors' report; and2. Auditors' report;(b) Within 45 days after the end of each of the first 3 quarters of its financial year or such longer period as the CBB may permit, or the preceding quarter, in such form as may be approved by the CBB, a copy of its:1. Profit and loss accounts;2. Balance sheet;3. Cash flow statement; and4. Change in shareholders equity;(c) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a report on how themember has discharged its responsibilities under the CBB Law and regulations and the rules of theSRO during that financial year;(d) Such other report as the CBB may require for the proper administration of this Module, at such time or on such periodic basis as may be required by the CBB.Amended: April 2013
Adopted January 2010MIR-4.9.2
The auditors' report referred to in rule MIR-4.9.1 (a) shall unless otherwise be provided to the CBB by way of a management letter, include the findings and recommendations of the auditors, if any, on the internal controls and risk management of the
member ; and(a) Any provision of this Module;(b) Any direction issued by anSRO and/or CBB under this Module; or(c) Any other relevant laws or regulations.Adopted January 2010MIR-4.9.3
Licensed
members are required to complete online non-financial information related to their institution by accessing the CBB's institutional information system (IIS). Licensees must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, the licensee must still access the IIS quarterly and confirm the information contained in the IIS. Licensees must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.Amended: April 2013MIR-4.9.4
Licensees failing to comply with the requirements of Paragraph MIR-4.9.3 or reporting inaccurate information are subject to financial penalties or other enforcement actions.
Amended: April 2013MIR-4.10 MIR-4.10 Additional Powers of the CBB in Respect of Auditors
MIR-4.10.1
If an auditor of a
licensed member in the course of the performance of his duties becomes aware of:(a) Any matter which in his opinion, adversely affects or may adversely affect the financialposition of thelicensed member to a material extent;(b) Any matter which in his opinion, constitutes or may constitute a breach of the CBB Law, rules and regulations, or an offence involving fraud or dishonesty; or(c) Any irregularity that has or may have a material effect upon the accounts of thelicensed member , including any irregularity that affects or jeopardises or may affect or jeopardise, the assets and money ofclients , then the auditor shall immediately send to the CBB andlicensed exchange and/orlicensed clearing house a written report of the matter or the irregularity.Adopted January 2010MIR-4.10.2
An auditor of a
licensed member shall not be, in the absence of malice on his part, liable to any action for defamation at the suit of anyperson in respect of any statement made in his report under paragraph MIR-4.10.1.Adopted January 2010MIR-4.10.3
Rule MIR-4.10.2 shall not restrict or affect any right, privilege or immunity that the auditor of a
licensed member may have as a defendant in an action for defamation.Adopted January 2010MIR-4.10.4
The CBB may impose all or any of the following duties on an auditor of a
licensed member :(a) A duty to submit such additional information and reports in relation to his audit as the CBB considers necessary;(b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of thelicensed member ;(c) A duty to carry out any other examination or establish any procedure in any particular case;(d) A duty to submit a report on any matter arising out of his audit, examination or establishment of procedure referred to in MIR-4.10.4 (b) or (c), and the auditor shall carry out such duties.Adopted January 2010MIR-4.10.5
The
licensed member shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in paragraph MIR-4.10.4.Adopted January 2010MIR-4.11 MIR-4.11 Obligation to Assist CBB
MIR-4.11.1
A
member shall provide such assistance to the CBB and/orSRO that is required for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provisions of:(a) Such books and information:1. Relating to the business of thelicensed member ; or2. In respect of such dealings insecurities or trading in futures contracts, products or other instruments; and(b) Such other information as the CBB may require for the proper administration of this Module in general, and for the investigation and enforcement purposes in particular;(c) Any information related to the handling and segregation of theclients assets.Amended: April 2013
Adopted January 2010MIR-4.11.2
The CBB may at is discretion:
(a) Call for the provision of additional information about the affairs of themember ;(b) Carry out inspections of the office of thelicensed member and inspect the books of accounts and other relevant books of thelicensed member ; and(c) Appoint one or more examiner or investigator to inquire into the affairs of thelicensed member .Adopted January 2010MIR-4.12 MIR-4.12 Obligation to Maintain Confidentiality
MIR-4.12.1
Subject to rule MIR-4.12.2, a
member and its officers, employees and representatives shall maintain, and aid in maintaining, the confidentiality of allclients or investors information that:(a) Comes to the knowledge of themember , or any of its officers, employees or representatives; and(b) Is in possession of themember , or any of its officers, employees or representatives.Adopted January 2010MIR-4.12.2
Rule MIR-4.12.1 shall not apply to:
(a) The disclosure of investors or users information for such purposes, or in such circumstances as anSRO and/or CBB may prescribe;(b) Any disclosure of investors or users information which is authorised by the CBB to be disclosed or furnished; or(c) The disclosure of investors or users information pursuant to any requirement imposed under any law or order of court in Bahrain.Adopted January 2010MIR-4.12.3
For the avoidance of doubt, nothing in this section shall be construed as preventing a
member from entering into a written agreement with an investor oruser which obliges themember to maintain a higher degree of confidentiality than that specified in this section.Adopted January 2010Exceptions to Obligation to Maintain Confidentiality
MIR-4.12.4
Without prejudice to the requirements of Article 117 of the CBB Law and the CSD Module, the obligation to maintain confidentiality shall not apply to the disclosure of investor or
client information by amember , or its officers, employees or representatives for the following purposes or in the following circumstances:(a) The disclosure of investor orclient information is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;(b) The disclosure of investor orclient information is permitted for such purpose specified in writing by the investor orclient or, where the investor orclient is deceased, by his appointed personal representative;(c) The disclosure of investor orclient information is necessary for the execution by themember of a transaction in anysecurities or futures contracts or clearing or settlement of a transaction, and such disclosure is made only to anotheruser which is:1. Alicensed exchange and/orlicensed clearing house through which the transaction is traded or cleared or settled; or2. A counterpartylicensed member through which that transaction is executed, cleared or settled;(d) The disclosure of investor orclient information is necessary:1. In any disciplinary proceedings of theSRO , orsecurities regulator, provided that reasonable steps are taken to ensure thatclient information disclosed to any thirdperson is used strictly for the purpose for which theclient information is disclosed; or2. For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;(e) Theclient information disclosed is already in the public domain;(f) The disclosure ofclient information is made in connection with:1. The outsourcing or proposed outsourcing of any service or activity of themember to a third party;2. The engagement or potential engagement of a third party by themember to create, install or maintain back-up or internal control systems of themember ; or3. The appointment or engagement of an auditor, lawyer, consultant or other professional by themember under a contract for service;(g) The disclosure ofclient information is necessary in:1. An application for a grant of probate or letters of administration or the resealing thereof in relation to the estate of a deceasedclient ; or2. The administration of the estate of a deceasedclient , including such disclosure as may be required for this purpose by the relevant authority;(h) The disclosure ofclient information is made in connection with:1. In the case where theclient is an individual, the bankruptcy of aclient or2. In the case where theclient is a body corporate, the winding up or receivership of aclient ; or(i) The disclosure of client information is made to anissuer for the purpose of theissuer's regulatory submission.Amended: April 2013
Adopted January 2010MIR-4.12.5
Where
client information is disclosed under paragraph MIR-4.12.4 (f), themember shall:(a) Maintain a record of the circumstances relating to the disclosure ofclient information referred to in paragraph MIR-4.12.4 (f); and the particulars of:1. In the case of the disclosure of information under paragraph MIR-4.12.4 (f), the outsourcing of the function of themember ;2. In the case of the disclosure of information under paragraph MIR-4.12.4 (f), the engagement of the third party; and3. In the case of the disclosure of information under paragraph MIR-4.12.4 (f), the appointment or engagement of the auditor, lawyer, consultant or other professional and make that record available for inspection by theSRO and/or CBB;(b) Disclose theclient information only insofar as this is necessary for the relevant purpose; and(c) Take reasonable steps to ensure that theclient information disclosed is used by the entitledperson to whom the disclosure is made strictly for the relevant purpose, and that theclient information is not disclosed by that entitledperson to any otherperson except with the consent of theSRO and/or CBB.Adopted January 2010MIR-4.12.6
Where disclosure of
client information is permitted to be made for any purpose or in any circumstance under paragraph MIR-4.12.4 to a body corporate, theclient information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.Adopted January 2010MIR-4.12.7
In paragraph MIR-4.12.6, "relevant purpose" means:
(a) In the case of the disclosure of information under paragraph MIR-4.12.4 (f)(1), facilitating the outsourcing of the function of themember ;(b) In the case of the disclosure of information under paragraph MIR-4.12.4 (f)(2), facilitating the engagement of the third party; and(c) In the case of the disclosure of information under paragraph MIR-4.12.4 (f)(3), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.Adopted January 2010MIR-4.13 MIR-4.13 Confirmation Requirements and Provision of Information to Clients
MIR-4.13.1
A
member shall confirm to itsclients or participants the execution of a transaction, as well as the clearing, settlement and depository ofsecurities in the manner and time prescribed by the rules of theSRO , (including the trading rules, and the clearing, settlement and depository rules of thelicensed exchange and/or thelicensed clearing house ), as the case may be.Adopted January 2010MIR-4.13.2
A
member shall provide itsclients or participants with the periodic and ad hoc statements in the manner and time prescribed by the rules of theSRO , as the case may be.Adopted January 2010MIR-4.13.3
A
member shall:(a) Make available upon request by; or(b) Publish in a manner that is accessible to, any investor who accesses or uses, or potential investor who may access or use, any system or services undertaken or provided by thatmember :1. Allregulated activities or services of themember ;2. All products available on theregulated activities undertaken by themember ;3. Applicable fees and charges;4. Applicable margin requirements; and5. Any arrangement that may be in place to compensate an investor who suffers pecuniary loss as a result of theseregulated activities or insolvency of themember .Amended: April 2013
Adopted January 2010MIR-4.14 MIR-4.14 Transmission and Storage of Transactions and Clients Information
MIR-4.14.1
A
member shall take or arrange to take all reasonable measures to maintain the integrity and security of the transmission and storage ofclient information related to theclient's orders and transactions undertaken by it, in accordance with the rules of theSRO .Adopted January 2010Records of Telephone Conversations and Electronic Communications
MIR-4.14.2
In addition to meeting the book-keeping and record-keeping requirements as per the applicable laws, rules and regulations, all members of
SROs must maintain records of telephone conversations and electronic communications, including facsimile, email and other instant messaging devices relating to their activities in thesecurities market, as required by the CBB's rules, regulations and directives, including but not limited to the following activities:(a) Receiving client orders;(b) Executing client orders;(c) Arranging for client orders to be executed;(d) Carrying out transactions on behalf of the member of anSRO , or anotherperson in the member of anSRO group, and which are part of the member of anSRO's trading activities, or the trading activities of anotherperson in the member of anSRO group;(e) Executing orders that result from decisions by the member of anSRO to deal on behalf of its client;(f) Placing orders with other entities for execution that result from decisions by the member of anSRO to deal on behalf of its client.Adopted January 2010MIR-4.15 MIR-4.15 Business Continuity Plan
MIR-4.15.1
A
member, in accordance with the rules of theSRO , shall maintain by itself or through arrangements with theSRO , at all times a plan of action (referred to in this Module as a Business Continuity Plan) setting out the procedures and establishing the systems necessary to restore fair, orderly and transparent operations of anyregulated activities it provides or undertakes, in the event of any disruption to its operations.Adopted January 2010MIR-4.15.2
A
member shall review the procedures and internal systems referred to in rule MIR-4.15.1 on such regular basis as may be specified in the Business Continuity Plan and the rules of theSRO .Adopted January 2010MIR-4.15.3
A
member shall immediately notify theSRO of any activation of its Business Continuity Plan and of any action taken or intended to be taken to restore fair, orderly and transparent operations it undertakes.Adopted January 2010MIR-4.15.4
A
member shall, within 14 days or such longer period as the CBB may permit, inform theSRO and/or CBB of any material change to the Business Continuity Plan, and shall submit at the request of the CBB, a copy of the new plan to the CBB.Adopted January 2010MIR-4.16 MIR-4.16 Outsourcing
MIR-4.16.1
A
member shall not outsource any function related to anyregulated activities without prior approval of the CBB, and/orSRO .Adopted January 2010MIR-4.16.2
The CBB would normally not grant its approval related to the outsourcing application, when such outsourcing application is related to controlled functions, or core business of such licensed
member .Amended: April 2013
Adopted January 2010MIR-4.16.3
The
member seeking to outsource functions related to any undertaking ofregulated activities should have the following in place:(a) Comprehensive policy to guide the assessment of whether and how these functions or services can be appropriately outsourced;(b) The management shall have the responsibility for the outsourcing policy and related overall responsibility for outsourced functions or services undertaken under that policy;(c) Themember retains the ultimate res'ponsibility for the functions or services that are outsourced;(d) Themember must obtain the approval of the respectiveSRO and notify the CBB before committing to an outsourcing arrangement;(e) Themember must maintain and regularly review contingency plans to enable him to set-up alternative arrangements should the outsourcing provider fail;(f) Themember must nominate an officer of senior management with day-to-day responsibility for handling the relationship with the outsourcing provider and ensuring that relevant risks are addressed;(g) All the outsourcing contract must be legally enforceable;(h) A notice period of at least three months shall be required from the outsourcing party to terminate the contract;(i) On termination all data pertaining to themember and itsclients shall be returned by the outsource provider to themember ; and(j) For the entire duration of the outsourcing contact, this shall be subject to the confidentiality requirements in general, and information related to theclients or users in particular.Adopted January 2010MIR-4.17 MIR-4.17 Compliance Officer [This Section was deleted in April 2013 as requirements are now found under Paragraphs MIR-3.1.6 and MIR-3.1.7.]
MIR-4.17.1
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-4.17.2
[This Paragraph was deleted in April 2013].
Deleted: April 2013MIR-4.18 MIR-4.18 Non-Compliance with Business Rules, Listing Rules, Clearing and Settlement Rules not to Substantially Affect the Rights of Persons
MIR-4.18.1
Any failure by a
member to comply with:(a) The CBB Law, rules and regulations;(b) This Module;(c) The rules of theSRO ; orin relation to a matter shall not prevent the matter from being treated, for the purposes of this Module, as done in accordance with the
business rules ,listing rules , trading rules, or clearing, settlement and depository rules, so long as the failure does not substantially affect the rights of theperson entitled to require compliance with such rules.Adopted January 2010MIR-4.19 MIR-4.19 Market Making Practice for Liquidity Enhancement
MIR-4.19.1
This section (MIR-4.19) sets out the requirements and obligations applicable to
members registered asmarket makers andissuers interested to enter into an agreement withmarket makers for the purpose of enhancing liquidity in the listedsecurities of the issuer.Added: January 2019
Liquidity Enhancement Practice
MIR-4.19.2
Issuers , whosesecurities are already listed on alicensed exchange orlicensed market operator and where thesecurities based on the criteria established by thelicensed exchange orlicensed market operator are eligible formarket making , may enter into amarket making agreement with amarket maker with an objective to enhance liquidity for a specific period of time thereby encouraging regular trading activity and avoiding price fluctuations which are not in line with the market trend.Added: January 2019
MIR-4.19.3
The
market making agreement referred to in Paragraph MIR-4.19.2 must define the conditions in which themarket maker will trade on behalf of theissuer by buying and selling theissuer's securities with the sole purpose of enhancing liquidity and regularity of trading in thesecurities .Added: January 2019
MIR-4.19.4
An
issuer concurrently must not enter intomarket making agreement with more than onemarket maker for a listedsecurity .Added: January 2019
Market Making Agreement
MIR-4.19.5
The
market making agreement must specify the conditions within which themarket maker will trade on behalf of theissuer by buying and selling theissuer's securities .Added: January 2019
MIR-4.19.6
The sole purpose of the
market making agreement must be to enhance liquidity and improve regularity of trading.Added: January 2019
MIR-4.19.7
The
market making agreement must establish the initial balances and the minimum balances to be maintained in thesecurities account and the bank account to ensure continuity ofmarket making activity and the measures to be adopted when the balances in the two accounts are insufficient to enable trades under themarket making agreement .Added: January 2019
MIR-4.19.8
The
market making agreement must establish themarket maker's independence as a provider of liquidityAdded: January 2019
MIR-4.19.9
The
market making agreement must establish the conditions for the remuneration payable by theissuer to themarket maker .Added: January 2019
MIR-4.19.10
The duration of the
market making agreement must not exceed a period of 12 months. Upon completion of the initial 12 months period and subject to mutual agreement ofissuer andmarket maker , themarket making agreement may be extended for an additional period of 12 months provided thelicensed exchange orlicensed market operator grants its approval for such an extension.Added: January 2019
Independence of the Market Maker
MIR-4.19.11
The
market maker must carry out the transactions under themarket making agreement with total independence from theissuer , and neither themarket maker nor theissuer may request or give any type of instructions or guidance. In particular, theissuer must not instruct, guide or intervene in the trading activity and themarket maker must have sole discretion as to the timing of transactions in theissuer's securities .Added: January 2019
MIR-4.19.12
The
market maker must have an internal organisational structure such that trading decisions concerning themarket making activities are independent from the activities related to investment services, proprietary account, client account or any other services provided by themarket maker .Added: January 2019
MIR-4.19.13
Without prejudice to being reimbursed for the expense incurred towards
market making , the remuneration method of themarket maker must be consistent with the purpose of the activity and must not impair themarket maker's independence.Added: January 2019
MIR-4.19.14
An
issuer must ensure that the remuneration method does not encourage themarket maker to influence thesecurity price and/or trading volume through trades in thesecurity . To that end, fees must be set within reasonable and justifiable levels with a maximum cap.Added: January 2019
MIR-4.19.15
A
market maker must not use its own funds to engage in trades under themarket making agreement .Added: January 2019
Securities account and bank account associated with the market making agreement
MIR-4.19.16
Trades performed under the market making agreement must be recorded through entries made by the market maker in two accounts, (i) a
securities account and (ii) a bank account, both opened in the name of theissuer and used solely formarket making transactions.Added: January 2019
MIR-4.19.17
When the
market making agreement is terminated, regardless of the reason, thesecurities account and the bank account referred to in Paragraph-MIR-4.19.16 must be cancelled in accordance with the following procedure:a) Bank account: Themarket maker will transfer the balance to another account designated by theissuer .b)Securities Account : Themarket maker must sell thesecurities in thesecurities account . Such sales must be performed in theissuer's best interests but without interfering with or hampering normal market operations and without misleading other market participants.Added: January 2019
MIR-4.19.18
Provisions of Paragraph MIR-4.19.17 should not apply where:
a) Thesecurities are transferred to anothermarket maker entrusted with anothermarket making agreement by the sameissuer .b) Theissuer , upon termination ofmarket making agreement , may recover a number ofsecurities , in which case that number may not exceed the number ofsecurities initially deposited by theissuer .Added: January 2019
Non-withdrawal of Securities
MIR-4.19.19
Unless the
market making agreement is terminated,securities allocated by theissuer for the purpose ofmarket making orsecurities acquired during the course of market making activity cannot be withdrawn from thesecurities account except as a result of transactions carried out under themarket making agreement .Added: January 2019
Conditions for trading
MIR-4.19.20
The transactions carried out under a
market making agreement must not impair the orderly functioning of themarket .Added: January 2019
MIR-4.19.21
Trades executed within the framework of
market making agreement must not create artificial change in thesecurities price with respect to the market trend, or hamper themarket's normal operations, or mislead other market participants.Added: January 2019
MIR-4.19.22
In the course of discharging its obligation to provide liquidity, the
market maker must trade in the official secondary market of thelicensed exchange orlicensed market operator and in accordance with the trading rules.Added: January 2019
MIR-4.19.23
Where a
licensed exchange orlicensed market operator allows for participation ofmarket maker during pre-opening period, amarket maker must ensure that its order during the pre-opening period does not have a material influence on thesecurities price.Added: January 2019
MIR-4.19.24
The
market maker and theissuer must at all times comply with the CBB law, rules and regulations on insider trading.Added: January 2019
MIR-4.19.25
Securities purchased or made available to themarket maker by theissuer cannot be allocated for other purposes before the completion of themarket making activity set forth in themarket making agreement .Added: January 2019
MIR-4.19.26
The
issuer must not engage, directly or indirectly, in any other trades in its ownsecurity while themarket making agreement is in force except for such transactions where theissuer has obtained necessary approvals from the CBB.Added: January 2019
MIR-4.19.27
For the purposes of MIR-4.19.26, market making activity must remain suspended in the following cases:
(a) From the date of the announcement of a takeover bid for theissuer's shares , up until the end of offer period; and(b) Duringshare repurchase programmes.Added: January 2019
MIR-4.19.28
The
issuer and/or themarket maker must comply with all other modules in Volume 6.Added: January 2019
MIR-4.19.29
Market makers failing to comply with the requirements of Section MIR-4.19 are subject to enforcement measures as outlined in Module MIE (Market Surveillance, Investigation and Enforcement).Added: January 2019
Reporting Requirements
MIR-4.19.30
In addition to the reporting obligations and disclosure requirements with regards to
securities to whichissuers are subject to, anissuer that enters into amarket making agreement must disclose the following by means of a public announcement as well as post it on its website:(a) Before themarket making agreement comes into force, the identity of themarket maker with which it has been arranged, the class ofsecurity and thelicensed exchange orlicensed market operator where the trades are to be made, the duration of the agreement, and the number ofsecurities and the amount allocated to thesecurities account and bank account, respectively.(b) Each month and when themarket making agreement is terminated, theissuer must disclose the transactions in ownsecurities made under themarket making agreement , detailing the total number of ownsecurities that were purchased and the total number of ownsecurities sold, the total amount of money paid and the total amount of money received, and the balance of thesecurities account and cash accounts at the end of the reporting period. The public announcement must be made within 10 days from the end of the reporting period.(c) In the event of termination of themarket making agreement , in addition to complying with the requirements of MIR-4.19.30(b), theissuer must disclose the termination immediately.Added: January 2019
MIR-4.19.31
An
issuer must submit, to the CBB, a copy of the signedmarket making agreement as well as all other public announcements referred to in Paragraph MIR-4.19.30.Added: January 2019
MIR-4.19.32
An
issuer must file themarket making agreement and obtain written approval from thelicensed exchange orlicensed market operator . The approval must be obtained prior to commencement ofmarket making activity.Added: January 2019
Termination of Market Making Agreement
MIR-4.19.33
Where an
issuer or amarket maker , regardless of the reason, intends to terminate themarket making activity with respect to theissuer's security , themarket maker must submit a written request and seek prior approval from thelicensed exchange orlicensed market operator .Added: January 2019
MIR-4.19.34
A
market maker , in the manner prescribed by the rules and regulations of thelicensed exchange orlicensed market operator , must by way of a public announcement inform themarket regarding the date of cessation ofmarket making activity in theissuer's security .Added: January 2019
MIR-4.19.35
The public announcement referred to in Paragraph MIR-4.19.34 must be made at least 30 days prior to the effective date of cessation of
market making activity. Themarket maker and theissuer must perform their respective obligations as specified in themarket making agreement during this 30 days period. In particular, themarket making activity must continue during the aforesaid period.Added: January 2019
Record Keeping
MIR-4.19.36
An
issuer and themarket maker must maintain separate records of all the information pertaining to transactions under themarket making agreement for a minimum period of 10 years.Added: January 2019
Disclosure to clients
MIR-4.19.37
Where a
member is registered asmarket maker , suchmember must disclose to its client the existence of themarket maker agreement entered into between the licensedmember and thelicensed exchange and written consent must be obtained from the client stating his awareness of themarket maker arrangement between themember and thelicensed exchange and that he has fully understood the potential risk and conflict of interest associated with such activities.Added: January 2019
Additional Market Making Rules for Equity Securities
Shareholders' Approval and Share Repurchase
MIR-4.19.38
In addition to the aforementioned rules specified under Section MIR4.19, an
issuer ofequity security must seek prior approval ofshareholders at a general meeting before entering into amarket making agreement .Added: January 2019
MIR-4.19.39
An
issuer may repurchase its own shares for the purpose ofmarket making after obtainingshareholders' approval.Added: January 2019
MIR-4.19.40
The maximum number of
shares that an issuer can repurchase for the purpose ofmarket making must not exceed 3% of the total issuedshares .Added: January 2019
MIR-4.19.41
The repurchase limit of 3% referred to in Paragraph MAE-4.19.40 must be included as part of the overall repurchase limit of 10% set out under TMA-4.1.8.
Added: January 2019
MIR-4.19.42
Where an issuer undertakes
share repurchase for the purpose ofmarket making , theissuer must ensure that theshare repurchase plan complies with the requirements of Module TMA (see Section TMA - 4.1).Added: January 2019
Material Rights of Shares Deposited in the Securities Account
MIR-4.19.43
Apart from the right to allocation of new
shares free of charge, all other material rights of theshares deposited in thesecurities account must remain suspended.Added: January 2019
MIR-4.19.44
The
issuer and themarket maker must ensure that the suspension of material rights referred to in Paragraph-4.19.43 is complied with, particularly with regards to dividend payments.Added: January 2019
Prior acquisition of shares to deposit in securities account
MIR-4.19.45
Where the
issuer does not depositshares into thesecurities account or deposits a number ofshares that is insufficient to enablemarket making operation to commence under the agreement, there should be an initial period during which themarket maker may only buyshares of theissuer until it attains the volume that is predetermined in themarket making agreement . Such acquisition should be for the sole purpose of enabling themarket maker to commence operations under themarket making agreement and they should be performed in theissuer's best interest but without interfering or hampering normal market operations and without misleading other market participants.Added: January 2019
MIR-4.19.46
The
shares acquired in the initial period should be deposited in thesecurities account referred to in Paragraph MIR-4.19.16.Added: January 2019
MIR-4.19.47
The
market maker should not sell any of theissuer's shares deposited in thesecurities account until the initial period concludes or until it attains the limits established in terms of number ofshares or value ofshares for the purpose of undertakingmarket making .Added: January 2019
MIR-4.19.48
Where the initial period concludes and the minimum initial balance of
shares in thesecurities account referred to in Paragraph MIR-4.19.16 has not been attained, theissuer and themarket maker may:a) Extend the initial period by a length of time not greater than the initially established period.a) Terminate the agreementb) Establish a lower number of sharesAdded: January 2019
MIR-5 MIR-5 Substantial Shareholding in a Licensed Member
MIR-5.1 MIR-5.1 Control of Substantial Shareholding in a Licensed Member
MIR-5.1.1
No
person shall enter into any agreement to acquire shares in a licensedmember by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of the licensedmember without first obtaining the approval of the CBB, to enter into the agreement.Amended: April 2013
Adopted January 2010MIR-5.1.2
In rule MIR-5.1.1 "substantial shareholder" means a
person who alone or together with his associates:(a) Holds not less than 5% of the shares in the licensedmember ; or(b) Is in aposition to control not less than 5% of the votes in the licensedmember .Amended: April 2013
Adopted January 2010MIR-5.1.3
In this section:
(a) Aperson holds a share if:1. He is deemed to have an interest in that share in terms of the CBB Law, rules and regulations; or2. He otherwise has a legal or a beneficial interest in that share, except such interest as is to be disregarded in the terms of the CBB Law, rules and regulations;(b) A reference to the control of a percentage of the votes in a licensedmember shall be construed as a reference to the control, whether direct or indirect, of that percentage of the total number of votes that might be cast in a general meeting of the licensedmember ; and(c) An associate of anotherperson means in respect of individuals, a direct family member and in the case of a company, means the company is bound to follow the directives of the substantial shareholder, or the company in which the substantial shareholder has 20% of the votes of that company.Amended: April 2013
Adopted January 2010MIR-5.1.4
The CBB may grant its approval referred to in rule MIR-5.1.1, subject to such conditions or restrictions as the CBB may think fit.
Adopted January 2010MIR-5.2 MIR-5.2 Application and Criteria for Approval to Acquire Substantial Shareholding
MIR-5.2.1
Any
person applying for approval under rule MIR-5.1.1 shall submit to the CBB a written application that sets out:(a) The name of the applicant;(b) In the case where the applicant is a company:1. Its place of incorporation;2. Its substantial shareholders;3. Itsdirector s andchief executive officer ; and4. Its principal business.(c) In the case where the applicant is a naturalperson :1. His nationality;2. His principal occupation; and3. His directorships;(d) All the companies in Bahrain or elsewhere, which the applicant has a substantial shareholding;(e) The percentage of shareholding and voting power that the applicant has in the licensedmember and/or in any other licensedmembers ;(f) The percentage of shareholding and voting power the applicant is seeking to have in the licensedmember ;(g) The reasons for making the application;(h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;(i) Whether the applicant will seek representation on the board ofdirectors of the licensedmember ; and(j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and properperson for the purposes of paragraph MIR-5.2.3 (a).Amended: April 2013
Adopted January 2010MIR-5.2.2
The CBB may require the applicant to furnish it with such information or documents as the CBB considers necessary in relation to the application and the applicant shall furnish such additional information or documents as required by the CBB.
Adopted January 2010MIR-5.2.3
The CBB may approve an application made under Paragraph MIR-5.2.1 if the CBB is satisfied that:
(a) The applicant is a fit and properperson to be a substantial shareholder;(b) Having regard to the applicant's likely influence, the licensedmember will or will continue to conduct its business prudently and in compliance with the provisions of the CBB Law, rules and regulations, and this Module; and(c) It would not be contrary to the interests of the public and market integrity to do so.Amended: April 2013
Adopted January 2010MIR-5.2.4
The CBB may, for the purposes of securing compliance with rule MIR-5.1.1 or paragraph MIR-5.2.2, or any condition or restriction imposed under rule MIR-5.2.5, by notice in writing direct the transfer or disposal of all or any of the shares of a licensed
member in which a substantial shareholder of the licensedmember has an interest. Thelicensed exchange and/orlicensed clearing house shall be notified of such extent.Amended: April 2013
Adopted January 2010MIR-5.2.5
Until a
person to whom a direction has been issued under paragraph MIR-5.2.4 transfers or disposes of the shares which are subject to the direction and notwithstanding anything to the contrary in the Memorandum and Articles of Association or other constituent documents of the licensedmember :(a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;(b) The licensedmember shall not offer or issue any shares (whether by way of rights, bonus share, dividend or otherwise) in respect of the shares which are the subject of the direction; and(c) Except in liquidation of the licensedmember shall not make any payment (whether by way of cash dividend, dividend in kind or otherwise) in respect of the shares which are the subject of the direction.Amended: April 2013
Adopted January 2010MIR-5.2.6
Any issue of shares by a licensed
member in contravention of rule MIR-5.2.5 (b) shall be deemed to be null and void, and aperson to whom a direction has been issued under paragraph MIR-5.2.4 shall immediately return those shares to the licensedmember , upon which the licensedmember shall return to theperson any payment received from him in respect of those shares.Amended: April 2013
Adopted January 2010MIR-5.2.7
Any payment made by a licensed
member in contravention of rule MIR-5.2.5 (c) shall be deemed to be null and void, and aperson to whom a direction has been issued under paragraph MIR-5.2.4 shall immediately return the payment he has received to the licensedmember .Amended: April 2013
Adopted January 2010MIR-5.2.8
The CBB may exempt:
(a) Anyperson or class ofpersons ; or(b) Any class or description of shares or interests in shares;from the requirement under paragraphs MIR-5.2.1 or MIR-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB in general, and where shares of the licensed
member are being listed in particular.Amended: April 2013
Adopted January 2010MIR-6 MIR-6 Control of a Licensed Member
MIR-6.1 MIR-6.1 Control of a Licensed Member
MIR-6.1.1
The CBB must be notified in any of the following cases:
(a) If effective control over a licensedmember takes place indirectly, whether by 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.The controller or the
person intending to take control over themember , and themember itself, if it is aware of such case, should notify the CBB as per rule MIR-6.1.3.Amended: April 2013
Adopted January 2010MIR-6.1.2
For the purposes of rule MIR-6.1.1, "control" means the right to appoint the majority of the
directors or to control the management or policy decisions exercisable by aperson orpersons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements, or in any other manner.Adopted January 2010MIR-6.1.3
Notice of control shall contain a request for the CBB's approval for taking control over a licensed
member or taking any action that may lead to control by submitting Form 2 and shall also contain such particulars and information and be accompanied by such documents as the CBB may specify. In the cases referred to in items (a) and (b) of rule MIR-6.1.1, the notice shall be made within 15 days from the date of control. In the case referred to in item (c) of rule MIR-6.1.1, the notice shall be made before taking any of the actions that would lead to control.Amended: April 2013
Adopted January 2010MIR-6.1.4
The CBB must, within 60 days from the date of receipt of the notice referred to above, notify the controller or the
person intending to take control over a licensedmember of its approval of control, any of the actions which would lead to control, or the refusal thereof as the CBB may determine at its own discretion, after consultation with theSRO .Amended: April 2013
Adopted January 2010MIR-6.1.5
The CBB may impose any restrictions that it considers necessary to be observed in case of its approval of control, or any of the actions that would lead to control.
Adopted January 2010MIR-6.1.6
If the period specified in rule MIR-6.1.4 lapses without a decision being taken on the application seeking approval of control, or any intended actions that would lead to control, the application shall be considered as accepted, unless the
SRO refuses such application within the specified period.Adopted January 2010MIR-6.1.7
The controller or the
person intending to take control over a licensedmember , may within 30 days of the notification, lodge a grievance against the CBB's decision to refuse the control or any conditions imposed in respect of such control.Amended: April 2013
Adopted January 2010MIR-6.1.8
The CBB shall decide on the grievance and notify the
person intending to take control over the licensedmember of its decision within 30 days from the date of submitting the grievance.Amended: April 2013
Adopted January 2010MIR-6.1.9
An appeal against a decision on control may be submitted within 30 days from the date when the concerned
person was aware of such decision.Adopted January 2010MIR-6.1.10
The CBB may refuse to give approval to control if it will affect the market integrity and interests of the investors or
clients , or if the CBB decides, according to its own discretion that it would be inappropriate to control a licensedmember according to the criteria set by the CBB.Amended: April 2013
Adopted January 2010MIR-6.1.11
Any
person who acquires control or shares in breach of the provisions of this Module shall carry out any instructions issued to him by the CBB to transfer such control or shares, or refrain from exercising control or voting rights according to the procedures prescribed in such instructions.Adopted January 2010MIR-6.1.12
The CBB may seek a court order to take appropriate precautionary measures or sell such shares if the
person(s) fails to carry out the order referred to above. The value of the shares sold shall be paid to the party who has rights therein after the deduction of expenses.Adopted January 2010MIR-6.1.13
A licensed
member shall not perform any of the following without prior written approval of the CBB:(a) Merge, amalgamate or enter into a partnership with anyperson in Bahrain or elsewhere, except in the ordinary course of business;(b) Transfer all or a major part of its assets or liabilities in Bahrain or elsewhere, without prejudice to the provisions of Chapter 6 (Articles 66, 67 & 68) of the CBB Law;(c) Make any modification to its issued or paid-up share capital;(d) Modify its Memorandum and Articles of Association;(e) Engage in major acquisition or investment operations as determined by the CBB.Amended: April 2013
Adopted January 2010MIR-6.1.14
The CBB, in granting any approval under rule MIR-6.1.13, may impose such conditions as it considers appropriate.
Adopted January 2010MIR-7 MIR-7 Business Transfer
MIR-7.1 MIR-7.1 Business Transfer
MIR-7.1.1
A licensed
member shall not transfer all or any part of its business related toregulated activities to others, without prior approval from the CBB.Amended: April 2013
Adopted January 2010MIR-7.1.2
A licensed
member who desires to transfer all or any part of its business referred to in rule MIR-7.1.1, shall make an application to the CBB in Form 5 (Approval for Business Transfer), as well as to thelicensed exchange and/orlicensed clearing house , as the case may be.Amended: April 2013
Adopted January 2010MIR-7.1.3
A Transfer of Business application referred to under paragraph MIR-7.1.2, shall be published in the Official Gazette and also in 2 daily newspapers, one in Arabic and one in English in Bahrain. The publication should include a call to the
SRO , or any concerned parties to submit any objections to the CBB within 60 days from the date of publication.Adopted January 2010MIR-7.1.4
The CBB shall consider the objections referred to in paragraph MIR-7.1.3 before taking any action on the application for transfer.
Adopted January 2010MIR-7.1.5
The following shall apply in order to approve a business transfer application:
(a) The business, subject of transfer, shall not be prohibited by the CBB;(b) The Transfer of Business shall not cause damage to the interests of themember's users andclients ;(c) The transferee must be licensed to carry out the business in the place to which it is to be transferred;(d) The transferee company should fulfil all the eligibility criteria laid down in this Module; and(e) The CBB must be satisfied that the Transfer of Business is appropriate under relevant regulations issued in this respect.Adopted January 2010MIR-7.1.6
The CBB shall give its approval to a Transfer of Business if the application satisfies the requirements set in rule MIR-7.1.5. Such approval may be given subject to any conditions deemed appropriate by the CBB.
Adopted January 2010MIR-7.1.7
The decision of the CBB on a Transfer of Business shall be published in the Official Gazette as well as in 2 daily newspapers, one in Arabic and one in English in Bahrain. The decision shall be effective from the date set therein.
Adopted January 2010MIR-7.1.8
An applicant whose application has been turned down or who faces restrictions regarding the transfer of his business may appeal to a competent court within 30 days from the date of publishing of such decision on the Official Gazette.
Adopted January 2010MIR-8 MIR-8 Listing of a Licensed Member
MIR-8.1 MIR-8.1 Listing of a Licensed Member
MIR-8.1.1
The shares of a licensed
member shall not be listed for quotation on alicensed exchange in Bahrain or elsewhere, without the CBB's prior approval.The CBB may not grant its approval where such listing may:
(a) Create possible conflicts of interest that may arise from such listing; and(b) When such listing may not ensure the market integrity.Amended: April 2013
Adopted January 2010MIR-9 MIR-9 Emergency Powers of the CBB
MIR-9.1 MIR-9.1 Emergency Powers of the CBB
MIR-9.1.1
Where the CBB has reason to believe that an emergency exists, or thinks that it is necessary or expedient in the interests of the public or a section of the public or for the protection of investors, the CBB may direct by notice in writing a licensed
member to take such action as it considers necessary to maintain or restore a fair, transparent and efficient market related to the trading, clearing, settlement and depository of anysecurities or futures contracts, or any class ofsecurities or futures contracts that are undertaken by any licensedmember .Amended: April 2013
Adopted January 2010MIR-9.1.2
Without prejudice to paragraph MIR-9.1.1, the actions with the CBB may direct a licensed
member to take include:(a) Terminating or suspending any function, or services related to theregulated activities undertaken by anymember ;(b) Ordering the liquidation of allpositions or part thereof, or the reduction of suchpositions related to suchmember ;(c) Set margin levels for transactions traded, cleared, or settled, or to be traded, cleared, or settled by or through suchmember to cater for the emergency;(d) Altering conditions of delivery of transaction cleared or settled, or to be cleared or settled through or by thatmember ;(e) Fixing the settlement price at which transactions undertaken by suchmember are to be liquidated;(f) Requiring margins or additional margins for transactions traded, cleared, or settled, or to be traded, cleared, or settled through or by suchmember ;(g) Modifying or suspending any transaction made by or through suchmember ;(h) Requiring anymember to act in a specified manner in relation to trading, clearing, settlement and depository insecurities or futures contracts, or any class ofsecurities or futures contracts.Amended: April 2013
Adopted January 2010MIR-9.1.3
In this section "emergency" means any threatened or actual market manipulation or disruption, and includes:
(a) Any act of any government affecting asecurities or commodity market;(b) Any majormarket disturbance which prevents the market from accurately reflecting the forces of supply and demand for suchsecurities or commodity; or(c) Any undesirable situation or practice which in the opinion of the CBB, constitutes an emergency;(d) Any threatened or actual market manipulation or disruption.Adopted January 2010MIR-9.1.4
The CBB may modify any action taken by a
licensed exchange ,licensed clearing house and/or licensedmember under Paragraph MIR-9.1.2, including the setting aside of that action.Amended: April 2013
Adopted January 2010CRA CRA Crypto-Asset
CRA-A CRA-A Introduction
CRA-A.1 CRA-A.1 Purpose
Executive Summary
CRA-A.1.1
The purpose of this Module is to provide the CBB's Directive concerning trading, dealing, advisory services, portfolio management services in
crypto-assets as principal, as agent, as custodian and as acrypto-asset exchange within or from the Kingdom of Bahrain. The key requirements relevant to these activities are outlined in this Module while thelicensees are also subject to other relevant Modules of the CBB Rulebook Volume 6. This Directive is supported by Article 44(c) of the Central Bank of Bahrain ('CBB') and Financial Institutions Law (Decree No. 64 of 2006) ('CBB Law').Amended: April 2023
Added: April 2019CRA-A.1.2
This Module must be read in conjunction with other parts of the Rulebook, mainly:
a) [This Subparagraph was deleted in 2023].b) High-level Controls (corporate governance);c) Market Intermediaries and Representatives;d) Anti-Money Laundering and Combating Financial Crime;e) Dispute Resolution, Arbitration and Disciplinary Proceedings;f) International Cooperation and Exchange of Information;g) Market Surveillance, Investigation & Enforcement;h) Prohibition of Market Abuse and Manipulation; andi) Training and Competency.Amended: April 2023
Added: April 2019Legal Basis
CRA-A.1.3
This Module contains the CBB's Directive (as amended from time-to-time) relating to
licensees providingregulated crypto-asset services (henceforth referred to aslicensees ) as defined in the Rulebook and is issued under the powers available to the CBB under Article 38 of the CBB Law.Licensees must also comply with the relevant Modules of the Rulebook Volume 6.Added: April 2019CRA-A.1.4
For an explanation of the CBB's Rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: April 2019CRA-A.2 CRA-A.2 Module History
CRA-A.2.1
This Module was first issued in February 2019. Changes made subsequently to this Module are annotated with the calendar quarter date in which the change was made as detailed in the table below. Chapter UG 3 provides further details on Rulebook maintenance and version control.
Module Ref. Change Date Description of Changes CRA-1.1.6(f) 04/2019 Amended sub-paragraph. CRA-1.1.6(g) 04/2019 Moved to sub-paragraph (f). CRA-1.6.3 04/2019 Added License fee table based on Category. CRA-1.6.10 04/2019 Amended Paragraph. CRA-1.2.19 10/2019 Changed from Rule to Guidance. CRA-1.2.20 10/2019 Changed from Rule to Guidance. CRA-1.2.21 10/2019 Changed from Rule to Guidance. CRA-1.4.1 10/2019 Changed from Rule to Guidance. CRA-B.1 01/2020 Added reference to cyber security risk. CRA-4.1.1 01/2020 Amended reference to CRA-4.1.1 (r). CRA-5.2.6-CRA-5.2.9 01/2020 Added new Paragraphs on the requirements of IT System Audit. CRA-5.3.6 01/2020 Removed “at least annually” for security tests. CRA-5.8 01/2020 Added these terms: Cyber Security Risk, Cyber Security Incident, Cyber Security Threats. CRA-5.8.19A 01/2020 Added a new Paragraph on requirements to submit a comprehensive report on cyber security incident. CRA-5.8.24 01/2020 Deleted Paragraph. CRA-5.8.25 01/2020 Deleted Paragraph. CRA-5.8.25A 01/2020 Added a new Paragraph on requirements for periodic assessments of cyber security threats. CRA-5.8.28-CRA-5.8.29 01/2020 Added new Paragraphs on the requirement for cyber security insurance. CRA-7.1.1 01/2020 Amended Paragraph. CRA-7.1.1A 01/2020 Added a new Paragraph on references to Module AML. CRA-7.1.2 01/2020 Deleted Paragraph. CRA-7.1.3 01/2020 Added clarification that simplified customer due diligence is not allowed. CRA-7.1.5 01/2020 Added a new Paragraph on reference to Module AML and removed transaction record details. Appendix-1 01/2020 Added reference to cyber security incident. Appendix-2 01/2020 Amended Mitigation and aggravating factors. CRA-4.1.1A 10/2020 Added a new Paragraph on Provision of Financial Services on a Non-discriminatory Basis. CRA-10.1.9 01/2022 Amended Paragraph on the submission of the written assessment of the observations/issues raised in the Inspection draft report. CRA-10.3.1 01/2022 Amended Paragraph on change in licensee corporate and legal name. CRA-10.3.2 01/2022 Amended Paragraph on change in licensee legal name. CRA-6.6 07/2022 Replaced Section with new Outsourcing Requirements. CRA 04/2023 Amended Module including a new Chapter on Digital Token Offerings and enhancements to cyber security requirements. CRA-5.9 10/2023 Added a new Section on cyber hygiene practices. Effective Date
CRA-A.2.2
The contents of this Module are effective from the date of release of the Module or the changes to the Module unless specified otherwise.
Amended: April 2023
Added: April 2019CRA-B CRA-B Scope of Application
CRA-B.1 CRA-B.1 Overview
CRA-B.1.1
The CBB has recognised that the market for
crypto-assets has been growing globally and people around the world and in Bahrain are currently dealing, buying, selling or otherwise holding positions incrypto-assets . The CBB's Rules are aimed at minimising the risk and, in particular, the risk of financial crime and illegal use ofcrypto-assets .Added: April 2019CRA-B.1.2
The Rules contained in this Directive cover licensing requirements, the conditions for the issuance and holding the CBB license, minimum capital requirements, measures to safeguard client or customer interests, technology standards and in particular the
cyber security risk management requirements, reporting, notifications and approval requirements, conduct of business obligations, prevention of market abuse and manipulation, enforcement and the powers under the CBB Law for inspections and access.Amended: January 2020
Added: April 2019CRA-B.1.3
The Rules additionally cover the regulatory framework governing the offerings of
digital tokens in/from the Kingdom of Bahrain. Pursuant to the authority of the CBB under Article (1) (definition of “securities”) of the CBB Law,digital tokens issued pursuant to this Module are considered assecurities .Added: April 2023CRA-B.1.4
Digital tokens have the potential to spur innovation and efficiency in capital raising or as investment opportunity and, as a result, the market fordigital token has been growing at a rapid pace. Whiledigital tokens may present a new way to raise capital, they also bring increased risk due to the underlying technologies upon which they are structured.Digital token offerings necessitate the classification of every offering as asecurity or otherwise, based on the features of the digital token.Added: April 2023CRA-B.1.5
Chapters CRA-1 to CRA-14 apply to Category 1, 2, 3 and 4
licensees offeringregulated crypto-asset services . Chapter CRA-15 contains applicable rules ondigital tokens and the requirements applicable todigital token advisors anddigital token issuers . The rules contained in Chapters CRA-1 to CRA-14 are not applicable todigital token issuers .Added: April 2023CRA-B.1.6
A
person that contravenes the provisions of this Module or other applicable Modules of the CBB Rulebook may be subject to enforcement actions in accordance with the provisions of the CBB Law.Added: April 2023CRA-1 CRA-1 Licensing
CRA-1.1 CRA-1.1 License for crypto-asset service
CRA-1.1.1
No person may market or undertake the activities, by way of business, within or from the Kingdom of Bahrain, comprised of
regulated crypto-asset services without obtaining a license from the CBB.Added: April 2019CRA-1.1.2
For the purposes of Paragraph 1.1.1, undertake the activities, by way of business means:
(a) Providing one or more of services specified in Paragraph CRA-1.1.6 for commercial gain;(b) Holding oneself out as willing and able to provide the services specified in Paragraph CRA-1.1.6; or(c) Regularly soliciting other persons to engage in providing the services specified in Paragraph CRA-1.1.6.Added: April 2019CRA-1.1.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: February 2019CRA-1.1.4
For the purpose of this Module, any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase, exchange, or otherwise acquire financial services in return for monetary payment or some other form of valuable consideration shall be considered "marketing" in accordance with Resolution No. (16) for the year 2012.
Added: April 2019CRA-1.1.5
The activities will be deemed to be undertaken 'within or from the Kingdom of Bahrain', if, for example, the person concerned:
(a) Is incorporated in the Kingdom of Bahrain;(b) Uses an address situated in the Kingdom of Bahrain for its correspondence; or(c) Directly solicits clients within the Kingdom of Bahrain.Added: April 2019Regulated Crypto-Asset Services
CRA-1.1.6
Regulated crypto-asset services means the conduct of any or any combination of the following types of activities:(a) Reception and Transmission of order: The reception from aclient of an order to buy and/or sell one or morecrypto-assets and the transmission of that order to a third party for execution.(b) Trading incrypto-assets as agent: Acting to conclude agreements to buy and/or sell for one or morecrypto-assets on behalf of theclients .(c) Trading incrypto-assets as principal: Trading against proprietary capital resulting in conclusion of transactions in one or morecrypto-assets .(d) Portfolio Management: Managingcrypto-assets belonging to a client and the arrangement for their management are such that thelicensee managing thosecrypto-assets has a discretion to invest in one or morecrypto-assets .(e) Crypto-asset Custodian: safeguarding, storing, holding, maintaining custody of or arranging on behalf of clients forcrypto-assets .(f) Investment Advice: Giving or offering, to persons in their capacity as investors or potential investors or as agent for an investors or potential investor, a personal recommendation in respect of one or more transactions relating to one or morecrypto-assets . A "personal recommendation" means a recommendation presented as suitable for theclient to whom it is addressed, or which is based on a consideration of the circumstances of that person, and must constitute a recommendation to buy, sell, exchange, exercise or not to exercise any right conferred by a particularcrypto-asset , or hold a particularcrypto-asset .(g) [This subparagraph was moved to CRA-1.1.6(f) in April 2019].(h) Crypto-asset exchange: means a crypto-asset exchange, licensed by the CBB and operating in or from the Kingdom of Bahrain, on which trading, conversion or exchange of:(i)crypto-assets for fiat currency or vice versa; and/or(ii)crypto-assets for anothercrypto-asset ,
may be transacted in accordance with the Rules of thecrypto-asset exchange .(i) Digital token advisor: advise and guide adigital token issuer on all matters relating to offering ofdigital tokens , trading ofdigital tokens as well as on the responsibilities and obligations of thedigital token issuer pursuant to the provisions of applicable law, rules and regulations.Amended: April 2023
Added: February 2019CRA-1.1.6A
Licensees intending to offerregulated crypto-asset services which were not included in its application for licence and/or additional services which are not part of theregulated crypto-asset services specified in Paragraph CRA-1.1.6, must seek the CBB’s prior written approval before offering the service.Licensees must provide the CBB with detailed description of the new services, the resources required and the operational framework for such service.Added: April 2023Exclusions
CRA-1.1.7
The following activities do not constitute
regulated crypto-asset services :(a) the creation of crypto assets;(b) the development, dissemination or use of software for the purpose of creating or mining a crypto asset;(c) a loyalty programme; or(d) any other activity or arrangement that is deemed by the CBB to not constitute undertakingregulated crypto-asset services .Amended: April 2023
Added: April 2019CRA-1.1.8
Depending on the type of
regulated crypto-asset services that a person wishes to undertake, applicants may seek to be licensed by the CBB under one of the following 4 categories of license:Added: April 2019Category 1
CRA-1.1.9
Category 1
licensees may undertake one or moreregulated crypto-asset service , as listed below:(a) Reception and transmission of orders;(b) Provide investment advice in relation tocrypto-assets .Amended: April 2023
Added: April 2019CRA-1.1.10
When undertaking the
regulated crypto-asset services listed under Rule CRA- 1.1.9, Category 1licensees :(a) Must not hold any client assets or client money;(b) Must refrain from receiving any fees or commissions from any party other than the client; and(c) Must not operate acrypto-asset exchange .Added: February 2019Category 2
CRA-1.1.11
Category 2
licensees may undertake one or moreregulated crypto-asset services , as listed below:(a) Trading incrypto-assets as agent;(b) Portfolio Management;(c) Crypto-asset custody;(d) Investment advice.Amended: April 2023
Added: April 2019CRA-1.1.12
When undertaking the
regulated crypto-asset services listed under Rule CRA- 1.1.11, Category 2licensees may hold or controlclient asset andclient money but must not deal from their own account ("dealing as principal") or operate acrypto-asset exchange .Added: February 2019Category 3
CRA-1.1.13
Category 3
licensees may undertake one or moreregulated crypto-asset services , as listed below:(a) Trading incrypto-assets as agent;(b) Trading incrypto-assets as principal;(c) Portfolio Management;(d) Crypto-asset custody;(e) Investment advice;(f) To act as a digital token advisor.Amended: April 2023
Added: April 2019CRA-1.1.14
When undertaking
regulated crypto-asset services listed under Rule CRA-1.1.13, Category-3licensees may hold or controlclient assets andclient money, may deal on their own account ("dealing as principal") but must not operate acrypto-asset exchange .Added: April 2019Category 4
CRA-1.1.15
Category 4
licensees may undertake one or moreregulated crypto-asset service , as listed below:(a) Operate a licensedcrypto-asset exchange ;(b) Crypto-asset custody service;(c) To act as adigital token advisor .Amended: April 2023
Added: April 2019CRA-1.1.16
Licensees offering crypto-asset exchange service (licensedcrypto-asset exchange ) must not execute client orders against proprietary capital, or engage in matched principal trading.Added: April 2019CRA-1.1.16A
Pursuant to Section CRA-15.4 (Trading and Settlement of Digital Tokens), licensees may undertake over-the-counter trading in
digital tokens which are issued in accordance with the requirements of Chapter CRA-15. The requirements of Paragraph CRA-1.1.16 are not applicable to trading indigital tokens provided the CBB has provided the licensee with an approval to trade thedigital token under the over-the-counter trading framework.Added: April 2023CRA-1.1.17
When undertaking the
regulated crypto-asset services listed under Rule CRA-1.1.15, Category-4licensees may hold or controlclient asset andclient money .Added: April 2019CRA-1.1.18
Persons wishing to be licensed to undertake the activities of
regulated crypto-asset services must apply in writing to the CBB in accordance with the requirements stipulated in CRA-1.2.Amended: April 2023
Added: April 2019CRA-1.1.19
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.1.20
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.1.21
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.1.22
Applicants seeking a
regulated crypto-asset service license must satisfy the CBB that they meet, by the date of grant of license, the minimum criteria for licensing, as contained in Chapter CRA-2. Once licensed, theregulated crypto-asset service licensee must continue to meet these criteria on an on-going basis.Added: April 2019CRA-1.1.23
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.1.24
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.1.25
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Combining Regulated Crypto-asset Services
Differentiation Between Intermediary Activity and Exchange Activity
CRA-1.1.26
Category-1, Category-2 and Category-3
crypto-asset licensees intending to operate solely as a broker and/or dealer for clients (intermediary service) are not permitted to structure their broking / dealing service or platform in such a way that it would be deemed as operating a market i.e. acrypto asset exchange . The CBB would consider features such as allowing for price discovery, displaying a public trading order book (accessible to any member of the public, regardless of whether they are clients), and allowing trades to automatically be matched using an exchange-type matching engine as characteristic of acrypto-asset exchange .Added: April 2023CRA-1.1.27
Category 1, Category 2 and Category 3
crypto-asset licensees should design and structure their operations, user interface, website, marketing materials and any public or client-facing information such that it does not create the impression that it is running a licensedcrypto asset exchange . In practice, category 1, category 2 and category 3 crypto-asset licensees must not:(a) Display any publicly-accessible information that may appear like a trading order book;(b) Provide for any price discovery; and(c) Give actual or potential clients the impression that they are interacting with a licensedcrypto-asset exchange .Added: April 2023CRA-1.2 CRA-1.2 Application for License
CRA-1.2.1
Applicants for a license must submit a duly completed Form 1 (Application for a License), under cover of a letter signed by an authorised signatory of the applicant marked for the attention of the Director, Licensing Directorate. The application must be accompanied by the documents listed in Rule CRA-1.2.4, unless otherwise directed by the CBB.
Added: April 2019CRA-1.2.2
This Paragraph was deleted in April 2023]
Deleted: April 2023
Added: April 2019CRA-1.2.3
References to applicant mean the proposed
licensee seeking a license. An applicant may appoint a representative — such as a law firm or professional consultancy — to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the licensing process, when seeking clarification of any issues.Added: April 2019CRA-1.2.4
Unless otherwise directed by the CBB, the following documents must be provided in support of the application for license:
(a) A duly completed Form 2 (Application for Authorisation of Shareholders) for each Shareholder of the proposedlicensee ;(b) A duly completed Form 3 (Application for Approved Person status), for each individual proposed to undertake a controlled function (as defined in Rule CRA-1.7.2) in the proposedlicensee ;(c) A comprehensive business plan for the application, addressing the matters described in Rule CRA-1.2.6;(d) [This Sub-Paragraph was deleted in April 2023].(e) A copy of the applicant's commercial registration certificate;(f) A certified copy of a Board resolution of the applicant, confirming its decision to seek a CBB crypto-asset service license;(g) In the case of applicants that are part of a group, a letter of non-objection to the proposed license application from the applicant's lead supervisor, together with confirmation that the group is in good regulatory standing and is in compliance with applicable supervisory requirements, including those relating to capital requirements;(h) [This Sub-Paragraph was deleted in April 2023].(i) [This Sub-Paragraph was deleted in April 2023].(j) In the case of applicants that are part of a group, copies of the audited financial statements of the applicant's group, for the three years immediately prior to the date of application;(k) In the case of applicants not falling under (j) above, copies of the audited financial statements of the applicant's substantial shareholder (where they are a legal person), for the three years immediately prior to the date of application; and(l) A copy of the applicant's memorandum and articles of association (in draft form for applicants creating a new company).(m) [This Sub-Paragraph was deleted in April 2023].Amended: April 2023
Added: April 2019CRA-1.2.5
The CBB, in its complete discretion may ask for a letter of guarantee from the applicant's controlling or major shareholders on a case by case basis as it deems appropriate/necessary as part of the required documents to be submitted pursuant to Paragraph CRA-1.2.4 above.
Amended: April 2023
Added: April 2019CRA-1.2.6
The business plan submitted in support of an application must include:
(a) An outline of the history of the applicant and its shareholders including the Ultimate Beneficiary Owners (UBO);(b) A description of the proposed, current, and historical business of the applicant, including detail on the products and services provided and to be provided, all associated websites addresses, the jurisdictions in which the applicant is engaged in business, the principal place of business, the primary market of operation and the projected customer base;(c) The reasons for applying for a license, including the applicant's strategy and market objectives;(cc) Details of the KYC and customer on-boarding process;(d) The proposed Board and senior management of the applicant and the proposed organisational structure of the applicant along with the proposed organization chart and the reporting lines;(dd) Detailed full business cycle flow from end to end of the business model;(e) An assessment of the risks that may be faced by the applicant, together with the proposed systems and controls framework to be put in place for addressing those risks and to be used for the main business functions;(f) An opening balance sheet for the applicant, together with a three-year financial projection, with all assumptions clearly outlined, demonstrating that the applicant will be able to meet applicable capital adequacy requirements;(g) Details of all banking arrangements for fund transfer as well as any other alternative form of arrangements for transfer of funds;(h) A copy of its business continuity plan; and(i) A description of the IT system that will be used, including details of how the IT system and other records will be backed up.Amended: April 2023
Added: April 2019CRA-1.2.7
The applicant's memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the license application, and must preclude the applicant from undertaking other regulated services, or commercial activities, unless these arise out of its
regulated crypto-asset services or are incidental to those.Added: April 2019CRA-1.2.8
All documentation provided to the CBB as part of an application for a license must be in either the Arabic or English languages. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof.
Added: April 2019CRA-1.2.9
Any material changes or proposed changes to the information provided to the CBB in support of a licensing application that occurs prior to licensing must be reported to the CBB.
Amended: April 2023
Added: April 2019CRA-1.2.10
Failure to inform the CBB of the changes specified in Rule CRA-1.2.9 is likely to be viewed as a failure to provide full and transparent disclosure of information, and thus a failure to meet licensing condition stipulated in Paragraph CRA-2.8.2.
Added: April 2019Licensing Process and Timelines
CRA-1.2.11
Articles 44 to 47 of the CBB Law govern the licensing process which stipulate that the CBB will issue its decision within 60 calendar days of an application being deemed complete (i.e. containing all required information and documents). By law, the 60 days' time limit only applies once the application is complete and all required information (which may include any clarifications requested by the CBB) and documents have been provided. This means that all the items specified in Rule CRA-1.2.4 have to be provided, before the CBB may issue a license.
Amended: April 2023
Added: April 2019CRA-1.2.12
The CBB recognises, however, that applicants may find it difficult to secure suitable senior management (refer CRA-1.2.4(b) above) in the absence of preliminary assurances regarding the likelihood of obtaining a license.
Added: April 2019CRA-1.2.13
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.2.14
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.2.15
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.2.16
Therefore, all potential applicants are strongly encouraged to contact the CBB at an early stage to discuss their plans, for guidance on the CBB's license categories and associated requirements. The Licensing Directorate would normally expect to hold at least one pre-application meeting with an applicant, prior to receiving an application.
Amended: April 2023
Added: April 2019CRA-1.2.17
Potential applicants should initiate pre-application meetings in writing, setting out a short summary of their proposed business and any issues or questions that they may have already identified, once they have a clear business proposition in mind and have undertaken their preliminary research. The CBB can then guide the applicant on the specific areas in the Rulebook that will apply to them and the relevant requirements that they must address in their application.
Added: April 2019CRA-1.2.18
An applicant must not hold himself out as having been licensed by the CBB, prior to the issuance of the CBB’s Resolution on granting the license. Failure to do so may constitute grounds for refusing an application and result in a contravention of Article 42 of the CBB Law (which carries a maximum penalty of BD 1 million).
Amended: April 2023
Added: April 2019Granting or Refusal of License
CRA-1.2.19
Should a license be granted, the CBB will notify the applicant in writing of the fact; the CBB will also publish its decision to grant a license in the Official Gazette and in two local newspapers (one published in Arabic, the other in English). The license may be subject to such terms and conditions as the CBB deems necessary for the additional conditions being met.
Amended: April 2023
Amended: October 2019
Added: February 2019CRA-1.2.20
The CBB may reject an application for a license if in its opinion:
(a) The requirements of the CBB Law or the Rulebook are not met;(b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potential clients.Amended: April 2023
Amended: October 2019
Added: April 2019CRA-1.2.21
Where the CBB intends to refuse an application for a license, it must give the applicant written notice to that effect. Applicants will be given a minimum of 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.
Amended: April 2023
Amended: October 2019
Added: February 2019CRA-1.2.22
Before the final approval is granted to a
licensee , a confirmation from a retail bank addressed to the CBB that the minimum capital, as specified in this Module, has been paid in must be provided to the CBB.Added: April 2019Readiness Assessment
CRA-1.2.23
Prior to commencement of operation, a
licensee must, after obtaining the CBB's prior written approval, appoint an independent third party to undertake a readiness assessment and submit a readiness assessment report.Added: April 2019CRA-1.2.24
The readiness assessment report must include the
licensee's risk management system, capital adequacy, organisational structure, operational manuals, information technology, information system security, policies and procedures and internal controls and systems.Added: April 2019CRA-1.2.25
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Commencement of Operations
CRA-1.2.26
Prior to commencement of operation the new
licensee must provide to the CBB (if not previously submitted):(a) The registered office address and details of premises to be used to carry out the business of the proposedlicensee ;(b) [This Sub-paragraph was deleted in April 2023];(c) Thelicensee's contact details including telephone and fax number, e-mail address and website;(d) [This Sub-paragraph was deleted in April 2023];(e) [This Sub-paragraph was deleted in April 2023];(f) A copy of the auditor's acceptance to act as auditor for the applicant;(g) A certificate from a retail bank operating in Bahrain certifying that the capital is deposited;(h) A copy of thelicensee's professional indemnity insurance policy;(i) A copy of the applicant's notarized memorandum and articles of association, addressing the matters described in Paragraph CRA-1.2.9;(j) A copy of the commercial registration certificate in Arabic and in English from the Ministry of Commerce, Industry and Tourism;(k) [This Sub-paragraph was deleted in April 2023];(l) Any other information as may be specified by the CBB;(m) A written confirmation, addressed to the CBB, from a licensed retail bank, stating that necessary banking arrangements, including opening of accounts (both corporate account and client money account) has been made by the applicant; and(n) Where thelicensee has entered into an agreement with a third party, other than a licensed bank, for the purpose of transfer of funds, a copy of the written agreement between thelicensee and the third party.Amended: April 2023
Added: April 2019CRA-1.2.27
Licensees must commence their commercial operations within 6 months of being granted a license by the CBB, failing which the CBB may cancel the license, in accordance with the provisions of the CBB Law.Amended: April 2023
Added: April 2019CRA-1.2.28
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.3 CRA-1.3 Cancellation or Amendment of License
Voluntary Surrender of a License
CRA-1.3.1
In accordance with Article 50 of the CBB Law,
licensees wishing to cease carrying out all the approved regulated services, must obtain the CBB's written approval, before ceasing their activities. All such requests must be made in writing to the Director, Capital Markets Supervision, setting out in full the reasons for the request and how the business is to be wound up.Amended: April 2023
Added: April 2019CRA-1.3.2
Licensees must satisfy the CBB that their clients' interests are to be safeguarded during and after the proposed cancellation.Added: April 2019CRA-1.3.3
The CBB will approve a request for cancellation of license by a licensee where there is no outstanding regulatory concerns and client interests would not be prejudiced. A voluntary surrender will only be allowed to take effect once the
licensee , in the opinion of the CBB, has discharged all its regulatory obligations towards clients.Amended: April 2023
Added: April 2019Cancellation of a License by the CBB
CRA-1.3.4
Pursuant to Article 48 (c) of the CBB Law, the CBB may cancel a license, for instance if a
licensee fails to satisfy any of its existing license conditions or in order to protect the legitimate interests of clients or creditors of thelicensee . The CBB generally views the cancellation of a license as appropriate only in the most serious of circumstances, and generally tries to address supervisory concerns through other means beforehand.Amended: April 2023
Added: April 2019CRA-1.3.5
The procedures for cancellation of a license are contained in Articles 48 and 49 of the CBB Law.
Amended: April 2023
Added: April 2019CRA-1.3.6
The CBB will only effect the cancellation once a
licensee has discharged all its regulatory responsibilities toclients . Until such time, the CBB will retain all its regulatory powers towards thelicensee and will direct thelicensee so that no newregulated crypto-asset services may be undertaken whilst thelicensee discharges its obligations to itsclients .Amended: April 2023
Added: April 2019Amendment to the scope of regulated services under the license or Amendment of the license
CRA-1.3.7
Licensees wishing to vary the scope of the regulated services under their existing license, whether by adding or ceasing some services, must obtain the CBB’s prior written approval. The CBB’s prior written approval must also be sought in relation to an amendment to the licensee’s license category.Added: April 2023CRA-1.4 CRA-1.4 Publication of the Decision to Grant, Cancel or Amend a License
CRA-1.4.1
In accordance with Articles 47 and 49 of the CBB Law, the CBB must 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.
Amended: October 2019
Added: February 2019CRA-1.4.2
For the purposes of Paragraph CRA-1.4.1, the cost of publication must be borne by the
Licensee .Added: April 2019CRA-1.4.3
The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.
Added: April 2019CRA-1.5 CRA-1.5 Licensing Application Fees
CRA-1.5.1
Applicants seeking a
regulated crypto-asset service 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.Added: April 2019CRA-1.5.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.6 CRA-1.6 Annual License Fees
CRA-1.6.1
Licensees must pay the relevant annual license fee to the CBB, on 1st December of the preceding year for which the fee is due.Added: April 2019CRA-1.6.2
The relevant fees are specified in Rule CRA-1.6.3 below. The fees due on 1st December are those due for the following calendar year, but are calculated on the basis of the firm's latest audited financial statements for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example), is calculated using the audited financial statements for 2012, assuming a 31st December year end. Where a
licensee does not operate its accounts on a calendar-year basis, then the most recent audited financial statements available are used instead.Added: April 2019CRA-1.6.3
The variable annual license fee payable by
licensees is 0.25% of their relevant operating expenses, subject to a minimum and maximum as per the table below:S1. No.Licensing CategoryMinimum Fees (BD)Maximum Fees (BD)1.Category-12,0006,0002.Category-23,0008,0003.Category-34,00010,0004.Category-45,00012,000Added: February 2019CRA-1.6.4
Relevant operating expenses are defined as the total operating expenses of the
licensee concerned, as recorded in the most recent audited financial statements available, subject to the adjustments specified in Rule CRA-1.6.5.Added: April 2019CRA-1.6.5
The adjustments to be made to relevant operating expenses are the exclusion of the following items from total operating expenses:
(a) Training costs;(b) Charitable donations;(c) CBB fees paid; and(d) Non-executive Directors' remuneration.Added: April 2019CRA-1.6.6
For the avoidance of doubt, operating expenses for the purposes of this Section, do not include items such as depreciation, provisions, interest expense, and dividends.
Added: April 2019CRA-1.6.7
The CBB would normally rely on the audited accounts of a
licensee as representing a true and fair picture of its operating expenses. However, the CBB reserves the right to enquire about the accounting treatment of expenses, and/or policies on intra-group charging, if it believes that these are being used artificially to reduce a license fee.Added: April 2019CRA-1.6.8
Licensees must complete and submit Form ALF (Annual License Fee) to the CBB, no later than 15th October of the preceding year for which the fees are due.Added: April 2019CRA-1.6.9
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 6 (Capital Markets) CBB Rulebook on the CBB Website.Added: February 2019CRA-1.6.10
For new
licensees , the first annual license fee is payable when the license is issued by the CBB. The amount payable is the minimum amount stipulated in Paragraph CRA-1.6.3 for each category of license.Added: April 2019CRA-1.6.11
For the first full year of operation, the
licensee would calculate its fee as the floor amount. For future years, thelicensee would submit a Form ALF by 15th October of the preceding year for which the fees are due and calculate its fee using its last audited financial statements (or alternative arrangements as agreed with CBB, should its first set of accounts cover an 18-month period).Added: April 2019CRA-1.6.12
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.
Added: April 2019CRA-1.6.13
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7 CRA-1.7 Approved Persons
General Requirements
CRA-1.7.1
Licensees must obtain the CBB's prior written approval in relation to any person wishing to undertake acontrolled function in alicensee . The approval from the CBB must be obtained prior to their appointment.Amended: April 2023
Added: April 2019CRA-1.7.2
Controlled functions are those functions occupied by board members and persons in executive positions and include:(a) Director;(b) Chief Executive or General Manager;(c) Head of function;(d) Chief Information Security Officer;(e) Compliance Officer; and(f) Money Laundering Reporting Officer (MLRO).Added: April 2019CRA-1.7.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.5
The CBB may grant an exemption from appointment of some of the
controlled functions contained in Paragraph CRA-1.7.2, provided thelicensee appoints at least the followingcontrolled functions (i) Directors, (ii) Chief Executive or General Manager, (iii) Compliance Officer and (iv) Money Laundering Reporting Officer.Amended: April 2023
Added: April 2019CRA-1.7.6
Pursuant to CRA-1.7.5, a
licensee seeking exemption from appointment of persons to specificcontrolled functions should provide in writing to the satisfaction of the CBB:(a) Nature, scale and complexity of their business and how performance of thecontrolled function to which no appointment is to be made will be managed;(b) Provide alternative arrangements which should ensure sound and prudent management and adequate consideration to the interest of clients and the integrity of the market; and(c) Confirmation that the individual entrusted with additional responsibilities pertaining to a controlled function is of sufficient good repute, possesses sufficient knowledge, skill and experience and ability to commit sufficient time to discharge the additional responsibility.Amended: April 2023
Added: April 2019Fit and Proper
CRA-1.7.7
Licensees seeking anapproved person authorisation for an individual, must satisfy the CBB that the individual concerned is ‘fit and proper’ to undertake thecontrolled function in question.Amended: April 2023
Added: April 2019CRA-1.7.8
Each applicant applying for
approved person status and those individuals occupyingapproved person positions must comply with the following conditions:(a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;(b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;(c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;(d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;(e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;(f) Must have personal integrity, good conduct and reputation;(g) Has appropriate professional and other qualifications for the controlled function in question. All persons proposed to undertake any controlled functions must meet the relevant examination and qualification requirements of the CBB.; and(h) Has sufficient experience to perform the duties of the controlled function.Amended: April 2023
Added: April 2019CRA-1.7.8A
In assessing the conditions prescribed in Paragraph CRA-1.7.8, the CBB will take into account the criteria contained in Paragraph CRA-1.7.8B. 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 acontrolled function with alicensee may not be considered to have sufficient expertise and experience to undertake nominally the samecontrolled function but in a much biggerlicensee .Added: April 2023CRA-1.7.8B
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:
(a) The propriety of a person’s conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;(b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;(c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;(d) Whether the person, or anybody corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;(e) The contravention of any financial services legislation;(f) Whether the person has ever been refused a license, authorisation, registration or other authority;(g) Dismissal or a request to resign from any office or employment;(h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;(i) The extent to which the person has been truthful and open with supervisors; and(j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.Added: April 2023CRA-1.7.8C
With respect to Paragraph CRA1.7.8B, 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.
Added: April 2023CRA-1.7.8D
Approved persons undertaking acontrolled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking acontrolled function .Added: April 2023CRA-1.7.8E
In determining where there may be a conflict of interest arising, factors that may be considered will include whether:
(a) A person has breached any fiduciary obligations to the licensee or terms of employment;(b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensee and its clients; and(c) A person has failed to declare a personal interest that has a material impact in terms of the person’s relationship with the licensee.Added: April 2023Prior Approval Requirements and Process
CRA-1.7.8F
An application for approval for a person occupying a
controlled function under Paragraph CRA-1.7.2 must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person Status) and Curriculum Vitae after verifying that the information in the Form 3, including previous experience is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms CRA Forms of the CBB Rulebook.Added: April 2023CRA-1.7.8G
When the request for
approved person status forms part of a license application, it must be marked for the attention of the Director, Licensing and Policy Directorate. When the submission to undertake acontrolled function is in relation to an existinglicensee , except if dealing with a MLRO, it must be marked for the attention of the Director, Capital Markets Supervision Directorate. In case of the MLRO, Form 3 must be marked for the attention of the Director, Compliance Directorate.Added: April 2023CRA-1.7.8H
When submitting the Forms 3,
licensees must ensure that the Form 3 is:(a) Submitted to the CBB with a covering letter signed by an authorised representative of thelicensee , seeking CBB approval;(b) Submitted in original form;(c) Submitted with a certified copy of the applicant’s passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and(d) Signed by an authorised representative of thelicensee and all pages stamped with thelicensee’s seal.Added: April 2023CRA-1.7.8I
Licensees seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders’ meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders’ rights to refuse those put forward for election/approval.Added: April 2023CRA-1.7.8J
For existing
licensees applying for the appointment of a Director or the Chief Executive/General Manager, the authorised representative should be the Chairman of the Board or a Director signing on behalf of the Board. For all other controlled functions, the authorised representative should be the Chief Executive/General Manager.Added: April 2023Assessment of Application
CRA-1.7.8K
The CBB shall review and assess the application for approved person status to ensure that it satisfies all the conditions required in Paragraph CRA-1.7.8 and the criteria outlined in Paragraph CRA-1.7.8B.
Added: April 2023CRA-1.7.8L
For purposes of Paragraph CRA-1.7.8I,
licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.Added: April 2023CRA-1.7.8M
The CBB reserves the right to refuse an application for
approved person status if it does not satisfy the conditions provided for in Paragraph CRA-1.7.8 and the criteria outlined in Paragraph CRA-1.7.8B. A notice of such refusal is issued to thelicensee concerned, setting out the basis for the decision.Added: April 2023Appeal Process
CRA-1.7.8N
Licensee or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB’s decision to refuse the application forapproved person status. The CBB shall decide on the appeal and notify thelicensee of its decision within 30 calendar days from submitting the appeal.Added: April 2023CRA-1.7.8O
Where notification of the CBB’s decision to grant a
person approved person status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents,licensees or the nominated approved persons may appeal to the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify thelicensee of its decision within 30 calendar days from the date of submitting the appeal.Added: April 2023Notification Requirements and Process
CRA-1.7.9
Licensees must promptly notify the CBB in writing when a person undertaking acontrolled function will no longer be carrying out that function together with an explanation as to the reasons for not undertaking thecontrolled function . In such cases, theirapproved person status is automatically withdrawn by the CBB. If acontrolled function falls vacant, thelicensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, thelicensee must make immediate interim arrangements to ensure continuity of the duties and responsibilities of thecontrolled function affected, provided that such arrangements do not pose a conflict of duties. These interim arrangements must be approved by the CBB.Amended: April 2023
Added: April 2019CRA-1.7.10
The notification should identify if the planned move was prompted by any concerns over the person concerned, or is due to a routine staff change, retirement or similar reason.
Added: April 2019CRA-1.7.10A
Licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved person.Added: April 2023Amendment of Authorisation
CRA-1.7.10B
Licensees must seek prior CBB approval before anapproved person may move from onecontrolled function to another within the samelicensee .Added: April 2023CRA-1.7.10C
For the purposes of Paragraph CRA-1.7.10B, a new application should be completed and submitted to the CBB. A person may be considered ‘fit and proper’ for one
controlled function , but not for another, if for instance the new role requires a different set of skills and experience.Added: April 2023Cancellation of Approved Person Status
CRA-1.7.11
The CBB may also move to declare someone as not 'fit and proper', in response to significant compliance failures or other improper behaviour by that person.
Amended: April 2023
Added: April 2019CRA-1.7.12
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.13
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.14
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.15
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.16
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.17
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-1.7.18
Where a firm is in doubt as to whether a function should be considered a
controlled function it must discuss the case with the CBB.Added: April 2019CRA-1.7.19
Licensees must designate an employee, of appropriate standing and resident in Bahrain, as compliance officer. The duties of the compliance officer include:(a) Having responsibility for oversight of thelicensee's compliance with the requirements of the CBB; and(b) Reporting to thelicensee's Board in respect of that responsibility.Added: April 2019CRA-2 CRA-2 Licensing Condition
CRA-2.1 CRA-2.1 Condition 1: Legal Status
CRA-2.1.1
The legal status of a licensed
crypto-asset service licensee must be:(a) For undertaking Category-1, Category-2 and Category-3 regulatedcrypto-asset services (i) A Bahraini company with limited liability ("W.L.L."); or(ii) A Bahraini joint stock company (B.S.C.); or(iii) [This Subparagraph was deleted in April 2023].(b) For undertaking Category-4 regulatedcrypto-asset services (Licensed crypto-asset exchange)(i) A Bahraini joint stock company (B.S.C.); or(ii) [This Subparagraph was deleted in April 2023].Amended: April 2023
Added: April 2019CRA-2.1.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-2.2 CRA-2.2 Condition 2: Mind and Management
CRA-2.2.1
Licensees must have designated place of business within the Kingdom of Bahrain.Licensees with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom.Amended: April 2023
Added: April 2019CRA-2.2.2
The CBB requires the following
approved persons occupyingcontrolled functions must be resident in Bahrain:(a) Chief Executive Officer or General Manager;(b) Compliance Officer;(c) Money Laundering Reporting Officer;(d) Head of Finance;(e) Head of Risk Management;(f) Head of Operations; and(g) Chief Information Security Officer.Amended: April 2023
Added: April 2019CRA-2.2.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-2.3 CRA-2.3 Condition 3: Substantial Shareholders
CRA-2.3.1
Licensees must satisfy the CBB that their substantial shareholders are suitable and pose no undue risks to thelicensee .Added: April 2019CRA-2.3.2
For the purposes of this Module "substantial shareholder" means a person who alone or together with his associates:
(a) Holds not less than 5% of the shares in thelicensee ; or(b) Is in a position to control not less than 5% of the votes in thelicensee .Added: April 2019CRA-2.4 CRA-2.4 Condition 4: Board and Employees
CRA-2.4.1
As per Article 65(a) of the CBB law, those nominated to carry out
controlled functions must satisfy CBB'sapproved person's requirements.Added: April 2019CRA-2.4.2
The definition of
controlled functions as well as the CBB’sapproved person requirements are contained in Section CRA-1.7.Amended: April 2023
Added: April 2019CRA-2.4.3
The
licensee's staff must collectively provide a sufficient range of skills and experience to manage the affairs of thelicensee in a sound and prudent manner.Licensees must ensure their employees meet any training and competency requirements specified by the CBB.Added: April 2019CRA-2.5 CRA-2.5 Condition 5: Financial Resources
CRA-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 always equal or exceed the minimum requirements contained in Chapter CRA-3.Amended: April 2023
Added: April 2019CRA-2.5.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-2.5.3
The CBB, in its complete discretion may ask for a guarantee from the potential licensee’s (applicant’s) controlling or major shareholders or the ultimate beneficiaries on a case by case basis as it deems appropriate/necessary as part of the required documents to be submitted as mentioned in Paragraph CRA-1.2.4.
Added: April 2023CRA-2.6 CRA-2.6 Condition 6: Systems and Controls
CRA-2.6.1
Licensees must maintain systems and controls that are adequate for the scale and complexity of their activities. These systems and controls, at a minimum, must meet the requirements contained in Chapter CRA-5 (Technology Governance and Cyber Security), Chapter CRA-6 (Risk Management) and the requirements of Module HC (High-level Controls) of the CBB Rulebook Volume 6.Amended: April 2023
Added: February 2019CRA-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 must ensure that no single individual has control over all stages of a transaction.Added: April 2019CRA-2.6.3
Licensees must maintain systems and controls that are adequate to address the risks of financial crime occurring in thelicensee . These systems and controls must meet the minimum requirements contained in Module AML of the CBB Rulebook Volume 6.Amended: April 2023
Added: February 2019CRA-2.6.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-2.6.5
Licensees must, in connection with anyclient assets received in the course of their business, establish and maintain separate client accounts, segregated from those used for their own funds, as specified in Section CRA-4.5.Amended: April 2023
Added: February 2019CRA-2.6.6
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-2.6.7
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: February 2019CRA-2.7 CRA-2.7 Condition 7: External Auditor
CRA-2.7.1
Pursuant to Article 61 of the CBB Law,
Licensees must appoint external auditors, subject to prior CBB approval.Licensees must comply with the minimum requirements regarding auditors contained in Section CRA-4.2.Amended: April 2023
Added: February 2019CRA-2.7.2
Applicants must submit details of their proposed external auditor to the CBB as part of their license application.
Added: April 2019CRA-2.8 CRA-2.8 Condition 8: Other Requirements
Books and Records
CRA-2.8.1
Licensees must maintain comprehensive books of accounts and other records, which must be available for inspection within the Kingdom of Bahrain by the CBB, or persons appointed by the CBB, at any time.Licensees must ensure that all relevant books and other information, as may be required by the CBB, are kept for a minimum period of 10 years.Amended: April 2023
Added: February 2019General Conduct
CRA-2.8.2
Licensees must conduct their activities in a professional and orderly manner, in keeping with good market practice standards.Licensees must comply with the general standards of business conduct as well as the standards relating to treatment ofclients contained in Chapter CRA-4 and CRA-12.Added: April 2019Additional Conditions
CRA-2.8.3
Licensees must comply with any other specific requirements or restrictions imposed by the CBB on the scope of their license.Added: April 2019CRA-2.8.4
In addition, the CBB may vary existing requirements or impose additional restrictions or requirements, beyond those already specified for
licensees , to address specific risks.Added: April 2019CRA-3 CRA-3 Minimum Capital Requirement
CRA-3.1 CRA-3.1 General Requirements
Obligation to Maintain Adequate Capital
CRA-3.1.1
Licensees are required to ensure that the minimum capital is paid into a retail bank licensed to operate in the Kingdom of Bahrain. They must provide, upon request, evidence to the CBB of the deposited amount.Amended: April 2023
Added: April 2019CRA-3.1.2
The minimum capital requirement comprising of paid-up share capital, unimpaired by losses, for respective category of
licensees are indicated in the table below:Minimum Capital Requirement
Sl. No. Licensing Category Minimum Capital (BD) 1. Category-1 25,000 2. Category-2 100,000 3. Category-3 200,000 4. Category-4 300,000 Added: April 2019CRA-3.1.3
In addition to the minimum capital requirements specified in CRA-3.1 onwards, the CBB may, at its discretion, require
licensees to hold additional capital in an amount and form as the CBB determines, should this be necessary (in the CBB's view) to ensure the financial integrity of thelicensee and its ongoing operations.Added: April 2019CRA-3.1.4
For the purposes of determining the additional amount of capital that must be maintained by a
licensee , the CBB may consider a variety of factors, including but not limited to:(a) the composition of thelicensee's total assets, including the position, size, liquidity, risk exposure, and price volatility of each type of crypto asset;(b) the composition of thelicensee's total liabilities, including the size and repayment timing of each type of liability;(c) the actual and expected volume of thelicensee's crypto asset business activity;(d) the liquidity position of thelicensee ;(e) the types of products or services to be offered by thelicensee ;(f) there is a change in the business of thelicensee that the CBB considers material;(g) thelicensee is exposed to risk or elements of risks that are not covered or not sufficiently covered by the minimum capital requirement;(h) the prudential valuation of the trading book is insufficient to enable thelicensee to sell or hedge out its position within a short period without incurring material losses under normal market conditions; and(i) thelicensee fails to establish or maintain an adequate level of additional capital to ensure that (i) cyclical economic fluctuations do not lead to a breach of the minimum capital requirement; or (ii) the capital requirement can absorb the potential losses and risks.Amended: April 2023
Added: April 2019CRA-3.1.5
In the event that a
licensee fails to meet any of the requirements specified in this Section, it must, on becoming aware that it has breached the minimum capital requirements, immediately notify the CBB in writing. Unless otherwise directed, thelicensee must in addition submit to the CBB, within 30 calendar days of its notification, a plan demonstrating how it will achieve compliance with these requirements.Added: April 2019CRA-3.2 CRA-3.2 Key Requirements
CRA-3.2.1
Licensees dealing incrypto assets as principal and thereby taking proprietary positions incrypto assets must ensure that their proprietary positions (at cost) do not exceed 50% of the paid-up capital or net shareholders' equity, whichever is lower.Amended: April 2023
Added: April 2019CRA-3.2.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-3.2.3
Pursuant to Article 57(a) of the CBB Law, a
licensee must seek CBB approval before making any modification to its issued or paid-up capital. In the case that alicensee has been granted approval to increase its paid-up capital, confirmation from its external auditor stating that the amount has been deposited in thelicensee's bank account will subsequently be required.Amended: April 2023
Added: April 2019CRA-3.3 CRA-3.3 Additional Requirements
CRA-3.3.1
A
licensee's liquid assets must be held in a form acceptable to the CBB, in a minimum amount of three months estimated expenditures including salaries, rent, general utilities and other operating costs.Added: April 2019CRA-3.3.2
Liquid assets comprise of cash, cash equivalents, and placements or deposits maturing within 30 days.
Added: April 2019CRA-4 CRA-4 Business Standards and Ongoing Obligations
CRA-4.1 CRA-4.1 General Obligations
CRA-4.1.1
In the course of undertaking
regulated crypto-asset services , alicensee must:(a) Ensure that the regulated activities are undertaken in a fair, orderly and transparent manner;(b) Manage any risks associated with its business and operations prudently;(c) Not act contrary to the interests of its clients and its investors;(d) Maintain proper arrangements to enforce compliance with the CBB Law, Rules and Regulations and develop, implement and adhere to a “crypto-asset compliance policy”, tailored to meet specific crypto-asset services requirements. The crypto asset compliance policy must reflect a clear comprehension and understanding of compliance responsibilities with respect tocrypto-assets ;(e) Act with due skill, care and diligence in all dealings withclients ;(f) Identifyclients ' specific requirements in relation to the services about which they are enquiring;(g) Provide sufficient information to enableclients to make informed decisions when purchasing services offered to them;(h) Provide sufficient and timely documentation toclients to confirm that their transaction arrangements are in place and provide all necessary information about their rights and responsibilities;(i) Maintain fair treatment ofclients through the lifetime of theclient relationships, and ensure thatclients are kept informed of important events and are not mislead;(j) Ensure complaints fromclients are dealt with fairly and promptly;(k) Take appropriate measures to safeguard any money andcrypto-assets handled on behalf ofclients and maintain confidentiality ofclient information;(l) Use or arrange to use a well-designed Business Continuity Plan and Disaster Recovery Plan;(m) Ensure that all its employees or representatives are provided with the required education, qualifications and experience and they fully understand the Rules and regulations of the CBB;(n) Ensure that there are sufficient and appropriate records, books and systems in place to record all transactions and maintain an audit trail;(o) Have an operating manual and internal policies;(p) Provide to the CBB, for its review and comment, the draft agenda at least 5 business days prior to, the shareholders' meetings (i.e. ordinary and extraordinary general assembly);(q) Ensure that any agenda items to be discussed or presented during the course of meetings which requires the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;(r) Invite a representative of the CBB to attend any shareholders' meeting that will take place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and(s) Within one month of any shareholders' meetings referred to in Paragraph CRA-4.1.1(p), provide to the CBB a copy of the minutes of the meeting.(t) [This Subparagraph was deleted in April 2023].Amended: April 2023
Amended: January 2020
Added: April 2019CRA-4.1.1A
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.Added: October 2020CRA-4.1.2
A
licensee must establish and document keyman risk management measures that include arrangements in place should individuals holding encryption keys or passcodes to stored assets, including wallets, or information be unavailable unexpectedly due to death, disability or other unforeseen circumstances.Amended: April 2023
Added: April 2019CRA-4.1.3
A
licensee must ensure that it maintains no encrypted accounts that cannot be retrieved in the future for any reason. It must also advise its clients who maintain wallets with firms outside Bahrain (i.e. not CBB licensees) and not licensed by the CBB about any associated risks.Amended: April 2023
Added: April 2019CRA-4.1.4
Licensees must use appropriate technology and wherever appropriate third-party services to identify the situations referred to below, and other additional mitigating or preventive actions as necessary to mitigate the money laundering and terror financing risks involved. The situations include amongst others:(a) The use of proxies, any unverifiable or high-risk IP geographical locations, disposable email addresses or mobile numbers, or frequently changing the devices used to conduct transactions; and(b) Transactions involving tainted wallet addresses such as “darknet” marketplace transactions and those involving tumblers.Added: April 2023CRA-4.1.5
Licensees must establish and maintain adequate and effective systems and processes, including suspicious transaction indicators to monitor transactions with a client or counterparty involvingcrypto- assets and conduct appropriate enquiry and evaluation of potentially suspicious transactions identified. In particular:(a) Identify transactions with wallet addresses or their equivalent which are compromised or tainted; and(b) Employ technology solutions which enable the tracking ofcrypto-assets through multiple transactions to more accurately identify the source and destination of thesecrypto- assets .Added: April 2023CRA-4.1.6
For the purposes of CRA-4.1.5(a), a wallet address is compromised or tainted where there is reasonable suspicion that it is used for the purpose of conducting fraud, identity theft, extorting ransom or any other criminal activity.
Added: April 2023Suitability and Appropriateness Assessment for Retail Clients
CRA-4.1.7
Licensees , prior to offering portfolio management service, investment advice or complex products such as but not limited to derivative products, margin or leverage products or products with features that may make it difficult for a retail investor to understand the essential characteristics of the product and its risks (including the pay-out structure and how the product may perform in different market and economic conditions), must undertake a suitability and appropriateness assessment for retail clients (investors other thanaccredited investors ) to determine the suitability and appropriateness of crypto-assets products and services for retail clients.Licensees must gather sufficient information from every retail client to be in a position to decide whether the crypto-asset product and/or services are suitable and appropriate for the client.Added: April 2023CRA-4.1.8
Licensees may seek the following information for the purposes of suitability and appropriateness assessment:(a) Client’s knowledge and experience:(i) the types of investment services and transaction which the client is familiar with;(ii) the nature, volume and frequency of the client’s transactions with trading and investments; and(iii) the level of education, profession or (if relevant) former profession of the client.(b) Client’s financial situation:(i) the source and extent of the client’s regular income;(ii) the client’s assets, including liquid assets, investments and real property;(iii) the client’s regular financial commitments;(iv) the ability to bear losses.(c) Client’s investment objective:(i) the client’s investment horizon;(ii) the client’s risk preferences, risk profile and risk tolerance; and(iii) the purposes of the investment.Added: April 2023Transaction with Unknown Counterparties
CRA-4.1.9
A
licensee should take reasonable measures to avoid transactions with another crypto-asset entity, infrastructure or service provider where the counterparty is unknown or anonymous (e.g., via certain peer to peer or decentralised exchanges) at any stage of its business process.Added: April 2023CRA-4.2 CRA-4.2 Auditors and Accounting Standards
CRA-4.2.1
Licensees must appoint external auditor for its accounts for every financial year. While appointing an auditor,licensees must exercise due skill, care and diligence in the selection and appointment of the auditor and must take into consideration the auditor’s experience and track record of auditingcrypto-asset related businesses.Amended: April 2023
Added: April 2019CRA-4.2.1A
In accordance with Article 61(b) of the CBB Law, if a licensee fails to appoint an auditor within four months from the beginning of the financial year, the CBB shall appoint such auditor.
Added: April 2023CRA-4.2.1B
The
licensee must pay the fees of the auditor regardless of the manner in which such auditor is appointed.Added: April 2023CRA-4.2.1C
An auditor must not be the chairman or a director in the
licensee’s board or a managing director, agent, representative or taking up any administrative work therein, or supervising its accounts, or a next of kin to someone who is responsible for the administration or accounts of alicensee , or having an extraordinary interest in a licensee.Added: April 2023CRA-4.2.1D
If any of the circumstances referred to in rule CRA-4.2.1C occurs after the appointment of the auditor, the
licensee must appoint another external auditor.Added: April 2023CRA-4.2.1E
Licensees must provide the external auditor with all information and assistance necessary for carrying out his duties.Added: April 2023CRA-4.2.1F
The duties of the external auditor must include the preparation of a report on the final accounts. The report must contain a statement on whether the licensee’s accounts are correct and reflect the actual state of affairs of the
licensee according to the auditing standards prescribed by the CBB, and whether thelicensee has provided the auditor with all required information and clarifications.Added: April 2023CRA-4.2.1G
The final audited accounts must be presented to the general meeting of the licensee together with the auditor’s report. A copy of these documents must be sent to the CBB at least 15 days before the date of the general meeting.
Added: April 2023CRA-4.2.2
Audited financial statements of a
licensee must be prepared in accordance with the International Financial Accounting Standards (IFRS) or AAOIFI standards as appropriate.Added: April 2019Annual Audited Financial statements
CRA-4.2.3
Licensees must submit to the CBB their annual audited financial statements no later than 3 months from the end of thelicensee's financial year. The financial statements must include the statement of financial position (balance sheet), the statements of income, cash flow and changes in equity and where applicable, the statement of comprehensive income.Added: April 2019Annual Report
CRA-4.2.4
Licensees must submit a soft copy (electronic) of their full annual report to the CBB within 4 months of the end of their financial year.Amended: April 2023
Added: April 2019Reviewed (Unaudited) Quarterly Financial Statements
CRA-4.2.5
Licensees must submit to the CBB unaudited quarterly financial statements (in the same format as their Annual Audited Accounts), reviewed by thelicensee’s external auditor, on a quarterly basis within 45 calendar days from the end of each of the first 3 quarters of their financial year.Added: April 2023CRA-4.3 CRA-4.3 Listing of Crypto-assets
CRA-4.3.1
This section outlines the frameworks, criteria and obligations for listing of crypto-assets by a
licensee .Amended: April 2023
Added: April 2019CRA-4.3.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.3.2A
Licensees are allowed to undertake spot trading (spot market) incrypto-assets .Added: April 2023CRA-4.3.2B
The CBB may, at its sole discretion, allow a
licensee to list and conduct trading activities in derivatives ofcrypto-assets such as, but not limited to, futures, options, indices, contract for difference (CFD’s), swaps etc provided the CBB is satisfied that thelicensee has a comprehensive derivative transactions risk management framework. The aforementioned risk management framework should provide appropriate measure to mitigate, amongst others, market risk, credit risk, liquidity risk, settlement risk, operational risk and legal risk. In addition, the derivative transaction risk management framework should also include guidelines for stress testing, back testing, settlement process, margin methodology, derivative product selection policy, client exposure limit and suitability and appropriateness policy.Added: April 2023CRA-4.3.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.3.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.3.5
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Crypto-asset Listing Policy
CRA-4.3.6
Licensees must establish and adopt a board approvedcrypto-asset listing policy in accordance with the framework stipulated in this Section.Added: April 2023CRA-4.3.7
Licensees must, prior to commencement of business operations, provide a copy of thecrypto-asset listing policy to the CBB. Unless the CBB raises specific concerns with respect to the board approvedcrypto-asset listing policy,licensees may implement the policy and self-certifycrypto-assets for listing on its platform.Added: April 2023CRA-4.3.8
Prior to listing a
crypto-asset , alicensee must notify the CBB of its intent to list thecrypto-asset , provide the findings of the risk assessment undertaken in accordance with Paragraph CRA- 4.3.14 along with the board resolution approving thecrypto-asset . Thelicensee must confirm in its notification to CBB that the proposed newcrypto-asset complies with the requirements of itscrypto-asset listing policy.Added: April 2023CRA-4.3.9
Licensees must provide a list of all thecrypto-assets listed on its platform no later than 10 days from the end of each quarter.Added: April 2023CRA-4.3.10
The
crypto-asset listing policy referred to in Paragraph CRA-4.3.6 must include robust procedures that comprehensively address all steps involved in the review and approval of crypto-assets.Licensees must have necessary monitoring capability (e.g. via monitoring systems, internal monitoring control, on-chain analysis etc.) in place before listing of thecrypto-asset on its platform.Added: April 2023CRA-4.3.11
The
crypto-asset listing policy should help establish a mechanism for approval of acrypto-asset only if thelicensee unambiguously concludes that the listing and trading of thecrypto-asset is consistent with the CBB’s approach to establish a fair, transparent and orderly crypto-asset market, complies with applicable laws, rules and regulations and is not detrimental to the interest of the market or client.Added: April 2023CRA-4.3.12
Licensees must not listcrypto-assets that facilitate or may facilitate the obfuscation or concealment of the identity of a client or counterparty orcrypto-assets that are designed to, or substantially used to circumvent laws and regulations.Licensees must ensure that they only listcrypto-assets to which they have in place the necessary AML monitoring capabilities.Added: April 2023CRA-4.3.13
Licensees must ensure that:(a) Decisions to approve or disapprove each newcrypto-asset is taken in accordance with the crypto-asset listing policy;(b) Any actual or potential conflicts of interest in connection with the review and decision-making process have been assessed and effectively addressed, whether such actual or potential conflicts of interest are related to thelicensee’s board members, shareholders employees, their families, or any other party;(c) Records are readily available for the CBB’s review, of thecrypto-asset listing policy’s application to eachcrypto-asset . This includes the final approval for listing of acrypto-asset , the documents reviewed including an assessment of all associated material risks in connection with eachcrypto-asset approval or disapproval, such as reviews and sign-offs by various departments of thelicensee , such as the legal, compliance, cybersecurity, and operations department etc.;(d) Thecrypto-asset listing policy is reviewed annually to ensure that it continues to properly identify, assess, and mitigate the relevant risks and to ensure the robustness of the governance, monitoring and oversight framework;(e) It informs the CBB immediately, at any time after the submission of itscrypto-asset listing policy to CBB, if the said policy ceases to comply with the general framework laid out in this Section; and(f) It does not make any changes or revisions to itscrypto-asset listing policy without the prior written approval of its Board. A copy of the revisedcrypto-asset listing policy along with the written Board approval must be submitted to the CBB.Added: April 2023Risk Assessment
CRA-4.3.14
Licensees must establish criteria and undertake a comprehensive risk assessment of thecrypto-assets that it intends to list on its platform. The assessment must include, but are not limited to, the following:(a)Licensees must conduct a thorough due diligence process to ensure that thecrypto-asset is created or issued for lawful and legitimate purposes, and not for evading compliance with applicable laws and regulations (e.g., by facilitating money laundering or other illegal activities) and that the process is subject to a strong governance and control framework.(b)Licensees must consider the following factors while undertaking the due diligence:(i) The technological experience, track record and reputation of the issuer and its development team;(ii) The availability of a reliable multi-signature hardware wallet solution;(iii) The protocol and the underlying infrastructure, including whether it is: (1) a separate blockchain with a new architecture system and network or it leverages an existing blockchain for synergies and network effects, (2) scalable, (3) new and/or innovative or (4) thecrypto-asset has an innovative use or application;(iv) The relevant consensus protocol;(v) Developments in markets in which the issuer operates;(vi) The geographic distribution of thecrypto-asset and the relevant trading pairs, if any;(vii) Whether thecrypto-asset has any in-built anonymization functions; and(viii)Crypto-asset exchanges on which thecrypto-asset is traded.(c) Operational risks associated with acrypto-asset . This includes the resulting demands on thelicensee’s resources, infrastructure, and personnel, as well as its operational capacity for continued client on-boarding and client support based on reasonable forecasts considering the overall operations of thelicensee ;(d) Risks associated with any technology or systems enhancements or modification requirements necessary to ensure timely adoption or listing of any newcrypto-asset ;(e) Risks related to cybersecurity: Whether thecrypto-asset is and will be able to withstand, adapt and respond to cyber security vulnerabilities, including size, testing, maturity, and ability to allow the appropriate safeguarding of secure private keys;(f) Traceability/Monitoring of thecrypto-asset : Whetherlicensees are able to demonstrate the origin and destination of the specificcrypto-asset , whether thecrypto-asset enables the identification of counterparties to each trade, and whether transactions in thecrypto-asset can be adequately monitored;(g) Market risks, including minimum market capitalisation, price volatility, concentration ofcrypto-asset holdings or control by a small number of individuals or entities, price manipulation, and fraud;(h) Risks relating to code defects and breaches and other threats concerning acrypto-asset and its supporting blockchain, or the practices and protocols that apply to them;(i) Risks relating to potential non-compliance with the requirements of the licensee’s condition and regulatory obligations as a result of the listing of newcrypto-asset ;(j) Legal risks associated with the newcrypto-asset , including any pending or potential civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of the newcrypto-asset ; and(k) Type of distributed ledger: whether there are issues relating to the security and/or usability of a distributed ledger technology used for the purposes of the crypto-asset, whether thecrypto-asset leverages an existing distributed ledger for network and other synergies and whether this is a new distributed ledger that has been demonstrably stress tested.Added: April 2023Periodic Monitoring
CRA-4.3.15
Licensees must have policies and procedures in place to monitor the listedcrypto-assets to ensure that continued use of thecrypto-asset remains prudent. This includes:(a) Periodic re-evaluation ofcrypto-assets , including whether material changes have occurred, with a frequency and level of scrutiny tailored to the risk level of individualcrypto-assets , provided that the frequency of re-evaluation must at a minimum be annual;(b) Implementation of control measures to manage risks associated with individualcrypto-assets ; and(c) The existence of a process for de-listing ofcrypto-assets , including notice to affected clients and counterparties in the case of such de-listing.Added: April 2023Disclosure
CRA-4.3.16
Licensees must make disclosures, which are easily accessible and prominently visible to clients, for each listed crypto-asset, containing at a minimum, the following information:(a) Details about the crypto-asset: the type of crypto-asset (payment token, asset token, utility token, stablecoin etc.), its function and details about the asset(s) where acrypto-asset is backed by asset(s);(b) The risks related to the specific crypto-asset such as, but not limited to, price volatility and cyber-security; and(c) Any other information that would assist clients to make an informed investment decision.Added: April 2023CRA-4.3.17
Licensees must prominently display on their platform the following statement, “THE CENTRAL BANK OF BAHRAIN HAS NEITHER REVIEWED NOR APPROVED THE LISTED CRYPTO-ASSETS”.
Added: April 2023CRA-4.3.18
Where the CBB determines that undertaking regulated services in a
crypto-asset may be detrimental to the financial sector of the Kingdom of Bahrain and/or it may affect the legitimate interest of clients, thelicensees , based on the instruction of the CBB, must delist thecrypto-asset . In such scenarios, thelicensee shall remain responsible for orderly settlement of trade and any liability arising due to the delisting of thecrypto-asset .Added: April 2023CRA-4.4 CRA-4.4 Dealing with Clients
CRA-4.4.1
Licensees must not undertake transactions with a person(s) unless they have been registered as a client(s) in accordance with the requirements of this Module.Added: April 2019CRA-4.4.2
Licensees must ensure their compliance with the applicable laws and regulations in the jurisdictions to which they provide regulatedcrypto-asset services.Amended: April 2023
Added: April 2019CRA-4.4.3
Licensees must not register an applicant as a client where the applicant and/or the beneficial owner(s) or the ultimate beneficial owner is/are domiciled in Non-Cooperative Countries or Territories ('NCCTS'). Paragraph AML-9.1.1(a) and (b) of Module AML provides the basis for identification of the Non-Cooperative Countries or Territories.Added: April 2019CRA-4.4.4
Licensees must, at the time of registration, verify and obtain a signed statement from applicants confirming whether or not the applicant is acting on their own.Added: April 2019CRA-4.4.5
Prior to commencement of business transactions,
licensees must:(a) Seek and register bank accounts details and other types of accounts details to be used for receipt or transfer of fiat funds (such as credit cards and pre-paid cards) of the clients; and(b) Verify the bank accounts and other types of accounts details provided by a client to ensure that the bank accounts and other accounts are in the name of the registered client.Amended: April 2023
Added: April 2019CRA-4.4.6
The bank accounts and other accounts details provided by the client must be used for the purpose of transfer of fiat funds between the client and the
licensee . Alicensee must not deposit and/or withdraw fiat funds through any account other than those accounts which are in the name of the client and registered with thelicensee for the said purpose.Amended: April 2023
Added: April 2019CRA-4.4.7
Where an applicant’s IP address is masked, a
licensee must take reasonable steps to unmask the IP address or decline to provide services to that applicant.Added: April 2023CRA-4.4.8
Licensees must not allow a single client to open multiple accounts.Added: April 2023CRA-4.4.9
At the time of registration,
licensees must set a trading limit, position limit or both with reference to the client’s financial situation with a view to ensuring that the client has sufficient financial capability to be able to assume the risks and bear the potential trading losses. The limit applicable to a client must be reviewed by thelicensee on a periodic basis and in light of any material change in the client’s financial situation.Added: April 2023CRA-4.5 CRA-4.5 Client Protection
Segregation and Handling of Clients' Assets
CRA-4.5.1
Licensees undertakingregulated crypto-asset service and authorised to holdclients’ assets must apply the same standards and comply with the requirements of segregation and handling ofclients’ assets Rules set out in this Section.Amended: April 2023
Added: April 2019CRA-4.5.1A
For the purpose of this Module, “clients assets” means
crypto-assets , money and other assets received or held on behalf of a client by thelicensee and anycrypto-assets , money or other assets accruing therefrom.Added: April 2023CRA-4.5.2
For purposes of safeguarding client's rights in relation to
crypto-assets andclient money which are held or controlled by thelicensee , alicensee must hold clients' money and/or tocrypto-assets in specially created and segregated accounts. These accounts must be identified separately from any other accounts used to hold money and/or tocrypto-assets belonging to thelicensee .Amended: April 2023
Added: February 2019CRA-4.5.3
A
licensee must obtain a written declaration from the entities with whom thelicensee has depositedclient assets that the said entity renounces and will not attempt to enforce or execute, any charge, right of set-off or other claim against the account.Amended: April 2023
Added: April 2019Client Money Client Money
CRA-4.5.4
A
licensee must properly handle and safeguardclient money . The arrangement to handle and safeguardclient money , must include, but not be limited to the following:(a) Establishing one or more client bank accounts with a retail bank licensed in the Kingdom of Bahrain for safekeeping ofclient money ;(b)Client money must not be paid out of a client bank account other than for:(i) Paying the client on whose behalf it is being held;(ii) Meeting the client’s settlement obligations in respect of dealings incrypto-assets carried out by thelicensee for the client, being the client on whose behalf it is being held;(iii) Paying money that the client owes to thelicensee in respect of the conduct ofregulated crypto-asset services ; or(iv) Paying in accordance with the client’s written instructions, including standing authorities or one-off directions; and(c) Not used for licensee’s own use or given as collateral for any purpose to a third party or be subject to any restrictions.Amended: April 2023
Added: April 2019CRA-4.5.5
Client money must be received by thelicensee directly into a client bank account.Added: April 2019CRA-4.5.5A
A
licensee must match any unidentified receipts in its client bank accounts with all relevant information in order to establish the nature of any payment and the identity of the person who has made it. Where the receipt is notclient money , within one business day of becoming so aware, that amount of money should be paid out of the client bank account.Added: April 2023Reconciliation of Clients' Money
CRA-4.5.6
Licensees must reconcile, at least on a monthly basis, the balance on each client's money account as recorded by thelicensee with the balance on that account as set out in the statement issued by the entity with whom thelicensee has deposited clients' money.Added: April 2019CRA-4.5.7
Licensees must also reconcile, at least on a monthly basis, the total of the balances on all clients' money accounts as recorded by thelicensee with the total of the corresponding credit balances in respect of each of its clients as recorded by thelicense .Added: April 2019CRA-4.5.7A
Licensees must ensure that theclient money reconciliations referred to in Paragraphs CRA-4.5.6 and CRA-4.5.7 are completed within 10 business days from the end of the months. Any differences, shortfalls and excess balances must be investigated, and corrective measures taken to restore correct client asset balance.Added: April 2023Risk Disclosure to Clients
CRA-4.5.8
As part of establishing a relationship with a
client , and prior to entering into an initial transaction with such client,licensee must disclose in clear, conspicuous, and legible writing in both Arabic and English languages, all material risks associated withcrypto-asset products and services including at a minimum, the following:(a) Acrypto-asset is not a legal tender and is not backed by the government;(b) legislative and regulatory changes or actions at national level or international level may adversely affect the use, transfer, exchange, and value ofcrypto-assets ;(c) transactions incrypto-assets may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable;(d) somecrypto-asset transactions may be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that theclient initiates the transaction;(e) the value ofcrypto-assets may be derived from the continued willingness of market participants to exchangefiat currency forcrypto-asset , which may result in the potential for permanent and total loss of value of a particularcrypto-asset should the market for thatcrypto-asset disappear;(f) the volatility and unpredictability of the price ofcrypto-assets relative tofiat currency may result in significant loss over a short period of time;(g) [This Subparagraph was deleted in April 2023];(h) the nature ofcrypto-assets means that any technological difficulties experienced by thelicensee may prevent the access or use of a client'scrypto-assets ; and(i) any investor protection mechanism.Amended: April 2023
Added: April 2019Disclosure of General Terms and Conditions
CRA-4.5.9
When registering a new
client , and prior to entering into transactions with suchclient , alicensee must disclose in clear, conspicuous, and legible writing in both Arabic and English languages, all relevant terms and conditions associated with its products and services including at a minimum, the following:(a) theclient's liability for unauthorizedcrypto-asset transactions;(b) theclient's right to stop payment of a preauthorizedcrypto-asset transfer and the procedure to initiate such a stop-payment order;(c) under what circumstances thelicensee will disclose information concerning the client's account to third parties;(d) theclient's right to receive periodic account statements from thelicensee ;(e) theclient's right to receive a confirmation note or other evidence of a transaction;(f) theclient's right to prior notice of a change in thelicensee's rules or policies or terms and conditions; and(g) [This Subparagraph was deleted in April 2023].(h) cybersecurity risks associated withcrypto-assets including the risk of partial or full loss ofcrypto-assets in the event of a cyber-attack, and measures that have been put in place to mitigate the cyber security risks.Amended: April 2023
Added: April 2019CRA-4.5.9A
In addition to the disclosure requirements stipulated in Paragraph CRA-4.5.9, Category-1, Category-2 and Category-3
crypto-asset licensees must disclose, in writing, the following information to clients:(a) How they execute and routeclient’s order and source liquidity (e.g. whether they pass or route orders to an exchange to execute). Where thelicensee routesclient orders to one or more crypto-asset exchanges for execution, it must disclose details of all the crypto-asset exchanges;(b) Whether it may carry trading incrypto-assets as principal, and if so, whether, it may trade against client’s position; and(c) How it determines the prices of thecrypto-assets it quotes to clients.Added: April 2023Disclosure of the Terms of Transactions
CRA-4.5.10
Prior to each transaction in a
crypto-asset with aclient , alicensee must furnish to theclient a written disclosure in clear, conspicuous, and legible writing in both Arabic or English languages, containing the terms and conditions of the transaction, which must include, at a minimum, to the extent applicable:(a) the amount of the transaction;(b) any fees, expenses, and charges borne by the client, including applicable exchange rates;(c) the type and nature of thecrypto-asset transaction;(d) a warning that once executed the transaction may not be undone; and(e) such other disclosures as are customarily given in connection with a transaction of this nature.Amended: April 2023
Added: April 2019Acknowledgement of Disclosure
CRA-4.5.11
A
licensee must ensure that all disclosures required in this Section are acknowledged as received by clients.Added: April 2019Confirmation Note
CRA-4.5.12
Upon completion of any transaction, a
licensee must provide to the client a confirmation note containing the following information:(a) the type, value, date, and precise time of the transaction;(b) the fee charged;(c) the exchange rate, if applicable;(d) the name and contact information of thelicensee , including a telephone number established by thelicensee to answer questions and register complaints;Added: April 2019CRA-4.5.12A
Where a
client undertakes more than one transaction, thelicensee may prepare a single confirmation note which:(a) Records all of those transactions; and(b) In respect of each of those transactions includes all of the information which would have been required to be included in the confirmation note.Added: April 2023CRA-4.5.12B
Licensees must provide the confirmation note to the client no later than the end of the business day on which the transaction was undertaken.Added: April 2023CRA-4.5.13
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Prevention of Fraud
CRA-4.5.14
Licensees must take reasonable steps to detect and prevent fraud, including by establishing and maintaining a written anti-fraud policy. The anti-fraud policy must, at a minimum, include:(a) the identification and assessment of fraud-related risk areas;(b) procedures and controls to protect against identified risks;(c) allocation of responsibility for monitoring risks and establish real-time/near real-time fraud risk monitoring and surveillance system; and(d) procedures for the periodic evaluation and revision of the anti-fraud procedures, controls, and monitoring mechanisms.Amended: April 2023
Added: April 2019CRA-4.5.14A
A
client account must be considered dormant if theclient does not trade for a period of 12 (twelve) continuous months. All the accounts designated as dormant need to be monitored carefully in order to avoid unauthorized transactions in the account.Added: April 2023CRA-4.5.14B
If a
client wishes to make his/her account active after 12 continuous months or thereafter, thelicensee must ensure that the client submits a request to reactivate his/her account. In case there is any change in the information such as; address, contact details, email ID, bank account, financial disclosure provided in KYC at the time of registration asclient , the same must be submitted along with the request. After verification of the updated / revised details and approval from the compliance officer or money laundering reporting officer (MLRO), the account can be made active and transactions can take place.Added: April 2023Client Agreements and Statements
CRA-4.5.15
Licensees must not provide aregulated crypto-asset service to a client as mentioned unless there is a client agreement entered into between thelicensee and theclient containing the key information specified in Rule CRA-4.5.16.Amended: April 2023
Added: April 2019CRA-4.5.16
The client agreement referred to in Rule CRA-4.5.15 must include:
(a) the name and address of thelicensee ;(b) the regulatory status of thelicensee ;(c) when and how the client agreement is to come into force and how the agreement may be amended or terminated;(d) details of fees, costs and other charges and the basis upon which thelicensee will impose those fees, costs and other charges;(e) sufficient details of the service that thelicensee will provide, including where relevant, information about any product or other restrictions applying to thelicensee in the provision of its services and how such restrictions impact on the service offered by thelicensee ; or if there are no such restrictions, a statement to that effect;(f) details of any conflicts of interests;(g) any soft dollar arrangements;(h) key particulars of thelicensee's complaints handling procedures or dispute resolution procedure; and(i) thecrypto-asset risk disclosure referred to in Rule CRA-4.5.8 and disclosure of general terms and conditions referred to in Rule CRA-4.5.9.Amended: April 2023
Added: April 2019CRA-4.5.16A
Licensees must provide periodic statements i.e. confirmation note, monthly statement of account and annual statement of account to their clients.Licensees may provide to their clients the periodic statement information through their website and/or application. Where alicensee provides the periodic statement through its website and application, the licensee is not required to send the periodic statement to their clients separately.Added: April 2023Monthly Statement of Account
CRA-4.5.17
A
licensee must prepare and provide a monthly statement of account to the client no later than 7 business days following the month where any of the following circumstances apply:(a) During a month, thelicensee has provided a confirmation note (refer CRA-4.5.12) or has received funds from the client;(b) At any time during a month, the client has an account balance (funds) that is not nil; or(c) At any time during a month,crypto-assets are held for the account of the client.Added: April 2023CRA-4.5.18
The monthly statement of account referred to in Paragraph CRA-4.5.17 must include the following information:
(a) The name and address of thelicensee ;(b) The name, address and account number of the client;(c) The date on which the statement of account is issued;(d) The outstanding balance of that account as at the beginning and as at the end of the month;(e) Details of all transactions undertaken by the client during the month;(f) Inward and outward transfer ofcrypto-assets during the month;(g) The quantity, and, in so far as readily ascertainable, the market price and total value of eachcrypto-asset held at the end of the month;(h) Details of all funds credited to and fees and charges levied during the month; and(i) Details of any restrictions, such as blocks pursuant to an order by a court or other competent authority.Added: April 2023Duty to Provide Statement of Account on Request
CRA-4.5.19
Where a
licensee receives a request from a client for a statement of account it must provide the client, as soon as practicable after the date of the request but no later than 5 working days from the date of the request, such statement of account which must include the information required as per Paragraph CRA-4.5.18 for the period specified by the client.Added: April 2023CRA-4.5.20
Where a
licensee provides the statement of account at the request of the client (refer to CRA-4.5.19), it may impose a reasonable charge on the client for providing the statement of account.Added: April 2023CRA-4.5.21
A
licensee must prepare and provide a statement of account to the client, on an annual basis, no later than the end of the seventh business day after the end of the financial year except under following circumstances:(a) There are no transactions;(b) The account balance (funds) is nil; and(c) The balance ofcrypto-assets held on behalf of the client is nil.Added: April 2023No Restriction on Withdrawal of Client Assets
CRA-4.5.22
Where a
client requests for withdrawal ofclient assets , alicensee , unless the restriction is pursuant to a freeze or block order from a court or due to factors related to money laundering and terror financing (suspicious transactions), must not impose restriction on withdrawal of theclient assets held under its control.Added: April 2023CRA-4.6 CRA-4.6 Marketing and Promotion
CRA-4.6.1
In all advertising and marketing materials,
licensees and any person or entity acting on its behalf, must not, directly or by implication, make any false, misleading, or deceptive representations or omissions.Added: April 2019CRA-4.6.1A
Licensees must ensure that all advertising and marketing materials adhere to the principles of fair competition. While comparative advertisement in product or service promotion is acceptable, the intent and connotation of comparative advertisement should be to inform and never to discredit or unfairly target competitors, competing products or services.Added: April 2023CRA-4.6.2
Licensees must not advertise its products, services, or activities in the Kingdom of Bahrain without including the name of thelicensee and a statement that thelicensee is "Licensed by the CBB as a crypto-asset service provider (Licensing category-...)".Amended: April 2023
Added: April 2019CRA-4.6.3
Licensees must not make use of the name of the CBB in any promotion in such a way that would indicate endorsement or approval of its products or services.Added: April 2019CRA-4.6.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.6.5
Licensees , at a minimum, must make the following information available on its website:(a) The services being offered;(b) Its trading and operational rules as well as admission and removal rules and criteria;(c) Its admission and trading fees and charges, including illustrative examples of how the fees and charges are calculated, for ease of understanding by clients;(d) The relevant material information for eachcrypto-asset , including providing clients with access to up-to-date whitepaper or information, and providing clients with material information as soon as reasonably practicable to enable clients to appraise the position of their investments (for example, any major events in relation to acrypto-asset or any other material information);(e) The rights and obligations of thelicensee and the client;(f) Arrangements for dealing with settlement failures in respect of transactions executed on its platform;(g) Detailed documentation of market models, order types as well as deposit and withdrawal processes for fiat currencies andcrypto-assets ;(h) Where applicable, client’s liability for unauthorisedcrypto asset transactions;(i) Client’s right to stop transfer of a preauthorisedcrypto-asset and the procedure for initiating such a stop-transfer order;(j) Circumstances under which thelicensee may disclose the client’s confidential information to third parties, including regulators;(k) Client’s right to prior notice of any change in thelicensee’s rules, policies and terms and conditions;(l) Dispute resolution mechanisms, including complaints procedures; and(m) System upgrades and maintenance procedures and schedules.Licensees must, as soon as practicable thereafter, publish any revisions or updates on its website and circulate them to the users of its platforms, identifying the amendments which have been made and providing an explanation for making them.Added: April 2023Promotion
CRA-4.6.6
Licensees must ensure that all the following requirements are met with regards to promotion of products or services:(a) They do not involve a breach of Bahrain law or any other relevant applicable law, rules or regulation;(b) All documentation concerning promotions is in a language that clients can fully understand;(c) Clients to whom promotions are directed must have equal opportunity in terms of access and treatment;(d) The communication concerning promotions must be clear, concise, truthful, unambiguous and complete to enable clients to make a fully informed decision;(e) Where the promotion involves communication of earnings potential or benefits associated with the products or services promoted, all costs, charges or levies and risks are also disclosed; and(f) Licensees using social media platforms as a medium of promotion must provide a reference or link to more comprehensive information available elsewhere.Added: April 2023CRA-4.7 CRA-4.7 Complaints
CRA-4.7.1
Licensees must establish and maintain written policies and procedures to resolve complaints in a fair and timely manner.Amended: April 2023
Added: April 2019CRA-4.7.2
A
licensee must provide, in a clear and conspicuous manner on their website and in all physical locations the following disclosures:(a) thelicensee's mailing address, email address, and telephone number for the receipt of complaints; and(b) [This Subparagraph was deleted in April 2023];(c) the CBB's mailing address, website, and telephone number.Amended: April 2023
Added: April 2019CRA-4.7.3
Licensees must notify to the CBB any change in their complaint policies or procedures within seven days prior to the implementation of the new complaint policy.Amended: April 2023
Added: April 2019CRA-4.7.4
The complaint handling procedures of a
licensee must provide for:(a) The receipt of written complaints;(b) The appropriate investigation of complaints;(c) An appropriate decision-making process in relation to the response to a customer complaint;(d) Notification of the decision to the customer;(e) The recording of complaints; and(f) How to deal with complaints when a business continuity plan (BCP) is operative.Added: April 2019CRA-4.7.5
A
licensee's internal complaint handling procedures must be designed to ensure that:(a) All complaints are handled fairly, effectively and promptly;(b) [This Subparagraph was deleted in April 2023];(c) The number of unresolved complaints referred to the CBB is minimized;(d) The employee responsible for the resolution of complaints has the necessary authority to resolve complaints or has ready access to an employee who has the necessary authority;(e) Relevant employees are aware of thelicensee 's internal complaint handling procedures that they comply with them and receive training periodically to be kept abreast of changes in procedures; and(f) Complaints are investigated by an employee of sufficient competence who, where appropriate, was not directly involved in the matter which is the subject of a complaint.Amended: April 2023
Added: April 2019Response of Complaints
CRA-4.7.6
Licensees must acknowledge in writing customer written complaints within 5 working days of receipt.Added: April 2019CRA-4.7.7
Licensees must respond to a client complaint promptly and within a period of 4 weeks of receiving the complaint or provide the complainant with an appropriate explanation as to why thelicensee is not, at that time, in a position to respond and must indicate by when thelicensee will respond.Amended: April 2023
Added: April 2019Redress
CRA-4.7.8
Licensees must decide and communicate how it proposes to provide the customer with redress. Where appropriate, thelicensee must explain the options open to the customer and the procedures necessary to obtain the redress.Added: April 2019CRA-4.7.9
Where a
licensee decides that redress in the form of compensation is appropriate, thelicensee must provide the complainant with fair compensation and must comply with any offer of compensation made by it which the complainant accepts.Added: April 2019CRA-4.7.10
Where a
licensee decides that redress in a form other than compensation is appropriate, it must provide the redress as soon as practicable.Added: April 2019CRA-4.7.11
A
licensee must inform the clients who have filed a complaint with the licensee and are not satisfied with the response received as per Paragraph CRA-4.7.7, about their right to forward the complaint to the Consumer Protection Unit at the CBB within 30 calendar days from the date of receiving the letter from thelicensee .Amended: April 2023
Added: April 2019Reporting of Complaints
CRA-4.7.12
Licensees must submit to the Consumer Protection Unit at the CBB, a quarterly report summarising the following:(a) The number of complaints received during the quarter;(b) The substance of the complaints;(c) The number of days it took thelicensee to acknowledge and to respond to the complaints; and(d) The status of the complaint, including whether resolved or not, and whether redress was provided.Amended: April 2023
Added: April 2019CRA-4.7.13
Where no complaints have been received by the
licensee within the quarter, a 'nil' report must be submitted to the Consumer Protection Unit at the CBB.Amended: April 2023
Added: April 2019Record of Complaints
CRA-4.7.14
A
licensee must maintain a record of all client complaints. The record of each complaint must include:(a) The identity of the complainant;(b) The substance of the complaint;(c) The status of the complaint, including whether resolved or not, and whether redress was provided; and(d) All correspondence in relation to the complaint.Such records must be retained by the
licensee for a period of 10 years from the date of receipt of the complaint.Added: April 2023CRA-4.8 CRA-4.8 Professional Indemnity Coverage
Key Provisions
CRA-4.8.1
Licensees handlingclient asset and/orclient money must maintain a professional indemnity coverage (insurance policy) in accordance with the scope of coverage provided in Paragraph CRA-4.8.3.Amended: April 2023
Added: April 2019CRA-4.8.2
For the purposes of Paragraph CRA-4.8.1,
licensees must maintain professional indemnity coverage for an amount that is determined based on its assessment of the potential risk exposure. Such amount, however, must not be less than BD100,000.Added: April 2019CRA-4.8.3
Licensees must ensure that the Professional Indemnity Coverage, inter alia:(a) covers any legal liability in consequence of any negligent act, error or omission in the conduct of thelicensee's business by thelicensee or any person employed by it or otherwise acting for it, including consultants under a contract for service with thelicensee ;(b) covers legal defence costs which may arise in consequence of any negligent act, error or omission in the conduct of thelicensee's business by thelicensee or any person employed by it or otherwise acting for it, including consultants under a contract for service with thelicensee ;(c) Covers any legal liability in consequence of any dishonest, fraudulent, criminal or malicious act, error or omission of any person at any time employed by thelicensee , or otherwise acting for it, including consultants under a contract for service with thelicensee ; and(d) covers loss of and damage to documents and records belonging to thelicensee or which are in the care, custody or control of thelicensee or for which thelicensee is responsible; including also liability and costs and expenses incurred in replacing, restoring or reconstructing the documents or records; including also consequential loss resulting from the loss or damage to the documents or records.Amended: April 2023
Added: April 2019CRA-4.8.4
The professional indemnity coverage must be obtained from an insurance firm acceptable to the CBB and licensed in the Kingdom of Bahrain.
Licensees must submit a Professional Indemnity Insurance Return (Form PIIR) on an annual basis. Additionally, they must provide, upon request, evidence to the CBB of the coverage in force.Added: April 2019CRA-4.8.5
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.8.6
The requirement to maintain professional indemnity coverage will normally be met by the
licensee obtaining an insurance policy from an insurance firm. The CBB may also accept an insurance indemnity policy issued at group level, e.g. issued with respect to the parent of thelicensee , provided the terms of the policy explicitly provide indemnity coverage with respect to thelicensee and meets the requirements of Paragraphs CRA-4.8.1, CRA-4.8.2 and CRA-4.8.3.Amended: April 2023
Added: April 2019CRA-4.8.7
Upon written application to the CBB, the requirement in Rule CRA-4.8.1 may instead be met by the
licensee depositing with a retail bank licensed to operate in the Kingdom of Bahrain, an amount, specified by the CBB, to be held in escrow against future claims. This amount will not be less than the minimum required policy limit.Added: April 2019CRA-4.8.8
The policy must contain a clause that it may not be cancelled or lapsed without the prior notification 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.
Amended: April 2023
Added: April 2019CRA-4.9 CRA-4.9 Other Obligations
Obligation to Maintain Proper Records
CRA-4.9.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Obligation to Maintain Confidentiality
CRA-4.9.2
A
licensee must maintain the confidentiality of all client information in accordance with the requirements of the Personal Data Protection Law (PDPL).Amended: April 2023
Added: April 2019Records of Telephone conversations and Electronic Communications
CRA-4.9.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.10 CRA-4.10 Matters Requiring Approval of CBB
CRA-4.10.1
A
licensee must comply with the following Rules of relating to a change of shareholding held by substantial shareholders, or a transfer of business or substantially all its assets or liabilities in the same manner set out in:(a) Section MIR-5 (Substantial Shareholding in a Licensed Member);(b) Section MIR-6 (Control of a Licensed Member); and(c) Section MIR-7 (Business Transfer).Amended: April 2023
Added: April 2019Dividends
CRA-4.10.2
Licensees must obtain the CBB's prior written approval to any dividend proposed to be distributed to the shareholders, before announcing the proposed dividend by way of press announcement or any other means of communication and prior to submitting a proposal for a distribution of profits to a shareholder vote.Added: April 2019CRA-4.10.3
One of the factors that the CBB will consider while determining whether to grant an approval is when it is satisfied that the level of dividend proposed is unlikely to leave the
licensee vulnerable to breaching the CBB's financial resources requirements, taking into account, as appropriate, the trends in thelicensee's business volumes, profitability, expenses and performance.Added: April 2019CRA-4.10.4
To facilitate the prior approval required under Paragraph CRA-4.10.2,
licensees must provide the CBB with:(a) Thelicensee 's intended percentage and amount of proposed dividends for the coming year;(b) A letter of no objection from thelicensee 's external auditor on such profit distribution; and(c) A detailed analysis of the impact of the proposed dividend on the capital adequacy requirements outlined in Chapter CRA-3 (Minimum Capital Requirements) and the liquidity position of thelicensee .Amended: April 2023
Added: April 2019CRA-4.11 CRA-4.11 Compliance
CRA-4.11.1
Licensees must establish, implement and maintain adequate policies and procedures designed to detect any risk of failure by thelicensee to comply with its obligations under the CBB Law, its regulations, resolutions and directives (including these Rules), as well as to detect the associated risks, and must put in place adequate measures and procedures designed to minimize such risk and to enable the CBB to exercise its powers effectively.Amended: April 2023
Added: April 2019CRA-4.11.2
For the purposes of Paragraph CRA-4.11.1,
licensees should take into account the nature, scale and complexity of its business and the nature and range ofregulated crypto-asset services undertaken in the course of the business.Added: April 2019CRA-4.11.3
Licensees must establish and maintain a permanent and effective compliance function which operates independently and has, as a minimum, the following responsibilities:(a) to monitor and, on a regular basis, to assess the adequacy and effectiveness of the measures and procedures put in place, and the actions taken to address any deficiencies in thelicensee's compliance with its obligations;(b) to draw up and implement a compliance monitoring plan; and(c) to advise and assist the relevant persons responsible for carrying outregulated crypto-asset services to comply with thelicensee's legal and regulatory obligations.Added: April 2019CRA-4.11.4
In order to enable the compliance function to discharge its responsibilities properly,
licensees must ensure that the following conditions, as a minimum, are satisfied:(a) the compliance function must have the necessary authority, resources, expertise and access to all relevant information;(b) a Compliance Officer must be appointed and shall be responsible for the compliance function and for any reporting as to compliance required by these Rules;(c) the relevant persons involved in the compliance function must not be involved in the performance of services or activities which they monitor; and(d) the method of determining the remuneration of the relevant persons involved in the compliance function must not compromise their objectivity.Amended: April 2023
Added: April 2019CRA 4.11.5
The CBB may exempt a
licensee from the requirements Paragraph CRA-4.11.4(c) if thelicensee is able to demonstrate to the satisfaction of the CBB, that in view of the nature, scale and complexity of its business, and the nature and range of regulated crypto-asset services and related activities, the requirement under Paragraph CRA-4.11.4(c) is not proportionate and that its compliance function continues to be independent, objective and effective.Added: April 2019CRA-4.11.6
The CBB may, at its discretion, allow the compliance officer of a
licensee to also act as thelicensee's Money Laundering Reporting Officer, provided thelicensee is able to demonstrate to the satisfaction of the CBB, that the nature, scale and complexity of the business is such that both the functions can be carried out effectively by the compliance officer without compromising on supervisory objectives.Amended: April 2023
Added: April 2019CRA-4.12 CRA-4.12 Additional requirements applicable to Crypto-asset Exchange Licensees
Listing and Trading of Crypto-assets
CRA-4.12.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.12.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.12.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Suspension of trading and delisting
CRA-4.12.4
Where a licensed
crypto-asset exchange decides to delist or suspend the trading of one or morecrypto-assets , it must notify the CBB with the rationale for the suspension or delisting of the crypto-asset.Amended: April 2023
Added: April 2019CRA-4.12.5
Without prejudice to the right of the CBB to demand suspension or delisting of a
crypto-asset from trading, a licensedcrypto-asset exchange must suspend or delist from trading acrypto-asset which no longer complies with the Rules of the licensedcrypto-asset exchange unless such suspension or delisting would likely cause significant damage to the clients' interests or the orderly functioning of the market.Amended: April 2023
Added: April 2019CRA-4.12.6
Where a licensed
crypto-asset exchange decides to suspends or delists from trading acrypto-asset , it must by way of a public announcement inform the clients' regarding the date of suspension or delisting of thecrypto-asset .Amended: April 2023
Added: April 2019CRA-4.12.7
Where a llicensed
crypto-asset exchange has suspended or delisted acrypto-asset from trading, the CBB may require that otherlicensees , which fall under its jurisdiction and trade the same crypto-asset, also suspend or delist thatcrypto-asset from trading, where the suspension or delisting is due to suspected market abuse, a take-over bid or the non-disclosure of inside information about the issuer orcrypto-asset except where such suspension or delisting could cause significant damage to the clients' interests or the orderly functioning of the market.Amended: April 2023
Added: April 2019Order Matching
CRA-4.12.8
A licensed
crypto-asset exchange must ensure expedient and accurate verification of trades and matching settlement instructions.Added: April 2019CRA-4.12.9
A licensed
crypto-asset exchange must ensure that it has necessary systems and controls to verify the existence of funds andcrypto-assets , as applicable, of clients submitting orders.Amended: April 2023
Added: April 2019Pre-trade transparency
CRA-4.12.10
A licensed
crypto-asset exchange must disclose to its clients and the public as appropriate, on a continuous basis during normal trading, the following information relating to trading ofcrypto-assets on its platform:(a) the current bid and offer prices and volume;(b) the depth of trading interest shown at the prices and volumes advertised through its systems for thecrypto-assets ; and(c) any other information relating tocrypto-assets which would promote transparency relating to trading.Amended: April 2023
Added: April 2019CRA-4.12.11
A licensed
crypto-asset exchange must use appropriate mechanisms to enable pre-trade information to be made available to the public in an easy to access and uninterrupted manner.Added: April 2019Post-trade transparency
CRA-4.12.12
A licensed
crypto-asset exchange must disclose the price, volume and time of the transactions executed in respect ofcrypto-assets to the public as close to real-time as is technically possible on a non-discretionary basis. A licensedcrypto-asset exchange must use adequate mechanisms to enable post-trade information to be made available to the public in an easy to access and uninterrupted manner, at least during business hours.Amended: April 2023
Added: April 2019Client Record Keeping
CRA-4.12.13
A licensed
crypto-asset exchange must keep, for at least 10 years, the relevant data relating to all orders and all transactions incrypto-assets which are carried out through their systems.Amended: April 2023
Added: April 2019CRA-4.12.14
For the purposes of Paragraph CRA-4.12.10, the records must contain the relevant data that constitute the characteristics of the order, including those that link an order with the executed transaction(s) that stems from that order. This shall include:
(a) details of the names and numbers of thecrypto- assets bought or sold;(b) the quantity;(c) the dates and times of execution;(d) the transaction prices; and(e) a designation to identify the clients in relation to which that transaction has been executed;Amended: April 2023
Added: April 2019CRA-4.12.15
A licensed
crypto-asset exchange must maintain adequate resources and have back-up facilities in place in order to be capable of reporting at all times.Added: April 2019CRA-4.12.16
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-4.12.17
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Exchange Systems
CRA-4.12.18
A licensed
crypto-asset exchange must have in place effective systems, procedures and arrangements to reject orders that exceed pre-determined volume and price thresholds or are clearly erroneous.Added: April 2019CRA-4.12.19
A licensed
crypto-asset exchange must be able to temporarily halt or constrain trading if there is a significant price movement in acrypto-asset on its platform or a related platform during a short period and, in exceptional cases, to be able to cancel, vary or correct any transaction.Amended: April 2023
Added: April 2019CRA-4.12.20
A licensed
crypto-asset exchange must report the reasons for halting trading and any material changes to those reasons to the CBB in a consistent and comparable manner.Added: April 2019CRA-4.12.21
A licensed
crypto-asset exchange must ensure that its fee structures are transparent, fair and non-discriminatory and that they do not create incentives to place, modify or cancel orders or to execute transactions in a way which contributes to disorderly trading conditions or market abuse.Added: April 2019CRA-4.12.22
A licensed
crypto-asset exchange must ensure that its Rules on co-location services are transparent, fair and non-discriminatory.Added: April 2019CRA-4.12.23
A licensed
crypto-asset exchange must be able to identify, by means of flagging from its clients, orders generated by algorithmic trading, the different algorithms used for the creation of orders and the relevant persons initiating those orders.Amended: April 2023
Added: April 2019CRA-4.12.24
A licensed
crypto-asset exchange must, upon request by the CBB, make available to the CBB, data relating to the order book or give the CBB access to the order book so that it is able to monitor trading.Added: April 2019Settlement
CRA-4.12.25
A licensed
crypto-asset exchange must establish procedures that enable the confirmation of relevant details of transactions incrypto-assets .Amended: April 2023
Added: April 2019CRA-4.12.26
A licensed
crypto-asset exchange's settlement procedures must clearly define the point at which settlement is final.Added: April 2019CRA-4.12.27
A licensed
crypto-asset exchange must complete final settlement no later than the end of the trade date, and preferably intraday or in real time, to reduce settlement risk.Added: April 2019CRA-4.12.28
A licensed
crypto-asset exchange must clearly define the point after which unsettled payments, transfer instructions, or other obligations may not be revoked by a client.Added: April 2019CRA-4.12.29
A licensed
crypto-asset exchange must minimize and strictly control the credit and liquidity risk arising from money settlements.Added: April 2019CRA-4.12.30
A licensed
crypto-asset exchange must clearly state its obligations with respect to the delivery ofcrypto-assets and should identify, monitor, and manage the risks associated with such delivery.Amended: April 2023
Added: April 2019CRA-4.12.31
A licensed
crypto-asset exchange must have in place adequate systems to safeguard against settlement failures as well as resolution systems which cater for such failures. Such systems should be clearly documented in the licensed crypto-asset exchange's policies, procedures and rules.Amended: April 2023
Added: April 2019CRA-4.12.32
A licensed
crypto-asset exchange must establish a system that monitors settlement failures of transactions incrypto-assets . Upon occurrence of such events, thelicensed crypto-asset exchange must immediately report to the CBB, details of the settlement failure and any other relevant information.Amended: April 2023
Added: April 2019Rules of a Licensed Crypto-asset Exchange
CRA-4.12.33
A licensed
crypto-asset exchange must issue clear and transparent Rules in order to ensure that anycrypto-assets being traded on its platform is being traded in a fair, orderly and efficient manner. Such rules, and any changes or amendments thereto are to be approved by the CBB.Amended: April 2023
Added: April 2019CRA 4.12.34
The CBB may require a licensed
crypto-asset exchange to effect any changes to its Rules, as it may deem necessary.Added: April 2019CRA-4.12.35
The Rules must, inter alia, include Sections on:
(a) the administration of the licensedcrypto-asset exchange , including but not limited to governance, compliance and risk management;(b) how the licensedcrypto-asset exchange operates, including the client on boarding procedure, the procedure for the listing ofcrypto-assets , trading procedures, pre- and post-trade transparency, market monitoring, custody and safekeeping arrangements, record keeping, and fees;(c) the reporting of suspicious transactions;(d) settlement and resolution mechanisms in the event of settlement failure;(e) suspension and removal from trading;(f) business continuity; and(g) Actions or measures which the licensedcrypto-asset exchange can take against itsclients .Amended: April 2023
Added: April 2019Inability to Discharge Functions
CRA-4.12.36
Where, due to the occurrence of any event or circumstances, a licensed
crypto-asset exchange is unable to discharge any of its functions whatsoever, it must on the day of such occurrence immediately notify the CBB of its inability to discharge that function, specifying:(a) the event or circumstance causing it to become unable to discharge any of its functions;(b) the functions which the licensed crypto-asset exchange is unable to discharge; and(c) what action, if any, is being taken or is being proposed by the licensed crypto-asset exchange in order to deal with the situation and, in particular, to be able to recommence discharging that function.Added: April 2019Actions or Measures
CRA-4.12.37
Where a licensed
crypto-asset exchange has taken any action against any of itsclients , including the suspension of theclient from trading, the blacklisting or expelling of aclient or any other action, in respect of a breach of its rules, that licensedcrypto-asset exchange must immediately notify the CBB of that event, providing:(a) The name of the person concerned;(b) Brief description of the breach;(c) Details of the action or measure taken by the licensedcrypto-asset exchange ; and(d) The reasons for taking that action or measure.Amended: April 2023
Added: April 2019CRA-5 CRA-5 Technology Governance and Cyber Security
CRA-5.1 CRA-5.1 General Requirements
CRA-5.1.1
Licensees must have in place clear and comprehensive policies and procedures, from a technology perspective, for the following key areas:(a) Maintenance and development of systems and architecture (e.g., code version control, implementation of updates, issue resolution, regular internal and third party testing);(b) Security measures and procedures for the safe storage and transmission of data;(c) Business continuity and client engagement planning in the event of both planned and unplanned system outages;(d) Processes and procedures specifying management of personnel and decision-making by qualified staff; and(e) Procedures for the creation and management of services, interfaces and channels provided by or to third parties (as recipients and providers of data or services).Added: April 2019CRA-5.1.2
Licensees must, as a minimum, have in place systems and controls with respect to the following:(a) Crypto-asset Wallets: Procedures describing the creation, management and controls of crypto-asset wallets, including:(i) Wallet setup/configuration/deployment/deletion/backup and recovery;(ii) Wallet access privilege management;(iii) Wallet user management;(iv) Wallet Rules and limit determination, review and update; and(v) Wallet audit and oversight.(b) Private keys: Procedures describing the creation, management and controls of private keys, including:(i) Private key generation;(ii) Private key exchange;(iii) Private key storage;(iv) Private key backup;(v) Private key destruction; and(vi) Private key access management.(c) Origin and destination ofcrypto-assets : Systems and controls to mitigate the risk of misuse ofcrypto-assets , setting out how:(vii) The origin ofcrypto-asset is determined, in case of an incoming transaction; and(viii) The destination ofcrypto-asset is determined, in case of an outgoing transaction.(d) Security: A security plan describing the security arrangements relating to:(i) The privacy of sensitive data;(ii) Networks and systems;(iii) Cloud based services;(iv) Physical facilities; and(v) Documents, and document storage.(e) Risk management: A risk management plan containing a detailed analysis of likely risks with both high and low impact, as well as mitigation strategies. The risk management plan must cover, but is not limited to:(i) Operational risks;(ii) Technology risks, including 'hacking' related risks;(iii) Market risk for eachcrypto-asset ; and(iv) Risk of financial crime.Amended: April 2023
Added: April 2019CRA-5.1.3
The CBB may grant exemptions from specific requirements of technology governance and cyber security. A
licensee seeking exemption from specific requirements must provide in writing, to the satisfaction of the CBB, that the nature, scale and complexity of their business does not require such technology governance and cyber security measures and in absence of such measures there will be no risk of violation of applicable laws, including the CBB Law, its regulations, resolutions or directives (including these rules) or risks associated with the integrity of the market and/or interest of clients.Amended: April 2023
Added: April 2019System Resilience
CRA-5.1.4
Licensees must have in place effective systems, procedures and arrangements to ensure that their IT systems including the trading and settlement systems, are resilient, have sufficient capacity to deal with peak order and message volumes, are able to ensure orderly trading under conditions of severe market stress, are fully tested to ensure such conditions are met and are subject to effective business continuity arrangements to ensure continuity of their services if there is any failure of their trading systems.Added: April 2023CRA-5.1.5
Licensees must continuously monitor the utilisation of their system resources against a set of pre-defined thresholds. Such monitoring must facilitate thelicensee in carrying out capacity management to ensure IT resources are adequate to meet current and future business needs.Added: April 2023CRA-5.1.6
Licensees must conduct regular testing of resilience of its IT systems to meet its business requirements.Added: April 2023CRA-5.1.7
A
licensee’s IT systems must be designed and implemented in a manner to achieve the level of system availability that is commensurate with its business needs. Fault-tolerant solutions must be implemented for IT systems which require high system availability and technical glitches must be minimized.Added: April 2023CRA-5.2 CRA-5.2 Maintenance and Development of Systems
CRA-5.2.1
Licensees must have a clear and well-structured approach for the implementation and upgrade of systems and software.Added: April 2019CRA-5.2.2
Licensees must also have well-established policies and procedures for the regular and thorough testing of any system currently implemented or being considered for use (e.g., upgrades to a matching engine or opening of a new Application Programming Interface ("API") with a third party).Licensees must ensure that the implementation of new systems, or upgrading of existing systems, is thoroughly checked by multiple members of technology staff.Added: April 2019CRA-5.2.3
Licensees must ensure that any changes made to a codebase in use are tracked and recorded, with a clear audit trail for appropriate internal checks and sign-offs.Added: April 2019CRA-5.2.4
For the purposes of Rule CRA-5.2.3, the use of version control software which allows for the accurate timestamping and identification of the user responsible for relevant changes must be considered.
Added: April 2019CRA-5.2.5
Licensees must maintain a clear and comprehensive audit trail for system issues internally, including security issues and those with third parties, and their resolution.Added: April 2019IT System Audit
CRA-5.2.6
[This Paragraph was deleted in January 2020].
Amended: January 2020
Added: April 2019CRA-5.2.7
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: January 2020CRA-5.2.8
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: January 2020CRA-5.2.9
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: January 2020CRA-5.3 CRA-5.3 Security Measures and Procedures
CRA-5.3.1
Licensees must have measures and procedures in place which comply with network security best practices (e.g., the implementation of firewalls, the regular changing of passwords and encryption of data in transit and at rest). Updates and patches to all systems, particularly security systems, must be performed as soon as safely feasible after such updates and patches have been released.Added: April 2019CRA-5.3.2
The IT infrastructures must provide strong layered security and ensure elimination of "single points of failure".
Licensees must maintain IT infrastructure security policies, describing in particular how strong layered security is provided and how "single points of failure" are eliminated. IT infrastructures must be strong enough to resist, without significant loss toclients , a number of scenarios, including but not limited to: accidental destruction or breach of a single facility, collusion or leakage of information by employees/former employees within a single office premise, successful hack of a cryptographic module or server, or access by hackers of any single set of encryption/decryption keys.Added: April 2019CRA-5.3.3
Licensees must regularly test security systems and processes. System components, processes, and custom software must be tested frequently to ensure security controls continue to reflect a changing environment.Added: April 2019CRA-5.3.4
Licensees must have in place policies and procedures that address information security for all staff sets the security tone for the whole entity and informs staff what is expected of them. All staff should be aware of the sensitivity of data and their responsibilities for protecting it.Amended: April 2023
Added: April 2019CRA-5.3.5
The encryption of data, both at rest and in transit, including consideration of API security (e.g. OAuth 2.0) should be included in the security policy. In particular, encryption and decryption of
crypto-asset private keys should utilise encryption protocols, or use alternative algorithms that have broad acceptance with cyber security professionals. Critical cryptographic functions such as encryption, decryption, generation of private keys, and the use of digital signatures should only be performed within cryptographic modules complying with the highest, and ideally internationally recognised, applicable security standards.Amended: April 2023
Added: April 2019CRA-5.3.6
Licensees must conduct regular security tests of their systems, network, and connections.Amended: January 2020
Added: April 2019CRA-5.4 CRA-5.4 Cryptographic Keys and Wallet Storage
CRA-5.4.1
Licensees must implement robust procedures and protective measures to ensure the secure generation, storage, backup and destruction of both public and private keys.Amended: April 2023
Added: April 2019CRA-5.4.2
In order to access crypto assets, the device on which the private key is held needs access to a network (which, in most cases is through the internet). A wallet where the private key is held on a network attached device is called a hot wallet. Hot wallets are vulnerable to hacking attempts and can be more easily compromised by viruses and
malware .Added: April 2019CRA-5.4.3
Crypto-assets that do not need to be immediately available must be held offline, in a 'cold wallet' (refer to CRA-8.1.9).Amended: April 2023
Added: April 2019Password protection and encryption
CRA-5.4.4
Both hot and cold wallets must be password protected and encrypted. The key storage file that is held on the online or offline device must be encrypted. The user is therefore protected against theft of the file (to the degree the password cannot be cracked). However,
malware on the machine may still be able to gain access (e.g., a keystroke logger to capture the password).Amended: April 2023
Added: April 2019CRA-5.4.5
Licensees must use multi-signature wallets (e.g., where multiple private keys are associated with a given public key and a subset of these private keys, held by different parties, are required to authorise transactions). Noting that there is no way to recover stolen or lost private keys unless a copy of that key has been made, multi-signature wallets offer more security because a user can still gain access to itscrypto-assets when two or more Private Keys remain available. (see also CRA-4.1.2 and CRA-4.1.3).Amended: April 2023
Added: April 2019Off Line Storage of Keys
CRA-5.4.6
To mitigate the risks associated with hot wallets, private keys can be stored in a cold wallet, which is not attached to a network.
Licensees should implement cold wallet key storage where possible if they are offering wallet services to their Clients.Added: April 2019Air Gapped Key Storage
CRA-5.4.7
Wallets may also be stored on a secondary device that is never connected to a network. This device, referred to as an air-gapped device, is used to generate, sign, and export transactions. Care should be taken not to infect the air-gapped device with
malware when, for example, inserting portable media to export the signed transactions. Hardware security modules emulate the properties of an air gap. A proper policy must be created to describe the responsibilities, methods, circumstances and time periods within which transactions can be initiated. Access and control of single private keys should be shared by multiple users to avoid transactions by a single user.Amended: April 2023
Added: April 2019Password Deliver Key
CRA-5.4.8
Some wallet solutions enable cryptographic keys to be derived from a user-chosen password (the "seed") in a "deterministic" wallet. The most basic version requires one password per key pair. A Hierarchical Deterministic wallet derives a set of keys from a given seed. The seed allows a user to restore a wallet without other inputs.
Added: April 2019CRA-5.4.9
Licensees offering deterministic wallet solutions must ensure that users are provided with clear instructions for situations where keys, seeds or hardware supporting such wallet solutions are lost.Added: April 2019Private Key Management
CRA-5.4.10
A
licensee must establish and implement strong internal controls and governance procedures for private key management to ensure all cryptographic seeds and private keys are securely generated, stored and backed up. Alicensee using a third party crypto-asset custodian must ensure that the third-party custodian establishes and implements such controls and procedures. The procedure must include the following:(a) The generated seed and private key must be sufficiently resistant to speculation or collusion. The seed and private key should be generated in accordance with applicable international security standards and industry best practices, so as to ensure that the seeds (where Hierarchical Deterministic Wallets, or similar processes, are used) or private keys (if seed is not used) are generated in a non-deterministic manner that ensures randomness so that they are not reproducible. Where practicable, seed and private key should be generated offline and kept in a secure environment, such as a Hardware Security Module (HSM), with appropriate certification for the lifetime of the seeds or private keys;(b) Detailed specifications for how access to cryptographic devices or applications is to be authorised, covering key generation, distribution, use and storage, as well as the immediate revocation of a signatory’s access as required;(c) Access to seed and private key relating tocrypto-assets is tightly restricted amongapproved persons , no singleapproved person has possession of information on the entirety of the seed, private key or backup passphrases, and controls are implemented to mitigate the risk of collusion among authorised personnel; and(d) Distributed backups of seed or private key is kept so as to mitigate any single point of failure. The backups need to be distributed in a manner such that an event affecting the primary location of the seed or private key does not affect the backups. The backups should be stored in a protected form on external media (preferably HSM with appropriate certification). Distributed backups should be stored in a manner that ensures seed and private key cannot be re-generated based solely on the backups stored in the same physical location. Access control to the backups must be as stringent as access control to the original seed and private key.Added: April 2023Private Key Storage Policy
CRA-5.4.11
Licensees must establish, maintain and implement a private key storage policy to ensure effective and prudent safekeeping of the seed and private key at all times. In particular, such policy must address:(a) The keyman risk associated with the storage of seed and private key is appropriately addressed;(b) The seed and private key can be retrieved at a short notice without excessive reliance on one or more individuals who may be unavailable due to death, disability or other unforeseen circumstances; and(c) Where alicensee maintains a physical copy of the seed and private key, the physical copies of seed and private key must be maintained in Bahrain in a secure and indestructible manner and the same can be used to access the wallets if a need arises.The private key storage policy along with other documents and evidences confirming that the seed and private key are held securely must be made available to the CBB upon request.
Added: April 2023CRA-5.5 CRA-5.5 Origin and Destination of Crypto-asset
CRA-5.5.1
Licensees must consider using technology solutions and other systems to adequately meet anti-money laundering, financial crime and know-your-customer requirements.Added: April 2019CRA-5.5.2
Licensees must develop, implement and maintain effective transaction monitoring systems to determine the origin of acrypto-asset , to monitor its destination and to apply strong “know your transaction” measures which enable thelicensees to have complete granular data centric information about the transactions conducted by a client.Added: April 2023CRA-5.5.3
Licensees must be vigilant and establish internal processes and indicators to identifycrypto-assets that may have been tainted i.e. used for an illegal purpose (for example, certain client or use of “mixer” and “tumbler” services).Added: April 2023CRA-5.6 CRA-5.6 Planned and Unplanned System Outages
CRA-5.6.1
Licensees must have multiple communication channels to ensure that its clients are informed, ahead of time, of any outages which may affect them.Added: April 2019CRA-5.6.2
Licensees must have clear, publicly available, procedures articulating the process in the event of an unplanned outage. During an unplanned outage,licensees must be able to rapidly disseminate key information and updates on a frequent basis.Added: April 2019CRA-5.6.3
Licensees should have a programme of planned systems outages to provide for adequate opportunities to perform updates and testing.Added: April 2019CRA-5.7 CRA-5.7 [This Section was deleted in April 2023]
CRA-5.7.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.7.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.7.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8 CRA-5.8 Cyber Security
General Requirements
CRA-5.8.1
A
licensee must establish and maintain an effective cyber security program to ensure the availability and functionality of thelicensee's electronic systems and to protect those systems and any sensitive data stored on those systems from unauthorized access, use, or tampering. The cyber security program must be designed to perform, at the minimum, the following five core cyber security functions:(a) identify internal and externalcyber security risks by, at a minimum, identifying the information stored on thelicensee's systems, the sensitivity of such information, and how and by whom such information may be accessed;(b) protect thelicensee's electronic systems, and the information stored on those systems, from unauthorized access, use, or other malicious acts through the use of defensive infrastructure and the implementation of policies and procedures;(c) detect system intrusions, data breaches, unauthorized access to systems or information,malware , and other cyber security events;(d) respond to detected cyber security events to mitigate any negative effects; and(e) recover from cyber security events and restore normal operations and services.Amended: April 2023
Amended: January 2020
Added: April 2019CRA-5.8.1A
Licensees must have a robust cyber security risk management framework that encompasses, at a minimum, the following components:(a) Cyber security strategy;(b) Cyber security policy; and(c) Cyber security risk management approach, tools and methodology and, an organization-wide security awareness program.Added: April 2023CRA-5.8.1B
The cyber security risk management framework must be developed in accordance with the National Institute of Standards and Technology (NIST) Cyber security framework which is summarized in Appendix A – Cyber security Control Guidelines. Broadly, the cyber security risk management framework should be consistent with the licensee’s risk management framework.
Added: April 2023CRA-5.8.1C
Senior management, and where appropriate, the boards, should receive comprehensive reports, covering cyber security issues such as the following:
(a) Key Risk Indicators/ Key Performance Indicators;(b) Status reports on overall cyber security control maturity levels;(c) Status of staff Information Security awareness;(d) Updates on latest internal or relevant external cyber security incidents; and(e) Results from penetration testing exercises.Added: April 2023CRA-5.8.1D
Licensees may establish a cyber security committee that is headed by an independent senior manager from a control function (like CRO), with appropriate authority to approve policies and frameworks needed to implement the cyber security strategy, and act as a governance committee for the cyber security function. Membership of this committee should include senior management members from business functions, IT, Risk and Compliance.Added: April 2023Roles and Responsibilities of the Board
CRA-5.8.2
The board must provide oversight and accord sufficient priority and resources to manage
cyber security risk , as part of thelicensee's overall risk management framework.Amended: January 2020
Added: April 2019CRA-5.8.3
In discharging its oversight functions, the board must:
(a) ensure that thelicensee's strategy, policy and risk management approach relating to cyber security are presented for the board's deliberation and approval;(b) ensure that the approvedcyber security risk policies and procedures are implemented by the management;(c) monitor the effectiveness of the implementation of thelicensee's cyber security risk policies and procedures and ensure that such policies and procedures are periodically reviewed, improved and updated, where required. This may include setting performance metrics or indicators, as appropriate, to assess the effectiveness of the implementation ofcyber security risk policies and procedures;(d) ensure that adequate resources are allocated to manage cyber security including appointing a qualified person as Chief Information Security Officer ("CISO") with appropriate authority to implement the cyber security strategy. The CISO is the person responsible and accountable for the effective management of cyber security;(e) [This Subparagraph was deleted in April 2023];(f) ensure that the impact ofcyber security risk is adequately assessed when undertaking new activities, including but not limited to any new products, investment decision, merger and acquisition, adoption of new technology and outsourcing arrangements; and(g) ensure that the board keeps itself updated and is aware of new or emerging trends ofcyber security threats , and understand the potential impact of such threats to thelicensee .(h) Ensure that the management continues to promote awareness on cyber resilience at all levels within the entity;(i) Ensure that the impact ofcyber security risk is adequately assessed when undertaking new activities, including but not limited to any new products, investments decision, merger and acquisition, adoption of new technology and outsourcing arrangements; and(j) Ensure that the board keeps itself updated and is aware of new or emerging trends ofcyber security threats and understand the potential impact of such threats to thelicensee .Amended: April 2023
Amended: January 2020
Added: April 2019Roles and Responsibilities of the Management
CRA-5.8.4
The management is responsible for:
(a) Establishing and implementing cyber security policies and procedures that commensurate with the level ofcyber security risk exposure and its impact on thelicensee . These policies and procedures must take into account the following:(i) The sensitivity and confidentiality of data which thelicensee maintains;(ii) Vulnerabilities of thelicensee's information systems and operating environment across thelicensee ; and(iii) The existing and emergingcyber security threats .(b) ensuring that employees, agents (where relevant) and third party service providers are aware and understand thecyber security risk policies and procedures, the possible impact of variouscyber security threats and their respective roles in managing such threats;(c) recommending to the board on appropriate strategies and measures to managecyber security risk , including making necessary changes to existing policies and procedures, as appropriate; and(d) reporting to the board of any cyber security breaches and periodically update the board on emergingcyber security threats and their potential impact on the entity.Amended: April 2023
Amended: January 2020
Added: April 2019CRA-5.8.4A
Management must ensure that:
(a) Thelicensee has identified clear internal ownership and classification for all information assets and data;(b) Thelicensee has maintained an inventory of the information assets and data which is reviewed and updated regularly;(c) Employees responsible for cyber security are adequate to manage thelicensee’s cyber security risks and facilitate the performance and continuous improvement of all relevant cyber security controls; and(d) It provides and requires employees involved in cyber security to attend regular cyber security update and training sessions (for example Security+, CEH, CISSP, CISA, CISM, CCSP) to stay abreast of changing cyber security threats and countermeasures.Added: April 2023CRA-5.8.4B
With respect to Paragraph CRA-5.8.4A(a), data classification entails analyzing the data the licensee retains, determining its importance and value, and then assigning it to a category. When classifying data, the following aspects should be determined:
(a) Who has access to the data;(b) How the data is secured;(c) How long the data is retained (this includes backups);(d) What method should be used to dispose of the data;(e) Whether the data needs to be encrypted; and(f) What use of the data is appropriate.The general guideline for data classification is that the definition of the classification should be clear enough so that it is easy to determine how to classify the data. The owner of data (i.e. the relevant business function) should be involved in such classification.
Added: April 2023Cyber Security Strategy
CRA-5.8.4C
An organisation-wide cyber security strategy must be defined and documented to include:
(a) The position and importance of cyber security at thelicensee ;(b) The primary cyber security threats and challenges facing thelicensee ;(c) Thelicensee’s approach to cyber security risk management;(d) The key elements of the cyber security strategy including objectives, principles of operation and implementation approach;(e) Scope of risk identification and assessment, which must include the dependencies on third party service providers;(f) Approach to planning response and recovery activities; and(g) Approach to communication with internal and external stakeholders, including sharing of information on identified threats and other intelligence among industry participants.Added: April 2023CRA-5.8.4D
The cyber security strategy should be communicated to the relevant stakeholders and it should be revised as necessary and, at least, once every three years. Appendix A provides cyber security control guidelines that can be used as a reference to support the
licensee ’s cyber security strategy and cyber security policy.Added: April 2023Cyber Security Risk Policy
CRA-5.8.5
Licensees must implement a writtencyber security risk policy setting out thelicensee's Board approved policies and related procedures that are approved by senior management, for the protection of its electronic systems andclient data stored on those systems. This policy must be reviewed and approved by thelicensee's board of directors at least annually. The cyber security policy, among others, must address the following areas:(a) A statement of thelicensee ’s overall cyber risk tolerance as aligned with thelicensee ’s business strategy. The cyber risk tolerance statement should be developed through consideration of the various impacts of cyber threats including customer impact, service downtime, recovery time objectives and occurrence/severity of cyber security breaches. The statement must also consider the impact on clients, potential negative media publicity, potential regulatory penalties, financial loss etc.;(b) Strategy and measures to managecyber security risk encompassing prevention, detection and recovery from a cyber security breach;(c) Roles, responsibilities and lines of accountabilities of the board, the board committees, person responsible and accountable for effective management ofcyber security risk and key personnel involved in functions relating to the management of cyber security risk (such as information technology and security, business units and operations, risk management, business continuity management and internal audit);(d) Processes and procedures for the identification, detection, assessment, prioritisation, containment, response to, and escalation of cyber security breaches for decision-making;(e) Processes and procedures for the management of outsourcing, system development and maintenance arrangements with third-party service providers, including requirements for such third-party service providers to comply with thelicensee's cyber security risk policy;(f) Communication procedures that will be activated by thelicensee in the event of a cyber security breach, which include reporting procedures, information to be reported, communication channels, list of internal and external stakeholders and communication timeline; and(g) Other key elements of the information security andcyber security risk management including the following:(i) information security;(ii) data governance and classification;(iii) access controls;(iv) business continuity and disaster recovery planning and resources;(v) capacity and performance planning;(vi) systems operations and availability concerns;(vii) systems and network security;(viii) systems and application development and quality assurance;(ix) physical security and environmental controls;(x) client data privacy;(xi) vendor and third-party service provider management;(xii) monitoring and implementing changes to core protocols not directly controlled by thelicensee , as applicable;(xiii) incident response; and(xiv) System audit.Amended: April 2023
Amended: January 2020
Added: April 2019Cyber Security Risk Measure
CRA-5.8.6
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8.7
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Prevention
CRA-5.8.8
A
licensee must conduct regular assessments as part of thelicensee's compliance programme to identify potential vulnerabilities andcyber security threats in its operating environment which could undermine the security, confidentiality, availability and integrity of the information assets, systems and networks.Amended: January 2020
Added: April 2019CRA-5.8.9
The assessment of the vulnerabilities of the
licensee's operating environment must be comprehensive, including making an assessment of potential vulnerabilities relating to the personnel, parties with whom alicensee deals with, systems and technologies adopted, business processes and outsourcing arrangements.Added: April 2019CRA-5.8.10
A
licensee must develop and implement preventive measures to minimise thelicensee's exposure tocyber security risk .Added: April 2019CRA-5.8.11
Preventive measures referred to in Paragraph CRA-5.8.10 above must include, at a minimum, the following:
(a) Deployment of End Point Protection (EPP) and End Point Detection and Response (EDR) including anti-virus software andmalware programs to detect, prevent and isolate malicious code;(b) Layering systems and systems components;(c) Use of firewalls for network segmentation including use of Web Application Firewalls (WAF), where relevant, for filtering and monitoring HTTP traffic between a web application and the Internet, and access control lists to limit unauthorized system access between network segments;(d) Rigorous testing at software development stage as well as after deployment to limit the number of vulnerabilities;(e) Penetration testing of existing systems and networks;(f) Use of authority matrix to limit privileged internal or external access rights to systems and data;(g) Use of a secure email gateway to limit email based cyber attacks such as malware attachments, malicious links, and phishing scams (for example use of Microsoft Office 365 Advanced Threat Protection tools for emails);(h) Use of a Secure Web Gateway to limit browser based cyber-attacks, malicious websites and enforce organization policies;(i) Creating a list of whitelisted applications and application components (libraries, configuration files, etc.) that are authorized to be present or active on the organization’s systems; and(j) Implementing Bring Your Own Device “BYOD” security policies to secure all mobile devices with any access to licensee systems, applications, and networks through security measures such as encryption, remote wipe capabilities, and password enforcement.Amended: April 2023
Added: April 2019CRA-5.8.11A
Licensees should also implement the following prevention controls in the following areas:(a) Data leakage prevention to detect and prevent confidential data from leaving the licensee’s technology environment;(b) Controls to secure physical network ports against connection to computers which are unauthorised to connect to thelicensee’s network or which do not meet the minimum-security requirements defined forlicensee computer systems (e.g. Network access control); and(c) Identity and access management controls to limit the exploitation and monitor the use of privileged and non-privileged accounts.Added: April 2023CRA-5.8.11B
Licensees must set up anti-spam and anti-spoofing measures to authenticate thelicensee ’s mail server and to prove to ISPs, mail services and other receiving mail servers that senders are truly authorized to send the email. Examples of such measures include:(a) SPF “Sender Policy Framework”;(b) DKIM “Domain Keys Identified Mail”; and(c) DMARC “Domain-based Message Authentication, Reporting and Conformance”.Added: April 2023CRA-5.8.11C
Licensees should subscribe to one of the Cyber Threat Intelligence services in order to stay abreast of emerging cyber threats, cybercrime actors and state of the art tools and security measures.Added: April 2023CRA-5.8.11D
Licensees must use a single unified private email domain or its subdomains for communication with clients to prevent abuse by third parties.Licensees must not utilise third-party email provider domains for communication with clients. The email domains must comply with the requirements of Paragraph OM-5.8.11B with respect to SPF, DKIM and DMARC.Added: April 2023CRA-5.8.11E
For the purpose of Paragraph CRA-5.8.11D,
licensees with subsidiaries or branches outside Bahrain will be allowed to use additional domains subject to CBB’s review.Licensees may be allowed, subject to CBB’s review, for their clients to receive emails from third-party service providers for specific services offered by such third-parties provided the clients were informed and agreed on such an arrangement. Examples of such third-party services include informational subscription services and document management services.Added: April 2023CRA-5.8.11F
Licensees must comply with the following requirements with respect to URLs or other clickable links in communications with clients:(a) Limit the use of links in SMS and other short messages (such as WhatsApp) to messages sent as a result of client request or action. Examples of such client actions include verification links for client onboarding, payment links for client-initiated transactions etc;(b) Refrain from using shortened links in communication with clients;(c) Implement measures to allow clients to verify the legitimacy of the links which may include:(i) clear instructions on thelicensee’s website/app where the link is sent as a result of client action on the licensee’s website/app;(ii) communication with client such as a phone call informing the client to expect a link from thelicensee ;(iii) provision of transaction details such as the transaction amount and merchant name in the message sent to the client with the link;(iv) use of other verification measures like OTP, password or biometric authentication; and(d) Create client awareness campaigns to educate their clients on the risk of fraud related to links they receive in SMS, short messages and emails with clear instructions to clients thatlicensees will not send clickable links in SMS, emails and other short messages to request information or payments unless it is as a result client request or action.Licensees may also train their clients by sending fake phishing messages.Added: April 2023CRA-5.8.12
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8.13
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Cyber Risk Identification and Assessments
CRA-5.8.13A
Licensees must conduct periodic assessments of cyber threats. For the purpose of analysing and assessing current cyber threats relevant to thelicensee , it should take into account the factors detailed below:(a) Cyber threat entities including cyber criminals, cyber activists, insider threats;(b) Methodologies and attack vectors across various technologies including cloud, email, websites, third parties, physical access, or others as relevant;(c) Changes in the frequency, variety, and severity of cyber threats relevant to the region;(d) Dark web surveillance to identify any plot for cyber attacks;(e) Examples of cyber threats from past cyber-attacks on thelicensee where applicable; and(f) Examples of cyber threats from recent cyber-attacks on other organisations.Added: April 2023CRA-5.8.13B
Licensees must conduct periodic assessments of the maturity, coverage, and effectiveness of all cyber security controls. Cyber security control assessment must include an analysis of the controls’ effectiveness in reducing the likelihood and probability of a successful attack.Added: April 2023CRA-5.8.13C
Licensees should ensure that the periodic assessments of cyber threats and cyber security controls cover all critical technology systems. A risk treatment plan should be developed for all residual risks which are considered to be above thelicensee ’s risk tolerance levels.Added: April 2023CRA-5.8.13D
Licensees must conduct regular technical assessments to identify potential security vulnerabilities for systems, applications, and network devices. The vulnerability assessments must be comprehensive and cover internal technology, external technology, and connections with third parties. Preferably, monthly assessments should be conducted for internal technology and weekly or more frequent assessments for external public facing services and systems.Added: April 2023CRA-5.8.13E
With respect to Paragraph CRA-5.8.13D, external technology refers to the
licensee ’s public facing technology such as websites, apps and external servers. Connections with third parties includes any API or other connections with fintech companies, technology providers, outsourcing service providers etc.Added: April 2023CRA-5.8.13F
Licensees must have in place vulnerability and patch management processes which include remediation processes to ensure that the vulnerabilities identified are addressed and that security patches are applied where relevant within a timeframe that is commensurate with the risks posed by each vulnerability.Added: April 2023CRA-5.8.13G
All
licensees must perform vulnerability assessment and penetration testing of their systems, applications, and network devices to verify the robustness of the security controls in place at least twice a year. These tests must be used to simulate real world cyber-attacks on the technology environment and must:(a) Follow a risk-based approach based on an internationally recognized methodology, such as National Institute of Standards and Technology “NIST” and Open Web Application Security Project “OWASP”;(b) Include both Grey Box and Black Box testing in its scope;(c) Be conducted by qualified and experienced security professionals who are certified in providing penetration testing services;(d) Be performed internally at periodic intervals by employees having adequate expertise and competency in such testing;(e) Be performed, twice a year, by external independent third parties who are rotated out at least every two years; and(f) Be performed on either the production environment or on non-production exact replicas of the production environment.Added: April 2023CRA-5.8.13H
The CBB may require additional third-party security reviews to be performed as needed.
Added: April 2023CRA-5.8.13I
The time period between two consecutive penetration test and the vulnerability assessment by an independent third party, referred to in Paragraph CRA-5.8.13G(e) must be 6 months and the report on such testing must be provided to CBB within two months following the end of the month where the testing took place. The vulnerability assessment and penetration testing reports must include the vulnerabilities identified and a full list of ‘passed’ tests and ‘failed’ tests together with the steps taken to mitigate the risks identified.
Added: April 2023Cyber Incident Detection and Management
CRA-5.8.14
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8.14A
Licensees must implement cyber security incident management processes to ensure timely detection, response and recovery for cyber security incidents. This includes implementing a monitoring system for log correlation and anomaly detection.Added: April 2023CRA-5.8.14B
Licensees should receive data on a real time basis from all relevant systems, applications, and network devices including operational and business systems. The monitoring system should be capable of identifying indicators of cyber incidents and initiate alerts, reports, and response activities based on the defined cyber security incident management process.Added: April 2023CRA-5.8.14C
Licensees should retain the logs and other information from the monitoring system for detecting cyber incidents, including "low-and-slow" attacks, in order to facilitate incident investigations, for 12 months or longer.Added: April 2023CRA-5.8.14D
Once a cyber incident is detected,
licensees should activate their containment measures, processes and technologies best suited to each type of cyber incident to prevent a cyber incident from inflicting further damage. This may involve, after considering the costs, business impact and operational risks, shutting down or isolating all or affected parts of their systems and networks as deemed necessary for containment and diagnosis.Added: April 2023CRA-5.8.14E
Licensees must define roles and responsibilities and assign adequate resources to detect, identify, investigate and respond to cyber incidents that could impact the licensee’s infrastructure, services and clients. Such responsibilities must include log correlation, anomaly detection and maintaining thelicensee ’s asset inventory and network diagrams.Added: April 2023CRA-5.8.14F
Licensees must regularly identify, test, review and update current cyber security risk scenarios and the corresponding response plan. This is to ensure that the scenarios and response plan remain relevant and effective, taking into account changes in the operating environment, systems or the emergence of new cyber security threats. If any gaps are identified, the monitoring system must be updated with new use cases and rule sets which are capable of detecting the current cyber incident scenarios.Added: April 2023CRA-5.8.14G
The cyber incident scenario tests should include high-impact-low-probability events and scenarios that may result in failure. Common cyber incident scenarios include distributed denial of service (DDoS) attacks, system intrusion, data exfiltration and system disruption.
Licensees should regularly use threat intelligence to update the scenarios so that they remain current and relevant.Licensees should periodically review current cyber incident scenarios for the purpose of assessing the licensee’s ability to detect and respond to these scenarios if they were to occur.Added: April 2023CRA-5.8.14H
Licensees must ensure that critical cyber security incidents detected are escalated to an incident response team, management and the Board, in accordance with thelicensee ’s business continuity plan and crisis management plan, and that an appropriate response is implemented promptly. See also Paragraph CRA-5.8.33 for the requirement to report to the CBB.Added: April 2023CRA-5.8.14I
Licensees should clearly define the roles, responsibilities and accountabilities for cyber incident detection and response activities to one or more named individuals that meet the pre-requisite role requirements. Potential conflicts of interest are minimised by ensuring a separation of implementation and oversight roles where possible. The roles should include:(a) Incident Owner: An individual who is responsible for handling the overall cyber incident detection and response activities according to the incident type and services affected. The Incident Owner is delegated appropriate authority to manage the mitigation or preferably, removal of all impacts due to the incident.(b) Spokesperson: An individual, who is responsible for managing the communications strategy by consolidating relevant information and views from subject matter experts and thelicensee’s management to update the internal and external stakeholders with consistent information.(c) Record Keeper: An individual who is responsible for maintaining an accurate record of the cyber incident throughout its different phases, as well as documenting actions and decisions taken during and after a cyber incident. The record should serve as an accurate source of reference for after-action reviews to improve future cyber incident detection and response activities.Added: April 2023CRA-5.8.14J
For the purpose of managing a critical cyber incident, the licensee should operate a situation room, and should include in the incident management procedure a definition of the authorities and responsibilities of staff members, internal and external reporting lines, communication channels, tools and detailed working procedures. The situation room or a war room is a physical room or a virtual room where relevant members of the management gather to handle a crisis in the most efficient manner possible.
Added: April 2023CRA-5.8.14K
Licensees should record and document in an orderly manner the incidents that have been handled and the actions that were taken by the relevant functions. In particular, thelicensee should maintain an "incident log" in which all the notifications, decisions and actions taken, in relation to cyber incidents, are documented, as close as possible to the time of their occurrence. It should also include the status of the issue whether it is open or has been resolved and the person in charge of resolving the issue/incident. The logs should be stored and preserved in a secure and legally admissible manner.Added: April 2023CRA-5.8.14L
Licensees should utilise pre-defined taxonomy for classifying cyber incidents according to, for example, the type of incident, threat actors, threat vectors and repercussions; and a pre-established severity assessment framework to help gauge the severity of the cyber incident. For example, taxonomies that can be used when describing cyber incidents:(a) Describe the cause of the cyber incident (e.g. process failure, system failure, human error, external event, malicious action).(b) Describe whether the cyber incident is due to a third-party service provider.(c) Describe the attack vector (e.g. malware, virus, worm, malicious hyperlink).(d) Describe the delivery channel used (e.g. e-mail, web browser, removable storage media).(e) Describe the impact (e.g. service degradation/disruption, service downtime, potential impact to clients, data leakage, unavailability of data, data destruction/corruption, reputational damage).(f) Describe the type of incident (e.g. zero-day attack, exploiting a known vulnerability, isolated incident).(g) Describe the intent (e.g. malicious, theft, monetary gain, fraud, political, espionage, opportunistic).(h) Describe the threat actor (e.g. script kiddies, amateur, criminal syndicate, hacktivist, nation state).The cyber incident severity may be classified as:
(a) Severity 1 incident has caused or will cause a serious disruption or degradation of critical service(s) and there is potentially high impact on public confidence in thelicensee .(b) Severity 2 incident has or will cause some degradation of critical services and there is medium impact on public confidence in thelicensee .(c) Severity 3 incident has little or no impact to critical services and there is no visible impact on public confidence in thelicensee .Added: April 2023CRA-5.8.14M
Licensees should determine the effects of the cyber incident on clients and to the wider financial system as a whole and report the results of such an assessment to the CBB if it is determined that the cyber incident may have a systemic impact.Added: April 2023CRA-5.8.14N
Licensees should establish metrics to measure the impact of a cyber incident and to report to management the performance of response activities. Examples include:(a) Metrics to measure impact of a cyber incident:(i) Duration of unavailability of critical functions and services;(ii) Number of stolen records or affected accounts;(iii) Volume of clients impacted;(iv) Amount of lost revenue due to business downtime, including both existing and future business opportunities; and(v) Percentage of service level agreements breached.(b) Performance metrics for incident management:(i) Volume of incidents detected and responded via automation;(ii) Dwell time (i.e. the duration a threat actor has undetected access until completely removed); and(iii) Recovery Point objectives (RPO) and recovery time objectives (RTO) satisfied.Added: April 2023CRA-5.8.15
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019CRA-5.8.16
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019CRA-5.8.17
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019CRA-5.8.18
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8.19
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019CRA-5.8.19A
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: January 2020CRA-5.8.20
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8.20A
Licensees must identify the critical systems and services within its operating environment that must be recovered on a priority basis in order to provide certain minimum levels of service during the downtime and determine how much time thelicensee will require to return to full service and operations.Added: April 2023CRA-5.8.20B
Critical incidents are defined as incidents that trigger the BCP and the crisis management plan. Critical systems and services are those whose failure can have material impact on any of the following elements:
(a) Financial situation;(b) Reputation;(c) Regulatory, legal and contractual obligations;(d) Operational aspects; and(e) Delivery of key products and services.Added: April 2023CRA-5.8.20C
Licensees must define a program for recovery activities for the purpose of timely restoration of any capabilities or services that were impaired due to a cyber security incident.Licensees must establish recovery time objectives (“RTOs”), i.e. the time within which the intended process is to be covered, and recovery point objectives (“RPOs”), i.e. point to which information used must be restored to enable the activity to operate on resumption.Licensees must also consider the need for communication with third party service providers, clients and other relevant external stakeholders as may be necessary.Added: April 2023CRA-5.8.20D
Licensees must ensure that all critical systems are able to recover from a cyber security breach within thelicensee ’s defined RTO in order to provide important services or some level of minimum services for a temporary period of time.Added: April 2023CRA-5.8.20E
Licensees should validate that recovered assets are free of compromise, fully functional and meet the security requirements before returning the systems to normal business operations. This includes performing checks on data to ensure data integrity. In some cases,licensees may need to use backup data kept in a disaster recovery site or plan for the reconstruction of data from external stakeholders such as business partners and clients.Added: April 2023CRA -5.8.20F
Licensees must define a program for exercising the various response mechanisms, taking into account the various types of exercises such as attack simulations, "war games" and "tabletop" exercises, and with reference to the relevant stakeholders such as technical staff, crisis management team, decision-makers and spokespersons.Added: April 2023CRA-5.8.20G
Licensees must define the mechanisms for ensuring accurate, timely and actionable communication of cyber incident response and recovery activities with the internal stakeholders, including to the board or designated committee of the board.Added: April 2023CRA-5.8.21
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8.22
A
licensee must ensure its business continuity plan is comprehensive and includes a recovery plan for its systems, operations and services arising from acyber security incident breach.Amended: April 2023
Added: April 2019Chief Information Security Officer
CRA-5.8.23
A
licensee 's CISO, as referred to in Paragraph CRA-5.8.3(d), is responsible for overseeing and implementing thelicensee 's cyber security program and enforcing its cyber security policy. The CISO must report to an independent risk management function or thelicensee must incorporate the responsibilities of cyber security risk into the risk management function.Amended: April 2023
Added: April 2019CRA-5.8.24
[This Paragraph was deleted in January 2020]
Deleted: January 2020
Added: April 2019IT System Audit
CRA-5.8.25
[This Paragraph was deleted in January 2020]
Deleted: January 2020
Added: April 2019CRA-5.8.25A
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: January 2020CRA-5.8.26
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-5.8.27
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019Application Security
Personnel and Intelligence
Cyber Risk Insurance
CRA-5.8.28
A
licensee , based on the assessment ofcyber security risk exposure and with an objective to mitigatecyber security risk , must evaluate and consider the option of availing cyber risk insurance. The evaluation process to determine suitability of cyber risk insurance as a risk mitigant must be undertaken on a yearly basis and be documented by thelicensee .Added: January 2020CRA-5.8.29
The cyber risk insurance policy, referred to in Paragraph CRA-5.8.28, may include some or all of the following types of coverage, depending on the risk assessment outcomes:
(a) Crisis management expenses, such as costs of notifying affected parties, costs of forensic investigation, costs incurred to determine the existence or cause of a breach, regulatory compliance costs, costs of analysing thelicensee’s legal response obligations;(a) Claim expenses such as costs of defending lawsuits, judgments and settlements, and costs of responding to regulatory investigations;(b) Coverage for a variety of torts, including invasion of privacy or copyright infringement; and(c) Coverages relating to loss of revenue due to interruption of data systems resulting from a cyber or denial of service attack and other costs associated with the loss of data collected by thelicensee .Amended: April 2023
Added: January 2020Training and Awareness
CRA-5.8.30
Licensees must evaluate improvement in the level of awareness and preparedness to deal with cyber security risk to ensure the effectiveness of the training programmes implemented.Added: April 2023CRA-5.8.31
The
licensee must ensure that all employees receive adequate training on a regular basis, in relation to cyber security and the threats they could encounter, such as through testing employee reactions to simulated cyber-attack scenarios. All relevant employees must be informed on the current cyber security breaches and threats. Additional training should be provided to ‘higher risk staff’.Added: April 2023CRA-5.8.32
The
licensees must ensure that role specific cyber security training is provided on a regular basis to relevant staff including:(a) Executive board and senior management;(b) Cyber security roles;(c) IT staff; and(d) Any high-risk staff as determined by thelicensee .Added: April 2023Reporting to the CBB
CRA-5.8.33
Upon occurrence or detection of any
cyber security incident or detection of any unplanned outages, whether internal or external, that compromises client information or disrupts critical services that affect operations,licensees must contact the CBB, immediately (within one hour), on 17547477 and submit Section A of the Cyber Security Incident Report (Appendix-B) to the CBB’s cyber incident reporting email, incident.cra@cbb.gov.bh, as soon as possible, but not later than two hours, following occurrence or detection of any cyber incidents.Added: April 2023CRA-5.8.34 CRA-5.8.34
Following the submission referred to in Paragraph CRA 5.8.33, the
licensee must submit to the CBB Section B of the Cyber Security Incident Report (Appendix B) within 10 calendar days of the occurrence of the cyber security incident.Licensees must include all relevant details in the report, including the full root cause analysis of the cyber security incident, its impact on the business operations and clients, and all measures taken by the licensee to stop the attack, mitigate its impact and to ensure that similar events do not recur. In addition, a weekly progress update must be submitted to CBB until the incident is fully resolved.Added: April 2023CRA-5.8.35
With regards to the submission requirement mentioned in Paragraph CRA-5.8.34, the
licensee should submit the report with as much information as possible even if all the details have not been obtained yet.Added: April 2023CRA-5.8.36
The vulnerability assessment and penetration testing report (see Paragraph CRA-5.8.13I), along with the steps taken to mitigate the risks must be maintained by the
licensee for a five-year period from the date of the report.Added: April 2023CRA-5.9 Cyber Hygiene Practices
Multi Factor Authentication
CRA-5.9.1
Licensees must ensure that everyclient account is secured to prevent any unauthorized access to or use of client account.Added: October 2023CRA-5.9.2
Licensees must use multi-factor authentication (two or more factors) to authenticate the identity and authorisation ofclients with whom it conducts business.Licensees must, at a minimum, establish adequate security features forclient authentication including the use of at least two of the following three elements:(a) Knowledge (something that only the user knows), such as a pin or password;(b) Possession (something only the user possesses such as a mobile phone, smart watch, smart card or a token; and(c) Inherence (something that the user is), such as fingerprint, facial recognition, voice patterns, DNA signature and iris format.Added: October 2023CRA-5.9.3
Licensees must ensure that at least one of the factors for authentication referred to in Paragraph CRA-5.9.2 is a dynamic or non-replicable factor unless one of the factors is inherence.Added: October 2023CRA-5.9.4
For the purpose of CRA-5.9.2,
licensees must ensure that the authentication elements are independent from each other, in that the breach of one does not compromise the reliability of the other and are sufficiently complex to prevent forgery.Added: October 2023CRA-6 CRA-6 Risk Management
CRA-6.1 CRA-6.1 Board of Directors' Responsibility
CRA-6.1.1
The Board of Directors of
licensees are responsible for the establishment of an adequate and effective framework for identifying, monitoring and managing risks across all its operations.Amended: April 2023
Added: April 2019CRA-6.1.2
The CBB expects the Board to be able to demonstrate that it provides suitable oversight and establishes, in relation to all the risks the
licensee is exposed to, a risk management framework that includes setting and monitoring policies, systems, tools and controls.Added: April 2019CRA-6.1.3
Although authority for the management of a firm's risks is likely to be delegated, to some degree, to individuals at all levels of the organisation, the overall responsibility for this activity should not be delegated from its governing body and relevant senior managers.
Added: April 2019CRA-6.1.4
A
licensee 's failure to establish, in the opinion of the CBB, an adequate risk management framework will result in it being in breach of Condition 6 of the Licensing Conditions. This failure may result in the CBB withdrawing or imposing restrictions on thelicensee , or thelicensee being required to inject more capital.Amended: April 2023
Added: April 2019CRA-6.1.5
The Board of Directors must also ensure that there is adequate documentation of the
licensee's risk management framework.Added: April 2019Systems and Controls
CRA-6.1.6
The risk management framework of
licensee must provide for the establishment and maintenance of effective systems and controls as are appropriate to their business, so as to identify, measure, monitor and manage risks.Added: April 2019CRA-6.1.7
An effective framework for risk management should include systems to identify, measure, monitor and control all major risks on an on-going basis. The risk management systems should be approved and periodically reviewed by the Board.
Added: April 2019CRA-6.1.8
The systems and controls required under Paragraph CRA-6.1.6 must be proportionate to the nature, scale and complexity of the
licensee’s activities.Amended: April 2023
Added: April 2019CRA-6.1.9
The processes and systems required must enable the
licensee to identify the major sources of risk to its ability to meet its liabilities as they fall due, including the major sources of risk in each of the following categories:(a) Counterparty risk;(b) Market risk;(c) Liquidity risk;(d) Operational risk includingcyber security risk ;(e) Outsourcing risk;(f) Group risk; and(g) Any additional categories relevant to its business.Amended: April 2023
Added: April 2019CRA-6.1.10
Licensees must establish and maintain a risk management function that operates independently and which has sufficient authority and resources, including access to the Board of Directors, to facilitate the carrying out of the following tasks:(a) The implementation of the risk management framework and maintenance of effective systems and controls referred to in Paragraph CRA-6.1.6;(b) The provision of reports and advice to senior management;(c) The development of thelicensee 's risk strategy; and(d) Direct communication with the Board of Directors, independently from thelicensee 's senior management, regarding concerns, where specific risk developments affect or may affect thelicensee , without prejudice to the responsibilities of the Board of Board in its supervisory and/or managerial functions.Amended: April 2023
Added: April 2019CRA-6.1.11
The CBB may permit a
licensee to establish and maintain a risk management function which does not operate independently, provided this does not give rise to conflicts of interest and thelicensee demonstrates to the CBB that the establishment and maintenance of a dedicated independent risk management function with sole responsibility for the risk management function is not appropriate and proportionate in view of the nature, scale and complexity of its business and the nature and range of theregulated crypto-asset services undertaken in the course of that business.Amended: April 2023
Added: April 2019CRA-6.1.12
Where a
licensee is granted an exemption referred to in Paragraph CRA-6.1.11, thelicensee must nevertheless be able to demonstrate that the policies and procedures which it has adopted in accordance with Paragraph CRA-6.1.6 satisfy the requirements thereof and are consistently effective.Added: April 2019CRA-6.2 CRA-6.2 Counterparty Risk
CRA-6.2.1
Licensees must adequately document the necessary policies and procedures for identifying, measuring, monitoring and controlling counterparty risk. This policy must be approved by the Board of Directors and regularly reviewed by the senior management of thelicensee .Amended: April 2023
Added: April 2019CRA-6.2.2
Among other things, the
licensee's policies and procedures must identify the limits it applies to counterparties, how it monitors movements in counterparty risk and how it mitigates loss in the event of counterparty failure.Added: April 2019CRA-6.3 CRA-6.3 Market Risk
CRA-6.3.1
Licensees must document their framework for the proactive management of market risk foraccepted crypto-assets . This policy must be approved by the Board of Directors and regularly reviewed by the senior management of thelicensee .Amended: April 2023
Added: April 2019CRA-6.3.2
Licensees must ensure that clients, before undertaking transactions, pre-fund their accounts.Added: April 2023CRA-6.3.3
Licensees must not provide any financial assistance to clients to acquire or undertake a transaction incrypto-assets .Added: April 2023CRA-6.4 CRA-6.4 Liquidity Risk
CRA-6.4.1
Licensees must maintain a liquidity risk policy for the management of liquidity risk, which is commensurate to the nature, scale and complexity of its activities. This policy must be approved by the Board of Directors and regularly reviewed by the senior management of thelicensee .Amended: April 2023
Added: April 2019CRA-6.4.2
Among other things, the
licensee's liquidity risk policy must identify the limits it applies, how it monitors movements in risk and how it mitigates loss in the event of unexpected liquidity events.Added: April 2019CRA-6.5 CRA-6.5 Operational Risk
CRA-6.5.1
Licensees must document their framework for the proactive management of operational risk. This policy must be approved by the Board of Directors and regularly reviewed by the senior management of thelicensee .Amended: April 2023
Added: April 2019CRA-6.5.2
Licensees must consider the impact of operational risks on their financial resources and solvency.Added: April 2019CRA-6.5.2A
Licensees must identify possible sources of operational risk, both internal and external, and mitigate their impact through the use of appropriate systems, policies, procedures, and controls. Systems should be designed to ensure a high degree of security and operational reliability including having adequate capacity.Added: April 2023CRA-6.5.2B
Licensees must, among other things:(a) Establish a robust operational risk-management framework with appropriate systems, policies, procedures, and controls to identify, monitor, mitigate and manage operational risks;(b) Have in place clearly defined roles and responsibilities for addressing operational risk;(c) Have in place clearly defined operational reliability objectives and have policies in place that are designed to achieve those objectives;(d) Ensure that it has adequate capacity proportionate to stress volumes to achieve its service-level objectives; and(e) Have a comprehensive physical and information security policy that addresses all potential vulnerabilities and threats.Added: April 2023CRA-6.5.3
Licensees' business continuity planning, risk identification and reporting must cover reasonably foreseeable external events and their likely impact on thelicensee and its business portfolio.Added: April 2019CRA-6.5.4
Business continuity management includes policies, standards, and procedures for ensuring that specified operations can be maintained or recovered in a timely fashion in the event of a disruption. Its purpose is to minimise the operational, financial, legal, reputational and other material consequences arising from a disruption. Effective business continuity management concentrates on the impact, as opposed to the source, of the disruption, which affords financial industry participants and financial authorities greater flexibility to address a broad range of disruptions. At the same time, however,
licensees should not ignore the nature of risks to which they are exposed.Added: April 2019Business Continuity and Disaster Recovery
CRA-6.5.5
Licensees must establish and maintain a written business continuity and disaster recovery plan reasonably designed to ensure the availability and functionality of theLicensee 's services in the event of an emergency or other disruption to theLicensee 's normal business activities. The business continuity and disaster recovery plan, at minimum, must:(a) Identify documents, data, facilities, infrastructure, personnel, and competencies essential to the continued operations of theLicensee 's business;(b) Identify the supervisory personnel responsible for implementing each aspect of the business continuity and disaster recovery plan; include a plan to communicate with essential Persons in the event of an emergency or other disruption to the operations of theLicensee , including employees, counterparties, regulatory authorities, data and communication providers, disaster recovery specialists, and any other Persons essential to the recovery of documentation and data and the resumption of operations;(c) Include procedures for the maintenance of back-up facilities, systems, and infrastructure as well as alternative staffing and other resources to enable the timely recovery of data and documentation and to resume operations as soon as reasonably possible following a disruption to normal business activities;(d) Include procedures for the back-up or copying, with sufficient frequency, of documents and data essential to the operations of theLicensee and storing of the information off site; and(e) Identify third parties that are necessary to the continued operations of theLicensee 's business.Amended: April 2023
Added: April 2019CRA-6.5.6
Licensees must distribute a copy of the business continuity and disaster recovery plan, and any revisions thereto, to all relevant employees and must maintain copies of the business continuity and disaster recovery plan at one or more accessible off-site locations.Amended: April 2023
Added: April 2019CRA-6.5.7
Licensees must provide relevant training to all employees responsible for implementing the business continuity and disaster recovery plan regarding their roles and responsibilities.Amended: April 2023
Added: April 2019CRA-6.5.8
Licensees must immediately notify the CBB of any emergency or other disruption to its operations that may affect its ability to fulfil regulatory obligations or that may have a significant adverse effect on theLicensee , its counterparties, or the market.Amended: April 2023
Added: April 2019CRA-6.5.9
The business continuity and disaster recovery plan must be tested at least annually by qualified, independent internal personnel or a qualified third party, and revised accordingly.
Amended: April 2023
Added: April 2019CRA-6.6 CRA-6.6 Outsourcing Arrangements
CRA-6.6.1
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.
Amended: July 2022
Added: April 2019CRA-6.6.2
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.
Amended: July 2022
Added: April 2019CRA-6.6.3
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:
i. The head office/regional office declares its ultimate responsibility of ensuring that adequate control measures are in place; andii. The head office/regional office is responsible to take adequate rectification measures, including compensation to the affected customers, in cases where customers suffer any loss due to inadequate controls applied by the third-party service provider.Amended: July 2022
Added: April 2019CRA-6.6.4
The licensee must not outsource the following functions:
(i) Compliance;(ii) AML/CFT;(iii) Financial control;(iv) Risk management; and(v) Business line functions offering regulated services directly to the customers (refer to Regulation No. (1) of 2007 and its amendments for the list of CBB regulated services).Amended: July 2022
Added: April 2019CRA-6.6.5
For the purposes of Paragraph CRA-6.6.4, 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 CRA-6.6.7. However, strategic decision-making and managing and bearing the principal risks related to these functions must remain with the licensee.
Amended: July 2022
Added: April 2019CRA-6.6.6
Branches of foreign entities may be allowed to outsource to their head office, the risk management function stipulated in Subparagraph CRA-6.6.4 (iv), subject to CBB’s prior approval.
Amended: July 2022
Added: April 2019CRA-6.6.7
Licensees must comply with the following requirements:(i) Prior CBB approval is required on any outsourcing to a third-party outside Bahrain (excluding cloud data services). The request application must:a. include information on the legal and technical due diligence, risk assessment and detailed compliance assessment; andb. be made at least 30 calendar days before the licensee intends to commit to the arrangement.(ii) Post notification to the CBB, within 5 working days from the date of signing the outsourcing agreement, is required on any outsourcing to an intragroup entity within or outside Bahrain or to a third-party within Bahrain, provided that the outsourced service does not require a license, or to a third-party cloud data services provider inside or outside Bahrain.(iii)Licensees must have in place sufficient written requirements in their internal policies and procedures addressing all strategic, operational, logistical, business continuity and contingency planning, legal and risks issues in relation to outsourcing.(iv)Licensees must sign a service level agreement (SLA) or equivalent with every outsourcing service provider. The SLA must clearly address the scope, rights, confidentiality and encryption requirements, reporting and allocation of responsibilities. The SLA must also stipulate that the CBB, external auditors, internal audit function, compliance function and where relevant the Shari’a coordination and implementation and internal Shari’a audit functions of thelicensee have unrestricted access to all relevant information and documents maintained by the outsourcing service provider in relation to the outsourced activity.(v)Licensees must designate an approved person to act as coordinator for monitoring and assessing the outsourced arrangement.(vi)Licensee must submit to the CBB any report by any other regulatory authority on the quality of controls of an outsourcing service provider immediately after its receipt or after coming to know about it.(vii)Licensee must inform its normal supervisory point of contact at the CBB of any material problems encountered with the outsourcing service provider if they remain unresolved for a period of three months from its identification date.Amended: July 2022
Added: April 2019CRA-6.6.8
For the purpose of Subparagraph CRA-6.6.7 (iv),
licensees as part of their assessments may use the following:a) Independent third-party certifications on the outsourcing service provider’s security and other controls;b) Third-party or internal audit reports of the outsourcing service provider; andc) Pooled audits organized by the outsourcing service provider, jointly with its other clients.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.Amended: July 2022
Added: April 2019CRA-6.6.9
For the purpose of Subparagraph CRA-6.1.7 (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.
Amended: July 2022
Added: April 2019CRA-7 CRA-7 Anti-Money Laundering & Combating of Financial Crime
CRA-7.1 CRA-7.1 [This Chapter was deleted in April 2023]
CRA-7.1.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019CRA-7.1.1A
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: January 2020CRA-7.1.2
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: April 2019CRA-7.1.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019CRA-7.1.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-7.1.5
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Amended: January 2020
Added: April 2019CRA-8 CRA-8 Crypto-asset Custody Services
CRA-8.1 CRA-8.1 General Requirements
CRA-8.1.1
This Section applies to
licensees that undertake safeguarding, storing, holding or maintaining custody ofcrypto-assets as specified in Paragraph CRA-1.1.6(e).Amended: April 2023
Added: April 2019CRA-8.1.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-8.1.3
A
licensee which undertakes safeguarding, storing, holding or maintaining custody ofcrypto-assets must have systems and controls in place to:(a) Ensure the proper safeguarding ofcrypto-assets ;(b) Ensure that such safe custody ofcrypto-assets is identifiable and secure at all times; and(c) Ensure protection against the risk of loss, theft or hacking.Amended: April 2023
Added: April 2019CRA-8.1.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-8.1.5
To the extent a
licensee stores, holds, or maintains custody or control ofcrypto-asset on behalf of a client, suchlicensee must holdcrypto-asset of the same type and amount as that which is owed or obligated to such other client.Amended: April 2023
Added: April 2019CRA-8.1.6
A
licensee is prohibited from selling, transferring, assigning, lending, hypothecating, pledging, or otherwise using or encumberingcrypto-asset stored, held, or maintained by, or under the custody or control of, suchlicensee on behalf of a client except for the sale, transfer, or assignment of suchcrypto-asset at the direction of the client.Amended: April 2023
Added: April 2019CRA-8.1.7
A
licensee that maintains custody or control ofcrypto-asset must avoid conflict of interest between its function as a crypto-asset custodian and any other activities. With an objective to avoid or mitigate actual or potential conflict of interest between its custody function and any other activities, thelicensee must adopt a governance structure that ensures adequate management of conflicts of interest crypto-asset custody activity is fully independent from its other activities. Such governance structure must include, among other things, having separate staffing arrangements to undertake the crypto-asset custody activity, who do not have any conflicting responsibilities within thelicensee’s other activities.Added: April 2023CRA-8.1.8
A
licensee that maintains custody or control ofcrypto-assets on behalf of a client must store, at a minimum, 90% of client’scrypto-assets in cold wallets to minimise exposure to losses arising from a compromise or hacking. The requirement to hold 90% of client’scrypto-assets in cold wallet is to be calculated separately for eachcrypto-asset that is listed on the licensee’s platform and not at aggregate level.Added: April 2023CRA-8.1.9
A
licensee must have a documented policy detailing the mechanism for the transfer ofcrypto-assets between hot, cold and other storage. The scope of authority of each function designated to perform any non-automated processes in such transfers must be clearly specified in the policy document.Added: April 2023Multi-Signature Arrangement
CRA-8.1.10
A
licensee that maintains custody or control ofcrypto-assets must not, at any time, permit arrangements whereby just a party or signatory is able to completely authorise the movement, transfer or withdrawal ofcrypto assets held under custody on behalf of clients. In particular,licensees must not have custody arrangements whereby only a sole person can fully access the private key or keys for thecrypto assets held under custody by thelicensee .Added: April 2023CRA-8.1.11
Licensees that maintain custody or control ofcrypto-assets are required to mitigate the risk of collusion between the authorised persons or signatories who are able to authorise the movement, transfer or withdrawal ofcrypto-assets held under custody.Added: April 2023Other Requirements
CRA-8.1.12
Licensees that maintain custody or control ofcrypto-assets are required to maintain, at all times, an updated list of all past and present authorised persons who were / are able to view, initiate, authorise, sign, approve or complete the transfer or withdrawal ofcrypto assets held under custody on behalf of clients. In addition,licensees must have clearly defined policies and procedures to enable or revoke the authority granted to these persons.Added: April 2023CRA-8.1.13
Licensees that maintain custody or control ofcrypto-assets are required to have policies and procedures in place that clearly describe the process that will be adopted in the event that the licensee comes to know or suspects that thecrypto assets it is holding under custody on behalf for clients have been compromised, such as in the event of a hacking attack, theft or fraud. Such policies and procedures must detail the specific steps thelicensee will take to protect client’scrypto assets in the event of such incidents.Licensees must also have the ability to immediately halt all further transactions with regard to thecrypto assets .Added: April 2023Forks and Air Drops
CRA-8.1.14
Licensees must have written procedures for dealing with events such as forks (hard, soft or temporary forks) or air drops from an operational and technical point of view.Added: April 2023CRA-8.1.15
Where a
licensee supports a new protocol, it must ensure that changes in the underlying protocol of acrypto-asset that result in a fork are managed and tested proactively. This includes temporary forks which should be managed for reverse compatibility for as long as required.Added: April 2023CRA-8.1.16
Where a
licensee supports a new protocol, alicensee must ensure that their clients are able to deposit and withdrawcrypto-assets in and out of the wallet as and when requested before and after a fork (except during go-live). Clients must be notified well in advance of any periods of time when deposits and withdrawals are not feasible.Added: April 2023CRA-8.1.17
Where the underlying protocol of a
crypto-asset is changed, and the older version of thecrypto-asset is no longer compatible with the new version and/or there is an entirely new and separate version of thecrypto-asset (hard fork), alicensee , where it supports a new protocol, must ensure that client balances on the old version are reconciled with the new version of thecrypto-asset . This includes availability of reverse compatibility for as long as required. Alicensee must maintain transparent lines of communication with their clients on how they are managing clientscrypto-asset holdings in such a scenario.Added: April 2023CRA-8.1.18
In the case of a hard fork, a
licensee , where it supports a new protocol, must proactively manage any discrepancy between the balances recorded on the previous version versus the new version by engaging with the entity which is responsible for updating and supporting the underlying protocol of the relevantcrypto-asset . Additionally,licensees must ensure that, where they seek to offer services in relation to thecrypto-asset associated with the new version of the underlying protocol, this newcrypto-asset meets the requirements for acrypto-asset and that they notify the CBB well in advance of offering the newcrypto-asset as part of their activities.Added: April 2023CRA-8.2 CRA-8.2 Custodial Arrangements
CRA-8.2.1
Licensees must provide to the CBB, for prior written approval, details of custodial arrangement put in place to safeguard, store, hold or maintain custody ofcrypto-assets .Amended: April 2023
Added: April 2019CRA-8.2.2
may implement the following three types of custodial arrangements or any other type of custodial arrangement that is acceptable to the CBB:Licensees (a) Thelicensee is wholly responsible for custody of client’scrypto-assets and provides this service “in-house” through its own crypto-assets wallet solution. Such an arrangement includes scenarios where alicensee provides its own in-house proprietary wallet for clients to store anycrypto-assets bought through thatlicensee or transferred into the wallet from other sources.(b) Thelicensee is wholly responsible for the custody of client’scrypto-assets but outsources this service to a third partycrypto-asset custodian. Such an arrangement includes the scenario where alicensee uses a third-party service provider to hold all its clients’accepted crypto-assets (e.g., all or part of the clients’ private keys).(c) Thelicensee wholly allows clients to “self-custodise” theiraccepted crypto-assets . Such an arrangement includes scenarios wherelicensees require clients to self-custodise theircrypto-assets . Suchlicensees only provide the platform for clients to buy and sellcrypto-assets . Clients are required to source and use their own third partycrypto-asset custodians (which thelicensee have no control over or responsibility for). This arrangement also includes the scenario wherelicensees provide an in-house wallet service for clients, but also allow clients to transfer theircrypto-assets out of this wallet to another wallet from a third-party wallet provider chosen by the client (and which thelicensee does not control).Amended: April 2023
Added: April 2019Third Party Crypto-asset Custody Arrangement
CRA-8.2.3
For the purposes of Paragraph CRA-8.2.2(b), where a
licensee provides a third party crypto-asset custodian to a client it must undertake an appropriate risk assessment of that crypto-asset custodian.Licensees must also retain ultimate responsibility for safe custody ofcrypto-assets held on behalf of clients and ensure that they continue to meet all their regulatory obligations with respect to crypto-asset custody service and outsourced activities.Amended: April 2023
Added: April 2019CRA-8.2.4
In undertaking an appropriate risk assessment of the third party
crypto-asset custodian in accordance with Paragraph CRA-8.2.3,licensees should take into account any or all of the following:(a) The expertise and market reputation of the third partycrypto-asset custodian, and once acrypto-asset has been lodged by the licensee with the third partycrypto-asset custodian, thecrypto-asset custodian's performance of its services to thelicensee ;(b) The arrangements, including cyber security measures, for holding and safeguardingcrypto-assets ;(c) An appropriate legal opinion as to the protection ofcrypto-assets in the event of insolvency of the custodian;(d) Whether the third partycrypto-asset custodian is regulated and by whom;(e) The capital or financial resources of the third partycrypto-asset custodian;(f) The credit rating of the third partycrypto-asset custodian; and(g) Any other activities undertaken by the third partycrypto-asset custodian and, if relevant, any affiliated companyAmended: April 2023
Added: April 2019CRA-8.2.5
When assessing the suitability of the third party crypto-asset custodian, the
licensee must ensure that the third partycrypto-asset custodian will provide protections equivalent to the protections specified in this Section and applicableclient asset andclient money protection rules as specified in Chapter CRA-4.5.Amended: April 2023
Added: April 2019CRA-8.2.6
A
licensee that safeguards, stores, holds or maintains custody ofcrypto-assets with a third partycrypto-asset custodian, must establish and maintain a system for assessing the appropriateness of its selection of thecrypto-asset custodian and assess the continued appointment of thatcrypto-asset custodian periodically as often as is reasonable. Thelicensee must make and retain a record of the grounds on which it satisfies itself as to the appropriateness of its selection or, following a periodic assessment, continued appropriateness of thecrypto-asset custodian.Amended: April 2023
Added: April 2019CRA-8.2.7
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Self-Custody Arrangement
CRA-8.2.8
For the purposes of Paragraph CRA-8.2.2(c), the CBB considers scenarios where clients are required to self-custodise their
crypto-assets as being a material risk given that the burden of protecting and safeguardingcrypto-assets falls wholly upon clients, and that thecrypto-assets face the constant risk of being stolen by malicious actors. As such,licensees requiring clients to self-custodisecrypto-assets are required to disclose this fact fully and clearly upfront to clients and meet the disclosure standards as specified in Paragraph CRA-4.5.8.Amended: April 2023
Added: April 2019CRA-8.2.9
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-8.3 CRA-8.3 Crypto Wallets
CRA-8.3.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-8.3.2
For the purposes of this Section,
licensees should consider, at the minimum, the following two types of crypto-asset wallets:(a) Custodial Wallet: the custodial wallet provider holdscrypto-assets (e.g., the private keys) as an agent on behalf of clients and has at least some control over these crypto-assets.Licensees that holdcrypto-assets on behalf of their clients should generally offer custodial wallets and may even offer multi-signature wallets (Paragraph CRA-5.4.5). Clients using custodial wallets do not necessarily have full and sole control over theircrypto-assets . In addition, there is a risk that should the custodial wallet provider cease operations or get hacked, clients may lose theircrypto-assets .; and(b) Non-Custodial (Self-Custody) Wallets: the non-custodial wallet provider, typically a third-party hardware add/or software company, offers the means for each client to hold theircrypto-assets (and fully control private keys) themselves. The non-custodial wallet provider does not control client’s crypto-assets – it is the client that has sole and full control over their crypto-assets. Hardware wallets, mobile wallets, desktop wallets and paper wallets are generally examples of non-custodial wallets. Clients using non-custodial wallets have full control of and sole responsibility for theircrypto-assets , and the non-custodial wallet provider does not have the ability to effect unilateral transfers of clients’crypto-assets without clients’ authorisation.Amended: April 2023
Added: April 2019CRA-8.3.3
In addition to the two main crypto-asset wallet types described in Paragraph CRA-8.3.2 above, the CBB recognises that there may be alternative crypto-asset wallet models in existence or which may emerge in future.
Licensees seeking to provide such alternative types of crypto-asset wallets and who are unsure of the regulatory obligations they may attract are encouraged to contact the CBB.Added: April 2019CRA-8.3.4
Only entities providing the custodial wallets as described in Paragraph CRA-8.3.2(a) above are considered to be carrying out the regulated activity of safeguarding, storing, holding, maintaining custody of or arranging custody on behalf of clients for
crypto-assets as specified in Paragraph CRA-1.1.6(e). With respect to the non-custodial wallets as described in Paragraph CRA-8.3.2(b) above, the wallet provider is merely providing the technology; it is the wallet user himself who has full control of and responsibility for thecrypto-assets .Amended: April 2023
Added: April 2019CRA-8.3.5
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-8.3.6
Licensees must assess the risks posed to each storage method in view of the new developments in security threats, technology and market conditions and must implement appropriate storage solutions to ensure the secure storage ofcrypto-assets held on behalf of clients. Wallet storage technology and any upgrades should be tested comprehensively before deployment to ensure reliability. Alicensee must implement and must ensure that its third-party crypto-asset custodian implements, measures to deal with any compromise or suspected compromise of all or part of any seed or private key without undue delay, including the transfer of all clientcrypto-assets to a new storage location as appropriate.Added: April 2023CRA-8.3.7
Licensees must have, or where thelicensee uses the service of a third party crypto-asset custodian it must ensure that the third party crypto-asset custodian has, adequate processes in place for handling deposit and withdrawal requests forcrypto-asset to guard against loss arising from theft, fraud and other dishonest acts, professional misconduct or omissions. In this regard, alicensee must:(a) Continuously monitor major developments (such as technological changes or the evolution of security threats) relevant to allcrypto-assets included for trading. There must be clear processes in place to evaluate the potential impact and risks of these developments, as well as processes for handling fraud attempts specific to distributed ledger technology (such as 51% attacks), and these processes should be proactively executed;(b) Ensure that client IP addresses as well as wallet addresses used for deposit and withdrawal are whitelisted, using appropriate confirmation methods;(a) Have clear processes in place to minimise the risks relating to handling deposits and withdrawals, including whether deposits and withdrawals are performed using hot or cold storage, whether withdrawals are processed on a real-time basis or only at certain cut-off times, and whether the withdrawal process is automatic or involves manual authorisation;(b) Ensure that any decision to suspend the withdrawal ofcrypto-assets is made on a transparent and fair basis, and is communicated without delay to all its clients; and(c) Ensure that the above processes include safeguards against fraudulent requests or requests made under duress as well as controls to prevent one or more officers or employees from transferring assets to wallet addresses other than the client’s designated wallet address.Added: April 2023CRA-8.3.8
Where the
licensee appoints a third-partycrypto-asset custodian, thelicensee must ensure that such custodian implements the above requirements.Added: April 2023CRA-8.4 CRA-8.4 Reconciliation, Client Reporting and Record Keeping
Reconciliation
CRA-8.4.1
A
licensee must at least every calendar month:(a) [This Subparagraph was deleted in April 2023];(b) Reconcile allcrypto-assets held by thelicensee , or its appointed third party custodian, and reconcile the result to the records of thelicensee ;(c) Reconcile individual client balances with thelicensee’s records ofcrypto-assets balances held in client accounts; and(d) Where thelicensee discovers discrepancies after carrying out the above reconciliations, it must maintain a record of such discrepancies and the measures taken to remedy such discrepancies.Amended: April 2023
Added: April 2019Client Reporting
CRA-8.4.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-8.4.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Record Keeping
CRA-8.4.4
A
licensee must ensure that proper records of theclient's custody account which it holds or receives, or arranges for another to hold or receive, on behalf of theclient , are made and retained for a period of ten years after the account is closed.Added: April 2019CRA-8.4.5
For the purpose of Paragraph CRA-8.4.4, the records must capture at a minimum the following details:
(a) The name of the account;(b) The account number;(c) Type of account;(d) The location of the account;(e) Whether the account is currently open or closed;(f) Details ofcrypto-assets held and movements in each account; and(g) The date of opening and where applicable, closure.Amended: April 2023
Added: April 2019CRA-9 CRA-9 High Level Controls
CRA-9.1 CRA-9.1 [This Chapter was deleted in April 2023]
CRA-9.1.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10 CRA-10 Reporting, Notifications and Approvals
CRA-10.1 CRA-10.1 Reporting Requirements
Reports Prepared by a Licensee
CRA-10.1.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.1.2
Licensees must submit a Professional Indemnity Insurance Return (Form PIIR) on an annual basis (ref. CRA-4.8.1). Additionally, they must provide, upon request, evidence to the CBB of the coverage in force.Added: April 2019CRA-10.1.3
Licensees must submit quarterly to the Consumer Protection Unit at the CBB a report summarising the outcome of their complaint handling procedures in accordance with the requirements of Paragraph CRA-4.7.12.Amended: April 2023
Added: April 2019CRA-10.1.3A
Licensees must submit on an annual basis, no later than 2 months from the end of the reporting period, a report on their liquidity partners which must include the liquidity partners’ names, information on the total value and volume transacted for each type ofcrypto-asset , and the percentage of all client orders executed through the use of each liquidity partner.Added: April 2023CRA-10.1.3B
Licensees must submit on a quarterly basis, the following information within 10 business days from the end of the reporting period:(a) A list of top 100 clients based on the total value traded during each month of the quarter. This report must include the following information:(i) Client ID;(ii) Place of residency;(iii) Crypto-asset type;(iv) Type of transaction (Buy or Sell);(v) Volume of transaction; and(vi) Value of transactions in USD;(b) Particulars of any unexpected or unusual volatility, volumes and activity.Added: April 2023Annual License Fee
Institutional Information System (IIS)
CRA-10.1.5
Licensees are required to complete online non-financial information related to their institution by accessing the CBB's institutional information system (IIS).Licensees must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, thelicensee must still access the IIS quarterly and confirm the information contained in the IIS.Licensees must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.Added: April 2019CRA-10.1.6
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Reports Prepared by External Auditors
CRA-10.1.7
Licensees that hold or controlclient assets must arrange for their external auditor to perform an audit of client assets every 6 months on the licensees’ compliance with the requirements related to the holding and segregation of the client’s assets requirements. The report must be submitted to the CBB by 30th September for the 30th June report and 31st March for the 31st December report. The format of the Auditor’s Report (Agreed Upon Procedure) is included in Part B of the Rulebook, as part of the supplementary information.Amended: April 2023
Added: April 2019Onsite Inspection Reporting
CRA-10.1.8
For the purpose of onsite inspection by the CBB,
licensees must submit requested documents and completed questionnaires to the Inspection Directorate at the CBB three working days ahead of inspection team entry date.Added: April 2019CRA-10.1.9
Licensees must review the contents of the draft Inspection Report and submit to the Inspection Directorate at the CBB a written assessment of the observations/issues raised within fifteen working days of receipt of such report. Evidentiary documents supporting management's comments must also be included in the response package.Amended: January 2022
Added: April 2019CRA-10.1.10
Licensees' board are required to review the contents of the Inspection Report and submit within one month, of the report issue date, a final response to such report along with an action plan addressing the issues raised within the stipulated timeline.Added: April 2019CRA-10.1.11
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.2 CRA-10.2 Notification Requirements
General Requirements
CRA-10.2.1
All notifications and approvals required in this Module are to be submitted by
licensees in writing.Added: April 2019CRA-10.2.2
In this Module, the term 'in writing' includes electronic communication capable of being reproduced in paper form.
Added: April 2019CRA-10.2.3
Where a l
icensee is required to make notifications to the CBB or seek its approval under the requirements of this Rulebook, it must make the notification or seek approval immediately after it becomes aware of such a requirement.Added: April 2019Matters Having a Serious Supervisory Impact
CRA-10.2.4
Licensees must notify the CBB if any of the following has occurred, may have occurred or may occur in the near future:(a) Thelicensee failing to satisfy one or more of the requirements specified in this Module;(b) Any matter which could have a significant adverse impact on thelicensee's reputation;(c) Any matter which could affect thelicensee's ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of thelicensee ;(d) Any matter in respect of thelicensee that could result in material financial consequences to the financial system or to otherlicensees ;(e) A significant breach of any provision of the Rulebook;(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 alicensee 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. Such notification must be immediately made to the CBB.Amended: April 2023
Added: April 2019CRA-10.2.5
The circumstances that may give rise to any of the events in Paragraph CRA-10.2.5 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
licensees to consider properly all potential consequences of events.Added: April 2019CRA-10.2.6
In determining whether an event that may occur in the near future should be notified to the CBB, a
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 controller that may indirectly have an effect on thelicensee .Added: April 2019Legal, Professional, Administrative or other Proceedings Against a Licensee
CRA-10.2.7
Licensees must notify the CBB immediately of any legal, professional or administrative or other proceedings instituted against it or its substantial shareholder that is known to thelicensee and is significant in relation to thelicensee 's financial resources or its reputation.Amended: April 2023
Added: April 2019CRA-10.2.8
Licensees must notify the CBB of the bringing of a prosecution for, or conviction of, any offence under any relevant law against thelicensee that would prevent thelicensee from undertaking its activities in fair, orderly and transparent manner or any of its Directors, officers or approved persons from meeting the fit and proper requirements of Section CRA-1.7.Added: April 2019Fraud, Errors and other Irregularities
CRA-10.2.9
Licensees must notify the CBB immediately if one of the following events arises:(a) It becomes aware that an employee may have committed fraud against one of its clients;(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 thelicensee 's regulated activities; or(e) Any conflicts of interest.Amended: April 2023
Added: April 2019Insolvency, Bankruptcy and Winding Up
CRA-10.2.10
A
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 thelicensee or a substantial shareholder of thelicensee ;(b) An application to dissolve a substantial shareholder of thelicensee or to strike thelicensee off the Register ofcrypto-asset licensee ;(c) The presentation of a petition for the winding up of a substantial shareholder of thelicensee ;(d) The making of any proposals, or the making of, a composition or arrangement with any one or more of thelicensee's creditors, for material amounts of debt;(e) An application for the appointment of an administrator or trustee in bankruptcy to a substantial shareholder of thelicensee ;(f) The appointment of a receiver for a substantial shareholder of thelicensee (whether an administrative receiver or a receiver appointed over particular property); or(g) An application for an interim in relation to a substantial shareholder of thelicensee under the applicable Bankruptcy laws.Amended: April 2023
Added: April 2019External Auditor
CRA-10.2.11
Licensees must notify the CBB of the following:(a) Removal or resignation of its external auditor; or(b) Change in audit partner.Added: April 2019Approved Persons
CRA-10.2.12
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.2.13
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.2.14
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.2.15
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.3 CRA-10.3 Approval Requirements
Change in Name
CRA-10.3.1
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.Amended: January 2022
Added: April 2019CRA-10.3.2
The request to change the licensee legal name must include the details of the proposed new name and the date on which the licensee intends to implement the change of name.
Amended: January 2022
Added: April 2019Change of Address
CRA-10.3.3
As specified in Article 51 of the CBB Law, a
licensee must seek prior written approval from the CBB of a change in the address of thelicensee's principal place of business in Bahrain, and that of its branches, if any.Amended: April 2023
Added: April 2019CRA-10.3.4
The request under Paragraph CRA-10.3.3 must include the details of the proposed new address and the date on which the
licensee intends to implement the change of address.Added: April 2019CRA-10.3.5
As specified in Article 51 of the CBB Law, a
licensee must seek prior written approval from the CBB where it intends 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 clients, administration of the business or as the head office in Bahrain of thelicensee .Amended: April 2023
Added: April 2019Change in Legal Status
CRA-10.3.6
A
licensee must seek the CBB’s prior written approval in relation to any change in its legal status that may, in any way, affect its relationship with or limit its liability to its clients.Amended: April 2023
Added: April 2019Change in Authorised or Issued Capital
CRA-10.3.7
As specified in Article 57(a) of the CBB Law, a
licensee must seek the CBB’s prior written approval before making any modification to its authorised or issued capital. In the case that alicensee has been granted approval to increase its paid-up capital, confirmation from the external auditor stating that the amount has been deposited in thelicensee's bank account or otherwise reflected in thelicensee's accounts will subsequently be required.Amended: April 2023
Added: April 2019Client Asset Transfers
CRA-10.3.8
Licensees must seek prior written approval from the CBB before transferring client assets to a third party, in circumstances other than when acting on instructions from the client concerned.Amended: April 2023
Added: April 2019Licensed Regulated Activities
CRA-10.3.9
Licensees wishing to cancel their license must obtain the CBB's written approval, before ceasing their activities. All such requests must be made in writing to the Director, Capital Markets Supervision, setting out in full the reasons for the request and how the business is to be wound up.Added: April 2019CRA-10.3.10
As specified in Article 50 of the CBB Law, a
licensee wishing to cease to provide all or any of its licensedregulated crypto-asset services must obtain prior written approval from the CBB.Added: April 2019CRA-10.3.11
Licensees seeking to obtain the CBB's permission to cease business must submit to the CBB a formal request for the appointment of a liquidator acceptable to the CBB.Added: April 2019Carrying out Business in Another Jurisdiction
CRA-10.3.12
As specified in Article 51 of the CBB Law, a
licensee must seek the CBB’s prior written approval where it intends to undertake business activities in a jurisdiction other than Bahrain. The request for CBB approval must be made at least three months prior to planned commencement date of such business.Amended: April 2023
Added: April 2019CRA-10.3.13
Paragraph CRA-10.3.12 applies whether or not the
licensee is required to be regulated locally in the jurisdiction where it proposes to undertake the business.Amended: April 2023
Added: April 2019CRA-10.3.14
The CBB will use the information to consider whether or not it should impose additional requirements on the
licensee .Amended: April 2023
Added: April 2019Mergers, Acquisitions, Disposals and Establishment of New Subsidiaries
CRA-10.3.15
As specified in Articles 51 and 57 of the CBB Law, a
licensee incorporated in Bahrain must seek prior written approval of the CBB where it intends 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: April 2023
Added: April 2019CRA-10.3.16
Licensees wishing cease operation of a subsidiary must obtain the CBB’s written approval, before ceasing the activities of the subsidiary.Amended: April 2023
Added: April 2019Outsourcing Arrangements
CRA-10.3.17
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Matters Having a Supervisory Impact
CRA-10.3.18
A
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.Added: April 2019CRA-10.3.19
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. AML-9.2.4).Added: April 2019CRA-10.3.20
As specified in Article 57 of the CBB Law, a
licensee wishing to modify its Memorandum or Articles of Association, must obtain prior written approval of the CBB.Amended: April 2023
Added: April 2019CRA-10.3.21
As specified in Article 57 of the CBB Law, a
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.Added: April 2019Dividend Distribution
CRA-10.3.22
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019External Auditor
CRA-10.3.23
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Approved Persons
CRA-10.3.24
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.3.25
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-10.3.26
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Withdrawals
CRA-10.3.27
No funds may be withdrawn by shareholders from the
licensee without the necessary prior written approval of the CBB.Added: April 2019CRA-11 CRA-11 Information Gathering by the CBB
CRA-11.1 CRA-11.1 Power to Request Information
CRA-11.1.1
Licensees must provide all information that the CBB requests in order to discharge its regulatory obligations.Amended: April 2023
Added: April 2019CRA-11.1.2
Licensees must provide all relevant information and assistance to the CBB inspectors andappointed experts on demand as required by Articles 111 and 114 of the CBB Law. Failure bylicensees to cooperate fully with the CBB's inspectors orappointed 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.Added: April 2019CRA-11.1.3
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 thelicensee .Added: April 2019Information Requested on Behalf of other Supervisors
CRA-11.1.4
[This Paragraph was deleted in April 2023]
Deleted: April 2023
Added: April 2019CRA-11.2 CRA-11.2 Access to Premises
CRA-11.2.1
Representatives of the CBB, or persons appointed by the CBB may access, with or without notice, any of the
licensee’s business premises in relation to the discharge of the CBB’s functions pursuant to the CBB Law.Amended: April 2023
Added: April 2019CRA-11.2.2
A
licensee must take reasonable steps to ensure that its agents and providers under outsourcing arrangements permit such access to their business premises, to the CBB.Added: April 2019CRA-11.2.3
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 thelicensee .Added: April 2019CRA-11.2.4
The cooperation that
licensees are expected to procure from such providers is similar to that expected oflicensees themselves.Added: April 2019CRA-11.3 CRA-11.3 Accuracy of Information
CRA-11.3.1
A
licensee must ensure that all information it provides to the CBB is:(a) Factually accurate or, in the case of estimates and judgements, fairly and properly based on appropriate analysis and enquiries have been made by thelicensee ; and(b) Complete, in that it should include everything which the CBB would reasonably and ordinarily expect to have or require.Amended: April 2023
Added: April 2019CRA-11.3.2
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:(a) Details of the information which is or may be false, misleading, incomplete or inaccurate, or has or may have changed;(b) An explanation why such information was or may have been provided in false, misleading, incomplete or inaccurate manner; and(c) The correct information.Amended: April 2023
Added: April 2019CRA-11.3.3
If the information in Paragraph CRA-11.3.2 cannot be submitted with the notification (because it is not immediately available), it must instead be submitted as soon as possible afterwards.
Added: April 2019CRA-11.4 CRA-11.4 Methods of Information Gathering
CRA-11.4.1
The CBB uses various methods of information gathering on its own initiative which require the cooperation of
licensees :(a) Representatives of the CBB may make onsite visits at the premises of thelicensee . These visits may be made on a regular basis, or on a sample basis, for special purposes such as theme visits (looking at a particular issue across a range oflicensees ), or when the CBB has a particular reason for visiting alicensee ;(b) Appointees of the CBB may also make onsite visits at the premises of thelicensee . Appointees of the CBB may include persons who are not CBB staff, but who have been appointed to undertake particular monitoring activities for the CBB, such as in the case ofAppointed Experts (refer to Section CRA-11.5).(c) The CBB may request thelicensee to attend meetings at the CBB's premises or elsewhere;(d) The CBB may seek information or request documents by telephone, at meetings or in writing, including electronic communication;(e) The CBB may requirelicensees to submit various documents or notifications, as per Chapter CRA-11, in the ordinary course of their business such as financial reports or upon the occurrence of a particular event in relation to thelicensee such as a change in control.Amended: April 2023
Added: April 2019CRA-11.4.2
When seeking meetings with a
licensee or access to thelicensee’s premises, the CBB or the CBB appointee will access to alicensee’s documents and personnel. Such requests will normally be made during reasonable business hours and with proper notice. However, there may be instances where the CBB may access thelicensee’s premises without prior notice.Amended: April 2023
Added: April 2019CRA-11.4.3
The CBB expects that a
licensee should:(a) Make itself readily available for meetings with representatives or appointees of the CBB;(b) Give representatives or appointees of the CBB reasonable access to any records, files, tapes or computer systems, which are within thelicensee's possession or control, and provide any facilities which the representatives or appointees may reasonably request;(c) Produce to representatives or appointees of the CBB specified documents, files, tapes, computer data or other material in thelicensee's possession or control as as requested or required;(d) Print information in thelicensee 's possession or control which is held on computer or otherwise convert it into a readily legible document or any other record which the CBB may reasonably request;(e) Arrange for representatives or appointees of the CBB to copy documents of other material on the premises of thelicensee at thelicensee 's expense and to remove copies and hold them elsewhere, or provide any copies, as requested by the CBB or its appointees; and(f) Answer truthfully, fully and promptly all questions which representatives or appointees of the CBB put to it.Amended: April 2023
Added: April 2019CRA-11.4.4
The CBB considers that a
licensee should ensure that the following persons act in the manner set out in Paragraph CRA-11.4.3:(a) Its employees; and(b) Any other members of its group and their employees.Amended: April 2023
Added: April 2019CRA-11.4.5
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-11.5 CRA-11.5 The Role of the Appointed Expert
Introduction
CRA-11.5.1
The content of this Section is applicable to all
licensees andappointed experts .Amended: April 2023
Added: April 2019CRA-11.5.2
The purpose of the contents of this Section is to highlight the roles and responsibilities of
appointed experts when appointed pursuant to Article 114 or 121 of the CBB Law.Amended: April 2023
Added: April 2019CRA-11.5.3
The CBB uses its own inspectors to undertake on-site examinations of
licensees as an integral part of its regular supervisory role. In addition, the CBB may commission reports on matters relating to the business oflicensees in order to assist it in assessing their compliance with CBB requirements.Amended: April 2023
Added: April 2019CRA-11.5.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-11.5.5
Appointed experts must not be the same firm appointed as external auditor of thelicensee .Amended: April 2023
Added: April 2019CRA-11.5.6
The CBB will decide on the range, scope and frequency of work to be carried out by
appointed experts .Amended: April 2023
Added: April 2019CRA-11.5.7
The appointment will be made in writing, and made directly with the
appointed experts concerned. A separate letter is sent to thelicensee , notifying them of the appointment. At the CBB’s discretion, atrilateral meeting may be held at any point, involving the CBB and representatives of thelicensee and theappointed experts , to discuss any aspect of the of the inspection or investigation or the report produced by the appointed expert.Amended: April 2023
Added: April 2019CRA-11.5.8
Following the completion of the investigation, the CBB will normally provide feedback on the findings of the investigation to the
licensee .Added: April 2019CRA-11.5.9
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 thelicensee’s group structure). The report produced by theappointed experts is the property of the CBBAmended: April 2023
Added: April 2019CRA-11.5.10
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 particularlicensee (i.e. create a conflict of interest).Added: April 2019CRA-11.5.11
The CBB may appoint one or more of its officials to work on the
appointed experts' team for a particularlicensee .Added: April 2019The Required Report
CRA-11.5.12
The scope of the required report will be determined and detailed by the CBB in the appointment letter.
Appointed experts would normally be required to report on one or more of the following aspects of alicensee’s business:(a) Accounting and other records;(b) Internal control systems;(c) Returns of information provided to the CBB;(d) Operations of certain departments; and/or(e) Other matters specified by the CBB.Amended: April 2023
Added: April 2019CRA-11.5.13
Appointed experts will be required to form an opinion on whether, during the period examined, thelicensee 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.Amended: April 2023
Added: April 2019CRA-11.5.14
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-11.5.15
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-11.5.16
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-11.5.17
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Other Notifications to the CBB
CRA-11.5.18
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 licensing conditions 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 concernedlicensee , 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 thelicensee . Notwithstanding the above, it is primarily thelicensee's responsibility to report such matters to the CBB.Added: April 2019CRA-11.5.19
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-11.5.20
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Permitted Disclosure by the CBB
CRA-11.5.21
Appointed experts must keep all information relating to thelicensee confidential and not divulge it to a third party except with the CBB’s written permission or unless required by applicable laws in the Kingdom of Bahrain.Amended: April 2023
Added: April 2019Trilateral Meeting
CRA-11.5.22
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12 CRA-12 Conduct of Business Obligations
CRA-12.1 CRA-12.1 General Scope and Application
CRA-12.1.1
This Section sets out the Conduct of Business Obligations which
licensees must adhere to.Added: April 2019CRA-12.1.2
This Section shall apply to all
licensees offeringregulated crypto-asset services except for Section CRA-12.5 which shall apply solely tolicensees executing clients' orders.Added: April 2019CRA-12.2 CRA-12.2 Conflicts of interest
General Obligations
CRA-12.2.1
Licensees must adopt appropriate and transparent reporting lines within its organisation in order to ensure that issues involving risks of non-compliance with conflicts of interest Rules are given the necessary priority.Added: April 2019CRA-12.2.2
Licensees must establish, implement and maintain effective organisational and administrative arrangements appropriate to the size of thelicensee and the nature, scale and complexity of its business, to prevent conflicts of interest from adversely affecting the interests of its clients.Amended: April 2023
Added: April 2019CRA-12.2.3
The circumstances which should be treated as giving rise to a conflict of interest should cover cases where there is a conflict between the interests of the
licensee or certain persons connected to thelicensee or the group of which thelicensee forms part, or from the performance of services and activities, and the duty thelicensee owes to a client; or between the differing interests of two or more of its clients, to whom thelicensee owes in each case a duty.Added: April 2019CRA-12.2.4
Licensees must establish, implement and maintain an effective conflicts of interest policy set out in writing and which is appropriate to the size of thelicensee and the nature, scale and complexity of its business, to prevent conflicts of interest from adversely affecting the interests of its clients. The conflicts of interest policy must, at a minimum, include the following:(a) The identification of, with reference to the specific services and activities carried out by or on behalf of thelicensee , the circumstances which constitute or may give rise to a conflict of interest entailing a risk of damage to the interests of one or more clients;(b) Procedures to be followed and measures to be adopted in order to manage such conflicts and to prevent such conflicts from damaging the interests of clients.Amended: April 2023
Added: April 2019CRA-12.2.5
Licensees must assess and periodically review, at least annually, the conflicts of interest policy established and must take all appropriate measures to address any deficiencies.Amended: April 2023
Added: April 2019CRA-12.2.6
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.2.7
Licensees must keep and regularly update a record of the situations or service carried out by or on behalf of thelicensee in which a conflict of interest entailing a risk of damage to the interests of one or more clients has arisen or, in the case of an ongoingregulated crypto-asset service , may arise. Senior Management must receive on a periodic basis, and at least annually, written reports on situations referred to in this Rule.Added: April 2019Operational Independence
CRA-12.2.8
Licensees must take all appropriate steps to identify, and to prevent or manage conflicts of interest between thelicensee , including their managers, employees, or any person directly or indirectly linked to them by control and their clients or between the interests of one client and another, including those caused by the receipt of inducements from third parties or by alicensee ’s own remuneration and other incentive structures.Amended: April 2023
Added: April 2019CRA-12.2.9
The Board of Directors of a
licensee must define, oversee and be accountable for the implementation of governance arrangements that ensure effective and prudent management of thelicensee including the segregation of duties within thatlicensee and the prevention of conflicts of interest, and in a manner that promotes the integrity of the market and the interest of clients.Added: April 2019Remuneration Policy
CRA-12.2.10
Licensees must define and implement remuneration policies and practices under appropriate internal procedures taking into account the interests of all its clients. The remuneration policy must be approved by the Board of Directors of thelicensee and be periodically reviewed, at least annually.Added: April 2019CRA-12.2.11
In defining its remuneration policies, a
licensee must ensure that:(a) Clients are treated fairly and their interests are not impaired by the remuneration practices adopted by thelicensee in the short, medium or long term; and(b) Remuneration policies and practices do not create a conflict of interest or incentive that may lead relevant persons to favour their own interests or thelicensee's interest to the potential detriment of its clients.Amended: April 2023
Added: April 2019Inducements Rules
CRA-12.2.12
Licensees providing its clients with advice on an independent basis or portfolio management must not accept and retain fees, for itself, commissions or any monetary or non-monetary benefits paid or provided by any third party or a person acting on behalf of a third party in relation to the provision of the services to clients. All fees, commissions or monetary benefits received from third parties in relation to the provision of advice on an independent basis and portfolio management must be transferred in full to the client.Where the
licensee receives minor non-monetary benefits that are capable of enhancing the quality of service provided to a client and are of a scale and nature such that they would not be deemed to impair compliance with thelicensee's duty to act in the best interest of the client must be clearly disclosed and be excluded from the application of this Rule.Amended: April 2023
Added: April 2019CRA-12.2.13
Licensees must set up and implement a policy to ensure that any fees, commissions or any monetary or non-monetary benefits paid or provided by any third party or a person acting on behalf of a third party in relation to the provision of advice on an independent basis and portfolio management are allocated and transferred to each individual client.Added: April 2019CRA-12.2.14
Licensees must inform clients about the fees, commissions or any monetary or non-monetary benefits transferred to them, such as through the periodic reporting statements provided to the client.Added: April 2019CRA-12.2.15
The Board of Directors must adopt and at least annually review the general principles of the inducements policy, and must be responsible for, and oversee, its implementation. The Board of Directors must also ensure that the compliance officer is involved in the establishment and the subsequent reviews of the inducements policy.
Amended: April 2023
Added: April 2019CRA-12.2.16
Licensees must not receive any remuneration, discount or non-monetary benefit for routing client orders to a particular trading venue which would infringe the requirements on conflicts of interest or inducements.Added: April 2019Personal Transaction
CRA-12.2.17 CRA-12.2.17
Licensees must establish, implement and maintain adequate arrangements which prevent any relevant person who is involved in activities that may give rise to a conflict of interest, or who has access to inside information or to other confidential information relating to clients or transactions with or for clients by virtue of an activity carried out by him on behalf of thelicensee .Added: April 2019CRA-12.2.18
Licensees must have a written policy governing employee dealing incrypto-assets , either through their own account or through related accounts, to eliminate, avoid, manage or disclose actual or potential conflicts of interests which may arise from such dealings.Added: April 2023CRA-12.2.19
For the purposes of CRA-12.2.18, the term “related accounts” refers to accounts of the employee’s spouse(s), children(s) of the employee or any other account(s) in which the employee holds any beneficial interest.
Added: April 2023CRA-12.2.20
The written policy governing employee’s dealing in
crypto-assets must specify the conditions under which an employee may deal incrypto-assets for their own account and related accounts (in particular, those who possess non-public information must be prohibited from dealing in the relevantcrypto-assets ). A copy of the policy must be provided to every employee at the time of joining as well as on periodic basis.Added: April 2023CRA-12.2.21
Transactions of employees’ own account and related accounts must be actively monitored by the compliance officer and procedures to detect irregularities and ensure that the handling by the
licensee of these transactions is not prejudicial to the interest of thelicensee’s other clients.Added: April 2023CRA-12.2.22
Any transactions for the employees own account and related accounts must be separately recorded and clearly identified in the records of the
licensee .Added: April 2023CRA-12.3 CRA-12.3 Sale Processes and Selling Practices
General Principles
CRA-12.3.1
Licensees must:(a) Seek from its clients information relevant to thecrypto-asset orregulated crypto-asset service requested;(b) In the completion of any document, make it clear that all the answers or statements regarding the client’s personal details and circumstances are the client’s own responsibility. The client should always be required to assume responsibility for the completed document and be advised that incomplete and/or inaccurate information may prejudice the client’s rights;(c) Not withhold from the client any written evidence or documentation relating to thecrypto-asset orregulated crypto-asset service without adequate and justifiable reasons being disclosed in writing and without delay to the client;(d) Not recklessly, negligently or deliberately mislead a client in relation to the real or perceived advantages or disadvantages of anycrypto-asset orregulated crypto-asset service ;(e) Ensure that all instructions from, or on behalf, of a client are processed properly and promptly;(f) Have proper regard for the wishes of a client who seeks to terminate any agreement with it to carry out business;(g) [This Subparagraph was deleted in April 2023].(h) Not exert undue pressure or undue influence on a client;(i) Give advice only on thosecrypto-assets orregulated crypto-asset services in which thelicensee is knowledgeable and seek or recommend other specialist advice when necessary; and(j) Treat all information supplied by the client with complete confidentiality.(k) [This Subparagraph was deleted in April 2023].Amended: April 2023
Added: April 2019CRA-12.3.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.3
For the purposes of CRA-12.3.1(j), the requirement to maintain all client information confidential shall not apply to:
(a) The disclosure of client information for such purposes, or in such circumstances as the CBB; or(b) [This Subparagraph was deleted in April 2023].(c) The disclosure of client information pursuant to any requirement imposed under any applicable law or court order in the Kingdom of Bahrain.Amended: April 2023
Added: April 2019CRA-12.3.4
Where a
licensee deals with a person who is acting for a client under a power of attorney, thelicensee must:(a) obtain a certified true copy of the power of attorney;(b) ensure that the power of attorney allows the person to act on the client's behalf; and(c) operate within the limitations set out in the power of attorney.Added: April 2019CRA-12.3.5
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Assessment of Clients' Suitability and Appropriateness
CRA-12.3.6
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Suitability
CRA-12.3.7
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.8
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.9
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.10
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.11
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.12
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.13
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.14
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019Appropriateness
CRA-12.3.15
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.16
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.3.17
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-12.4. CRA-12.4. Accepting Client and Contractual Agreement with Client
Terms of Business
CRA-12.4.1
Licensees must provide clients with their terms of business, setting out the basis on which theregulated crypto-asset services are to be conducted.Added: April 2019CRA-12.4.2
The terms of business in relation to providing
regulated crypto-asset services to a client must take the form of a client agreement.Added: April 2019CRA-12.4.3
The terms of business must include the rights and obligations of parties to the agreement, as well as other terms relevant to the
regulated crypto-asset services .Added: April 2019CRA-12.4.5
An application form in relation to
regulated crypto-asset services will be deemed to be a client agreement, provided the form includes the principal terms and conditions of the service, such that the client is provided sufficient information to allow him to understand the basis on which the service is to be conducted.Added: April 2019CRA-12.4.6
The client agreement must be provided in good time prior to providing the regulated crypto-asset services, and it must set out or refer to, among other matters, the rights and obligations of the parties to the agreement, and the terms on which the service is to be conducted.
Added: April 2019CRA-12.4.7
For the purposes of Paragraph CRA-12.4.6, "good time" should be taken to mean sufficient time to enable the client to consider properly the service or on offer before he is bound.
Amended: April 2023
Added: April 2019Client Understanding and Acknowledgement
CRA-12.4.8
Licensees must not enter into a client agreement unless they have taken reasonable care to ensure that their client has had a proper opportunity to consider the terms.Amended: April 2023
Added: April 2019CRA-12.4.9
Licensees must obtain their client's consent to the terms of the client agreement as evidenced by a signature or an equivalent mechanism.Added: April 2019CRA-12.4.10
The client agreement must contain the signature of both parties to the agreement. A copy of the signed client agreement must be provided by the
licensee to the client.Added: April 2019CRA-12.4.11
Licensees must keep records of client agreements and any documents referred to in the client agreement the entire period the agreement is in force. Upon termination of the agreement, for whatsoever reason, the client agreement must be retained for a period of at least 5 years from the date of closure of the client account.Amended: April 2023
Added: April 2019CRA-12.5 CRA-12.5 Execution of Clients' Orders
CRA-12.5.1
Licensees must take sufficient steps to obtain, when executing orders, the best possible result for its clients taking into account the best execution factors of price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.Added: April 2019CRA-12.5.2
Whenever there is a specific instruction from a client, the
licensee must execute the order following the specific instruction. Thelicensee shall be deemed to have satisfied its obligations to take all reasonable steps to obtain the best possible result for a client to the extent that it executes an order or a specific aspect of the order following specific instructions from a client relating to the order or the specific aspect of the order.Added: April 2019Order Execution Policy
CRA-12.5.3
Licensees must establish and implement an order execution policy to allow it to obtain, for its client orders, the best possible result.Added: April 2019CRA-12.5.4
Licensees must ensure that the trading venue or entity it selects will enable it to obtain results for its clients that are at least as good as the results that it reasonably could expect from using alternative entities.Added: April 2019CRA-12.5.5
Licensees must provide appropriate information to their clients on their order execution policy. That information must explain clearly, in sufficient detail and in a way that can easily be understood by clients.Added: April 2019CRA-12.5.6
Licensees must notify clients of any material changes to its order execution arrangements or order execution policy.Added: April 2019Monitoring and Review
CRA-12.5.7
A l
icensee must review, at least on an annual basis, its order execution policy and order execution arrangements.Added: April 2019CRA-12.5.8
A
licensee must demonstrate to its clients, at their request, that it has executed their orders in accordance with thelicensee 's order execution policy and it must also ensure that it is able to demonstrate to the CBB upon request that thelicensee is in compliance with this Module.Amended: April 2023
Added: April 2019Client Order Handling Rules
CRA-12.5.9
When carrying out client orders, a
licensee must implement procedures and arrangements which provide for the prompt, fair and expeditious execution of client orders, relative to the trading interests of thelicensee .Added: April 2019CRA-12.5.10
A
licensee must not misuse information relating to pending client orders, and shall take all reasonable steps to prevent the misuse of such information by any of its relevant persons.Added: April 2019CRA-12.5.11
A
licensee must not carry out a client order or a transaction for own account in aggregation with another client order unless the following conditions are met:(a) It is unlikely that the aggregation of orders and transactions will work overall to the disadvantage of a client whose order is to be aggregated;(b) It is disclosed to each client whose order is to be aggregated that the effect of aggregation may work to its disadvantage in relation to a particular order;(c) An order allocation policy must be established and effectively implemented, provided for the fair allocation of aggregated orders and transactions, including how the volume and price of orders determines allocations and the treatment of partial executions.Amended: April 2023
Added: April 2019CRA-12.5.12
Where a
licensee has aggregated transactions for own account with one or more clients' orders, suchlicensee must not allocate the related trades in a way that is detrimental to a Client.Added: April 2019CRA-12.5.13
Where a
licensee aggregates a client order, with a transaction for own account and the aggregated order is partially executed, thelicensee must allocate the related trades to the client in priority to itself, except where thelicensee is able to demonstrate on reasonable grounds that without the combination it would not have been able to carry out the order on such advantageous terms, or at all, in which event it may allocate the transaction for own account proportionally, in accordance with its order allocation policy.Amended: April 2023
Added: April 2019Selection of Trading Venues by Licensees
CRA-12.5.14
Licensees must not structure or charge its commission in such a way as to discriminate unfairly between trading venues.Added: April 2019CRA-13 CRA-13 Prevention of Market Abuse and Manipulation
CRA-13.1 CRA-13.1 General Requirements
CRA-13.1.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CBB’s Approach to Market Abuse and Manipulation
CRA-13.1.1A
The risk of market abuse and manipulation, such as, but not limited to, price manipulation, inside trading, price rigging, non-disclosure of material information, disclosure of false or misleading information and other similar actions poses a significant challenge to establish fair, transparent and orderly market in
crypto-assets .Added: April 2023CRA-13.1.1B
Licensees andissuers of digital tokens must comply with the same set of requirements contained in Module Prohibition of Market Abuse and Manipulation (Module MAM) including adherence to:(a) Accepted market practices;(b) Prohibited conduct in possession of insider information;(c) Prohibited market conduct; and(d) Penalty for contraventionAdded: April 2023Policies for Prevention of Market Abuse and Manipulation
CRA-13.1.1C
Licensees must establish and implement written policies and controls for the proper surveillance of its trading platform in order to identify, prevent and report any manipulative or abusive trading activities. The policies and controls should, at a minimum, cover the following:(a) Preventing any potential market abuse or manipulation;(b) monitoring activity on its platform;(c) identifying anomalies; and(d) taking immediate steps to restrict or suspend trading upon discovery of manipulative or abusive activities (for example, temporarily suspending accounts).Added: April 2023CRA-13.1.1D
A
licensee must notify the CBB as soon as practicable of any market manipulative or abusive activities on its trading platform (whether potential, attempted or conducted). The licensee must provide the CBB with full assistance in connection with such activities and implement appropriate remedial measures.Added: April 2023Market Surveillance System
CRA-13.1.1E
In addition to internal market surveillance policies and controls referred to in Paragraph CRA-13.1.1C above, a
licensee must adopt an effective market surveillance system provided by a reputable and independent provider to identify, monitor, detect and prevent any market manipulative or abusive activities on its platform, and provide access to this system to the CBB to perform its own surveillance functions when required by the CBB.Added: April 2023CRA-13.1.1F
A
licensee must review the effectiveness of the market surveillance system provided by the independent provider on a regular basis, at least annually, and make enhancements as soon as practicable to ensure that market manipulative or abusive activities are properly identified. The review report should be submitted to the CBB upon request.Added: April 2023CRA-13.1.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.1.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.1.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2 CRA-13.2 [This Section was deleted in April 2023]
CRA-13.2.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.5
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-13.2.6
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-13.2.7
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-13.2.8
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.9
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.10
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.11
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.2.12
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.3 CRA-13.3 [This Section was deleted in April 2023]
CRA-13.3.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.3.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.3.3
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-13.3.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.4 CRA-13.4 [This Section was deleted in April 2023]
CRA-13.4.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.4.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.4.3
[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-13.4.5
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.5 CRA-13.5 [This Section was deleted in April 2023]
CRA-13.5.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.5.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.5.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.5.4
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.6 CRA-13.6 [This Section was deleted in April 2022]
CRA-13.6.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.6.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.6.3
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.7 CRA-13.7 [This Section was deleted in April 2023]
CRA-13.7.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.7.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.8 CRA-13.8 [This Section was deleted in April 2023]
CRA-13.8.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.9 CRA-13.9 [This Section was deleted in April 2023]
CRA-13.9.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-13.9.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14 CRA-14 [This Chapter was deleted in April 2023]
CRA-14.1 CRA-14.1 [This Section was deleted in April 2023]
CRA-14.1.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.1.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.1.3
[This Paragraph was deleted in April 2023].
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Deleted: April 2023
Added: April 2019CRA-14.1.14
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.2 CRA-14.2 [This Section was deleted in April 2023]
CRA-14.2.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.2.2
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.2.3
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Added: April 2019CRA-14.2.6
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Added: April 2019CRA-14.3 CRA-14.3 [This Section was deleted in April 2023]
CRA-14.3.1
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.3.2
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.3.7
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Added: April 2019CRA-14.4 CRA-14.4 [This Section was deleted in April 2023]
CRA-14.4.1
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.4.2
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Added: April 2019CRA-14.4.3
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Added: April 2019CRA-14.4.5
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Added: April 2019CRA-14.5 CRA-14.5 [This Section was deleted in April 2023]
CRA-14.5.1
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.5.2
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Added: April 2019CRA-14.5.8
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Added: April 2019CRA-14.6 CRA-14.6 [This Section was deleted in April 2023]
CRA-14.6.1
[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.7 CRA-14.7 [This Section was deleted in April 2023]
CRA-14.7.1
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8 CRA-14.8 [This Section was deleted in April 2023]
CRA-14.8.1
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8.2
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8.3
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8.4
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8.5
[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8.7
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8.8
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.8.9
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.9 CRA-14.9 [This Section was deleted in April 2023]
CRA-14.9.1
[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.9.8
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.9.9
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.9.10
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.10 CRA-14.10 [This Section was deleted in April 2023]
CRA-14.10.1
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[This Paragraph was deleted in April 2023].
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[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.10.5
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.10.6
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.10.7
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.10.8
[This Paragraph was deleted in April 2023].
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Added: April 2019CRA-14.10.9
[This Paragraph was deleted in April 2023].
Deleted: April 2023
Added: April 2019CRA-14.10.10
[This Paragraph was deleted in April 2023].
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Added: April 2019Appendix -1 CYBER SECURITY INCIDENT REPORTING TEMPLATE
[Appendix -1 was deleted in April 2023]
Deleted: April 2023
Amended: January 2020
Added: April 2019Appendix -2 Methodology for calculating financial penalties
[Appendix -2 was deleted in April 2023]
Deleted: April 2023
Added: April 2019CRA-15 CRA-15 Digital Tokens
CRA-15.1 CRA-15.1 Digital Token Offerings
CRA-15.1.1
A company must not make an offer or issue a
digital token whose issuance is regulated by the CBB unless it has obtained a written approval from the CBB. Prior to offering a digital token, the digital token issuer must meet the eligibility criteria and requirements set out in this Module.Added: April 2023Digital Tokens
CRA-15.1.2
All offers of
digital tokens which exhibit the characteristics of asecurity are regulated by the CBB.Added: April 2023CRA-15.1.3
While determining whether a
digital token qualifies as asecurity , the CBB will examine the underlying economic purpose of thedigital token , its structure and characteristics, including the rights attached to thedigital token . For the avoidance of doubt, adigital token may be considered:(a) Equivalent of an equity security: where it confers or represents ownership interest in the issuer or gives entitlement to share in the issuer's profit; or(b) Equivalent of a bond or debt security: where it constitutes or evidences the indebtedness of the issuer of thedigital token in respect of any money that is lent to the issuer by thedigital token holder, its maturity is fixed, is redeemable at maturity and gives entitlement to share in interest distributed by thedigital token issuer .Added: April 2023CRA-15.1.4
In order to determine whether a
digital token is considered asecurity , the CBB shall, amongst other things, take into consideration the following:(a) Does it give thedigital token holder an entitlement against thedigital token issuer ? If so, is the entitlement in kind or a monetary entitlement? If it is monetary entitlement, is it profit sharing, a predetermined entitlement, or an undetermined other kind of entitlement?(b) Does thedigital token represent a monetary claim on thedigital token issuer ?(c) Is thedigital token transferable?(d) Does it confer decision power on the project of thedigital token issuer ?Added: April 2023CRA-15.1.5
The guidance provided are indicative and not exhaustive and, the CBB may take into consideration additional factors while assessing an application for issuance of a
digital token . Adigital token shall be considered asecurity if it is either autility token or anasset token and exhibits the following characteristic:(a) Utility tokens: Autility token shall be considered a security if it has an investment purpose at the point of issue or it has the potential to become investment objects. To this end,utility tokens which are transferable shall be considered as securities.
Autility token shall not be treated as asecurity if its sole purpose is to confer digital access rights to an application or a service, and if theutility token can actually be used in this way at the point of issue. In such cases, the underlying function is to grant access rights and the connection and resemblance to an equity security or debt security is absent.(b) Asset tokens: Anasset token shall be treated as asecurity where it:(i) gives rights to financial entitlement and exhibits features of either bonds or equity securities: the former if the entitlement is a predetermined cash flow; and the latter if the entitlement is a share in profit;(ii) gives right to an entitlement in kind, and the token holder holds decision making powers in the project.Added: April 2023Initial Assessment
CRA-15.1.6
Potential
digital token issuers seeking to undertake adigital token offer are encouraged to initiate preliminary discussion with the CBB to determine whether the digital token is regulated by the CBB. As part of the initial assessment, potentialdigital token issuers should provide necessary details, including details about the issuer and description of the project, to the CBB to determine suitability of thedigital token for issuance.Added: April 2023CBB’s Right of Refusal or Restrictions on Digital Token Offering
CRA-15.1.7
The CBB may reject an application for offering of
digital tokens if it is found that the issuance thereof might cause damage or be contrary to the interests of the holders of thedigital tokens or the market in general.Added: April 2023CRA-15.1.8
Where the CBB grants its approval in relation to an offering, it may impose additional conditions, as it deems necessary.
Added: April 2023General Requirements
CRA-15.1.9
The
digital token issuer must meet the following requirements for adigital token offering:(a) Thedigital token issuer must be a legal person duly incorporated under the laws of the Kingdom of Bahrain or a jurisdiction acceptable to the CBB and which is not publicly listed on a stock exchange;(b) Thedigital token issuer must ensure no conflict of interest arises during the issuance ofdigital tokens ;(c) Thedigital token issuer must protect and act in the best interests ofdigital token holders as well as provide equal treatment to alldigital token holders;(d) Thedigital token issuer must adhere to the offering and issuing timetable contained in thewhitepaper , or as amended, subject to the CBB’s written approval;(e) The maturity period of adigital token exhibiting characteristics of a debt security must not exceed 5 years;(f) For any single offering ofdigital token , thedigital tokens must have identical terms and conditions of issuance, including having the same price; and(g) The offer period for adigital token offering must not be less than 10 calendar days after the day of commencement of the offer and must not exceed a maximum period of three (3) months.Added: April 2023CRA-15.1.10
The digital token issuer and the
digital token advisor must fulfil all obligations in their respective capacities in accordance with the signed written agreements concluded between them in respect of thedigital token issue.Added: April 2023Moratorium on Equity Interest
CRA-15.1.11
Founders and senior management of thedigital token issuer must, in aggregate, own at least 50% equity holding in thedigital token issuer , on the date of the issuance of thedigital tokens .Added: April 2023CRA-15.1.12
Post issuance of the
digital tokens , thefounders and senior management of thedigital token issuer are not entitled to sell or transfer their shareholding for a period of 1 year, starting from the date of the issuance of the digital tokensAdded: April 2023Cooling-off Period
CRA-15.1.13
A cooling-off right must be given to an investor who is investing in a
digital token offering, except for where such investor is a shareholder, board member or an employee of thedigital token issuer . The cooling-off period must be not less than two (2) business days commencing from the date of close of the issue. No fee or penalty must be charged to the investor who exercises the right to a refund during the cooling-off period.Added: April 2023CRA-15.1.14
Investors exercising their cooling-off rights must be refunded within five (5) business days. The refund amount must be the sum of:
(a) The purchase price paid for thedigital token ; and(b) Any other charges imposed at the time of purchase of thedigital token .Added: April 2023Soft Cap (Minimum Subscription)
CRA-15.1.15
The
soft cap must not be set lower than 80% of the digital token offer size.Digital token issuers may set a highersoft cap .Added: April 2023CRA-15.1.16
Where a
digital token offer fails to reach thesoft cap as set in thewhitepaper , thedigital token advisor must within five (5) business days from the closure of thedigital token offering:(a) Send each investor a notification about the failure to reach thesoft cap and refund the subscription amount and other charges that the investor paid for thedigital token offer; and(b) Report the failure to reach thesoft cap , the refund made and cancellation of thedigital token offer to the CBB.Added: April 2023Oversubscription
CRA-15.1.17
If a
digital token offering is over-subscribed after the closing of the offering period, thedigital token advisor must make allotment in accordance with the pre-determined basis which must be described in thewhitepaper . Thedigital token advisor must not make allotment in excess of the limit stated in thewhitepaper and any excess subscription amounts received from investors must be refunded to investors within 3 business days from the date of allotment.Added: April 2023Release of Funds
CRA-15.1.18
The
digital token issuer and thedigital token advisor must enter into an agreement with provisions, among other matters, on the schedule of release of proceeds (if stated in thewhitepaper ), the progress report that will be required before each release of proceeds, and that thedigital token advisor will return the said proceeds to the investors in case thesoft cap of thedigital token offer is not reached or in a pro-rata basis in case the project is not completed by thedigital token issuer .Added: April 2023CRA-15.1.19
The banking arrangement for the purpose of managing subscription money between the
digital token issuer and thedigital token advisor must be dissolved upon completion of fund transfer process, unless thedigital token offering failed to meet thesoft cap target or the project is not completed by thedigital token issuer with notification to the CBB.Added: April 2023CRA-15.1.20
If the
digital token issuer is not able to complete the project, the appointeddigital token advisor must:(a) Immediately notify the CBB regarding the non-completion of the project by thedigital token issuer and the reason behind the project not being completed; and(b) Within 5 business days from the date of notifying the CBB, individually notify each investor about the non-completion of the project and refund the remaining proceeds under its care on a pro-rata basis to the investors based on the amount of their investment.Added: April 2023Allotment
CRA-15.1.21
Digital tokens must be allotted to subscribing investors within 6 calendar days of the closing date of the digital token offer in accordance with the allotment basis stipulated in thewhitepaper . The subscription results must be announced on thedigital token advisor’s platform.Added: April 2023Approval Requirements
CRA-15.1.22
A
digital token issuer must submit the application along with the draftwhitepaper and other documents as specified in Paragraph CRA-15.1.28, through itsdigital token advisor , in a form and manner as specified by the CBB, including the liabilities of its signatories and a fit and proper declaration of its board members and senior management.Added: April 2023CRA-15.1.23
The
digital token issuer must demonstrate to the CBB that the gross proceeds to be raised from thedigital token offering would be sufficient to undertake the project or business as proposed in thewhitepaper .Added: April 2023CRA-15.1.24
The CBB will make a decision on the application within 30 working days of receipt of all required information and documents complete in all respect.
Added: April 2023CRA-15.1.25
The CBB’s approval for an offer of
digital tokens does not mean that it has approved the appropriateness of thedigital token issuer’s project or authenticated the financial and technical information presented in thewhitepaper .Added: April 2023Suspension or Withdrawal of the Approval
CRA-15.1.26
Notwithstanding the approval granted by the CBB to the
digital token issuer , the CBB may, at any time during the offer period, or before the funds raised is released to thedigital token issuer , do any or all of the following:(a) Revoke the CBB’s approval;(b) Issue a direction to suspend thedigital token offering; or(c) Issue a direction to defer the implementation of thedigital token offering.Added: April 2023CRA-15.1.27
The CBB may exercise its powers under Paragraph CRA-15.1.26 if the CBB becomes aware of any of the following:
(a) Thedigital token issuer has breached the CBB Law, its regulations, resolutions or directives (including any requirement of this Module or any other applicable Modules of the CBB Rulebook);(b) Thedigital token issuer has failed to comply with any terms or conditions imposed by the CBB and/or thedigital token advisor ;(c) The application, including thewhitepaper , contains any statement or information that is false or misleading or from which there is a material omission; or(d) There is a concern with regards to thedigital token issuer’s corporate governance record or with the integrity of any of thedigital token issuer’s directors and senior management.Added: April 2023Documentation Requirements
CRA-15.1.28
A
digital token issuer , through its appointeddigital token advisor , must provide the CBB the following documents:(a) A draftwhitepaper prepared in accordance with the requirements of this Module;(b) An up-to-date copy of the memorandum and articles of association;(c) A copy of thedigital token issuer’s Board of Directors’ resolution approving the issuance ofdigital tokens ;(d) Copies of audited financial statements. A company that has been established for less than one year must submit projected financial statements whereas a company that has been established for a longer period (more than 1 year) must provide the financial statements for the past financial years going up to a maximum of preceding 3 financial years;(e) Documents proving the establishment of an arrangement that ensures the monitoring and safeguarding of the funds to be collected through thedigital token offering in accordance with Paragraph CRA-15.2.10;(f) A copy of the agreement entered into with the appointed licensed retail bank for deposit of funds to be raised through the digital token offer;(h) All proposed marketing material related to thedigital token offering;(i) A declaration by thedigital token advisor confirming its responsibility for carrying out due diligence on thedigital token issuer and assessing accuracy of the information contained in thewhitepaper and other documents submitted as part of the application (Appendix CRA-2);(j) A declaration by the Board of Directors regarding the reliability and accuracy of the information provided to the CBB as part of thedigital token offering requirements (Appendix CRA-3);(k) A copy of the duly signed declaration by the legal advisor for thedigital token offer, based on a due diligence exercise of all applicable laws, facts and arrangements, including enforceability of the rights relating to thedigital tokens , as appropriate (Appendix CRA-4); and(l) Any other information as required by the CBB.Added: April 2023Registration of Whitepaper
CRA-15.1.29
The final corrected copies of the whitepaper and other documents must be registered with the CBB no later than 2 business days prior to the date of commencement of the offering period.
Added: April 2023Contents of the Whitepaper
CRA-15.1.30
The
whitepaper must contain, in both the Arabic and English language, all the information concerning thedigital token issuer and the proposeddigital token offering that would enable investors to make an informed investment decision and understand the risks relating to the offering. The information in thewhitepaper must, at a minimum, include the following:(a) A detailed description of thedigital token issuer's project, the reasons for the offering and the planned use of the funds raised;(b) Detailed information about the directors, senior management, key personnel and advisers involved in the project’s design and development including the name, designation, nationality, address, professional qualifications and related experience;(c) The business plan of thedigital token issuer ;(d) The key characteristics of thedigital token including the rights, conditions, function and obligations attached to thedigital tokens including any specific rights attributed to a token holder and the procedures and conditions of exercise of these rights;(e) A summary of the legal opinion regarding the priority of the claims ofdigital token holders in the event of insolvency or liquidation of the digital token issuer;(f) A detailed description of thedigital token offering, including but not limited to:(g) The number ofdigital tokens to be issued;(h) Thedigital token issue price;(i) The subscription terms and conditions;(j) The minimum amount necessary to carry out the project and the maximum amount of the offering; and(k) The subsequent use and application of the proceeds thereafter illustrated in a scheduled timeline for drawdown and utilisation of proceeds (“schedule of proceeds”);(l) The technical specifications of thedigital token ;(m) The risks relating to thedigital token issuer , thedigital tokens , thedigital token offering and the carrying out of the project, as well as mitigating measures thereof;(n) A detailed description on the determination of the accounting and the valuation treatments for the digital tokens including all valuation methodology and reasonable presumptions adopted in such calculation;(o) The allotment policy for the digital tokens;(p) A detailed technical description of the protocol, platform and/or application of the digital token, as the case may be, and the associated benefits of the technology;(e) Detailed description of the sustainability and scalability of the underlying business or project;(f) Detailed description of the financial, technical, legal and commercial due diligence and market feasibility undertaken on the project;(g) Financial statements of thedigital token issuer in accordance with CRA15.1.28(d); and(h) The offering timetable.Added: April 2023CRA-15.1.31
The
whitepaper must not include presentation of estimates, projections, forecasts, or forward-looking statements, or overviews, without sufficient qualification, or without sufficient factual basis and reasonable assumptions.Added: April 2023CRA-15.1.32
The information provided in the
whitepaper must be fair, clear, accurate, complete in all respects and not misleading, and must be presented in a concise and comprehensible manner. It must not include any promotional statements to excite rather than to inform.Added: April 2023CRA-15.1.33
The whitepaper must be prepared in accordance with the template provided in Appendix CRA-1.
Added: April 2023CRA-15.1.34
The CBB, prior to approving an application for offering of
digital tokens , shall assess whether the information provided in thewhitepaper is complete and comprehensible. Thewhitepaper should be drawn up by thedigital token issuer under the guidance of thedigital token advisor prior to being submitted to the CBB.Added: April 2023CRA-15.1.35
Along with the
whitepaper , a summary of thewhitepaper must be made available to investors both in the Arabic and English language.Added: April 2023CRA-15.1.36
The
digital token issuer must describe in thewhitepaper the procedures for collection and management of the funds raised through thedigital token offering. Thedigital token issuer must ensure the consistency of these procedures relative to the duration of the offering and the planned use of the funds collected.Added: April 2023CRA-15.1.37
The mechanism for collection of funds must offer sufficient guarantees ensuring its reliability and efficiency. It must have at least the following characteristics:
(a) It must ensure the security of the funds collected;(b) It must ensure that the funds collected are deposited in a CBB licensed retail bank account in Bahrain dedicated specifically to thedigital token offering;(c) It must ensure that the funds collected cannot be transferred to thedigital token issuer unless thesoft cap threshold is reached; and(d) It must ensure that the funds collected can be transferred to thedigital token issuer or used by thedigital token issuer only if the drawdown conditions provided for by thedigital token issuer in thewhitepaper are met.Added: April 2023Responsibility for Reliability and Accuracy of the Whitepaper
CRA-15.1.38
The
whitepaper and the supplementarywhitepaper must include a duly signed Board of Directors responsibility statement. The signature on thewhitepaper and the supplementarywhitepaper by the Board of Directors must be preceded by a declaration specifying that, to their knowledge, the information presented in thewhitepaper corresponds to the facts, there is no omission liable to make it misleading and that they accept full responsibility for the information contained in the whitepaper.Added: April 2023Validity of the Whitepaper Approval by the CBB
CRA-15.1.39
The
whitepaper remains valid for a maximum period of six months from the date of notification of the CBB’s approval. After this period, no person shall offerdigital tokens based on such whitepaper, unless approved by the CBB.Added: April 2023Supplementary Whitepaper
CRA-15.1.40
Where a
digital token issuer ordigital token advisor becomes aware of new facts which have a significant influence on the investment decision, after thewhitepaper has been approved by the CBB, but before the closing of the offer period, thedigital token issuer must immediately notify the CBB and furnish a supplementarywhitepaper to the CBB. At a minimum, a supplementarywhitepaper must be filed with the CBB, upon occurrence of the following:(a) A matter has arisen, and information in respect of that matter would have required by these Rules to be disclosed in thewhitepaper if the matter had arisen at the time thewhitepaper was prepared;(b) There has been a material change affecting a matter disclosed in thewhitepaper ;(c) Thewhitepaper contains a statement or information that is false or misleading;(d) Thewhitepaper contains a statement or information from which there is a material omission; or(e) Where the assumptions based upon which the project or business proposition, the due diligence, or market feasibility were made are no longer valid or reliable.Added: April 2023CRA-15.1.41
Where a
digital token issuer files a supplementarywhitepaper with the CBB, it must immediately inform investors about the filing of a supplementarywhitepaper by announcing it on the digital token advisor’s platform, as well as on its own website.Added: April 2023CRA-15.1.42
The changes made in the amended
whitepaper shall not extend the six-month time limit referred to in Paragraph CRA-15.1.39, unless approved by the CBB.Added: April 2023CRA-15.1.43
A supplementary
whitepaper must conform to the following requirements:(a) The order of the information appearing in the supplementarywhitepaper must be consistent with that of the originalwhitepaper ;(b) Clear identification of the items/paragraphs it supplements or replaces;(c) A statement that it is to be read in conjunction with the originalwhitepaper ; and(d) A responsibility statement from the Board of Directors of thedigital token issuer .Added: April 2023CRA-15.1.44
The CBB shall make its decision with respect to the supplementary
whitepaper , subject to any required changes, within 15 working days from receipt of all necessary documents and information complete in all aspects.Added: April 2023CRA-15.1.45
The supplementary
whitepaper must be published and disseminated in manner as the originalwhitepaper . The document must contain the word “Supplementary Whitepaper” on the first page and describe the changes in relation to the originalwhitepaper .Added: April 2023CRA-15.1.46
An investor may withdraw subscription following publication of supplementary
whitepaper . The withdrawals period of the subscription must be no less than six (6) business days from the date of publication of the supplementarywhitepaper and the refund amount comprising the purchase price paid and any other charges imposed at the time of purchase of the digital token must be made within 5 business days from the date of refund request. No fee must be charged to the investor for the refund.Added: April 2023Dissemination of whitepaper
CRA-15.1.47
Upon approval by the CBB, the
whitepaper must be made available to the investors at least 5 calendar days prior to the commencement ofdigital token offering.Added: April 2023CRA-15.1.48
The
whitepaper must be effectively disseminated by posting it in an easily identifiable and accessible manner on the platform of thedigital token advisor , as well as on the website of thedigital token issuer in a downloadable format.Added: April 2023CRA-15.1.49
The
whitepaper or the supplementarywhitepaper , as disseminated and made available to the public by thedigital token advisor , must be identical to the version approved by the CBB and must not undergo changes by thedigital token issuer or thedigital token advisor subsequent to the CBB’s approval.Added: April 2023Marketing and Promotion
CRA-15.1.50
The marketing material for the
digital token offering must be disseminated only after obtaining the CBB’s approval.Added: April 2023CRA-15.1.51
A
digital token issuer must not engage any third-party individual(s) or entity, other than thedigital token advisor , to endorse or represent thedigital token issuer with the intended purpose of marketing, promoting, gaining publicity or soliciting funds for itsdigital token offering.Added: April 2023CRA-15.1.52
The draft marketing material must be submitted to the CBB for approval and must:
(a) Indicate where the investor can obtain thewhitepaper approved by the CBB by specifying the name of the website(s)/platform on which it is posted;(b) State that investors should read the information contained in the whitepaper prior to making investment decisions;(c) Be clearly identifiable as marketing material;(d) Be fair, clear and not misleading;(e) Disclose the risks related to thedigital token offering; and(f) Contain information that is consistent and does not contradict with the information provided in thewhitepaper .Added: April 2023CRA-15.1.53
If, after the approval of the
whitepaper by the CBB, thedigital token issuer envisages to release marketing material whose content is substantially different from the marketing material submitted to the CBB prior to such approval, it must submit to the CBB the draft modified marketing material for approval.Added: April 2023CRA-15.1.54
Where a supplementary
whitepaper is approved by the CBB, a modified version of the marketing material must be disseminated after seeking the prior approval of the CBB, in instances where the original marketing material is not in line with the changes made by the supplementarywhitepaper .Added: April 2023Fees for Offering of Digital Tokens
CRA-15.1.55
Offering of
digital tokens is subject to fees levied by the CBB, pursuant to Article 180 of the CBB Law and Resolution No. (1) of 2007 with respect to determining fees categories due for licenses and services provided by the CBB. The following table outlines the non-refundable fees payable to the CBB, at the time of submission of an application for adigital token offering:Amount in BD
No. Type of Approval % of Offer Value Min Amount Max Amount 1. Approval of the Whitepaper 0.025% 500 1250 3. Supplementary Whitepaper Fixed 100 100 Added: April 2023CRA-15.1.56
An application for approval of a
digital token offering and review of the documents related to thedigital token offering will not be regarded as complete or submitted until the fee has been paid in full.Added: April 2023CRA-15.2 CRA-15.2 Digital Token Issuers Obligations
General Obligations
CRA-15.2.1
Digital token issuers must meet the following requirements:(a) Appoint adigital token advisor to fulfil the obligations stipulated in this Module;(b) Appoint a legal advisor for carrying out legal due diligence;(c) Ensure that a robust corporate governance structure, which at a minimum includes necessary and appropriate policies, practices and internal controls, is in place to safeguard against unethical conduct, mismanagement and fraudulent activities;(d) Put in place necessary systems and controls for mitigating the risks of money laundering and financing of terrorism. For this purpose, thedigital token issuer must set up suitable organisational structures, internal procedures and a supervision system to address these risks and ensure compliance with its obligations relating to anti-money laundering and terror financing;(e) Provide to the CBB any information or assistance as the CBB deems necessary relating to thedigital tokens ;(f) Retain all relevant documents and agreements related to thedigital token offering for a period of five (5) years; and(g) Be liable towards itsdigital token holders for any damages incurred by them resulting from its wilful misconduct or negligence, including the failure to perform in whole or in part its obligations.Added: April 2023Governance Requirements
CRA-15.2.2
A
digital token issuer must be headed by an effective Board. The size and composition of the Board should be commensurate with the size, nature and complexity of its business.Added: April 2023CRA-15.2.3
The Board is responsible for ensuring that the
digital token issuer complies with the relevant provisions of the CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook).Added: April 2023CRA-15.2.4
The Board has, both collectively and on an individual basis, an obligation to acquire and maintain sufficient knowledge and understanding of the
digital token issuer’s business to enable them to discharge their duties.Added: April 2023CRA-15.2.5
The Board must:
(a) Act honestly and in good faith in the best interests of thedigital token issuer and token holders;(b) Exercise reasonable care, skill and diligence;(c) Exercise the powers it has diligently and in line with applicable laws and not misuse such powers;(d) Exercise its powers independently and without subordinating such powers to the will of others;(e) Monitor, on an ongoing basis, the execution of the functions delegated to thedigital token issuer’s employees and be satisfied that they are performing their functions in accordance with their obligations;(f) Identify and manage the risks relating to thedigital token issuer and its activities;(g) Monitor, on an ongoing basis, compliance with the relevant requirements of CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook);(h) Avoid conflicts of interest in so far as it is possible and, where it is not, ensure – inter alia by way of disclosure and internal conflicts of interest management procedures – that investors are treated fairly;(i) Be responsible for thedigital token issuer’s compliance with the AML/CFT requirements; and(j) Adopt a management structure commensurate with thedigital token issuer’s size, complexity, structure and risk profile.Added: April 2023CRA-15.2.6
A
digital token issuer must ensure that its appointed senior management employees:(a) Possess sufficient knowledge and expertise in the field of information technology, blockchain technology, digital tokens and their underlying technologies; and(b) Maintain sufficient knowledge and understanding of thedigital token issuer’s business to enable them to discharge their function in a diligent manner.Added: April 2023CRA-15.2.7
Where a member of senior management leaves the organisation or is removed or replaced, such a change must be immediately disclosed to the
digital token advisor and the digital token holders.Added: April 2023CRA-15.2.8
A
digital token issuer must ensure that its Board and senior management are fit and proper, taking into account the following:(a) They are suitably qualified to assume the position including having the relevant experience and track record in managing the business and affairs of thedigital token issuer ;(b) They have not been disqualified to be a director by a court, regulator or any other competent authority;(c) There is no pending criminal charge against the person in any court of law, whether within or outside Bahrain, for an offence involving fraud, integrity, dishonesty or mismanagement of an entity;(d) They have not had any civil enforcement action initiated against them by any court of law or other competent authority, whether within or outside Bahrain;(e) They have not:(i) Been convicted, whether within or outside Bahrain, of an offence involving fraud, integrity, dishonesty other criminal conduct;(ii) Been convicted of an offence under the securities laws or any other laws within or outside Bahrain relating to the capital market;(iii) Contravened any provision of any law relating to a financial sector or companies in general, whether within or outside Bahrain involving dishonesty, incompetence, negligence, misconduct or malpractice;(iv) Engaged in any business practices appearing to the CBB to be deceitful, oppressive or otherwise improper, whether unlawful or not, or which otherwise reflect discredit in the method of conducting business;(v) Engaged in or has been associated with any other business practices or otherwise conducted himself in such a way as to cast doubt on his competence and soundness of judgement; or(vi) Engaged in or has been associated with any conduct that cast doubt on his/her ability to act in the best interest of investors, having regard to the reputation, character, financial integrity and reliability.Added: April 2023CRA-15.2.9
The
digital token issuer , must submit a fit and proper declaration of its Board and senior management to:(a) The CBB at the time of submitting the application for offering ofdigital tokens ; and(b) Thedigital token advisor for any subsequent appointment to its board or senior management.Added: April 2023Digital Token Advisor Requirements
CRA-15.2.10
Prior to appointing a
digital token advisor , thedigital token issuer should review the ability of thedigital token advisor to provide the service. While determining the suitability of adigital token advisor , thedigital token issuer should consider the following:(a) Historical record and prior performance;(b) Availability of adequate systems, controls and resources to discharge its obligations in accordance with the CBB’s requirement; and(c) Suitably experienced and qualified employees having adequate knowledge and professional expertise to discharge its obligations.Added: April 2023CRA-15.2.11
A
digital token issuer must enter into a formal agreement with thedigital token advisor by way of a signed letter of engagement defining clearly the extent of responsibilities and the terms of the agreement. The scope of the agreement must cover the obligations of thedigital token advisor under the CBB rules in this regard.Added: April 2023Repurchase of Digital Tokens
CRA-15.2.12
If a
digital token issuer has disclosed adigital token repurchase mechanism in thewhitepaper , it may, after itsdigital tokens have been traded for a full year, carry out a repurchase (buyback) of itsdigital tokens , provided that it completes the execution of the buyback within 2 months from the day of making the public disclosure about the repurchase (buyback).Added: April 2023CRA-15.2.13
A
digital token issuer must immediately cancel thedigital tokens that it acquires under thedigital token repurchase plan.Added: April 2023Periodic Reporting Requirements
CRA-15.2.14
Within 45 days after the end of each of the first 3 quarters, a
digital token issuer must prepare a report in accordance with CRA-15.2.17 and publish it on thedigital token advisor’s platform.Added: April 2023CRA-15.2.15
A
digital token issuer must prepare and publish a report, in accordance with CRA-15.2.16, on annual basis. The report must be published on thedigital token advisor’s platform within 60 days from the end of the financial year.Added: April 2023CRA-15.2.16
The
digital token issuer’s reports must contain information on the performance of the underlying business or project, including–(a) Total amount ofdigital tokens issued and in circulation;(b) Status of the utilisation of thedigital token’s proceeds by thedigital token issuer ;(c) Status of the underlying business or project and any deviation from the whitepaper;(d) Types of problems encountered, and the procedures applied or that will be applied to manage and resolve such problems;(e) Risks facing the underlying business or project and measures taken for mitigation; and(f) Unaudited quarterly financial statements reviewed by the external auditor for quarterly reporting and audited annual financial statements for annual reporting.Added: April 2023CRA-15.2.17
The financial statements must comply with International Financial Reporting Standards (IFRS). For Islamic institutions, audited financial statements must comply with AAOIFI standards or where AAOIFI standards do not cover a subject, IFRS must be followed.
Added: April 2023CRA-15.2.18
A copy of the quarterly report and annual report referred to in Paragraphs CRA-15.2.15 and CRA-15.2.16 must be filed with the CBB no later than the date of its publication.
Added: April 2023Disclosure of Material Information
CRA-15.2.19
A
digital token issuer must immediately disclose information regarding any material matter/event on the appointeddigital token advisor’s platform. Information would be regarded as material if its omission or misstatement could change or influence the assessment or decision of an investor relying on that information for the purpose of making economic decisions.Added: April 2023CRA-15.2.20
For the purposes of CRA-15.2.19, the following are examples of events that are to be considered material:
(a) Loss of creditworthiness;(b) Searches and seizures by law enforcement authorities, any litigious or non-litigious matter, administrative disposition, administrative litigation, precautionary injunctive procedure, or compulsory execution, with a material effect on the finances or business or project of thedigital token issuer ;(c) Major decrease in operations or a full or partial work stoppage;(d) A pledge/lien on all or a major portion of its assets;(e) Amendment, termination, or rescission of memorandum and articles of association;(f) A plan for strategic alliance or other business cooperation plan or important contract, or a change in important content of a business plan, or purchase of an enterprise, or acquisition of or assignment to another of patent rights, trademark rights, copyrights, or other intellectual property related transactions, with a material effect on the finances or business or project of thedigital token issuer ;(g) Occurrence of a disaster, protest, strike, environmental pollution event, information security incident, with a material effect on the finances or business of thedigital token issuer ;(h) The resignation, dismissal or appointment of any key Board/management personnel;(i) Material changes to the equity holding held by the board of directors or senior management;(j) Change in the registered office address, legal name, financial year-end, or external auditor;(k) Resolution by the board of directors to repurchase (buyback)digital tokens , expiration of a repurchase (buyback) period, or completion of execution of a repurchase (buyback);(l) Resolution by the board of directors to apply for termination of trading of the issuer'sdigital tokens on the trading platform; and(m) Announcement of suspension or termination of trading of thedigital tokens on thetrading platform .Added: April 2023CRA-15.2.21
To ensure equal access to information, a
digital token issuer must not externally disclose any material information on its own before publishing it on the appointeddigital token advisor’s platform.Added: April 2023CRA-15.2.22
If there is any material change in the development of subsequent events with respect to material information that a
digital token issuer has already published, thedigital token issuer must update or supplement in a timely manner the content of the relevant information in accordance with the procedure under which the information was originally disclosed.Added: April 2023Power of the CBB to issue Direction
CRA-15.2.23
The CBB may at any time issue a direction to the
digital token issuer which must be complied with, if the CBB:(a) is of the view that it is necessary for the:(i) purposes of ensuring fair and orderly market; or(ii) purposes of the protection of the holders ofdigital tokens , or in the public interest; or(b) is of the opinion that the underlying project or business is no longer viable or sustainable.Added: April 2023CRA-15.2.24
A direction issued under Paragraph CRA-5.2.23 may include a direction:
(a) Not to deal or transfer monies or properties to any other person;(b) Not to solicit business from any person;(c) To cease or refrain from committing an act or pursuing a course of conduct or activity;(d) To do any act, in relation to its business, affairs, property, project or digital token as the CBB deems necessary;(e) To give effect to any requirement of the applicable laws, rules and regulations; or(f) Relating to other matter as the CBB considers necessaryAdded: April 2023CRA-15.3 CRA-15.3 Role and Responsibilities of Digital Token Advisor
CRA-15.3.1
This section sets the role and responsibility of a category-3 or category-4
crypto-asset licensee acting as adigital token advisor to adigital token issuer .Added: April 2023CRA-15.3.2
Digital token issuers must appoint either a category-3 or a category-4crypto-asset licensee asdigital token advisor . Thedigital token advisor must ensure that thedigital token issuer satisfies all requirements as prescribed under the CBB Law, its regulations, resolutions and directives (including this Chapter and other applicable rules of the CBB Rulebook).Added: April 2023Independence and Avoidance of Conflict of Interest
CRA-15.3.3
A
digital token advisor must be independent from thedigital token issuer . A confirmation in writing of its independence must be submitted to the CBB. Adigital token advisor will not be considered independent by the CBB if:(a) It has ownership interest in thedigital token issuer or any other company within thedigital token issuer’s group;(b) It has a business relationship with, or financial interest in, thedigital token issuer or any other entity in thedigital token issuer’s group that would give thedigital token advisor , or thedigital token advisor’s group, a material interest in the outcome of the transaction; or(c) A director or employee of the appointeddigital token advisor or another entity in the appointeddigital token advisor’s group, has a material interest in thedigital token issuer or any other entity in thedigital token issuer’s group.Added: April 2023CRA-15.3.4
A
digital token advisor’s directors and shareholders must disclose to the investors on its platform if they hold any shares in any of the issuers hosted on its platform.Added: April 2023CRA-15.3.5
A
digital token advisor is prohibited from providing direct or indirect financial assistance to investors, to invest indigital tokens .Added: April 2023Obligations of Digital Token Advisor
CRA-15.3.6
A
digital token advisor must:(a) Ensure that thedigital token issuer satisfies all the requirements as applicable for offering ofdigital tokens ;(b) Advise and guide thedigital token issuer as to its responsibilities and obligations to ensure compliance with the CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook) and all other applicable laws;(c) Exercise its own judgment and carry out assessment on thedigital token issuer’s compliance with the requirements of Chapter CRA-15 including as to whether thedigital token issuer will be able to satisfy the requirement to provide an innovative solution or a meaningful security value proposition;(d) Appoint an eligible CBB licensed retail bank for deposit of all funds raised through the digital token issue;(e) Submit to the CBB all required information and documentation including the documents required for assessment of thedigital token offer , in a timely manner;(f) Carry out due diligence on adigital token issuer including:(i) Understanding and verifying the business and project of thedigital token issuer to ensure that thedigital token issuer does not engage in any business practices appearing to be deceitful, oppressive or improper, whether unlawful or not;(ii) Conduct background checks on the issuer’s board and senior management to ensure “fit and proper” requirements are met by thedigital token issuer ;(iii) Understand the features of thedigital token to be issued by thedigital token issuer and the rights attached to it;(iv) Assess thedigital token issuer’s whitepaper as well as other documents as stated in Chapter CRA-15. In assessing thedigital token issuer’s whitepaper as well as other documents, thedigital token advisor must ensure that the contents of the aforementioned documents include the information required under Chapter CRA-15 and that its contents are fair, accurate, complete, clear, not misleading and there are no material omissions.(g) Disclose to the CBB, without delay, any information or explanations that the CBB may reasonably require for the purpose of verifying any information which should be taken into account in considering an application for registration of awhitepaper ; and(h) Act as liaison between thedigital token issuer and the CBB on all matters arising in connection with the registration of thewhitepaper or the trading of the issuer’sdigital token on thecrypto-asset exchange platform.Added: April 2023CRA-15.3.7
In addition to the obligations set out in Paragraph CRA-15.3.6, a
digital token advisor must:(a) Make thedigital token issuer’s whitepaper accessible to investors through its electronic platform;(b) Must make available through its electronic platform all relevant information relating to adigital token issuer including any material changes that are affecting thedigital token issuer or thedigital token issuer’s project;(c) Take reasonable steps in monitoring the drawdowns bydigital token issuer and that it has been utilised for the purposes stated in thewhitepaper ;(d) Ensure that its electronic platform is operating in an orderly, fair and transparent manner;(e) Have in place rules and procedures for the offering ofdigital tokens on its electronic platform;(f) Ensure that all fees and charges payable are fair, reasonable and transparent;(g) Take all reasonable measures to avoid situations that are likely to involve a conflict of interest with thedigital token issuer and establish and maintain policies and procedures to effectively and efficiently manage actual and potential conflicts of interest, including the management of non-public material information and conflicts with thedigital token issuer ;(h) Ensure that all disclosures are fair, accurate, clear and not misleading; and(i) Provide any information or document to the CBB as it may require.Added: April 2023CRA-15.3.8
A
digital token advisor must immediately notify the CBB if any of the following has occurred:(a) Any breach of the provisions of the CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook); and(b) Any material adverse change to thedigital token issuer including, but not limited to, any of the following matters:(i) The discovery of a false or misleading statement in any disclosures in relation to thedigital token offer;(ii) The discovery of any material omission of information that may affect digital token holders; and(iii) There is a material change or development in the circumstances relating to thedigital token offering or thedigital token issuer .Added: April 2023Supplementary Whitepaper
CRA-15.3.9
Where a supplementary
whitepaper has been submitted by adigital token issuer to the CBB, thedigital token advisor must notify the subscribers for thedigital token regarding the filing of the supplementarywhitepaper with the CBB and that the supplementarywhitepaper will be made available on the electronic platform upon approval of the CBB.Added: April 2023CRA-15.3.10
Upon approval of the CBB, the supplementary
whitepaper must be made available on the electronic platform of thedigital token advisor .Added: April 2023CRA-15.3.11
Where a subscriber, pursuant to publication of supplementary whitepaper, wishes to withdraw his/her subscription for the
digital token , the withdrawal period of the subscription and the refund period must be in accordance with Chapter CRA-15.Added: April 2023Register of Initial Digital Token Holders
CRA-15.3.12
A
digital token advisor must maintain a register of initialdigital token holders who subscribed for thedigital tokens during the offer period and enter into the register the total amount ofdigital tokens subscribed by each digital token holder.Added: April 2023Record of Digital Token Holders Monies and Digital Tokens
CRA-15.3.13
A
digital token advisor must establish systems and controls for maintaining an accurate and up to date record ofdigital token holders and any monies ordigital tokens held in relation to them.Added: April 2023CRA-15.3.14
A
digital token advisor must ensure that records pertaining to register of initial digital token holders is maintained in an easily retrieval format for examination by the CBB.Added: April 2023Custody of Digital Tokens
CRA-15.3.15
The
digital token advisor must maintain custody of thedigital tokens issued by thedigital token issuer on its platform. At a minimum, the custodial arrangement must meet the requirements stipulated in Chapter CRA-8 of this Module.Added: April 2023CRA-15.3.16
A
digital token advisor must ensuredigital tokens held under a custody arrangement are properly safeguarded from conversion or inappropriate use by any person, including, but not limited, to implementing multi-signature arrangements.Added: April 2023Investor Money
CRA-15.3.17
Subscription monies received in respect of the
digital token offer must be held in a separate bank account under an escrow arrangement with a licensed retail bank in Kingdom of Bahrain.Added: April 2023CRA-15.3.18
The release of funds to the
digital token issuer must be done in accordance with the provisions stipulated in Chapter CRA-15.Added: April 2023CRA-15.3.19
A
digital token advisor may impose any other additional conditions before releasing the funds, provided that the additional conditions serve the interest of the digital token holders.Added: April 2023Fund Monitoring and Safeguarding Arrangement
CRA-15.3.20
Digital token advisors must have in place a fund monitoring and safeguarding arrangement for the funds raised through thedigital token offering which must include:(a) The subscription money (client money) be received into aclient money account with aretail bank in Bahrain and make clear in the title of the account that the funds in the account belong to one or more clients of thelicensee and not to thelicensee :(i) Held in a segregated client money account;(ii) Held in a fiduciary capacity and must not be commingled with its own funds;(iii) Used only for the purposes for which thelicensee received it from itsclients ;(iv) Not used forlicensee’s own use at any point in time or given as collateral for any purpose to a third party or be subject to any restrictions;(v) Reported separately as on balance sheet item in thelicensee’s financial statements specifying also the nature and purpose for which such funds are held by the bank on behalf of its customers; and(b) Procedures for collection and management of the funds including procedures for the utilisation, refund and release of funds.Added: April 2023CRA-15.4 CRA-15.4 Trading and Settlement of Digital Tokens
CRA-15.4.1
Trading of
digital tokens can be conducted either by:(a) Operating an automated order matching system (exchange type order matching engine) by a category-4crypto-asset exchange licensee, wherein buyer and seller orders are automatically matched by the matching engine and thecrypto-asset exchange does not buy or selldigital tokens over-the-counter (acting as a dealer); or(b) Over-the-counter trading, wherein a category-3 or a category-4 crypto-asset licensee acts as a dealer and provides price quotes, on its trading platform, with its clients for thedigital tokens issued and listed on its platform.Added: April 2023CRA-15.4.2
A
digital token must not be simultaneously listed on the same platform for both types of trading i.e. order matching type market (buyer and seller orders are matched automatically by a matching engine) and over-the-counter trading market.Added: April 2023Over-the-counter Trading
CRA-15.4.3
Category-3 and category-4
crypto-asset licensees must establish written rules for over-the-counter trading ofdigital tokens and publish them on its trading platform.Added: April 2023CRA-15.4.4
The over-the-counter trading rules referred to in Paragraph CRA-15.4.3 must include the trading platform's business days and trading hours, price quote method, trade execution principles, price stabilization mechanism, trading procedures, method for the advance collection of purchase prices and
digital tokens to be sold, upper and lower price limit for trading, conditions under which trading halt (circuit breaker) shall be imposed, and the handling of settlement and default.Added: April 2023CRA-15.4.5
Category-3 and category-4
crypto-asset licensees engaging in over-the-counter trading ofdigital tokens with clients on its trading platform must collect in advance from a client the full amount of the purchase price or thedigital tokens to be sold.Added: April 2023CRA-15.4.6
Category-3 and category-4
crypto-asset licensees undertaking over-the-counter trading ofdigital tokens must open a dedicated account at a licensed bank in Kingdom of Bahrain for the collection and payment of funds.Added: April 2023CRA-15.4.7
Category-3 and category-4
crypto-asset licensees engaging in over-the-counter trading ofdigital tokens must provide two-way, buy and sell, quotes.Added: April 2023CRA-15.4.8
Category-3, and category-4
crypto-asset licensees , undertaking over-the-counter trading ofdigital tokens , must provide reasonable price quotes based on its professional judgment and must efficiently adjust demand and supply in the market depending on the market situation and must not give a quote that deviates from a reasonable price, thereby impairing the formation of fair prices.Added: April 2023CRA-15.4.9
Where a category-3, category-4
crypto-asset licensee engages in over-the-counter trading ofdigital tokens with its clients on its trading platform, the aggregate trading volume of the purchases and sales of any singledigital token on any single business day must not exceed 50 percent of the issued quantity of thatdigital token .Added: April 2023CRA-15.4.10
Category-3 and category-4
crypto-asset licensees undertaking over-the-counter trading of adigital token with its clients on its trading platform, must disclose on the trading platform relevant information to take informed trading decision including price, quantities and other trade information.Added: April 2023CRA-15.4.11
The trade information referred to in Paragraph CRA-15.4.10 must, at a minimum, include the price and quantity of the most recent trade, the cumulative trading volume, and highest, lowest, and weighted average trading price, of the
digital token during the trading hours.Added: April 2023CRA-15.4.12
After the close of daily trading hours, category 3 and category-4
crypto-asset licensees must prepare and disclose the trading volume and weighted average trading price of eachdigital token on that day.Added: April 2023CRA-15.4.13
The CBB may, at any time, by notice in writing to a category-3, category-4, vary any condition or restriction or impose such further condition or restriction as it may deem fit including but not limited to suspension of trading or termination of trading of a
digital token .Added: April 2023CRA-15.4.14
Category-3 and category-4
crypto-asset licensee undertaking over-the-counter trading must adhere to conduct of business obligations as stipulated in Section CRA-12 of this Module.Added: April 2023Market Standards
OFS — Offering of Securities
OFS-A OFS-A Introduction
OFS-A.1 OFS-A.1 Purpose
Legal Basis
OFS-A.1.1
Module OFS formulates the regulatory framework of the Central Bank of Bahrain ('CBB') to govern the issuing and offering of
securities in/from the Kingdom of Bahrain. It incorporates the requirements of Articles 80-85, 96 and 166 of the CBB Law. These regulations are issued pursuant to the authority of CBB under Article 37 to establish and enforce rules, while meeting the specific requirements of Part 4 of the Central Bank of Bahrain and Financial Institutions Law of 2006 ('CBB Law').January 2014OFS-A.1.2
This Module contains the CBB's Directive (as amended from time to time) relating to the issuing and offering of
securities and is issued under the powers available to the CBB under Article 38 of the CBB Law, together with the abovementioned provisions of the CBB Law. The Directive in this Module is applicable to all market participants and relevant persons, including but not limited toissuers ofsecurities or any person acting on their behalf,licensed exchanges ,licensed market operators ,licensed clearing houses , depositories, market intermediaries, business trusts, listed companies, any person acting for or on behalf of listed companies,shareholders of listed companies,securities ownership transfer agents, lead managers,underwriters , professional advisors, listing agents, auditors, financial analysts and any other person who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether such person is a market participant or not. OFS-A.2.3This Module should be read in conjunction with Resolution No.(16) of 2013 with respect to Financial Services Marketed in the Kingdom of Bahrain and Resolution No (1) of 2007 (as amended from time to time) with respect to determining fees categories due for licensees and services provided by the CBB.
Amended: January 2021
January 2014OFS-A.2 OFS-A.2 Division of Responsibilities
Responsibility of the CBB
OFS-A.2.1
A clear division of responsibilities between the CBB as the
securities regulator, theissuer ofsecurities and thelicensed exchanges or thelicensed market operators as a self-regulatory organisation (SRO) is required:(a) To maximise the regulatory effectiveness;(b) To permit flexibility to thelicensed exchanges or thelicensed market operators in their functioning;(c) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations; and(d) To minimise the regulatory cost.January 2014OFS-A.2.2
As a regulator, the CBB's role is as follows:
(a) Regulatory supervision;(b) Maintaining and promoting fairness, efficiency and transparency within the capitalmarket ;(c) Enhancing the efficiency of the capital-raising process;(d) Ensuring full, timely and accurate disclosure of financial and other information material to investors;(e) Ensuring fair and equal treatment to all securities, subscribers, allottees, and holders;(f) Ensuring adherence to international accounting, reporting and auditing standards;(g) Ensuring that the issuer of securities, the licensed exchanges, licensed market operators, licensed clearing houses, depositories' institutions, and othercapital market advisory services providers and members of SROs have appropriate systems and procedures for ensuring compliance with the CBB Law and disclosure requirements by listed companies and issuers; and(h) Facilitating the introduction of a broad range of capital market products and services.January 2014Responsibility of SROs
OFS-A.2.3
The
licensed exchange or thelicensed market operator established as an SRO must comply with the requirements laid down under the CBB Law, this Module and other applicable laws and regulations.January 2014OFS-A.2.4
As an SRO, the main objective of the exchange or the operator would be to:
(a) Promote fairness and investor protection;(b) Ensure fair access tomarket facilities and information;(c) Provide timely and accessible relevantmarket data;(d) Ensure the efficient regulation of its members;(e) Ensure compliance with CBB Law, listing rules and disclosure requirements by listed companies and issuers;(f) Ensure immediate dissemination and publication of relevant information related toissuers ;(g) Report any non-compliance to the regulator; and(h) Take disciplinary action against any contravention by listed companies.January 2014Responsibility of Issuers and Advisors
OFS-A.2.5
The
issuer ofsecurities in/from Bahrain or any person acting on its behalf must comply with the requirements laid down under the CBB Law, this Module and the other applicable laws, rules and regulations.January 2014OFS-A.2.6
The main responsibility for the
issuer ofsecurities or any other person acting on its behalf is to:(a) Adhere to the CBB Law, rules and regulations and any other applicable laws, rules and regulations;(b) Ensure and accept responsibility for the information contained in theprospectus or other offering documents and that these documents do not contain any false or misleading information or data and omissions likely to affect the importance and completeness of theprospectus , or offering documents;(c) Ensure fair and equal treatment of all subscribers, allottees and holders of each type ofsecurities issued by it ;(d) Use an effective and efficient mechanism for capital raising for financing their businesses or any expansions thereof;(e) Using the most professional capital market advisory services provider; and(f) Ensure adherence of allcapital market advisory services providers involved to all requirements regarding protecting and maintaining the subscribers money, in accordance with the applicable laws, rules and regulations.January 2014OFS-A.3 OFS-A.3 Module History
Evolution of Module
OFS-A.3.1
This Module was first issued in January 2014 by the CBB. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
January 2014OFS-A.3.2
The most recent changes made to this Module are detailed in the table below:
Module Ref. Change Date Description of Changes OFS-1.6.11, OFS-1.10.5, OFS-3.5.26, OFS-4.1.1, OFS-4.3.2, OFS-4.4.1, OFS-4.4.4, OFS-7.1.2, OFS-7.1.3 04/2014 Added links to Glossary for the words 'days' and 'licensed exchange'. OFS-1.14 04/2014 Corrected reference to Glossary for the term 'overseas issuer(s)'. OFS-3.2.6 04/2016 Added reference to securities market regulation certification and other qualifications. OFS-3.3.8 04/2016 Corrected cross reference to CBB Law. OFS-1.4.1(e) 10/2017 Amended sub-paragraph based on changes made to the definitions section. OFS-7.5.1 01/2018 Amended Paragraph. OFS-2.6.7A 07/2018 Deleted Paragraph. OFS-3.2.19(c) 07/2018 Amended sub-paragraph. OFS-3.4.6(a) 07/2018 Amended sub-paragraph. OFS-3.5.7(c) 07/2018 Amended sub-paragraph. OFS-A.1.2 01/2021 Added reference to Resolution No (1) of 2007. OFS-8.2.3 01/2021 Amended the fee schedule as per Resolution No (2) of 2020. Superseded Requirements
OFS-A.3.3
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/other references Provision Subject BSE Resolution No. 4 of 1992 All Prospectus Requirements ODG/407/03 Disclosure Standards Chapter 1 Prospectus and ongoing disclosure requirements in relation to equity securities ODG/74/04 Guidelines for the Issuing, Offering and Listing of Debt securities All parts Issue, offer and listing of debt securities EDBS/KH/0688/2008 on Private Placement of Securities Issued by or Promoted by Banks Licensed in Bahrain. All parts Private placement requirements EDFIS/C/039/2017 Module Issuance of the Amended Offering of Securities Module — Volume 6 Amended: October 2017OFS-B OFS-B Scope of Application
OFS-B.1 OFS-B.1 Scope
OFS-B.1.1
In accordance with Article 81 of the CBB Law, this Module applies to all types of
securities issued and offered in/from Bahrain, whether offered publicly or privately.January 2014OFS-B.1.2
A person makes an offer "in the Kingdom of Bahrain" when;
(a) It is made to another person in the Kingdom which upon acceptance would give rise to a contract for the issue, sale,allotment or allocation of thosesecurities by him or another person with whom he has made arrangements for that issue, sale orallotment within Bahrain, regardless of whether such acceptance actually takes place; or(b) He invites personally or through an agent, another person in the Kingdom to make an offer which upon acceptance would give rise to the issue, sale orallotment of thosesecurities within Bahrain.January 2014OFS-B.1.3
A person makes an offer "from the Kingdom of Bahrain" when;
(a) It is made to another person outside the Kingdom which upon acceptance would give rise to a contract for the issue, sale,allotment or allocation of thosesecurities by him or another person with whom he has made arrangements for that issue, sale orallotment within Bahrain, regardless of whether such acceptance actually takes place; or(b) He invites personally or through an agent, another person outside the Kingdom to make an offer which upon acceptance would give rise to the issue, sale orallotment of thosesecurities within Bahrain.January 2014OFS-1 OFS-1 Issuance of Securities
OFS-1.1 OFS-1.1 General Eligibility
OFS-1.1.1
Article 81 of the CBB Law states that: "no person may issue any
securities in the Kingdom unless the Central Bank of Bahrain's written approval is granted. The CBB shall specify the information and documents that are required for obtaining permission to issuesecurities ."January 2014OFS-1.1.2
Before
securities can be issued, a person must meet the criteria detailed in this Module for:(a) The various types ofsecurities that can be issued; and(b) The specific requirements pertaining toissuer eligibility.January 2014OFS-1.2 OFS-1.2 Types of Securities
OFS-1.2.1
In accordance with Article 86 of the CBB Law of 2006, the following types of
securities may be offered to the public:(a)Equity securities ofjoint stock companies incorporated in the Kingdom of Bahrain;(b)Equity securities of non-Bahraini companies that are approved by the CBB;(c)Bonds anddebt securities approved for offering and listing by the CBB;(d) Shari'a compliantsecurities approved for offering and listing by the CBB;(e)Securities issued by corporations situated within the jurisdiction of any of the states who is a member of the Gulf Cooperation Council; and(f) Any othersecurities approved by the CBB including but not limited to futures and other derivatives on currencies and commodities.January 2014OFS-1.2.2
For the purpose of Rule OFS-1.2.1 (f) "any other
securities " includes those defined assecurities not already included in Rule OFS-1.2.1 (a), (b), (c), (d) and (e) as well as any other financial investment approved by the CBB as asecurity from time-to-time.January 2014OFS-1.2.3
For the purpose of this Module,
equity securities include:(a) Voting and non-votingshares ;(b) Participating and non-participatingshares ;(c) Preferenceshares , whether convertible or non-convertible, accumulated or non-accumulated and redeemable, or irredeemable; and(d) Anyclass ofsecurities being part of theshareholders' equity fund being represented in the form ofshares .January 2014OFS-1.3 OFS-1.3 Types of Offer
OFS-1.3.1
This Module applies to the following types of offer of
securities :(a) Public offering (including Initial Public Offering (IPO));(b) Rights offering;(c) Private placement;(d) Employee share benefit scheme;(e) Capitalisation issue;(f) Consideration issue;(g) Exchange, swapping or substitution ofsecurities ;(h) Listing of closed or private companies;(i) Global Depository Receipts; or(j) Other offering approved by the CBB.January 2014OFS-1.4 OFS-1.4 Exempt Offers
OFS-1.4.1
The following offerings are exempt from this Module:
(a)Securities approved or authorised as part of acollective investment undertaking and offered or marketed subject to CBB Rulebook Volume 7;(b)Securities offered, allotted, or to be allotted in connection withsecurities offered because of a take-over, merger, acquisition andshare repurchase by means of an exchange offer; these are subject to Module TMA;(c)Equity securities offered, allotted or to be allotted free of charge to existingshareholders if dividends are paid out in the form ofshares of the sameclass ;(d)Securities utilised for lending and borrowing transactions concluded under the CBB Rules and the relevantlicensed exchange's requirements for such transaction; and(e) An offering of ordinary shares by means of anequity crowdfunding offer by anequity crowdfunding issuer through acrowdfunding platform operated by a licensedcrowdfunding platform operator and subject to the requirements of Module MAE of the CBB Rulebook Volume 6.Amended: October 2017
January 2014OFS-1.4.2
An offer made outside Bahrain, but marketed from within Bahrain is subject to the filing requirement as laid out in this Module.
January 2014Structured Products
OFS-1.4.3
Where structured products are offered outside but marketed inside the Kingdom of Bahrain, the following must be adhered to by the
issuer and any advisor or agent acting on behalf of theissuer , in addition to the general requirements for exempt offers laid out below:(a) The marketing may only relate to offers toaccredited investors who are existing account holders of theissuer or its agent (dealer);(b) The securities related to the structured product is in registered form;(c) The specific structured product disclaimer, as prescribed by the CBB, is contained in the baseprospectus which is filed with the CBB; and(d) An approval of theissuer's home securities or financial market regulator (which must be a full member of IOSCO) for such structured product(s) being marketed in other jurisdictions must be obtained.January 2014OFS-1.4.4
The
offering document of anysecurities to be offered exclusively outside Bahrain, and marketed through aroadshow , must contain the following prominent statement under the heading "Important Notice", of theprospectus (or such otheroffering documents ) of such offer:"In relation to investors in the Kingdom of Bahrain, securities issued in connection with this prospectus and related offering documents must be in registered form and must only be marketed to existing account holders and accredited investors as defined by the CBB in the Kingdom of Bahrain where such investors make a minimum investment of at least US$ 100,000, or any equivalent amount in other currency or such other amount as the CBB may determine.
This offer does not constitute an offer of securities in the Kingdom of Bahrain in terms of Article (81) of the Central Bank and Financial Institutions Law 2006 (decree Law No. 64 of 2006). This prospectus and related offering documents have not been and will not be registered as a prospectus with the Central Bank of Bahrain (CBB). Accordingly, no securities may be offered, sold or made the subject of an invitation for subscription or purchase nor will this prospectus or any other related document or material be used in connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or indirectly, to persons in the Kingdom of Bahrain, other than as marketing to accredited investors for an offer outside Bahrain.
The CBB has not reviewed, approved or registered the prospectus or related offering documents and it has not in any way considered the merits of the securities to be marketed for investment, whether in or outside the Kingdom of Bahrain. Therefore, the CBB assumes no responsibility for the accuracy and completeness of the statements and information contained in this document and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the content of this document.
No offer of
securities will be made to the public in the Kingdom of Bahrain and thisprospectus must be read by the addressee only and must not be issued, passed to, or made available to the public generally."January 2014OFS-1.4.5
Any
offering document for marketing and/or a foreign private placement that does not include the statement, in Paragraph OFS-1.4.4 may not be circulated or used in the Kingdom of Bahrain.January 2014Filing Requirements
OFS-1.4.6
Where an offer of
securities is not being made in or from the Kingdom of Bahrain, but such offer is to be marketed in Bahrain as part of aroadshow , theissuer and or his advisor or marketing agent is required to provide prior notification to the CBB of suchroadshow and to file a copy of theprospectus with the Capital Markets Supervision Directorate (CMSD).January 2014OFS-1.4.7
The
offering document for anysecurities not to be offered in or from Bahrain but to be marketed in Bahrain as part of aroadshow , must contain the following prominent statement on the cover page of theoffering document :"A copy of this prospectus has been submitted and filed with the Central Bank of Bahrain. Filing of this prospectus with the Central Bank of Bahrain does not imply that any Bahraini legal or regulatory requirements have been complied with. The Central Bank of Bahrain has not in any way considered the merits of the Securities to be offered for investment whether in or outside of the Kingdom of Bahrain.
Neither the Central Bank of Bahrain nor the licensed exchange assumes responsibility for the accuracy and completeness of the statements and information contained in this prospectus and each expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the contents of this prospectus.
The Issuer together with any local agent or adviser accepts responsibility for the information contained in this prospectus. To the best of the knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the information contained in this prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information."
January 2014OFS-1.5 OFS-1.5 General Requirements for the Issuing of Securities
OFS-1.5.1
The following general requirements for issuing of
securities represent the minimum requirements applicable to allissuers and/or all types of offers. The CBB reserves the right to add to, amend or vary such requirements, depending on the nature of theissuer and/or the offering to be made. Specific exemptions may be granted to small and medium enterprises.January 2014OFS-1.5.2
The
issuers of anysecurities in the Kingdom of Bahrain must meet the following general requirements:(a) Be incorporated or in the process of applying to be incorporated, in accordance with the applicable laws, rules and regulations;(b) Have produced or will produce audited financial statements in accordance with the International Financial Reporting Standards (IFRS), Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), or other accounting standards acceptable to the CBB. If the financial statements have not been prepared in accordance with IFRS, AAOIFI or other accounting standards acceptable to the CBB, theissuer must restate the financial statements in accordance with IFRS or AAOIFI, as the case may be;(c) Its annual financial statements must be audited in accordance with the international auditing standards issued by International Auditing Practices Committee of the International Federation of Accountants;(d) Its interim financial statements must be reviewed and be in accordance with OFS-1.5.2(b);(e) Provide to the CBB an appropriate confirmation and evidence and disclose in the offering document that there has been no material adverse change in the financial condition of theissuer (or the guarantor, in the case of a guaranteed issue) since the end of the period last reported on by the external auditor;(f) Appoint an eligible CBB Licensee asreceiving bank andpaying agent that is approved by the CBB;(g) Its appointedcapital market advisory services providers (CMSPs) must meet the requirements of this Module and/or other requirements imposed in this respect by the CBB;(h) May not allocate or allot anysecurities without meeting the CBB's requirements for that type of securities offering with respect to the final allocation orallotment ;(i) Must ensure that they adhere to the utilisation of proceeds statement in theprospectus and obtain the securities holders consent and CBB prior approval for any alteration thereto;(j) When considering the currency of issue, that it may issuesecurities denominated in Bahraini Dinars, currencies of the Gulf Cooperation Council (GCC) or United States Dollars (US$) and other international currencies on approval of the CBB;(k) Should ensure conflicts of interest do not arise during either the issuing ofsecurities or through the offering and relevant appointments or transactions;(l) Must protect and act in the interests ofsecurities holders;(m) Must provide equal treatment to allsecurities subscribers and/or holders for each issue ofsecurities . No discrimination among subscribers and/or holders in any form or by any means may be made by theissuer . Special attention of theissuer in this context shall be drawn particularly to the subscription or offer price of thesecurities ;(n) Must adhere to the issuing timetable contained in its offering documents, or as amended upon the CBB approval;(o) Theissuer and appointed CMSPs must fulfil all obligations in their respective capacities in accordance with the signed written agreements concluded between them in respect of the issue and must provide a written declaration of due diligence in respect of their obligation within theoffering document ;(p) Thefounders , promoters, or the Board of Directors of theissuer must confirm in writing to the CBB that it is responsible for complying with the CBB Law, rules and regulations and any other applicable laws, rules and regulations in accordance with the CBB's standard statement;(q) Thefounders , promoters, or the Board of Directors of theissuer must not establish any restrictions on the rights of thesecurities holders not provided for in law, particularly regarding voting and granting of proxy to any eligible person(s) (no irrevocable proxies or any term of issue subject to a grant of proxy will be permitted);(r) Any special purpose vehicle acting as anissuer and used in the securitisations of assets located in the Kingdom of Bahrain must be incorporated as a company under the laws of the Kingdom of Bahrain;(s) All issues of securities must be in response to the receipt of consideration (cash or in kind). Anissuer may not offer a substitution of one investment for another unless such subsitution is part of an approved corporate event conducted on alicensed exchange ; and(t) The securities issued by theissuer must have a registered International Securities Identification Number (ISIN) issued by a national numbering agent.January 2014OFS-1.5.3
In addition to the requirements of Paragraph OFS-1.5.2, and in order to meet the general requirements the
issuer must:(a) Submit to the CBB the draft or final, duly signed Memorandum and Articles of Association;(b) Submit all the relevant information in due time and form as required under this Module;(c) Submit to the CBB all attachments with its application including the required declarations, as stipulated under this Module;(d) Appoint its relevant advisors for the purposes of its application, as required under this Module and disclose these to the CBB;(e) Confirm that it will comply with all the "fit and proper" provisions contained in the relevant Bahraini Corporate Governance Code and Module HC (Corporate Governance) Volume 6, as applicable;(f) Confirm that it will adhere to its ongoing obligations and the disclosure requirements; and(g) Submit to the CBB at least 2 independent valuation reports in respect of the assets used as underlying assets for asset backedsecurities being issued or offered.January 2014OFS-1.5.4
The
founders of the public shareholding company orlisted company are not entitled to dispose of their shareholding for a period of 1 year, starting from the date of listing on alicensed exchange .January 2014OFS-1.5.5
Unless otherwise permitted by the CBB,
securities issued after the effective date of this Module must be in dematerialised form and theissuer is required to designate the clearing house, or depository facilities in which suchsecurities are deposited.January 2014OFS-1.5.6
All
securities issued under this Module must be in registered form and no bearersecurities may be issued without CBB permission.January 2014OFS-1.5.7
The
issuer or any person acting on its behalf or providing any services to the issue is prohibited to use any part of the proceeds of the issue before theissuer is fully incorporated and the proceeds are placed with the Board of Directors.January 2014OFS-1.5.8
Issuers and market participants are required to adhere to the fees and charges imposed oulined in Chapter OFS-8, or as required by the CBB from time-to-time.January 2014OFS-1.6 OFS-1.6 Eligibility to Issue and Offer Equity Securities
Issuing of Equity Securities to the Public
OFS-1.6.1
Issuers ofequity securities to the public must meet the following additional eligibility criteria in order to obtain approval from the CBB:(a) Theissuer , under formation, must prior to submitting its application to the CBB, submit an application to the Ministry of Industry & Commerce for the purpose of obtaining its no objection for incorporation purposes;(b) Existingissuers intending to list on a main board of alicensed exchange , should have 100 or moreshareholders who are not employees or associated persons. Newissuers must have 100 or moreshareholders after the completion of theinitial public offering or public offering;(c) Theissuer must issue to the above mentionedshareholders free float of at least 10% of the total issued outstandingshares . The CBB reserves its right to amend this amount taking into account the interest of the market;(d)Securities are readily transferable and not subject to any restrictions other than those restrictions stipulated on the Memorandum and Articles of Association or such other applicable laws, rules and regulations;(e) Forequity securities issued at a premium, the issue shall be underwritten by an independentunderwriter through the conclusion of a firm commitment and irrevocable underwriting agreement; and(f) Each type ofsecurities issued shall be equal in respect of rights and obligations, particularly in respect of voting and receipt of dividends and/or profits.January 2014OFS-1.6.2
With respect to Subparagraph OFS-1.6.1(c), the CBB reserves its right to amend such percentage in accordance with the type and size of the issue.
January 2014OFS-1.6.3
With respect to Subparagraph OFS-1.6.1(e), the CBB may exempt any issue from the underwriting requirements where the
offering price is equal to or below the average market price for the last six months, or where it is issued at the flat par value.January 2014OFS-1.6.4
The ownership of
equity securities of theissuer must not be restricted otherwise than in accordance with theissuer's Memorandum and Articles of Association, or the applicable laws, rules and regulations.January 2014OFS-1.6.5
The
founders of theissuer must confirm and submit bank certificates to the CBB that their contribution in theshare capital of theissuer is paid before the CBB grants its approval to issue itssecurities to the public.January 2014OFS-1.6.6
The
issuer's preliminary contract must include the details as specified in this Module.January 2014OFS-1.6.7
Any newly established
issuer must submit to the CBB a duly signed and irrevocable agreement entered into between financial institutions or other third party in respect of procuring partial finance of anissuer's project if such project is required to be financed by the total proceeds of the issue together with such finance.January 2014OFS-1.6.8
For listed or existing
issuers , the issuance and offering of additional and/or newequity securities must obtain the approval of the General Assembly of itsshareholders , in accordance with theissuer's Memorandum and Articles of Association or such other applicable laws, rules and regulations.January 2014CBB's Right of Refusal or Restriction on Issue
OFS-1.6.9
The CBB may reject the registration and issuance of any
securities if it is found that the issuance thereof might cause damage, dilute or be contrary to the interests of the owners or holders of theissuer's securities or public investors in general.January 2014OFS-1.6.10
The CBB may refuse to grant its approval, postpone granting such approval, or fix the timeframe for the
offering period , if the CBB deems that the market condition or circumstances justifies such action.January 2014OFS-1.6.11
The CBB will decide on the application within sixty calendar days from the date of its submission. Any rejection by the CBB will contain reasons for the decision. The applicant whose application has been rejected has the right to be heard by the CBB within thirty
days from the date of notifying it of the rejection of its application. The CBB's decision is final.Amended: April 2014
January 2014OFS-1.6.12
The
founders do not have the right to re-apply for the issuance ofsecurities before addressing the reasons for the rejection or the lapse of six months from the date of the CBB's rejection decision.January 2014OFS-1.7 OFS-1.7 Eligibility to Issue and Offer Debt Securities
OFS-1.7.1
Any
issuer ofdebt securities and the guarantor, in the case of a guaranteed issue, must each be duly incorporated, or otherwise established, under the laws of the place where they are incorporated, or otherwise established, and must be in conformity with those laws and its Memorandum and Articles of Association, or equivalent documents.January 2014OFS-1.7.2
Issuers ofdebt securities must ensure that the issuance ofdebt securities is approved by the General Assembly, or any other equivalent body in accordance with the Memorandum and Articles of Association of theissuer and/or originator.January 2014OFS-1.7.3
Any change, alteration, or modification in the issued
debt securities' rights, obligations, terms and conditions is subject to the approval of thedebt securities holders meeting. Thetrustee is responsible for preparing and presenting at thedebt securities holders' meeting a report through which the holders must be advised whether to accept or reject the proposed changes, alterations or modifications, or arrangements that will be made by theissuer in this respect.January 2014OFS-1.7.4
The
debt securities must be in registered form, having equal par value in each issue.Debt securities of the same issue must confer upon their holders' equal rights towards theissuer and every condition to the contrary must be null and void.January 2014OFS-1.7.5
The
debt securities must be freely transferable.January 2014OFS-1.7.6
A
debt securities holder must have the right to receive an interest or income as per the terms of the security and also to receive the nominal value upon its maturity.January 2014OFS-1.7.7
If the
issuer ofdebt securities is alisted company , any convertibledebt securities issue must first be offered to the existingshareholders unless a whitewash resolution is passed by theshareholders' General Assembly.January 2014OFS-1.7.8
Debt securities to whichoptions ,warrants or similar rights to subscribe or purchaseequity securities ordebt securities are attached, must also comply with the requirements applicable to suchoptions ,warrants or similar rights.January 2014OFS-1.7.9
The
issuer may issue discountdebt securities that may be sold at its redemption value at the time of issuance.January 2014OFS-1.7.10
Public offers of
debt securities must be offered to the market either through a lead manager, or an eligible primary dealer who is required to make the necessary arrangements to re-selldebt securities to the public. The eligible primary dealer must be aCBB licensee under Volumes 1 or 2 and be a member of alicensed exchange .January 2014OFS-1.7.11
The
issuer , the originator and/or the guarantor, in the case of a guaranteed issue, must have produced audited financial statements in accordance with the International Financial Reporting Standards, or other accounting standards acceptable to the CBB covering at least the last 2 financial years preceding the application date.January 2014OFS-1.7.12
The financial statements must be audited to a standard comparable to that required by the International Auditing Practices Committee of the International Federation of Accountants.
January 2014OFS-1.7.13
In the case of a new applicant, if the period since the last financial year of audited financial statements exceeds 15 months at the time of the offering, interim period financial statements, which may be unaudited but reviewed by an external auditor, as compared with the same period in the previous financial year, must also be provided.
OFS-1.7.14
If the
debt securities are guaranteed by tangible assets, properties, or any other assets, theissuer must provide asset valuation reports prepared by at least two independent valuers and submit these to the CBB and be disclosed in theoffering documents , or made available for inspection by potential subscribers.January 2014OFS-1.7.15
The
issuer of public offers ofdebt securities must provide the depository arrangements through which the issueddebt securities can be maintained.January 2014OFS-1.7.16
The
issuer must confirm to the CBB that it will maintain apaying agent at an address in the Kingdom of Bahrain until the date on which nodebt securities are outstanding, unless theissuer performs that function himself.January 2014OFS-1.7.17
If
debt securities are:(a) Redeemable by theissuer , either in whole or in part, by an issue ofshares ;(b) Convertible intoshares , either in whole or in part, by the holder; or(c) Issued in conjunction with separateoptions to subscribe forshares ;then, the terms of the issue of the
securities must provide for all appropriate adjustments to the conversion rights in the event of any alteration to the capital of theissuer , and whether the holders of the debtsecurities and/oroptions have any participating rights in the event of a takeover offer for theissuer .January 2014OFS-1.8 OFS-1.8 Eligibility to Issue Asset-backed Securities
OFS-1.8.1
For the issue of asset-backed
securities , which include mortgaged-backedsecurities (certificates), theissuer must be a single purpose entity (vehicle) (SPV).January 2014OFS-1.8.2
The requirement to be a SPV does not preclude the addition to the pool of further assets during the life of the
securities . Furthermore, otherclasses of debtsecurities may be issued by the SPV, backed by separate pools of similar assets.January 2014OFS-1.8.3
The audited financial statements requirements for previous years' statements do not apply to
issuers of asset-backedsecurities (SPVs), but are required for the issue's originator and/or guarantor, as the case may be.January 2014OFS-1.8.4
Where an issue of asset-backed
securities is backed byequity securities :(a) Thosesecurities must be listed on an exchange;(b) Theequity securities must represent minority interests in and must not confer legal or management control of the companies issuing theequity securities ; and(c) Whereoptions or conversion rights relating toequity securities are used to back an issue, these requirements apply in respect of thesecurities resulting from the exercise of thoseoptions or rights.January 2014OFS-1.8.5
There must be, until the date on which no
debt securities are outstanding, an eligible independenttrustee representing the interests of the holders of the asset-backedsecurities and with the right of access to appropriate, timely information relating to the assets.January 2014OFS-1.8.6
If the
issuer issuesdebt securities guaranteed by mortgages on its property or any other collaterals, the legal procedures for mortgages must be undertaken in favour of the debt-holders, or atrustee representing them before offering thedebt securities for subscription. Theissuer itself must undertake such procedures or they may be undertaken by the party presenting the guarantee, if it is presented by a party other than theissuer . Theissuer must, within a period not exceeding one month from the closing date of subscription, take the necessary measures to enter the loan value, together with all related details in the register in which the mortgage has been entered.January 2014OFS-1.9 OFS-1.9 Eligibility to Issue Shari'a Compliant (Islamic) Securities
OFS-1.9.1
For the issue of Islamic debt
securities or Sukuk, theissuer must be a single purpose entity (vehicle) (SPV).January 2014OFS-1.9.2
The
issuer and/or originator must appoint either:(a) An independent Shari'a advisor or committee who has been approved by the CBB, in case of anissuer who does not have an existing Shari'a advisor or committee; or(b) An Islamic bank or a licensed institution approved by the CBB to carry out Islamic banking to advise on all aspects of the Islamic privatedebt securities .January 2014OFS-1.9.3
The CBB may, where it is of the view that the structure of the offering poses undue risks to the investor, reject the application to issue and offer such securities or require the
issuer to satisfy the CBB that such risks have been addressed.January 2014OFS-1.9.4
The
issuer of Islamicdebt securities must comply with Shari'a principles and the Shari'a pronouncement report.January 2014OFS-1.9.5
The Shari'a advisor appointed in accordance with Rule OFS-1.9.2 must advise the
issuer on all aspects of theIslamic securities, including documentation, structuring, investment, as well as other administrative and operational matters in relation to theIslamic securities , and ensure compliance with applicable Shari'a principles.January 2014OFS-1.9.6
The
issuer is responsible for the compliance of the instrument with Shari'a principles. The Shari'a advisor's role does not release management from their responsibility in ensuring such compliance. Theissuer must not restrict the activities of the Shari'a advisor in any way. In any case where restrictions are imposed these must be disclosed by the Shari'a advisor to the CBB, as well as disclosed in theoffering document .January 2014OFS-1.9.7
For the purposes of Rule OFS-1.9.1, types of
Islamic securities or Sukuk that may be issued include all Islamic Sukuk that are eligible to be issued under the CBB Volume 2 Rulebook, but are not limited to:(a) Ijara contract (similar in structure to a standard lease);(b)Salam contract (payment in advance of goods to be delivered at a date in the future);(c)Murabaha contract (asset financing);(d)Modarabah contracts ;(e)Istisna'a contract ;(f)Bai Bithaman Ajil contracts ;(g) Intifaa; or(h) Any other Islamic contracts approved by a Shari'a Advisory Committee, or considered as an eligible issue under the CBB Volume 2 Rulebook.January 2014OFS-1.9.8
For the purpose of this Module, the Islamic or Shari'a compliance contracts or transactions must have the following meaning:
(a)Ijara Sukuk is issued on stand alone assets identified on the balance sheet. For this purpose, the assets identified can be land which is to be leased, or equipment (e.g. aircraft, ships) to be leased. The rental rates of returns on these Sukuk can be both fixed and floating, depending on the particular originator;(b)Salam contracts are issued when payment is made in cash at the point of contract, but the delivery of the asset purchased is deferred to a pre-determined date;(c)Murabaha contracts are those that cover the sale and purchase transaction for the financing of an asset whereby the cost and profit margin (mark-up) are made known and agreed by all parties involved. The settlement for the purchase can be a deferred lump sum payment or an instalment basis of payments;(d)Modarabah contracts are used to finance a project or business venture whereby the investor (Rabb Al Maal) provides capital and a manager (Mudarib) manages the project or the business. A financial institution may act as the Mudarib for funds it mobilizes for investments in Shari'a compliant products. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio and losses if any are to be borne solely by the provider of the capital (Rabb Al Maal);(e)Istisna'a contracts are used primarily in project finance. Such contracts are not tradablesecurities since the underlying asset does not yet exist. The proceeds of such an issue would typically be used to construct the base infrastructure through multiple Istisna'a agreements;(f)Mixed Ijara contracts are contracts where the underlying assets can comprise of Istisna'a or Murabaha receivables in addition to Ijara; and(g)Mixed Ijara Sukuk allows for a greater variety of funds to be used since previously inaccessible Murabaha and Istisna'a assets can be used in the portfolio.January 2014OFS-1.9.9
The listing and tradability of the various Islamic contracts is subject to the Shari'a rules and principles and Shari'a Pronouncement Report in respect of each contract.
January 2014OFS-1.10 OFS-1.10 Eligibility to Issue Convertible Debt Securities
OFS-1.10.1
All convertible
debt securities which are convertible intoequity securities or outstandingsecurities of theissuer , or a company in the same group as theissuer for which an issuance or offering is to be sought, must comply both with the requirements applicable to thedebt securities for which an issuance is sought, and with the requirements applicable to the underlyingequity securities to which such convertibledebt securities relate. In the event of any conflict or inconsistency between the various requirements, those applicable to suchequity securities prevail.January 2014OFS-1.10.2
Where convertible
debt securities are convertible intoequity securities of a listedissuer , these convertibledebt securities must also be listed on the samelicensed exchange .January 2014OFS-1.10.3
Convertible
debt securities which are convertible into assets, properties, orsecurities other thanequity securities may be listed only if the CBB and thelicensed exchange are satisfied that holders have the necessary information available to form an opinion concerning the value of the other property to which such convertibledebt securities relate. This principle does not apply to an issue of convertibledebt securities by a state or a supranational.January 2014OFS-1.10.4
Any alterations in the terms and conditions of convertible
debt securities after issue must be approved by the debt securities holders and on obtaining such approval by the CBB, except where the alterations take effect automatically under the existing terms and conditions of such convertibledebt securities .January 2014OFS-1.10.5
The
issuer's shareholders must have priority right to subscribe for the convertibledebt securities if they express their desire to do so within a period not exceeding 15days from the date of calling them to exercise such right. Theshareholder may use his priority to subscribe for suchdebt securities in excess of his share in theissuer's capital if the offereddebt securities allow this.Amended: April 2014
January 2014OFS-1.10.6
The
issuer must not distribute bonusequity securities or profits from the reserve or issue new convertibledebt securities , except after taking the necessary measures to safeguard the rights of the holders of the convertibledebt securities who elect to convert them intoequity securities , by granting them bonusshares or profits from the reserve or some of thesedebt securities as if they wereshareholders .January 2014OFS-1.10.7
Any changes to the conversion rights attached to
convertible securities must be brought to the attention of the CBB immediately and is subject to CBB approval.January 2014OFS-1.11 OFS-1.11 Eligibility to Issue Warrants and Other Securities
Warrants
OFS-1.11.1
Where the
issuer directly issueswarrants , he must satisfy the requirements relating to the underlyingsecurities in accordance with this Module.January 2014Structured Warrants
OFS-1.11.2
Structured warrants or such similar instruments must be issued by a third-partyissuer which is:(a) A Volume 1, or Volume 2 licensee authorised by its relevant supervisory directorate of the CBB to conduct such issue (offer); or(b) A foreign financial institution subject to appropriate supervision acceptable to the CBB.January 2014OFS-1.11.3
Structured warrants and other similar instruments may only be issued in relation to:(a)Securities that are listed on a licensed or regulated exchange;(b) Commodities or metals, provided that they are traded on a licensed or regulated exchange and regularly operating open market;(c) Currencies; or(d) Stock indices or basket of listedsecurities .January 2014Placement and Holder Size
OFS-1.11.4
At least 50% of an issue must be placed out to a minimum of 50 persons. This requirement does not apply if there is a designated
market maker for thestructured warrants or other instruments.January 2014OFS-1.11.5
The minimum board lot size, the issue size, issue price and any other details for
structured warrants based on listed or quotedsecurities are subject to thelicensed exchange business rules.January 2014Tenure of Issue
OFS-1.11.6
The tenure of the
structured warrant must not exceed three years from the date of issue, or such longer time as the CBB may allow.January 2014Exercise Settlement
OFS-1.11.7
On exercise,
structured warrants must cash settled unless the CBB has approved physical settlement where the underlyingsecurities are cash or cash equivalent securities. The settlement method must be specified in theoffering document . Theissuer thereafter must not have an option to elect for settlement either inshares or cash upon exercise of thestructured warrants .January 2014OFS-1.11.8
An
issuer must decide on the method for determining the cash settlement price at the time of the launch of an issue, and this must be stipulated in theoffering document and or term sheet. The settlement price must be either:(a) The average of the closing prices of the underlyingsecurities (subject to any adjustment to reflect any capitalisation issue,rights issue , distribution or the like) for the five market days prior to, and including, the market day immediately before the relevant exercise/expiry date;(b) The closing price of the underlyingsecurities on the market day immediately before the exercise/expiry date; and(c) For securities regarded as illiquid, a cash settlement price determination agreed between theissuer and the CBB for that particular security.January 2014Conversion Ratio
OFS-1.11.9
For the exercise of
structured warrants based on individualsecurities , the conversion ratio must avoid using fractions ofsecurities .January 2014Adjustments
OFS-1.11.11
The terms of the issue must provide for adjustment to the exercise price and, where appropriate, the number of
securities which eachstructured warrant carries the right to sell or purchase, in the event of any capitalisation issue,rights issue , distribution or the like relating to the underlyingsecurities. January 2014Designated Market Maker
OFS-1.11.12
If there is a designated
market maker in respect of the issue, the CBB together with thelicensed exchange must be satisfied that the designatedmarket maker's obligations are being fulfilled.January 2014Underlying Securities
OFS-1.11.13
Necessary arrangements must be made for the underlying
securities to be held by atrustee orcustodian to meet the exercise of all obligations of the outstandingwarrants .January 2014OFS-1.11.14
Where the
warrants relate tosecurities issued by a third party, the declaration by theissuer should take the following form:"Subject as set out below, the issuer whose name appears on page [the issuer's Board of Directors and management] accepts responsibility for the information contained in this document. To the best of the knowledge and belief of the issuer (who has taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect such information.
The information contained herein with regard to [name of issuer of underlying securities], its subsidiary undertakings and the [description of underlying securities], consists of extracts from or summaries of information contained in financial and other information released publicly by [name of issuer of underlying securities] and summaries of certain provisions of [jurisdiction of issuer of underlying securities] law. The issuer accepts responsibility for accurately reproducing such extracts or summaries. The issuer accepts no further or other responsibility in respect of such information."
January 2014OFS-1.11.15
In the case of
warrants related to anything other thansecurities , the declaration in Paragraph OFS-1.11.14 should be appropriately modified.January 2014OFS-1.11.16
Where the issue of
warrants is guaranteed, the information requirements which apply to theissuer must also be applied to the guarantor, depending on whether the guarantor is listed or is the guarantor of other listedsecurities .January 2014OFS-1.11.17
The equivalent
offering document must include details of conditions of and procedures for exchange, exercise or cash settlement and details of the situations in which they may be amended, including any provisions for the adjustment of the terms of thewarrants .January 2014OFS-1.12 OFS-1.12 Eligibility for States and Supranationals to Issue Securities
OFS-1.12.1
For issues by states and supranationals, copies of all enabling governmental or legislative laws, authorisations, consents or orders must be submitted to the CBB.
January 2014OFS-1.12.2
The requirements for submission of the following documents do not apply to the
securities issued by states and supranationals:(a) Certificate of incorporation or equivalent document;(b) Memorandum and Articles of Association;(c) Annual financial statements;(d) The resolutions of theissuer at the general meeting authorising the issue of thesecurity ;(e) The resolution(s) of the board of directors; and(f) Notice(s) ofshareholders meeting.January 2014OFS-1.13 OFS-1.13 Eligibility for State Corporations to Issue Securities
OFS-1.13.1
The accountants' report in relation to an issuing of
debt securities issued by a state corporation incorporated or otherwise established in Bahrain is not required. In such case, the latest audited financial statements, which must relate to a financial period ended not more than 15 months before the date the document is issued, must be included in or appended to the issuing andoffering document .January 2014OFS-1.13.2
The issuance of
securities issued by a state corporation incorporated or otherwise established outside Bahrain, where the latest financial period reported on by the external auditor exceeds 15 months before the date of the issuing document, requires reviewed interim financial statements relating to a period ended not more than 9 months before the date of the issuing andoffering document , and appropriate evidence must be given to the CBB that there has been no material adverse change in the financial condition of theissuer or the guarantor, in the case of a guaranteed issue since the end of the period last reported on by the external auditor.January 2014OFS-1.13.3
The requirement of submission of the following documents does not apply to the
securities issued by a state corporation:(a) Certificate of incorporation or equivalent document of theissuer and guarantor, in the case of a guaranteed issue;(b) Certificate entitling theissuer and the guarantor, in the case of guaranteed issue, to commence business; and(c) Notice(s) ofshareholders meeting.January 2014OFS-1.14 OFS-1.14 Eligibility for Overseas Issuers to Issue Securities
OFS-1.14.1
The issuance and offering requirements for local
issuers apply equally tooverseas issuers , subject to the additional requirements, modifications or exceptions below.Amended: April 2014
January 2014OFS-1.14.2
The CBB reserves the right, in its absolute discretion, to refuse any issuing, offering or listing application of
securities of anoverseas issuer if:(a) It believes that it is not in the public interest to approve such application; or(b) Theoverseas issuer's securities , particularlyequity securities , has not obtained the approval of its home market regulator or licensed exchange for offering or listing, as the case may be, and the CBB is not satisfied that the overseasissuer is incorporated or otherwise established in a jurisdiction where the standards ofsecurities holders' protection are at least equivalent to those provided in Bahrain.Amended: April 2014
January 2014OFS-1.14.3
In the case of registered
securities , provision must be made for a depository orsecurities ownership transfer agent, to register holders to be maintained in Bahrain, or such other place as the CBB may accept, and for transfers to be registered locally.January 2014OFS-1.14.4
For purposes of Paragraph OFS-1.14.3, the CBB may consider an alternative proposal for registering transfers for holders in Bahrain, in exceptional circumstances.
January 2014OFS-1.14.5
The following modifications apply:
(a) The references in this Module to "Directors" must be read as references to members of theoverseas issuer's governing body;(b) The issuing andoffering documents must be signed by at least two members of the governing body of theoverseas issuer or guarantor, in the case of a guaranteed issue, or by their agents authorised in writing rather than signed by or on behalf of every director or proposed director; and(c) The declaration to be submitted to the CBB may require adjustment by virtue of the laws to which theoverseas issuer is subject and may be signed by a director's and secretary's agent, authorised in writing, rather than by a director and the secretary.Amended: April 2014
January 2014OFS-1.14.6
The CBB may be prepared to accept modifications to the
offering document and/or listing application as it considers appropriate in a particular case. In particular, in the case of anoverseas issuer whose home market or primary listing is on another regulated exchange recognised by the CBB, particularly for those jurisdictions who are IOSCO members, and signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU), the CBB may accept anoffering document or listing application which incorporates equivalent continuing obligations to those imposed by that other market or exchange.Amended: April 2014
January 2014OFS-1.14.7
Conversely, the CBB may impose additional requirements in certain instances. In particular, if the
overseas issuer's securities has or is to have a primary listing on the exchange, or obtained the approval of thesecurities regulator, the CBB may impose such additional requirements as it considers necessary to ensure that investors have the same protection as that afforded to them in Bahrain.Amended: April 2014
January 2014OFS-1.14.8
Issuers must fulfil their obligations regarding the circulation and contents of annual and interim financial statements and accounts, to ensure simultaneous release of information to other exchanges and to the market in Bahrain.January 2014OFS-1.14.9
The external auditor must be independent, both of the
overseas issuer and of any other company concerned.Amended: April 2014
January 2014OFS-1.14.10
Financial statements in respect of
overseas issuers are required to conform with accounting standards acceptable to the CBB which must meet at a minimum the IFRS, as promulgated from time-to-time by the International Accounting Standards Committee. The relevant standards will normally be those current in relation to the last financial year reported on and, wherever possible, appropriate adjustments must be made to show profits for all periods in accordance with such standards.Amended: April 2014
January 2014OFS-1.14.11
Where the CBB allows reports to be drawn up otherwise than in conformity with accounting standards set by the International Accounting Standards Committee, the CBB may, having regard to the jurisdiction in which the
overseas issuer is incorporated or otherwise established, require the report to contain a statement of the financial effect to the financial statements of the use of accounting standards other than IFRS.Amended: April 2014
January 2014OFS-1.14.12
Where the figures in the report differ from those in the audited annual financial statements, a statement of adjustments must be incorporated in the
offering documents and submitted to the CBB which enables the figures to be reconciled.January 2014OFS-2 OFS-2 Offering of Securities
OFS-2.1 OFS-2.1 Permission Requirements
OFS-2.1.1
Offers in relation to an
overseas issuer may only be made through a person acting as a lead manager or placement agent who is licensed as and eligible to undertake such activity in terms of its relevant CBB Volume.January 2014OFS-2.1.2
The CBB may grant a waiver to an
issuer on eligibility conditions if the interests of the investors, or the capital market in general will not be compromised.January 2014OFS-2.2 OFS-2.2 Methods of Offering
OFS-2.2.1
The following are non-exclusive examples of the types of offering that may take place in the Kingdom of Bahrain with specific eligibility and other approval requirements for each type to be found later in this Chapter:
(a)Initial Public Offering : An offer for subscription to the public by or on behalf of a newly-established company, or an unlistedissuer of its ownsecurities ;(b)Initial Offer for Sale : An offer for sale to the public by or on behalf of existing companies or unlistedissuers or itssecurities holders or part of itssecurities holders, whosesecurities are already in issue or subscribed;(c)Subsequent Public Offer : An offer for subscription to the public by or on behalf of a listedissuer of its ownsecurities other than by arights issue , after obtaining the approval on waiving of the pre-emptive rights of the existingsecurities holders;(d)Rights Issue : Arights issue offer by way of exercising the pre-emptive rights by existing holders ofsecurities which enables those holders to subscribe to thosesecurities in proportion to their existing holding, or otherwise on the basis ofallotment approved by those holders;(e)Private Placement : Private placement is an offer toaccredited investors , as defined in this Module, selected or accepted by theissuer or the appointed lead manager for obtaining subscriptions forsecurities of an issue, or for obtaining subscription for sale ofsecurities by anunderwriter or lead manager;(f)Employee Share Benefit Plan : Offering ofsecurities which is made by theissuer on the exercise ofoptions granted to or for the benefit of management and/or employees, after obtaining the approval ofsecurities holders and the CBB;(g)Capitalisation Issue : A capitalisation issue is anallotment of furthersecurities to existingsecurities holders, credited as fully paid-up out of theissuer's reserves or profits, in proportion to their existing holdings, or otherwise not involving any monetary payments;(h)Consideration Issue : A consideration issue is an issue ofsecurities as consideration, other than cash, in a transaction or in connection with a takeover or merger or the division of anissuer ;(i) Swapping, Exchange or Substitution of Securities:Securities issued through an exchange or a substitution, swapping or conversion ofsecurities into otherclasses ofsecurities ;(j)Initial Listings for Publicly Traded Companies : For non-Bahrainiissuers whosesecurities are issued in other markets, or listed on another regulated exchange and who wish to list on alicensed exchange in Bahrain; or(k)Listing of Closed or Private Companies (including Small and Medium Enterprises SME's); and(l) Closed, private, family companies, or such other non-public companies that offer theirsecurities to the public and list.January 2014OFS-2.3 OFS-2.3 Public Offering
OFS-2.3.1
All public offering applications must meet the eligibility criteria under Section OFS-1.5 and the eligibility criteria related to the type of
security orissuer and follow the requirements outlined in Appendix OFS-1.January 2014Corporate Governance
OFS-2.3.2
Issuers ofsecurities in a public offering must confirm to the CBB before the registration of theoffering document that it is able to comply with the CBB Law, rules and regulations, as well as with all other applicable laws, rules and regulations.January 2014OFS-2.3.3
The
issuer must meet the following requirements in order for apublic offer to be approved by the CBB:(a) Theissuer is a duly incorporated entity under the laws of the Kingdom of Bahrain, or in case of anoverseas issuer , under the laws of its place of incorporation;(b) Theissuer operates in conformity with its Memorandum and Articles of Association or equivalent constitutional documents;(c) Thesecurities are freely transferable and free from any encumbrances;(d) The offeredsecurities are to be listed on alicensed exchange in the Kingdom of Bahrain, and there are adequate assurances between the issuer and thelicensed exchange that they will be admitted to such a platform;(e) The necessary custodial and/or central depository arrangements have been made including the deposit of securities with an entity eligible to provide depository services under Article 94 of the CBB Law;(f) The necessary clearing and settlement arrangements have been made that give effect to Article 108 of the CBB Law;(g) Theissuer has made the appointment of the eligible advisors, as per this Module including the appointment of a listing agent to liaise with thelicensed exchange and the CBB where the CBB deems necessary; and(h) Theissuer meets such other requirement as determined by the CBB from time to time.Amended: October 2017
January 2014OFS-2.3.4
The
issuer must appoint a lead manager for anypublic offer .January 2014OFS-2.3.5
An
issuer in aninitial public offering of equity securities must ensure that the issue is underwritten, unless an exception is made by the CBB, in accordance with Paragraph OFS-2.3.6.Amended: October 2017
January 2014Underwriting
OFS-2.3.6
The CBB may approve an issue without an
underwriter where:(a) More than one institution who are not related parties provide the proposedoffering price ; or(b) The lead manager has established the issue price through abook building mechanism; and(c) The lead manager has signed a declaration of due diligence and has submitted a declaration confirming to theissuer and the CBB that the issue will be fully subscribed, which declaration must be included in theoffering document .January 2014OFS-2.3.7
Where the issue is to be underwritten, full details of the
underwriter and the underwriting arrangement must be disclosed in theprospectus and the full underwriting agreement as signed by the parties must be made available for inspection by the subscribers.January 2014OFS-2.3.8
Where the issue is not to be underwritten, the CBB retains its right to impose full or
partial underwriting based upon pricing of thesecurities to be issued and market conditions.January 2014OFS-2.3.9
Where the issue is underwritten the:
(a)Underwriter must not be a related party; and(b) Lead manager and/orunderwriter must directly or through an authorised market maker, establish a price stabilisation mechanism for thesecurities for a period of at least six months starting from the first day of trading on alicensed exchange . The CBB may require a longer period of price stabilisation where it considers it necessary.January 2014OFS-2.3.10
Details of underwriting agreements must be disclosed in the
offering document and the agreement must be capable of being enforced under any circumstance.January 2014OFS-2.3.11
In respect of
public offers ofdebt securities , where the issue is to be underwritten or sold through primary dealer arrangements, full details of theunderwriter , primary dealer, the underwriting arrangement and/or primary dealer arrangements must be disclosed in theprospectus and the underwriting agreement must made available for inspection by the subscribers.January 2014Book Building
OFS-2.3.12
The
preliminary/red herring prospectus containing all the information except the information regarding the price at which thesecurities are offered, must be filed with the CBB prior to it being used in any manner by theissuer or its advisors.January 2014OFS-2.3.13
The lead manager and/or the
underwriter to the issue must be nominated by theissuer as a book runner and his name must be disclosed in theprospectus .Amended: October 2017
January 2014OFS-2.3.14
The
preliminary/red herring prospectus to be circulated may indicate the price band within which thesecurities are being offered for subscription.January 2014OFS-2.3.15
The book runner, on receipt of the offers must maintain a record of the names and number of
securities ordered and the price at which the investors are willing to subscribe tosecurities under the placement portion.January 2014OFS-2.3.16
On receipt of the information, the book runner and the
issuer must determine the price at which thesecurities are to be offered to the public.January 2014OFS-2.3.17
The book runner and other appointed advisors associated with the
book building process must maintain records of thebook building process and the CBB has the right to inspect and obtain a copy of such records.January 2014OFS-2.3.18
Details of the outcome of the
book building process must be disclosed in theprospectus or offer document and must include information such as the general range of the prices at which the institutional investors are willing to subscribe to under the placement portion, the total number of securities ordered and the total number of institutions involved. The CBB shall have the right to require the disclosure of any other additional information if it deems necessary.Added: October 2017OFS-2.3.19
The
issuer , lead manager and/orunderwriter must consider the outcome of thebook building process and/or any other processes or arrangements employed, when establishing the final offer price at which the securities are to be offered to the public. A statement to the effect must be duly disclosed in theprospectus .Added: October 2017OFS-2.4 OFS-2.4 Private Placement
OFS-2.4.1
Offers made by
private placement pursuant to a Private Placement Memorandum (PPM) are subject to the general eligibility criteria and requirements stipulated under this Module.January 2014OFS-2.4.2
A
private offer must only be made toaccredited investors and must be for a minimum investment of USD 100,000.00. Aprivate offer , excluding those offers made by way of private equity, is limited to a take up by less than 100accredited investors .January 2014OFS-2.4.3
Any subsequent issues or offering of
securities by a publicly listedissuer , for its ownsecurities , must first be offered to its existingshareholders (rights offering) and then to the public. Any listedissuer that would like to make aprivate placement must obtain CBB approval and the approval of theshareholders' General Assembly.January 2014OFS-2.4.4
Issuers must combine all offers ofsecurities that are in substance part of a single offering. The CBB will consider if the offer occurs in the six-month period before or the six-month period after the completion of an offer, for the purpose of the above determination.January 2014OFS-2.4.5
In order for the CBB not to regard the offer as a
public offer , theissuer must exercise reasonable care to ensure that the purchasers ofsecurities are not acquiring them for resale, redistribution to other investors within a period not less than one year.January 2014OFS-2.4.6
The
issuer , lead manager and any appointed advisor to theprivate placement offer must not disseminate or make available any information related to theprivate placement offer to the public prior to the subscription being closed and must not at any time disclose or make available any information that could be regarded as an inducement to deal in thesesecurities .January 2014OFS-2.4.7
Any
private placements marketed or promoted by licensees of the CBB must set fees within the actual cost and must be within reasonable and justifiable levels that do not materially compromise the interests of theissuer or the investor. Theprivate placement fees or any other fees or charges related to the placement and any other related cost must be disclosed clearly in the PPM.January 2014OFS-2.4.8
The level of fees for
issuers of differing sizes of issue is given below as a guidance:Size of Issue Maximum Fee Percentage Up to BD100,000,000 3% BD100,000,001 to BD500,000,000 2% BD500,000,001 and above 1% January 2014OFS-2.5 OFS-2.5 Rights Offering
OFS-2.5.1
Rights offerings of listedequity securities are subject to the eligibility criteria under this Module.January 2014OFS-2.5.2
The CBB may only grant its approval for a
rights issue where the General Assembly of theissuer has issued a resolution approving such offer.January 2014OFS-2.5.3
An
offering period of arights offering must be approved by the CBB and must be close to the public announcement of financial statements so that shareholders and potential subscribers have the most recent financial information of the issuer.January 2014OFS-2.5.4
An application for approval of a
rights issue must include the issue price and principal terms and conditions of the issue.January 2014OFS-2.5.5
If the
rights offering is made at a high share premium or above the market price on alicensed exchange , such issue shall be subject to the underwriting requirement under Subparagraph OFS-1.6.1 (e).January 2014OFS-2.5.6
The content of the
rights offering document must meet the minimum requirements provided in Appendix OFS-1, where relevant.January 2014OFS-2.5.7
To accommodate for the possibility of under subscription by the existing
shareholders ,issuers must preparerights offering documents in line with public offering documents to avoid any delay regarding the approval of a further public offering where therights issues are not fully underwritten or taken up.January 2014OFS-2.5.8
If the
rights issue is not fully subscribed or fully underwritten and thereafter is made to the public, theprospectus requirements of Section OFS-5.1 apply in relation to theoffering document .January 2014OFS-2.5.9
Any announcement made by the
issuer or his advisors prior to receiving the approval of the CBB must clearly state that therights issue is subject to the approval of the CBB.January 2014OFS-2.5.10
The
issuer must disclose the price, terms and the purpose of therights issue , as well as the financial circumstances that call for therights issue .January 2014OFS-2.5.11
The
offering period for arights issue must be at least 15 calendar days.January 2014OFS-2.5.12
A
rights issue which allows holders ofsecurities to participate in proportion or pro rata to the amount of existingshares held, must allow for renunciation, in part or whole, in favour of a third party at the option of the entitledshareholders .January 2014OFS-2.5.13
The CBB will not allow any
rights issue in which the rights cannot be renounced, in part or whole, in favour of a third party at the option of the entitledshareholders , unless theissuer made the necessary arrangements with alicensed exchange to trade the rights, subject to such renunciation.January 2014OFS-2.5.14
Subsequent to a
rights issue , theissuer must submit to the CBB the results of the issue including an allotment report and, if any rights are not taken up or are sold, the details of the sale, including the date and price pershare .January 2014OFS-2.6 OFS-2.6 Employee Stock Option Plan
OFS-2.6.1
Any
employee stock option plan of a listedissuer utilising itsequity securities requires CBB approval.January 2014OFS-2.6.2
The
issuer may reserve up to 10% of its total issuedsecurities, for its directors and employees through anemployee stock option plan .January 2014OFS-2.6.3
The
employee stock option plan must be approved by theshareholders at the General Assembly. Theissuer must provide theshareholders' General Assembly with full details and information about the terms, conditions, eligibility criteria and timeframe and all information included under Rule OFS-2.6.4.January 2014OFS-2.6.4
The
employee stock option plan must contain provisions relating to:(a) The persons to whomsecurities may be issued or sold under the plan ("participants");(b) The total number and/or amount of thesecurities to be issued or purchased on a licensed exchange;(c) Entitlement in terms of number and amount ofsecurities for any one participant;(d) The amount payable on application or acceptance, and the basis for determining the subscription or sale or option price, and the period in or after which payments or calls or loans to provide the same, may be paid or called;(e) The time limit for the plan;(f) The period during which the participants must not dispose of the allottedsecurities , if applicable; and(g) The voting, dividend, transfer and other rights, including those arising from the liquidation of the company attached to thesecurities .January 2014OFS-2.6.5
Any announcement made prior to receiving the approval of the CBB must clearly state that the
employee stock option plan is subject to the approval of the CBB.January 2014OFS-2.6.6
The resolution must approve a specific plan and refer to either the plan itself, or to a summary of its principal terms included in the circular, which must contain all the provisions set out in Rule OFS-2.6.4. Where directors of the
issuer aretrustees of the plan, or have a direct or indirect interest in the plan, the circular must disclose the interest.January 2014OFS-2.6.7
All listed companies'
securities held on behalf of the employees under anemployee stock option plan oremployee share benefit plan , must be held in trust by atrustee subject to the prior written approval of the CBB. The securities account opened and maintained at alicensed central depository for this purpose must be clearly identified as a trust account for theemployee stock option plan oremployee share benefit plan accordingly. Where employees are eligible to trade in the securities of theissuer held on their behalf in anemployee stock option plan , the directors, executive management and any other key persons must not be eligible to hold the position oftrustee of such plan.Amended: October 2017
January 2014Transitional Arrangement
[This Sub-Heading was deleted in July 2018].
Deleted: July 2018OFS-2.6.7A
[This Paragraph was deleted in July 2018].
Deleted: July 2018OFS-2.6.8
Unless the
securities subject to the same plan are identical with othersecurities , they must be separately designated.January 2014OFS-2.6.9
The plan may provide for an adjustment of the subscription or option price, or the number or amount of
securities subject that such variation provides a participant the same portion of the equity capital as that to which he was previously entitled.January 2014OFS-2.6.10
The issue of
securities as consideration for an acquisition will not be regarded as a circumstance requiring adjustment.January 2014OFS-2.6.11
An adjustment other than on a
capitalisation issue must be confirmed in writing by the company's auditor and in its opinion be fair and reasonable.January 2014OFS-2.6.12
The plan must provide, or the circular must state, that the provision relating to the matters contained in Rule OFS-2.6.4 cannot be altered to the advantage of participants, without the
shareholders' prior approval at a General Assembly.January 2014OFS-2.6.13
The plan and any other subsequent renewal or amendments to the terms of the plan are subject to the prior approval of the CBB.
January 2014OFS-2.6.14
The holders or the owners of
securities issued or subsequently issued under anyemployee share benefit plan , whether theissuer or the directors of theissuer aretrustee of the plan or not, are subject to the provisions related to prohibition of abuse ofinside information andinsider trading laws including but not limited to those set out in Module MAM of CBB Rulebook Volume 6.January 2014OFS-3 OFS-3 Capital Market Advisory Services Provider
OFS-3.1 OFS-3.1 Capital Market Advisory Services Provider
OFS-3.1.1
For the purpose of this Module, a
Capital Market Advisory Services Provider (appointed advisor) means any person who provides or involves himself with any activity or services stipulated under Article 80 of the CBB Law.January 2014Definition of Advisors
OFS-3.1.2
For the purpose of this Module, in addition to any other designation by the CBB, a
Capital Market Advisory Services Provider may be classified as follows:(a) Auditors;(aa) Financial Advisors;(b)Custodian ;(c) Independent Reporting Accountant;(d) Independent Valuer;(e) Issue Agent;(f) Lead Manager;(g) Legal Advisor;(h)Paying Agent ;(i)Receiving Bank ;(j) Securities Depositor and ownership transfer agent;(k)Trustee ;(l) Shari'a Advisor;(m) Promoter;(n) Listing Agent;(o)Underwriter ; or(p) Any other person designated as aCapital Market Advisory Service Provider by the CBB from time to time.Amended: October 2017
January 2014OFS-3.2 OFS-3.2 General Eligibility
Incorporation, Licensing and Acceptance
OFS-3.2.1
The appointed advisor must be either incorporated in the Kingdom of Bahrain and licensed by the CBB or authorised to provide this service by the CBB.
January 2014OFS-3.2.2
The Memorandum and Articles of Association and/or the by-laws of the advisor must allow it to provide such service.
January 2014OFS-3.2.3
Where applicable, the appointed advisor must be incorporated in, be a member, associate or registered with the relevant local, and/or international professional body of a jurisdiction which is a signatory to the IOSCO MMoU.
January 2014Ability to Provide the Service
OFS-3.2.4
In addition to incorporation and licensing, the CBB will review the ability of the advisor to provide the service. The CBB will consider the following in such determination:
(a) Historical records and prior performance;(b) Maintenance of systems and controls set-up by the advisor; and(c) Number of suitably experienced and qualified employees.Moreover, advisors' fees and charges should be fixed reasonably in order to ensure that the costs associated with raising capital or initial public offerings are competitive.
Amended: October 2017
January 2014Controlled Functions
OFS-3.2.5
All persons proposed to undertake any of the
controlled functions must be subject to the provisions and requirements related to these functions, particularly in respect of anti-money laundering and financial crime, the compliance function and any person directly involved in the preparation of theprospectus oroffering documents .January 2014OFS-3.2.6
All persons proposed to undertake any
controlled functions and any other persons recruited or employed by thecapital market advisory service provider must meet the relevant examination and qualification requirements of the CBB, including qualifications such as the Securities Market Regulation Certification Programme (Series 7), the General Securities Representative Qualification (Series 79), and/or any other relevant examinations and qualifications recognised by the CBB that are appropriate to capital market functions, as the case may be. However the CBB reserves the right to impose a higher level of qualifications as it deems necessary.Amended: April 2016
January 2014OFS-3.2.7
Capital market advisory services providers must maintain and keep records of agreements, contracts, correspondence and other information to demonstrate their compliance with the requirements of this Module. These records must be kept for at least 10 years.January 2014Appointment, Change, Termination
OFS-3.2.8
Any appointment of an advisor must be made in the form of a written agreement, contract and/or official letter issued by the
issuer or lead manager as applicable.January 2014OFS-3.2.9
The acceptance of the appointment by the advisor must be made in the form of an official written confirmation.
January 2014OFS-3.2.10
The name of the appointed advisors must be prominently disclosed in the
offering document and in all advertising materials.January 2014OFS-3.2.11
A person appointed to act as an appointed advisor shall not cease to act as such until another has taken office with CBB approval.
January 2014OFS-3.2.12
An
issuer must notify the CBB in writing immediately of the appointment or dismissal or replacement of an advisor that had been appointed. In the case of a dismissal, the reasons for dismissal must be provided.January 2014Transparency and Disclosure
OFS-3.2.13
Where a
prospectus oroffering document includes a statement purporting to be made by, or based on a statement made by an expert, theprospectus oroffering document must not be issued unless:(a) The expert has, before the approval and registration of theprospectus oroffering document , as the case may be, provided his written consent to the issue thereof; and(b) There appears in theprospectus oroffering document , a statement that the expert has given such consent.January 2014OFS-3.2.14
The appointed advisor must provide a statement regarding its due diligence with regard to its appointed responsibility and this statement must be included in the
prospectus oroffering document .January 2014OFS-3.2.15
The appointed advisor must disclose in the
prospectus and/oroffering documents , whether it has any capital of theissuer under option, or agreed conditionally or unconditionally to be put under option, including:(a) The title and amount ofsecurities covered by theoptions ;(b) The exercise price;(c) The purchase price, if any; and(d) The expiration date of theoptions .January 2014OFS-3.2.16
Where
options have been granted, or agreed to be granted to all the holders ofshares ordebt securities , or of anyclass thereof, or to any appointed advisor, or to employees under theemployees' share benefit plan , a general disclosure of such fact may be made.January 2014OFS-3.2.17
The information provided in Rule OFS-3.2.15 must also be disclosed where there is authorised but unissued capital, or an undertaking to increase the capital in connection with
warrants , convertible obligations or other outstanding equity-linkedsecurities , or subscription rights granted or to be granted to any appointed advisor. Such information must indicate:(a) The amount of outstanding equity-linkedsecurities and of such authorised capital or capital increase and where appropriate, the duration of the authorisation;(b) The categories of advisors having preferential subscription rights for such additional portions of capital;(c) The terms, arrangements and procedures for theshare issue corresponding to such portions; and(d) That no subscription is made by the issuer in contravention of Subparagraph OFS-1.5.2(s).January 2014OFS-3.2.18
In regard to the implementation of the granting of capital in Paragraphs OFS-3.2.15 and OFS-3.2.17:
(a) The General Assembly of thesecurities holders must approve a separate resolution of the rights oroptions through a majority of disinterestedsecurities holders;(b) It must be implemented, exercised and/or allocated separately from the process of the related offering ofsecurities , i.e. either before or after theoffering period ; and(c) Forissuers under formation, the implementation, exercising and or allocation of the requiredsecurities must take place only after the publication of theissuer's incorporation order in the Official Gazette.January 2014Independency and Avoidance of Conflict of Interest
OFS-3.2.19
An appointed advisor must be independent of the
issuer . An appointed advisor will not be considered independent by the CBB if:(a) He owns an interest of 5% or more ofequity securities of theissuer or any other company within theissuer's group;(b) He has a business relationship with, or financial interest in theissuer or any other entity in theissuer's group that would give the appointed advisor, or the appointed advisor's group a material interest in the outcome of the transaction;(c) He provides and has provided in the previous 2 years any service, assurance, or guidance in any event to theissuer , other than the offering or listing in which he is appointed as an appointed advisor, or to another entity in theissuer's group; or(d) A director, partner or employee of the appointed advisor or another entity in the appointed advisor's group has a material interest in theissuer or any other entity in theissuer's group.Amended: July 2018
January 2014OFS-3.2.20
When an appointed advisor undertakes business other than the capital market advisory services, or undertakes two or more of the capital market advisory services, the appointed advisor must ensure that the performance of such business is subject to the avoidance of any conflict of interest.
January 2014Confidentiality and Prohibition of Insider Trading
OFS-3.2.21
Appointed advisors are subject to confidentiality requirements which must be explicitly stated in the respective agreements, contracts and/or letters.
January 2014OFS-3.2.22
All advisors must abide by the rules relating to the Prohibition of Market Abuse and Manipulation contained in Module MAM of Volume 6 CBB Rulebook, as well as the relevant rules of the
licensed exchange regarding the prevention ofinsider trading , in their capacity as a temporary insider.January 2014Reporting and Notification to the CBB
OFS-3.2.23
An appointed advisor is responsible, in addition to the reporting and disclosure requirements stipulated under this Module, for immediate notification to the CBB of any offence involving money laundering, fraud, theft, or other dishonest conduct related to the offer or listing, irrespective of whether such conduct is reported to the CBB by the
issuer and/or the lead manager.January 2014Declaration and Accountability
OFS-3.2.24
An appointed advisor is required to provide the CBB with a declaration confirming his acceptance to the accountability and enforceability of the CBB Law, rules and regulations, and all other applicable laws, rules and regulations, and in particular to the CBB Law Articles 82, 84, 85, 106, 166, 167 and 168.
January 2014CBB Approval
OFS-3.2.25
The CBB shall decide on the eligibility of the appointed advisor(s) on a case by case basis, taking into consideration, the nature and complexity of the offering, as well as, the nature of involvement and commitment of the appointed advisor(s).
January 2014OFS-3.3 OFS-3.3 Role and Responsibilities of the Appointed Advisors
OFS-3.3.1
An appointed advisor is required to fufill the applicable role and responsibilities as laid out in this Section and contained in the agreement signed between the
issuer and advisor.January 2014Role and Responsibilities of the Lead Manager
OFS-3.3.2
All
issuers must engage aCBB licensee to act as a lead manager or to fulfil the obligations of a lead manager as defined in this Section.January 2014OFS-3.3.3
The lead manager is in addition to Paragraph OFS-3.2.24 required by the CBB to act with appropriate care and skill and perform the following:
(a) Prepare and file the application for approval of asecurities offering to the CBB;(b) Report to the CBB on the due diligence undertaken in respect of the issue and theissuer ;(c) Make a declaration that is provided to the CBB and included in theoffering document , that theoffering document does not contain information that is false or misleading, in its opinion does not prejudice the interests of present or future investors and does not omit any material information;(d) Make a declaration that is provided to the CBB and included in theoffering document that theoffering document is in accordance with all the CBB Law, other rules and regulations and this Module;(e) The lead manager's declaration under (d) is only acceptable to the CBB, if it is attached with a duly signed and fully completed offering prospectus checklist prescribed under Appendix OFS-7; and(f) Where the issue is not underwritten, the lead manager must provide the CBB with the method of price determination and price stabilisation for a period of one year or such other period as the CBB may determine.January 2014OFS-3.3.4
For the purposes of Rule OFS-3.3.3, the outstanding underwriting commitments of a lead manager should not exceed reasonable limits including in relation to its capital and capital adequacy requirements.
January 2014OFS-3.3.5
The lead manager is expected to also assist the
issuer with the appointment of other advisors.January 2014OFS-3.3.6
Where the lead manager is also acting as a listing agent or sponsor in relation to a planned listing, the lead manager is also responsible for:
(a) Advising theissuer on its suitability for listing;(b) Ensuring the applicant, as well as the listing documents, meet admission requirements;(c) Preparing the application and listing documents for listing;(d) If thesecurities listing application for obtaining the CBB approval is made separately from the application for the offering ofsecurities , ensuring that in the case of the listing documents the requirements related to the declaration under Subparagraph OFS-3.3.3 (d) and prospectus checklist under Subparagraph OFS-3.3.3 (e) are also applied;(e) Ensuring that theissuer is sufficiently set up to comply with the continuing listing obligations under thelicensed exchange's listing rules including meeting the corporate governance requirements;(f) Ensuring the CBB is informed of all matters which should be brought to its attention; and(g) Notifying the CBB of any amendments to the application or listing documents after submission.January 2014OFS-3.3.7
The lead manager must inform the CBB where:
(a) It is no longer able to satisfy the criteria for approval;(b) Any of the approved executives of the lead manager are convicted of an offence involving fraud, theft or other dishonesty, or are the subject of a bankruptcy proceeding; or(c) It resigns as a lead manager, listing agent or sponsor. In this case, the lead manager must provide written notification to both the CBB and the relevantissuer .January 2014E-Subscription
OFS-3.3.8
In line with Articles 83 and 178 of the CBB Law and the
dematerialisation ofsecurities requirements under Paragraph OFS-1.5.5,issuers and lead managers must put in place appropriate technical infrastructure and other arrangements to encourage subscribers to use e-subscription facilities.Amended: April 2016
January 2014OFS-3.4 OFS-3.4 Role and Responsibilities of Auditor and Independent Reporting Accountant on Financial Projections
OFS-3.4.1
Newly-established
issuers or small and medium enterprises who cannot provide financial statements, or historical records must include projected financial statements in theprospectus oroffering document .January 2014OFS-3.4.2
Other than for newly-established
issuers , financial projections, forecasts, or estimates of future operating results are not required to be included inoffering documents , unless otherwise stated in this Module or by the CBB. However, if theissuer decides to disclose such information, it has to justify its projections adequately. Theissuer should provide an explanation as to how the projections were calculated, taking into account all assumptions and risks.January 2014OFS-3.4.3
Where the projections of financial statements, or forecasted financial information are disclosed in the
prospectus oroffering document , the projections must be reviewed and reported on by an independent reporting accountant or other expert and such report must be set out in theoffering document , in accordance with the International Standards on Assurance Engagement (ISAE), or any other applicable international standards required from time-to-time and the declaration required under Paragraph OFS-3.2.24 must be in line with this standard.January 2014OFS-3.4.4
The
issuer , lead manager and the independent reporting accountant must ensure that sufficient details on the bases and assumptions of the projections are disclosed to enable the investor to assess the reliability of the projections and the effect of any changes to the assumptions used. The bases and assumptions must:(a) Provide useful information to investors to assist them in forming a view as to the reasonableness and reliability of the projections;(b) Draw the investors' attention to, and where possible quantify, those uncertain factors which could materially affect the achievement of the projections;(c) Avoid generalisations and all-embracing assumptions (general asumptions, where applicable, could be made) and those relating to the general accuracy of the projections; and(d) Be clearly stated and reviewed for reasonableness by the directors who are responsible for the projections, bases and assumptions.January 2014OFS-3.4.5
The following requirements are applicable in respect of profit/cash flow projections:
(a) The projections must be realistic and achievable to provide investors with information on theissuer's prospects;(b) The projections must be compiled with utmost care and objectivity; and(c) Where the projections are subject to high probability of variation, theissuer must provide a sensitivity analysis based on any one of the key variables such as sales price, volume of sales, production costs, production capacity, operating expenses and financing costs.January 2014OFS-3.4.6
In addition to the above, owing to the specific nature of profit/cash flow projections, the
issuer must take note of the following:(a) A projection, being a representation of financial information based on a set of assumptions which are uncertain and hypothetical, must be qualified as to its achievability for those reasons;(b) The qualifications of projected financial information must draw attention to the fact that the presentation is based on hypothetical assumptions, and that actual events may differ from those assumed and may materially affect the financial information projected; and(c) Notwithstanding the uncertainties and hypothetical assumptions associated with projections, the projections must be prepared with care, skill and objectivity so as to represent the stated assumptions and not to purport unreasonable hypotheses and assumptions.Amended: July 2018
January 2014Eligibility
OFS-3.4.7
The independent reporting accountant is required to adhere to the independence and other standards applicable to auditors, in addition to the general eligibility under Section OFS-3.2.
January 2014OFS-3.5 OFS-3.5 Role and Responsibilities of Trustees and Custodians
OFS-3.5.1
Borrowing corporations and issuers of
debt securities (hereinafter referred to as borrowing corporations) must appointtrustees to whom the ownership of the trust property must be transferred.January 2014Eligibility
OFS-3.5.2
A Bahrain domiciled
trustee must be established and authorised in accordance with the Bahrain Trust Law of 2006. In the case of overseas domiciledtrustees , they must be registered in their own jurisdiction and be acceptable to the CBB.January 2014Appointment of Trustee
OFS-3.5.3
Every
issuer ofdebt securities must make provision in thosedebt securities , or in a trust deed relating to thosedebt securities, for the appointment of atrustee corporation astrustee for the holders of thedebt securities within a maximum of one month from the allotment date.January 2014Independence
OFS-3.5.4
A
trustee corporation must not be appointed, hold office or act astrustee for the holders ofdebt securities of a borrowing corporation if thattrustee corporation is:(a) Ashareholder who beneficially holdsshares in the borrowing corporation;(b) Beneficially entitled to monies owned by the borrowing corporation to it;(c) A corporation that has entered into a guarantee in respect of the principal debt secured by thosedebt securities or in respect of interest thereon; or(d) A corporation that is related to:(i) Any corporation referred to in Subparagraphs (a), (b) or (c); or(ii) The borrowing corporation.January 2014OFS-3.5.5
The
trustee must be independent of theissuer , or any of theissuer's related party, subsidiaries and/or associates, and must exercise the powers and duties as defined in the Trust Law of 2006 and the trust deed, without interference or guidance from theissuer .January 2014OFS-3.5.6
An
issuer may remove atrustee after obtaining CBB approval if he exceeds the limits or is otherwise in contravention of the trust deed, or if he violates the provisions of the Trust Law of 2006.January 2014Contents of a Trust Deed
OFS-3.5.7
Where a corporation or any other entity makes an offer or invitation in respect of
debt securities , thedebt securities or the relevant trust deed must contain a limitation on the amount that the borrowing corporation may borrow, pursuant to thosedebt securities or that deed and must contain covenants by the borrowing corporation, or if thedebt securities do not or the trust deed does not expressly contain those covenants, they or it are deemed to contain covenants by the borrowing corporation, to the following effect:(a) That the borrowing corporation will use its best endeavours to carry on and conduct its business in a proper and efficient manner;(b) That thetrustee or any auditor or director appointed by thetrustee shall:(i) Be entitled to require the borrowing corporation to make available for its or his inspection the whole of the accounting or other records of the borrowing corporation; and(ii) Give to it or him such information as it or he requires with respect to all matters relating to the accounting or other records of the borrowing corporation; and(c) That the borrowing corporation must, on the application of persons holding at least 10% in nominal value of the issueddebt securities give notice:(i) To each of the holders of thosedebt securities at his address as specified in the register ofdebt securities ;(ii) By an advertisement in at least two local daily newspapers, one each published in the Arabic and English languages addressed to all holders of thosedebt securities ; and(iii) Call a meeting of the holders of thosedebt securities to consider the accounts and balance sheet which were last submitted to thetrustee for the holders of thedebt securities by the borrowing corporation, and to give to thetrustee directions in relation to the exercise of thetrustee's powers. Such meeting is to be held at a time and place specified in the notice and advertisement under the chairmanship of a person nominated by thetrustee , or such other person as appointed on behalf of the holders of thosedebt securities present at the meeting.Amended: July 2018
January 2014OFS-3.5.8
Trust deeds for
convertible securities must not include any provisions for:(a) The extension or shortening of tenure of the convertibles; and(b) Changes to the number ofshares received for the conversion of eachconvertible security , or changes to the pricing mechanism for the conversion of theconvertible security , except where these changes are adjustments pursuant to capitalisation issues,rights issues , or consolidation or sub-division ofshares or capital reduction exercises.January 2014OFS-3.5.9
Any changes in the terms of
convertible securities must be clearly determined and disclosed in the trust deed andoffering document /listing document/circular, or any other documents issued in relation to the proposal.January 2014OFS-3.5.10
Once determined, the terms and conditions of the
convertible securities may not be altered unless approved by the holders of thesecurities and the CBB.January 2014Retirement of Trustees
OFS-3.5.11
A
trustee for the holders ofdebt securities must not cease to be thetrustee until a corporation qualified for appointment astrustee for the holders ofdebt securities has been appointed and has taken office as such. The holders of thesecurities and the CBB must be informed immediately of this event.January 2014OFS-3.5.12
Where provision has been made in the
debt securities or in the relevant trust deed for the appointment of a successor to atrustee for the holders of thedebt securities upon retirement or otherwise, the successor may be appointed in accordance with such provision.January 2014OFS-3.5.13
Where no provision has been made in the
debt securities or in the relevant trust deed for the appointment of a successor to a retiringtrustee , the borrowing corporation may appoint a successor which is qualified for appointment.January 2014OFS-3.5.14
Notwithstanding anything in any
debt securities or trust deed, a borrowing corporation may, with the consent of an existingtrustee for the holders of thedebt securities , appoint as successor to the existingtrustee any corporation which is qualified for such appointment.January 2014OFS-3.5.15
Where the
trustee for the holders of thedebt securities has ceased to exist or to be qualified, or fails or refuses to act or is disqualified, the court may, on the application of the borrowing corporation or the CBB, appoint any corporation qualified to be thetrustee for the holders of the debtsecurities in place of thetrustee which has ceased to exist or to be qualified, which has failed or refused to act astrustee , or which is disqualified.January 2014OFS-3.5.16
Where a successor is appointed to be a
trustee in place of anytrustee , the successor must immediately after the appointment submit to the holders of thesecurities and the CBB notice of such appointment.January 2014Roles and Responsibilities of the Trustees
OFS-3.5.17
A
trustee for the holders ofdebt securities must:(a) Exercise reasonable diligence to ascertain whether or not the assets of the borrowing corporation and of each of its guarantor corporations which are or may be available, whether by way of collateral orsecurity or otherwise, are sufficient or are likely to be or become sufficient to discharge the principal debt as and when it becomes due;(b) Satisfy itself that eachprospectus relating to thedebt securities does not contain any matter which is inconsistent with the terms of thedebt securities or with the relevant trust deed;(c) Ensure that the borrowing corporation complies with the CBB Law, rules and regulations and any other laws, rules and regulations related to thedebt securities as applicable;(d) Exercise reasonable diligence to ascertain whether or not the borrowing corporation and each of its guarantor corporations have committed any breach of the covenants, terms and provisions of thedebt securities or the trust deed;(e) Except where it is satisfied that the breach will not materially prejudice the collateral or thesecurity , if any, for thedebt securities or the interests of the holders of thedebt securities , take all steps and take all such actions as it is empowered to do to cause the borrowing corporation and any of its guarantor corporations to remedy any breach of those covenants, terms and provisions;(f) Where the borrowing corporation or any of its guarantor corporations fails when so required by thetrustee to remedy any breach of the covenants, terms and provisions of thedebt securities or the trust deed, place the matter before a meeting of holders of thedebt securities and submit such proposals for the protection of their interest as thetrustee considers necessary or appropriate and obtain the directions of the holders in relation thereto; and(g) Where the borrowing corporation submits to those holders a compromise or arrangement, give to them a statement explaining the effect of the compromise or arrangement and, if it or he thinks fit, recommend to them an appropriate course of action to be taken by them in relation thereto.January 2014OFS-3.5.18
Where a
trustee for the holders of thedebt securities after due enquiry, at any time is of the opinion that the assets of the borrowing corporation and of any of its guarantor corporations which are or should be available, whether by way of collateral orsecurity or otherwise, are insufficient, or likely to become insufficient, to discharge the principal debt as and when it becomes due, it must apply to the CBB for an order under Paragraph OFS-3.5.19.January 2014OFS-3.5.19
The CBB, on receiving an application under Paragraph OFS-3.5.18 may:
(a) After giving the borrowing corporation an opportunity to make representations in relation to the application, and by order in writing served on the corporation at its registered office in Bahrain, impose such restrictions on the activities of the borrowing corporation, including restrictions on advertising for deposits or loans and on borrowing by the corporation as proposed by thetrustee and/orissuer or the CBB considers necessary for the protection of the interests of the holders of the debtsecurities ; or(b) If the CBB so requires, direct thetrustee to apply to the court for an order; and thetrustee shall act in accordance with the court order.January 2014OFS-3.5.20
Where:
(a) After due enquiry, thetrustee is at any time of the opinion that the assets of the borrowing corporation and of any of its guarantor corporations which are or should be available, whether by way of collateral orsecurity or otherwise, are insufficient or likely to become insufficient to discharge the principal debt as and when it becomes due; or(b) The borrowing corporation has contravened an order made by the CBB under Paragraph OFS-3.5.19.the
trustee may apply to the court for an order.January 2014Powers of the Trustee to Apply to Court
OFS-3.5.21
A
trustee for the holders ofdebt securities may apply to the court:(a) For directions in relation to any matter arising in connection with the performance of the functions of thetrustee ; or(b) To determine any question in relation to the interests of the holders ofdebt securities .January 2014OFS-3.5.22
Prior to making any application to the CBB or to the court, a
trustee must consider the nature and kind of collateral orsecurity given when the offer or invitation in respect of thedebt securities was made to the public, and if nosecurity was given must consider the position of the holders of thedebt securities as unsecured creditors of the borrowing corporation.January 2014OFS-3.5.23
A
trustee may rely upon any certificate or report given or statement made by any legal advisor, auditor or officer of the borrowing corporation or guarantor corporation, if it reasonably believes that such legal advisor, auditor or officer was competent to give or make the certificate, report or statement.January 2014Obligations of the Issuer or Borrowing Corporation
OFS-3.5.24
The directors of the borrowing corporation must:
(a) At the end of a period not exceeding 3 months (being a day after the date of the issue of the relevantprospectus ); and(b) At the end of each succeeding period thereafter, being a period of 3 months or such shorter time as thetrustee may, in any special circumstances allow,prepare a report that relates to that period and complies with the requirements of Paragraph OFS-3.5.25, and within one month after the end of each such period submit a report relating to that period to the
trustee with a copy being submitted to the CBB.January 2014OFS-3.5.25
The report referred to in Paragraph OFS-3.5.24, must be signed by not less than two of the directors on behalf of all of them and must set out in detail any matters adversely affecting the collateral or
security , or the interests of the holders of thedebt securities and, without affecting the generality of Paragraph OFS-3.5.24, state:(a) Whether or not the limitations on the amount that the corporation may borrow have been exceeded;(b) Whether or not the borrowing corporation and each of its guarantor corporations have observed and performed all the covenants and provisions binding upon them respectively by or pursuant to the debtsecurities or any trust deed;(c) Whether or not any event has happened which has caused or could cause the debtsecurities or any provision of the relevant trust deed to become enforceable and, if so, particulars of that event;(d) Whether or not any circumstances affecting the borrowing corporation, originator, group companies or its guarantor corporation(s) or any of them have occurred which materially affect any collateral orsecurity or charge included in or created by the debtsecurities or any trust deed and, if so, particulars of those circumstances;(e) Whether or not there has been any major change in the nature of the business of the borrowing corporation or any of its group companies, originator or any of its guarantor corporation(s) since the debtsecurities were first issued which has not previously been reported upon as required by Section OFS-3.5 and, if so, particulars of that change; and(f) Where the borrowing corporation has deposited money with or lent money to or assumed any liability of a corporation which is related to the borrowing corporation, particulars of:(i) The total amounts so deposited or lent and the extent of any liability so assumed during the period covered by the report; and(ii) The total amounts owing to the borrowing corporation in respect of money so deposited or lent and the extent of any liability so assumed as at the end of the period covered by the report, distinguishing between deposits, loans and assumptions of liabilities which are secured and those which are unsecured, but not including any deposit with or loan to or any liability assumed on behalf of a corporation if that corporation has guaranteed the repayment of thedebt securities of the borrowing corporation, and has secured the guarantee by a charge over its assets in favour of thetrustee for the holders of thedebt securities of the borrowing corporation.January 2014OFS-3.5.26
The
trustee must demand that the borrowing corporation and each of its guarantor corporation(s) which has guaranteed the repayment of the monies raised by the issue ofdebt securities to:(a) Furnish in writing to thetrustee , within 30days after the creation of a charge, with the particulars of any charge created by the corporation or the guarantor corporation, as the case requires; and(b) When the amount to be advanced on the collateral or thesecurity of the charge is indeterminate, furnish thetrustee in writing within 10days after the advance, particulars of the amount or amounts actually advanced.Amended: April 2014
January 2014OFS-3.5.27
Where any such advance referred to in Subparagraph OFS-3.5.26(b) is merged in a current account with bankers or trade creditors, it shall be sufficient for particulars of the net amount outstanding in respect of any such advance to be furnished every 3 months.
January 2014OFS-3.5.28
The
trustees must submit to the CBB a report addressing the requirements stipulated under Paragraph OFS-3.5.17 on a regular basis but not later than each occurrence of the payment of periodic interest or income or when thetrustee deems necessary to keep the CBB informed about the compliance with those requirements.January 2014OFS-3.5.29
The directors of every borrowing corporation and of every guarantor corporation must cause to be made out and submitted to the CBB and
trustee :(a) A profit and loss account for the first 3 months of every financial year of the corporation and a balance sheet as at the end of that period, not less than 3 months after the expiration of the period of 6 months; and(b) A profit and loss account for every financial year of the corporation and a balance sheet as at the end of that period, not later than 3 months after the end of that financial year.January 2014OFS-3.5.30
Where:
(a) The directors of a borrowing corporation do not submit to thetrustee the report as required by Paragraph OFS-3.5.25; or(b) The directors of a borrowing corporation or the directors of a guarantor corporation do not submit with thetrustee the balance sheets and profit and loss accounts as required by Paragraph OFS-3.5.29, within the time prescribed;the
trustee must immediately notify the CBB of this fact.January 2014Obligations of Guarantor
OFS-3.5.31
For the purpose of the preparation of a report that, by this Module, is required to be signed by or on behalf of the directors, or persons approved by the CBB of a borrowing corporation or any of them, that borrowing corporation may, by notice in writing, require any of its guarantor corporations to furnish it with any information relating to that guarantor corporation which is, by this Module, required to be contained in that report.
January 2014OFS-3.5.32
The guarantor corporation must furnish the borrowing corporation with that information required under Paragraph OFS-3.5.31 before the specified date, being a date not earlier than one month after the notice is given.
January 2014OFS-3.6 OFS-3.6 Role and Responsibilities of the Underwriter
Eligibility
OFS-3.6.1
Any person acting as an
underwriter to any offering, must be licensed or otherwise authorised by the CBB to undertake such activity.January 2014OFS-3.6.2
For the purpose of this Module, the definition, role and requirements related to the
underwriter also apply to co-underwriters .January 2014OFS-3.6.3
The CBB may investigate the financial suitability of a proposed
underwriter and may reject the appointment of theunderwriter and/or the application for offering if it is not satisfied as to theunderwriter's ability to meet its commitment under the proposed underwriting agreement and its potential impact in its capital adequacy.January 2014Firm Commitment Underwriting
OFS-3.6.4
Where an
underwriter has been appointed and thesecurities are not fully subscribed during theoffering period , theunderwriter must purchase the balance of thesecurities through afirm commitment underwriting arrangement.January 2014OFS-3.6.5
The
firm commitment underwriting arrangement must be detailed in an underwriting agreement, which must be submitted to the CBB as part of the offering ofsecurities application.January 2014OFS-3.6.6
For the purpose of this Module, the total of all the underwriting undertakings of the
underwriter , the company that controls it, its subsidiary, a subsidiary of the company that controls it and a company affiliated with it, are calculated as one underwriting undertaking.January 2014OFS-3.6.7
The
underwriter may appoint or form an underwriting group for any underwritten issue.January 2014OFS-3.6.8
The
underwriter must comply with the CBB Law, rules and regulations, including Volume 6 of the CBB Rulebook, and theissuer's Memorandum and Articles of Association, particularly in respect of the eligibility of the expected subscribers to acquire theissuer's securities and related disclosure requirements.Amended: October 2017
January 2014OFS-3.6.9
After the approval of the
offering documents (including the underwriting agreement) neither theissuer nor any advisor or person acting on its behalf, nor theunderwriter or any person acting on its behalf, has the right to change any provision or commitments stipulated in the underwriting agreement.January 2014OFS-3.6.10
All commitments, terms and conditions stipulated in the underwriting agreement must be enforced and implemented without any change or alterations, including the relevant timeframes.
January 2014OFS-3.6.11
The CBB may consider amendments to an underwriting agreement where the stability of the financial sector and/or capital market will be adversely affected by the agreement's current provisions. In this regard, the CBB must be provided with a supporting application signed by both the
issuer and theunderwriter , before considering such amendment.January 2014Firm Commitment Underwriting
OFS-3.6.12
A
firm commitment underwriting arrangement is required for all public offerings. However, the CBB may accept other underwriting arrangements other thanfirm commitment underwriting , in the following cases:(a) Offering ofsecurities below the average market price during the last six months; or(b) Offering ofsecurities at the flat par value.January 2014OFS-3.6.13
A
firm commitment underwriting arrangement may also be done through a bought-out deal wherein the underwritten issue is bought entirely by theunderwriter to resell to investors.January 2014OFS-3.6.14
In case of issues which are exempted from
firm commitment underwriting arrangements (non-public offers), the CBB may acceptpartial underwriting commitment arrangements, orbest-efforts underwriting .January 2014Disclosure
OFS-3.6.15
The name of the
underwriter and the terms of the underwriting agreement must be prominently disclosed in theoffering document and in the application for approval.January 2014OFS-3.6.16
A summary of the underwriting agreement or arrangements must be provided in the
prospectus oroffering document , including but not limited to the cost of underwriting and other related fees and charges.January 2014OFS-3.6.17
The
underwriter is required to provide sufficient and adequate information to the CBB and disclose the same in theprospectus oroffering documents as to the method, bases, mechanism, assumptions, and all other related information used to reach theoffering price .January 2014OFS-3.6.18
In cases where the
offering price is determined by theunderwriter jointly with any other advisor or third party, the name and role of such advisor or person must be provided to the CBB and disclosed in theprospectus oroffering document .January 2014OFS-3.6.19
The underwriting agreement must be provided as a document available for inspection to the subscriber.
January 2014OFS-3.6.20
For purposes of Paragraph OFS-3.6.17 and item 25.1(b) under Section 17 of Appendix OFS-1, relating to the pricing of securities and bases or methods for determining the issue or offer price and for prospectus disclosure purposes, the bases used for determining the pricing of securities must be elaborated on and general statements must be avoided.
Added: October 2017OFS-3.6.21
For purposes of Paragraph OFS-3.6.20, factors that are commonly cited in pricing determination which should be elaborated may include, but are not limited to, prevailing market performance and condition (e.g. price earnings ratio, dividend yield, etc.), financial and operating performance (e.g. earnings per share, etc.), consolidated net tangible assets per share and/or net assets per share (or liabilities as to the case may be), earnings potential, assessment of management, market valuation of companies in related businesses, intellectual property and technology, etc. Where appropriate, cross-references should be made to the relevant and specific sections of the prospectus.
Added: October 2017OFS-3.7 OFS-3.7 Role and Responsibilities of the Paying Agent
OFS-3.7.1
The
paying agent must be licensed by the CBB to undertake this activity.January 2014OFS-3.7.2
For an issue of
debt securities , theissuer must appoint and maintain apaying agent , or where appropriate, acentral depository in Bahrain until all outstanding obligations relating to thosesecurities have been met, unless theissuer itself performs these functions.January 2014OFS-3.7.3
The
paying agent must provide facilities for obtaining newdebt securities , in accordance with the terms and conditions of thedebt securities , to replace thosedebt securities which have been damaged, lost, stolen, or destroyed, and for all other purposes provided for in the terms and conditions of thedebt securities , trust deed and/oroffering documents .January 2014OFS-3.7.4
The
paying agent must undertake responsibility for timely disbursement of funds made available by theissuer or thetrustee , as the case may be, to investors in accordance with the terms of thesecurity and the timelines stipulated by the CBB.January 2014OFS-3.7.5
The
paying agent must notify the CBB immediately when theissuer , originator and/or guarantor delays in meeting any required payments, whether in whole or in part.January 2014OFS-3.7.6
The
paying agent or any other party must not issue a new certificate mentioned under Rule OFS-3.7.3, without mandating the certificate holder to publish in a local newspaper and the market that such certificate has been damaged, lost, stolen, or destroyed. A new certificate may only be issued 15 calendar days from the date of the above mentioned publication date.January 2014OFS-3.8 OFS-3.8 Role and Responsibilities of the Shari'a Advisor
OFS-3.8.1
The Shari'a advisor must review the key aspects of the issue of
Islamic securities , including documentation, structuring, investment, as well as any operational matters in relation to theIslamic securities and ensure compliance with applicable Shari'a principles.January 2014OFS-3.8.2
The Shari'a advisor must produce and sign a Shari'a pronouncement report or declaration that the issue is in compliance with the principles of Shari'a and include the report in the offering documentation which is submitted to the CBB.
January 2014OFS-3.8.3
The Shari'a advisor must be of good reputation and character and must possess the necessary qualifications and expertise in relevant Islamic jurisprudence. He must possess a minimum of three years experience in Islamic finance.
January 2014OFS-3.8.4
The Shari'a advisor must be independent of the
issuer . Theissuer must not restrict the activities of the Shari'a advisor in any way. In a case where restrictions are imposed, these must be disclosed by the Shari'a advisor to the CBB.January 2014OFS-3.9 OFS-3.9 Role and Responsibilities of the Legal Advisor
OFS-3.9.1
A legal advisor must be appointed for every offering of
securities and its name must be included in theoffering document and in any advertisement or announcement.January 2014OFS-3.9.2
The lead manager may appoint a legal advisor to assist in carrying out legal due diligence, the results of which must be included in the declaration by the lead manager (See Appendix OFS-8).
January 2014OFS-3.10 OFS-3.10 Role and Responsibilities of the Receiving Bank
OFS-3.10.1
A
receiving bank must be licensed or otherwise authorised by the CBB.January 2014OFS-3.10.2
For any offering made in or from Bahrain (
overseas issuers ), co-receiving banks may be exempted from the requirements under Rule OFS-3.10.1.January 2014OFS-3.10.3
The
issuer , lead manager, and thereceiving bank must designate a separate bank account for each issue ofsecurities . The name(s) of the designated bank(s) must be provided in detail in theoffering document .January 2014OFS-3.10.4
The
receiving bank must notify the CBB immediately upon its appointment and must receive the CBB's approval before entering into an agreement or contract with theissuer or lead manager.January 2014OFS-3.10.5
The
receiving bank must not activate the designated bank account or receive any payment from the subscribers other than during the date, time and working hours stipulated in theprospectus oroffering document . Where there is a change, amendment or alteration to the date, time or working hours, a copy of the CBB's prior approval issued separately to this extent must be received in advance by thereceiving bank before implementing such change or alteration.January 2014OFS-3.10.6
The
receiving bank must not activate the subscription bank account, or accept any subscription form or payment, or continue to accept receiving such forms and payment without ensuring that for each application and payment a final printed copy of theoffering document was made available to the subscriber.January 2014OFS-3.10.7
The
receiving bank is responsible for the accuracy and completeness of all information provided in the subscription form in accordance with the Know Your Client requirements under Module AML or other relevant standard and has the authority to reject any form which is not complete or which contains inaccurate information. Thereceiving bank in cooperation and coordination with theissuer or lead manager is responsible for the avoidance of any duplicate applications for the same beneficiary (subscriber).January 2014OFS-3.10.8
The
receiving bank must adhere to the laws, rules and regulations related to anti-money laundering and financial crime.January 2014OFS-3.10.9
The
receiving bank must not transfer the issue's total proceeds in whole or part to the Board of Directors of theissuer , without receiving the CBB's approval on theallotment and thereceiving bank is required to notify and provide the CBB with a bank certificate or transfer notice upon the transfer of such proceeds.January 2014OFS-3.10.10
The
receiving bank must not charge the subscriber for any additional costs, fees, or charges other than those costs, fees, or charges stipulated in theoffering document . Such costs, fees, or charges must be provided and displayed for the subscribers in a clear and readable place in theoffering document .January 2014OFS-3.10.11
The
receiving bank must be responsible for meeting the refunding and dispatching deadline with respect to the subscription money and shall ensure that all required arrangements are in place before entering into an agreement or contract with theissuer or lead manager.January 2014OFS-3.10.12
Where the refunding and dispatching deadline could not be met due to negligence or without prior approval of the CBB, the
receiving bank , jointly with theissuer and lead manager, is liable to pay to the subscriber interest or penalty on the subscription money equal to BIBOR for any day or part thereof after the deadline.January 2014OFS-3.10.13
Receiving banks should lay down technical infrastructure and other arrangements for promoting the electronic subscription and receipt of moneys (e-subscription) in Bahrain.January 2014OFS-3.11 OFS-3.11 Role and Responsibilities of the Securities Ownership Transfer Agent
OFS-3.11.1
If the issued
securities are not dematerialised, allissuers ofsecurities must appoint asecurities ownership transfer agent to perform the required function of theissuer in respect of the creation, maintenance and update of thesecurities register in terms of this Module.January 2014OFS-3.11.2
The
securities ownership transfer agent must comply with the CBB Law, rules and regulations including those relating to Anti-Money Laundering and Financial Crime and must be subject to an audit according to control and inspection procedures stipulated by the CBB. In addition, the securities ownership transfer agent must provide theissuer with a declaration that the shareholder list is up to date and is accurate.OFS-3.11.3
All
securities ownership transfer agents must provide the CBB on request as well as on a quarterly basis, a summary of the list of securities holders they maintain in the form required by the CBB.OFS-3.11.4
Securities ownership transfer agents shall be responsible for any loss or damage to the securities holder due to any inaccurate information or entries made in the securities holders register.
OFS-3.12 OFS-3.12 Role and Responsibilities of Other Experts or Advisors
OFS-3.12.1
Where an offer of
securities is made in or accompanied by aprospectus oroffering document which includes a statement purporting to be made by, or based on a statement made by an expert, theprospectus oroffering document must not be issued unless:(a) The expert has given and has not before the registration of theprospectus oroffering document , as the case may be, withdrawn his written consent to the issue thereof with the statement included in the form and context in which it is included; and(b) There appears in theprospectus oroffering document , as the case may be, a statement that the expert has given and has not withdrawn his consent.OFS-3.12.2
Every person making the offer must cause a true copy of every written consent referred to under Paragraph OFS-3.12.1 to be deposited within a maximum 7 calendar days after the registration of the
offering document at the registered office of theissuer in Bahrain or, if theissuer has no registered office in Bahrain, at the address in Bahrain specified in theoffering document for that purpose.OFS-3.12.3
The CBB may require a declaration from any appointed expert as per their role and responsibility in the preparation of any
offering document as per Article 85 of the CBB Law.OFS-4 OFS-4 Submission of Offering Application with CBB
OFS-4.1 OFS-4.1 Application Requirements
OFS-4.1.1
An application for the offering of
securities must be made in accordance with Paragraph OFS-4.1.2, accompanied by the required information, documentation and the fee to the CBB for approval at least 30days prior to commencement of the intendedoffering period .Amended: April 2014
January 2014OFS-4.1.2
The application must be submitted under cover of a letter signed by two authorised signatories of the applicant, together with all supporting documentation as outlined in Section OFS-4.2. The authorised signatories are persons authorised as such by the Board of Directors of the
issuer .January 2014OFS-4.1.3
The CBB requires the submitted application and supporting documents to be comprehensive, accurate and complete in all respects. If the CBB has any further concerns, or is dissatisfied with the application it will not be able to grant approval on a timely basis, and the abovementioned timeframe of the CBB approval will start only upon receipt of all information and documentation related to the offer. The CBB will not grant its approval unless and until all such information and documentation required is submitted to the CBB.
January 2014OFS-4.2 OFS-4.2 Information and Documentation Requirements
OFS-4.2.1
Any application under Section OFS-4.1 must include the following minimum information:
(a) A copy of theissuer's Board of Directors proposal in respect of the issue to its General Assembly;(b) A copy of the General Assembly resolution through which the issuing and offering ofsecurities is approved;(c) A copy of the duly signed Board of Directors' responsibility statement, signed by all directors in the standard statement stipulated by this Module (Appendix OFS-9);(d) A copy of the duly signed declaration by the lead manager, based on a due diligence exercise of all relevant conditions, facts and arrangements, as appropriate (Appendix OFS-8);(e) A copy of the duly signed declaration by the legal advisor for the offer, based on a due diligence exercise of all relevant legal conditions, facts and arrangements, as appropriate (Appendix OFS-10);(f) A final ratified Memorandum and Articles of Association, or relevant constitutional documents for existingissuers , or a draft copy thereof forissuers under formation;(g) A draft of theoffering document prepared in line with the CBB requirements as stipulated under this Module;(h) A copy of all arrangements, contracts and/or letters signed with theissuer and or lead manager with all appointed advisors;(i) Duly completed term sheet on the offering, as stipulated by the CBB from time to time in this Module;(j) The expected offering timetable;(k) A bona fide copy of either theissuer's external auditor unqualified report on the annual audited financial statements, or interim period reviewed financial statements prepared by theissuer's external auditor;(l) A copy of the audited financial statements, including the balance sheet, income statement, cash flow statement and change inshareholders' fund, for the period required under this Module for each type of offer, and the interim period reviewed financial statements for the period required under this Module;(m) A copy of the duly signed report prepared by an independent accountant on any estimates, projections of the financial statements, or future operating results of theissuer , if applicable;(n) A copy of at least two independent valuer's reports if the proposed offering ofsecurities is guaranteed, is made up of physical assets or property or backed by any assets, property, or any form of collateral;(o) A copy of all documents available for inspection by the potential subscribers and/or allottees;(p) Information on the legal structure of the company and company registration; and(q) Any other information as required by the CBB.January 2014Lead Manager Declaration
OFS-4.2.2
The declaration by the lead manager (Appendix OFS-8) required under Paragraph OFS-4.2.1 must consider and contain the following:
(a) A confirmation that all compliance requirements, including those specified in the CBB Rulebook Volume 6 are met;(b) A due diligence of the commercial and business prospects based on the analysis of past and current circumstances, both in relation to theissuer and in relation to the external market or industry in which it operates;(c) An analysis of the macroeconomic factors affecting theissuer or the underlyingsecurities being offered;(d) Due consideration for the reasonableness of theissuer's business strategy and related business plan and budgets where appropriate;(e) In the case of asset-backedsecurities ,warrants andIslamic securities , the quality of the underlying assets and anticipated future cash flows and relevant risk factors; and(f) The price stabilisation method, limits and determination of issue price where the issue is not underwritten.January 2014Issue of No Objection by the CBB
OFS-4.2.3
The CBB will notify an applicant of its decision in writing within 15 business days of the receipt of the offering of
securities application, complete in all respects and complying with the provisions of this Module. If permission is granted, it may be conditional or unconditional.January 2014OFS-4.2.4
The CBB may refuse an application on any ground, including but not limited to the following conditions:
(a) The requirements of the CBB Law and Rulebook Volume 6 are not met comprehensively;(b) Theissuer , the lead manager or other appointed advisors do not meet the requirements of this Module;(c) False or misleading information has been provided to the CBB or to another regulator of theissuer or in theoffering documents ;(d) Information otherwise specified by the CBB has not been provided;(e) If the offer is associated with a listing on alicensed exchange , the CBB may consider that admission to listing of thesecurities may be detrimental to the fair, orderly and efficient operation of the Bahrainisecurities market or to the reputation of CBB;(f) Asecurity is already admitted tolisting on another market and theissuer is in breach oflisting rules or other relevant regulations; or(g) The CBB believes it is necessary to refuse permission in order to safeguard the interests of potential investors.January 2014OFS-4.2.5
A notification under Paragraph OFS-4.2.4 will set out:
(a) Grounds for proposed refusal, and(b) The rights of the applicant to appeal the CBB's decision.January 2014OFS-4.2.6
The applicant is allowed to make representation to the CBB within 30 calendar days of the receipt of a notification under Paragraph OFS-4.2.5. The applicant can undertake this through the lead manager to clarify any grounds set out in the notification. The CBB will consider any such representations before issuing a final decision.
January 2014OFS-4.2.7
The CBB will make a decision which is final within 30 calendar days of receiving the representation under Paragraph OFS-4.2.6.
January 2014OFS-4.3 OFS-4.3 Additional Requirements and Exceptions
OFS-4.3.1
In addition to the requirements under Section OFS-4.2, the following specific requirements or exemptions are applicable.
January 2014Public Offering
OFS-4.3.2
For public offerings, the following additional requirements and documentation are required:
(a) A draft of the summaryprospectus to be published in two daily local newspapers, one in Arabic and the other in English, at least 5days before the start of the offering period;(b) If the offer is subject to the listing requirements, theissuer or lead manager must provide information on the listing arrangements and information on the designated listing agent if different from the lead manager;(c) If, in addition to listing on alicensed exchange , the offer will be listed on an exchange outside the Kingdom of Bahrain, a copy of the approval of the relevant regulator within that jurisdiction;(d) If the offer will be made in countries other than the Kingdom of Bahrain, a copy of such other country's regulatory approval for such offer;(e) If thesecurities under the proposed offer are already listed on an exchange, details of the current listing requirements and performance of thesecurities ;(f) If thesecurities under the proposed offer have been placed throughprivate placement prior to the date of submission of application, full details about such placement;(g) Draft or proof print of any application form to subscribe or purchase thesecurities ;(h) A copy of the draft or any temporary document of title proposed to be issued; and(i) For initial public offerings, initial offer for sale ofsecurities and foreign listings, theissuer is required to provide the CBB with a draft of agreements or contracts related to the depositing ofsecurities and registration arrangements.Amended: April 2014
January 2014Rights Offering
OFS-4.3.3
An application to the CBB for a
rights issue by a listedissuer need not contain the following:(a) A copy of the Memorandum and Articles of Association, if such document has already been submitted to the CBB, as amended; nor(b) A separate copy of the previous annual audited financial statements and/or interim period reviewed financial statements, but these must be included in therights issue offering document.January 2014Private Placement
OFS-4.3.4
An application for
private placement of anysecurities must include the following additional information and documents:(a) A confirmation from theissuer and/or lead manager that the offer will not be offered to the public and only offered in line with requirements of Section OFS-2.4;(b) A copy of the subscription form which must include theaccredited investor status confirmation; and(c) A list of the expectedaccredited investors , if available at the time of submission.January 2014Employee Stock Option Plan
OFS-4.3.5
An application for employees stock option plan proposed by a listed
issuer is subject to requirements under Subparagraphs OFS-4.2.1(a) and (b).January 2014Capitalisation Issue
OFS-4.3.6
If the capitalisation issue is made in the form of a
rights issue , then the same requirements stipulated under Section OFS-4.2 as well as Paragraphs OFS-4.3.2 and OFS-4.3.3 will apply.January 2014OFS-4.3.7
If the capitalisation issue is made in the form of a stock dividend for free it is only subject to the requirements under Subparagraphs OFS-4.2.1(a) and (b).
January 2014Consideration Issue
OFS-4.3.8
An application for a consideration issue by a listed
issuer , or listing applicant through which an issue ofsecurities as a consideration other than cash in a transaction, or in connection with a take-over or merger or the division of anissuer is subject to the Take-over, Mergers Acquisitions and Share Repurchases (TMA) Module.January 2014Swapping, Exchange and Substitution of Securities
OFS-4.3.9
An application for the swapping, exchange or substitution of listed
securities must be made as an application for listing, rather than as an offering ofsecurities .January 2014Applications of Listings for Publicly Traded Securities
OFS-4.3.10
An application for the listing of publicly traded
securities must be dealt with either as aninitial public offering , or aninitial offer for sale ofsecurities , as mentioned above.January 2014Issuing of Securities under Privatisation Programmes
OFS-4.3.11
For any state owned entity, or government owned company planning to issue
shares to the public, it must either be made as a public offering, orinitial offer for sale ofsecurities , as the case may be, and is subject to the abovementioned requirements provided for public offering as per Paragraph OFS-4.3.2 unless otherwise exempted by the CBB under Section OFS-1.13.January 2014Debt Securities
OFS-4.3.12
The following additional information and documents must be provided with an application for the offering of
debt securities :(a) A copy of the trust deed or other document securing thedebt securities ;(b) A copy of any collateralising instruments or details of underlying assets;(c) A copy of any intended guarantees provided to holders ofdebt securities ; and(d) A copy of the underlying asset valuation report produced by at least two independent valuers.January 2014Warrants and Other Certificates
OFS-4.3.13
Where appropriate, a copy of the custodial or trusteeship agreement for the underlying
securities must be provided with the application for the offering ofwarrants and other certificates.January 2014Islamic Securities
OFS-4.3.14
The following additional information and documents must be provided with the application for the offering of Shari'a compliant
securities :(a) A copy of Shari'a Pronouncement report that thetransaction is in compliance with the principles of Shari'a;(b) A copy of the trust deed or other document securing the Shari'a compliantsecurities together with anytrustees agreement;(c) A copy of any collateralising instruments and details of underlying assets;(d) A copy of the underlying asset valuation report produced by at least two independent valuers; and(e) Any other documents made available for inspection.January 2014Assets-Backed and Mortgage-Backed Securities
OFS-4.3.15
The following additional information and documents must be provided with an application for the offering of assets-backed and mortgage-backed
securities :(a) A copy of the trust deed or other document securing the assets-backed and mortgage-backedsecurities ; and(b) A copy of the underlying asset valuation report produced by at least two independent valuers.January 2014Offers by Overseas Issuers
OFS-4.3.16
The following additional information, documents (to be provided with the application) are required for an offering of
securities byoverseas issuers :(a) A copy of any necessary approval from the home regulator;(b) A copy of the home market's relevant laws, rules and regulations that show that no restrictions are imposed on the transferability of thesecurities ;(c) Detailed information on listing requirements andsecurities performance on the home or other market(s);(d) Confirmation by theoverseas issuer that it will adhere to the general requirements as well as with the additional requirements and declarations, either in accordance with the type of offer or type ofsecurities , as stipulated in this Module;(e) An appointment of a listing agent where the securities are to be listed on alicensed exchange ; and(f) The issuer to bear the costs of any investigation or inspection by the CBB.January 2014OFS-4.3.17
The CBB may grant exemptions to any
overseas issuer's application, depending upon the type of offer and type ofsecurities on a case-by-case basis.January 2014Other Offering Approved by the CBB
OFS-4.3.18
The CBB may impose additional requirements in respect of the offer of
securities by way of a guaranteed issue.January 2014OFS-4.3.19
The CBB (in conjunction with the
licensed exchange where relevant) may exempt start-up or small and medium size companies from parts of this Module, as it deems appropriate.January 2014OFS-4.4 OFS-4.4 Preliminary/Red Herring Prospectus to be Made Public
OFS-4.4.1
The draft
offering document orred herring prospectus filed with the CBB must be made public for a period of 15days from the date of filing theoffering document with the CBB.Amended: April 2014
January 2014OFS-4.4.2
The lead manager must, while filing the draft
offering document with the CBB:(a) File the draftoffering document with the stock exchanges where thesecurities are proposed to be listed; and(b) Make copies of the draftoffering document available to the public, host the draft and finaloffering documents on the websites of theissuer , lead manager andunderwriters associated with the issue as the case may be, and also ensure that the contents of documents hosted on the websites are the same as that of their printed versions.January 2014OFS-4.4.3
Public investors may provide the CBB with their comments and complaints, and the lead manager must make available to the CBB all comments and complaints received by it.
January 2014No Complaints Certificate
OFS-4.4.4
After a period of 21
days from the date the draftoffering document is made public, the lead manager must file a statement with the CBB giving a list of complaints received, a statement whether it proposes to amend the draftoffering document or not, and highlight those amendments.Amended: April 2014
January 2014OFS-5 OFS-5 Offering Documents
OFS-5.1 OFS-5.1 Prospectus Requirements
OFS-5.1.1
A
prospectus must be drawn up for every offer ofsecurities. Theprospectus must contain the minimum information requirements set out in Sections OFS-5.2 to OFS-5.10 and in this Module and must be submitted to the CBB for approval.January 2014OFS-5.1.2
Issuers ofsecurities , depending on the industry that the issuer is involved in (e.g. engaged in specialised industries (i.e. banking, insurance, mining, telecommunications and oil and gas companies as well as any other specialised industries), are required to provide additional information as directed by the CBB.Amended: October 2017
January 2014Material Information
OFS-5.1.3
The
issuer must disclose any information that would be material to an investor's investment decision.January 2014OFS-5.1.4
In addition to the information prescribed under this Module, a
prospectus must include all such information within the knowledge of those preparing theprospectus so that investors may make an informed assessment.January 2014OFS-5.1.5
It is the responsibility of each
issuer and lead manager to determine the material information:(a) According to the particular nature of its own affairs and the nature and type ofsecurities for which an offering or listing is sought;(b) Necessary to enable a person who invests or seeks to invest insecurities to make an informed assessment of the activities, assets, liabilities, financial position, management and prospects of theissuer , and of its profits and losses and the rights attached to suchsecurities ; and(c) The implicit risk associated with such investment.January 2014OFS-5.1.6
For the purpose of Paragraph OFS-5.1.5, material information consists of both material facts and material changes related to the business and affairs of the
issuer , taking into account qualitative and quantitative facts, developments and events capable of influencing the offering or market price or value of issuedsecurities .January 2014Omission of Information
OFS-5.1.7
If a disclosure requirement is not applicable to an
issuer's sphere of activity or legal form, no information need be provided in response to that requirement, although equivalent information must be given.January 2014OFS-5.1.8
For purposes of Paragraph OFS-5.1.7, the CBB may authorise the omission of information from the
prospectus if it considers that:(a) Such information is of minor importance only and as such, will not influence the assessment of the activities, assets, liabilities, financial position, profits and losses, or implicit risks and prospects of theissuer ;(b) Such information required in theprospectus represents a competitive advantage for theissuer , and its disclosure could affect its financial situation or operating results; or(c) Disclosure of such information would be contrary to the public interest, or be seriously detrimental to theissuer , provided that such an omission would not be likely to mislead the public with regard to facts and circumstances, knowledge of which is essential for the assessment of thesecurities in question.January 2014OFS-5.1.9
To be granted the right to omit information as noted in Paragraph OFS-5.1.8, the
issuer must obtain the CBB's authorisation by explaining in writing to the CBB the reasons for not making information public.January 2014Replacement and Supplementary Document
OFS-5.1.10
A supplementary or replacement
prospectus is aprospectus that has the same wording as the originalprospectus , except for the provision of new or additional information, or the correction of deficiencies in the originalprospectus .January 2014OFS-5.1.11
A supplementary or replacement
prospectus must be submitted to the CBB as soon as practicable if, during the validity period of aprospectus , theissuer becomes aware that theprospectus is deficient or outdated in that:(a) Theprospectus contains a material statement that is false or misleading;(b) There is a material omission from theprospectus ;(c) There has been a significant change affecting information in theprospectus ; or(d) A significant new matter has arisen, and theprospectus content requirements would have required information on that matter to have been included in theprospectus , if the matter had arisen when theprospectus was being prepared.January 2014OFS-5.1.12
The supplementary and/or replacement
prospectus must be approved by the CBB and published in summary form in accordance with Article 81(b) of the CBB Law.January 2014OFS-5.1.13
The supplementary or replacement
prospectus may be used to correct, update or add to the originalprospectus at any time before the date of the CBB approval and/or start of theoffering period .January 2014OFS-5.1.14
All supplementary or replacement
prospectuses must contain the following:(a) A statement that it is a supplementary or replacementprospectus ;(b) An identification of theprospectus it supplements or replaces;(c) An identification of any previous supplementary or replacementprospectus in relation to the same offer;(d) A statement that it is to be read together with theprospectus , as well as any previous supplementary or replacementprospectus ; and(e) A responsibility statement from the board of directors of theissuer .January 2014OFS-5.1.15
All supplementary and/or replacement
prospectuses must clearly indicate the changes and revisions made.January 2014OFS-5.1.16
For purposes of Paragraph OFS-5.1.15, such changes must be made clear in all copies provided to the CBB and the investing public.
January 2014CBB Approval
OFS-5.1.17
Application for approval for any changes to the
prospectus must be accompanied by the following:(a) The supplementary and/or replacementprospectus containing at least the minimum information set out in this Module;(b) A declaration by theissuer and the lead manager that the changes to the supplementary and/or replacementprospectus are free from false or misleading statements, or information biased towards any of its presentshareholders and future investors;(c) A declaration by theissuer and the lead manager that the changes to the supplementary and/or replacementprospectus do not omit any material information; and(d) A declaration by theissuer and the lead manager that the changes to the supplementary and/or replacementprospectus are to the best of their knowledge in accordance with all the applicable laws, rules and regulations.January 2014Announcement
OFS-5.1.18
For public offers, the
issuer must inform the public of the changes and make the supplementary and/or replacementprospectus available to it. In accordance with Article 84 of CBB Law of 2006,issuers ofsecurities must publish a summary of the supplementary and/or replacementprospectus in two daily local newspapers, one in Arabic and the other in English and disclose the material amendments therein.January 2014Equivalent Information
OFS-5.1.19
For Bahraini
issuers who made an offer or listed theirsecurities outside Bahrain, and foroverseas issuers who made an offer or listed theirsecurities in Bahrain, all information of importance toshareholders made public about theissuer in other markets must be made public in Bahrain, whether or not disclosure of such information would otherwise be required by the CBB.January 2014Presentation
OFS-5.1.20
Although the information sections and order of presentation are not mandatory, the CBB recommends that the format of the standards outlined in this Module be followed to enhance comparability. If the same information required by this Module is also required by the body of accounting principles used in preparing financial statements, the information need not be repeated, as long as there is a cross-reference to the location of the information. It is also recommended that a table of contents be provided at the beginning of the document.
January 2014Validity of the Offering Document
OFS-5.1.21
The
prospectus must remain valid for a maximum period of six months from the date of notification of the CBB approval. After this period no person shall offersecurities based on suchprospectus , unless approved by the CBB.January 2014Preliminary or Red Herring Prospectuses
OFS-5.1.22
When a draft
prospectus is submitted to the CBB or to any appointed advisor, the finaloffering price is not required to be disclosed. Theoffering price must however be included in the final printed proofprospectus and before the start of theoffering period is set.January 2014Responsibility for Offering Document
OFS-5.1.23
In accordance with Article 85 of the CBB Law, the person responsible for the preparation of the
prospectus must ensure that it is free of incorrect or misleading information. Furthermore, Article 166 (b) makes it an offence to intentionally include false or misleading information and that the responsible persons may, subject to any greater penalty under the penal code, be punished by imprisonment or a fine not exceeding BD3,000.January 2014OFS-5.1.24
The following persons are responsible for the reliability and accuracy of the
prospectus oroffering documents :(a) Theissuer of thesecurities covered by theprospectus ;(b) The board of directors of theissuer of thesecurities ;(c) The lead manager of thesecurities offered; and(d) Any other appointed advisor or person whose name appears in theprospectus oroffering document each in their respective capacity according to the declaration made by him.January 2014Consent and Declaration
OFS-5.1.25
The
issuer and/or lead manager must obtain confirmation and/or consent letters from the appointed advisors or experts acknowledging their responsibilities and obligations under Article 85 of the CBB Law of 2006.January 2014Registration and Publication
OFS-5.1.26
If the
prospectus is approved by the CBB subject to changes, the final corrected copy must be registered with the CBB within 24 hours prior to the date of commencement of the offering period.January 2014Documents Available for Inspection
OFS-5.1.27
The
prospectus must be attached with all agreements, contracts, arrangements and documents required under this Module, or as referred to in theprospectus as being available for inspection.January 2014Preparation of the Prospectus
OFS-5.1.28
The
issuer , lead manager, or any other appointed advisors or persons involved in the preparation of anyoffering documents must ensure that the content and the statements included in such documents will meet, but not be limited to the following requirements:(a) Theprospectus and all statements included therein must be factual, clear and succinct;(b) Must be balanced and fair;(c) Must contain sufficient quantitative information to allow investors to make informed decisions regarding their participation in the offer;(d) Must avoid any omission of important and favourable facts, or minimising such facts by "burying" them at the end of the related statement or at the end of a section of information, or provided as an appendix to theprospectus , instead of including such facts in the main body of theprospectus ;(e) Must not include a presentation of estimates, projections, forecasts, or forward looking statements or overviews, without sufficient qualification, or without a sufficient factual basis;(f) Must not include any promotional jargon calculated to excite rather than to inform;(g) Must avoid using negative statements phrased so as to create a positive implication like "The company cannot now predict whether the development will have a materially favourable effect on its earnings," (creating the implication that the effect will be favourable even if not materially favourable), or "The company expects that the development will not have a materially favourable effect on earnings in the immediate future," (creating the implication that the development will eventually have a materially favourable effect);(h) Must avoid over-technical language, and where possible, use language comprehensible to laymen; and(i) Must avoid presentation of providing information in the form of diagrams and charts, without first presenting the same information in the form and style of written statements.January 2014OFS-5.1.29
For the purpose of Paragraph OFS-5.1.28, unwarranted promotional information means disclosing information beyond that necessary to inform investors and used only as an attempt to influence potential subscribers.
January 2014OFS-5.1.30
In order to meet the requirements under Paragraphs OFS-5.1.31 and OFS-5.1.32, the contents of the
prospectus and statement therein should either be prepared, reviewed, or edited by the legal advisor or other related appointed advisors, depending on the importance and complexity of the concerned contents or statement.January 2014Use of Prospectus
OFS-5.1.31
No person shall use any
offering document unless:(a) It has been submitted to and approved by the CBB and published; and(b) Where required, a summary of theoffering document has been published in one Arabic and one English language daily newspaper published in Bahrain.January 2014OFS-5.2 OFS-5.2 Contents of the Prospectus
Specific Content for Equity Securities
OFS-5.2.1
An
offering document in respect ofequity securities must contain the minimum content requirements of this Section and be prepared in accordance with Appendix 1.January 2014Front Cover Page
OFS-5.2.2
Front cover page: The cover page of the offering document must contain the following particulars:
(a) Full name and registration number of theissuer ;(b) Type and amount ofsecurities ;(c) Date of theoffering document ;(d) Date of expiry of validity of theprospectus ;(e) Logo and full name of each advisor;(f) Logo and full name of the lead manager and co-managers;(g) Logo and name of theunderwriter , if any;(h) Face or par value of thesecurities ;(i) Offer price;(j) Premium (if applicable);(k) Placement fee or charge (if applicable);(l) Minimum subscription limit (if applicable);(m) Maximum subscription limit (if applicable);(n) Eligible subscribers (general classification by nationality or region); and(o) Standard disclaimer statement, written in capital letters and box framed, as follows:
THE CENTRAL BANK OF BAHRAIN AND [NAME OF THE LICENSED EXCHANGE] ASSUME NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS DOCUMENT AND EXPRESSLY DISCLAIM ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS DOCUMENT. January 2014OFS-5.2.3
If the offer is planned to be issued in any other jurisdiction or is planned to be listed on any other regulated exchange(s) then the name of the
securities regulator of such jurisdiction and/or the name of the other regulated exchange may be added to the above disclaimer statement, if such regulator or regulated exchange has the same or equivalent requirement.January 2014OFS-5.2.4
The CBB will not permit any change, alteration, modification, reduction and/or addition in the above disclaimer statement, other than the cases mentioned under Paragraph OFS-5.2.3.
January 2014Inside Cover Page
OFS-5.2.5
The
prospectus must include on the inside cover page the following standard prominent and legible declaration and responsibility statement within a box frame:THE DIRECTORS OF THE COMPANY, WHOSE NAMES APPEAR HEREIN, ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS DOCUMENT. TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THE DIRECTORS, WHO HAVE TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE, THE INFORMATION CONTAINED IN THIS DOCUMENT IS IN ACCORDANCE WITH THE FACTS AND CONTAINS NO OMISSIONS LIKELY TO AFFECT THE IMPORTANCE AND COMPLETENESS OF THE DOCUMENT. January 2014OFS-5.2.6
The abovementioned standard responsibility statement must be duly signed by the
issuer's board of directors.January 2014OFS-5.2.7
The standard responsibility statement must be produced in the
prospectus and the same must be submitted to the CBB.January 2014OFS-5.2.8
The CBB will not normally accept any board of directors responsibility statement, unless it is duly signed by all directors. In cases where one or more of the directors cannot provide their signature on such statement, the
issuer is required to provide to the CBB and disclose in theprospectus itself the actual reasons and justification.January 2014OFS-5.2.9
In addition to the information required to be included on the front and inside cover pages of the
prospectus , theprospectus must contain, at the minimum, the following information:(a) Important Notice - which may include:(i) Important notice to subscribers;(ii) Due diligence statements;(iii) Forward looking statements; and(iv) General risk statement;(b) Applicants Identification and Anti-Money Laundering requirement;(c) Table of contents;(d) Glossary of the defined terms and abbreviations;(e) Offering timetable;(f) Resolutions and approvals;(g) Summary of the offering;(h) Offering statistics and expected timetable;(i) Information on theissuer , which may include:(i) Background and history;(ii) Principal activities;(iii) Business strategy;(iv) Organisational structure;(v) Corporate governance practices;(vi) Board of Directors(vii) Board of Directors practices;(viii) Senior management team;(ix) Employees;(x) Compensation;(xi) External auditor;(xii) Legal advisor and other advisors;(xiii) Majorshareholders and transactions;(xiv) Related party transactions;(xv) Interests of experts and counsel;(xvi) Material contracts;(xvii) Business overview;(xviii) Key financial information;(xix) Operating and financial review and prospects;(xx) Property, plant and equipment;(xxi) Research and development, patents and licenses;(xxii) Significant assets and liabilities;(xxiii) Liquidity and capital resources;(xxiv) Consolidated financial statements;(xxv) Material changes to financial statements;(xxvi) Restatement of financial statements;(xxvii) Ratios and analysis;(xxviii) Projections of financial statements; and(xix) Subsidiary's separate financial statements;(j) Industry analysis which may include:(i) Economic overview;(ii) Sectoral performance and overview; and(iii) Sub-sectoral performance and overview;(k) Investment considerations, which may include:(i)Equity securities' rights and obligations;(ii) Ranking ofshares ;(iii) Dividend policy;(iv) Listing ofshares ;(v) Description of the offering;(vi) Underwriting arrangements;(vii) Commitments to the offering arrangements;(viii) Contracts or arrangements with the appointed advisor;(ix) Expenses of the issue;(x) Use of proceeds; and(xi) Dilution;(l) Risk factors, which may include:(i) General risks;(ii) Business risks;(iii) Legal and regulatory risks; and(iv) Other specific risks;(m) Disputes, litigations and court orders;(n) Subscription terms and conditions, which may include:(i) Application procedures;(ii) Subscription restrictions;(iii) Subscription period;(iv)Receiving banks ;(v) Mode of payment;(vi) Fund transfer fees and charges;(vii) Rejected applications;(viii)Allotment ;(ix) Over-subscriptionallotment ;(x) Dispatching and refunds; and(xi) Announcements and acknowledgements;(o) Additional information, which may include:(i)Share capital structure; and(ii) Memorandum and Articles of Association;(p) Applicable law;(q) Documents available for inspection; and(r) Appendices.January 2014OFS-5.3 OFS-5.3 Additional and Specific Content for Debt Securities
OFS-5.3.1
An
offering document in respect ofdebt securities must contain the minimum content requirements of this section and be prepared in accordance with Appendix 3.January 2014Front Cover Page
OFS-5.3.2
Front cover page:
The cover page of the
debt securities offering document must contain the following particulars:(a) Full name and registration number of theissuer ;(b) Full name and registration number of the originator;(c) Logo and full name of the guarantor, if any;(d) Type and amount ofdebt securities ;(e) Date of theoffering document ;(f) Date of the expiry of the validity of theprospectus ;(g) Logo and full name of each advisor;(h) Logo and full name of the lead manager, primary dealer, issuing house;(i) Logo and full name of co-managers;(j) Logo and name of theunderwriter , if any;(k) Logo and full name of thetrustee ;(l) Rating ofdebt securities , if any;(m) Face or par value;(n) Offer price;(o) Premium (if applicable);(p) Placement fee or charge (if applicable);(q) Minimum subscription limit (if applicable);(r) Maximum subscription limit (if applicable);(s) Eligible subscribers (general classification by nationality or region); and(t) Standard disclaimer statement, written in capital letters and box framed, as follows:
THE CENTRAL BANK OF BAHRAIN AND [NAME OF LICENSED EXCHANGE] ASSUME NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS DOCUMENT AND EXPRESSLY DISCLAIM ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS DOCUMENT. January 2014Inside Cover Page
OFS-5.3.3
The
offering document must include on the inside cover page the standard prominent and legible declaration and responsibility statement within a box frame:THE DIRECTORS OF THE COMPANY, WHOSE NAMES APPEAR HEREIN, ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS DOCUMENT. TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THE DIRECTORS, WHO HAVE TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE, THE INFORMATION CONTAINED IN THIS DOCUMENT IS IN ACCORDANCE WITH THE FACTS AND CONTAINS NO OMISSIONS LIKELY TO AFFECT THE IMPORTANCE AND COMPLETENESS OF THE DOCUMENT. January 2014OFS-5.3.4
The abovementioned standard responsibility statement must be duly signed by the
issuer's /originator's board of directors.January 2014OFS-5.3.5
The standard responsibility statement must be produced in the
offering document and the same must be submitted to the CBB.January 2014OFS-5.3.6
The CBB will not normally accept any board of directors' responsibility statement unless it is duly signed by all directors. In cases where one or more of the directors cannot provide their signature on such statement, the
issuer is required to provide to the CBB and disclose in theoffering document itself, the actual reasons and justifications.January 2014OFS-5.3.7
In addition to the information required to be included on the front and inside cover pages of the
prospectus or offering documents, theoffering documents ofdebt securities must contain, at the minimum, the following sections of information:(a) Important Notice - which may include:(i) Important notice to subscribers;(ii) Due diligence statements;(iii) Forward looking statements; and(iv) General risk statement;(b) Applicants Identification and Anti-Money Laundering requirement;(c) Table of contents;(d) Glossary of the defined terms and abbreviations;(e) Offering timetable;(f) Resolutions and approvals;(g) Summary of the offering;(h) Offering statistics and expected timetable;(i) Structural overview of the securitisation transaction:(i) Summary of transaction;(ii) Transaction overview diagram;(iii) Cash flow description;(iv) Cash inflow;(v) Monthly instalment;(vi) Cash outflow;(vii) Issuance cost;(viii) Annual expenses;(ix) Delinquencies and defaults;(x) Investment parameters for the investment of temporary liquidity surpluses;(xi) Source of payments;(xii) Order of priority of payments;(xiii) Fees payable;(xiv) Sale of the underlying assets;(xv) Nature of the sale;(xvi) Terms of the sale;(xvii) Underlying assets;(xviii) Purchase consideration;(xix) Cancellation;(xx)Debt securities issuance;(xxi) Partial early redemption;(xxii) Mandatory redemption in full;(xxiii) Formula for optional/mandatory redemption in full;(xxiv)Debt securities redemption table;(xxv) Servicing function;(xxvi) Servicing by the originator;(xxvii) Servicing of thedebt securities by theissuer ; and(xxviii) Utilisation of proceeds;(j) The following minimum information must be provided for:(i) Details of theissuer (for all issues);(ii) Details of the originator (if different from theissuer );(iii) Details of the guarantor (for all guaranteed issues):• Background and history;• Principal activities;• Business strategy;• Organisational structure;• Corporate governance practices;• Board of Directors• Board of Directors practices;• Senior management team;• Employees;• Compensation;• External auditor;• Legal advisor and other advisors;• Majorshareholders and transactions;• Related party transactions;• Interests of experts and counsel;• Material contracts;• Business overview;• Key financial information;• Operating and financial review and prospects;• Significant assets and liabilities;• Property, plant and equipment;• Research and development, patents and licenses;• Liquidity and capital resources;• Consolidated financial statements;• Material changes to financial statements;• Restatement of financial statements;• Ratios and analysis;• Projections of financial statements; and• Subsidiary's separate financial statements;(k) Industry analysis which may include:(i) Economic overview;(ii) Sectoral performance and overview; and(iii) Sub-sectoral performance and overview;(l) Investment considerations, which may include:(i) Limited recourse;(ii) Thedebt securities ;(iii) No prior market for thedebt securities ;(iv) Market value of thedebt securities ;(v) Fluctuation of interest rates;(vi) Inflation risks;(vii) Partial early redemption of thedebt securities ;(viii) Legal investment considerations;(ix) Investment in thedebt securities may not be suitable for all investors;(x) The underlying assets;(xi) Timeliness of collections;(xii) Conditions of the sector/sub-sector/market;(xiii) Obligor's obligations;(xiv) No perfection of theissuer's interests in the underlying assets;(xv) No assurance on conformity with eligibility criteria;(xvi) Reliance on the servicer;(xvii) Rescheduling of payment obligations;(xviii) Replacement of servicer and transaction administrator;(xix) Theissuer ;(xx) Bankruptcy risk;(xxi) Dependence on key personnel;(xxii) No recourse toshareholder ;(xxiii) No operational history;(xxiv) Limitation on enforcement ofsecurity and foreclosure;(xxv) Tax risks;(xxvi) Absence of independent valuation of the underlying assets;(xxvii) General risk associated with emerging markets; and(xxviii) Political, economic and social consideration relating to home market;(m) Risk factors, which may include:(i) Credit risk;(ii) Legal risk;(iii) Interest rate risk;(iv) Operational risk;(v) Currency risk;(vi) Liquidity risk;(vii) Maturity risk;(viii) Other risks;(n) Disputes, litigations and court orders;(o) Subscription terms and conditions, which may include:(i) Type and nominal amount ofdebt securities ;(ii) Ranking ofdebt securities ;(iii) Issue price;(iv) Interest/coupon/profit rate/ income;(v) Minimum subscription required of thedebt securities in order to satisfy the objectives of the issue, offer or invitation (to include procedures for refund if this requirement is not met);(vi) Tenor (nature) of thedebt securities ;(vii) Form and denomination ofdebt securities on issuance;(viii) Underwriting arrangements;(ix) Events of default;(x) Details of anysecurity for thedebt securities ;(xi) Rating assigned todebt securities (together with a description of the rating);(xii) Type of listing that is sought;(xiii) Summary of rights conferred upon the holders ofdebt securities ;(xiv) Governing law — any special legislation under which thedebt securities have been created and the choice of jurisdiction in the event of litigation;(xv) Repayment terms and frequency of interest/profit/income payments;(xvi) Shari'a principle and concept adopted (for Islamicdebt securities );(xvii) Types of underlying assets of the transaction;(xviii) Details of any sinking fund requirement; and(xix) Regulatory approvals required including dates of approval;(p) Announcements and acknowledgements;(q) Additional information, which may include:(i)Share capital structure;(ii) Memorandum and Articles of Association;(r) Applicable law;(s) Documents available for inspection; and(t) Appendices.January 2014OFS-5.4 OFS-5.4 Additional and Specific Content for Convertible Securities
OFS-5.4.1
The
issuer ofconvertible securities must disclose in theoffering document the extent to which theshareholder may subscribe for theconvertible securities .January 2014OFS-5.4.2
For the purpose of this Section,
securities may be converted into other types ofsecurities , or these can be converted into anotherclass of the samesecurities . The conversion ofsecurities may also take place within the samesecurities issuer's company and/or group, or in relation to another company or group.January 2014OFS-5.4.3
In the case of
convertible securities which are exchangeable forsecurities of another company, anissuer must submit to the CBB theannual report and accounts of that other company unless that company is listed or adequate information is otherwise available.January 2014OFS-5.4.4
If the
debt securities are convertible into equity or are issued withwarrants , whether or not detachable, the following detailed information (where applicable) must be made available:(a) Mode of conversion;(b) Number ofwarrants ;(c) Conversion period;(d) Price ofwarrants ;(e) Conversion ratio;(f) Rights attached towarrants ;(g) Conversion price;(h) Warrant exercise period; and(i) Warrant exercise price.January 2014OFS-5.5 OFS-5.5 Additional and Specific Content for Asset-backed Securities
OFS-5.5.1
With regard to asset-backed
securities , the following information must be disclosed in addition to the minimum content requirements set out in section OFS-5.3 and Appendix 4:(a) Under a separate section of theoffering document , a description of the assets used to back the asset-backedsecurities , giving at least the following (where relevant):(i) The legal jurisdiction(s) to which the assets are subject;(ii) The types of assets;(iii) The expiry or maturity date(s) of the assets;(iv) The amount of the assets;(v) Where the assets are secured on or backed by real property or other physical assets, or rely on suchsecurity , the ratio of the amount of the assets to the value or amount of suchsecurity at origination, if available;(vi) For loans and credit agreements, the principal lending criteria and extent to which loans may be included which do not meet these criteria;(vii) An indication of significant representations and warranties given to theissuer relating to the assets;(viii) The method of origination or creation of the assets;(ix) Any rights to substitute the assets and a description of the assets which may be substituted for the original assets;(x) For loans and credit agreements, any rights or obligations to make further advances;(xi) A description of the principal insurance policies, including the names, and where appropriate, the addresses and a brief description of the providers. Any concentration with one insurer should be disclosed if it is material to the transaction;(xii) Where the assets consist of obligations of an obligor's accounts for 10% or more of the assets, so far as theissuer is aware and/or is able to ascertain from information published by the obligor(s), the information required in respect of each obligor will be the same as that which would be required if it were itself theissuer of thesecurities to be listed;(xiii) Where it is already listed on a regulated stock exchange or the obligations are guaranteed by an entity listed on a regulated stock exchange, in this case only the name, address, country of incorporation, nature of business and name of the exchange on which itssecurities are listed need be disclosed in respect of the obligor and the guarantor (if applicable);(xiv) Any relationship between theissuer , guarantor and obligor, if any, must be included. The principal terms and conditions of the obligations must be stated, except where the obligations aredebt securities listed on a regulated stock exchange;(xv) Where the assets consist of obligations of more than 10 obligors, or where an obligor accounts for less than 10% of the assets the general characteristics and descriptions of the obligors must be given; and(xvi) Where the assets consist ofequity securities , the information under section OFS-5.2 should be included in respect of thosesecurities .(b) Investment considerations:(i) An explanation of any matter of significance to investors relating to the issue. Any such explanation should be given appropriate prominence depending on the nature of the matter concerned and its significance to investors; and(ii) Where theissuer proposes to or may issue furtherdebt securities backed by the same assets, a prominent statement to that effect and unless those furtherdebt securities are fungible with or are subordinated to anyclass of existing listeddebt security , a statement that the prior approval of the holders of thatclass will be sought.(c) A description of the method and a statement of the date of the sale, transfer or assignment of the assets or of any rights in the assets to theissuer ;(d) A description of the structure of the transaction;(e) An explanation of the flow of funds stating:(i) How the cash flow from the assets is expected to meet theissuer's obligations to holders of thesecurities ;(ii) Information on any credit enhancements;(iii) An indication of where material potential liquidity shortfalls are expected to occur;(iv) The availability of any liquidity supports as an indication of provisions to cover interest shortfall risks;(v) An indication of any investment parameters for the investment of temporary liquidity surpluses;(vi) How payments are collected in respect of the assets;(vii) The order of priority of payments made by theissuer to the holders of theclass ofdebt securities in question;(viii) Any fees payable by theissuer ;(ix) Details of any other arrangements upon which payments of interest and principal to investors are dependent;(x) Information regarding the accumulation of surpluses in theissuer ; and(xi) Details of any subordinated debt finance.(f) The name, address, description and significant business activities of the originator, or creator of the assets backing the issue;(g) The name, address, description and significant business activities of the administrator or equivalent, (if any), together with a summary of the administrator's responsibilities and a summary of the provisions relating to the termination of the appointment of the administrator and the appointment of an alternative administrator;(h) The names and addresses and brief description of:(i) Any swap counterparties and any providers of other material forms of enhancement; and(ii) The banks with which the main accounts relating to the transaction are held.(i) If applicable, a statement that theissuer does not intend to publishannual reports and accounts and that the trust deed constituting the issue requires theissuer to provide written confirmation to thetrustee (or equivalent), on an annual basis, that no event or default or other matter which is required to be brought to thetrustee's attention has occurred.January 2014OFS-5.5.2
If applicable, all information under Paragraph OFS-5.5.1 must be disclosed in the
offering document in respect of any underlying assets used to secure the issuedsecurities , whether classified as asset-backsecurities or otherwise.January 2014OFS-5.6 OFS-5.6 Additional and Specific Content for Special Purpose Vehicles (SPV)
OFS-5.6.1
In respect of a Special Purpose Vehicle (SPV) created for the purpose of issuing
debt securities , the appointed advisor, orissuer , or other sponsor for the issue, must disclose to the CBB all relevant facts and information relating to the legal, commercial and economic structure associated with the issue.January 2014OFS-5.6.2
The Memorandum and Articles of Association, or copy of such document of the SPV as an
issuer , must be submitted to the CBB along with the offering application and must be made available for inspection to the subscriber.January 2014OFS-5.6.3
SPVs are responsible to meet all ongoing obligations related to the
securities issued.January 2014Additional Issue
OFS-5.6.4
In the case of an
issuer wishing to issue moredebt securities which are:(a) Backed by the same assets;(b) Not freely exchangeable with existingclasses ofdebt securities ; or(c) Not subordinated to existingclasses ofdebt securities ;then the
issuer must inform thedebt security holders of the existingclasses .January 2014OFS-5.7 OFS-5.7 Additional and Specific Content for Islamic Securities
OFS-5.7.1
The application for approval from the CBB for making an offering of
Islamic securities must include the following attachments:(a) A declaration by the Shari'a advisor that the transaction is in compliance with the principles of Shari'a;(b) A declaration by theissuer that the vehicle issuing thesecurities will remain subject to proper Shari'a review, until the maturity date of thesecurity ; and(c) A copy of the trust deed or other document securing or constituting theIslamic securities .January 2014Appointed Shari'a Advisors
OFS-5.7.2
The
offering document must contain the identity of the appointed advisors, including the Shari'a advisor.January 2014Shari'a Advisor's Report
OFS-5.7.3
The offering document must contain a Shari'a advisor's report that, at the minimum, covers the compliance of the
security and its structure with the Shari'a principles.January 2014OFS-5.8 OFS-5.8 Additional and Specific Contents of the Offering Document for Warrants
OFS-5.8.1
The offering document must contain all the information that reasonable investors would require in order to make an informed decision of:
(a) The capacity of theissuer and guarantor (if any) to fulfil the obligations specified under the terms of the issue; and(b) The risks, rights and obligations associated with thewarrants .January 2014OFS-5.8.2
The offering documents for
warrants must contain, at the minimum, the following information:(a) Terms and structure of the issue;(b) Financial information on theissuer and its guarantor (if any);(c) Financial information on the entity whosesecurities are the subject of the issue ofwarrants ;(d) Whether theissuer has authority to issue furtherwarrants ; and(e) If thewarrants are not fully covered by the underlyingsecurities held by atrustee , a declaration that theissuer has appropriate risk management capabilities to manage thewarrants issue.January 2014OFS-5.8.3
In the case of
warrants relating to equity ordebt securities , the offering document must contain at the minimum:(a) The names of the regulated exchange (if any) on whichequity securities are already listed or traded;(b) The name, registered office and, if different, head office of theissuer ;(c) The country of incorporation of theissuer ; and(d) The title of thesecurities including nominal value.January 2014OFS-5.8.4
Additional information to be contained in the offering document, where
warrants offer rights to acquiresecurities :(a) In the case ofwarrants offering rights to acquireequity securities: (i) A statement regarding tax on the income from theshares withheld at source in the country of origin;(ii) A statement whether theissuer assumes responsibility for the withholding of tax at source;(ii) Arrangements for transfer of theshares and (where permitted) any restrictions on their free transferability (for example, provisions requiring transfers to be approved); and(iv) A statement whether theshares are in registered or bearer form.(b) In the case ofwarrants offering rights to acquiredebt securities :(i) A statement regarding tax on the income from thedebt securities withheld at source in the country of origin;(ii) A statement whether theissuer assumes responsibility for the withholding of tax at source;(iii) A statement whether thedebt securities are in registered or bearer form; and(iv) Details of any arrangements for transfer of thesecurities and any restrictions on the free transferability of thedebt securities .January 2014OFS-5.8.5
Where any
security represents 10 percent or more of the total value of thesecurities underlying thewarrant, a table showing the price range of each suchsecurity for each of the last three years must be included.January 2014OFS-5.8.6
In the case of
warrants relating to indices, theoffering document must contain at the minimum:(a) A description of the index, including the name of the publisher of the index, its date of establishment, how it is compiled and a summary of its components;(b) An explanation of the computation of the index;(c) The frequency with which the index is updated and published; and(d) The provisions in the event of modification and discontinuance of the index.January 2014OFS-5.8.7
In the case of
warrants relating to other types ofsecurities , assets or variables, theoffering document must contain at the minimum:(a) A description of thesecurities , assets or variables;(b) A description of the market on which they are traded, including its date of establishment, an indication of daily trading volumes, how price information is published, information as to the standing of the market in its country and the name of the market's regulatory authority; and(c) The frequency with which prices of the relevantsecurities , assets or variables are published.January 2014OFS-5.9 OFS-5.9 Additional and Specific Content for Private Placement Memorandum (PPM)
OFS-5.9.1
An
offering document for a private placement ofsecurities must meet the requirements of the particularsecurity , as laid out in OFS-5.1, OFS-5.2 and OFS-5.3, and Appendix 2 in regard to preparation. In addition to the above, it must meet the specific requirements forprivate placement as outlined in this Section.January 2014Confirmation as Accredited Investor
OFS-5.9.2
The
issuer must obtain a signed confirmation from its investors as to their status asaccredited investors using the "Accredited Investors " Form (Appendix 11).January 2014OFS-5.9.3
The
issuer must submit a copy of the status confirmation contained in Rule OFS-5.9.2 on submission of theoffering document .January 2014Suitability of Investors and Risk Statements
OFS-5.9.4
The
offering document must contain the following statement in respect of suitability of investors:"This offer is a private placement. It is not subject to all of the regulations of the Central Bank of Bahrain that apply to public offerings of
securities . This Memorandum is therefore intended only for "Accredited Investors " as defined in the Glossary to this Memorandum.The
securities offered by way of Private Placement may only be offered in minimum subscriptions of $100,000 (or equivalent in other currencies).The Central Bank of Bahrain assumes no responsibility for the accuracy and completeness of the statements and information contained in this document and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the contents of this document.
The Board of Directors and the management of the
issuer accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Board of Directors and the management, who have taken all reasonable care to ensure that such is the case, the information contained in this document is in accordance with the facts and does not omit anything likely to affect the reliability of such information".January 2014OFS-5.9.5
The
offering document must contain statements covering the risk of investment to the effect that:(a) All prospective investors should make their own investigation into the offer, and consult their own advisors concerning the risks of the investors and the suitability of thesecurities for their individual requirements; and(b) There may be a lack of liquidity and lack of public market for thesecurities on offer.January 2014OFS-5.9.6
Issuers must ensure that all relevant financial and risk information is placed in theoffering document to allow investors to make an informed decision.January 2014Utilisation of Proceeds and Disclosure of Fees
OFS-5.9.7
In line with Subparagraph OFS-1.5.2(i), all funds collected through an
offering document must only be utilised as prescribed in theoffering document , and such condition must be clearly stated in theprospectus under the related section 'Use of Proceeds'. Any usage of funds that is not as stated in theoffering document is prohibited without the consent of the securities holders and the approval of the CBB. All applications to the CBB for approval must include evidence of the consent of the securities holders.January 2014OFS-5.9.8
The PPM must disclose the estimated total amount of the proceeds of the issue, and the proposed timetable for their utilisation. Disclosure must also be made of the total amount of fees payable by the investors, up-front discount or placement commission agreed by the
underwriters or other placement or selling agents and theissuer of sellingshareholders , as well as the percentage such up-front discounts or placement commissions represent of the total amount of the offering, and the amount of up-front discount or placement commission persecurity .January 2014OFS-5.9.9
The document must highlight to the investor the ultimate dilution of proceeds through the disclosure of fees, offering expenses or up-front discounts or placement commissions. There must be a statement of the major categories of expenses incurred in connection with the issuance and distribution of
securities to be offered, and by whom the expenses are payable, if other than by theissuer . If any of thesecurities are to be offered for the account of an existing holder ofsecurities in theissuer , the PPM must indicate the portion of expenses incurred by him.January 2014OFS-5.9.10
Any
private placement ofsecurities offered in the Kingdom of Bahrain should meet the requirements as set out in OFS-2.4.7 and must set fees within reasonable and justifiable levels that do not materially compromise the interests of theissuer or the investor. The above disclosures of fees and utilisation of proceeds must be made prominently and clearly for the attention of investors.January 2014OFS-5.10 OFS-5.10 Additional and Specific Content for Guaranteed Issues
Guarantees
OFS-5.10.1
With regards to the guaranteed issues, the following information must be disclosed in addition to the minimum content requirement set out in Section OFS-5.3:
(a) Nature of guarantee, including description of any arrangement intended to ensure that any obligation material to the issue will be duly serviced, whether in the form of a guarantee, surety, keep well agreement, mono-line insurance policy or other equivalent commitment; and(b) Scope of guarantee:(i) Details regarding the terms and condition and scope of guarantee; and(ii) Details of any guarantors power of veto in relation to changes tosecurity holder's rights.January 2014OFS-5.10.2
Where issuing and offering is sought for
debt securities of anissuer guaranteed or secured by another legal entity other than its holding company, the guarantor will be required to comply with the requirements of this Section to the same extent as if such guarantor were theissuer of the relevantdebt securities. January 2014OFS-5.10.3
An
offering document issued in relation to a guaranteed issue must contain the same information regarding the guarantor as that regarding theissuer , so that, where appropriate the "issuer " should be read as applying equally to the guarantor.January 2014OFS-5.10.4
The relevant guarantee must be issued in conformity with the law of the place where the guarantor is incorporated or otherwise established and in conformity with the guarantor's Memorandum and Articles of Association or equivalent documents, and all authorisations needed for its issue under such law or documents must have been duly given.
January 2014OFS-6 OFS-6 Registration of Prospectus and Offering Documents
OFS-6.1 OFS-6.1 General Requirements
OFS-6.1.1
The
issuer , lead manager, or principal advisor must provide 2 copies to the CBB of the draftprospectus , together with a completed prospectus checklist (Appendix OFS-7). The CBB will not commence its review of a draftprospectus unless theprospectus is complete and attached with all required documents and information, as stipulated under Paragraph OFS-6.1.5.January 2014OFS-6.1.2
Once the CBB has completed its review of the draft
prospectus and notified theissuer accordingly, theissuer is required to make any changes determined by the CBB and to submit the printed proof of theprospectus to the CBB for registration.January 2014Registration
OFS-6.1.3
A copy of the
prospectus submitted for registration must be signed by each director of theissuer .January 2014OFS-6.1.4
If the
prospectus is signed by an agent or alternate director, the printer's proofprospectus and the printedprospectuses must disclose this to be the case under the place where the respective director is meant to have signed theprospectus .January 2014OFS-6.1.5
The printed proof copy of the
prospectus must be accompanied by the following:(a) An application for registration of theprospectus ;(c) A letter of approval from any other relevant regulator or other authority;(d) Original copies of all letters of confirmation, declaration or consent;(e) A certified copy of all material contracts and documents available for inspection disclosed in theprospectus , and in the case of contracts not reduced into writing, a memorandum which gives full particulars of the contracts;(f) A certified copy of underwriting agreements (if applicable);(g) Memorandum and Articles of Association of theissuer , originator and/or guarantor and Certificate of Incorporation or Commercial Registration (or equivalent documents);(h) Original written authority by directors appointing any agents to sign theprospectus on their behalf;(i) Letter of confirmation from theissuer and/or lead manager, that the printed proof copy of theprospectus has incorporated all changes as required by the CBB; and(j) Letter of confirmation from theissuer , lead manager, or other appointed advisors that the final printed copy of theprospectus will be the same as the printed proof of theprospectus registered with the CBB.January 2014OFS-7 OFS-7 Distribution and Subscription
OFS-7.1 OFS-7.1 Prior Request for Announcement and Invitation for Subscription
OFS-7.1.1
No person may make an announcement for invitation for subscription of an offering of
securities , unless he makes sure that the following requirements are met:(a) Theprospectus or offering document has been duly approved and registered with the CBB;(b) All designated advisors have been duly appointed and are ready to undertake their roles and responsibilities;(c) All requirements and arrangements related to the offer are in place or it has made sure that such requirements and arrangements will be in place in due course before the announcement of the offer, or commencement of theoffering period ;(d) The availability of a sufficient number of final printed copies of theprospectus or offering document being not later than the date of the commencement of theoffering period , and free of charge to potential subscribers on request;(e) Confirmation to the CBB that no more changes, amendments or alterations in respect of the information contained in theprospectus or offering document, appointment of the advisors or any information related to theissuer itself, or to the issue will take place after the announcement of the offer or thereafter and a supplementary or replacement prospectus will have to be made as per Paragraph OFS-5.1.11;(f) No press releases, press articles and/or interviews or any other form of dissemination of information related to the issue will take place before the subscription invitation announcement in the local daily newspaper; and(g) Ensure that all permanent and temporary insiders fully adhere to the insiders' trading rules and confirmation to this extent is submitted to the CBB not later than the commencement of theoffering period .January 2014Timetable and Record Date
OFS-7.1.2
No person may make an announcement or invitation for subscription of
securities , without determining the final record date, which must be a future date after the announcement of the offer but before the commencement of theoffering period :(a) In relation to apublic offer , the CBB must be notified at least 10days before the intendedrecord date ;(b) Theoffering document and public announcement must disclose the record date; and(c) Once announced, theissuer must not make any subsequent alterations to therecord date .Amended: April 2014
January 2014Offer Period
OFS-7.1.3
Unless otherwise determined in law or agreed by the CBB, the offer period for subscription of
securities must be open for subscription as follows:(a) Forequity securities , the offer period cannot be less than 10 calendar days after the day of commencement of the offer and must not exceed a maximum period of 6 months;(b) For a secondary listing involving an offer ofshares or in the case of arights issue , 5days from the issue of an announcement stipulating the issue is fully subscribed;(c) For othersecurities the offer period must not be less than 15 calendar days after the day of commencement of the offer. Additionally, it must not exceed a maximum period of 6 months from the date of opening unless extended by the CBB in writing;(d) For any offering ofsecurities , theoffering period must not extend beyond the validity of the date of theprospectus oroffering document , which is a period of 6 months; and(e) Must not allow for the closing of theoffering period to be less than 1 month from the publication of annual audited financial statements, or interim unaudited but reviewed financial statements.Amended: April 2014
January 2014Offer Price
OFS-7.1.4
An
issuer , when stating an offer price must also make reference to and provide a description in theprospectus oroffering document of the bookbuilding, underwriting, price stabilisation or other relevant price factors.January 2014OFS-7.1.5
Where an
issuer is making apublic offer following a rights share offering or a private offer, it may price the offers differently for thepublic offer orprivate placement . In such cases, the differential pricing must also consider the market trends and the justification for the price difference must be outlined in theoffering document . The CBB will determine whether the differential pricing is in the best interests of the investors and the market in general.January 2014Listings
OFS-7.1.6
Where the
securities are to be listed on alicensed exchange , this must be disclosed in the offer and must provide the following information:(a) Location and name of the exchange;(b) Listing agent, if any;(c) Planned listing timeline;(d) The percentage of the total issued and outstanding securities to be made available for public subscription and trading on a licensed exchange;(e) Any market making or price stabilisation arrangements;(f) Any anticipated buy back agreement or related intention of the issuer;(g) Any lock up period of major or other class of securities holders;(h) The necessary clearing, settlement, central depository and securities transfer ownership arrangements; and(i) Any intention or agreement for a secondary (cross) listing.January 2014OFS-7.1.7
Where the
offering document states that the offer will be listed on issue, the CBB may preventallotment from taking place where theissuer has not obtained the authority to list from thelicensed exchange at the time of issue, and order that theissuer refund any monies paid by subscribers in respect of such issue.January 2014OFS-7.1.8
The
issuer , lead manager and/or any other appointed advisor must ensure that the requisite listing agreement is signed within a maximum of 10 calendar days from the closing date of theoffering period , and that the date for commencement of trading on alicensed exchange is within a maximum of 15 calendar days from the closing date of theoffering period . Immediately upon the signing of the listing agreement with thelicensed exchange , the lead manager must notify the CBB confirming the signing of the listing agreement and inform the CBB of the date for the commencement of trading.Added: October 2017OFS-7.1.9
As the listing authority under Article 86 of the CBB Law, the CBB shall retain the right to determine and decide on the final date of listing and/or date of commencement of trading of securities on a licensed exchange.
Added: October 2017OFS-7.2 OFS-7.2 Announcement
OFS-7.2.1
No person may make a
public offer ofsecurities unless a summary of theoffering document has been published in two local daily newspapers, one in Arabic and one in English.January 2014OFS-7.2.2
The summary of the
offering document must be published in at least a 52 cm x 31.5 cm format. For those papers whose pages are smaller than the prescribed size noted in this Paragraph, the publication must take place over 2 pages or more to meet the total size specified and must be clear and legible.January 2014OFS-7.2.3
The
offering document must be made available to the public at least 5 calendar days prior to the commencement of theoffering period and at the same time as publishing the summary of theoffering document .January 2014OFS-7.2.4
The
offering document available to the public must be identical to the printed proof version approved by the CBB.January 2014OFS-7.2.5
The
offering document is available to the public when:(a) An announcement is made in accordance with Rule OFS-7.2.1;(b) It is publicly available in final printed form free of charge at the registered office of theissuer , lead manager andreceiving bank for public offering and, if applicable, at the offices of the principal advisor or other designated advisorplacing or selling thesecurities ; and(c) If available in electronic form, it is available on theissuer's , lead manager's or other principal advisor's website.January 2014OFS-7.2.6
Announcements for a public offering must:
(a) Contain a prominent statement to the effect that the advertisement is not anoffering document and investors should not subscribe for anysecurities , except on the basis of information in theoffering document ;(b) Indicate the date of approval by the CBB of theoffering document ;(c) Indicate how theoffering document may be obtained, including particulars of the internet website where a soft copy of the document can be found if available;(d) Include clear risk warnings, including the potential for loss that is to be prominently presented and not obscured or disguised; and(e) Be consistent with the information contained in theoffering document .January 2014OFS-7.2.7
An
issuer and its affiliated employees and professional advisors are prohibited from stating or disseminating any statements during theoffering period that may lead to:(a) Encouragement of subscription for thesecurities ;(b) Inducement of a particular person to deal in thesecurities ;(c) Sale or purchase of thesecurities ; or(c) Raising, lowering, maintaining or stabilising the market price of thesecurities in conjunction with dissemination or statement of misleading information.January 2014OFS-7.2.8
No announcement, advertisement or promotion of an offer of
securities that would constitute or induce a person to subscribe for suchsecurities may be made without meeting the requirements of Paragraph OFS-5.1.28.January 2014OFS-7.3 OFS-7.3 Stop Order for Offering Document
OFS-7.3.1
The following is a non-exclusive list of examples under which the CBB may issue an order under this Section:
(a) If there exists any statement or matter which, in the opinion of the CBB, is false or misleading;(b) Omission of information that should have been included in theoffering documents in accordance with this Module;(c) There is a change in circumstances of theissuer or conditions;(d) If theoffering period is fixed or extended to be close to the date of the next declaration of theissuer's financial statements for a period not less than 30 calendar days;(e) Receipt of any serious complaint from the subscribers, particularly relating to the availability of the final printedoffering document , or the imposition of additional cost or charges which have not been stipulated in theoffering document ;(f) The raising of new litigation or a court order related to theissuer and/or to the offering itself in or outside Bahrain; or(g) The withdrawal of any declaration or consent that has been given by any appointed advisor.January 2014OFS-7.3.2
The CBB may, by an order in writing, prevent any further use of a
prospectus oroffering document or issue, sale orallotment ofsecurities connected to an offer where theissuer or any person acting on its behalf has committed a violation of the CBB Law, CBB rules or this Module. The CBB may in addition, issue such order where it believes such action is in the best interest of investors or the capital market in general.January 2014OFS-7.4 OFS-7.4 Subscription Results and Allotment
Announcement of Subscription
OFS-7.4.1
Subscription monies received in respect of a
public offer must be held in a separate bank account with an approvedreceiving bank , until the finalallotment of suchsecurities has been approved by the CBB.January 2014OFS-7.4.2
The
issuer , lead manager or other principal advisor must publish the results of the subscription of a public offer in at least two local newspapers, one in Arabic and the other in English, stating all facts related to the outcome of the subscription in at least a 26 cm x 31.5 cm format. The announcement must be published within a maximum period of two calendar days from the closing date of theoffering period and must include the finalallotment basis. The declaredallotment basis must not be subject to any change thereafter.Amended: October 2017
January 2014OFS-7.4.3
The
issuer must allot or allocatesecurities within 6 calendar days of the closing date of the offer in accordance with theallotment basis stipulated in theoffering document or otherwise approved by the CBB upon the subscription results and publication referred to in Paragraph OFS-7.4.2.Amended: October 2017
January 2014Under-subscription
OFS-7.4.4
The
offering document must provide full information about the possibility of an under-subscription event, particularly regarding the treatment of unsubscribedshares for those issues which are not fully underwritten.January 2014OFS-7.4.5
In the event that the
issue is not underwritten noallotment may be made of anysecurities unless the subscription received is, at least equal to the minimum subscription amount set out in theoffering document .January 2014OFS-7.4.6
If a public offering of
equity securities has not been fully subscribed and the offer is underwritten, theunderwriter must purchase the unsubscribedshares and after obtaining the CBB approval, may then re-offer or resell the unsubscribedshares . For the avoidance of doubt, any unsubscribedshares that might be re-offered or re-sold to a related company of theunderwriter such as the company that controls it, its subsidiary, a subsidiary of the company that controls it and a company affiliated with it, shall be subject to the same underwriting commitment of theunderwriter .Amended: October 2017
January 2014OFS-7.4.7
If a rights offering of
equity securities which is underwritten has not been fully subscribed during theoffering period , theunderwriter may either re-offer the unsubscribedshares to the public or purchase the unsubcribedshares .January 2014OFS-7.4.8
If a public offering of
debt securities or other which is underwritten has not been fully subscribed for during theoffering period , theunderwriters must purchase the unsubscribedsecurities and after obtaining the CBB approval, may then resell thesesecurities .January 2014Over-subscription
OFS-7.4.9
If an offer of
securities is over-subscribed after the closing of theoffering period , theissuer must allot theshares in accordance with the pre-determined basis ofallotment which must be described in theoffering document or otherwise approved by the CBB.January 2014OFS-7.4.10
Issuers and lead managers must make sure conditions relating toallotment basis and minimum subscription amounts are in compliance with the Memorandum and Articles of Association, or equivalent constitutional documents of theissuer , as well as in accordance with the applicable laws, rules and regulations.January 2014General Guidance on the Allotment
OFS-7.4.11
The basis of
allotment of anysecurities offered, must be clearly stated in theoffering document .January 2014OFS-7.4.12
While exercising the
allotment ofsecurities theissuer , lead manager, or any appointed advisor must ensure that:(a) For any new public offering ofequity securities , no subscriber is allotted more than 10% of the totalshares offered;(b) All subscribers are treated equally and in accordance with theallotment basis in all aspects, particularly when the rounding up rule is applied;(c) No payment, direct or indirect in the nature of a discount, commission and allowance or otherwise may be made either by theissuer or the promoters in anypublic offer to the parties who received firmallotment ;(d) Noshareholder of theissuer may receive, directly or indirectly, any consideration in the nature of fees, commission, allowance or other benefit, whether in cash or in kind, in a public offering;(e) The totalsecurities allotted must in any case not exceed the totalsecurities offered and approved by the General Assembly and theissuer , lead manager and any other appointed advisor must establish theallotment basis to avoid such possibility;(f)Allotment ofsecurities must avoid allocation of anysecurities fraction, and therefore theissuer must provide provisions related to the possibility of fractions ofsecurities remaining after finalallotment ; and(g) For anyrights issue , the pro-rataallotment basis must be applied, or otherwise the General Assembly ofsecurities holders must have approved such otherallotment basis.January 2014Over-allotments
OFS-7.4.13
The "over-allotment option" may only be exercised if such an option is disclosed and provided for in the
offering document .January 2014OFS-7.4.14
While exercising the over-allotment option, the
issuer , lead manager or any other appointed advisor must fully adhere to general guidelines under Paragraph OFS-7.4.12.January 2014OFS-7.4.15
The CBB may allow the extension of the allotment period up to 6 calendar days to exercise the over-allotment option upon the request of the
issuer , lead manager or any other appointed advisor on application, which contains the reasons and justifications for such extension.Amended: October 2017
January 2014OFS-7.4.16
In the event of the over-allotment option, the
issuer , lead manager or any other appointed advisor is not allowed to exercise any discrimination, whether in cash or in kind among the subscribers or allottees.January 2014Trading of Underwritten Securities Subscribed by the Underwriter
OFS-7.4.17
Where the
underwriter has subscribed for, or purchasedsecurities under an underwriting or sub-underwriting agreement following the under-subscription of the offering ofsecurities , any intention to sell thosesecurities in the ordinary course of trading on alicensed exchange shall, in the interest of maintaining market integrity, not be sold against any price stabilisation fund or the designatedmarket maker as the buying counterparty.Added: October 2017OFS-7.5 OFS-7.5 Refunding and Dispatching
OFS-7.5.1
The
issuer , lead manager or any other appointed advisor must refund the excess subscription money and dispatchsecurities within a maximum of 9 calendar days from the closing date of theoffering period .Amended: January 2018
Amended: October 2017
January 2014OFS-7.5.2
A record for such refunding and dispatching must be maintained for further reference and CBB inspection requirements.
January 2014OFS-7.5.3
If the
issuer fails to meet the refunding and dispatching date under Rule OFS-7.5.1, an interest at one month BIBOR is payable to the subscriber with respect to the subscription amounts received for the period from the required refunding and dispatching date to the actual refunding or dispatching date.January 2014Dematerialised Securities
OFS-7.5.4
As per Paragraph OFS-1.5.5,
securities issued to the public after the effective date of this Module must have an allocated ISIN and be in dematerialised form and theissuer is required to designate the clearing house, or depository facility in which suchsecurities will be deposited.January 2014OFS-7.5.5
For the purposes of Article 178 of the CBB Law and Volume 6, dematerialised
securities shall meansecurities issued and entered in the registry in an electronic format anddematerialisation means the conversion of asecurity certificate from a physical form to an electronic form forsecurities that have already been issued before the effective date of this Module.January 2014OFS-7.5.6
For the purposes of
dematerialisation , each subscriber orshareholder will have to open an account with alicensed clearing house or alicensed central depository , acceptable to the CBB, and then request fordematerialisation of his certificates through the depository.January 2014OFS-7.5.7
The dispatching of the dematerialised
securities must be done in accordance with the CSD Module and SROs business rules.January 2014OFS-7.5.8
The ownership and entitlement of allotted
securities for each subscriber or allottee is established by book entry in the register maintained by thelicensed clearing house and orlicensed central depository , rather than through the issuing of a physical share certificate.January 2014Physical Securities
OFS-7.5.9
Subject to the requirements of the CSD Module, unless the
security is required to be in dematerialised form, the subscriber may request a certificate as evidence of his shareholding, which certificate must contain or be in the following form:(a) The serial number;(b) The par value andclass of thesecurity ;(c) The name of theissuer and the authority under which it was incorporated;(d) The address of the registered office of theissuer ;(e) The name and address of theclearing house ,central depository institution, and/orsecurities ownership transfer agent, if it is different from the registered office of theissuer ;(f) Where a rubber seal is imprinted, original signatures must support it;(g) Where an embossed seal is used, it may, subject to the Articles of Association of theissuer , be supported by facsimile signatures only;(h) Where only the seal is used without supporting signatures, the method or system of control by theissuer on the application of the seal must be approved by the auditor of theissuer , and a copy of such approval forwarded to the CBB;(i) The certificatesecurity must be designed so that the paper quality and watermark forgery and/or alterations are easily detectable;(j) The printing ofsecurities certificates must only be entrusted to recognisedsecurities printers; and(k) The size of the certificate is prescribed by the clearing house and/or central depository, which is used by theissuers .January 2014OFS-7.5.10
[This Paragraph was deleted in October 2017]
Deleted: October 2017
January 2014OFS-8 OFS-8 Fees and Charges
OFS-8.1 OFS-8.1 Introduction
OFS-8.1.1
Offering of securities is subject to fees levied by the CBB, pursuant to Article 180 of the CBB Law and Resolution No.(1) of 2007 with respect to determining fees categories due for licenses and services provided by the CBB. The fees charged vary depending on the nature of the offering and is payable at the time of submission of application.
January 2014OFS-8.2 OFS-8.2 Fees for Offering of Securities
OFS-8.2.1
Subject to any regulation issued by the CBB in respect of fees and charges, for any offering of
securities , certain non-refundable fees are payable to the CBB as set out in Paragraph OFS-8.2.3f.January 2014OFS-8.2.2
An application for approval or reviewing an
offering document related to an offering ofsecurities will not be regarded as complete or submitted until the fee has been paid in full.January 2014OFS-8.2.3
The following table outlines the fees payable to the CBB for the various services provided:
(amount in BD)
No. Type of Approval % of Issue/Offer Value Min Amount Max Amount A Registration of Equity Securities Offering Documents. 1 Public Offering. 0.005% 1000 5000 2 Rights Offering for Listed Issuer. 0.00125% 500 1000 3 Private Placement Memorandum. 0.005% 1000 5000 4 Warrants on Equity. 0.00125% 500 1000 B Registration of Preference Shares, Bonds, Debt Securities and Islamic Sukuk Offering Documents. 1 Applications of securities to be Listed. (Public) 0.005% 1000 5000 2 Applications of securities not to be Listed.(PPM) 0.006% 2000 6000 C Registration of Convertible into Equity Securities Offering Documents. 1 Application of securities to be Listed.(Public) 0.003% 1000 5000 2 Application of securities not to be Listed.(PPM) 0.006% 2000 6000 D Registration of Structured Products Offering Documents. 0.006% 2,000 6,000 E Registration of Options, Commodities, Futures or Derivatives Contracts. Fixed 500 500 F Registration of Replacement and Supplementary Prospectus. Fixed 100 100 G Registration of Pricing Statements (Term Sheets) for Programmes. Fixed 100 100 H Registration of Capital Securities Offering Documents. 0.006% 2,000 6,000 I Filing of Offering Documents in relation to Exempt Offers. Fixed 2,000 6,000 J Examining of an application to approve the increase of the Capital of Listed Companies. Fixed 100 100 Amended: January 2021
January 2014TMA — Take-overs, Mergers and Acquisitions
TMA-A TMA-A Introduction
TMA-A.1 TMA-A.1 Purpose
Executive Summary
TMA-A.1.1
The Module provides an orderly framework within which
takeovers ,mergers or acquisitions andshare repurchases are to be conducted and sets forth special requirements relating to timing and mode ofoffer , announcements, documentaton and disclosure of adequate information to enable shareholders to make an informed decision as to the merits of anoffer relating to atakeover ,merger or acquisition.Amended: October 2019TMA-A.1.2
The
general principles contained in the Module represent the overarching principles relevant totakeovers ,mergers andshare repurchases . In addition to thegeneral principles , each chapter contains a series of rules, some of which are effectively expansions of thegeneral principles and examples of their application and others are rules of procedure designed to govern specific types oftakeovers ,mergers orshare repurchases .Amended: October 2019TMA-A.1.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.4
The CBB may modify or relax the application of a rule if it considers that in the specific circumstances of the case, strict application of a rule would operate in an unnecessarily restrictive or unduly burdensome, or otherwise inappropriate manner.
TMA-A.1.5
The Module also seeks to ensure that the shareholders in the company subject to a takeover are given sufficient information, advice and time to consider and decide on the offer and in some instances an option to relinquish their holdings. The Module seeks to achieve fair treatment by requiring equality of treatment of shareholders of publicly listed companies which are targets in a takeover, merger or acquisition as defined in the Glossary in Part B of the CBB Rulebook Volume 6.
Amended: October 2019TMA-A.1.6
Since the primary purpose of Module TMA is to facilitate fair treatment for all shareholders of publicly listed companies affected by TMA, it is not concerned with the financial or commercial advantages or disadvantages of a
takeover ,merger or acquisition which are matters for the company and its shareholders to decide on.Amended: October 2019Legal Basis
TMA-A.1.7
Article 3 of the Central Bank of Bahrain and Financial Institutions Law (the "CBB Law") states that the objectives of the CBB are to, inter alia, develop the financial sector and enhance confidence therein and protect the interests of depositors and customers of financial institutions, and enhance the Kingdom's credibility as an international financial centre.
TMA-A.1.8
Parts 2 and 4 of the CBB Law empower the CBB to lay down rules for licencees, listed companies and others who undertake capital market and/or securities-related activity in the Kingdom;
TMA-A.1.9
Article 38(a) of the CBB Law empowers the Governor of the CBB to issue Directives to ensure the implementation of the CBB Law, any regulations issued in accordance with that Law and the achievement of the objectives of the CBB.
TMA-A.1.10
These rules are issued by way of a legally-binding Directive.
TMA-A.1.11
Article (3) of Decree No. 64 of 2006 with respect to promulgating the Central Bank of Bahrain and Financial Institutions Law (CBB Law) states that the provisions of the Commercial Companies Law (CCL) issued by Decree No. 21 of 2001 shall apply on all matters that are not stipulated in the CBB Law.
TMA-A.1.11A
This Module should be read in conjunction with Resolution No.(54) of 2023 with respect to issuing a Regulation on the Rules and Procedures for Mergers and Acquisitions of Shares of Companies listed on Stock Exchanges Licensed by the Central Bank of Bahrain (as amended from time to time).
Added: January 2024TMA-A.1.12
Following is also list of relevant Articles of the CBB Law that apply to persons covered by Module TMA:
Circular/ other references Provision Subject CBB Law 2006 Article 99–100 and Article 105 Restrictions of publishing market information and the use and disclosure of insider information. CBB Law 2006 Article 167 Penalty for violating Article 100. CBB Law 2006 Article 106 The offence of market manipulation. CBB Law 2006 Article 168 Penalty for violating Article 106. CBB Law 2006 Article 163 Penalty for concealing documents and information or providing false or misleading information or statements. CBB Law 2006 Article 128 Imposing restrictions on licensees and listed companies. CBB Law 2006 Article 132 Public censure on breaches committed by licensees and listed companies. CBB Law 2006 Article 52 –56 Nature and limits of control, procedures that must be undertaken and the regulations and conditions for granting approval of control CBB Law 2006 Article 162 Penalty for violating Article 52–58. Role of the CBB
TMA-A.1.13
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.14
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.15
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.16
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.2 TMA-A.2 Module History
TMA-A.2.1
This Module was first issued in December 2008. It is numbered as version 01. All subsequent changes to this Module are annotated with a sequential version number: UG-3 provides further details on Rulebook maintenance and version control.
TMA-A.2.1A
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes TMA-3.1.4 04/2013 Guidance Paragraph deleted on mandatory offer limit. Module TMA 10/2019 Restructured the whole Module TMA (including moving definitions to the glossary and also the appendices under Part B of the CBB Rulebook Volume 6) TMA-2.2 01/2022 Amended paragraphs in the Section. TMA-2.3 01/2022 Amended paragraphs in the Section. TMA-2.7.7 01/2022 Amended paragraph. TMA-2.7.8 01/2022 Deleted paragraph. TMA-2.8.1 01/2022 Amended paragraph. TMA-2.11.1 01/2022 Amended paragraph. TMA-2.14.1 01/2022 Deleted paragraph. TMA-2.18.1 01/2022 Amended paragraph. TMA-2.18.2 01/2022 Amended paragraph. TMA-2.19 01/2022 Amended paragraphs in the Section. TMA-2.20.6 01/2022 Amended paragraph. TMA-3.4 01/2022 New revised Section. TMA-A.1.11A 01/2024 Added a new Paragraph on Module legal basis. TMA-2.2 01/2024 Amended Section on independent advice and shareholder approval. Superseded Requirements
TMA-A.2.2
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/ other references Provision Subject TMA-A.3 TMA-A.3 [This Section was deleted in October 2019].
TMA-A.3.1
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.5
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.6
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.7
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.8
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B TMA-B Scope of Application
TMA-B.1 TMA-B.1 Scope
TMA-B.1.1
Module TMA applies to persons ("
relevant persons ") involved in, engaging in or intending to engage in anoffer for,takeover ormerger or acquisition of a controlling interest in a company whose primary listing of its ordinaryequity securities is on alicensed exchange in the Kingdom of Bahrain.Amended: October 2019TMA-B.1.2
The Module applies to
take-overs ,mergers , acquisitions andshare repurchases affecting:(a) Bahrain domiciled publicly listed company whose ordinary votingequity securities are listed on a licensed exchange in Bahrain are the potential targets fortakeovers ,mergers and acquisitions; or(b) Overseas company whose primary listing of its ordinary votingequity securities is on alicensed exchange in Bahrain.Amended: October 2019TMA-B.1.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.5
The TMA Module will not require holders of securities of 30% or more in a listed company at the effective date of this Module to make an
offer under this Module. However, such holders shall comply with the requirments of this Module if they plan to increase their existing holdings by any method as per the requirements of this Module.Amended: October 2019TMA-B.1.6
"While the TMA Module applies to listed companies in which control may change, there are circumstances such as where an unlisted company is a target of a listed company (reverse takeover) in which it is necessary to consider the spirit, General Principles, standards and rules of this Module wherever it is applicable. When there is any doubt as to whether a proposed course of conduct accords with the spirit, General Principles, standards and rules of this Module, parties or their advisers should consult the CBB in advance."
Amended: October 2019
Amended: April 2013TMA-B.1.7
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.8
[This Paragraph was deleted in October 2019].
Deleted: October 2019Exemptions
TMA-B.1.9
Module TMA does not apply to
offers ofequity securities for the following:(a)Offers for non-voting, non-equity capital unless required by this Module;(b) Anexempt share repurchase ;(c) Anoffer document filed with the CBB under Module OFS for the sole purpose of issuing or listing securities that are convertible toequity securities and do not confer, directly or indirectly,a voting right to the holder of such securities;(d) Therelevant person has or had, at any time, financial instruments that are convertible toequity securities and do not confer, directly or indirectly, avoting right ;(e) Therelevant person is not subject to Module TMA under CBB Law;(f) Anexempt fund manager or anexempt principal trader recognized as such by the CBB for the purposes of the Module; and(g) Acquisition of a controlling interest pursuant to an underwriting agreement subject to the timeline of the disposal of such acquisition being approved by the CBB.Amended: October 2019
Amended: April 2013TMA-B.1.10
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.1.11
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.1.12
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
Compliance Responsibility
TMA-B.1.13
Each director of an
offeror and of theofferee company as well as thoseacting in concert and theirprofessional advisers has a responsibility to ensure, so far as he is reasonably able, that the requirements of this Module are complied with in the conduct of transactions which are the subject of the TMA Module.Amended: October 2019TMA-B.1.14
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.15
The primary responsibility for ensuring compliance with the Module rests with parties involved in a
take-over ,merger , acquisition, orshare repurchase and theirprofessional advisers as follows:(a) Persons or groups of persons who seek to gain or consolidate control of companies that are subject to the Module; and(b) Their brokers and otherprofessional advisers ; or parties who otherwise participate in, act in concert or are connected with, transactions to which the Module applies.Amended: October 2019TMA-B.1.16
[This Paragraph was deleted in October 2019].
Deleted: October 2019Penalty for Non Compliance
TMA-B.1.17
Without prejudice to any greater penalty prescribed under the Penal Code or any other law, including the relevant provisions of the CBB Law, any person who breaches any of the provisions of this module shall be liable to a fine and such other restrictions and prohibitions the CBB may choose to impose under the CBB Law.
Amended: October 2019TMA-B.2 TMA-B.2 [This Section was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2010].
TMA-B.2.1
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.2
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.3
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.4
Associated company: A company shall be deemed to be an associated company of another company if one of them owns or controls 20% or more of the voting rights of the other or if both are associated companies of the same company.
TMA-B.2.5
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.6
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.7
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.8
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.9
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.10
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.11
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.12
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.13
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.14
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.15
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.16
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.17
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.18
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.19
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.20
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.21
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.22
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.23
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.24
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.25
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.26
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.27
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.28
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.29
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.30
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.31
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.32
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.33
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.34
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.35
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.36
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.37
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.38
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.39
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-1 TMA-1 General Principles
TMA-1.1.1
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-1.1.2
Equal Treatment to all Shareholders: All
relevant persons including anypersons acting in concert in relation to anoffer must treat all holders of each class of securities of anofferee company in a fair and equitable manner demonstrating no bias to a single, group or class of shareholders.Amended: October 2019TMA-1.1.3
Duties of Directors with Personal Interests: Directors of an
offeror and theofferee company must always, in advising their shareholders, act only in their capacity as directors and not have regard to their personal or family shareholdings or to their personal relationships with the companies. They must only consider the shareholders' interests taken as a whole when they are giving advice to shareholders. Directors of theofferee company must give careful consideration before they enter into any commitment with anofferor which would restrict their freedom to advise their shareholders. Such commitments may give rise to conflicts of interest or result in a breach of the directors' fiduciary duties.Amended: October 2019TMA-1.1.4
Minority interests must be protected: Oppression of minority or non-controlling shareholders is not acceptable in any case. Therefore, rights of control must be exercised in good faith in the context of protecting minority shareholders.
Amended: October 2019TMA-1.1.5
Information to All Shareholders: During the course of an
offer , or when anoffer is in contemplation, neither anofferor , nor theofferee company, nor any of their respective advisers may furnish information to some shareholders which is not made available to all shareholders. This principle does not apply to the furnishing of information in confidence by theofferee company to a bona fide potentialofferor or vice versa.Amended: October 2019TMA-1.1.6
Standards of Care in Documents: All
relevant persons including anypersons acting in concert in relation to anoffer must, as with a prospectus act with due skill, care and diligence in relation to all matters connected with anoffer including but not limited to matters relating to standards of research and analysis, public announcements, documentation, information being given to shareholders and the appointment ofadvisers , among others.Amended: October 2019TMA-1.1.7
Announcements: An
offeror must announce anoffer only after careful and responsible consideration. The same applies to making acquisitions which may lead to an obligation to make amandatory offer . In either case theofferor and itsadvisers must be satisfied that it can and will continue to be able to implement theoffer in full.Amended: October 2019TMA-1.1.8
Sufficient Information and Time to Shareholders: Shareholders must be given sufficient information, advice and time to reach an informed decision on an
offer . No relevant information must be withheld. All documents must, as in the case with a prospectus, be prepared with the highest possible degree of care, responsibility and accuracy.Amended: October 2019TMA-1.1.9
Full and Prompt Disclosure and Prevention of a False Market: All
relevant persons including anypersons acting in concert in relation to anoffer must ensure that all information provided inoffer , announcements and related documentation is clear, fair and not misleading, and appropriate to the information needs of the readers. All persons concerned withoffers must make full and prompt disclosure of all relevant information and take every precaution to avoid the creation or continuance of a false market.Relevant persons and theirprofessional adviser (s) involved in anoffer covered by this Module must take care that statements are not made which may mislead shareholders or the market.Amended: October 2019TMA-1.1.10
No Frustration of Bona Fide Offer: At no time after a bona fide
offer has been communicated to the board of theofferee company, or after the board of theofferee company has reason to believe that a bona fideoffer might be imminent, may the board of theofferee company take any action in relation to the affairs of the company, without the approval of shareholders in a general meeting, which could effectively result in any bona fideoffer being frustrated or in the shareholders being denied an opportunity to decide on its merits.Amended: October 2019TMA-1.1.11
Secrecy before Announcements: At any time before the
offer or during theoffer , the management of all relevant persons including any personsacting in concert in relation to anoffer andprofessional adviser (s) must maintain secrecy and confidentiality of theoffer .Amended: October 2019TMA-1.1.12
Limitation On Directors' Actions: The boards of an
offeror and theofferee company and their respective advisers and associates have a duty to act in the best interests of the shareholders of theofferor andofferee company respectively, and these General Principles and the Rules may impinge on the freedom of action of boards and persons involved inoffers . They must, therefore, accept that there are limitations, in connection with transactions which are the subject of the Modules, on the manner in which the pursuit of those interests can be carried out.Each director of an
offeror and of theofferee company has a responsibility to ensure, so far as he is reasonably able, that this Module is complied with in the conduct of transactions which are the subject of this Module.Amended: October 2019TMA-1.1.13
Acquisition or Consolidation of Control: If control of a company changes or is acquired or is consolidated, a
mandatory offer to all other shareholders is required. Where an acquisition is contemplated as a result of which a person may incur such an obligation, he must, before making the acquisition, ensure that he can and will continue to be able to implement such anoffer .Amended: October 2019TMA-1.1.14
Appointment of
Professional Adviser (s): Anofferee board which receives anoffer or is approached with a view to anoffer being made, should in the interest of its shareholders, seek professional advice by aprofessional adviser (s).Amended: October 2019
Amended: April 2013TMA-1.1.15
Co-operation with the CBB: All parties concerned with transactions subject to this Module are required to co-ordinate and co-operate to the fullest extent with the CBB's Capital Markets Supervision Directorate, and to provide all relevant information.
Amended: October 2019TMA-1.1.16
Validity of CBB Approval: Where a transaction requires CBB prior approval, any execution or part thereof must take place within a period of 90 days (including any applicable lock-up period) from the date of the approval, unless otherwise stipulated in writing by the CBB.
Amended: October 2019TMA-1.1.17
Transactions to be concluded on a
licensed exchange : Except with the consent of the CBB, any transaction concluded in terms of this Module shall be executed on the relevantlicensed exchange .Amended: October 2019
Amended: April 2013TMA-2 TMA-2 Rules
TMA-2.1 TMA-2.1 Communication of the Offer
TMA-2.1.1
An
offer must be put forward in the first instance to the board of directors (the "board") of theofferee company in writing.Identity of Offeror
TMA-2.1.2
If the
offer or an approach with a view to anoffer being made is not made by the ultimateofferor or potentialofferor , the identity of that person must be disclosed at the outset to the board of theofferee company. When that person is a company, the identity of its ultimate controlling shareholder(s) and the identity of its ultimate parent company, or, where there is a listed company in the chain between such company and its ultimate parent company, the identity of such listed company must be disclosed.Amended: October 2019Seriousness of Offeror
TMA-2.1.3
The board of the
offeree company when approached is entitled to be satisfied that theofferor is, or will be, in a position to implement theoffer in full. Anofferor , upon receiving a request from the board of theofferee company, must provide reasonable information to verify that theofferor is, or will be, in a position to implement theoffer in full.Confidentiality
TMA-2.1.4
The confidentiality of the
offer before an announcement must be maintained and all persons in possession of confidential information, and particularly price-sensitive information, concerning anoffer or contemplatedoffer must treat that information as secret and may only pass it to another person if it is necessary to do so and if the other person understands the need for secrecy.Amended: October 2019TMA-2.2 TMA-2.2 Independent Advice and Shareholder Approval
Appointment of Advisors by Offeree
TMA-2.2.1
A board which receives an
offer or is approached with a view to anoffer being made, must, in the interests of shareholders, appoint an independentprofessional adviser to advise the board as to whether the financial terms of theoffer is, or is not, fair and reasonable. Such advice, including reasons, must be obtained in writing and made known to shareholders by including it in theofferee board circular along with the recommendation of theofferee company’s board regarding acceptance and voting, where applicable, of theoffer . The board must announce the appointment of theprofessional adviser in the initial announcement of theoffer or possibleoffer , or as soon thereafter as the appointment is made.Amended: January 2024
Amended: January 2022
Amended: October 2019TMA-2.2.1A
For the purposes of Paragraph TMA-2.2.1, the
offeree company’s board, prior to appointment of an independentprofessional adviser , must ensure that the independentprofessional adviser has sufficient experience and a satisfactory work record in corporate finance or in a related field over the period of at least the past 5 years.Added: January 2022TMA-2.2.1B
For the purposes of Paragraph TMA-2.2.1A, a
professional adviser is considered to have the relevant corporate finance experience if it has provided advice for any of the following:a) IPOs;b) Mergers and acquisitions involving listed companies;c) Fund-raising exercise through the capital market by listed companies; and/ord) Restructuring exercises involving listed companies.Added: January 2022TMA-2.2.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.2.3
When it is not possible to give a recommendation or there is a divergence of views amongst board members or between offeree board and the
professional advisor , as to the merits of theoffer or recommendation being made, then it must be stated in theofferee board circular and an explanation given, including the arguments for the recommendation to shareholders with regards to acceptance or rejection of the offer. The views of any directors who are in a minority must also be included in the offeree board circular.Amended: January 2024
Amended: October 2019TMA-2.2.3A
If a director has a conflict of interest, he must not be joined with the rest of the board in the expression of their views on the
offer . The conflict must be disclosed, in the offeree board circular, to the shareholders.Added: January 2024TMA-2.2.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019In-Eligible Professional Adviser(s)
TMA-2.2.5
A person shall not be appointed as an independent
professional adviser if the person is arelated company to theofferor orofferee or who has, or had, a significant connection, financial or otherwise, with either theofferor or theofferee company, or the controlling shareholder(s) of either of them, of a kind likely to create, or to create the perception of, a conflict of interest, or reasonably likely to affect the objectivity of his advice.Amended: October 2019TMA-2.2.5A
For the purposes of Paragraph TMA-2.2.5, a
professional adviser would not generally be considered independent if theprofessional adviser :(a) holds voting rights in theofferor or theofferee at any time during the preceding 12 months from the beginning of theoffer period . While determining the voting rights, shares held under trust arrangement, discretionary managed funds or other form of non-beneficial ownership by the professional adviser in theofferor orofferee company are not to be taken into consideration;(b) provides or has provided any audit and/or review services during the preceding 12 months from the beginning of theoffer period ;(c) has a business relationship with theofferor or theofferee , at any time during the preceding 12 months from the beginning of theoffer period that contributes to more than 10 per cent in revenue or profit of the adviser, based on the latest financial statements;(d) has a representative on the board of theofferor or theofferee ;(e) has a representative from either theofferor or theofferee on its board;(f) is or will be involved in the financing of the offer;(g) is a substantial creditor of either theofferor or theofferee , based on the latest financial statements; or(h) has a financial interest in the outcome of the offer other than as outlined in paragraphs TMA-2.2.5A(a)–(g) above.Added: January 2022TMA-2.2.5B
For the purposes of Paragraph TMA-2.2.5A(g), a
professional adviser would be considered to be a “substantial creditor”, if:(a) the loan (including hire purchase, leasing, corporate bonds and Islamic financing) extended by theprofessional adviser to theofferor or theofferee represents more than 10 per cent of the loan outstanding in theofferor or theofferee ; or(b) the loan (including hire purchase, leasing, corporate bonds and Islamic financing) extended by theprofessional adviser to theofferor or theofferee represents more than 10 per cent of the latest audited shareholders’ funds of theprofessional adviser ; or(c) the professional adviser is a lead banker in a syndicated loan (including Islamic financing) extended to theofferor or theofferee , at any time during the period of 12 months preceding the beginning of the offer period.Added: January 2022TMA-2.2.5C
Paragraph TMA-2.2.1 requires the
professional adviser to have a sufficient degree of independence to ensure that the advice given is proper and objective. Accordingly, in certain circumstances it may not be appropriate for aprofessional adviser who has had a recent advisory relationship with anofferor orofferee to give advice. In such cases, the CBB should be consulted. Also, aprofessional adviser may conduct functions such as corporate finance, lending, stockbroking, fund management and corporate advisory activities on a day-to-day basis quite separately within the same organisation, but it is necessary for theprofessional adviser to satisfy the CBB that it arranges its affairs to ensure that there is total and effective segregation of those operations (Chinese wall), and those operations are conducted without regard for the interests of other parts of the same organisation or of its clients.Amended: January 2024
Added: January 2022TMA-2.2.6
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019Independent Committee
TMA-2.2.6A
If any of the directors of an
offeree company is faced with a conflict of interest, then such directors must notify theofferee company’s board and their interest and they must not vote on the resolution to be adopted in regards of theoffer , and if possible, the offeree company board should establish an independent committee of the board to discharge the board’s responsibilities in relation to theoffer . If it is not possible to form an independent committee, responsibility for representing the interests of independent shareholders must reside primarily with theprofessional adviser . In case of doubt the CBB must be consulted.Added: January 2024TMA-2.2.7
Members of an independent committee of a company’s board of directors (established to discharge the board`s responsibilities in relation to the
offer ) must consist of non-executive directors of the company who have no direct or indirect interest in anyoffer or possibleoffer for consideration by the independent committee other than, in the case of a director of theofferee company, as a shareholder of theofferee company.Amended: January 2024
Amended: October 2019Shareholder Votes to be Conducted by Way of a Poll
TMA-2.2.8
Whenever this Module requires a matter to be approved by shareholders or any class or group thereof in general meeting the vote must be conducted by way of a poll. The results of the poll must be announced.
Amended: October 2019Approval of Delistings by Independent Shareholders
TMA-2.2.9
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019Board of Offeror Company
TMA-2.2.10
Where an
offeror is a listed company, and theoffer being made is a reversetakeover or when the directors of theofferor are faced with a conflict of interest, the board of theofferor must appoint an independent adviser and obtain professional independent advice as to whether the making of theoffer is in the interests of theofferor’s shareholders. The advice must be obtained before announcing an offer or revisedoffer . Theoffer or revisedoffer must also be made subject to the approval of the shareholders of theofferor in a general meeting. The advice must be in writing and sent to the shareholders with the notice of the meeting. If anofferor considers that these requirements should not apply, where for example theoffer is not material to theofferor , it may apply to the CBB for a waiver of these requirements.Amended: January 2024
Amended: October 2019TMA-2.2.10A
For the purposes of TMA-2.2.10, a conflict of interests, amongst others, includes:
a) significant cross shareholdings (10% or more) between an offeror and the offeree company;b) a number of directors common to both companies; orc) a commoncontrolling shareholder in both companies is a director of or has a nominee director in either company.Added: January 2024TMA-2.2.11
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019TMA-2.2.12
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019TMA-2.2.13
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019TMA-2.3 TMA-2.3 Announcement of Offer or Possible Offer
Announcement to be Made by Offeror
TMA-2.3.1
Except in the case of a
mandatory offer where any of the circumstances occurring in TMA-2.3.10, a brief announcement that a potentialofferor is considering making anoffer must be made after obtaining permission from the CBB.TMA-2.3.2
Before the board of the
offeree company is approached, the responsibility for making an announcement lies with theofferor or potentialofferor . Theofferor or potentialofferor should, therefore, keep a close watch on theofferee company's share price and volume for signs of unusual movement.Amended: October 2019Announcements to be Made by Potential Vendor
TMA-2.3.3
The potential vendor must make an announcement when there are negotiations or discussions between a potential
offeror and the holder, or group of holders, of shares carrying 30% or more of the voting rights of the company and the company is subject to rumour or speculation about a possibleoffer or there is unusual movement in its share price or in the volume of share turnover, and there are reasonable grounds for concluding that it is the potential vendor's actions which have led to the situation.Amended: October 2019Suspension of Trading
TMA-2.3.4
When an announcement is required under this Section, the listed company(ies) being the
offeror or theofferee company, as the case may be, must notify the CBB and thelicensed exchange immediately that an announcement is imminent and if there is any possibility that an uninformed market for shares of theofferor or theofferee company could develop prior to publication of the announcement, serious consideration must be given to requesting a suspension of trading in such shares pending publication of the announcement. A potential offeror must not attempt to prevent the board of theofferee company from making an announcement or requesting thelicensed exchange to grant a temporary suspension of trading at any time the board thinks appropriate. The CBB or thelicensed exchange may, at their discretion and irrespective of whether or not there is a request, suspend trading temporarily on the shares of a listed company being anofferee orofferor .Amended: October 2019Announcements of Certain Purchases
TMA-2.3.5
Acquisitions of
voting rights of the offeree company by anofferor or by any personacting in concert with theofferor may give rise to an obligation to make a cash offer, to increase anoffer or to make amandatory offer . Immediately after any acquisition giving rise to any such obligation, an announcement must be made, stating the number of shares acquired and the price paid, together with the information required (to the extent that it has not previously been announced).Amended: October 2019TMA-2.3.6
CBB should be consulted if an
offeror is wishing to approach a wider group, for example in order to arrange financing for theoffer , whether through equity or debt, or to organize a consortium to make theoffer .TMA-2.3.7
Where the
offeror orofferee does not make an announcement when obliged to do so in terms of this Module, the CBB shall have the right to, without prejudice to any further action imposed by the CBB, instruct theofferor and theofferee to make an announcement in accordance with this Module and theofferor orofferee must comply with the time stipulated in the instruction.Amended: October 2019Publication of an Announcement about an Offer or Possible Offer
TMA-2.3.8
When an
offer or possibleoffer is announced, the announcement must be in accordance with Appendix B in Part B of the CBB Rulebook Volume 6 and be sent to thelicensed exchange and published in two local daily newspapers in Bahrain, one in Arabic, or Arabic and the other in English.Amended: October 2019TMA-2.3.9
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.3.10
An
offeror or potentialofferor must make an announcement under the following conditions:(a) Before an approach has been made to theofferee company, theofferee company is in the subject of rumour or speculation about a possibleoffer .(b) There is unusual movement in the company's share price or in the volume of share turnover, and there are reasonable grounds for concluding that it is the actions of the potentialofferor or personsacting in concert with it through inadequate security, which have led to the situation;(c) When negotiations or discussions are about to be extended to include more than a very restricted number of persons; outside those who need to know in the companies concerned and their immediate advisors; or(d) Immediately upon acquisition of voting rights which gives rise to an obligation to make amandatory offer . The announcement that an obligation has arisen must not be delayed due to information being obtained, additional information can be the subject of a later supplementary announcement.Amended: October 2019Announcement to be Made by Offeree
TMA-2.3.11
Following an approach to the board of the
offeree company which may or may not lead to anoffer , the primary responsibility for making an announcement will normally rest with the board of theofferee company. Theofferee company must, therefore, keep a close watch on its share price and volume.The board of the
offeree company must make an announcement to thelicensed exchange and market and inform its shareholders immediately upon the occurrence of the following conditions:(a) A firm intention to make anoffer has been notified to the board of theofferee company from an authorised source, irrespective of the attitude of the board of theofferee company;(b) When following an approach to theofferee company, whether there is a firm intention to make anoffer or not, theofferee company is the subject of rumour or speculation about a possibleoffer or there is unusual movement in its share price or in the volume of share turnover;(c) When negotiations or discussions about a potentialoffer are about to be extended to include more than a very restricted number of persons;(d) When the board of a company is aware that there are negotiations or discussions between a potentialofferor and the holder, or group of holders of shares carrying 30% or more of the voting rights of a company; or(e) When the board of a company is seeking potentialofferor s, and(i) The company is the subject of rumour or speculation about a possibleoffer , or there is unusual movement in its share price or a significant increase in the volume of share turnover; or(ii) More than a very restricted number of potential purchasers orofferor are about to be approached.Amended: October 2019
Amended: April 2013TMA-2.3.12
When a proposed
offer is conditional on acceptances or undertakings to accept by one or more shareholders, the proposed announcement must include a statement by those shareholders who have accepted or undertaken to accept theoffer , whether such acceptances or undertakings are revocable, and if so, the conditions under which such acceptances or undertakings may be revoked.Amended: October 2019Firm Intention to Make an Offer by Offeror
TMA-2.3.13
An
offeror must announce a firm intention to make anoffer where suchofferor has every reason to believe that it can and will continue to be able to implement theoffer .Amended: October 2019TMA-2.3.14
The announcement of a firm intention to make an
offer must state the following:(a) Terms of theoffer ;(b) Identity of theofferor and, where theofferor is a company, the identity of its ultimate controlling shareholder and the identity of its ultimate parent company, or where there is a listed company in the chain between such company and its ultimate parent company, the identity of such listed company;(c) Details of any existing holding of shares and rights over shares in theofferee company:(i) Which theofferor owns or over which it has control or direction;(ii) Which is owned or controlled or directed by any person acting in concert with theofferor ;(iii) In respect of which theofferor or any personacting in concert with it has received an irrevocable commitment to accept theoffer ; and(iv) In respect of which theofferor or any personacting in concert with it holds convertible securities, warrants or options;(d) Details of any outstanding derivative in respect of securities in theofferee company entered into by theofferor or any personacting in concert with it;(e) All conditions (including normal conditions relating to acceptance, listing and change in capital) to which theoffer is subject;(f) Details of any arrangement (whether by way of option, indemnity or otherwise) in relation to shares of theofferor or theofferee company and which might be material to theoffer . Details of any relevant securities of theofferee company in which theofferor or any personacting in concert with it has an interest or has a right to subscribe. In each case, the nature of the interests or rights concerned needs to be specified;(g) Details of any relevant securities of theofferee company which theofferor or any person acting in concert with it has borrowed or lent, save for any borrowed shares which have been either on-lent or sold;(h) All conditions (including normal conditions relating to acceptances, admission to listing, admission to trading and increase of capital) to which theoffer or the posting of it is subject;(i) Details of any agreements or arrangements to which theofferor is party which relate to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or the consequences of its doing so, including details of any break fees payable as a result; and(j) Details of any arrangement for the payment of an inducement fee or similar arrangement.Amended: October 2019
Amended: April 2013TMA-2.3.15
Where the
offer is for cash, or includes an element of cash, the announcement of firm intention must include a statement by an adviser, or another appropriate third party, that they have carried out necessary assessment to confirm that sufficient resources are available to theofferor to satisfy the full implementation and acceptance of theoffer .Amended: January 2022
Amended: October 2019TMA-2.3.15A
For the purpose of Paragraph TMA-2.3.15, the CBB may require the appointed adviser or third party to provide evidence in support of the confirmation statement referred to in Paragraph TMA-2.3.15 confirming that sufficient resources are available to satisfy the
offeror’s obligation in respect of theoffer .Added: January 2022TMA-2.3.16
Except with the consent of the CBB, if an incorrect or misleading statement is made in an announcement by the potential
offeror , or on behalf of the potentialofferor , or its directors, or officials or advisors, and not immediately withdrawn, then the potentialofferor will be bound by the statement if anoffer for theofferee company is subsequently made.TMA-2.3.17
Except with the consent of the CBB, where the incorrect or misleading statement concerned relates to the price of a possible
offer (or a particular exchange ratio in the case of a proposed securities exchangeoffer ), the potentialofferor will not be allowed subsequently to make anoffer for theofferee company at a lower price (taking the price of any securities concerned at the date of announcement of the firm intention to make theoffer ), unless there has occurred an event which the potentialofferor specified in the statement as an event which would enable it to be set aside.Preconditions
TMA-2.3.18
Any pre-conditions included in an announcement to making a possible
offer must be agreed in advance by the CBB and clearly state whether or not the pre-conditions must be satisfied before anoffer can be made or whether they are waived.Announcement of the Progress of the Offer
TMA-2.3.19
Until a firm intention to make an
offer has been notified a brief announcement by a potentialofferor or theofferee company that talks are taking place or that a potentialofferor is considering making anoffer will normally satisfy the obligations under this Section.If following the announcement of a possible
offer no further announcement has been made in respect of thatoffer or possibleoffer within one month, an announcement must be made setting out the progress of the talks or the consideration of a possibleoffer . This obligation continues, and announcements will be required monthly, until announcement of firm intention to make anoffer or of a decision not to proceed with anoffer . When talks are terminated or a potentialofferor decides not to proceed with anoffer , clear and unambiguous announcement must be made to that effect.Amended: October 2019Statements of Intention Not to Make an Offer
TMA-2.3.20
A person making a statement that he does not intend to make an
offer for a company must make a statement to the market that is very clear and unambiguous.Amended: October 2019TMA-2.3.21
Except with the consent of CBB, unless there has been a material change of circumstances or an event has occurred which the person specified in his statement as an event which would enable it to be set aside, neither the person making the statement, nor any person
acting in concert with him, nor any person who is subsequentlyacting in concert with either of them, may within six months from the date of the statement:(a) Announce anoffer or possibleoffer for theofferee company, including apartial offer ;(b) Acquire any interest in shares of theofferee company if any such person is obliged under TMA-3.1 to make a mandatoryoffer ;(c) Acquire any interest, or procure an irrevocable commitment in respect of, shares of theofferee company if the shares in which such person, together with any personsacting in concert with him, would be interested and the shares in respect of which he, or they, had acquired irrevocable commitments would in aggregate carry 30% or more of the voting rights of theofferee company;(d) Make any statement which raises or confirms the possibility that anoffer might be made for theofferee company; or(e) Proceed with actions to make a possibleoffer , for theofferee company, where knowledge of the possibleoffer might be extended outside the potentialofferor and immediate advisors.Amended: October 2019TMA-2.3.22
Failure to comply with this rule may lead to the period of six months set out to be extended.
TMA-2.3.23
Any person considering issuing a statement of an intention not to make an
offer should consult CBB; particularly when specific reservations are to be included or to be set aside.TMA-2.3.24
Restrictions imposed by TMA-2.3.21 on statements made will apply to any persons
acting in concert with the person making the statement. Unless clear in the statement or at the time of the statement, the restrictions will not apply to the personsacting in concert and that they are continuing to consider making anoffer .Amended: October 2019TMA-2.3.25
When a person is announcing in a statement an intention of not making an
offer , CBB will take into account the manner of any public reporting following the statement. Advisors should advise the directors and officials of companies of the implications of TMA-2.3.21.TMA-2.4 TMA-2.4 No Frustrating Action
TMA-2.4.1
Once a bona-fide
offer has been communicated to the board of anofferee company or the board of anofferee company has reason to believe that a bona-fideoffer may be imminent, no action which could effectively result in anoffer being frustrated, or in the shareholders of theofferee company being denied an opportunity to decide on the merits of anoffer , shall be taken by the board of theofferee company in relation to the affairs of the company without the approval of the shareholders of theofferee company in general meeting. In particular theofferee company's board must not, without such approval, do or agree to do the following:(a) Issue any shares;(b) Create, issue or grant, or permit the creation, issue or grant of, any convertible securities, options or warrants in respect of shares of theofferee company;(c) Other than during the normal course of business, sell, dispose of or acquire assets of a material amount;(d) Enter into contracts, including service contracts, otherwise than in the ordinary course of business; or(e) Cause theofferee company or any subsidiary or associated company to purchase or redeem any shares in theofferee company or provide financial assistance for any such purchase.TMA-2.4.2
For purposes of Paragraph TMA-2.4.1, where the
offeree company is under a prior contractual obligation to take any such action, or where there are other special circumstances, the CBB must be consulted at the earliest opportunity.Amended: October 2019TMA-2.5 TMA-2.5 No Withdrawal of an Offer
TMA-2.5.1
Except with the consent of the CBB, following an announcement of a firm intention to make an
offer , theofferor cannot withdraw theoffer and must continue to implement it unless theoffer is subject to the fulfilment of a specified condition and the condition has not been met.TMA-2.5.2
A change in general economic, industrial or political circumstances will not justify failure to proceed with an announced
offer , unless circumstances of an exceptional and specific nature arise.TMA-2.5.3
If a competitor has posted a higher
offer to the one already made by the firstofferor , the CBB may consent to the withdrawal of the announcedoffer . This should not carry any additional conditions other than those necessary for the implementation of such announcedoffer .TMA-2.5.4
If an
offeror is permitted to withdraw from anoffer , or anoffer is waived because of non-fulfilment of a condition, theofferor will be required to make an announcement giving reasons for the withdrawal.TMA-2.5.5
The CBB may seek to hear views of the
offeree company and its advisors, prior to consenting to a withdrawal of an announcedoffer .TMA 2.6 TMA 2.6 Information to Offeror(s)
TMA-2.6.1
Upon signing a confidentiality agreement to give access to any due diligence material, any information, including particulars of shareholders, given to one
offeror or potentialofferor must be furnished equally and promptly to any other bona fideofferor or potentialofferor .Amended: October 2019TMA-2.6.2
If the
offer or potentialoffer is a management buy-out or similar transaction, the information which this Paragraph requires to be given to a competing or potentialofferor is:(a) The information generated by theofferee company (including the management of theofferee company acting in their capacity as such) which is passed to external providers or potential providers of finance (whether equity or debt) to theofferor or potentialofferor ; and(b) Any other information that is material in the context of making anoffer insofar as the board of theofferee company is aware that the management is in possession of such information.This, however, does not include providing information on the
offeree company's trade and business secrets. The CBB expects the directors of theofferee company who are involved in making theoffer to cooperate with the independent directors of theofferee company and its advisers in the assembly of information.Amended: October 2019
Amended: April 2013TMA-2.6.3
The information related to an
offer should be provided by theofferee company to the ultimateofferor or potentialofferor , the identity of which must be disclosed to the directors of theofferee company.Amended: October 2019Mutual Due Diligence Review
TMA-2.6.4
Where the consideration under an
offer includes exchange of securities, theofferor and theofferee company may, subject to such terms and conditions as may be agreed between theofferor andofferee company under a confidentiality agreement, undertake mutual due diligence (mutual due diligence review) of each other's business.Added: October 2019TMA-2.6.5
Where the CBB is of the opinion that mutual due diligence review as referred to in Paragraph TMA-2.6.4 is in the best interest of the shareholders, it may, at its sole discretion, by notice in writing, order the
offeror and theofferee company to enter into a mutual due diligence review agreement.Added: October 2019TMA 2.7 TMA 2.7 Timing and Content of Documents
Equality of Information to Shareholders
TMA-2.7.1
All
offeree company shareholders must be given sufficient information and advice about anoffer . Information must be made equally available to all shareholders, at the earliest and in the same manner to enable them to reach an informed decision about theoffer .Amended: October 2019TMA-2.7.2
Shareholders must, in accordance with Appendix C in Part B of the CBB Rulebook Volume 6, be given all the facts necessary to make an informed judgment on the merits or demerits of an
offer . Such facts require accurate and fair presentation and must be given to the shareholders early enough to enable them to make a decision in good time. The obligation of theofferor in these respects towards the shareholders of theofferee company is no less than theofferor's obligation towards its own shareholders. In particular, whether or not theoffer consideration is cash, information must be given about theofferor .Amended: October 2019TMA-2.7.3
The
offer document must include a heading stating: "If you are in doubt about any aspect of thisoffer , you should consult a licensed securities dealer or licensed institution in securities, a bank manager, solicitor or attorney, professional accountant, or other professional advisor."TMA-2.7.4
No new material must be released in meetings, interviews or discussions with the media. If any new information is made public as a result of meetings, interviews or discussions with the media, then a circular must be sent to shareholders and where appropriate newspaper space.
Amended: October 2019Subsequent Documents
TMA-2.7.5
Documents subsequently sent to shareholders of the
offeree company must contain details of any material changes in information previously submitted or published by or on behalf of either party during theoffer period . If there have been no such changes this must be stated. In particular, the following matters must be updated:(a) Changes or additions to material contracts;(b) Shareholdings and dealings;(c) Changes to directors' service contracts;(d) Special arrangements;(e) Ultimate owner of securities acquired under theoffer ; and(f) Arrangements in relation to dealings.Amended: October 2019
Amended: April 2013Offer Document Time Limit
TMA-2.7.6
The
offer document must be sent to theofferee company by or on behalf of theofferor within 21 calendar days of the date of the announcement of the terms of theoffer . The CBB's consent is required if theoffer document may not be posted within this period.Amended: October 2019Timing and Contents of Offeree Board Circular
TMA-2.7.7
The
offeree company must send the circular containing the information in Appendix D in Part B of the CBB Rulebook Volume 6, together with any other information it considers to be relevant to enable its shareholders to reach an informed decision on theoffer accompanied by theoffer document to all its shareholders within a maximum period of 21 calendar days from the date of receipt of theoffer document . The CBB’s written approval is required if theofferee board circular may not be sent to the shareholders within the abovementioned period. Theofferee board circular must include the views of theofferee company’s board or its independent committee on theoffer and the written advice of itsprofessional adviser as to whether theoffer is, or is not, fair and reasonable and the reasons thereof.Amended: January 2022
Amended: October 2019TMA-2.7.8
[This Paragraph was deleted in January 2022]
Deleted: January 2022
Amended: October 2019Prospectus Standard
TMA-2.7.9
Each document issued or statement made in relation to an
offer or possibleoffer or during anoffer period must, as is the case with a prospectus, satisfy the highest standards of accuracy and the information given must be adequately and fairly presented. This applies whether theofferor , theofferee company, or any of their advisors or agents issues the document, advertisement, or announcement. Those who issue or make any such document or statement must ensure that it remains accurate and up-to-date throughout theoffer period , and must notify shareholders of any material changes as soon as possible.Amended: October 2019Directors' Responsibility Statement
TMA-2.7.10
All documents must state on the inside cover page that: All directors of the company issuing the document, whose names appear therein, jointly and severally accept full responsibility for the accuracy of information contained in the document. To the best of the knowledge and belief of the directors, who have taken all reasonable care to ensure that such is the case, the information contained in the document is in accordance with the facts and contains no omissions likely to affect the importance and completeness of the document.
Amended: October 2019TMA-2.7.11
If it is proposed that any director be excluded from the Director's Responsibility Statement, the CBB's consent is required. Such consent is given only in exceptional circumstances and in such cases the omission and the reasons for it must be stated in the document to which the Director's Responsibility Statement applies.
Amended: October 2019TMA-2.7.12
The directors of the
offeree company should comment on the statement in theoffer document regarding theofferor's intentions in respect of theofferee company and its employees.Arabic/English Language
TMA-2.7.13
Each document must be written in Arabic and/ or English and shall include or be accompanied by a translation, as the case requires, in Arabic or English.
Amended: October 2019Documents to be on Display
TMA-2.7.14
Except with the consent of the CBB, the following documents must be available for inspection from the time that the
offer document or theofferee board circular is published, until the end of theoffer period . Theoffer document and theofferee board circular must state which documents are available and where, and the place where inspection can be made:(a) Memorandum and articles of association of theofferor or theofferee company or equivalent documents;(b) Audited consolidated accounts of theofferor or theofferee company for the last two financial years for which these have been published in accordance with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) or other accounting standards acceptable to the CBB;(c) All service contracts ofofferee company directors;(d) Any report, letter, valuation or other document any part of which is exhibited or referred to in any document issued by or on behalf of theofferor or theofferee company;(e) Written consents of theprofessional advisers ;(f) All material contracts in relation to theoffer ;(g) Where a profit forecast has been made, the reports of the auditors or consultant accountants and of theprofessional advisers in addition to the letters giving the consent of the auditors or consultant accountants and of theprofessional advisers to the issue of the relevant document with the report in the form and context in which it is included or, if appropriate, to the continued use of the report in a subsequent document;(h) Where an asset valuation has been made, the valuation certificate and associated report containing details of the aggregate valuation, in addition to a letter stating that the valuer has given and not withdrawn his consent to the publication of his name in the relevant document;(i) Any document evidencing an irrevocable commitment or a letter of intent which has been procured by theofferor orofferee company (as appropriate) or any of their respectiveassociates ;(j) Where the CBB has given consent to aggregation of dealings, a full list of all dealings;(k) Documents relating to the financing arrangements for theoffer or a detailed statement from the professional advisor indicating that they have taken all reasonable steps to convince themselves that sufficient resources are available to implement theoffer ;(l) Documents relating to the payment of an inducement fee or similar arrangement;(m) Any agreements or arrangements, or, if not reduced to writing, a memorandum of all the terms of such agreements or arrangements, disclosed in theoffer document ; and(n) Any agreements or arrangements, or, if not reduced to writing, a memorandum of the terms of such agreements or arrangements.Amended: October 2019TMA-2.8 TMA-2.8 The Offeree's Director Responsibilities
TMA-2.8.1
The board of directors of the
offeree company must ensure that proper arrangements are in place to enable it to monitor all aspects relating to the offer to ensure that:(a) The board is provided promptly with copies of all documents and announcements issued by or on behalf of the offeree company which bear on theoffer ; the board receives promptly details of all dealings in relevant securities made by the offeree company or itsassociates and details of any agreements, understandings, guarantees, expenditure (including fees) or other obligations entered into or incurred by or on behalf of the offeree company in the context of theoffer which do not relate to routine administrative matters;(b) Those directors or committee members (appointed in accordance with Paragraph TMA-2.2.7) who undertake daily responsibilities for theoffer are in a position to justify to the board all their actions and proposed courses of action;(c) The opinions of advisers, including professional advisers, are available to the board; and(d) The possible temporary insiders (including members of the board themselves) are identified and that theofferee company (including its employees) comply with the relevant provisions of Insiders as stipulated in the CBB Law and in theofferee’s policy oninsiders .Amended: January 2022
Amended: October 2019
Amended: April 2013TMA-2.8.2
The procedures identified in TMA-2.8.1 must be followed, and board meetings must be held, whenever necessary throughout the offer in order to ensure that all directors remain updated with events and with actions taken.
Amended: October 2019TMA-2.8.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.8.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.8.5
Where directors (including their connected persons, related trusts and companies controlled by such directors, connected persons and related trusts) or shareholders or groups of shareholders acting collectively holding effective control, whether represented on the board or not, sell shares to a purchaser, as a result of which the purchaser is required to make an
offer under TMA-3.1 (Mandatory Offer), the vendors must ensure that as a condition of the sale the purchaser undertakes his obligations in accordance with TMA-3.1 .Amended: October 2019Resignation of Directors of Offeree Company
TMA-2.8.6
Once a bona-fide
offer has been communicated to the board of theofferee company or the board of theofferee company has reason to believe that a bona-fideoffer is imminent, except with the consent of the CBB, the directors of anofferee company or any of its subsidiaries must not resign until the first closing date of theoffer , or the date when theoffer becomes or is declared unconditional, whichever is the later. Resignation of directors of theofferee company must be made in accordance with theofferee company's Memorandum and Articles of Association.Amended: October 2019Prompt Registration of Transfers
TMA-2.8.7
The board and officials and registrars of an
offeree company should use their best endeavours to ensure the prompt registration of transfers during anoffer period so that shareholders can freely exercise their voting and other rights.Added: October 2019TMA-2.9 TMA-2.9 Profit Forecast and Other Financial Information
TMA-2.9.1
The directors are responsible for ensuring that the profit forecasts are compiled with the highest standards, presentation and accuracy to shareholders in an
offer . Financial advisors must ensure that the directors are preparing the forecasts with sufficient explanation on how the projection was calculated, taking into account all the assumptions and risk of failure in the projected result. Such project must be examined and reported on by independent reporting accountants, experts, or consultants in accordance with the applicable international standard (International Standard on Assurance Engagement — ISAE).TMA-2.9.2
Profit forecasts provided by the
offeror and/or theofferee must include:(a) A profit forecast for the current financial year. If the forecast year is less than three months of the current financial year, then the period of the forecast will be the current financial year and the next immediate financial year;(b) The assumptions, in addition to the commercial assumptions, on which the forecasts are based must be included in documents sent toofferee shareholders with regards to anoffer ;(c) A statement with the consent of the relevant advisors, including the consultant accountant and professional advisor, that they have given and not withdrawn their consent to the publication of the profit forecast;(d) A statement by the directors that the forecast remains valid for the purpose of theiroffer and that the professional advisors and accountants who reported the forecast agree that their reports continue to apply;(e) The accounting policies and calculations of the forecasts which have been examined and reported on by the auditors, consultant accountants or any other professional advisor of theofferor or theofferee ; and(f) When a profit forecast is made in relation to a period in which trading has already commenced, any previously published profit figures in respect of any expired part of that trading period, together with comparable figures for the same part of the preceding year.Amended: October 2019TMA-2.9.3
When income from land and buildings is a material element in a forecast, that part of the forecast must normally be examined and reported on by an independent valuer. Exceptional items should also be examined and reported on with special care.
Amended: October 2019TMA-2.9.4
Except with the consent of the CBB, any profit forecast which has been made before the commencement of the
offer period must be examined, reproduced and reported on in the document sent to shareholders.Amended: October 2019TMA-2.9.5
Exceptionally, the CBB may accept that, because of the uncertainties involved, it is not possible for a forecast previously made to be reported on in accordance with this Module nor for a revised forecast to be made. In these circumstances, the CBB would insist on shareholders being given a full explanation as to why the requirements of this Module were not capable of being met.
Publication of Reports
TMA-2.9.6
When a profit forecast is made during an
offer period , any documents sent to shareholders must include the forecast reports as required by TMA-2.9.2(e), TMA-2.9.3 and TMA-2.9.4. The reports must include a statement that consent has been given and has not been withdrawn to the circulation to shareholders.Amended: October 2019TMA-2.9.7
If a company's forecast is published first in a press announcement, it must be repeated in full, together with the reports required in TMA-2.9.2(e), TMA-2.9.3 and TMA-2.9.4, in the documents sent to shareholders. The reports must include a statement that consent has been given and has not been withdrawn to the publication.
Amended: October 2019Continuing Validity of Forecast
TMA-2.9.8
When a company includes a forecast in a document, any document subsequently sent out by that company in connection with that
offer must, contain a statement by the directors that the forecast remains valid for the purpose of theoffer and that theprofessional advisers and accountants who reported on the forecast have indicated that they have no objection to their reports continuing to apply.Amended: October 2019Statements Which will be Treated as Profit Forecasts
TMA-2.9.9
When no particular figure is mentioned or even if the word "profit" is not used, certain forms of words may constitute a profit forecast, particularly when considered in context. Examples are "profits will be somewhat higher than last year" and "performance in the second half-year is expected to be similar to our performance and results in the first half-year" (when interim figures have already been published). Whenever a form of words puts a floor under, or a ceiling on, the likely profits of a particular period or contains the data necessary to calculate an approximate figure for future profits, it will be treated by the CBB as a profit forecast which must be reported on. In cases of doubt, the CBB should be consulted in advance.
TMA-2.9.10
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.9.11
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.9.12
[This Paragraph was deleted in October 2019].
Deleted: October 2019When a Forecast Relates to a Period which has Commenced
TMA-2.9.13
[This Paragraph was deleted in October 2019].
Deleted: October 2019Merger Benefits Statements in Securities Exchange Offers
TMA-2.9.14
In a
securities exchange offer , a quantified statement about the expected financial benefits of a proposedtakeover ormerger is deemed to be a profit forecast statement for the purpose of this TMA-2.9. In addition to satisfying the existing standards of information and requirements under the TMA Module, a person issuing such a statement must provide:(a) The basis of the belief (including sources of information) supporting the statement;(b) An analysis and explanation of the constituent elements sufficient to enable shareholders to understand the relative importance of these elements; and(c) A base figure for any comparison drawn.Amended: October 2019
Amended: April 2013TMA-2.10 TMA-2.10 Asset Valuation
TMA-2.10.1
When a valuation of assets is given in connection with an
offer , it must be supported by the opinion of a named independentvaluer who has no connection with other parties to the transaction. Asset valuations by a professionally qualified independent valuer must be provided when asset values are a particularly significant factor in assessing the relevanttakeover ormerger transaction.Amended: October 2019TMA-2.10.2
Valuation of assets documents provided by the
offeror or theofferee must include:(a) The professional qualifications and address of the independent valuer;(b) The basis of valuation;(c) The opinion of the independent valuer supporting the valuation;(d) The effective date at which the assets were valued. If a valuation is not current, the valuer must state that a current valuation would not be materially different and if this statement cannot be made, the valuation must be updated;(e) A statement with the consent of the valuer that he has given and not withdrawn his consent to the use of his valuation report.TMA-2.10.3
Valuation report addressed to shareholders must be made available for inspection together with an associated report containing details of the aggregate valuation. Where CBB is satisfied that such disclosure may be commercially disadvantageous to the company concerned, it will allow the report to be in a summarized form.
Basis of Valuation
TMA-2.10.4
In any valuation of an asset or business the basis of valuation must be clearly stated. Only in exceptional circumstances should it be qualified and in that event the valuer must explain the meaning of the words used. The material assumptions made in a valuation must be stated in the valuation.
Amended: October 2019TMA-2.10.5
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.10.6
In the case of land currently being developed or with immediate development potential, in addition to giving the open market value in the state existing at the date of valuation, the valuation should include:-
(a) The value after the development has been completed;(b) The estimated total cost, including carrying charges, of completing the development and the anticipated dates of completion and of letting or occupation; and(c) A statement whether planning or other regulatory consent has been obtained and, if so, the date thereof and the nature of any conditions attaching to the consent which affect the value.However, the value of the property should also be given as a net of any charges, levy, tax, etc.
Amended: April 2013Opinion and Consent Letters
TMA-2.10.7
Standards of care; A valuation must be made with due care and consideration by the valuer or
professional adviser making the valuation.Amended: October 2019TMA-2.10.8
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.10.9
When the valuer withdraws its written consent, the document must state such fact.
TMA-2.10.10
[This Paragraph was deleted in October 2019].
Deleted: October 2019[This Subsection was deleted in October 2019]
TMA-2.10.11
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.11 TMA-2.11 Issuance of Documents
Filing of Documents for Comments
TMA-2.11.1
All documents must be filed with the CBB for its feedback prior to release or publication and must not be released or published until the CBB has issued its written approval within 10 working days thereon. The final copy of the documents must be filed with the CBB.
Amended: January 2022Publication of Documents
TMA-2.11.2
All announcements in respect of listed companies must be made in accordance with the requirements of the Disclosure Standards. All announcements in respect of unlisted companies must be circulated to their shareholders.
[This Subsection was deleted in October 2019]
TMA-2.11.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.12 TMA-2.12 Offers for More than One Class of Equity Shares
TMA-2.12.1
Where a company has more than one class of equity share capital, a comparable
offer must be made for each class whether such capital carries voting rights or not. The comparableoffer or proposal for each class of share capital required must normally be subject to similar conditions. Such a scheme must be considered at separate meetings for each class of the equity share capital, if required by law or the company's Memorandum and Articles of Association.Amended: October 2019TMA-2.13 TMA-2.13 Appropriate Offers for Convertibles
Offeree Companies with Convertible Securities
TMA-2.13.1
Where an
offer is made for equity share capital and theofferee company has convertible securities outstanding, theofferor must make an appropriateoffer or proposal to the holders of the convertible securities to ensure that their interests are safeguarded. Holders ofconvertible securities must be treated equally.Amended: October 2019Professional Independent Advice
TMA-2.13.2
The board of the
offeree company must obtain professional independent advice in writing on theoffer or proposal to the holders of convertible securities and the substance of such advice must be made known to all holders of its securities, together with the board's views on theoffer or proposal.Amended: October 2019Dispatch of Appropriate Offers
TMA-2.13.3
Whenever practicable the
offer or proposal should be dispatched to the holders of convertible securities at the same time that theoffer document is posted to other shareholders, but if this is not practicable the CBB should be consulted and theoffer or proposal should be dispatched as soon as possible thereafter.Amended: October 2019Conditions of Appropriate Offers
TMA-2.13.4
The
offer or proposal required by TMA-2.13.1 must be made conditional on theoffer for equity share capital becoming or being declared unconditional and should not normally be subject to any other conditions. It may, however, be put by way of a scheme to be considered at a meeting of the holders of convertible securities in accordance with the Memorandum and Articles of Association and/oroffer documents in respect of such securities, as the case may be.Amended: October 2019Warrants, Options and Subscription Rights
TMA-2.13.5
The provision of Paragraph TMA-2.13.1 applies also when an
offeree company has warrants, options or subscription rights outstanding in respect of any class of equity share capital (including non-transferable options), with the appropriate amendments.Amended: October 2019TMA-2.14 TMA-2.14 Offer Timetable
Offer to Remain Open for 15 Days
TMA-2.14.1
[This Paragraph was moved to TMA-2.14.2A in October 2019].
Amended: October 2019TMA-2.14.2A
Where a conditional
offer becomes or is declared unconditional, it must remain open for acceptance for not less than 15 calendar days thereafter.Added: October 2019Offering Period
TMA-2.14.2
Where an
offer document and theofferee board circular are distributed on different dates, theoffer must initially be open for acceptance for at least 15 calendar days following the date on the later date in respect of which the document is posted.In any announcement of an extension of an
offer , the next closing date must be stated.Amended: October 2019Final Day Rule
TMA-2.14.3
Except with the consent of the CBB, an
offer (whether revised or not) may not become or be declared unconditional as to acceptances after the official working hours on the 60th day after the day the initialoffer document was posted. The CBB's consent will normally be granted only if a competingoffer has been announced (in which case both or allofferors will normally be bound by the timetable established by the posting of the competingoffer document which is posted later).The consent of the CBB, in such cases, will only be given in very exceptional circumstances.Amended: October 2019Compulsory Acquisition
TMA-2.14.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019Time for Fulfillment of all other Conditions
TMA-2.14.5
Except with the consent of the CBB, all conditions must be fulfilled or the
offer must lapse within 15 calendar days of the first closing date or of the date theoffer becomes or is declared unconditional as to acceptances, whichever is the later.Amended: October 2019TMA-2.15 TMA-2.15 Revised and Alternative Offers
Offer Open for 15 Calendar Days after Revision
TMA-2.15.1
If, in the course of an
offer , theofferor revises its terms, allofferee company shareholders, whether or not they have already accepted theoffer , will be entitled to the revised terms. A revisedoffer must be kept open for at least 15 calendar days following the date on which the revisedoffer document is posted. Therefore, no revisedoffer document may be posted in the 15 calendar days ending on the last day theoffer is able to become unconditional as to acceptances.Amended: October 2019New Conditions for Improved Offers
TMA-2.15.2
An
offeror may introduce new improved conditions to be attached to a revisedoffer , but only to the extent necessary to implement the revisedoffer and subject to the consent of the CBB.Amended: October 2019Reintroduction of Alternative Offers
TMA-2.15.4
Where a firm statement has been made that an alternative
offer will not be extended or reintroduced, neither that alternative, nor any substantially similar alternative, may be extended or reintroduced. Where, however, such a statement has not been made and an alternativeoffer has closed, anofferor will not be precluded from reintroducing that alternative at a later date. Reintroduction constitutes a revision of theoffer and is, therefore, subject to the requirements of, and only permitted as provided in, this Section.Amended: October 2019TMA-2.15.5
CBB must be consulted if a competitive situation continues to exist in the later stages of the
offer period . CBB will normally consider applying a procedure to resolve the situation which is agreed between competingofferors and the board of theofferee company.TMA-2.16 TMA-2.16 Acceptors' Right to Withdraw
TMA-2.16.1
An acceptor will be entitled to withdraw his acceptance after 14 days from the first closing date of the
offer , if theoffer has not become unconditional as to acceptances by that date. Such entitlement to withdraw will be exercisable until theoffer becomes unconditional as to acceptances. However, on the 60th day (or any date beyond which theofferor has stated that itsoffer will not be extended) the final time for the withdrawal must coincide with the final time for the lodgement of acceptances.Amended: October 2019TMA-2.17 TMA-2.17 Statements during Course of Offer
TMA-2.17.1
Information, documents, advertisements or statements issued during an
offer period must not be misleading and must be of the highest standard and accuracy. This is whether the information is issued directly by theofferor ,offeree or by the advisors. All parties and their advisers are responsible for ensuring that any release of information abides with this rule.TMA-2.17.2
Any parties of an
offer or potentialoffer and their advisors must take care not to issue any statements which, while not factually inaccurate, may mislead shareholders and the market and cause uncertainty. Statements regarding anofferor improving hisoffer without committing itself to doing so must not be made.TMA-2.17.3
Documents issued to shareholders or advertisements published in relation to an
offer by, or on behalf of, theofferor or theofferee company, must state where appropriate, that the directors of theofferor and/or theofferee company accept full responsibility for the information contained in the documents and advertisements, to the best of their knowledge, that the information contained in the document or advertisement is in accordance with the facts and that it contains no omissions likely to affect the importance and consistencies of the document.No Extension Statements
TMA-2.17.4
If statements in relation to the duration of an
offer such as "theoffer will not be extended beyond a specified date unless it is unconditional as to acceptances" ("no extension statements") are included in documents sent toofferee company shareholders, or are made by or on behalf of anofferor , its directors, officials or advisers, and not withdrawn immediately if incorrect, only in extremely exceptional circumstances will theofferor be allowed subsequently to extend itsoffer beyond the stated date except where the right to do so has been specifically reserved.Amended: October 2019No Increase Statements
TMA-2.17.5
If statements in relation to the value or type of consideration such as "the
offer will not be further increased" or "ouroffer remains at BHD X per share and it will not be raised" ("no increase statements") are included in documents sent toofferee company shareholders, or are made by or on behalf of anofferor , its directors, officials or advisers, and not withdrawn immediately if incorrect, only in extremely exceptional circumstances will theofferor be allowed subsequently to amend the terms of itsoffer in any way even if the amendment would not result in an increase of the value of theoffer (e.g. the introduction of a lower paper alternative) except where the right to do so has been specifically reserved.Amended: October 2019TMA-2.17.6
An
offeror orofferee company must not make statements about the level of support received from shareholders or other persons, unless they have clearly stated their intentions to theofferor orofferee company, or advisors, as appropriate. CBB will require statements made to be verified, which could include the shareholder confirming their support in writing to theofferor or its advisors, which will then be treated as a letter of intent/consent, as the case may be.Amended: October 2019TMA-2.17.7
Shareholders must not be pressured by any means or by any party involved in an
offer to accept or reject suchoffer through information, documents, advertisements or statements.Amended: October 2019Advertisements
TMA-2.17.8
Any advertisements published in terms of the Module must obtain the prior approval of the CBB. The publication of advertisements in relation to an
offer or potentialoffer is prohibited unless they fall within the following categories:(a) Product advertisements not having an effect on anoffer or potentialoffer , CBB must be consulted if there is any doubt;(b) Corporate image advertisements not having an effect on anoffer or potentialoffer ;(c) Advertisements in relation to non-controversial information about anoffer , such as the value of anoffer or closing dates;(d) Advertisements in relation to preliminary or interim results;(e) Advertisements comprising a tenderoffer ; or(f) [This Subparagraph was deleted in October 2019](g) Advertisements published with the specific prior consent of CBB.Amended: October 2019TMA-2.17.9
Any forms connected with an
offer , including acceptance forms, withdrawal forms, proxy cards must not be published in newspapers or any form of advertisement.Telephone Campaigns
TMA-2.17.10
Campaigns relating to contacting shareholders or persons interested in the
offer by telephone must be conducted only by theprofessional advisor and his staff, who are fully aware of the responsibilities and requirements of this Module. Information passed to such persons must be accurate, already published and not misleading. Persons contacted must not be pressured and must be encouraged to consult their advisors.Amended: October 2019TMA-2.17.11
[This Paragraph was deleted in October 2019]
Deleted: October 2019TMA-2.18 TMA-2.18 Announcement of Result of Offer
Timing and Contents
TMA-2.18.1
An
offeror must publish an announcement on the business day following the day on which theoffer will expire, or becomes or is declared unconditional (whether as to acceptances or in all respects), or is revised or extended.Amended: January 2022
Amended: October 2019TMA-2.18.2
For the purpose of Paragraph TMA-2.18.1, the
offeror must forward such announcement to the CBB and thelicensed exchange andofferee company and publish the announcement on the website of thelicensed exchange before trading hours at thelicensed exchange in Bahrain.Amended: January 2022
Amended: October 2019TMA-2.18.3
The announcement must state the number of shares and rights over shares:
(a) For which acceptances of theoffer have been received;(b) Held, controlled, or directed by theofferor or personsacting in concert with it before theoffer period ; and(c) Acquired or agreed to be acquired during theoffer period by theofferor or any personsacting in concert with it.Amended: October 2019
Amended: April 2013TMA-2.18.4
The announcement must include a prominent statement of the total numbers of shares which the
offeror may count towards the satisfaction of its acceptance condition and must specify the percentages of each class of relevant securities represented by these figures. CBB must be consulted if theofferor wishes to make any other statement about acceptance levels in any announcement made.Amended: October 2019TMA-2.18.5
The
offeror must send copies of the certificate issued by the designatedreceiving bank to the CBB, thelicensed exchange and theofferee company'sprofessional advisor as soon as possible after it is issued.Amended: October 2019TMA-2.18.6
If statements are made during an
offer by anofferor or its advisors, either orally or written, about level of acceptances of theoffer or number or percentages of shareholders who have accepted theoffer , then an immediate announcement must be made.TMA-2.18.7
Companies whose securities are not admitted to listing or trading that are a party to the
offer will normally not be required to make a public announcement, however it will be required to inform all shareholders about the result of theoffer .Amended: October 2019TMA-2.18.8
When the
offeree company has the intention to make an announcement on the level of withdrawals of acceptance of anoffer , CBB must be consulted before any announcement is made.Consequences of Failure to Announce
TMA-2.18.9
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.18.10
If the
offeror is unable to comply with any of the requirements of this Section, within the time limit granted, the CBB shall have the right to request thelicensed exchange to suspend dealings in theofferee company's shares and, where appropriate, in theofferor's shares until the relevant information and documents are provided.Amended: October 2019TMA-2.18.11
If an
offeror has been declared unconditional as to acceptance, but theofferor fails to comply with any of the requirements of this Section by the close of trading at thelicensed exchange in Bahrain on the relevant day, the CBB shall have the right to grant the acceptors the right of withdrawal from theoffer .Amended: October 2019TMA-2.18.12
This right of withdrawal may be terminated not less than 8 days after the relevant date in the case that the
offeror confirms that theoffer is still unconditional as to acceptances and complies with this Section.Amended: October 2019TMA-2.19 TMA-2.19 Settlement of Consideration and Share Transfer
Timing of Acquisition and Payment
TMA-2.19.1
Shares represented by acceptances in any
offer must not be accepted by theofferor until theoffer has become or has been declared unconditional. Such shares must be paid by theofferor in accordance with the terms of payment as stipulated in theoffer document .Amended: October 2019Withdrawn or Lapsed Offers
TMA-2.19.2
If an
offer is withdrawn or lapses, theofferor must, as soon as possible but in any event within 7 calendar days thereof, post the share certificates or transfer documents lodged with acceptance forms to, or make such share certificates or transfer documents available for collection by, thoseofferee company shareholders who accepted theoffer .Amended: October 2019TMA-2.19.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019TMA-2.19.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019TMA-2.19.5
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019Payment of Consideration
TMA-2.19.6
An
offeror must complete payment of consideration whether in the form of cash, in form of securities, or a combination of cash and securities, as the case may be, to all shareholders by crediting the shareholders bank account and/or the shareholders’securities account , as the case may be, who have accepted the offer, within 10 calendar days from the last closing date of theoffer .Amended: January 2022
Added: October 2019TMA-2.19.7
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019TMA-2.19.8
An
offeror must deposit the unclaimed balances, if any, in an escrow account with a licensed bank within 15 calendar days from the last closing date of theoffer .Added: January 2022TMA-2.19.9
An
offeror , on its own or together with personacting in concert , must not exercise thevoting rights attached to the shares received through acceptances of the take-over offer prior to full settlement of the consideration.Added: January 2022TMA-2.20 TMA-2.20 Restrictions on Dealings before and during the Offer
Restrictions on Dealings Before the Offer
TMA-2.20.1
No dealings of any kind in the securities of the
offeree company (including convertible securities, warrants, options and derivatives in respect of such securities) may be transacted by any person, not being theofferor , who is engaged in theoffer and who has confidential price-sensitive information concerning an actual or contemplatedoffer or revisedoffer between the time when there is reason to suppose that an approach or anoffer or revisedoffer is contemplated and the announcement of the approach, theoffer , the revisedoffer , or of the termination of the discussions where an announcement of theoffer has been made public.Amended: October 2019TMA-2.20.2
Such restrictions do not apply to persons
acting in concert with anofferor in respect of dealings where the securities of such dealings are excluded from theoffer or where there are no-profit arrangements in place.Amended: October 2019TMA-2.20.3
No person who is engaged in the
offer and who has access to the price-sensitive information may deal in securities of theofferor except where the proposedoffer is not price-sensitive in relation to such securities.Amended: October 2019TMA-2.20.4
No person who is engaged in the
offer and who has access to the price-sensitive information may make any recommendations to any other person as to dealing in the relevant securities.Amended: October 2019TMA-2.20.5
CBB must be consulted before acquisitions of interests in
offeree company securities are made by members or potential members of a consortium. If there are existing interests in such securities, it will be necessary to satisfy the CBB that they were acquired before the consortium was formed.Amended: October 2019TMA-2.20.6
A person is considered to have access to confidential price-sensitive information concerning an
offer or contemplatedoffer if the person:(a) Is a director or employee of one of the companies or entities concerned or engaged in theoffer or potential offer including, but not limited to, theofferor , theofferee or any person acting in concert with theofferor orofferee ;(b) An advisor, includingprofessional adviser , to one of the companies or persons concerned or engaged in the offer or potentialoffer ;(c) In a position to have received and has actually received information through a confidential relationship;(d)Connected persons and companies controlled by theofferor and those described in (a), (b) and (c); or(e) Is considered as having or had access to price sensitive information by virtue of the relevant facts and circumstances.Amended: January 2022
Amended: October 2019No-Profit Arrangement
TMA-2.20.7
Arrangements made by a potential
offeror with aperson acting in concert, where securities in theofferee company are acquired by the personacting in concert and theofferor will bear all the risks and receive all the benefits are not prohibited by TMA-2.20.1. Arrangements which have benefits or potential benefits to the person acting in concert, beyond normal expenses and carrying costs, are normally prohibited. In cases of doubt, CBB should be consulted.Amended: October 2019Restrictions on Dealings during an Offer
TMA-2.20.8
The
offeror and personsacting in concert with it must not sell any securities in theofferee company during theoffer period except with the prior consent of the CBB, after 24 hour's advance notice by public announcement of the intention to sell.Amended: October 2019TMA-2.20.9
The CBB will not provide its consent for the sale of securities by an
offeror and personsacting in concert with it where amandatory offer is being made.Amended: October 2019TMA-2.20.10
After an announcement of an intention to sell the securities of the
offeree company has been made, neither theofferor nor personsacting in concert with it can make further purchases and only in exceptional circumstances will the CBB allow theofferor to raise the offer price.Amended: October 2019TMA-2.20.11
Subject to TMA-2.20.8 in respect of the conditions applicable, the sale of any shares in the
offeree company must not be below theoffer price.Amended: October 2019TMA-2.20.12
An
offeror or other persons shall be restricted from dealing or procuring other persons to deal, if theofferor has been supplied by theofferee company with confidential price sensitive information duringoffer discussions.Amended: October 2019TMA-2.20.13
The consent of the CBB is not required for placing or underwriting arrangements made during an
offer in order to achieve the minimum public shareholding to maintain the listing of theofferee company's shares provided that such arrangements are not effective prior to the date when theoffer becomes or is declared unconditional. If anofferor wishes to make such arrangements in order to hold less than 75% (or such percentage as may be relevant in the event that thelicensed exchange has accepted that a percentage other than 20% of theofferee company's shares needs to be in public hands to maintain the listing of theofferee company's shares) of theofferee company's shares, the consent of the CBB is required.Amended: October 2019TMA-2.20.14
Directors and
professional advisers to a company who have interests in securities in that company that is party to anoffer , must not deal in such securities contrary to any advice they have given to shareholder, or which it can be reasonably assumed that they were associated, without giving a 24 hours advance public notice of their intentions with an explanation.Amended: October 2019Restriction on Dealings by Offeror during Non-Cash Offers
TMA-2.20.15
Where the consideration under an
offer includes securities of theofferor or a personacting in concert with it, neither theofferor nor any personacting in concert with it may deal in any such securities during theoffer period .Amended: October 2019Restrictions on Dealings by a Competing Offeror
TMA-2.20.16
Except with the consent of the CBB, where two competing
offers have been made and one of theoffers has lapsed, then neither thatofferor nor any personacting in concert with thatofferor may acquire any interest in shares in theofferee company at a price higher than that made available under its lapsedoffer .Amended: October 2019TMA-2.20.17
Paragraph TMA-2.20.16 shall not apply where each of the competing
offers has either been declared unconditional in all respects or has itself lapsed.Amended: October 2019TMA-2.20.18
For the purpose of Paragraph TMA-2.20.16, the price of the lapsed
offer shall be calculated as at the day theoffer lapsed.Amended: October 2019Dealings After Termination of Discussions
TMA-2.20.19
If following an announcement that
offer discussions are taking place, or that an approach oroffer is being contemplated, discussions are then terminated or theofferor then decides not to proceed with anoffer , an announcement of the position must take place before any dealings in securities of theofferee company take place by any person privy to confidential information.Amended: October 2019Dealings in Offeree Company Securities by Certain Offeree Company Associates
TMA-2.20.20
During the
offer period ,professional advisers or stockbrokers (or any person controlling, controlled by or under the same control as any such adviser or stockbroker) to anofferee company (or any of its parents, subsidiaries or fellow subsidiaries, or their associated companies or companies of which such companies are associated companies) must not, except with the consent of CBB:(a) Purchaseofferee companysecurities or deal in convertible securities, warrants, options or derivatives in respect of suchsecurities for its own account or for its discretionary clients;(b) Make any loan to a person to assist in making any such purchases; or(c) Enter into any indemnity or option arrangement or any arrangement, agreement or understanding, formal or informal, or in any other nature, which may be an inducement for a person to retain, deal or refrain from dealing in relevant securities of theofferee company.TMA-2.20.21
Paragraph TMA-2.20.20 does not apply to fund managers and principal traders that are exempt by CBB who are dealing for any of their investment accounts managed on a discretionary basis.
Amended: October 2019Gathering Irrevocable Commitments
TMA-2.20.22
Any person proposing to contact a private individual or a corporate shareholder with the aim of obtaining an irrevocable commitment should consult CBB in advance.
Amended: October 2019TMA-2.21 TMA-2.21 Disclosure of Dealings During Offer Period
Dealings by Parties and by Associates for Themselves or for Discretionary Clients
TMA-2.21.1
Dealings in relevant securities by an
offeror or theofferee company, and by any associates, for their own account or for the account of discretionary investment clients account during anoffer period must be publicly disclosed.Amended: October 2019TMA-2.21.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.21.3
Except with the consent of the CBB, dealings in relevant securities during an offer period for the account of discretionary investment clients by an associate which is an
exempt fund manager connected with an offeror or the offeree company must be privately disclosed. If, however, theExempt fund manager is anassociate by virtue of sub-paragraph (f) of the definition ofassociate , theexempt fund manager must disclose publicly, in addition to disclosing privately.Amended: October 2019Dealings by Parties and by Associates for Non-Discretionary Clients
TMA-2.21.4
Except with the consent of the CBB, dealings in relevant securities during an offer period by an
offeror or theofferee company, and by any associates, for the account of non-discretionary investment clients (other than anofferor , theofferee company and anyassociates ) must be privately disclosed.Amended: October 2019Discretionary Accounts
TMA-2.21.5
If a person manages investment accounts on a discretionary basis, relevant securities so managed will be treated, for the purpose of this rule, as controlled by that person and not by the person on whose behalf the relevant securities are managed. Except with the consent of the CBB, where more than one discretionary investment management operation is conducted in the same group, relevant securities controlled by all such operations will be treated for the purpose of this rule as those of a single person and must be aggregated.
Amended: October 2019Connected Exempt Principal Traders
TMA-2.21.6
Dealings in relevant securities by an
exempt principal trader connected with anofferor or theofferee company must be aggregated and disclosed to thelicensed exchange before trading hours at thelicensed exchange in Bahrain on the business day following the date of the transactions.In the case of dealings in options or derivatives, full details must be given so that the nature of the dealings can be fully understood.
Amended: October 2019TMA-2.21.7
For the purposes of this Section, the disclosure shall consider the following:
(a) Disclosure shall be made before trading hours at thelicensed exchange in Bahrain on the business day following the date of the transaction. CBB should be consulted on any practical difficulties;(b) In the case of a public disclosure, dealings should be disclosed in writing to allofferor s and theofferee company or their respectiveprofessional advisers while also disclosing to the CBB and also, in respect of dealings in listed securities, to thelicensed exchange ; and(c) The disclosure shall include the following:(i) The total number of securities purchased or sold;(ii) Prices paid or received. In the case of an average price bargain each underlying trade should be disclosed;(iii) Identity of the associate or any other person dealing if different from the owner or controller;(iv) If dealing with an associate, an explanation of how that status arises;(v) If disclosure is made by a 5 percent shareholder or group of shareholders, a statement to that effect;(vi) The resultant total number of relevant securities owner or controlled by the associate and percentage which it represents; and(vii) If relevant, details of any arrangements required in the context of indemnity and other arrangements.Amended: October 2019
Amended: April 2013TMA-2.22 TMA-2.22 When Cash Offer is Required
TMA-2.22.1
Except with the CBB's consent, a cash
offer is required where:-(a) Theofferor and any personacting in concert with it has bought for cash during theoffer period and within 6 months prior to its commencement, an interest in shares of any class underoffer in theofferee company carrying 10% or more of the voting rights of that class; or(b) In the view of the CBB there are circumstances which render such a course necessary.The
offer for each class of shares must be in cash or accompanied by a cash alternative at not less than the highest price paid by theofferor or any personacting in concert with it for shares of the class during theoffer period and within 6 months prior to the commencement.Amended: October 2019
Amended: April 2013TMA-2.23 TMA-2.23 Purchases at Above Offer Price
Highest Price Paid
TMA-2.23.1
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.23.2
[This Paragraph was moved to Paragraph TMA-2.23.5A in October 2019].
Amended: October 2019Acquisitions Before Announcement of a Firm Intention to Make an Offer
TMA-2.23.3
The
offer to the holders of shares of the same class shall not be on less favourable terms, when anofferor or any personacting in concert with it has acquired an interest in shares in theofferee company:(a) Within the three month period prior to the commencement of theoffer period ; or(b) During the period, if any, between an announcement made by theofferor and the commencement of theoffer period .Amended: October 2019Acquisitions After Announcement of a Firm Intention to Make an Offer
TMA-2.23.4
After an announcement of a firm's intention to make an
offer and before theoffer closes for acceptance, anofferor or any personacting in concert with it acquires any interest in shares at above theoffer price, it shall increase itsoffer to not less than the highest price paid for the interest in shares acquired in such circumstances.Amended: October 2019TMA-2.23.5
Immediately after the acquisition of shares at above the
offer price, theofferor must announce that a revisedoffer will be made in accordance with this Section. This announcement must state the number of shares concerned and the price paid.Amended: October 2019TMA-2.23.5A
Subscription for new securities at a price above the
offer price will be treated as a purchase for the purposes of Paragraph TMA-2.23.4.Added: October 2019Offers Involving a Further Issue of Listed Securities
TMA-2.23.6
If the
offer involves a further issue of securities of a class already listed on alicensed exchange , the current value of theoffer on a given day should normally be established by reference to the weighted average traded price of board lots (excluding special bargains and odd lots) of such securities traded during the immediately preceding trading day. If theoffer involves a combination of cash and securities and further purchases of theofferee company's shares oblige theofferor to increase the value of theoffer , theofferor must endeavour, as far as practicable, to effect such increase while maintaining the same ratio of cash to securities as is represented by theoffer .Amended: October 2019TMA-2.24 TMA-2.24 Provision for Escrow
[This Section was moved to Section TMA-2.19 in October 2019]
TMA-2.24.1
[This Section was moved to Section TMA-2.19 in October 2019]
Amended: October 2019TMA-2.24.2
[This Section was moved to Section TMA-2.19 in October 2019]
Amended: October 2019TMA-2.24.3
[This Section was moved to Section TMA-2.19 in October 2019]
Amended: October 2019TMA-2.25 TMA-2.25 No Special Deals or Arrangements with Selected Shareholders
TMA-2.25.1
Except with the CBB's consent, the
offeror or personsacting in concert with it may not make any arrangements with selected shareholders; and may not deal or enter into arrangements to deal; or make purchases or sales of shares of theofferee company; or enter into arrangements concerning acceptance of anoffer either during anoffer or when one is reasonably in contemplation, if there are favourable conditions attached which are not being extended to all shareholders.Amended: October 2019TMA-2.25.2
An arrangement with special conditions attached includes any arrangement where there is a promise to make good to a vendor of shares any difference between the sale price and the price of any subsequent successful
offer , revisedoffer or successful competingoffer . An irrevocable commitment to accept anoffer combined with an option to put the shares to theofferor should theoffer fail will also be regarded as such an arrangement.Amended: October 2019TMA-2.25.3
Two-tier
offers where shareholders who accept theoffer before a stipulated cutoff date would receive a higher consideration than those who accept theoffer after the cut-off date will be regarded as arrangements with special conditions. A two-tieroffer thatoffers to pay a higheroffer price if a certain level of acceptances is reached will not be regarded as an arrangement with special conditions if the higheroffer price is payable to all accepting shareholders.Amended: October 2019TMA-2.25.4
Paragraph TMA-2.25.1 also covers cases where a shareholder in an
offeree company is to be remunerated for playing a part in promoting anoffer . The CBB will normally consent to such remuneration, provided that the shareholding is not substantial and it can be demonstrated that a person who had performed the same services, but had not at the same time been a shareholder, would be entitled to receive no less remuneration.Amended: October 2019TMA-2.25.5
The CBB should be consulted if the management of the
offeree company is to remain financially interested in the business after theoffer is completed. The methods by which this may be achieved vary but the principle which the CBB is concerned to safeguard is that the risks as well as the rewards associated with an equity shareholding should apply to the management's retained interest.Amended: October 2019TMA-2.26 TMA-2.26 Proxies
TMA-2.26.1
A shareholder must not appoint a person as his proxy to vote in respect of his shares in the
offeree company; or to exercise any other rights; or to take any other action in relation to those shares unless the appointment is under the following conditions:(a) Theoffer is unconditional in all respects;(b) The votes are to be cast as far as possible to satisfy any outstanding condition to the offer, where relevant;(c) The appointment ceases to be valid if the acceptance is withdrawn; and(d) The appointment only applies to shares assented to the offer.Added: October 2019TMA-2.26.2
The terms for the appointment of a proxy must be set out in the
offer document .Added: October 2019TMA-3 TMA-3 Types of Offer
TMA-3.1 TMA-3.1 Mandatory Offer
Conditions for a Mandatory Offer
TMA-3.1.1
A
mandatory offer is required when:(a) Any person acquires, whether by series of transactions over a period of time or not, 30% or more of the voting rights of a company;(b) Two or more persons areacting in concert and they collectively hold less than 30% of the voting rights of a company, and any one or more of them acquires voting rights which increases to 30% or more of the voting rights of the company; or(c) Any person holds not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights acquires additional shares carrying more than 1% of the voting rights in any period of 6 months; or(d) Two or more persons are acting in concert, and they collectively hold not less than 30%, but not more than 50% of the voting rights of a company, and any one or more of them acquires additional voting rights carrying more than 1% of the voting rights in any period of 6 months.Amended: October 2019TMA-3.1.2
The person making the
mandatory offer is required to extend offers to all holders of each class of equity share capital of the company, whether the class carries voting rights or not, and also to the holders of any class of voting non-equity share capital in which such person, or personsacting in concert with him, hold shares. Amended: October 2019TMA-3.1.3
Offers for different classes of equity share capital should be consulted in advance in such cases.Amended: October 2019Creeping Provision
Acquisition and Disposal
TMA-3.1.3A
Any person, or together with persons
acting in concert , holding not less than 30% but not more than 50% of thevoting rights of a company may be permitted to acquire additional shares carrying not more than 1% of suchvoting rights in any period of 6 months without incurring an obligation to make amandatory offer . Within this 1% band, dispositions ofvoting rights may be netted off against acquisitions thereof. If such person, or together with personsacting in concert , intend to acquire such additional shares, the CBB must be consulted in advance.Added: October 2019Effect of Disposal
TMA-3.1.3B
Any person, or together with persons
acting in concert , holding not less than 30% of thevoting rights of a company disposes ofvoting rights in circumstances other than those mentioned in Paragraph TMA-3.1.3A, then the provisions of TMA-3.1 shall apply to the reduced holding. As a result, an obligation to make amandatory offer will arise if:a) the reduced holding is 30% and more and is increased by acquisition of voting shares by more than 1% in any period of 6 months; orb) following a reduction of the holding to less than 30%, it is increased to 30% or more.In this context, disposal of
voting rights may not be netted off against acquisitions thereof.Added: October 2019Holding between 49% and 50%
TMA-3.1.3C
The restriction in Rule TMA-3.1.1 (c) applies to any person, or group of persons
acting in concert , holding 50% or less of thevoting rights. Thus, a person or group of persons holding between 49% and 50% of the voting rights of a company will be restricted from acquiring more than a further 1% of the offeree company'svoting rights for any period of 6 months thereafter.Added: October 2019TMA-3.1.3D
A person or group of persons
acting in concert , holding more than 50% of thevoting rights of a company will normally be free to acquire further shares without incurring any obligation under TMA-3.1 to make amandatory offer subject to Paragraph TMA-3.1.3E.Added: October 2019Acquisition of voting rights by members of a group acting in concert
TMA-3.1.3E
An obligation to make a mandatory offer will normally arise whenever a group of persons
acting in concert collectively hold 30% or more of the voting rights of a company and as a result of an acquisition of the voting rights from another member of the group or from non-members, a single member comes to hold 30% or more of the voting rights of the company or, if holding between 30% and 50%, has acquired more than 1% of the voting rights in any period of 6 months.Added: October 2019Placing and Other Arrangements
TMA 3.1.4
[This Paragraph was deleted in April 2013].
Deleted: April 2013TMA-3.1.5
An agreement between a shareholder and financial institutions and lending institutions, where the shareholder borrows money for the acquisition of shares which gives rise to an obligation under Paragraph TMA-3.1.1 will not normally result in such institution becoming a concert party.
Amended: October 2019TMA-3.1.6
An
offer will not be required under Paragraph TMA-3.1.1 where control of theofferee company is acquired as a result of avoluntary offer made in accordance with Module TMA to all the holders of voting equity share capital and other transferable securities carrying voting rights.Amended: October 2019TMA-3.1.7
If a person acquires shares other than through trading on the
licensed exchange (exempted transaction) which makes the aggregate number of shares carryingvoting rights in which he is interested to 30% or more then the CBB must be consulted.Amended: October 2019TMA-3.1.8
If a person borrows or lends shares he will be treated as holding the
voting rights of such shares save for any borrowed shares which he has either on-lent or sold. CBB must be consulted in such cases before borrowing shares when taken together with shares he or any personacting in concert is interested in and shares already borrowed or lent by him or any personacting in concert would result in amandatory offer .Amended: October 2019Conditions and Consents
TMA-3.1.9
Except with the consent of CBB:
(a) Anofferor shall not include any other condition in amandatory offer other than the condition that theoffer is subject to theofferor having received acceptances which would result in theofferor and all personsacting in concert with theofferor holding in aggregate more than 50% of the voting rights; and(b) No acquisition of anyvoting rights in shares which would give rise to a requirement for amandatory offer may be made, if it is dependent on the passing of a resolution at any meeting of the shareholders of theofferor or upon any other conditions, consents or arrangements.Amended: October 2019
Amended: April 2013TMA-3.1.9A
An offer made under TMA-3.1 should normally be unconditional when the
offeror and personsacting in concert with it hold more than 50% of the voting rights before the offer.Added: October 2019Nature of Consideration
TMA-3.1.10
The consideration to be paid, or provided, for the acquisition of the
voting rights to which themandatory offer relates shall consist solely of cash, securities, or a combination thereof at not less than the highest price paid by theofferor or any personacting in concert with it for shares of that class of theofferee company during theoffer period and within 6 months prior to its commencement.Amended: October 2019TMA-3.1.11
The cash
offer , securities or a combination thereof for the purpose of Paragraph TMA-3.1.10 must remain open after theoffer has become or is declared unconditional for not less than 15 days thereafter.Amended: October 2019TMA-3.1.12
When directors sell shares to an
offeror which result in theofferor having to make amandatory offer , the directors must ensure that theofferor fulfils his obligation under this Module.Amended: October 2019TMA-3.1.13
Such directors must not resign, except with the consent of CBB, from the board of directors until the first closing date of the
takeover offer or the date when thetakeover offer becomes or is declared unconditional as to acceptances, whichever is the later.Amended: October 2019TMA-3.1.14
Until the
offer document has been posted, noofferor , or personsacting in concert , may be appointed to the board of theofferee company or any of its subsidiaries, or exercise or procure the exercise of the votes attaching to any shares in theofferee company.Amended: October 2019Whitewash Resolution/Exemption from Mandatory Offer
TMA-3.1.15
Relevant persons in anoffer subject to themandatory offer requirement may apply to the CBB to waive the obligation under the procedure set out formandatory offers , if themandatory offer is required as a result of:(a) Issuing new securities as consideration for an acquisition, cash injection or subsidiary loan; or(b) Fulfilment of obligations in respect of underwriting the issue of securities; or(c) Any other circumstance with CBB's approval.Amended: October 2019TMA-3.1.16
For purposes of Paragraph TMA-3.1.15, any application for an exemption from a
mandatory offer obligation must be submitted to the CBB before the obligation is triggered.Amended: October 2019TMA-3.1.17
The waiver will be subject to the following conditions:
(a) Obtaining an independent vote at a shareholders meeting of the offeree company (the Whitewash Resolution) to waive their right to receive a general offer from the offeror and partiesacting in concert with the offeror. For this purpose, "independent vote" means a vote by shareholders who are not involved in, or interested in, the transaction in question;(b) The whitewash resolution is separate from other resolutions;(c) Theofferor , partiesacting in concert , and parties not independent from them must abstain from voting on the whitewash resolution;(d) Theofferor , and partiesacting in concert , have not acquired and will not acquire any shares or instruments convertible into options, in respect of shares of theofferee company:(i) During the period between the proposal announcement and the date shareholders approve the whitewash resolution; and(ii) In the 6 months prior to the announcement of the proposal to issue new securities but subsequent to negotiations, discussions or the reaching of understandings or agreements with the directors of the company in relation to such issue;(e) An independentprofessional adviser shall be appointed by theofferee company to provide its independent shareholders with advice on the whitewash resolution;(f) Theofferee company must provide a circular to shareholders giving the particulars, at a minimum, information included in Appendix A under Part B of the CBB Rulebook Volume 6; and(g) Theofferor obtains the CBB's approval in advance.Amended: October 2019
Amended: April 2013TMA-3.1.18
The CBB waiver cannot be transferred or assigned to another person.
TMA-3.1.19
In the case of underwriting or placing of
offeree company securities, the CBB must be furnished with details of all proposed underwriters or placees.Amended: October 2019TMA-3.1.20
An announcement must be made by the
offeree company giving the result of the meeting and the number and percentage ofofferee company shares that theofferor has become entitled to as a result subsequent to the meeting at which the proposals are considered by shareholders.Amended: October 2019TMA-3.1.21
Immediately following the approval of the proposals at the shareholders' meeting, the
offeror will be free to acquire shares in theofferee company, subject to provisions under Module TMA.Amended: October 2019Prompt Registration of Transfers
TMA-3.1.22
[This Paragraph was moved to Paragraph TMA-2.8.7 in October 2019]
Amended: October 2019TMA-3.2 TMA-3.2 Partial Offer
CBB's Consent Required
TMA-3.2.1
CBB's consent is required for any
partial offer . CBB will normally grant consent in the case of anoffer which could not result in theofferor and personsacting in concert with it being interested in shares carrying 30% or more of the voting rights of a company.Amended: October 2019TMA-3.2.2
Consent will not normally be granted in the case of an
offer which could result in theofferor holding not less than 30%, and which must result in a holding of not more than 50% of the voting rights of a company.Amended: October 2019Acquisition Prior to the Offer
TMA-3.2.3
In the case of a
partial offer which could result in theofferor and personsacting in concert with it holding 30% or more, but which must result in their holding less than 100%, of the voting rights of a company, such consent will not normally be granted if theofferor or personsacting in concert with it have acquired, selectively or in significant numbers, voting rights in theofferee company during the 6 months preceding the application for consent or if voting rights have been acquired at any time after thepartial offer was reasonably in contemplation.Amended: October 2019Acquisitions During and After the Offer
TMA-3.2.4
In all
partial offers , theofferor and personsacting in concert with it must not acquire any interest in shares in theofferee company during theoffer period .Amended: October 2019TMA-3.2.5
The
offeror or any personacting in concert with theofferor , or any person who is subsequentlyacting in concert with any of them in the course of thepartial offer , must not acquire any interest in shares during the 12-month period following the end of theoffer period , except with the consent of CBB.Amended: October 2019Offer for between 30% and 50%
TMA-3.2.6
Any
partial offer which could result in theofferor holding 30% or more of the voting rights of a company must normally be conditional, not only on the specified number of acceptances being received, but also on approval of theoffer , signified by means of a separate box on the form of acceptance, being given by shareholders holding over 50% of the voting rights not held by theofferor and personsacting in concert with it. This requirement may be waived if over 50% of the voting rights of theofferee company are held by one independent shareholder who has indicated his approval.Amended: October 2019Control Position Warning
TMA-3.2.7
In the case of a
partial offer which could result in theofferor holding more than 50% of the voting rights of theofferee company, then this must be included in a prominent manner in theoffer document .Amended: October 2019TMA-3.2.8
Where a
partial offer made for a company with more than one class of equity share capital could result in theofferor and personsacting in concert with it being interested in shares carrying 30% or more of the voting rights, a comparableoffer must be made for each class.Amended: October 2019Precise Number of Shares to be Stated
TMA-3.2.9
A
partial offer must be made for a precise number of shares, such number must be stated, and theoffer may not be declared unconditional as to acceptances unless acceptances are received for not less than that number.Amended: October 2019Pro Rata Entitlement
TMA-3.2.10
Partial offers must be made to all shareholders of the class and arrangements must be made for those shareholders who wish to do so to accept in full for the relevant percentage of their holdings. Shares tendered in excess of this percentage must be accepted by theofferor from each shareholder in the same proportion as the number tendered to the extent necessary to enable him to obtain the total number of shares for which he has offered.Amended: October 2019TMA-3.2.11
[This Paragraph was moved to Section TMA-2.26 in October 2019].
TMA-3.2.12
[This Paragraph was moved to Section TMA-2.26 in October 2019].
TMA-3.3 TMA-3.3 Voluntary Offer
TMA-3.3.1
A
voluntary offer is atake-over offer for the voting shares of a company made by a person when he has not incurred an obligation to make amandatory offer for theofferee company under TMA-3.1.1.Amended: October 2019TMA-3.3.2
A
voluntary offer must be conditional upon theofferor receiving acceptances in respect of voting rights which, together with voting rights acquired or agreed to be acquired before or during theoffer , will result in theofferor and personacting in concert with it holding more than 50% of the voting rights.Amended: October 2019TMA-3.3.3
A
voluntary offer must not be made subject to conditions whose fulfilment depends on the subjective interpretation or judgement by theofferor or lies in theofferor's hands.TMA-3.3.4
Normal conditions, such as level of acceptance, approval of shareholders for the issue of new shares and listing, may be attached without reference to the CBB. The CBB should be consulted where other conditions would be attached.
TMA-3.3.5
Where any condition states that the approval of a regulatory authority is required and where such approval is given subject to certain terms and conditions which substantially change the terms and circumstances of the
offer , theofferor may, with the consent of the CBB, be permitted to withdraw itsoffer .Amended: October 2019TMA-3.3.6
Subject to Paragraph TMA-3.1.6, if during an
offer period of a non-mandatory offer, theofferor is obliged under Paragraph TMA-3.1.1 to make amandatory offer , CBB should be consulted in advance. Under such circumstances, theofferor is required to make an announcement.Amended: October 2019TMA-3.3.7
Voluntary offers made must, in respect of each class ofequity securities involved, be in cash or securities or a combination thereof at not less than the highest price paid by theofferor or any personacting in concert with it for voting rights of theofferee company during theoffer period and within 6 months prior to its commencement.Amended: October 2019Pre-Condition in Firm Offer Announcements and Offer Conditions
TMA-3.3.8
An
offer must not normally be subject to conditions or pre-conditions which depend solely on subjective judgements by the directors of theofferor or of theofferee company (as the case may be) or the fulfillment of which is in their hands.Amended: October 2019TMA-3.3.9
The CBB may be prepared to accept an element of subjectivity in certain circumstances especially in cases involving official authorisations or regulatory clearances, the granting of which may be subject to additional material obligations for the
offeror or theofferee company (as the case may be).Amended: October 2019TMA-3.3.10
[This Paragraph was deleted in October 2019].
Acceptability of Pre-Conditions
TMA-3.3.11
Except with the consent of the CBB, an
offer must not be announced subject to a pre-condition unless the pre-condition involves:(a) A material official authorisation; or(b) A regulatory clearance; and(c) Theoffer is publicly recommended by the board of theofferee company; or(d) The CBB is satisfied that it is likely to prove impossible to obtain the authorisation or clearance within the timetable.The CBB must be consulted in advance if a person proposes to include a pre-condition to which the posting of the
offer will be subject.Amended: October 2019
Amended: April 2013TMA-3.3.12
[This Paragraph was deleted in October 2019].
Invoking Conditions and Pre-Conditions
TMA-3.3.13
An
offeror must not invoke any condition or pre-condition so as to cause theoffer not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke the condition or pre-condition are of material significance to theofferor in the context of theoffer . The acceptance condition is not subject to this provision.Amended: October 2019TMA-3.3.14
Following the announcement of a firm intention to make an
offer , anofferor must use all reasonable efforts to ensure the satisfaction of any conditions or pre-conditions to which theoffer is subject.Amended: October 2019Invoking Offeree Protection Conditions
TMA-3.3.15
An
offeree company must not invoke, or cause or permit theofferor to invoke, any condition to anoffer unless the circumstances which give rise to the right to invoke the condition are of material significance to the shareholders in theofferee company in the context of theoffer .Amended: October 2019TMA-3.4 TMA-3.4 Compulsory Acquisitions (Squeeze-Out), Sell-Out and Delisting
Compulsory acquisition (squeeze-out) - Right of offeror to buy-out minority shareholders
TMA-3.4.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019TMA-3.4.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019TMA-3.4.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019TMA-3.4.4
Where an
offeror orofferor and personsacting in concert :(a) made anoffer for all the shares in anofferee company; and(b) have received acceptances of 90% or more of the offer shares of the offeree company,the
offeror , may within three months beginning immediately after the day on which theoffer receives 90% or more acceptances, acquire the remainingshares of theofferee company, by issuing a notice for compulsory acquisition, in the form or manner specified by the CBB (Appendix E of Part B of Volume 6), to all thedissenting shareholders subject to TMA-3.4.9.Added: January 2022TMA-3.4.5
Where the
offeror orofferee and personsacting in concert , pursuant to anoffer , intends to exercise the compulsory acquisition right, theofferor must state in theoffer document its intention to exercise its power of compulsory acquisition in the event that the conditions under TMA-3.4.4 are satisfied.Added: January 2022TMA-3.4.6
For the purpose of Paragraph TMA-3.4.4(b), the acceptances must not include
shares already held on the date of theoffer by theofferor and personsacting in concert .Added: January 2022TMA-3.4.7
The notice for compulsory acquisition referred to in Paragraph TMA-3.4.4 must be:
(a) issued within 15 calendar days from the date theoffer is declared unconditional in all respects;(b) accompanied by a copy of a declaration by theofferor that the conditions for giving the notice are satisfied; and(c) delivered to thedissenting shareholders in person or by registered post.Added: January 2022TMA-3.4.8
Where the
offeror , despite best efforts, fails to deliver the compulsory acquisition notice, either in person or by registered post todissenting shareholders , and therefore theofferor contemplates alternative methods to serve the notice, including by electronic means, theofferor must consult the CBB prior to initiating any measures to serve the notice by an alternative method.Added: January 2022TMA-3.4.9
Where a notice for compulsory acquisition is issued by an
offeror todissenting shareholders , anddissenting shareholder(s) do not accept the notice for compulsory acquisition, such dissenting shareholder may, within sixty days from the date of the notice for compulsory acquisition, approach a competent court.Added: January 2022TMA-3.4.10
If pursuant to Paragraph TMA-3.4.9, an application to a competent court has been made by a
dissenting shareholder(s) , and where the case is pending (i.e. no ruling is issued on the subject matter), the offeror must pay, allot or transfer to all thedissenting shareholders , the funds or other consideration for the shares to which the notice for compulsory acquisition relates.Added: January 2022TMA-3.4.11
The
offeror must complete the compulsory acquisition settlement process for thedissenting shareholders after the sixty days period (duration during whichdissenting shareholders may approach a competent court) but before the end of the three months period, beginning immediately after the day on which the offer receives 90% or more acceptances.Added: January 2022TMA-3.4.12
The
offeror must acquire the shares to which the notice for compulsory acquisition relates on the same terms as theoffer .Added: January 2022TMA-3.4.13
Where alternative considerations were offered to
shareholders , anofferor must provide thedissenting shareholders the right to select their preferred consideration and specify the time period available to make the selection. While offering alternative considerations to thedissenting shareholders , theofferor must state in theoffer document which of those considerations will apply to the shares ofdissenting shareholders in the event thedissenting shareholders fails to make the selection within the specified time.Added: January 2022Right of Sell-Out by Dissenting Shareholders
TMA-3.4.14
Where an
offeror orofferee and personsacting in concert :(a) made an offer for all theshares in anofferee company; and(b) in pursuance to theoffer having received 90% or higher level of acceptance of the offershares to which theoffer relates,dissenting shareholders may, send a request to theofferor , requiring theofferor to acquire his/hershares within three months beginning immediately after the day on which theoffer receives 90% or more acceptances. Theofferor is bound to acquire thoseshares on the terms of thetake-over offer within three months from the date of receiving the request from thedissenting shareholders .Added: January 2022TMA-3.4.15
For the purposes of calculating 90% or more level of acceptances referred to in Paragraph TMA-3.4.14(b),
shares already held by the offeror and personsacting in concert on the date of the offer must not be taken into consideration.Added: January 2022TMA-3.4.16
An
offeror , upon achieving 90% or higher acceptance level specified in Paragraph TMA-3.4.14(b), must give alldissenting shareholders who have not accepted theoffer , a notice in the manner specified by the CBB (Appendix-F of Part B of Volume 6) regarding the sell-out rights that are exercisable by thedissenting shareholders .Added: January 2022TMA-3.4.17
The sell-out right notice, referred to in Paragraph TMA-3.4.16, must be issued within 15 calendar days from the date the
offer is declared unconditional in all respects.Added: January 2022TMA-3.4.18
The sell-out right notice referred to in Paragraph TMA-3.4.16 must be:
(a) accompanied by a copy of a declaration by theofferor that the conditions for giving the notice are satisfied; and(b) delivered to thedissenting shareholders in person or by registered post.Added: January 2022TMA-3.4.19
Where the
offeror , despite best efforts, fails to deliver the sell-out right notice, either in person or by registered post todissenting shareholders , and therefore theofferor contemplates alternative methods to serve the notice, including by electronic means, theofferor must consult the CBB prior to initiating any measures to serve the sell out right notice by alternative method.Added: January 2022TMA-3.4.20
A sell-out right notice under Paragraph TMA-3.4.16 must specify the period within which the sell-out right is exercisable and that such rights cannot be exercised after the end of that period.
Added: January 2022TMA-3.4.21
The sell-out right conferred on a
dissenting shareholder under Paragraph TMA-3.4.14 is exercisable by a written request addressed to theofferor .Added: January 2022TMA-3.4.22
Sell-out right does not apply if the
offeror has given thedissenting shareholders a notice for compulsory acquisition pursuant to Paragraph TMA-3.4.4.Added: January 2022Acknowledgement of Compulsory Acquisition or Sell-Out Right Notice
TMA-3.4.23
Pursuant to the provisions of compulsory acquisition and sell-out right, where a notice is served to
dissenting shareholders by theofferor , either to exercise the right of compulsory acquisition or to inform about the sell-out right of the dissenting shareholders, theofferor should put in place necessary measures to ensure thatdissenting shareholders who receive the letter duly acknowledge its receipt.Added: January 2022Delisting in Relation to a Takeover Offer
TMA-3.4.24
Upon completion of the acquisition of the remaining
shares pursuant to a compulsory acquisition by theofferor or sell out right exercised bydissenting shareholders , the offeree company must apply to the CBB to delist from thelicensed exchange .Added: January 2022TMA-3.4.25
In cases where the
offeror and personsacting in concert do not receive acceptances of 90% or more of the offer shares of theofferee company, the CBB may approve an application to delist theofferee company after theoffer subject to the following:(a) theofferee company convenes a general meeting to obtainshareholders approval on the delisting of theshares of theofferee company; and(b) the resolution to delist has been approved by at least 75% of the votes attaching to thedisinterested shares that are cast either in person or by proxy at the meeting. Theofferor and any personsacting in concert with theofferor must abstain from voting on the resolution.Added: January 2022TMA-3.5 TMA-3.5 [This Section was deleted in October 2019].
TMA-3.5.1
[This Paragraph was deleted in October 2019].
[This subsection was deleted in October 2019].
TMA-3.5.2
[This Paragraph was deleted in October 2019].
TMA-3.6 TMA-3.6 Restrictions Following an Offer
Delay of 12 Months before a Subsequent Offer
TMA-3.6.1
Except with the consent of the CBB, where an
offer has been announced or posted but has not become or been declared wholly unconditional and has been withdrawn or has lapsed, neither theofferor , nor any person who acted in concert with theofferor in the course of the originaloffer , nor any person who is subsequentlyacting in concert with any of them, may within 12 months from the date on which suchoffer is withdrawn or lapses either:(a) Announce anoffer or possibleoffer for theofferee company (including apartial offer which could result in theofferor and personsacting in concert with it being interested in shares carrying 30% or more of the voting rights of theofferee company);(b) Acquire any interest in shares of theofferee company if theofferor or any such person would thereby become obliged to make anoffer as per Section TMA-3.1;(c) Acquire any interest in, or procure an irrevocable commitment in respect of, shares of theofferee company if the shares in which such person, together with any personsacting in concert with him, would be interested and the shares in respect of which he, or they, had acquired irrevocable commitments would in aggregate carry 30% or more of the voting rights of theofferee company;(d) Make any statement which raises or confirms the possibility that anoffer might be made for theofferee company; or(e) Take any steps in connection with a possibleoffer for theofferee company where knowledge of the possibleoffer might be extended outside those who need to know in theofferor and its immediate advisers.Amended: October 2019Restrictions on a Partial Offer
TMA-3.6.2
The restrictions in Paragraph TMA-3.6.1 will also apply following a
partial offer :(a) Which could result in theofferor and personsacting in concert with it being interested in shares carrying not less than 30% but not holding shares carrying more than 50% of the voting rights of theofferee company whether or not theoffer has become or been declared wholly unconditional. When such anoffer has become or been declared wholly unconditional, the period of 12 months runs from that date; and(b) For more than 50% of the voting rights of theofferee company which has not become or been declared wholly unconditional.Amended: October 2019TMA-3.6.3
The restrictions in Paragraph TMA-3.6.1 will not normally apply following a
partial offer which could only result in theofferor and personsacting in concert with it being interested in shares carrying less than 30% of the voting rights of theofferee company.Amended: October 2019Delay of 6 Months
TMA-3.6.4
Except with the consent of the CBB, if a person, together with any person
acting in concert with him, holds shares carrying more than 50% of the voting rights of a company, neither that person nor any personacting in concert with him may, within 6 months of the closure of any previousoffer made by him to the shareholders of that company which became or was declared wholly unconditional, make a secondoffer to any shareholder in that company, or acquire any interest in shares in that company, on more favourable terms than those made available under the previousoffer . For this purpose the value of asecurities exchange offer shall be calculated as at the date theoffer closed. In addition, special deals with favourable conditions attached may not be entered into during this 6-month period.Amended: October 2019Restrictions on Dealings by a Competing Offeror
TMA-3.6.5
Except with the consent of the CBB, where an
offer has been one of two or more competingoffers and has lapsed, neither thatofferor , nor any personacting in concert with thatofferor , may acquire any interest in shares in theofferee company on more favourable terms than those made available under its lapsedoffer until each of the competingoffers has either been declared unconditional in all respects or has itself lapsed. For these purposes, the value of the lapsedoffer shall be calculated as at the day theoffer lapsed.Amended: October 2019TMA-4 TMA-4 Share Repurchases
TMA-4.1 TMA-4.1 Share Repurchases
Increase in Shareholding Deemed to be Acquisitions
TMA-4.1.1
If as a result of a
share repurchase a shareholder's proportionate interest in the voting rights of the repurchasing company increases, such increase will be treated as an acquisition of voting rights for purposes of this Module.Amended: October 2019TMA-4.1.2
As a result, a shareholder, or group of shareholders
acting in concert , could obtain or consolidate control of a repurchasing company and thereby become obliged to make amandatory offer . If so the CBB should be consulted at the earliest opportunity.Amended: October 2019TMA-4.1.3
In the case of a
share repurchase by general offer the CBB will treat an application for a waiver from the requirement to make amandatory offer as if it were an application for a whitewash waiver. The CBB will normally grant such a waiver if:(a) The TMA Module implications of theshare repurchase are disclosed in the repurchasing company'soffer document ;(b) Theshare repurchase is approved in accordance with applicable shareholder approval requirements by those shareholders who could not become obliged to make amandatory offer as a result of theshare repurchase ; and(c) For the purpose of this Section, dealings in relevant securities includeshare repurchases of the relevant securities of a repurchasing company.Amended: October 2019
Amended: April 2013Shareholders' Approval
TMA-4.1.4
During the course of an
offer , or even before the date of theoffer if the board of theofferee company has reason to believe that a bona fideoffer might be imminent, no redemption or purchase by theofferee company of its own securities may, except in pursuance of a contract entered into earlier, be effected without the approval of the shareholders at a general meeting. The notice convening the meeting must include information about theoffer or anticipatedoffer . Where an obligation or other special circumstance exists without a formal contract, the CBB must be consulted and its consent to proceed without a shareholders' meeting obtained.Amended: October 2019Disclosure
TMA-4.1.5
Dealings in relevant securities include the purchase of, or taking or exercising an option over, any of its own relevant securities by the offeree company. Shares repurchased by the offeree company are not considered outstanding for the purposes of voting, dividend or earnings per share calculations. Shares repurchased shall not be shown in the financial statements of the offeree company as a direct deduction from the outstanding shares or paid up share capital but must be represented as a deduction from other reserves and retained earnings. Therefore, listed companies shall not be entitled to repurchase its own shares unless it has sufficient distributable reserves or retained earnings. The total amount of securities of the relevant class remaining in issue following the redemption or purchase must also be disclosed.
Amended: October 2019Disclosure in the Offeree Board Circular
TMA-4.1.6
The
offeree board circular must state the amount of relevant securities of theofferee company which theofferee company has purchased during the period commencing 6 months prior to theoffer period and ending with the latest practicable date prior to the posting of the document, and the details of any such redemptions and purchases, including dates and prices.Amended: October 2019Redemption or Purchase of Securities by the Offeror Company
TMA-4.1.7
The
offer document must state (in the case of asecurities exchange offer only) the amount of relevant securities of theofferor which the offeror has purchased during the period commencing 6 months prior to theoffer period and the details of any such purchases, including dates and prices.Amended: October 2019Repurchase Limit
TMA-4.1.8
A company listed on a
licensed exchange may repurchase its own shares, after obtaining shareholder approval up to a maximum of 10% of its issued and paid-up share capital. The CBB's prior approval must be sought before the company can repurchase its own shares.Amended: October 2019TMA-4.1.9
The shares repurchase can be used by the company for the purpose of:
(a) Employee Stock Option Plan;(b) Capital reorganisation schemes;(c) Reselling such shares in order to support its share price and liquidity on alicensed exchange ; or(d) For any other purpose with CBB approval.Amended: October 2019
Amended: April 2013TMA-4.1.10
If the shares repurchased are not utilized for the purpose outlined in Paragraph TMA-4.1.9 for a period of 12 months without the consent of the CBB, such shares shall be considered redeemed and must be resold within the specified period.
Amended: October 2019Appendices Appendices
Appendix TMA-A Information to be Included Supporting a Whitewash Resolution
(a) Details of the proposed issue of new securities or convertibles;(b) The dilution effect of issuing the new shares, or upon the exercise or conversion of th convertibles to be issued, to existing holders of voting rights;(c) The number and percentage of voting rights in the offeree company and the number of instruments convertible into, rights to subscribe for and option in respect of shares in the offeree company (other than the convertibles to be issued) held by the offeror and its concert parties as at the latest practicable date;(d) The number and percentage of voting rights to be issued to the offeror, or to be acquired by the offeror upon the exercise or conversion of the convertibles to be issued;(e) Where the proposal could result in the offeror holding shares carrying over 49% of the voting rights of the offeree company, there must be reference to this fact and to the fact that the offeror will be free to acquire further shares without incurring any obligation under TMA-3.1 to make a mandatory offer;(f) That shareholders, by voting for the whitewash resolution, are waiving their rights to a mandatory offer from the offeror at the highest price paid by the offeror and persons acting in concert with it for the shares of the offeree company in the past 6 months prior to the commencement;(g) That shareholders voting for the whitewash resolution could be foregoing the opportunity to receive a mandatory offer from another person who may be discouraged from making a mandatory offer due to the potential dilution effect of the convertibles;Appendix TMA-B Information Contents of the Public Announcement of Offer
The
public announcement made by an offeror or offeree shall contain the following particulars:(a) The issued and paid up share capital of the offeree company, the number of fully paid up and partly paid up shares;(b) The total number and percentage of shares proposed to be acquired by the offeror(c) The minimum offer price for each fully paid-up or partly paid up share;(d) Mode of payment of consideration;(e) The identity of the offeror(s) and in case the offeror is a company or companies, the identity of the management and, or the persons having control over such company(ies) and the group, if any, to which the company(ies) belong;(f) The existing holding, if any, of the offeror in the shares of the offeree, including holdings of persons acting in concert with him;(g) The existing shareholding, if any, of the merchant banker in the offeree;(h) Salient features of the agreement, such as:(i) The date;(ii) The name of the seller;(iii) The price at which the shares are being acquired;(iv) The manner of payment of the consideration; and(v) The number and percentage of shares in respect of which the offeror has entered into the agreement to acquire the shares; or(vi) The consideration, monetary or otherwise, for the acquisition of control over the offeree company, as the case maybe;(i) The highest and the average price paid by the offeror or persons acting in concert with him for acquisition, if any, of shares of the offeree company made by him during the twelve month period prior to the date of public announcement;(j) Object and purpose of the acquisition of the shares and future plans, if any, of the offeror for the target company, including disclosures whether the offeror proposes to dispose of or otherwise encumber any assets of the offeree in the succeeding two years, except in the ordinary course of business of the offeree;(k) Where the future plans are set out, the public announcement shall also set out how the offeror propose to implement such future plans. The offeror shall not sell, dispose of or otherwise encumber any substantial asset of the offeree except with the prior approval of the shareholders.(l) The date by which individual letters of offer would be posted to each of the shareholders;(m) The date of opening and closure of the offer and the manner in which and the date by which the acceptance or rejection of the offer would be communicated to the shareholders;(n) The date by which the payment of consideration would be made for the shares in respect of which the offer has been accepted;(o) Disclosure to the effect that firm arrangement for financial resources required to implement the offer is already in place, including details regarding the sources of the funds whether domestic, i.e. from banks, financial institutions, or otherwise;(p) Regulatory and statutory approvals, if any, required to be obtained for the purpose of acquiring the shares under the Commercial Company Law 2001 and/or any other applicable laws;(q) Whether the offer is subject to a minimum level of acceptance from the shareholders; and(r) Such other information as is essential for the shareholders to make an informed decision in regard to the offer.Amended: April 2013Appendix TMA-C Appendix TMA-C Offer Document for Takeovers, Mergers and Acquisitions
Offer and Offeror
The following details of the offeror must be included in the offer document:
(a) Name and address of the offeror and any financial advisor or other person making the offer on behalf of the offeror, and the principal members of the offeror's concert group;(b) The place of incorporation, a description of their capital structures, group structures, business and assets accompanied by a structural chart depicting the structure of the company.(c) If the offeror or persons acting in concert is a company, then the identity of the ultimate controlling shareholders, and the names of the directors and the directors of their ultimate parent companies, or where there is a listed company in the chain between such companies and their ultimate parent companies, the directors of such listed company;(d) A statement as to whether or not any securities acquired in pursuance of the offer will be transferred to any other persons, including the names of the persons of any such arrangement. Additionally, the terms and conditions of such arrangement;(e) CBB may at its discretion waive the above stated requirement (d); and(f) Offeror's intentions for the future of the companyDetails regarding the offeror's intentions for the future of the company must be included in the offer document:
(a) Continuation of the business of the offeree company;(b) Strategic plans for the offeree company, and its repercussions on employment;(c) Any major changes to be introduced in the business, including redeployment of the fixed assets of the offeree company;(d) Long term commercial justification for the proposed offer; and(e) Continued employment of the employees and management of the offeree company and of its subsidiaries.Amended: April 2013Shareholdings and Dealings
The following details of the offeror's shareholding in the offeree company and other material information must be included in the offer document:
(a) The shareholdings of the offeror in the offeree company;(b) In the case of securities exchange offers the shareholdings in the offeror and in the offeree company:(i) In which directors of the offeror are interested; and(ii) Which any persons acting in concert with the offeror own or control and the names of such persons;(c) By any persons who, prior to the posting of the offer document, have committed themselves to accept or reject the offer and the names of such persons;(d) Owned or controlled by a person with whom the offeror or any person acting in concert with the offeror has any arrangements involving rights over shares, and any agreement or understanding, formal or informal, relating to relevant securities which may be an inducement to deal or refrain from dealing; and(e) Dealings in offeror's shareholding during 6 months prior to offer period including prices, dates and volume.All conditions of the offer must be stated, including:
(a) The price and other considerations to be paid for the securities.(b) Whether the offer is conditional upon acceptances being received in respect of a minimum number and the last day on which the offer can become unconditional to acceptances. This must include particulars of all documents required, and procedures to be followed for acceptances of an offer; and(c) A statement by the offeror regarding the intentions of availing of any powers of compulsory acquisition.Amended: April 2013Market Prices of Offeree Company
The closing price of the securities of the offeree company which are listed on the licensed Exchange, and are subject of the offer must be included in the offer document, as they stand:
(a) On the latest practicable date prior to publication of the offer document;(b) On the last business day prior to the date of the initial announcement, if any;(c) On the last business day prior to the date of the announcement of a firm intention to make an offer; and(d) At the end of each of the calendar months during the period commencing 6 months prior to the commencement of the offer period and ending on the latest practicable date prior to the posting of the offer document.If any of the securities of the offeree company which are subject of the offer are not listed, any information available as to the number and price of transactions which have taken place during the period stated above should be stated along with the source.
The highest and lowest closing market prices with the relevant dates during the period commencing 6 months prior the commencement of the offer period and ending on the latest practicable date prior to the posting of the offer document must be included in the offer document.
Comparisons issued by the offeror between the value of the offer and previous prices of the offeree company's securities, then a comparison between the current value of the offer and the price of the offeree company's securities on the last business day prior to the commencement of the offer period must be included.
Information should also be provided for securities of the offeror if the consideration for the offer involves such securities.
Amended: April 2013Offeror's Business
Except with the consent of CBB, the following must be included in the offer document for all types of offers:
(a) The nature of the offeror's business, its principal activities and its financial and trading prospects;(b) Details of the last 3 financial years for which the information has been published, turnover, net profit or loss before and after taxation, the charge for tax (where applicable), extraordinary items, minority interests, the amount absorbed by dividends and earnings and dividends per share;(c) A statement of the assets and liabilities shown in the last published audited accounts;(d) If provided in the last published audited accounts, a cash flow statement and any other primary statement shown;(e) All material changes in the financial or trading position or outlook of the offeror, following the last published audited accounts or a statement that there are no material changes;(f) Significant accounting polices together with any points from the notes to the relevant published accounts which are of major relevance to an appreciation of the figures;(g) If, due to a change in an accounting policy, figures are not comparable to a material extent, this should be disclosed and the approximate amount of the resultant variation should be stated;(h) Except for cash offer seeking to privatize the offeree company, all offer documents must contain a description of how the offer is to be financed and the source of the finance. The principal lenders or arrangers of such finance must be named; and(i) If any arrangements are made where the offeror intends that the payment of interest on repayment of or security for any liability will depend to an extent on the business of the offeree company, then a description of the arrangements must be included.Amended: April 2013Financial Information
Where the offer includes an element of cash or any other asset except new securities to be issued by the offeror company, then an independent financial advisor must include a confirmation that sufficient resources are available to satisfy full implementation of the offer.
When an offer involves issuance of unlisted securities, the value of such securities estimated by an advisor, including the assumptions and method used to arrive at that value must be stated.
The offer document must contain a statement to the effect that settlement of the consideration to which any shareholder is entitled under the offer will be implemented in full in accordance with the terms of the offer.
Arrangements
If any arrangement involving rights over shares, any indemnity arrangement, and any agreement or understanding, formal or informal, relating to relevant securities which may be an inducement to deal or refrain from dealing exist between the offeror or any person acting in concert should be stated, otherwise it should be stated that no such arrangements have been made.
The following regarding any arrangements or agreements made between the offeror and another party should be included in the offer document:
(a) Details of compensation arrangements to be given to any directors of the offeree company in connection with the offer; and(b) A statement to whether any agreement, arrangement or understanding, including any compensation agreement exists; including its details, in connection with the offer, between the offeror or any person acting in concert with it and the directors or shareholders of the offeree company.Amended: April 2013Offering of Securities
The offeror company should include the following in the offer document when the offeror is offering its securities in exchange for the securities of the offeree company:
(a) The nature of its business and its financial and trading prospects;(b) The date and country of its incorporation;(c) The address of its head office;(d) The authorized and issued share capital and the rights of the shareholders in respect of capital, dividends and voting;(e) A precise description of the rights of the holders of the securities, including as to ranking for dividends and capital;(f) Details of shares issued and shares repurchased starting the end of the last financial year of the offeror;(g) Details of options, warrants and conversion rights affecting shares in the offeror;(h) Details of any reorganisation of capital during the 2 financial years previous to the commencement of the offer period;(i) Details of any bank overdrafts or loans, or other similar transactions, mortgages, charges, guarantees or other material contingent liabilities of the offeror and any of its subsidiaries, or, if there are no such liabilities, a statement to that effect. Details should be not more than 3 months preceding the latest practicable date prior to the posting of the document;(j) Details of any material litigation to which the offeror is, or may become, a party;(k) Details of every material contract entered into 2 years prior to the commencement of the offer period;(l) When and how the documents of title to the securities will be issued;(m) The effect of the offer on the directors of the offeror. If there will be no effect, this must be stated; and(n) The effect of full acceptance of the offer upon the offeror's assets, liabilities, profits and business which may be significant for a proper appraisal of the offer. This does not require a profit forecast to be made.Amended: April 2013Appendix TMA-D Appendix TMA-D Offeree Board Circular
The offeree board circular must include the following regarding the view of the board:
(a) The names of the directors of the offeree company;(b) The recommendation of the directors as to whether they accept or reject the offer, or a statement that the directors are unable to make a recommendation, in addition to their reasons for giving the recommendation or for making no recommendation; and(c) A copy of the written advice of the offeree company's financial advisors.Amended: April 2013Shareholdings and Dealings
The document of the offeree company advising its shareholders on an offer (whether recommending acceptance or rejection of the offer) must state:
(a) The shareholdings of the offeree company in the offeror;(b) The shareholdings in the offeree company and in the offeror in which directors of the offeree company are interested;(c) The shareholdings in the offeree company and in the offeror (in the case of a securities exchange offer only):(i) Owned or controlled by the independent professional adviser to the offeree company; or(ii) By funds whose investments are managed by the adviser on a discretionary basis; and(d) Whether the directors of the offeree company intend, in respect of their own beneficial shareholdings, to accept or reject the offer.If in any of the above categories there are no shareholdings, then this fact should be stated. Where the persons mentioned above have dealt for value in shares during the six months prior to the offer period, the same should be disclosed (whether there is an existing holding or not).
The above disclosure details must include dates and prices of the transaction.
Amended: April 2013Share Capital of Offeree Company
The following information about the offeree should be disclosed:
(a) The authorised and issued capital, and the rights of the shareholders in respect of capital, dividends and voting;(b) The number of shares issued since the end of the last financial year; and(c) Details of options, warrants and conversion rights affecting shares in the offeree company.Amended: April 2013Financial Information
The offeree circular must include the following information about the offeree company:-
(a) The financial information of the last 3 financial years for which the information has been published, turnover, net profit or loss before and after taxation, the charge for tax, extraordinary items, exceptional items, minority interests, the amount absorbed by dividends, and earnings and dividends per share;(b) A statement of the assets and liabilities shown in the last published audited accounts;(c) A cash flow statement if provided in the last published audited accounts;(d) Any other primary statement shown in the last published audited accounts;(e) All material changes in the financial or trading position or outlook of the offeree company subsequent to the last published audited accounts or a statement that there are no known material changes;(f) Details relating to items referred to (a) above in respect of any interim statement or preliminary announcement made since the last published audited accounts;(g) Significant accounting policies together with any points from the notes to the relevant published accounts which are of major relevance to an appreciation of the information contained above (a) to (f);(h) Details of any qualification contained in the auditors' report in respect of each of the last 3 financial years or a statement that there is no such qualification; and(i) Where, because of a change in accounting policy, figures are not comparable to a material extent, this should be disclosed and the approximate amount of the resultant variation should be stated.Amended: April 2013Director's Service Agreements
The offeree board circular must contain particulars of all service contracts of any director:
(a) Which, have been entered into or amended within 6 months before the commencement of the offer period;(b) Which are continuous contracts with a notice period of 12 months or more; or(c) Which are fixed term contracts with more than 12 months to run irrespective of the notice period.The particulars must be given of the earlier contracts, if any, which have been replaced or amended as well as the current contracts. If no disclosures are required to be made under this paragraph, this should be stated.
MAM — Prohibition of Market Abuse and Manipulation
MAM-A MAM-A Introduction
MAM-A.1 MAM-A.1 Purpose
Executive Summary
MAM-A.1.1
The CBB believes that in order to achieve the basic objectives of securities regulation of ensuring investor protection and fairness, efficiency and transparency of the market, it is essential to ensure that prices of securities are determined by the collective judgment of uninterrupted market forces of supply and demand.
November 2010MAM-A.1.2
Market manipulation, misleading behaviour or conduct, insider trading and fraudulent or deceptive behaviour or conduct may distort the price discovery system and distort prices and thereby unfairly disadvantage the investors. While the CBB Law criminalizes the offence of market manipulation, the CBB seeks to maintain investor confidence on the integrity and fairness of the Kingdom's capital market by clearly laying down the various types of prohibited market behaviour or conduct to facilitate the understanding of the market participants in this regard.
November 2010MAM-A.1.3
The CBB's approach is to provide a strong and facilitative regulatory framework along with an effective enforcement of regulatory requirements. While the CBB favours an open and pragmatic approach to supervision within the boundaries set by the law and the CBB's regulations, and avoids a legalistic and confrontational style of supervision, it ensures effective enforcement of regulatory requirements.
November 2010MAM-A.1.4
The CBB seeks to clearly lay down the rules that will be applied transparently and consistently to ensure that the bona fide investors and market participants are not inconvenienced in their normal course of business, by enabling them to take all reasonable precautions and exercise due diligence to avoid their engagement in prohibited market behaviour or conduct. This is intended to drive the development and strategic positioning of the Kingdom's capital market and lay a strong foundation for further growth.
November 2010Legal Basis
MAM-A.1.5
Article 3(4) of the Central Bank of Bahrain and Financial Institutions (CBB) Law requires the CBB to protect the interests of depositors and the customers of financial institutions, and enhance the Kingdom's credibility as an international financial centre. Article 4(10) mandates the CBB to safeguard the legitimate interests of licensees' customers against the risks associated with the financial services industry.
November 2010MAM-A.1.6
Article (38) (a) mandates the Governor of the CBB to issue necessary directives to ensure the implementation of the CBB Law and regulations and the achievement of the objectives of the CBB. Article (38) (b) provides the CBB with the power to issue necessary directives to ensure the implementation of CBB Laws and regulations that aim to formulate the understanding and implementation of the CBB Law.
November 2010MAM-A.1.7
Chapter 1 of Part 5 of the CBB Law (Articles 97 to 105) defines insiders, inside information and market information, prohibits abuse of inside information, and provides defences. Particularly, Article 99 provides the CBB with the power to issue regulations concerning the necessary procedures and controls of publishing market information, and Article 105 states that a person shall not be guilty of inside dealing if he proves that the dealing was completed in accordance with CBB's price policies.
November 2010MAM-A.1.8
Chapter 2 of Part 5 of the CBB Law (Articles 106 and 107) deals with violation of market dealings:
Article 106 states that: "In the application of this law a person is guilty of market manipulation if he:
(1) Is engaged, or encourages others to engage, in any conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of any securities.(2) Is engaged, or encourages others, to engage in any conduct that may give an unrealistic picture of the market regarding the volume and prices of any securities."Article 107 states that: "A person shall not be guilty of market manipulation if he proves that his reasons for engaging in the alleged conduct were legitimate and that he had acted in conformity with the accepted market practices in the market concerned, or that he had acted in conformity with any price stablization rules made by the Central Bank, or if he believed on reasonable grounds that his conduct did not violate Article 106 of this Law and that he had taken all reasonable precautions and exercised all due diligence to avoid behaving in any way against the said Article."
November 2010MAM-A.1.9
Part 11 of the CBB Law (Articles 160 — 172) provides for penalties for various contraventions and violations of the provisions of the CBB Law:
Article 167 specifically provides penalty for the offences of abuse of inside information and states that: "Without prejudice to any greater penalty prescribed in the Penal Code or under any law, a person who contravenes Article (100) of this Law, while he is fully aware, shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars (10,000), or either penalty".
Article 168 specifically provides penalty for the offence of market manipulation and states that: "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a person who contravenes Article (106) of this Law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty".
November 2010MAM-A.1.10
This Module contains the CBB's Directive relating to the prohibition of market abuse and market manipulation and is issued under the powers available to the CBB under Article 38 of the CBB Law, read with the abovementioned provisions of the CBB Law. The Directive under this Module is applicable to all market participants and relevant persons, including but not limited to issuers of securities or any person acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, investment firms, business trusts, listed companies, any person acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts and any other person who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether such person is a market participant or not. These rules are issued by way of a legally-binding Directive.
November 2010MAM-A.2 MAM-A.2 Module History
Evolution of Module
MAM-A.2.1
This Module was first issued in January 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
November 2010MAM-A.2.2
The CBB's Disclosure Standards issued vide Circular No. ODG/407/03 dated 3rd December 2003 and available at www.cbb.gov.bh, inter-alia, contain ongoing obligations of issuers, including immediate announcement of material information, rules governing transactions of directors and senior management and guidelines for trading by directors and senior management and their related parties. The principles contained in the CBB's Disclosure Standards will become part of Module DIS (Disclosure) on its issuance.
November 2010MAM-A.2.3
The BSE's Guidelines on Issuers' Key Person Dealing Policies and available at www.bahrainstock.com, contains rules for the prohibition of abuse of inside information and guidelines and procedures for monitoring, supervising and handling of insiders' issues, as well as insiders' duty to declare and restrict their dealings.
November 2010MAM-A.2.3A
The most recent changes made to this Module are detailed in the table below:
Module Ref. Change Date Description of Changes MAM-2.14.1 04/2021 Changed guidance to Rule. MAM-2.14.2 04/2021 Added Paragraph number and changed from guidance to Rule. MAM-2.14.3 04/2021 Changed guidance to Rule. MAM-3.10.1 07/2021 Amended references in Paragraph. Superseded Requirements
MAM-A.2.4
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/ other references Provision Subject November 2010MAM-A.3 MAM-A.3 Interaction with Other Modules
MAM-A.3.1
All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.
November 2010MAM-A.4 MAM-A.4 Division of Responsibilities
MAM-A.4.1
While dealing with cases relating to market abuse and manipulation, a clear division of responsibilities between CBB as the securities regulator and the
licensed exchanges or thelicensed market operators orlicensed clearing houses ordepositories as a self regulatory organisation (SRO) is required:(a) To maximise the regulatory effectiveness;(b) To permit flexibility to thelicensed exchanges or thelicensed market operators in their functioning(c) To achieve greater efficiency and transparancy in the enforcement of the laws, rules and regulations;(d) To minimise the regulatory cost; and(e) To maintain market integrity and investor confidence.November 2010MAM-A.4.2
As a regulator, the CBB's role is as follows:
(a) Regulatory supervision, including the licensing, supervision, inspection, investigation and enforcement and regulatory oversight on the licensed exchanges, licensed market operators, licensed clearing houses and depositories and other SROs.(b) Maintaining and promoting fairness, efficiency and transparency within the capital market;(c) Acting as an enforcement agency with powers to investigate and take administrative, civil or criminal actions as it may deem appropriate;(d) Approving the rules, by-laws and internal regulations of thelicensed exchanges or thelicensed market operators ,licensed clearing houses ordepositories , whereby any change in the rules, by-laws and regulations of the SROs would need prior approval of the CBB.November 2010MAM-A.4.3
The
licensed exchange or thelicensed market operator orclearing house ordepository established as an SRO must comply with the requirements laid down under the CBB Law, rules and regulations, this Module and the other applicable laws and regulations.November 2010MAM-A.4.4
As an SRO, the main objective of the exchange or the operator or the clearing house or depository should include steps to:
(a) Promote fairness and investor protection;(b) Promote fair access to market facilities and information;(c) Promote the provision of timely and accessible relevant market data;(d) Promote the efficient regulation of its members;(e) Develop rules that are designed to set standards of behaviour for its members and to promote investor protection;(f) Take disciplinary actions for contraventions by markets and listed companies through an SRO's Disciplinary Action Committee(s);(g) Identify unlawful transactions and take preventative actions;(h) Maintain fairness of price discovery mechanism and ensure prices are determined by the genuine forces of demand and supply;(i) Monitor the trading and market on a continuous basis;(j) Report any suspected transactions or suspected market behaviour or suspected cases of market abuse or market manipulation.November 2010Role of Other CBB Licensees
MAM-A.4.5
All capital market service providers and listed companies in general, and members of the SROs in particular, must have the necessary infrastructure and systems to identify and report any irregular transactions or suspected cases of market abuse or market manipulation which they come across in the normal course of business to the CBB in the format given in paragraph MAM-A.4.6
November 2010Market Abuse Reporting Format
MAM-A.4.6
Persons subject to the obligations to report irregular transactions to the CMSD shall report in the following standard format:
Description of the transaction(s)
Details of the securities, including the code of the security (ISIN Number); the market(s) concerned; the original order's entry date/time, price and size; the times and sizes of the transaction(s); the type and characteristics of the order, etc.Reasons for Suspicion
Reasons for suspecting that the transaction(s) might constitute insider dealing/market abuse/ market manipulationIdentities of persons carrying out transaction(s)
Names, addresses, telephone number, location, account number, client Identification code used by the firm, etc.Identities of any other persons known to be involved in the transaction(s)
Names, addresses, telephone number, location, relation to person carrying out the transaction, position held, role played, etc.Capacity in which the person performing the transaction(s) acts
e.g. broker, underwriter, agent, investment/fund manager, auditor, insider.Any information which may be of significance (along with a list of any accompanying documents/evidence) Details of the person making notification
Name of person, name of firm, position held within firm, contact details, etc.Signed ........... (person making report)
Dated ........... (date of report)November 2010MAM-A.4.8
Where the information specified to be reported is not available at the time of reporting, the report shall include at least the reasons why the reporting persons suspect that the transactions might constitute insider dealing or market manipulation. All remaining information shall be provided to the CMSD as soon as it becomes available.
Persons making suspicious transactions reports therefore, do not need to have all the required information before contacting the CMSD. If the case is one which (the persons subject to the reporting obligation consider) needs to be brought to the attention of the CMSD urgently, then the person(s) concerned shall make the first contact quickly. This can be done by telephone if appropriate, giving the basic details and reasons for suspicion, followed by written confirmation. The other information can be supplied subsequently.
November 2010MAM-B MAM-B Scope of Application
MAM-B.1 MAM-B.1 Scope
MAM-B.1.1
This Module shall apply to:
(a) Any behaviour or conduct occurring within Bahrain; or any transaction or expected transaction done by or on behalf of any person(s) within Bahrain in relation to securities offered, issued or listed in Bahrain or elsewhere;(b) Any behaviour or conduct occurring outside Bahrain or any transaction or expected transaction done by or on behalf of any person(s) outside Bahrain in relation to securities offered, listed or issued in Bahrain;(c) Any behaviour or conduct occurring within Bahrain; or any transaction or expected transaction done by or on behalf of any person(s) within Bahrain in relation to:(i) Futures contracts, whether traded on a futures market in Bahrain or elsewhere; or(ii) Leveraged foreign exchange trading contracts, whether in Bahrain or elsewhere; and(d) Any behaviour or conduct occurring outside Bahrain; or any transaction or expected transaction done by or on behalf of any person(s) outside Bahrain in relation to:(i) Futures contracts traded on a futures market in Bahrain;(ii) Leveraged foreign exchange trading contracts in Bahrain; or(iii) Leveraged foreign exchange trading contracts that are accessible from Bahrain.November 2010MAM-B.1.2
This Module is applicable to all market participants and relevant persons, including but not limited to issuers of securities or any person acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, investment firms, business trusts, collective investment undertakings, listed companies, any person acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts and any other person who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether such person is a market particpant or not.
November 2010MAM-B.2 MAM-B.2 Definitions
For the purpose of this Module, the following definitions shall apply:
November 2010MAM-B.2.1
"A Person Associated with another Person":
(1) Any reference in this Module to a person associated with another person shall be construed as a reference to:(a) Where the other person is a company:(i) A director or secretary of the company;(ii) A related company; or(iii) A director or secretary of such related company;(b) Where the matter to which the reference relates is the extent of a power to exercise, or to control the exercise of, the voting power attached to voting shares in a company, a person with whom the other person has, or proposes to enter into, an agreement, arrangement, understanding or undertaking, whether formal or informal, or express or implied:(i) By reason of which either of those persons may exercise, directly or indirectly, control the exercise of, or substantially influence the exercise of, any voting power attached to a share in the company;(ii) With a view to controlling or influencing the composition of the board of directors, or the conduct of affairs, of the company; or(iii) Under which either of those persons may acquire from the other of them shares in the company or may be required to dispose of such shares in accordance with the directions of the other of them;except that in relation to a matter relating to shares in a company, a person may be an associate of the company and the company may be an associate of a person;(c) A person with whom the other person is acting, or proposes to act, in concert in relation to the matter to which the reference relates;(d) Where the matter to which the reference relates is a matter, other than the extent of a power to exercise, or to control the exercise of, the voting power attached to voting shares in a company:(i) Subject to paragraph (2) a person who is a director of a company of which the other person is a director; or(ii) A trustee of a trust in relation to which the other person benefits or is capable of benefiting otherwise than by reason of transactions entered into in the ordinary course of business in connection with the lending of money;(e) A person with whom the other person is, according to any subsidiary legislation made under this Module, to be regarded as associated in respect of the matter to which the reference relates;(f) A person with whom the other person is, or proposes to become, associated, whether formally or informally, in any other way in respect of the matter to which the reference relates; or(g) Where the other person has entered into, or proposed to enter into a transaction or has done, or proposes to do so, any other act or thing, with a view to becoming associated with a person as referred to in sub-paragraph (a), (b), (c), (d), (e) or (f), that last-mentioned person.(2) Where, in any proceedings under this Module, it is alleged that a person referred to in paragraph (1) (d) (i) was associated with another person at a particular time, the first-mentioned person shall not be considered to be so associated in relation to a matter to which the proceedings relate unless the person alleging the association proves that the first-mentioned person at that time knew or ought reasonably to have known the material particulars of that matter.(3) A person shall not be considered to be associated with another person by virtue of paragraph (1) (b), (c), (e) or (f) by reason only of one or more of the following:(a) That one of those persons furnishes advice to, or acts on behalf of, the other person in the proper performance of the functions attaching to his professional capacity or to his business relationship with the other person;(b) That one of those persons, a customer, gives specific instructions to the other, whose ordinary business includes dealing in securities, trading in futures contracts or leveraged foreign exchange trading, to acquire shares on the customer's behalf in the ordinary course of that business;(c) That one of those persons has sent, or proposes to send, to the other a take-over offer, or has made or proposes to make, offers under a take-over announcement, within the meaning of the Take-overs, Mergers, Acquisitions and Share Repurchases (TMA) Module in relation to shares held by the other;(d) That one of those persons has appointed the other, otherwise than for valuable consideration given by the other or by an associate of the other, to vote as a proxy or representative at a meeting of members, or of a class of members of a company.November 2010MAM-B.2.2
"Beneficial Owner" the term "beneficial owner" of securities for the purposes of this Module refers to any person who, even if not the recorded owner of the securities, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities, or to receive the economic benefit of ownership of the securities. A person is also considered to be the "beneficial owner" of securities if that person has the right to acquire such securities within a certain period of time, either by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through issuers in which they have a "controlling interest", which means the direct or indirect power to direct the management and policies of the issuer, or any other entity in question.
November 2010MAM-B.2.3
"Capital Market Service provider" means any person licensed or authorised or involved in providing any activity specified under Article 80 of the CBB Law.
November 2010MAM-B.2.4
"Connected Persons" in relation to an individual means:
(a) The individual's spouse and his/her son, adopted son, stepson, daughter, adopted daughter, step-daughter, father, step-father, mother, step-mother, brother, step-brother, sister or step-sister, under his/her guardianship or control; or(b) A firm or company in which the individual or any of the persons mentioned in sub-paragraph (a) has control of not less than 10% of the voting power in the firm or company, whether such control is exercised individually or jointly; Connected persons in relation to a firm or company means another firm or company in which the first-mentioned firm or company has control of not less than 10% of the voting power in that other firm or company.November 2010MAM-B.2.5
"CMSD" means the Capital Markets Supervision Directorate of the Central Bank of Bahrain.
November 2010MAM-B.2.6
"Dealing in Securities" includes (whether as principal or agent) making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into an any agreement for or with a view to acquiring, disposing of, subscribing for, or underwriting securities.
November 2010MAM-B.2.7
"Director and Senior Management" includes any member of senior management, regardless of title, including:
(a) The issuer's directors;(b) Senior management, including the General Manager, Chief Executive Officers, Presidents, Heads of Finance, Heads of Business Departments;(c) Partners with unlimited liability, in the case of a limited partnership with share capital;(d) Nominees to serve in any of the aforementioned positions; and(e) Founders, if the issuer has been established for fewer than two years.November 2010MAM-B.2.8
(a) "Fraud" includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, and shall also include:(i) A knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment;(ii) A suggestion as to a fact which is not true by one who does not believe it to be true;(iii) An active concealment of a fact by a person having knowledge or belief of the fact;(iv) A promise made without any intention of performing it;(v) A representation made in a reckless and careless manner whether it be true or false;(vi) Any such act or omission as any other law specifically declares to be fraudulent;(vii) Deceptive behaviour by a person depriving another of informed consent or full participation;(viii) A false statement made without reasonable ground for believing it to be true;(ix) The act of an issuer of securities giving out misinformation that affects the market price of the security, resulting in investors being effectively misled even though they did not rely on the statement itself or anything derived from it other than the market price;and "fraudulent" shall be construed accordingly.Nothing contained in this paragraph shall apply to any general comments made in good faith in regard to:
(a) The economic policy of the government;(b) The economic situation of the country;(c) Trends in the securities market; or(d) Any other matter of a like nature.November 2010MAM-B.2.9
"Insider" means any person who has obtained inside information;
(a) By virtue of his employment or profession;(b) Being an officer or shareholder of the issuer of the securities; or(c) Through illegal means.A person may be an insider if he is already aware that such information is classified as inside information even though none of the above applies to him.
All persons who have access or come into possession of material inside information before its public release are considered insiders. Such persons include controlling shareholders, "directors and senior management", officers and employees, and frequently should also include any officials of the CBB and the Exchange who have access to such information, outside attorneys, accountants, auditors, underwriters, investment bankers, public relations advisers, advertising agencies, consultants and other independent contractors. The husbands, wives, immediate families and those under the control of insiders may also be regarded as insiders. Where acquisition or other negotiations are concerned, the above relationships apply to other parties to the negotiations as well. Further, for purposes of this Module, insiders include "tippees" who come into possession of material inside information.
November 2010MAM-B.2.10
"Inside Information" means information that;
(a) Is precise in nature relating directly or indirectly to one or more of the securities or the issuer thereof;(b) Has not been made public;(c) If made public, is likely to have a significant impact on the price of those securities or their derivatives;(d) Is, directly or indirectly, related to derivatives of commodities which the traders expect to be disclosed according to the market regulations.November 2010MAM-B.2.11
"Insider Trading" refers not only to the purchase or sale of an issuer's equity and debt securities, but also to the purchase or sale of puts, calls or other options with respect to such securities. Such trading is deemed to be done by an insider whenever he has any beneficial interest, direct or indirect, in such securities or options, regardless of whether they are actually held in his name. Included in the concept of "insider trading" is "tipping", or revealing inside information to outside individuals, to enable such individuals to trade in the issuer's securities on the basis of undisclosed information.
November 2010MAM-B.2.12
"Information" includes:
(a) Matters of supposition and other matters that are insufficiently definite to warrant being made known to the public;(b) Matters relating to the intentions, or the likely intentions, of a person;(c) Matters relating to negotiations or proposals with respect to:(i) Commercial dealings;(ii) Dealing in securities; or(iii) Trading in futures contracts;(d) Information relating to the financial performance of a company or an issuer, or otherwise;(e) Information that a person proposes to enter into, or had previously entered into one or more transactions or agreements in relation to securities or has prepared or proposes to issue a statement relating to such securities; and(f) Matters relating to the future.November 2010MAM-B.2.13
"Information Disclosed Widely Enough" for the purposes of this Module, information is disclosed widely enough if:
(a) It consists of readily observable matter;(b) Without limiting the generality of paragraph (a):(i) It has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information; and(ii) Since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed; or(c) It consists of deductions, conclusions or inferences made or drawn from either or both of the following:(i) Information referred to in paragraph (a);(ii) Information made known as referred to in paragraph (b) (i);(d) It is disclosed in the manner and within the timeframe stipulated by the CBB rules and regulations.November 2010MAM-B.2.14
"Market Information" means any published information about trading or non-trading in certain types of securities, their number, prices, range of price for trading or the identity of those involved or who may be involved, in any capacity, such as trading.
November 2010MAM-B.2.15
"Materiality" information is material if its omission or mis-statement could influence the economic decisions of the users taken on the basis of the financial statements. For the purpose of this Module, a reasonable person would be taken to expect information to have a material effect on the price or value of securities if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether or not to subscribe for, buy or sell the first-mentioned securities.
November 2010MAM-B.2.16
"Manipulation" includes any deliberate/reckless act or attempt or act, expression, omission or concealment or influence to interfere with the free and fair functioning of the market or to introduce misinformation or misleading appearance in the market, or to impede judgement of investors and market participants.
November 2010MAM-B.2.17
"Permanent Insider" means members of the Board of Directors of a company, its senior management, the Issuer itself, and such other persons as decided by the Issuer's Board to have access to inside information relating to the Issuer from time-to-time
November 2010MAM-B.2.18
"Profit" includes the avoidance of any loss.
November 2010MAM-B.2.19
"Purchase" in relation to securities, includes, in the case of an option contract under which a party acquires an option or right from another party, acquiring the option or right under the contract, or taking an assignment of the option or right, whether or not on another's behalf.
November 2010MAM-B.2.20
"Related Company" means where a company:
(a) Is the holding company of another company;(b) Is a subsidiary of another company; or(c) Is a subsidiary of the holding company of another company,that first-mentioned company and that other company shall for the purposes of this Module be deemed to be related to each other.
November 2010MAM-B.2.21
"Rumour" includes an unverified statement or account or explanation of events, circulating from person to person, whose veracity or authenticity or trueness is not immediately verifiable.
November 2010MAM-B.2.22
"Securities" means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:
(a)Shares in companies and othersecurities equivalent to shares in companies or other entities, and depositary receipts in respect of shares;(b)Bonds or other forms of debt, including depositary receipts in respect of suchsecurities ;(c)Warrants ;(d)Units, rights or interests (however described) of theparticipants in a collective investment scheme;(e)Options, futures and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);(f)Options, futures and any other derivative contract relating to commodities that can be physically settled;(g) Units to Real Estate Investment Trusts (REITs);(h) Index tracking products including Islamic indices;(i) Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such instrument on an exchange; and(j) Islamicsecurities , being those financial instruments that are Shari'a compliant.November 2010MAM-B.2.23
"Sell" in relation to securities, includes, in the case of an option contract under which a party acquires an option or right from another party:
(a) Grant or assign the option or right; or(b) Take, or cause to be taken, such action as releases the option or right, whether or not on another's behalf.November 2010MAM-B.2.24
"Trading and Procuring Trading in Securities" for the purposes of this Module, trading in securities that is ordinarily permitted on the securities market or future market shall be taken to be permitted on that securities market or futures market, even though trading in any such securities on that securities market or futures market is suspended.
For the purposes of this Module, but without limiting the meaning that the expression "procure" has apart from this paragraph, if a person incites, induces, or encourages an act or omission by another person, the first-mentioned person is taken to procure the act or omission by the other person.
November 2010MAM-B.2.25
"Temporary Insider" means any person who is an insider, but not a permanent insider.
November 2010MAM-B.2.26
"Person" means unless the context requires otherwise, a natural or legal person.
November 2010MAM-1 MAM-1 Accepted Market Practices
MAM-1.1 MAM-1.1 Accepted Market Practices
MAM-1.1.1
Accepted market practices are those practices that are reasonably expected on one or more financial markets and are accepted by the CBB.
November 2010MAM-1.1.2
Accepted market practices in no way constitute safe harbours similar to those provided by section MAM-4.1 (which deals with price stabilization).
November 2010MAM-1.2 MAM-1.2 Criteria for Assessment of a Market Practice
MAM-1.2.1
When assessing whether a market practice is acceptable, the CBB will take at least the following criteria into account:
(a) The level of transparency of the relevant market practice to the whole market;(b) The disclosure requirement of the relevant market practice by the market participants;(c) The need to safeguard the operation of market forces and the interplay of supply and demand, or safeguard the interest of the securities holders;(d) The degree to which the relevant market practice has an impact on market liquidity and efficiency;(e) The degree to which the relevant practice takes into account the trading mechanism of the relevant market and enables market participants to react properly and in a timely manner to the new market situation created by that practice;(f) The risk inherent in the relevant practice for the integrity of directly or indirectly, related markets, whether regulated or not, in the relevant securities within Bahrain;(g) The outcome of any inspection or investigation of the relevant market practice by the CBB, by any other authority or market operator with which the CBB cooperates, by any other authority or market undertaking acting on behalf or on the authority of the CBB, or by the courts acting on a referral from the CBB, in particular whether the relevant market practice breached rules or regulations designed to prevent market abuse, or codes of conduct, be it on the market in question or on directly or indirectly related markets within Bahrain;(h) The structural characteristics of the relevant market including whether it is regulated or not, the types of financial instruments traded and the type of market participants, including the extent of non-professional investor participation in the relevant marketHaving regard to (c) above, the CBB takes account in its assessment of how the relevant practice will affect market conditions, with particular reference to daily weighted average prices or daily closing prices.
November 2010MAM-1.2.2
The CBB periodically reviews accepted market practices, in particular taking into account significant changes to the relevant market environment, such as changes to trading rules or to market infrastructure.
November 2010MAM-1.2.3
Where an organization representing companies making public offers of securities, investment service providers, investors or market operators seeks the CBB's acceptance of a market practice, the CBB shall consult the other organizations concerned before deciding whether to accept or reject such practice.
November 2010MAM-1.2.4
The CBB will also consult other competent authorities in respect of existing practices, notably on markets that are comparable in terms of structures, volumes or types of transaction.
November 2010MAM-1.2.5
Where inspections or investigations of specific cases have already started, the consultation procedure referred to above may be delayed until the end of such inspections or investigations and possible related sanctions.
November 2010MAM-1.2.6
A market practice that was accepted following the consultation procedure shall not cease to be accepted without using the same procedure. Where appropriate, a CBB instruction shall specify the arrangements for implementing the market practice accepting procedure.
November 2010MAM-1.3 MAM-1.3 Market Abuse
MAM-1.3.1
For the purposes of this Module, market abuse is behaviour or conduct (whether by one person alone or by two or more persons jointly or in concert):
(a) Which occurs in relation to securities traded on a market to which this Module applies;(b) Which satisfies any one or more of the conditions set out in paragraph MAM-1.3.2; and(c) Which is likely to be regarded by a regular user of that market who is aware of the behaviour or conduct as a failure on the part of the person or persons concerned to observe the standard of behaviour or conduct reasonably expected of a person in his or their position in relation to the market.November 2010MAM-1.3.2
The conditions referred to in paragraph MAM-1.3.1 (b) are that:
(a) The behaviour or conduct is based on information which is not generally available to those using the market but which, if available to a regular user of the market, would or would be likely to be regarded by him as relevant when deciding the terms on which dealings or transactions in securities of the kind in question should be effected;(b) The behaviour or conduct is likely to give a regular user of the market a false or misleading impression as to the supply of, or demand for, or as to the price or value of, securities of the kind in question;(c) A regular user of the market would, or would be likely to, regard the behaviour or conduct as behaviour or conduct which would, or would be likely to, distort the market in securities of the kind in question.November 2010MAM-1.3.3
For the purposes of this Module, the behaviour or conduct which is to be regarded as occurring in relation to securities, includes behaviour or conduct which:
(a) Occurs in relation to anything which is the subject matter, or whose price or value is expressed by reference to the price or value of those securities; or(b) Occurs in relation to securities whose subject matter is those securities.November 2010MAM-1.3.4
Information which can be obtained by research or analysis conducted by, or on behalf of users of a market, is to be regarded for the purposes of this Module as being generally available to them.
November 2010MAM-1.3.5
Behaviour or conduct does not amount to market abuse if it conforms with a rule which includes a provision to the effect that behaviour or conduct conforming with the rule does not amount to market abuse.
November 2010MAM-1.3.6
Any reference in this Module to a person engaged in market abuse is a reference to a person engaged in market abuse whether alone or with one or more other persons.
November 2010MAM-1.3.7
In this Module; "behaviour or conduct" includes action or inaction; "regular user" in relation to a particular market means a reasonable person who regularly deals on that market in securities of the kind in question.
November 2010MAM-1.3.8
The types of behaviour or conduct that amount to market abuse include:
(a) Abuse of information:(i) Insider dealing;(ii) Improper disclosure;(iii) Misuse of information.(b) Market manipulation:(iv) Manipulating transactions;(v) Manipulating devices;(vi) Dissemination;(vii) Misleading behaviour and distortion.November 2010MAM-2 MAM-2 Prohibited Conduct in Possession of Inside Information
MAM-2.1 MAM-2.1 Prohibited Conduct with respect to Possession of Inside Information
MAM-2.1.1
Pursuant to Article 100 of the CBB Law a person who is in possession of inside information, as an insider shall not use such information to:
1) Deal in any securities to which that information relates;2) Encourage any person to deal in any securities to which that information relates;3) Disclose inside information to any other person, otherwise than in the proper performance of the functions of his employment, office or profession;4) Violate the rules governing the publishing of market information.November 2010MAM-2.2 MAM-2.2 Prohibited Conduct of Permanent Insiders
MAM-2.2.1
Without prejudice to rule MAM-2.1, where:
(a) A person who is a Permanent Insider to a company possesses information concerning that company that is not disclosed widely enough; and(b) The Permanent Insider knows or ought reasonably to know that:(i) The information is not disclosed widely enough; and(ii) If it were disclosed widely enough, it might have a material effect on the price or value of those securities of that company;rules MAM-2.2.2, MAM-2.2.3 AND MAM-2.2.4 shall apply.
November 2010MAM-2.2.2
The Permanent Insider must not (whether as principal or agent):
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities referred to in rule MAM-2.2.1; or(b) Procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities referred to in rule MAM-2.2.1.November 2010MAM-2.2.3
Where trading in the securities referred to in rule MAM-2.2.1 is permitted on the securities market of a licensed exchange, the Permanent Insider must not, directly or indirectly, communicate the information, or cause the information to be communicated to another person if the Permanent Insider knows, or ought reasonably to know, that the other person would or would be likely to:
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities; or(b) Procure a third person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.November 2010MAM-2.2.4
In any proceedings for a contravention of rules MAM-2.2.2 and MAM-2.2.3 against a Permanent Insider to a company referred to in rules MAM-2.2.1, MAM-2.2.2 and MAM-2.2.3, where the prosecution or plaintiff proves that the Permanent Insider was at the material time:
(a) In possession of information concerning the company to which he was connected; and(b) The information was not disclosed widely enough;
it shall be presumed, until the contrary is proved that the permanent insider knew at the material time that:(i) The information was not disclosed widely enough; and(ii) If the information were disclosed widely enough, it might have a material effect on the price or value of securities of that company.November 2010MAM-2.3 MAM-2.3 Prohibited Conduct by Other Persons in Possession of Inside Information
MAM-2.3.1
Without prejudice to section MAM-2.1, where:
(a) A person who is not a Permanent Insider (referred to in this section as the insider) possesses information that is not disclosed widely enough; and(b) The insider knows that:(i) The information is not disclosed widely enough; and(ii) If it were disclosed widely enough, it might have a material effect on the price or value of those securities;rules MAM-2.3.2 and MAM-2.3.3 shall apply.
November 2010MAM-2.3.2
The insider must not (whether as principal or agent):
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell any such securities; or(b) Procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.November 2010MAM-2.3.3
Where trading in the securities referred to in rule MAM-2.3.1 is permitted on the securities market of a licensed exchange, the insider must not, directly or indirectly, communicate the information or cause the information to be communicated to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to:
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell any such securities; or(b) Procure a third person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.November 2010MAM-2.4 MAM-2.4 Not Necessary to Prove Intention to Use
MAM-2.4.1
Without prejudice to the criminal law proceedings, for the avoidance of doubt, in any proceedings against a person for a contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3 it is not necessary for the prosecution or plaintiff to prove that the accused person or defendant intended to use the information referred to in rules MAM-2.2.1 (a) or MAM-2.3.1 (a) in contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3 as the case may be.
November 2010MAM-2.4.2
Without prejudice to the criminal law proceedings, in any proceedings against a person for a contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3, it is not necessary for the prosecution or plaintiff to prove the absence of facts or circumstances which if they existed would, by virtue of rules MAM-2.5 to MAM-2.15 or any other CBB regulations, preclude the act from constituting a contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3 as the case may be.
November 2010MAM-2.5 MAM-2.5 Exception for Redemption of Units in a Collective Investment Scheme
MAM-2.5.1
Sections MAM-2.2 or MAM-2.3 shall not apply in respect of the redemption of units in a collective investment scheme by a trustee or manager under a trust deed relating to that collective investment scheme in accordance with a buy-back covenant contained or deemed to be contained in the trust deed at a price that is required by the trust deed to be calculated, so far as is reasonably practicable, by reference to the underlying value of the assets less:
(a) Any liabilities of that collective investment scheme to which the units relates; and(b) Any reasonable charge for purchasing the units.November 2010MAM-2.5.2
The exception provided under rule MAM-2.5.1 will not be applicable to fund managers or trustees who are identified as insiders for the selling of underlying securities of a collective investment scheme for the purpose of redemption of units.
November 2010MAM-2.6 MAM-2.6 Exception for Underwriters
MAM-2.6.1
Sections MAM-2.2 and MAM-2.3 shall not apply in respect of:
(a) Subscribing for, or purchasing securities under an underwriting agreement or a sub-underwriting agreement;(b) Entering into an agreement referred to in paragraph (a); or(c) Selling securities subscribed for or purchased under an agreement referred to in paragraph (a).November 2010MAM-2.6.2
Sections MAM-2.2 and MAM-2.3 shall not apply in respect of the communication of information in relation to securities:
(a) To a person solely for the purpose of procuring the person to enter into an underwriting agreement in relation to any such securities; or(b) By a person who may be required under an underwriting agreement to subscribe for, or purchase any such securities if the communication is made to another person solely for the purpose of procuring the other person to do either or both of the following:(i) Enter into a sub-underwriting agreement in relation to any such securities;(ii) Subscribe for, or purchase any such securities.November 2010MAM-2.7 MAM-2.7 Attribution of Knowledge within Companies
MAM-2.7.1
For the purposes of this Module:
(a) A company is taken to possess any information which an officer of the company possesses and which came into his possession in the course of the performance of duties as such an officer; and(b) If an officer of a company knows or ought reasonably to know any matter or thing because he is an officer of the company, it is to be presumed, until the contrary is proved, that the company knows or ought reasonably to know that matter or thing.November 2010MAM-2.7.2
A company does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement at any time merely because of information in the possession of an officer of the company if:
(a) The decision to enter into the transaction or agreement was taken on its behalf by a person other than that officer;(b) It had in operation at that time arrangements that could reasonably be expected to ensure that the information was not communicated to the person who made the decision and that no advice with respect to the transaction or agreement was given to that person by a person in possession of the information; and(c) The information was not communicated and no such advice was given.November 2010MAM-2.8 MAM-2.8 Attribution of Knowledge with Partnerships and Limited Liability Partnership
MAM-2.8.1
For the purposes of this Module:
(a) A partner of a partnership or a limited liability partnership (as the case may be) is taken to possess any information:(i) Which another partner of the partnership or limited liability partnership (as the case may be) possesses and which came into such other partner's possession in his capacity as a partner of the partnership or limited liability partnership (as the case may be); or(ii) Which an employee of the partnership or a manager of a limited liability partnership (as the case may be) possesses and which came into the possession of such an employee or manager in the course of the performance of his duties as such an employee or manager; and(b) If a partner or employee of a partnership or a partner, manager or employee of a limited liability partnership (as the case may be) knows or ought reasonably to know any matter or thing in his capacity as such a partner, manager, or employee, it is to be presumed that every partner of the partnership or limited liability partnership (as the case may be) knows or ought reasonably to know that matter or thing.November 2010MAM-2.8.2
The partners of a partnership or limited liability partnership (as the case may be) do not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement at any time merely because one or more (but not all) of the partners, or a manager or managers, or an employee or employees, of the partnership or limited liability partnership (as the case may be) are in actual possession of information if:
(a) The decision to enter into the transaction or agreement was taken on behalf of the partnership or limited liability partnership by any one or more of the following persons:(i) A partner who is taken to have possessed the information merely because another partner, or a manager or employee of the partnership or limited liability partnership, was in possession of the information;(ii) An employee of the partnership or limited liability partnership or a manager of the limited liability partnership who was not in possession of the information;(b) The partnership or limited liability partnership had in operation at that time arrangements that could reasonably be expected to ensure that the information was not communicated to the person or persons who made the decision and that no advice with respect to the transaction or agreement was given to that person or any of those persons by a person in possession of the information; and(c) The information was not so communicated and no such advice was so given.November 2010MAM-2.8.3
A partner of a partnership or limited liability partnership (as the case may be) does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement otherwise than on behalf of the partnership or limited liability partnership merely because he is taken to possess information that is in the possession of another partner, a manager, or an employee of the partnership.
November 2010MAM-2.9 MAM-2.9 Exception for Knowledge of Person's Own Intentions Or Activities
MAM-2.9.1
An individual does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement in relation to securities merely because he is aware that he proposes to enter into, or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10 MAM-2.10 Exception for Companies and its Officers, etc.
MAM-2.10.1
A company does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement in relation to securities merely because it is aware that it proposes to enter into or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10.2
Subject to rule MAM-2.10.3, a company does not contravene section MAM-2.3 by entering into a transaction or agreement in relation to securities merely because an officer of the company is aware that the company proposes to enter into, or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10.3
Rule MAM-2.10.2 shall not apply unless the officer of the company mentioned in that rule became aware of the matters referred to in that rule in the course of the performance of duties as such an officer.
November 2010MAM-2.10.4
Subject to rule MAM-2.10.5, a person does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement on behalf of a company in relation to securities merely because he is aware that the company proposes to enter into, or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10.5
Rule MAM-2.10.4 shall not apply unless the person became aware of the matters referred to in that rule in the course of the performance of duties as an officer of the company or in the course of acting as an agent of the company.
November 2010MAM-2.11 MAM-2.11 Unsolicited Transactions by the Holder of a CBB License
MAM-2.11.1
The holder of a CBB license who acts as a broker to deal in securities or trade in futures contracts, or a representative of such a holder does not contravene sections MAM-2.2 or MAM-2.3 by subscribing for, purchasing or selling, or entering into an agreement to subscribe for, purchase or sell, securities that are traded on the stock market or futures market if:
(a) The licensed person entered into the transaction or agreement concerned on behalf of another person (referred to in this section as the principal) under a specific instruction by the principal to enter into that transaction or agreement which was not solicited by the licensed person;(b) The licensed person has not given an advice to the principal in relation to the transaction or agreement or otherwise sought to procure the principal's instructions to enter into the transaction or agreement; and(c) The principal is not an associate of the licensed person.November 2010MAM-2.12 MAM-2.12 Parity of Information
MAM-2.12.1
In any proceedings against a person for a contravention of sections MAM-2.2 or MAM-2.3 because the person entered into, or procured another person to enter into, a transaction or agreement at a time when certain information was in the first-mentioned person's possession, it is a defence if the court is satisfied that:
(a) The information came into the first-mentioned person's possession solely as a result of the information having been disclosed widely enough; or(b) The other party to the transaction or agreement knew, or ought reasonably to have known of the information before entering into the transaction or agreement.November 2010MAM-2.12.2
In any action against a person for a contravention of sections MAM-2.2 or MAM-2.3 because the person communicated information, or caused information to be communicated, to another person, it is a defence if the court is satisfied that:
(a) The information came into the first-mentioned person's possession solely as a result of the information having been disclosed widely enough; or(b) The other person knew, or ought reasonably to have known, of the information before the information was communicated.November 2010MAM-2.13 MAM-2.13 Defences
MAM-2.13.1
In line with Article 101 of the CBB Law: "The mere trading by any person with inside information in securities, or encouraging others to trade therein, shall not be considered as a violation to this chapter if,
(1) He did not, at the time, expect that he will make a profit due to the inside information;(2) He reasonably believed at the time of dealing that the information had been disclosed widely enough that none of those taking part in the dealing would be prejudiced by not being aware of the said information;(3) He would have acted as he did even if such information was not available to him."This defence will be available only in cases where the person has reasonable or sufficient grounds to believe that the information had been "Information disclosed widely enough" as referred to in this Module.
November 2010MAM-2.13.2
In line with Article 102 of the CBB Law: "A person with inside information shall not be violating this chapter if he proves that he did not expect, at the time of disclosure, any person to trade in such securities based on such information, or that he did expect such trading but never thought that such person would make profits because the disclosed information was an inside information."
This defence will be available only for cases where the disclosure of information is made in the proper performance of the functions, office or profession.
November 2010MAM-2.13.3
In line with Article 103 of the CBB Law: "A person shall not be violating this chapter by virtue of dealing in securities or encouraging another person to deal, if he proves that he had acted in good faith in the course of his business as a licensed mediator or his employment with a mediator."
This defence will be available only in cases where the person has acted in his capacity as an investment firm licensee or an underwriter and the transactions are covered by the exceptions provided under sections MAM-2.6 or MAM-2.11.
November 2010MAM-2.13.4
In line with Article 104 of the CBB Law: "An individual is not guilty of inside dealing by virtue of dealing in securities or encouraging another person to deal if he proves that:
(1) The information, which he had as an insider, was market information;(2) It was reasonable that any person in their position would have acted similarly despite having such information as an insider at the time. In determining the appropriateness of such action, a special consideration shall be given to the content of the information, the circumstances in which it was first acquired and in what capacity did he act at the time of dealing."This defence will be available only if the individual proves that there was parity of information available as per section MAM-2.12.
November 2010MAM-2.13.5
In line with Article 105 of the CBB Law: "A person shall not be guilty of inside dealing by virtue of dealing in securities or encouraging another person to deal if he proves that:
(1) The securities were, at the time of dealing, under consideration or negotiation, or that the dealing took place during the course of a series of such negotiations;(2) The dealing was intended to facilitate the negotiation of securities or execute a series of negotiations of such securities;(3) The dealing was completed in accordance with the Central Bank's price policies."The first two defences mentioned in this rule will be available only for exceptions specified in section MAM-2.9 or MAM-2.10. The third defence mentioned in this rule will be available only for price stabilization transactions undertaken by a market maker who should also be a Category 1 Investment Firm Licensee.
November 2010MAM-2.14 MAM-2.14 Restrictions on Insider's Trading
Trading by Permanent Insiders
MAM-2.14.1
Permanent Insiders must schedule their trading of securities issued by the company in such a manner that their trading will not undermine confidence in the securities market.
Amended: April 2021
November 2010Trading After Publication of Financial Statements
Following the publication of financial statements by a company, Permanent Insiders of that company must refrain from trading and wait until the commencement of the following day's trading session, or after 24 hours, whichever is less, after the publication of the financial statements have been released in the local newspapers.
November 2010MAM-2.14.2
Following the publication of financial statements by a company, Permanent Insiders of that company must refrain from trading and wait until the commencement of the following day's trading session, or after 24 hours, whichever is less, after the publication of the financial statements have been released in the local newspapers.
Amended: April 2021
November 2010Scope of the Restriction on Trading
MAM-2.14.3
The restrictions on trading must be applied to the listed company's Permanent Insiders. A Permanent Insider must also be responsible for compliance with the restriction on trading when the management of the securities of the Permanent Insider has been assigned to another party.
Amended: April 2021
November 2010MAM-2.14.4
The restriction on trading shall not be applied in cases where:
(a) Buying securities by subscribing or obtaining them directly from the company or its group in a public issue;(b) Receiving securities in consideration of redemption, merger, demerger, or as compensation in accordance with a public tender offer, or in another comparable manner;(c ) Receiving shares as dividends (bonus shares), or another form of payout from retained earnings;(d) Receiving securities as compensation for work or other performance or service;(e) Receiving securities as inheritance under a will, as a present, or as a result of partition of an estate, or by means of similar acquisition.November 2010MAM-2.15 MAM-2.15 Obligations of Insiders, Listed Companies and Brokerage Firms
Creation of Register
MAM-2.15.1
Permanent Insiders shall provide to the listed company their basic personal data and information for the purpose of creating a register of such details. The register must be maintained at its headquarters in Bahrain and be made available for investigation and inspection to the CBB at all times. The register shall be maintained and kept by the listed company for a minimum period of 5 years.
November 2010Changes in Declared Information
MAM-2.15.2
Any changes in personal data and information or change in beneficial ownership or holdings of securities shall be notified to the listed company by the end of the next business day following the date the change took place.
November 2010Obligations of Listed Companies
MAM-2.15.3
Listed companies shall organize regular supervision (at least annually) of the Permanent Insiders to verify the information declared to the company and the trading of the Permanent Insiders.
November 2010MAM-2.15.4
Listed companies shall, where necessary, case-by-case, verify the trading of securities of a Permanent Insider more diligently, for example if a Permanent Insider deals with a large volume of securities or is trading frequently.
November 2010MAM-2.15.5
Any violations of this Module or the requirement of a licensed exchange shall be reported immediately to the CBB.
November 2010Annual Verification
MAM-2.15.6
The register data shall be verified at least once a year before the Annual General Meeting by the internal auditor of the company. The result of such verification shall be forwarded to the CBB not more than 10 days after the date of the company's AGM.
November 2010Written Guidelines and Instructions
MAM-2.15.7
All listed companies must have their own written guidelines on Permanent Insiders in line with the Module and the requirements of the listed exchange. The company may define other instructions or restrictions, as it deems fit according to its situation.
November 2010MAM-2.15.8
The listed company's written guidelines on Permanent Insiders should be submitted to the licensed exchange for approval before being officially implemented. The company shall make its approved guidelines available to its Permanent Insiders, and to ordinary shareholders or any other interested parties.
November 2010MAM-2.15.9
Each listed company shall appoint an officer of the company to maintain and manage the register and requirements imposed by this Module and the licensed exchange.
November 2010Obligations of Capital Markets Service Providers
MAM-2.15.10
Capital Markets Service Providers shall lay down internal guidelines on the prevention of abuse of Inside Information, and compliance with this Module, and the requirements of a licensed exchange in respect of their staff, directors, proprietors and partners dealing in securities of any company listed or to be listed.
November 2010MAM-2.15.11
Capital Markets Service Providers are prohibited from entering any order by any Permanent Insider, if there is any suspicion that this Module or the requirements of a licensed exchange may be violated.
November 2010Obligations of Licensed Exchanges
MAM-2.15.12
The licensed exchanges shall have appropriate systems and procedures to prevent the abuse of inside information and to ensure prompt disclosure by listed companies of price sensitive information, in order to limit the possibility of abuse of inside information.
November 2010MAM-2.15.13
Licensed exchanges shall have appropriate functions and systems to monitor trading and the market on a continuous basis and detect the possible cases of contravention of this Module, including abuse of inside information.
November 2010MAM-2.15.14
Licensed exchanges shall report the detected suspected transactions, or suspected market behaviour or conduct, or suspected cases of market abuse to the CBB's Capital Markets Supervision (CMS) Directorate for further investigation.
November 2010MAM-3 MAM-3 Prohibited Market Conduct
MAM-3.1 MAM-3.1 Prohibited Market Conduct
MAM-3.1.1
Article 106 of the CBB Law states that a person is guilty of market manipulation if he engages or encourages to engage in any conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of any securities or that may give an unrealistic picture of the market regarding the volume and/or prices of any securities. In application of this Article 106 of the CBB Law, the CBB will consider that a person is guilty of market manipulation if he engages or encourages to engage in any act of commission or omission of the prohibited market behaviour or conduct listed in rule MAM-3.1.2.
November 2010MAM-3.1.2
No person shall directly or indirectly:
(a) Engage or encourage others to engage in any behaviour or conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of any securities.(b) Engage or encourage others to engage in any behaviour or conduct that may give an unrealistic picture of the market regarding the volume and/or prices of any securities.(c) Create or do anything that is intended or likely to create a false or misleading appearance:(i) Of active trading in any securities on a securities market;(ii) With respect to the market for, or the price of, such securities; or(iii) By engaging or encouraging others to engage in any act of conducting or attempting to conduct a manoeuver with the intention to impede normal functioning of a market.(d) Maintain, inflate, depress, stabilize, or cause fluctuations in the market price of any securities, or the trading volume of any securities by means of a purchase or sale of any securities that do not involve a change in the beneficial ownership of those securities, or by any fictitious transaction or device.(e) Engage or encourage others to engage in any fraudulent or misleading or manipulative practice, such as to:(i) Employ any device, scheme or artifice to defraud;(ii) buy, sell, intermediate or otherwise deal in securities in a fraudulent manner;(iii) Obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;(iv) Engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser; or(v) Induce, fraudulently, other persons to deal in securities, or trade in futures contracts.(f)Use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a licensed exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the CBB Law or the rules and regulations made thereunder, including the rules and regulations of licensed exchanges.(g)Manipulate or publish or cause to publish or report or cause to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities.(h) Indulge in price manipulation or any act or omission amounting to manipulation of the price or volume of a security.(i) Make a statement, promise, forecast or any other action, or disseminate information that is false or misleading and has or is likely to have an impact on the price or volume of securities.(j) Employ manipulative or deceptive devices or practices.(k) Disseminate information about illegal transactions.(i) Fail, intentionally or recklessly, to notify the licensed exchange or the CBB of such information as is required to be disclosed as per the CBB Law, rules and regulations, Modules on listing requirements, Disclosure Standards and AML/CFT of CBB's Rulebook Volume 6.(m) Indulge in manipulative or fraudulent or unfair trade practices in securities.(n) Advance or agree to advance any money to any person thereby inducing any other person to offer to buy any security in any issue only with the intention of manipulating or securing the minimum subscription to such issue.(o) Enter into a transaction in securities without the intention of performing it, or without the intention of change of ownership of such security.(p) Sell, deal or pledge stolen or counterfeit securities, whether in physical or dematerialized form.(q) Provide clients with such information relating to a security that cannot be verified by the clients before their dealing in such security.(r) Encourage clients to deal in securities solely with the object of enhancing his brokerage or commission.(s) Indulge in buying or selling securities in advance of a substantial client order, or whereby a futures or option position is taken about an impending transaction in the same or related futures or options contract.(t) Plant false or misleading news or rumours, or deceitful information which may induce sale or purchase of securities.November 2010MAM-3.2 MAM-3.2 False Trading and Market Rigging Transactions
MAM-3.2.1
Without prejudice to the provisions of the rule MAM-3.1.2 above, a person who:
(a) Effects, takes part in, is concerned in or carries out directly or indirectly, any transaction of purchase or sale of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities;(b) Makes or causes to be made an offer to sell any securities at a specified price where he has made or caused to be made or proposes to make or to cause to be made, or knows that a person associated with him has made or caused to be made or proposes to make or to cause to be made, an offer to purchase the same number, or substantially the same number of securities at a price that is substantially the same as the first-mentioned price; or(c) Makes or causes to be made an offer to purchase any securities at a specified price where he has made or caused to be made or proposes to make or to cause to be made, or knows that a person associated with him has made or caused to be made or proposes to make or to cause to be made, an offer to sell the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price,shall be deemed to have created a false or misleading appearance of active trading in securities on a securities market.
November 2010MAM-3.2.2
In any proceedings against a person for a contravention of rule MAM-3.1.2 (c) and (d) because of an act referred to in rule MAM-3.2.1, it is a defence if the defendant establishes that the purpose or purposes for which he did the act was not, or did not include, the purpose of creating a false or misleading appearance of active trading in securities on a securities market.
November 2010MAM-3.2.3
For the purposes of rule MAM-3.1.2 (c) and (d) and rule MAM-3.2.1, a purchase or sale of securities does not involve a change in the beneficial ownership if a person who had an interest in the securities before the purchase or sale, or a person associated with the first-mentioned person in relation to those securities, has an interest in the securities after the purchase or sale.
November 2010MAM-3.2.4
In any proceedings against a person for a contravention of rule MAM-3.2.1 in relation to a purchase or sale of securities that did not involve a change in the beneficial ownership of those securities, it is a defence if the defendant establishes that the purpose or purposes for which he purchased or sold the securities was not, or did not include, the purpose of creating a false or misleading appearance with respect to the market for, or the price of, securities.
November 2010MAM-3.2.5
The reference in rule MAM-3.2.1 to a transaction of purchase or sale of securities includes:
(a) A reference to the making of an offer to purchase or sell securities; and(b) A reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to purchase or sell securities.November 2010MAM-3.3 MAM-3.3 Fraudulent Dealings
Fraudulently Inducing Persons to Deal in Securities
MAM-3.3.1
Without prejudice to the provisions of rule MAM-3.1.2 (e), no person shall:
(a) By making or publishing, by any means, any statement, promise or forecast that he knows or ought reasonably to have known to be misleading, false or deceptive;(b) By any dishonest concealment of material facts;(c) By the reckless making or publishing of any statement, promise or forecast that is misleading, false or deceptive; or(d) By recording or storing in, or by means of, any mechanical, electronic or other device information that he knows to be false or misleading in a material particular;induce or attempt to induce another person to deal in securities.
November 2010MAM-3.3.2
In any proceeding against a person for a contravention of rule MAM-3.3.1 constituted by recording or storing information as mentioned in rule MAM-3.3.1 (d), it is a defence if it is established that, at the time when the defendant so recorded or stored the information, he had no reasonable grounds for expecting that the information would be available to another person.
November 2010MAM-3.3.3
In any proceedings against a person for a contravention of rule MAM-3.3.1, the opinion of any registered or public accountant as to the financial position of any company at any time or during any period in respect of which he has made an audit or examination of the affairs of the company according to recognised audit practice shall be admissible, for any party to the proceedings, as evidence of the financial position of the company at any time or during that period, notwithstanding that the opinion is based in whole or in part on book-entries, documents or vouchers or on written or verbal statements by other persons.
November 2010Employment of Manipulative and Deceptive Devices or Practices
MAM-3.3.4
Without prejudice to the provisions of rule MAM-3.1.2 (e), no person shall, directly or indirectly, in connection with the subscription, purchase or sale of any securities:
(a) Employ any device, practice, scheme or artifice to defraud;(b) Engage in any act or course of business which operates as a fraud or deception, or is likely to operate as a fraud or deception, upon any person;(c) Make any statement he knows to be false in a material particular; or(d) Omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.November 2010MAM-3.4 MAM-3.4 Dissemination of Information about Illegal Transactions
MAM-3.4.1
Without prejudice to the provisions of section MAM-3.1, no person shall circulate or disseminate, or authorise or be concerned in the circulation or dissemination of, any statement or information to the effect that the price of any securities will, or is likely, to rise or fall or be maintained by reason of a transaction entered into, or to be entered into, or other act or thing done or to be done in relation to such securities which to his knowledge, was entered into or done in contravention of section MAM-3.1, or if entered into or done would be in contravention of section MAM-3.1, if:
(a) The person, or a person associated with the person, has entered into or purports to enter into any such transaction or has done or purports to do any such act or thing; or(b) The person, or a person associated with the person, has received, or expects to receive, directly or indirectly, any consideration or benefit for circulating or disseminating, or authorising or being concerned in the circulation or dissemination, the statement or information.November 2010MAM-3.5 MAM-3.5 False or Misleading Statements
MAM-3.5.1
Without prejudice to the provisions of rule MAM-3.1.2 (e) and (f), no person shall make a statement, or disseminate information, that is false or misleading in a material particular and is likely:
(a) To induce other persons to subscribe for securities;(b) To induce the sale or purchase of securities by other persons; or(c) To have the effect of raising, lowering, maintaining or fixing the market price of securities;if, when he makes the statement or disseminates the information:
(a) He does not care whether the statement or information is true or false; or(b) He knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.November 2010MAM-3.6 MAM-3.6 Price Manipulation
MAM-3.6.1
Without prejudice to the provisions of rule MAM-3.1.2, no person shall effect, take part in, be concerned in or carry out, directly or indirectly, two or more transactions in securities, being transactions that have, or are likely to have, the effect of raising, lowering, maintaining or fixing the price of securities on a securities market, with intent to induce other persons to subscribe for, purchase or sell securities of the company or of a related company.
November 2010MAM-3.6.2
A reference to rule MAM-3.6.1 (a) or (b) to transactions in securities includes:
(a) A reference to the making of an offer to purchase or sell such securities; and(b) A reference to the making of an invitation, however expressed, that directly or indirectly invites a person to offer to purchase or sell such securities.November 2010MAM-3.7 MAM-3.7 Continuous Disclosure
MAM-3.7.1
This rule shall apply to:
(a) An entity the securities of which are listed for quotation on a licensed exchange;(b) A trustee of a business trust, where the securities of the business trust are listed for quotation on a securities exchange; or(c) A responsible person of a Collective Investment undertaking or business trust, where the units of the Collective Investment scheme are listed for quotation on a securities exchange.if the entity, trustee or responsible person is required by the licensed exchange under the listing rules or any other requirement of the licensed exchange to notify the licensed exchange of information on specified events or matters as they occur or arise for the purpose of the licensed exchange making that information available to a securities market operated by the licensed exchange.
November 2010MAM-3.7.2
The persons specified in rule MAM-3.7.1 shall not intentionally, recklessly or negligently fail to notify the licensed exchange of such information, as is required to be disclosed by the licensed exchange under the listing rules or any other requirement of the licensed exchange.
November 2010MAM-3.7.3
A contravention of rule MAM-3.7.2 shall not be an offence unless the failure to notify is intentional or reckless.
November 2010MAM-3.8 MAM-3.8 Fraudulent and Manipulative Practices in Offering Or Issuing Securities
MAM-3.8.1
Without prejudice to section MAM-3.1, no person shall either directly or indirectly:
(a) Obtain or participate in a subscription for any offering or issue of securities or use the proceeds thereof, in a fraudulent or manipulative manner, or in contravention of the CBB Law, the Offering Module or other applicable laws, rules and regulations; or(b) Induce or compel any person to surrender any rights attached to a security, including voting rights or the ability to appoint a proxy, either as a pre-condition for subscription of such security or otherwise;(c) Manipulate or fraudulently secure a minimum subscription of any offering or issue of securities, either by accepting a subscription in contravention of the Anti-Money Laundering (AML) and Combating Financial Crime (CFC) Laws and regulations, or by accepting incomplete subscription forms or otherwise.(d) Make a reference to the CBB's or any other authority's approval for the purpose of marketing of or obtaining subscription for any offering or issue of securities, or give a misleading appearance that such an approval or no-objection relates to financial soundness of any project or merits of any offering or issue of securities.November 2010MAM-3.9 MAM-3.9 Prohibited Conduct — Futures Contract and Leveraged Foreign Exchange Trading
False Trading — Futures Contracts and Leveraged Foreign Exchange Trading
MAM-3.9.1
Without prejudice to section MAM-3.1, no person shall create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any futures contract on a futures market or in connection with leveraged foreign exchange trading, or a false or misleading appearance with respect to the market for, or the prices of futures contracts on a futures market or foreign exchange, in connection with leveraged foreign exchange trading.
November 2010Bucketing
MAM-3.9.2
Without prejudice to section MAM-3.1 no person shall:
(a) Knowingly execute, or hold himself out as having executed, an order for the purchase or sale of a futures contract on a futures market, without having effected a bona fide purchase or sale of the futures contract in accordance with the business rules, practices and procedures of the licensed exchange;(b) Knowingly execute, or hold himself out as having executed, an order to make a purchase or sale of foreign exchange in connection with leveraged foreign exchange trading, without having effected a bona fide purchase or sale in accordance with the order.November 2010Manipulation of Price of Futures Contract and Cornering
MAM-3.9.3
Without prejudice to section MAM-3.1 no person shall, directly or indirectly:
(a) Manipulate or attempt to manipulate the price of a futures contract that may be dealt in on a futures market, or of any commodity which is the subject of such futures contract; or(b) Corner, or attempt to corner, any commodity which is the subject of a futures contract.November 2010Fraudulently Inducing Persons to Trade in Futures Contracts
MAM-3.9.4
Without prejudice to section MAM-3.1 no person shall:
(a) By making or publishing any statement, promise or forecast that he knows or ought reasonably to have known to be false, misleading or deceptive;(b) By any dishonest concealment of material facts;(c) By the reckless making or publishing of any statement, promise or forecast that is false, misleading or deceptive; or(d) By recording or storing in, or by means of hard copy or any mechanical, electronic or other device information that he knows to be false or misleading in a material particular;induce or attempt to induce another person to trade in a futures contract or engage in leveraged foreign exchange trading.
November 2010MAM-3.9.5
In any proceedings against a person for a contravention of rule MAM-3.9.4, constituted by recording or storing information as mentioned in rule MAM-3.9.4 (d), it is a defence if it is established that, at the time when the defendant so recorded or stored the information, he had no reasonable grounds for expecting that the information would be available to another person.
November 2010Employment of Fraudulent or Deceptive Devices and Practices
MAM-3.9.6
Without prejudice to section MAM-3.1 no person shall directly or indirectly, in connection with any transaction involving trading in a futures contract or leveraged foreign exchange trading:
(a) Employ any device, scheme or artifice to defraud;(b) Engage in any act, practice or course of business which operates as a fraud or deception, or is likely to operate as a fraud or deception, upon any person;(c) Make any false statement of a material fact; or(d) Omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.November 2010Dissemination of Information about Illegal Transactions
MAM-3.9.7
Without prejudice to section MAM-3.1 no person shall circulate, disseminate, or authorise or be concerned in the circulation of dissemination of, any statement or information to the effect that the price of a class of futures contracts or foreign exchange in connection with leveraged foreign exchange trading will, or is likely to, rise or fall or be maintained because of the market operations of one or more persons which, to his knowledge, are conducted in contravention of section MAM-3.1 if:
(a) The person, or a person associated with the person, has conducted such market operations; or(b) The person, or a person associated with the person, has received, or expects to receive, directly or indirectly, any consideration or benefit for circulating or disseminating or authorising or being concerned in the circulation or dissemination, the statement or information.November 2010MAM-3.10 MAM-3.10 Methods of Market Abuse and Manipulation
MAM-3.10.1
A person who engages or encourages others to engage in market manipulation by his acts of commission or omission will be liable for penalties under the CBB Law, irrespective of the methods used for market manipulation. Methods of market abuse and market manipulation may include but not be limited to the methods mentioned in rules MAM-3.10.2 to MAM-3.10.38.
(a) Abuse of information:Amended: July 2021
November 2010Insider Dealing
MAM-3.10.2
Frontrunning: Frontrunning (or trading ahead) occurs when a broker times the purchase or sale of shares of a security for his own account so as to benefit from the price movement that follows execution of large customer orders. Frontrunning involves a trader taking a position in a security to profit from advance non-public knowledge of an imminent order that may affect the market price of that security.
November 2010MAM-3.10.3
Tailgating: When a broker or adviser buys or sells a security for an informed client(s) and then immediately makes the same transaction in his or her own account.
November 2010MAM-3.10.4
Spreading False Information to Purchase at Bargain Prices: An unlawful practice occurring mainly on the internet. A small group of informed people attempt to push down a stock by spreading false information and rumours. If they are successful, they can purchase the stock at bargain prices.
November 2010Improper Disclosure
MAM-3.10.5
Concealing Ownership: This is a transaction or a series of transactions which is designed to conceal the ownership of a security via the breach of disclosure requirements through the holding of the instrument in the name of a colluding party (or parties). The disclosures are misleading in respect of the true underlying holding of the instrument. (This practice does not cover cases where there are legitimate reasons for securities to be held in the name of a party other than the beneficial owner; e.g. nominee holdings. Nor do all failures to make a required disclosure necessarily constitute market manipulation.)
November 2010MAM-3.10.6
Touting: The practice refers to any person who is paid directly or indirectly, to recommend the sale of any security, without disclosing this fact and the amount of compensation to be received. Once someone is paid to recommend a security, this information should be provided to the market. Touting is also an unlawful practice in the securities market, since it does not follow the principle of full disclosure to the market and gives an unfair advantage to some investors over others.
November 2010Misuse of Information
MAM-3.10.7
Pump and Dump: This practice involves taking a long position in a security and then undertaking further buying activity and/or disseminating misleading positive information about the security with a view to increasing the price of the security. Other market participants are mislead by the resulting effect on price and are attracted into purchasing the security. The manipulator then sells out at the inflated price. Pump and dump is a scheme that attempts to boost the price of a stock through brokers recommendations, internet forums, or cold calling based on false, misleading or greatly exaggerated statements, and the perpetrators of this scheme, who already have an established position in the company's stock, sell their positions after the hype has led to a higher share price.
November 2010MAM-3.10.8
Trash and Cash: Trash and cash (or "slur and slurp") is the opposite of pump and dump. A party will take a short position in a security; undertake further selling activity and/or spread misleading negative information about the security with the purpose of driving down its price. The manipulator then closes their position after the price has fallen.
November 2010MAM-3.10.9
Influencing Market Price without Controlling the Available Supply or Demand: An individual may not control the supply of a security or the asset underlying a derivative contract, but may use various other means to manipulate the price, such as disseminating false information about the relevant company or taking advantage of a congested market. False information about the company or the derivative or cash market, which influences the price of the company's shares or of the asset underlying a derivative contract may be disseminated in publicly filed financial statements, press releases, or through some other medium.
November 2010MAM-3.10.10
Boiler Room Sales: Boiler rooms use banks of telephones to make cold calls to as many potential investors as possible using high-pressure selling techniques to persuade investors to purchase "house stocks"- stocks that the firm buys or sells as a market maker or has in its inventory. Boiler room operators typically sell worthless shares or thinly traded stocks of "microcap" or "small cap" companies.
November 2010MAM-3.10.11
Cybersmear: Cybersmear is a practice in which individuals post malicious messages about businesses in online forums, to manipulate the stock or to hurt a company they have a grievance against.
November 2010MAM-3.10.12
Scalping: Scalping is the fraudulent trading practice that occurs when a person buys shares of thinly-traded, small-cap companies, recommending the companies to the general public, and then selling the majority of his shares when the increased demand generated by his favourable recommendations drove up the stock price.
November 2010MAM-3.10.13
False Market: A market where prices are manipulated and impacted by erroneous information, preventing the efficient negotiation of prices. These types of markets will often be marred by volatile swings because the true value of the market is clouded by the misinformation.
November 2010MAM-3.10.14
Short and Distort (Bear Raid): An unlawful practice employed by unethical investors who short-sell a stock and then spread unsubstantiated rumours and other kinds of unverified bad news in an attempt to drive down the equity's price and realize a profit.
November 2010MAM-3.10.15
Long and Distort: An unlawful practice employed by unethical investors who buy a stock and then spread unsubstantiated rumours and other kinds of unverified good news in an attempt to drive up the equity's price and realize a profit.
November 2010MAM-3.10.16
Stock Basher: An individual, either acting alone or on behalf of someone else, who attempts to devalue a stock by spreading false or exaggerated claims against a public company. After the stock's price has dropped, the basher, or the basher's employer, will then purchase the stock at a lower price than that he or she believes it is intrinsically worth.
(b) Market Manipulation:November 2010Manipulating Transactions
MAM-3.10.17
Painting the Tape: This practice involves engaging in a transaction or series of transactions which are shown on a public display facility to give the impression of activity or price movement in a security. This may include an unlawful practice in which traders buy and sell a specific security among themselves, creating the illusion of high trading volume and significant investor interest, which can attract unsuspecting investors who might then buy the stock and enable the traders to profit. Or, an unlawful action by a group of market manipulators buying and/or selling a security among themselves to create artificial trading activity, which, when reported on the ticker tape, lures in unsuspecting investors as they perceive an unusual volume.
November 2010MAM-3.10.18
Wash Sales: This is the practice of entering into arrangements for the sale or purchase of a security where there is no change in beneficial interests or market risk, or where the transfer of beneficial interest or market risk is only between parties who are acting in concert or collusion. (Repo transactions and stock lending/borrowing or other transactions involving transfer of securities as collateral do not constitute wash trades.) Wash sales include an unlawful transaction a trader makes by simultaneously buying and selling a security through two different brokers, thereby creating the illusion of activity. The trader sometimes would use a relative to conclude such manipulative transactions.
November 2010MAM-3.10.19
Improper Matched Orders: Transactions where both buy and sell orders are usually entered at the same time, with the exact same price and quantity by different but colluding parties.
November 2010MAM-3.10.20
Marking the Close: Marking the close (or ramping) involves deliberately buying or selling securities or derivatives contracts at the close of the market in an effort to alter the closing price of the security or derivatives contract. This practice may take place on any individual trading day but is particularly associated with dates such as future/option expiry dates or quarterly/annual portfolio or index reference/valuation points.
November 2010MAM-3.10.21
Cornering the Market: Securing such control of the bid or demand-side of both the derivative and the underlying asset that leads to a dominant position. This position can be exploited to manipulate the price of the derivative and/or the asset. With regards to derivatives, in a corner, a market participant or group of participants accumulates a controlling position in an asset in the cash, derivative and other markets. The market participant or group of participants then requires those holding short positions to settle their obligations under the terms of their contracts, either by making delivery or by purchasing the asset from the manipulator or by offsetting in the derivatives market opposite the manipulator at prices distorted by the manipulators.
In the context of a futures contract and leveraged foreign trading corners or attempts to corner, any commodity which is the subject of a futures contract.
November 2010MAM-3.10.22
Abusive Squeeze: This involves a party or parties with a significant influence over the supply of, or demand for, or delivery mechanisms for a security and/or the underlying product of a derivative contract exploiting a dominant position in order materially to distort the price at which others have to deliver, take delivery or defer delivery of the security/product in order to satisfy their obligations.
November 2010MAM-3.10.23
Capping and Pegging: This practice involves activity on both the stock market and the derivatives market. A trader writes an option, which obliges the trader to sell to (in the case of a call option) or buy from (in the case of a put option) the option holder a specified number of shares covered by the option in order to affect the share price in a direction that will make the option unprofitable to exercise.
November 2010MAM-3.10.24
Manipulative Naked Short Sales: A short sale is generally the sale of a stock the seller does not own. In a "naked" short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard settlement period. As a result, the seller fails to deliver securities to the buyer when delivery is due. Selling stock short and failing to deliver shares at the time of settlement with the purpose of driving down the security's price is a manipulative activity.
November 2010MAM-3.10.25
Pooling and Churning: "Pooling and Churning" can involve wash sales or pre-arranged trades executed in order to give an impression of active trading, and therefore investor interest in the stock.
November 2010MAM-3.10.26
Interpositioning: Interpositioning involves a 2-step process that allows the brokerage firm to generate a profit for the brokerage firm from the spread between two opposite trades. Interpositioning can take various forms. In one form, the broker purchases stock for the brokerage firm's proprietary account from the customer sell order; and then fills the customer buy order by selling from the brokerage firm's proprietary account at a higher price — thus locking in a riskless profit for the brokerage firm's proprietary account. A second form of interpositioning involves the broker selling stock into the customer buy order, and then filling the customer sell order by buying for the brokerage firm's proprietary account at a lower price — again, locking in a riskless profit for the brokerage firm's proprietary account. In both forms of interpositioning, the broker participates on both sides of the trade, thereby capturing the spread between the purchase and sale prices, disadvantaging at least one of the parties to the transaction.
November 2010MAM-3.10.27
Late Trading: This involves purchasing mutual fund shares at the closing price after the market closes. This is an investment technique involving short-term "in and out" trading of mutual fund shares, which has a detrimental effect on the long-term shareholders. The technique is designed to exploit market inefficiencies when the "net asset value" of the mutual fund shares; which is set at the market close, does not reflect the current market value of the stocks held by the mutual fund. When a "market timer" buys mutual fund shares at the stale NAV, it realizes a profit when it sells those shares the next trading day or thereafter. That profit dilutes the value of shares held by long term investors. Late Trading (or market timing) includes: (a) frequent buying and selling of shares of the same mutual fund; or (b) buying or selling mutual fund shares in order to exploit inefficiencies in mutual fund pricing. Market timing, while not illegal per se, can harm other mutual fund shareholders because it can dilute the value of their shares, if the market timer is exploiting pricing inefficiencies, or disrupt the management of the mutual funds' investment portfolio and can cause the targeted mutual fund to incur costs borne by other shareholders to accommodate frequent buying and selling of shares by the market timer.
November 2010MAM-3.10.28
Holding the Market: The practice of placing active or pending orders for a security into a market where the price is dropping rapidly in an attempt to "hold" the price of the security steady, or create a floor in the security. This practice is unlawful except when a broker or other party is mandated to keep the price of a security steady as part of Price Stabilization or a buy-back programme. This is only done in rare cases where there is not enough market depth to hold the price.
November 2010MAM-3.10.29
Ghosting: An unlawful practice whereby two or more market makers or brokers collectively attempt to influence and change the price of a stock. Ghosting is used to affect stock prices so the manipulators can profit from the price movement.
November 2010MAM-3.10.30
Freeriding: An unlawful practice in which an underwriting syndicate member withholds part of a new securities issue and later sells it at a higher price. This practice involves the unlawful activity of buying a stock and selling it before paying for the purchase.
November 2010MAM-3.10.31
Bucketing: A brokerage that makes trades on a client's behalf and promises a certain price and/or confirms execution of an order to a client without actually executing it. The brokerage however, waits until a different price arises and then makes the trade, keeping the difference as profit in an attempt to make a short-term profit.
November 2010MAM-3.10.32
Portfolio Pumping. The unlawful act of bidding up the value of a fund's holdings right before the end of a quarter, when the fund's performance is measured. This is done by placing a large number of orders on existing holdings, which drives up the value of the securities within the Portfolio.
November 2010Manipulating Devices
MAM-3.10.33
Advancing the Bid: Increasing the bid for a security to increase its price artificially, creating the impression of strength or the illusion that stock activity was causing the increase.
November 2010MAM-3.10.34
Placing Orders without Intention to Execute: This involves the entering of orders, especially into electronic trading systems, which are higher/lower than the previous bid/offer. The intention is not to execute the order but to give a misleading impression that there is demand for or supply of the security at that price. The orders are then withdrawn from the market before they are executed. (A variant on this type of market manipulation is to place a small order to move the bid/offer price of the security and being prepared for that order to be executed if it cannot be withdrawn in time.) These manipulative orders are entered in the pre-open sessions and also during the normal trading sessions.
November 2010MAM-3.10.35
Excessive Bid-ask Spreads: This conduct is carried out by intermediaries which have market power, such as specialists or market makers acting in cooperation, in such a way intentionally to move the bid-ask spread to and/or to maintain it at artificial levels and far from fair values, by abusing their market power, i.e. the absence of other competitors.
November 2010Misleading Behaviour and Distortion
MAM-3.10.36
Short and Extort: This practice occurs when short sellers state, for example posting messages on message boards, they would stop shorting the stock if they were given money or free shares.
November 2010MAM-3.10.37
Spoofing: Spoofing (or small lot bailing) is a fraudulent trading practice that occurs when a person uses a displayed limit order to manipulate prices, entering quotes followed by virtually simultaneous cancellations, obtaining an improper trading advantage. The order is placed with the intention of briefly triggering a market movement from which the participant or others may benefit by trading the opposite side of the original manipulative order.
November 2010MAM-3.10.38
Overtrading: An unethical practice employed by some brokers to increase their commissions by excessively trading in a client's account. It is also referred to as "churn and burn", "twisting" and "churning".
November 2010MAM-3.11 MAM-3.11 Motives and Parties Involved in Market Manipulation
MAM-3.11.1
Any manipulative behaviour or conduct prohibited under this Module will attract a penalty specified in Article 106 of the CBB Law and other enforcement actions by the CBB, irrespective of the objective of such manipulative market behaviour or conduct.
However, the CBB would investigate into the intentions behind the market behaviour or conduct and the objectives of the market behaviour or conduct of the various parties while dealing with suspected market behaviour or conduct cases.
(a) Some examples of such motives include:(i) Influencing the price or value of a security or a derivative contract, so that the manipulator can:• Buy at a lower price;• Sell at a higher price;• Influence takeover bids, or other large transactions; or• combat competitive transactions;(ii) Influencing the price of a derivative contract or the underlying asset;(iii) Influencing the subscription price in public or non-public offerings;(iv) Influencing the price/conversion ratio in connection with the merger of companies;(v) Influencing the price of a security in connection with take-over offers;(vi) Influencing someone to subscribe for, purchase, or sell assets or rights to assets, or to abstain from doing so;(vii) Influencing the accounts/balance sheet of institutional investors;(viii) Influencing the limit for triggering forced sale by creditors; and(ix) Influencing the impression of financial advice or placements.(b) Any person who violates, or aides or abets any violation of the provisions of this Module will be liable for penalty and other enforcement actions under the CBB Law, irrespective of the status or position of the person involved. Those in a position to effect a manipulation include:(i) Issuers of securities;(ii) Participants in the securities market, derivatives market or underlying cash market, including investors and institutions;(iii) Market intermediaries;(iv) Financial analysts;(v) Any other person;(vi) Any combination of the above acting in cooperation with one another; and(vii) Any person aiding or abetting the person(s) involved in prohibited behaviour or conduct.November 2010MAM-3.12 MAM-3.12 Error Trades
MAM-3.12.1
Every licensed exchange and market operator should have policies and systems for error trades which should be transparent and applied consistently and fairly, so that the brokerage firms and their representatives are made accountable for providing correct information with regards to the investor's and transaction details at the time of entering the orders into the trading systems of the licensed exchanges or market operators.
November 2010MAM-3.12.2
All transaction information after execution in the Automated Trading System of licensed exchanges must not be changed except when there is a misallocation of the Investor Account. Such change can only be made subject to the prior approval of the licensed exchange and any change after the settlement period can be made only after obtaining the CBB's Capital Markets Supervision Directorate's written approval.
November 2010MAM-3.12.3
A repeated pattern of error trades could be indicative of possible manipulation or other abuse market activity and the licensed exchanges should have adequate systems in place to detect such activities and report to the CBB.
November 2010MAM-3.12.4
If there is an error trade which is caused by mistake or lapse on the part of a brokerage firm, the cost for correcting such error trade shall be borne by the respective brokerage firm.
November 2010MAM-3.13 MAM-3.13 Defences
MAM-3.13.1
A person shall not be guilty of violation of section MAM-3.1 if he proves that his reasons for engaging in the alleged behaviour or conduct were legitimate and that he had acted in conformity with the accepted market practices in the market concerned, or that he had acted in conformity with any price stabilization rules or market making rules made/approved by the Central Bank, or if he believed on reasonable grounds that his behaviour or conduct did not violate Article 106 of the CBB Law, and that he had taken all reasonable precautions and exercised all due diligence to avoid behaving in any way against the said Article.
November 2010MAM-4 MAM-4 Exemption for Price Stabilization
MAM-4.1 MAM-4.1 Exemption for Price Stabilization
MAM-4.1.1
Price stabilization action taken by a designated market maker who is also a Category 1 Investment Firm Licensee acting as or on behalf of the Price Stabilization Manager in Bahrain in respect of an initial public offering, shall not be considered as market manipulation or abuse of inside information, if and only if, the conditions mentioned in section MAM-4.2 are satisfied.
November 2010MAM-4.1.2
For the purposes of sections MAM-4.1 and MAM-4.2, unless the context otherwise requires:
(a) ''Closing Date" in relation to an offer, means the date specified in the offer document as the last date for the submission of applications for subscription or purchase of the securities being offered.(b) "Dealer' means a Category 1 Investment Firm Licensee acting on behalf of a Price Stabilization Manager.(c) "Issuer" in relation to an offer, means the person who issues the securities being offered or, where the securities have been issued, the person making the offer.(d) "Offer" means an offer to the public for subscription or purchase of securities in conjunction with the listing of such securities on a licensed exchange, or on both a securities exchange and an overseas securities exchange, as the case may be, where the securities are not previously listed on any licensed exchange or overseas securities exchange.(e) "Offer Price" in relation to an offer, means the price of the securities being offered, or where the securities are offered in more than one tranche at different prices, the highest price offered, after deducting any concession, commission, brokerage, transaction fee or levy.(f) "Over-Allotment" in relation to an offer, means the allotment or sale of a number of the relevant securities in excess of the number of the securities available for subscription or purchase under the offer.(g) "Relevant Securities" in relation to an offer, means the securities which are, or when issued will be, uniform in all respects with the securities being offered under the offer and includes the securities being offered under the offer.(h) 'Stabilizing Action" in relation to an offer, means the action taken in Bahrain or elsewhere by a stabilizing manager, or by a Category 1 Licensee on behalf of the stabilizing manager:(i) Where the securities being offered under the offer are debentures, to buy or to offer or agree to buy, any relevant securities; or(ii) In any other case, to buy or offer or agree to buy any relevant securities on the securities market;In order to stabilize or maintain the market price of such securities in Bahrain or elsewhere.(i) "Stabilizing Manager" in relation to an offer, means a person:(i) Who is appointed in writing by the issuer of an offer to take stabilizing action in respect of the offer; and(ii) Whose appointment under paragraph (i) is notified to the licensed exchange on which the relevant securities are or are intended to be listed before the closing date of the offer.November 2010MAM-4.2 MAM-4.2 Conditions for Exemption for Stabilizing Action
MAM-4.2.1
In order to be eligible for exemption under rule MAM-4.1.1, the stabilizing action taken must be in respect of an offer of securities where:
(a) The relevant securities are or are intended to be listed on a licensed exchange or on both a licensed exchange and an overseas securities exchange, as the case may be;(b) The price stabilization scheme, the total value of securities and the maximum number of securities that the price stabilization manager can buy or sell are approved by the CBB at the time of permitting the issue or listing of relevant securities;(c) The offer document states:(i) That stabilizing action may be taken in respect of the relevant securities;(ii) The maximum period during which stabilizing action may be taken;(iii) The total nominal value or number, as the case may be, of the securities which are the subject of an over-allotment option, if applicable; and(iv) The total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action, which shall not exceed the value or number approved by the CBB, as the case may be;(d) A public announcement has been made, through the licensed exchange on which the relevant securities are or are intended to be listed, on the business day of that licensed exchange immediately following the closing date of the offer, stating:(i) That such securities may be subject to stabilizing action;(ii) The maximum period during which stabilizing action may be taken;(iii) The total nominal value or number, as the case may be, of the securities which are the subject of an over-allotment option, if applicable; and(iv) The total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action, which shall not exceed the value or number approved by the CBB, as the case may be; and(e) The offer is on cash terms and is to be, is or has been, made at a specified price payable in any currency acceptable to the CBB.November 2010MAM-4.2.2
The stabilizing manager shall:
(a) Take stabilizing action only after he is reasonably satisfied that the price of the relevant securities is not false or misleading; and(b) Shall continue with the stabilizing action only after he is reasonably satisfied that the price of the relevant securities has not become false or misleading other than by reason of any stabilizing action.November 2010MAM-4.2.3
No stabilizing action shall be taken before the following date:
(a) Where the relevant securities are debt securities, the date on which the earliest public announcement of the offer which states the offer price is made through the licensed exchange on which the relevant securities are or are intended to be listed;(b) In any other case;(i) The date of commencement of trading in the securities being offered on the licensed exchange or the overseas securities exchange, as the case may be; or(ii) Where the relevant securities are offered on both the licensed exchange and the overseas exchange, the earlier of the dates of commencement of trading in the securities on these exchanges.November 2010MAM-4.2.4
No stabilizing action shall be taken:
(a) Where the relevant securities are debt securities, after the earlier of the following dates:(i) The date of expiry of the period of 30 calendar days from the date of commencement of trading in the securities being offered on the licensed exchange or the overseas securities exchange, or the date of expiry of the period of 60 calendar days from the date on which the earliest public announcement of the offer which states the offer price is made through the licensed exchange on which the relevant securities are or are intended to be listed, whichever is the earlier;(ii) The date on which the stabilizing manager has bought, whether on the securities exchange, the overseas securities exchange or both, the total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action as stated in the offer document under rule MAM-4.2.1 (c).(b) In any other case, after the earlier of the following dates:(i) The date of expiry of the period of 30 calendar days from the date of commencement of trading in the securities being offered on the securities exchange or the overseas securities exchange;(ii) The date that the stabilizing manager has bought, whether on the securities exchange, the overseas securities exchange or both, the total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action as stated in the offer document under rule MAM-4.2.1 (c).November 2010MAM-4.2.5
No stabilizing action may be taken in respect of an offer of securities (other than debt securities) at a price higher than the offer price, or the price determined on the basis indicated in the offering document at the time of obtaining the CBB's permission for the issue or listing.
November 2010MAM-4.2.6
Subject to rule MAM-4.2.7 the stabilizing manager shall not effect or cause to be effected, directly or indirectly, any sell order of the relevant securities prior to the date of commencement of each stabilizing action or during the period in which stabilizing action is permitted under this Module.
November 2010MAM-4.2.7
Nothing in rule MAM-4.2.6 shall prohibit:
(a) The stabilizing manager; or(b) An associate of the stabilizing manager, in the associate's capacity as a dealer;from executing any sell order of the relevant securities for a person who is not an associate of the issuer of the offer of securities.
November 2010MAM-4.2.8
The stabilizing manager shall:
(a) Keep a register in such form as the securities exchange on which the relevant securities are listed may require; and(b) Record in the register the particulars of each transaction to buy the relevant securities entered into in connection with the stabilizing action, including the price, quantity and name of the dealer, before the end of the day on which the transaction is entered into.November 2010MAM-4.2.9
Where the register referred to in rule MAM-4.2.8 is kept in Bahrain, it shall be made available by the stabilizing manager for inspection by the CBB, or the licensed exchange on which the relevant securities are listed, within such time as may be stipulated by the CBB or that licensed exchange, as the case may be.
November 2010MAM-4.2.10
Where the register referred to in rule MAM-4.2.8 is kept outside Bahrain:
(a) It shall be capable of being brought into Bahrain and made available by the stabilizing manager for inspection by the CBB, or the licensed exchange on which the relevant securities are listed, within such time as may be stipulated by the CBB or that licensed exchange, as the case may be;(b) If it is not capable of being brought into Bahrain, a copy of the register certified to be a true copy by the stabilizing manager shall be brought into Bahrain and made available by the stabilizing manager for inspection by the CBB or the licensed exchange on which the relevant securities are listed, within such time as may be stipulated by the CBB or that licensed exchange, as the case may be.November 2010MAM-4.2.11
The stabilizing manager shall:
(a) Before the closing date of the offer of securities, inform the licensed exchange on which the relevant securities are or are intended to be listed of the name of any dealer, whether in Bahrain or elsewhere, appointed by the stabilizing manager to take the stabilizing action; and(b) Inform that licensed exchange of any subsequent change of dealer immediately upon such change.November 2010MAM-4.2.12
Where, pursuant to any stabilizing action, a transaction to buy any relevant securities (other than debt securities) has been effected, the stabilizing manager shall make a public announcement through the licensed exchange on which the relevant securities are listed of the number of the securities bought by the stabilizing manager and the price range, no later than 12 noon on the first full trading day of that licensed exchange immediately following the day on which the transaction was effected, whether in Bahrain or elsewhere.
November 2010MAM-4.2.13
The stabilizing manager shall make a public announcement through the licensed exchange on which the relevant securities are listed of the cessation of any stabilizing action, whether in Bahrain or elsewhere, no later than the start of the trading day of that licensed exchange immediately following the day of cessation of the stabilizing action.
November 2010MAM-4.2.14
No stabilizing action in respect of an offer shall be taken after the public announcement of the cessation referred to in rule MAM-4.2.13.
November 2010MAM-5 MAM-5 Penalty for Contravention
MAM-5.1 MAM-5.1 Penalty for Contravention
MAM-5.1.1
Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any person who contravenes any of the provisions of this Module shall be liable for penalties and enforcement actions stipulated under various provisions of the CBB Law including, but not limited to, criminal sanctions, fines, imprisonment, suspension of license, public censure, freezing of accounts, cease and desist order and specific directives.
November 2010MAM-5.1.2
The CBB's investigation and enforcement proceedings and procedures, as set out in the Market Surveillance, Investigation and Enforcement (MIE) Module will be applicable for contraventions of this Module.
November 2010MIE — Market Surveillance, Investigation & Enforcement
MIE-A MIE-A Introduction
MIE-A.1 MIE-A.1 Purpose
Executive Summary
MIE-A.1.1
The Central Bank of Bahrain’s (CBB) statutory regulatory objectives include maintaining and promoting the fairness, efficiency, competitiveness, transparency and orderliness of the
securities markets in the Kingdom of Bahrain. The CBB believes that investor confidence in the fairness of markets enhances liquidity and efficiency of the markets and for this purpose, it is essential that the laws and standards governing the markets are rigorously and credibly enforced. In this respect, the CBB is making continuous efforts to ensure that the rules are strongly and fairly enforced, with proscribed behaviour clearly and unambiguously defined.Amended: July 2021The CBB's Enforcement Responsibilities
MIE-A.1.2
The CBB's key enforcement-related aims are to protect investors and maintain market integrity and confidence. The CBB's regulatory framework needs to address stray cases of non-compliance to ensure that such contraventions of relevant laws, rules and regulations:
• do not cause potential loss to the investing public;• do not disrupt the financial sector in general and the capital market in particular;• do not adversely impact the Kingdom's credibility as an international financial centre;• do not encourage non-compliance or contravention of rules; and• do not unfairly disadvantage the market participants who comply with all laws, rules and regulations.MIE-A.1.3
The Market Surveillance, Investigation and Enforcement Module (MIE Module) sets out the CBB's regulatory framework governing the mechanisms and proceedings relating to detection and
investigation of breaches of laws, rules and regulations and the appropriate enforcement actions. The process of enforcing the laws and regulations generally involves three main steps:• Market Surveillance: identifying that a potential breach of the relevant laws or regulations has taken place and identification of those responsible for the potential breach;• Investigation: once there is a suspected case of a breach of relevant laws or standards, the CBB may conductinvestigations or enquiries to find out what has happened, and whether there is any evidence of a breach; and• Enforcement: taking necessary steps to protect the public interest and if appropriate, to punish those responsible for the breach.The CBB's Approach to Enforcement
MIE-A.1.4
The CBB's approach is to provide a strong and facilitative regulatory framework along with an effective enforcement of regulatory requirements. While the CBB favours an open and pragmatic approach to supervision within the boundaries set by the law and the CBB's regulations, it ensures effective enforcement of regulatory requirements.
MIE-A.1.5
The CBB seeks to clearly lay down the rules that will be applied transparently and consistently to ensure that the bona fide investors and market participants are not inconvenienced in their normal course of business, by enabling them to take all reasonable precautions and exercise due diligence to avoid their engagement in prohibited market conducts.
MIE-A.1.6
The CBB is guided by the following principles of regulation and enforcement:
• Firmness — firm and appropriate action against those who harm investors or damage market integrity, regardless of their position or status.• Fairness — treat everyone fairly. The requirements of procedural fairness and natural justice are important in CBB's decision-making processes.• Consistency — try to ensure that consistency is maintained in decisions or actions whilst having regard to the specific circumstances of each case.• Proportionality — try to ensure that decisions or actions are proportionate, or balanced. For example, take tough action against serious misconduct but more lenient action against less serious conduct.MIE-A.1.7
The CBB's enforcement actions are aimed at achieving the following:
• Prevention — it is better to stop improper conduct before it happens. To achieve this, the CBB encourages market participants to foster a culture of compliance. The investing public can also help by learning how to look after their own rights and interests.• Remedying what has happened — if a breach has already occurred, the CBB will take appropriate steps in terms of applicable laws, rules and regulations to remedy it and look at each situation in light of its particular circumstances and consider what might be appropriate courses of action. It is important to note that, although the CBB is required to act in the public interest, the CBB cannot seek compensation for those who have suffered loss as a result of a breach, or directly assist them in their attempts to seek compensation through the courts.• Punishing wrongdoers and deterring others — in general, punishment is usually appropriate for those who engage in wrongdoing. Punishment serves a number of purposes. Firstly, it is an effective tool to deter wrongdoers from engaging in further wrongdoing. Punishment may also deter others from engaging in wrongdoing. Thus, it has a deterrent effect that minimises misconduct. To maximise the deterrent effect, the CBB generally publicises its enforcement sanctions wherever appropriate. Note that the CBB cannot represent or bind other authorities or regulators that may have an interest in the matter.• Effectiveness of action — the CBB must set priorities and make the best use of the limited resources available. Therefore, the costs and benefits of any action that the CBB proposes to take must be considered.• Cooperation with other regulators — the CBB cooperates with other domestic and overseas regulators in situations where it may be more appropriate for a regulatory body other than the CBB to take action.• A balancing act — each of the CBB's enforcement actions involves a careful balancing of a number of complex issues. These issues will also vary from case-to-case. In balancing them and making a decision, the CBB will always endeavour to act firmly, fairly and impartially, keeping in mind at all times the CBB's principles of regulations and aims described under paragraphs MIE-A.1.6 and MIE-A.1.7.Legal Basis
MIE-A.1.8
Article 38 (a) of Chapter 8 of Part 1 of the CBB Law mandates the Governor of the CBB to issue necessary directives to ensure the implementation of the CBB Law and regulations and the achievement of the objectives of the CBB. Article 38 (b) provides the CBB with the power to issue necessary directives to ensure the implementation of CBB laws and regulations that aim to formulate the understanding and implementation of the CBB Law and regulations.
Amended: July 2021MIE-A.1.9
Article 96 of Chapter 2 of Part 4 of the CBB Law states that: "Subject to the rules and laws of evidence and electronic transactions, any computer data, electronic files, recorded telephone calls, telex and facsimile correspondence may be used as evidence in disputes relating to
securities ".Amended: July 2021MIE-A.1.10
Chapter 1 of Part 5 of the CBB Law (Articles 97-105) defines insiders, inside information and market information, prohibits abuse of inside information, and provides defences. Particularly, Article 99 provides the CBB with the power to issue regulations concerning the necessary procedures and controls of publishing market information. Article 100 states that: "A
person who is in possession of inside information, as an insider shall not use such information to:(1) Deal in anysecurities to which that information relates.(2) Encourage anyperson to deal in anysecurities to which that information relates.(3) Disclose inside information to any otherperson , otherwise than in the proper performance of the functions of his employment, office or profession.(4) Violate the rules governing the publishing of market information."Amended: July 2021MIE-A.1.11
Chapter 2 of Part 5 of the CBB Law (Articles 106 and 107) deals with Violation of Market Dealings. Article 106 states that: "In the application of this law a
person is guilty of market manipulation if he:(1) Is engaged, or encourages others to engage, in any conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of anysecurities .(2) Is engaged, or encourages others, to engage in any conduct that may give an unrealistic picture of the market regarding the volume and prices of anysecurities ."Amended: July 2021MIE-A.1.12
Chapter 1 of Part 7 of the CBB Law (Articles 111-115) provides the CBB with the power to obtain information and reports, conduct
inspections and to participate in judicialinvestigations with the Ministry of Justice and Islamic Affairs.Amended: July 2021MIE-A.1.13
Part 8 of the CBB Law (Articles 116-120) provides for restrictions on disclosure of confidential information.
MIE-A.1.14
Part 9 of the CBB Law (Articles 121-132) provides for the appointment of
investigators , obtaining information, documents and explanations in possession of a third party, entering and inspecting specific premises to obtain relevant information, documents and explanations, retaining the information, penalties and administrative proceedings, and assistance ininvestigations by overseas authorities.MIE-A.1.15
Part 11 of the CBB Law (Articles 160-172) provides for penalties for various contraventions and violations of the provisions of the CBB Law.
MIE-A.1.16
Article 167 of Part 11 of the CBB Law specifically provides penalty for the offence of abuse of inside information and states that "Without prejudice to any greater penalty prescribed in the Penal Code or under any law, a
person who contravenes Article 100 of this Law, while he is fully aware, shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars (10,000), or either penalty".Amended: July 2021MIE-A.1.17
Article 168 of Part 11 of the CBB Law specifically provides penalty for the offence of market manipulation and states that: "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a
person who contravenes Article 106 of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty".Amended: July 2021MIE-A.1.18
Article 175 of Part 12 of the CBB Law provides that neither the CBB nor any of its employees shall be responsible for any procedure, action or forbearance that resulted in inflicting damages to others if such procedure, action or forbearance was performed in good faith in the course of execution of the duties and responsibilities of the CBB and within its authorities as specified in the Law and the regulations and by-laws issued in implementing it.
Amended: July 2021MIE-A.2 MIE-A.2 Module History
Evolution of Module
MIE-A.2.1
This Module was first issued in October 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
MIE-A.2.2
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-A.2.3
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-A.2.4
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-A.2.5
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Superseded Requirements
MIE-A.2.6
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/ other references Provision Subject MIE-A.3 MIE-A.3 Interaction with Other Modules
MIE-A.3.1
All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.
MIE-A.4 MIE-A.4 Division of Responsibilities
MIE-A.4.1
While dealing with cases relating to contravention of the CBB Law, rules and regulations, or other applicable laws, rules and regulations, a clear division of responsibilities between the CBB as the
securities regulator and thelicensed exchanges or thelicensed market operators as a self-regulatory organization (SRO) is required:(a) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations;(b) To maximise the regulatory effectiveness;(c) To permit flexibility to thelicensed exchanges or thelicensed market operators in their functioning;(d) To minimise the regulatory cost; and(e) To maintain market integrity and investor confidence.Amended: July 2021MIE-A.4.2
As a regulator, CBB's role is as follows:
(a) Regulatory supervision, including the licensing,inspection ,investigation and enforcement and regulatory oversight on thelicensed exchanges ,licensed market operators ,licensed clearing houses anddepositories and otherSROs and other capital market service providers ;(b) Maintaining and promoting fairness, efficiency and transparency within the capitalmarket ;(c) Acting as an enforcement agency with powers to investigate and take administrative, civil or criminal actions as it may deem appropriate;(d) Approving the rules, by-laws and business rules of thelicensed exchanges or thelicensed market operators ,licensed clearing houses ordepositories , whereby any change in the rules, by-laws and regulations of theSROs would need prior approval of the CBB; and(e) Ensuring that thelicensed exchanges andlicensed market operators ,licensed clearing houses anddepositories , members ofSROs and othercapital market service providers have appropriate systems and procedures for detection of unlawful transactions and contraventions of the CBB Law, rules and regulations and report the same to the CBB at the earliest stage possible.Amended: July 2021MIE-A.4.3
The
licensed exchange or thelicensed market operator orlicensed clearing house orcentral depository established as anSRO must comply with the requirements laid down under the CBB Law, rules and regulations, this Module and the other applicable laws and regulations.MIE-A.4.4
As an
SRO , the main objective of the exchange or the operator or the clearing house would be to:(a) Actively perform market surveillance as a front-line regulator;(b) Promote fairness and investor protection;(c) Promote fair access tomarket facilities and information;(d) Promote the provision of timely and accessiblemarket information;(e) Promote the efficient regulation of its members;(f) Maintain fairness of price discovery mechanism and ensure prices are determined by the genuine forces of supply and demand;(g) Monitor the trading and market on a continuous basis;(h) Report any irregular transactions or irregular market behaviour or suspected cases of market abuse or market manipulation, or any contravention of the CBB Law, rules and regulations;(i) Identify irregular transactions and take appropriate enforcement actions;(j) Take disciplinary action for contraventions by market participants and listed companies through anSRO 's Disciplinary Action Committee(s).MIE-A.4.5
Apart from the obligations of the
licensed exchanges and market operators under the Markets & Exchanges (MAE) Module, and the obligations of thelicensed clearing houses anddepositories under the Clearing, Settlement and Central Depository (CSD) Module, theseSROs shall:(a) Provide such assistance to the CBB in the manner required by the CBB for the purposes of the CBB's market surveillance,investigation and enforcement functions;(b) Provide such reports as the CBB may require for the purposes of this Module;(c) Conductinspections orinvestigations as the CBB may require theSRO to do and submit its Inspection and Investigation Report, along with the facts, documents and evidence supporting the outcome of suchinspection orinvestigation ;(d) Implement the decisions or measures or actions decided by the CBB, both at the market level and at the level of the individual security or issuer, or member or market participant level in the manner required by the CBB;(e) Promptly implement such enforcement actions determined by the CBB against the members and issuers, through theSROs Disciplinary Action Committees.Role of Other Capital Market Service Providers
MIE-A.4.6
All
capital market service providers in general, and members of theSROs in particular, must have the necessary infrastructure and systems to identify and report any irregular transactions or suspected cases of market abuse or market manipulation, or suspected cases of contravention of the CBB Law, rules and regulations, or any other relevant laws, rules and regulations, which they come across in the normal course of business, to the CBB in the format given in paragraph MIE-A.4.7. This reporting shall be done immediately on becoming aware of such incidences or contraventions, or suspected cases.Reporting of Irregular Transactions
MIE-A.4.7
Persons subject to the obligations to report irregular transactions to the Capital Markets Supervision Directorate (CMSD ) shall report in the following standard format:Description of the transaction(s)
Details of the securities, including the code of the security (ISIN Number); the market(s) concerned; the original order's entry date/time, price and size; the times and sizes of the transaction(s); the type and characteristics of the order, etc.Reasons for Suspicion
Reasons for suspecting that the transaction(s) might constitute insider dealing/market abuse/ market manipulationIdentities of persons carrying out transaction(s)
Names, addresses, telephone number, location, account number, client identification code used by the firm, etc.Identities of any other persons known to be involved in the transaction(s)
Names, addresses, telephone number, location, relation to person carrying out transaction, position held, role played, etc.Capacity in which the person performing the transaction(s) acts
e.g. broker, underwriter, agent, investment/fund manager, auditor, insider.The ownership of securities before and after the execution of the transaction (of the concerned parties carrying out the transactions). Any information which may be of significance (along with a list of any accompanying documents/evidence) Details of the person making notification
Name of person, name of firm, position held within firm, contact details, etc.Signed ........... (person making report)
Dated ........... (date of report)Amended: July 2021MIE-A.4.8
Where the information specified to be reported is not available at the time of reporting, the report shall include at least the reasons why the reporting
persons suspect that the transactions might constitute contravention of the CBB Law, rules and regulations. All remaining information shall be provided to theCMSD as soon as it becomes available.Persons making reports therefore, do not need to have all the required information before reporting to theCMSD . If the case is one which (thepersons subject to the reporting obligation consider) needs to be brought to the attention of theCMSD urgently, then theperson (s) concerned shall make the first contact quickly. This can be done by telephone if appropriate, giving the basic details and reasons for suspicion, followed by written confirmation. The other information may be supplied subsequently.Records of Telephone Conversations and Electronic Communications
MIE-A.4.9
In addition to meeting the book-keeping and record-keeping requirements as per the applicable laws, rules and regulations, all
capital market service providers must maintain records of telephone conversations and electronic communications, including facsimile, email and other instant messaging devices relating to their activities in thesecurities market and particularly the following activities:(a) Receiving client orders;(b) Executing client orders;(c) Arranging for client orders to be executed;(d) Carrying out transactions on behalf of thecapital market service provider , or anotherperson in thecapital market service provider group, and which are part of thecapital market service provider's trading activities, or the trading activities of anotherperson in thecapital market service provider group;(e) Executing orders that result from decisions by thecapital market service provider to deal on behalf of its client;(f) Placing orders with other entities for execution that result from decisions by thecapital market service provider to deal on behalf of its client;that are required to be maintained by the
capital market service provider as per the CBB rules, regulations and directives.Amended: July 2021MIE-A.4.10
All
capital market service providers must take reasonable steps to retain and protect the records referred to in rule MIE-A.4.9:(a) Apart from complying with various requirements relating to record keeping, as per CBB Law, rules and regulations and other applicable laws, rules and regulations, the recordings of telephone conversations and electronic communications, including facsimile, email and other instant messaging devices relating to their activities in the securities market must be retained for a period of at least twelve months from the date the record was created;(b) [This subparagraph was deleted in July 2021];(c) In a medium that allows the storage of the information in a way accessible for future reference by the CBB, and so that the following conditions are met:(i) The CBB must be able to access the records readily and take copies;(ii) It must be possible for any corrections or other amendments, and the contents of the records prior to such corrections and amendments to be easily ascertained;(iii) It must not be possible for the records to be otherwise manipulated or altered.Amended: July 2021MIE-B MIE-B Scope of Application
MIE-B.1 MIE-B.1 Scope of Application
Scope
MIE-B.1.1
This Module shall apply to:
(a) Any conduct or behaviour occurring within Bahrain; or any transaction or expected transaction done by or on behalf of anyperson (s) within Bahrain in relation tosecurities offered, issued or listed in Bahrain or elsewhere;(b) Any conduct or behaviour occurring outside Bahrain or any transaction or expected transaction done by or on behalf of anyperson (s) outside Bahrain in relation tosecurities offered, listed or issued in Bahrain;(c) Any conduct or behaviour occurring within Bahrain; or any transaction or expected transaction done by or on behalf of anyperson (s) within Bahrain in relation to:(i) Futures contracts, whether traded on a futures market in Bahrain or elsewhere; or(ii) Leveraged foreign exchange trading contracts, whether in Bahrain or elsewhere; and(d) Any conduct or behaviour occurring outside Bahrain; or any transaction or expected transaction done by or on behalf of anyperson (s) outside Bahrain in relation to:(i) Futures contracts traded on a futures market in Bahrain;(ii) Leveraged foreign exchange trading contracts in Bahrain; or(iii) Leveraged foreign exchange trading contracts that are accessible from Bahrain.MIE-B.1.2
This Module contains the CBB's Directive relating to Market Surveillance, Investigation and Enforcement and is issued under the powers available to the CBB under Article 38 of the CBB Law, read with the abovementioned provisions of the CBB Law. The Directive under this Module is applicable to all market participants and relevant
persons , including but not limited to issuers ofsecurities or anyperson acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories,crypto-asset licensees , investment firms, collective investment undertakings, business trusts, listed companies, anyperson acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts, credit rating agencies and any otherperson who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether suchperson is a market participant or not. These rules are issued by way of a legally-binding Directive.Amended: July 2021MIE-B.2 [This Section has been deleted in July 2021].
MIE-1 MIE-1 Market Surveillance
MIE-1.1 MIE-1.1 Market Surveillance
Market Surveillance
MIE-1.1.1
The CBB's surveillance function is focused on identifying potential breaches of the relevant laws, rules and regulations and those responsible for the potential breaches. The surveillance function includes the following:
a) Policy formulation for introducing surveillance systems that bring integrity, safety and stability to thesecurities market in the Kingdom of Bahrain;b) Gather and analyze information for the purpose of spotting abnormal situations in the market;c) Detect potential contraventions of relevant laws, rules and regulations and identify those responsible for such contraventions;d) Prepare initial analysis report;e) Take interim enforcement actions, if warranted;f) Pursue preventative action, if required, and avoid market disruptions at the earliest possible time.g) [This Subparagraph has been deleted in July 2021].Amended: July 2021MIE-1.1.2
The Market Surveillance, Department of the Capital Markets Supervision Directorate within the CBB is responsible for the market surveillance function relating to the
securities market in the Kingdom of Bahrain.Amended: July 2021MIE-1.1.3
The CBB may apply, adopt, determine and implement various measures, mechanisms and requirements, as may be required from time-to-time.
MIE-1.1.4
Licensed exchanges and market operators, licensed clearing houses and depositories, members of
SROs and othercapital market service providers must have appropriate systems and procedures for the detection of potential cases of unlawful transactions and contraventions of the CBB Law, rules and regulations and report to the CBB at the earliest stage possible.Amended: July 2021MIE-1.2 MIE-1.2 Information Gathering
MIE-1.2.1
The CBB may exercise its powers under Part 7 and Part 9 of the CBB Law for obtaining information, data, documents and explanations from:
(a)Self-Regulatory Organizations (SRO s), including licensed exchanges, licensed clearing houses and depositories, and related parties;(b) Members ofSROs and related parties;(c) Listed companies and issuers ofsecurities ;(d) Any otherperson who is in the possession of information or documents relevant for the purpose of conducting specific preliminaryinvestigations by the CBB.Amended: July 2021Type of Information
MIE-1.2.2
For the purpose of this Module, information includes:
(a) Any books, records or registers required to be maintained by acapital market service provider (including members of SROs, listed companies and issuers of securities) and related parties under the CBB Law, rules and regulations and any other law, rules and regulations;(b) Information, books, records or documents known to or in the possession of acapital market service provider (including members of SROs, listed companies and issuers of securities) and related party;(c) [This Subparagraph has been deleted in July 2021];(d) [This Subparagraph has been deleted in July 2021](e) Information, books, records or documents maintained by or known to or in the possession of any other relevantperson .Amended: July 2021MIE-1.2.3
In this Module, a reference to disclosing information includes, in relation to information that is contained in a document, a reference to producing the document.
Acquisition and Disposal of Securities or Futures Contract
MIE-1.2.5
Without prejudice to the generality of rule MIE-1.2.4:
(a) The CBB may, where it considers it necessary for the protection of investors, require acapital market service provider to disclose to the CBB in relation to any acquisition or disposal ofsecurities or futures contracts:(i) The name of theperson from or through whom or on whose behalf thesecurities or futures contracts were acquired; or(ii) The name of theperson to or through whom or on whose behalf thesecurities or futures contracts were disposed of;and the nature of the instructions given to the licensee or licensed exchange, or licensed clearing house and depository in respect of the acquisition or disposal.(b) The CBB may require aperson who has acquired, held or disposed ofsecurities or futures contracts to disclose to the CBB whether he acquired, held or disposed of thosesecurities or futures contracts, as the case may be, as custodian or trustee for, or on behalf of, anotherperson (whether or not as a nominee), and if so:(i) The name of that otherperson ; and(ii) The nature of any instructions given to the first-mentionedperson in respect of the acquisition, holding or disposal.(c) The CBB may require a licensed exchange to disclose to the CBB in relation to an acquisition or disposal ofsecurities , or futures contracts on the licensed exchange, the names of the members of that licensed exchange who acted in the acquisition or disposal.(d) The CBB may require a licensed clearing house and/or depository for asecurities market or futures market to disclose to the CBB in relation to any dealing insecurities on thatsecurities market, or trading in futures contracts on that futures market, the names of the members of the licensed clearing house and/or depository who were concerned in any act or omission in relation to the dealing or trading.Amended: July 2021Exercise of Certain Powers in Relation to Securities
MIE-1.2.6.1
Where the CBB considers that:
(i) It may be necessary to prohibit under the Markets & Exchanges (MAE) Module dealing insecurities of, or made available by, a company or an issuer ofsecurities ;(ii) Aperson may have contravened any of the provisions of the Prohibition of Market Abuse and Manipulation (MAM) Module in relation tosecurities of, or made available by, a company; or(iii) Aperson may have contravened any of the provisions of the Disclosure Standards or Take-overs, Mergers, & Acquisitions (TMA) Module in relation tosecurities in a company;The CBB may require an officer of a company, or an issuer of
securities , to disclose to the CBB any information of which he is aware and which may have affected any dealing that has taken place, or which may affect any dealing that may take place, insecurities of or made available by, the company or the issuer ofsecurities .Amended: July 2021MIE-1.2.6.2
Where the CBB believes on reasonable grounds that a
person is capable of giving information concerning any of the following matters:(i) Any dealing insecurities of, or made available by, a company or an issuer ofsecurities ;(ii) Any advice given or any report or analysis issued or published concerning suchsecurities , by anycapital market service provider to deal insecurities , or a representative of such a holder;(iii) The financial position of any business carried on by aperson who is or has been (either alone or together with anotherperson or otherpersons ) the holder of acapital market service provider to deal insecurities and who has dealt or given advice or issued or published a report or an analysis concerning suchsecurities ;(iv) The financial position of any business carried on by a nominee controlled by aperson referred to in paragraph (iii) or jointly controlled by two or morepersons at least one of whom is aperson referred to in that paragraph; or(v) An audit of, or any report of an auditor concerning any book of thecapital market service provider to deal insecurities , being a book relating to dealings in suchsecurities .the CBB may require the
person to disclose to the CBB the information that theperson has about the matter.Amended: July 2021Exercise of Certain Powers in Relation to Futures Contracts
MIE-1.2.7
(a) Where the CBB considers that:(i) It may be necessary to give a direction or take any action in relation to any trading in futures contracts under the Markets & Exchanges (MAE) Module;(ii) Aperson may have contravened any of the provisions of the Prohibition of Market Abuse & Manipulation (MAM) Module in relation to futures contracts.(b) Where the CBB believes on reasonable grounds that aperson is capable of giving information concerning the following matters:(i) Any trading in futures contracts;(ii) Any advice given publicly or privately, or any report or analysis issued or published concerning such futures contracts by thecapital market service provider to trade in futures contracts, or a representative of such a holder;(iii) The financial position of any business carried on by aperson who is or has been (either alone or together with anyperson or otherpersons ) thecapital market service provider to trade in futures contracts and has traded in or given advice or issued or published a report or an analysis concerning such futures contracts;(iv) The financial position of any business carried on by a nominee controlled by aperson referred to in paragraph (iii) or jointly controlled by two or morepersons , at least one of whom is aperson referred to in that paragraph; or(v) An audit of, or any report of an auditor concerning any book of thecapital market service provider to trade in futures contracts, being a book relating to trading, clearing or settlement in such futures contracts.the CBB may require theperson to disclose to the CBB the information that theperson has about that matter.Amended: July 2021Self-Incrimination
MIE-1.2.8
(a) Aperson is not excused from disclosing information to the CBB under a requirement made of him under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, on the grounds that the disclosure of the information might tend to incriminate him.(b) Where aperson claims before making a statement disclosing information that he is required to disclose by a requirement made of him under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, that the statement might tend to incriminate him, that statement shall not be used by the CBB to support any CBB disciplinary measures against him.Savings for Advocates and Solicitors
MIE-1.2.9
(a) Nothing in Section 1.2 shall compel the disclosure by an advocate and solicitor of information containing a privileged communication made by or to him in that capacity.(b) An advocate and solicitor who refuses to disclose the information referred to in paragraph (a) shall nevertheless be obliged to give the name and address (if he knows them) of theperson to whom, or by or on behalf of whom, that privileged communication was made.Immunities Under CBB Law
MIE-1.2.10
(a) The CBB shall not bring any civil or criminal proceedings, other than proceedings for an offence under rule MIE-1.2.11 against anyperson for disclosing any information to the CBB, if he had done so in good faith in compliance with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, 1.2.6A or MIE-1.2.7.(b) Anyperson who complies with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7 shall not be treated by the CBB as being in breach of any restriction upon the disclosure of information or thing imposed by any prescribed written law, or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.Offences
MIE-1.2.11
(a) Aperson who, without reasonable excuse, refuses or fails to comply with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6 or MIE-1.2.7, may be guilty of an offence of concealing information, or providing false information, or obstructing a currentinvestigation , or aninvestigation likely to be conducted by the CBB in accordance with Part 9 of the CBB Law, punishable under Articles 163 and 170 of the CBB Law.(b) Aperson who, in purported compliance with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6 or MIE-1.2.7, discloses information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.(c) It may be a defence to prosecution for an offence under paragraph (b) if the defendant proves that he believed on reasonable grounds that the information or statement was not misleading.Amended: July 2021Copies of or Extracts from Documents to be Admitted as Evidence
MIE-1.2.12
(a) The CBB shall treat copies of or extracts from a document produced under this Module that are provided to be a true copy of the document, or the relevant part of the document, as if they were the original document, or the relevant part of the original document.(b) For the purposes of paragraph (a), evidence that a copy of or extract from a document is a true copy of the document or of a part of the document may be given by aperson who has compared the copy or extract with the document or the relevant part of the document and may be given orally or by an affidavit sworn, or by a declaration made before aperson authorised to take an affidavit or statutory declarations.MIE-1.3 MIE-1.3 Information from Self-Regulatory Organizations (SROs)
MIE-1.3.1
Without prejudice to the generality of rule MIE-1.2.4 and apart from using reports, notifications, communications, information, records, data and documents and explanations already provided to the CBB by the licensed exchanges, licensed market operators and licensed clearing houses, and central depositories, the CBB may also use methods of obtaining information mentioned in paragraph MIE-1.3.2, in addition to the usual methods of obtaining information from licensees.
MIE-1.3.2
The methods of obtaining information referred to in paragraph MIE-1.3.1, which may be used by the CBB, may include but not be limited to:
(a) Online connectivity
The CBB may require the licensed exchanges, licensed market operators, licensed clearing houses and central depositories to establish and maintain online connectivity with the CBB for the purpose of receiving on a continuous basis, as well as on a periodical basis (including real-time, intra-day, daily, weekly, monthly, quarterly and/or annually), such market transaction information, market referential information and any other data or information. For this purpose, the CBB may require a direct online connectivity to the trading system, clearing and settlement facilities and depository facilities. The CBB may collect, validate, transform, consolidate and load such information and other information received from various sources for the purpose of market surveillance, research and regulatory analysis into the CBB's systems and records.(b) Periodic and Emergency Meetings
The CBB may conduct periodic meetings and emergency meetings with the licensed exchanges, market operators, licensed clearing houses and central depositories. The CBB may obtain information, reports, documents and data during or pursuant to such periodical or emergency meetings, and use the same for to satisfy the supervisory objectives of the CBB.(c) Periodic and Event Based Reports (Electronic Form or Physical Form)
The CBB may stipulate periodic and event-based reports in addition to other reporting requirements applicable to licensed exchanges, market operators, licensed clearing houses and central depositories under the MAE Module and CSD Module respectively; and other rules and regulations. The CBB requires these reports either in electronic form or in physical form.(d) Inspection
The CBB may conduct aninspection under the MAE Module or CSD Module, either an overallinspection or a special purposeinspection of a licensed exchange or market operator, or licensed clearing house or central depository, and use the information, data, reports, records and documents obtained through suchinspection for the purpose of the CBB's market surveillance, investigation and enforcement functions.(e) Information Provided to Public Investors
The CBB may also use the information made available by licensed exchanges, market operators, licensed clearing houses or central depositories to the public investors.(f) Referrals from SROs
If a licensed exchange, market operator, licensed clearing house or central depository (SRO ) discovers any conduct in violation or contravention of the CBB Law, rules and regulations, business rules of suchSRO , or any other applicable laws, rules and regulations, the concernedSRO shall, apart from taking action based on its own findings andinvestigations on the matter, refer the potential contraventions to the CBB. Such referrals shall contain or be followed by a detailedinvestigation report on the matter and the evidence obtained by theSRO .(g) Investigation Report
The CBB may require a licensed exchange, market operator, licensed clearing house or central depository to conduct aninvestigation on any matter considered appropriate by the CBB for the purpose of the CBB's market surveillance, investigation and enforcement functions, and to submit a detailedinvestigation report on the matter required by the CBB to be investigated, along with the evidence collected during theinvestigation , for the findings and conclusions of suchinvestigation .(h) Formal Request for Information
As part of the CBB’s ongoing supervision, the CBB may, by direction, specifically request information or temporary or ad-hoc reporting from a licensee under Article 111 of the CBB Law, or frompersons related to any licensee under Article 113 of the CBB Law, and the recipients of such request are bound to provide the information requested within the time specified by the CBB.Amended: July 2021MIE-1.4 MIE-1.4 Information from Members of SROs and Other Capital Market Service Providers
MIE-1.4.1
Without prejudice to the generality of rule MIE-1.2.4 and apart from using reports, notifications, communications, information, records, data, documents and explanations already provided to the CBB by the
capital market service providers the CBB may also use the methods of obtaining information mentioned in paragraph MIE-1.4.2, in addition to the other ongoing obligations and reporting obligations of the respectivecapital market service provider for the purpose of the CBB's market surveillance, investigation and enforcement function.Amended: July 2021MIE-1.4.2
The methods of obtaining information referred to in paragraph MIE-1.4.1 which may be used by the CBB may include, but not be limited to:
(a) Formal Request for Information
As part of the CBB's ongoing supervision, the CBB may, by direction, specifically request information or temporary or ad-hoc reporting from a licensee under Article 111 of the CBB Law, or frompersons related to any licensee under Article 113 of the CBB Law, and the recipients of such request are bound to provide the information requested within the time specified by the CBB.(b) Meetings
Apart from the normal meetings, periodical prudential meetings, or any other special purpose meeting, the CBB may convene a meeting with a CBB licensee for the purpose of obtaining specific information.(c) Periodic Reports and Event-Based Reports (in Electronic Form or Physical Form)
The CBB may use the periodic reports and event-based reports submitted by acapital market service provider to the CBB or to anSRO (including a licensed exchange or market operator and a licensed clearing house or central depository). For example, the CBB may use a Suspicious Transaction Report made by acapital market service provider under the Anti-Money Laundering and Combating Financial Crime Module (AML Module), or the Prohibition of Market Abuse and Manipulation Module (MAM Module) for the purpose of obtaining information. The CBB may require these reports either in electronic form or physical form.(d) Inspection
The CBB may conduct aninspection and use the information obtained through suchinspection .(e) Additional Responsibilities to Auditors
As per Article 63 of the CBB Law, the CBB may request from the external auditors of acapital market service provider to increase the scope of audit and provide additional information to the CBB and the information and reports provided by the external auditors can be used by the CBB.(f) Notifications, Registrations, Filings and other Communications
The CBB may use any information contained in any of the notifications, registrations, filings and other communications received from the CBB licensees and related parties for the purpose of the market surveillance, investigation and enforcement functions.(g) Record of Telephone Conversations and Electronic Communications
The CBB may also use the records of telephone conversations and electronic communications that are required to be maintained by acapital market service provider or for the purposes of the CBB’s market surveillance, investigation and enforcement functions.Amended: July 2021MIE-1.5 MIE-1.5 Information from Listed Companies and Issuers of Securities
MIE-1.5.1
As per Article 112 of the CBB Law, the CBB may require any listed company or issuer of
securities , or anyperson acting on their behalf, to provide such information as the CBB deems necessary for discharging its duties and responsibilities under this Law.MIE-1.5.2
Without prejudice to the generality of paragraph MIE-1.5.1, the CBB may, in addition to using reports, notifications, announcements, annual reports, reports, communications, records, data and explanations received from any listed company or issuer of
securities , also use methods mentioned in paragraph MIE-1.5.3 for obtaining information in addition to the usual methods of obtaining information from listed companies and issuers ofsecurities .MIE-1.5.3
The methods of obtaining information referred to in paragraph MIE-1.5.2 which may be used by the CBB to obtain information from listed companies and issuers of
securities include, but are not limited to:(a)Formal Request for Information
The CBB may require any listed company or issuer ofsecurities to provide such information as the CBB deems necessary within the time specified by the CBB.(b)Inspection
The CBB may conduct aninspection and use the information obtained through suchinspection in discharging its supervisory responsibilities. (c)Additional Responsibilities to Auditors
As per Article 63 of the CBB Law, the CBB may request from the external auditors of a listed company or issuer ofsecurities to increase the scope of audit and provide additional information to the CBB, and the information and reports provided by the external auditors can be used by the CBB.(d)Notifications, Registrations, Filings and other Communications
The CBB may also use any information contained in any of the notifications, registrations, filings and other communications received from listed companies and issuers ofsecurities and related parties for the purpose of discharging its supervisory duties.(e)Meetings
The CBB may convene a meeting with any issuer or listed company for the purpose of discussing matters relating to the market surveillance, investigation and enforcement functions of the CBB.(f)Periodic Reports
The CBB may use the periodic and other reports submitted by the listed companies and issuers for the purpose of the CBB's market surveillance, investigation and enforcement functions.Amended: July 2021MIE-1.6 MIE-1.6 Referrals from Other Domestic Authorities
MIE-1.6.1
The CBB may use information contained in referrals received from other domestic authorities, including but not limited to the Ministry of Industry, Commerce & Tourism (MOICT) and the Financial Intelligence Directorate within the Ministry of Interior (MOI) based on the discovery made by them regarding potential cases of contravention of the CBB Law, rules and regulations and other applicable laws, rules and regulations.
Amended: July 2021MIE-1.7 MIE-1.7 Referrals from Overseas Authorities
MIE-1.7.1
The CBB may receive referrals from overseas authorities, either pursuant to the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU), or other multilateral/bilateral arrangements, or otherwise, leading to potential cases of contravention of the CBB Law, rules and regulations, or any other applicable laws, rules and regulations.
Amended: July 2021MIE-1.8 MIE-1.8 Complaints from the Public and Information from Other Sources
MIE-1.8.1
Complaints from the public and customers of the CBB licensees are received by the CBB in the complaint forms available on the CBB's official website and such complaints which relate to potential cases of contravention of the CBB Law, rules and regulations, or
SROs ' business rules are also used by the CBB for the purposes of the CBB’s market surveillance, investigation and enforcement functions.The CBB’s surveillance, investigation and enforcement functions also uses information disseminated through the media, including newspapers, television, newsletters, internet, research reports and other media.
Amended: July 2021MIE-1.9 MIE-1.9 Reports from Experts
MIE-1.9.1
Article 121 of the CBB Law enables the CBB to appoint qualified
investigators (including professional firms) and Article 63 of the CBB Law enables the CBB to request additional duties from external auditors.The CBB may at its discretion, require a CBB licensee or a listed company or an issuer of
securities , or any other relevantperson to provide a report by an expert in order to support the CBB's market surveillance,investigation and enforcement functions. The costs associated with such appointment of an expert shall be borne bypersons required to appoint an expert.MIE-1.9.2
The factors the CBB will consider when deciding whether to use an expert include:
(a) If the CBB's objectives for making further enquiries are predominantly for the purposes of fact finding; i.e. gathering historic information or evidence for determining whether enforcement action may be appropriate, the CBB's information gathering andinvestigation powers under Part 7 of the CBB Law are likely to be more effective and more appropriate than appointing an expert.(b) If the CBB's objectives include obtaining expert analysis or recommendations (or both) for say, the purposes of seeking remedial action, it may be appropriate to appoint an expert instead of or in conjunction with the CBB's other available powers.MIE-1.9.3
The CBB shall normally make clear both to the
persons referred to in rule MIE-1.9.1and to the expert, the nature of the concerns that led the CBB to decide to appoint an expert, and the possible uses of the results of the report. A report the CBB commissions for purely diagnostic purposes may identify issues which could lead to the appointment of aninvestigator and/or enforcement action.MIE-1.9.4
The CBB shall:
a) Requirepersons referred to in rule MIE-1.9.1 to appoint experts only for specific purposes, rather than for general enquiry;b) Not use the procedure as a matter of routine in relation to particularpersons ;c) Use the procedure only after having considered the alternatives;d) Normally use the procedure because of the added value to be gained from use of an expert, because of their particular expertise or knowledge, not because of CBB's resource constraints;e) Take into account cost implications, including whether the likely cost of an expert's report is proportionate and will provide enough benefit, having regard to the issue in question and the resources of thepersons referred to in rule MIE-1.9.1;f) Take into account the expected benefit to thepersons referred to in rule MIE-1.9.1; andg) Use the procedure in a focused, proportionate way and ensure that reports are scoped accordingly.This policy does not preclude the use of the same procedure for generically similar purposes in different cases, for example, to review systems and controls of
persons referred to in rule MIE-1.9.1 or to obtain verification of information provided to the CBB.Who the CBB will Nominate or Approve when Using Experts
MIE-1.9.5
When considering whether to nominate or approve an expert to make a report, the CBB will have regard to such factors as whether the proposed
person appears to have:(a) The skills necessary to make a report on the matter concerned;(b) The ability to complete the report within the time required;(c) Relevant specialised knowledge on the matter to be reported on;(d) Any professional difficulty or potential conflict of interest in reviewing the matters to be reported on, including but not limited to questions reflecting on the quality or reliability of work previously carried out by the expert;(e) Independence, bearing in mind the closeness of any existing professional or commercial relationship, to give an objective opinion on such matters as:(i) Matters already reported on by the expert (e.g. on the firm's financial statements or in relation to a firm's systems and controls);(ii) Matters that are likely to be contentious and may result in disciplinary or other enforcement actions against thepersons referred to in rule MIE-1.9.1, its management, shareholders or major shareholders; or(iii) Matters that the expert has been involved in, in another capacity.MIE-1.9.6
In appropriate circumstances it may be cost effective for the CBB to nominate or approve the appointment of an expert who has already acted for, or advised the
persons referred to in rule MIE-1.9.1. For example, the CBB may nominate or approve the appointment of a firm's auditor to prepare a report, taking into account where relevant, the considerations set out in paragraph MIE-1.9.2.MIE-1.10 MIE-1.10 Detection of Potential Cases of Contraventions
MIE-1.10.1
The
CMSD captures all the relevant information, reports, data and documents received from various sources and stores them in its records and systems for the purpose of regulatory analyses and identifies potential cases of contravention of the CBB Law, rules and regulations, and other applicable laws, rules and regulations. On-line and off-line alerts are generated based on the information available and analysis made of potential cases of contraventions and such alerts are further examined by the Market Surveillance Department at theCMSD , to evaluate the potential evidences indicating suspicions of contraventions.Amended: July 2021MIE-1.11 MIE-1.11 Determination of Preliminary Investigation
MIE-1.11.1
If the analysis of the known facts and potential evidence indicates contraventions the
CMSD shall consider whether a sufficient, credible source of facts and evidence suggests contravention of the CBB Law, rules and regulations and/or an enforcement action is warranted. Some of the factors that could be considered include, but are not limited to:(a) The laws, rules or regulations that could potentially be considered as having been contravened or violated;(b) The severity and/or seriousness of such contravention or violation;(c) The potential magnitude of such contravention or violation;(d) The potential losses involved or harm to an investor or investors;(e) Whether the affected group is particularly vulnerable or at risk;(f) Whether the conduct is ongoing;(g) Whether the conduct can be investigated efficiently;(h) WhetherSROs or other authorities might be better suited to investigate the conduct.Amended: July 2021MIE-1.11.2
After conducting an analysis referred to in paragraph MIE-1.11.1, the Director of the
CMSD shall be consulted regarding any further analysis that should be undertaken, before determining whether a preliminaryinvestigation of the potential cases of contravention shall be undertaken. Approval of the Director of theCMSD shall be sought for opening a preliminaryinvestigation .Amended: July 2021MIE-1.12 MIE-1.12 Preliminary Investigation
Information from Third Parties During Preliminary Investigation
MIE-1.12.1
As per Article 123 of the CBB Law, the CBB may require any
person who is in possession of information or documents relevant to aninvestigation conducted by the CBB, to promptly present such information and documents to the CBB.MIE-1.12.2
Pursuant to a preliminary
investigation referred to in section MIE-1.11, theCMSD , or any official of the CBB authorised in this regard, may take copies or extracts from such documents referred to in rule MIE-1.12.1 and also require theperson producing such a document, or any other relevantperson to provide an explanation, including written explanations, of the contents of the document.MIE-1.12.3
If a
person required under rule MIE-1.12.1 to produce the document required fails to produce such a document, but he has information about the whereabouts of such a document, then he must indicate to theCMSD , or any official of the CBB authorised in this regard, where the document is located and who is in possession of the document.Access to Premises, Information and Documents
MIE-1.12.4
As per Articles 114 and 124 of the CBB Law, the
CMSD , or any other CBB staff who are authorised to undertake a preliminaryinvestigation referred to in section MIE-1.11, may enter and inspect the premises, offices, or locations of anycapital market service provider to obtain any information or necessary documents or data.Amended: July 2021MIE-1.12.5
If necessary, the
CMSD or the authorised CBB staff may retain any documents obtained by virtue of the provisions of the previous paragraph for a period not exceeding six months. However, if the procedures of a trial of anyperson commenced in connection with committing a crime within the period of the specified six months and the procedures of the said trial continued beyond this period, and the mentioned documents prove to be of relevance to such procedures, then theCMSD or the authorised CBB staff may retain such documents up to the end of the said trial procedures, or to any other date determined by the Competent Court.MIE-1.12.6
As per Article 123 of the CBB Law, it shall be the duty of every
person who is in possession of information or documents relevant to a preliminaryinvestigation conducted by the CBB to:(a) Allow the staff of theCMSD or the authorised CBB staff to have access to the premises, offices and locations occupied by suchpersons at all reasonable times for the purpose of preliminaryinvestigation .(b) Extend the staff of theCMSD or the authorised CBB staff facilities for examining any books, accounts and other documents in the custody or control (whether kept manually or in a computer, or in any other form) of suchperson , required for the purposes of the preliminaryinvestigation .(c) Provide to such staff of theCMSD or the authorised CBB staff copies of any books, records, documents, information, data and explanation which in the opinion of the staff of theCMSD are relevant to the preliminaryinvestigation .MIE-1.12.7
If the staff of the
CMSD or the authorised CBB staff fail to enter and inspect the premises, offices, or locations of anySRO , or member of anSRO or any othercapital market service provider , to obtain any information, or documents, or data, then theCMSD shall seek approval for formalinvestigation , and theCMSD investigator appointed to conduct the formalinvestigation may seek a court order, as per Article 124 of the CBB Law, to carry out the following:(a) Entering and inspecting specific premises and obtaining relevant information, data, or documents.(b) Copying or taking extracts of any relevant document, information or data.(c) Compelling anyperson employed by anySRO , or member of anSRO or any othercapital market service provider , to give an explanation, or to specify the whereabouts of any documents, information, or data.Compelling force may be used, where necessary.
Amended: July 2021MIE-1.12.8
The
CMSD should evaluate the facts and evidence gathered during the preliminaryinvestigation to determine whether it is appropriate to:(a) Open a formalinvestigation considering the factors mentioned in section MIE-2.2.4; or(b) Close the preliminaryinvestigation without any recommendation for enforcement actions; or(c) Initiate appropriate enforcement actions, without opening up a formalinvestigation , based on the findings of the preliminaryinvestigation , and facts and evidence of the case.Amended: July 2021MIE-1.12.9
In respect of cases where it is determined to open a formal
investigation and if it is considered appropriate to initiate appropriate interim enforcement measures swiftly, before further damage is done and remedial actions are taken as early as possible, theCMSD shall evaluate and initiate appropriate interim enforcement measures that are required to be taken, pending the outcome of the formalinvestigations on the case.MIE-1.12.10
After determining the outcome of the preliminary
investigation and recommended course of interim or final enforcement measures, theCMSD staff authorised to conduct the preliminaryinvestigation shall submit the preliminaryinvestigation report containing the findings of the preliminaryinvestigation , facts and evidence of the case along with the recommended course of action, based on the outcome of the preliminaryinvestigation mentioned in rule MIE-1.12.7.Amended: July 2021MIE-1.12.11
The
CMSD shall decide on the course of action of the preliminaryinvestigation mentioned in rule MIE-1.12.7 and also, if required, decide on the interim or final enforcement actions and seek the approval of H.E. the Governor for the same.MIE-1.12.12
The procedure and proceedings of the enforcement actions shall be governed by chapter MIE-3 of this Module.
MIE-1.13 MIE-1.13 Preventive Surveillance Actions
MIE-1.13.1
The CBB seeks to proactively prevent contraventions or unfair practices or improper conduct and protect the interests of the public investors and
securities market at the earliest possible time and the CBB may take preventive surveillance measures. Such preventive surveillance measures may include but not be limited to:(a)Interim Enforcement Actions
Interim enforcement actions can be taken based on the information, facts and evidence available to theCMSD and such action can be initiated at the earliest possible time as part of the market surveillance function. Details of such interim enforcement actions are given in chapter MIE-3 of this Module.(b)Directives Under Article 38
The CBB may issue directives to anycapital market service provider , or any market participant, or any other relevantperson as a preventive surveillance measure. Such directives under Article 38 of the CBB Law may be issued where the CBB believes that it is necessary or expedient in the interest of the public investors orsecurities market, or for the protection of investors, to take such action as it considers necessary, and such preventive surveillance measures can be imposed either market-wide or be made available to individualsecurities or issuers or anSRO , or any member of anSRO or any othercapital market service provider , or market participants or any relevantpersons .(c)Imposition of Trading Limits, Margins and Trading Restrictions
TheCMSD may, as a pro-active surveillance measure in emergency situations, impose limits or restrictions or measures. Such measures may include but not be limited to trading limits, position limits, additional margins, trading restrictions, suspending trading of anysecurities , freezing of accounts, suspending clearing/settlement of any transaction(s), or off-setting the suspected transactions, or any other prudential limits for the purposes of protecting the interests of investors and thesecurities market.Amended: July 2021MIE-2 MIE-2 Formal Investigation
MIE-2.1 MIE-2.1 Scope of Investigation
MIE-2.1.1
Notwithstanding anything in this Module, or any other rules and regulations of the CBB, the Governor of the CBB may, if he thinks fit and it is in the public interest to do so, order an
investigation as per Article 121 of the CBB Law.(a) The CBB may conduct suchinvestigation as it considers necessary or expedient for any of the following purposes:(i) to exercise any of its powers or to perform any of its functions and duties under the CBB Law;(ii) to ensure compliance with the CBB Law, rules, regulations, directives, or any written direction issued under the CBB Law;(iii) to investigate an alleged or suspected contravention of any provision of the CBB Law, rules, regulations, or directives, or any written direction issued under the CBB Law;(iv) to investigate whether the transactions insecurities are being dealt with in a manner detrimental to the investors or thesecurities market in violation of the CBB Law, rules and regulations; or(v) to investigate whether anycapital market service provider , or anyperson associated with thesecurities market, or any otherperson has violated any of the provisions of the CBB Law, or the rules, regulations or directives issued thereunder.(b) A requirement imposed by the CBB in the exercise of its powers under Parts 7 or 9 of the CBB Law shall be deemed to have effect notwithstanding any obligations as to secrecy or other restrictions upon the disclosure of information imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.(c) Anyperson who complies with a requirement imposed by the CBB in the exercise of its powers under Parts 7 or 9 of the CBB Law shall not be treated by the CBB as being in breach of any restriction upon the disclosure of information, or thing imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.(e) In this Module, "requirement by the CBB" includes a requirement imposed by theCMSD or aninvestigator appointed by the CBB to conduct a formalinvestigation .Amended: July 2021MIE-2.1.2
When necessary, the
CMSD may appoint one or more qualifiedinvestigators to conduct aninvestigation with respect to the following, in accordance with Chapter 1 of Part 9 (Articles 121-124) of the CBB Law:(a) Nature or position of the business of thecapital market service provider ;(b) A particular aspect of the businesses of thecapital market service provider ;(c) The ownership or control of thecapital market service provider ;(d) Whether thecapital market service provider is practicing the very business licensed thereto, and assessing to what extent thecapital market service provider is abiding, in providing the said business, by the provisions of the law and the terms and conditions of the licence.(e) Whether thecapital market service provider is carrying out unlicensed business;(f) Whether the listed companies are abiding by the procedures and principles of listing referred to in paragraph (c) of Article 86 of the CBB Law.The
investigator may conduct aninvestigation , where necessary, on the business of any member of a group or company to which thecapital market service provider underinvestigation is a party. Thecapital market service provider underinvestigation must be notified in writing of the decision to investigate its business.Amended: July 2021MIE-2.1.3
In exercise of powers available to the CBB under Article 38 of the CBB Law, the CBB implements the scope referred to in rule MIE-2.1.2 above for the purpose of achieving the objectives of the CBB stated in Article 3 of the CBB Law, and discharging duties and responsibilities mandated to the CBB vide Article 4 of the CBB Law, the matters referred to in rule MIE-2.1.2 (a)-(f) shall include the following:
(i)Investigation of matters considered expedient for the purpose of ensuring compliance with the CBB Law, or any rules or regulations issued thereunder.(ii) Alleged or suspected contravention of any provision of the CBB Law or rules and regulations made thereunder, or any directive issued by the CBB.(iii) Whether the transactions insecurities are being dealt with in a manner detrimental to the investors or thesecurities market in violation of the CBB Law, rules and regulations; or(iv) Whether acapital market service provider , or anyperson associated with thesecurities market, or any otherperson has violated any of the provisions of the CBB Law, or the rules, regulations or directives issued thereunder or business rules ofSROs .Amended: July 2021Self-Incrimination and Savings for Advocates and Solicitors
MIE-2.1.4
(a) Aperson is not excused from disclosing information to the CBB or, as the case may be, aninvestigator appointed by the CBB to conduct a formal investigation, under a requirement made of him in any provision of this Module, on the grounds that the disclosure of the information might tend to incriminate him.(b) Where aperson claims, before making a statement disclosing information that he is required to under any provision of this Module to the CBB or, as the case may be, aninvestigator appointed by the CBB to conduct a formalinvestigation , that the statement might tend to incriminate him, that statement shall not be used by the CBB to support any CBB disciplinary measures against him.(c) Nothing in this Module shall:(i) Compel an advocate and solicitor to disclose or produce a privileged communication, or a document or other material containing a privileged communication, made by or to him in that capacity; or(ii) Authorise the taking of any such document or other material which is in his possession.(d) An advocate and solicitor who refuses to disclose the information to produce the document or other material referred to in paragraph (c) shall nevertheless be obliged to give the name and address (if he knows them) of theperson to whom, or by or on behalf of whom, that privileged communication was made.Amended: July 2021MIE-2.2 MIE-2.2 Ordering a Formal Investigation
Appointment of Investigator
MIE-2.2.1
(a) TheCMSD may, at any time by order in writing, direct any official of theCMSD specified in the order to conduct a formalinvestigation into the affairs of anySRO , or member of anSRO , or listed company or issuer ofsecurities , or any othercapital market service provider orpersons associated with thesecurities market or any otherperson , and to report thereon to the CBB, as per Article 121 of the CBB Law.(b) TheCMSD may also appoint, with the approval of the Governor, any professional firm to conduct such formalinvestigation referred to in paragraph (a) of this rule.Amended: July 2021MIE-2.2.2
Before it proceeds with an
investigation , theCMSD will satisfy itself that there are grounds to investigate under the statutory provisions that give the CBB powers to appointinvestigators . If the statutory test is met, it will decide whether to carry out aninvestigation after considering all the relevant circumstances. To assist its consideration of cases, theCMSD will apply a set of assessment criteria stated in paragraph MIE-2.2.4. Not all of the criteria will be relevant to every case and there may be other considerations which are not mentioned in the list, but which are relevant to a particular case. TheCMSD's assessment will include considering whether using alternative procedures is more appropriate, taking into account the overall circumstances of theperson concerned and the wider context. Another consideration will be whether the CBB is under a general duty to take action on behalf of, or otherwise to provide assistance to another domestic or overseas authority.MIE-2.2.3
Formal
investigation can be ordered in three ways. Firstly, it can be when a preliminaryinvestigation opened under section MIE-1.11 can be converted into a formalinvestigation based on the findings, facts and evidence gathered during the preliminaryinvestigation . Secondly, prior to completion of the preliminaryinvestigation , it may be determined that it would be appropriate to order a formalinvestigation on the case. Thirdly, a formalinvestigation can also be ordered without any history of a preliminaryinvestigation on the matter.Factors Considered while Deciding on a Formal Investigation
MIE-2.2.4
Without prejudice to the generality of the powers of the CBB to order formal
investigations , the factors that may be considered by the CBB, while deciding to order a formalinvestigation , include but are not limited to:(a) Whether the subject matter is a CBB priority in the context of the CBB's objectives and responsibilities, as per Articles 3 and 4 of the CBB Law.(b) Whether an action would address a problematic industry practice.(c) Whether the conduct undermines the fairness or integrity of the Kingdom'ssecurities market.(d) Whether an action would provide an opportunity for the CBB to address violative conduct targeted to a specific market participant, or group ofpersons that might not otherwise be familiar with the CBB, or the protections afforded by thesecurities laws.(e) Whether an action would present a good opportunity to coordinate with other regulators or authorities in the Kingdom and overseas authorities.(f) Whether the conduct can be addressed by other regulators or authorities.(g) Whether an action would alert the investing public of a new type ofsecurities fraud or misconduct.(h) The magnitude of the potential violations involved in theinvestigation , considering:(i) The severity and seriousness of the conduct;(ii) The length of time the conduct continued, or whether it is ongoing;(iii) The number of violations;(iv) Whether recidivists were involved;(v) Whether violations were repeated;(vi) The amount of harm or potential harm to victims;(vii) The amount of ill-gotten gains to the violators;(viii) Whether victims were specifically targeted based on personal or affinity group characteristics;(ix) forcapital market service providers , whether the conduct involved officers, directors, or senior management;(x) Whether gatekeepers (such as accountants or attorneys) orsecurities industry professionals are involved.(i) The resources required to investigate the potential violations, considering:(i) The complexity of the potential violations;(ii) The approximate staff man days required over the course of theinvestigation ;(iii) The duration of the relevant conduct;(iv) The number of potential violators;(v) The number and location of potential witnesses;(vi) The volume of evidence that the staff must collect and review, such as trading records, corporate documents and email correspondence;(vii) The level of analysis required for complex data and evidence, such as auditor workpapers, bluesheets, or financial data;(viii) The number and location of witnesses and the scheduling of the examination ofpersons ;(ix) Travel requirements.(j) Whether there is an urgent need to file an enforcement action, such as aninvestigation into ongoing fraud or conduct that poses a threat of imminent harm toinvestigators .Amended: July 2021Investigation of Certain Cases
MIE-2.2.5
The combination of the priority given to certain types of misconduct over others and the CBB's risk-based approach to enforcement means that certain cases will be subject to enforcement action and others will not, even where they may be similar in nature or impact. The CBB's choice as to the use of the enforcement tool is therefore a question of how the CBB uses its resources effectively and efficiently and how it ensures that it is an effective regulator.
Amended: July 2021MIE-2.2.6
Where unauthorised business poses a significant risk to the investor protection objective or to the CBB's other regulatory objectives, unauthorised activity will be a matter of serious concern for the CBB. The CBB deals with cases of suspected unauthorised activity in a number of ways and it will not use its
investigation powers and/or take enforcement action in every single instance.MIE-2.2.7
The CBB's primary aim in using its
investigation and enforcement powers in the context of suspected unauthorised activities is to protect the interests of investors. The CBB's priority will be to confirm whether or not a regulated activity has been carried on in the Kingdom of Bahrain by someone without licensed authorisation or exemption, and if so, the extent of that activity and whether other related contraventions have occurred. It will seek to assess the risk to investors' assets and interests arising from the activity as soon as possible.MIE-2.2.8
The CBB often takes a different approach to that described above where
capital market service providers no longer meet the licensing conditions. The CBB views the licensing conditions as being fundamental requirements for licensing and authorisation and it will generally take action in all such cases which come to its attention and which cannot be resolved through the use of supervisory tools. The CBB does not generally appointinvestigators in such cases. Instead,capital market service providers may first be given an opportunity to correct the failure. If the CBB licensee does not take the necessary remedial action, the CBB will consider whether its license to carry out regulated businesses should be varied and/or cancelled. However, there may be cases where the CBB considers that a formalinvestigation into a licensing condition concern is appropriate.Amended: July 2021MIE-2.2.9
When the CBB has information regarding possible contravention of the Issuing and Offering of Securities Module, or listing rules, or the Disclosure Standards (DIS) Module, or any violation or contravention relating to the primary market, the CBB will use its investigative powers and/or take enforcement action, as deemed fit.
Cases where Other Authorities or SROs have an Interest
MIE-2.2.10
Action before or following an
investigation may include, for example, referring some issues or information to other authorities or SROs for consideration, including where another authority or SRO appears to be better placed to take action. For example, when considering whether to use its powers to conduct formalinvestigations into market misconduct, the CBB will take into account whether another regulatory authority or anSRO is in a position to investigate and deal with the matters of concern (as far as a licensed exchange or market operator or licensed clearing house and depository is concerned, the CBB will consider the extent to which the licensed exchange or market operator, or licensed clearing house and depository has adequate and appropriate powers to investigate and deal with a matter itself). Equally, in some cases the CBB may investigate and/or take action in parallel with another domestic or international authority or SRO.Amended: July 2021Sources of Cases
MIE-2.2.11
The CBB may be alerted to possible contraventions or breaches by complaints from the public or CBB licensees, or listed companies or issuers of
securities by referrals from other authorities, or through its own enquiries and supervisory activities. CBB licensees or listed companies, or issuers ofsecurities may also bring their own contraventions to the CBB's attention, as they are obliged to do so under the CBB Law, rules and regulations.Assisting Overseas Regulators
MIE-2.2.12
Providing assistance upon request by an overseas authority will be governed by Article 122 of the CBB Law and the Cooperation and Exchange of Information with Overseas Authorities (ICO) Module.
MIE-2.3 MIE-2.3 Investigation Proceedings
Request for Information and Documents
MIE-2.3.1
(a) As per Article 123 of the CBB Law:"(i) Anyperson who is in possession of information or documents relevant to aninvestigation conducted by the Central Bank or its duly appointedinvestigator , should promptly present such information or documents upon request by the Central Bank or its duly appointedinvestigator .(ii) If the Central Bank or its duly appointedinvestigator receives a document according to the requirement imposed under this Chapter, it may:• Take copies or extracts from such document.• Require theperson producing the document, or any other relevantperson , to provide an explanation of the contents of the document.(iii) If theperson fails to produce the document required, but he has information about the whereabouts of such document, then he should, upon the request of the Central Bank or its appointedinvestigator , indicate where the document is located."(b) Examination of Persons
As per Article 124 of the CBB Law:"(i) If the Central Bank or its authorisedperson , for any reason, fails to enter and inspect the premises, offices, or locations of the licensee to obtain any information or necessary documents and data, or if the powers conferred to the Central Bank are not sufficient for it to practice its supervision tasks over the business of the licensee, then the Central Bank may seek a court order upon a petition to enable the authorisedinvestigators to carry out the following:• Entering and inspecting specific premises and obtaining relevant information, data or documents.• Copying or taking extracts of any relevant document information or data.• Compelling anyperson employed by the licensee to give explanation respecting, or to specify the whereabouts of, any documents, information or data.Compelling force may be used, where necessary.(ii) If necessary the Central Bank may retain any documents obtained by virtue of the provisions of the previous paragraph for a period not exceeding six months. However, if the procedures of a trial of anyperson commenced in connection with committing a crime within the period of the specified six months and the procedures of the said trial continued beyond this period, and the mentioned documents prove to be of relevance to such procedures, then the Central Bank may retain such documents up to the end of the said trial procedures, or to any other date determined by the Competent Court."Requirement to Appear for Examination
MIE-2.3.2
(a) Pursuant to Articles 123 and 124 of the CBB Law and for the purpose of aninvestigation under this Module, theCMSD or its duly appointedinvestigator may, in writing, require aperson :(i) To give theCMSD or its duly appointedinvestigator all reasonable assistance in connection with theinvestigation ; and(ii) To appear before an officer of theCMSD or its duly appointedinvestigator for examination under oath and to answer questions under oath.(b) A requirement in writing imposed under paragraph (a) shall state the general nature of the matter referred to in paragraph (a).Proceedings at Examination
MIE-2.3.3
The provisions of section MIE-2.3 shall apply where, pursuant to a requirement made under rule MIE-2.3.2 for the purposes of an
investigation under this Module, aperson (referred to in this Module as the examinee) appears before anotherperson (referred to in this Module as theinvestigator ) for examination.Requirements Made of Examinee
MIE-2.3.4
(a) Pursuant to the powers provided under Article 123(b) of the CBB Law, theinvestigator may examine the examinee on oath or affirmation and may, for that purpose, administer an oath or affirmation to the examinee.(b) The oath or affirmation to be taken or made by the examinee for the purposes of the examination is an oath or affirmation that the statements that the examinee will make are true.(c) Theinvestigator may require the examinee to answer a question that is put to the examinee at the examination and is relevant to a matter that theCMSD is investigating, or is to investigate, under this Module.Examination to Take Place in Private
MIE-2.3.5
(a) The examination shall take place in private and theinvestigator may give directions as to who may be present during the examination or part thereof.(b) Aperson shall not be present at the examination unless he is:(i) Theinvestigator or the examinee;(ii) Aperson approved by theCMSD to be present; or(iii) Entitled to be present by virtue of a direction under rule MIE-2.3.5(a).Record of Examination
MIE-2.3.6
(a) Theinvestigator may, and shall if the examinee so requests, cause a record to be made of statements made at the examination.(b) If a record made under rule MIE-2.3.6 (a) is in writing, or is reduced to writing:(i) Theinvestigator may require the examinee to read the record, or to have it read to him, and may require him to sign it; and(ii) Theinvestigator shall, if requested in writing by the examinee to give to the examinee a copy of the written record, comply with the request without charge but subject to such conditions as theinvestigator may impose.Giving Copies of Record to Other Persons
MIE-2.3.7
(a) The CBB may give a copy of a written record of the examination, or such a copy together with a copy of any related record, or document, or book, to an advocate and solicitor acting on behalf of aperson who is carrying on, or is contemplating in good faith, a proceeding in respect of a matter to which the examination relates.(b) If the CBB gives a copy to aperson under rule MIE-2.3.7 (a), theperson , or any otherperson who has possession, custody or control of the copy, or a copy of it, shall not except in connection with preparing, beginning or carrying on, or in the course of any proceedings:(i) Use the copy or a copy of it; or(ii) Publish or communicate to aperson , the copy, a copy of it, or any part of the copy's contents.(c) The CBB may, subject to such conditions or restrictions as it may impose, give to aperson a copy of a written record of the examination, or such a copy together with a copy of any related record, or document, or book.Amended: July 2021Copies Given Subject to Conditions
MIE-2.3.8
If a copy of a written record, or document, or book is given to a
person under rules MIE-2.3.6 (b) or MIE-2.3.7 (c), subject to conditions or restrictions imposed by the CBB, theperson and any otherperson who has possession, custody or control of the copy or a copy of it, shall comply with the conditions.Record to Accompany Report
MIE-2.3.9
(a) If, in the CBB's opinion a statement made at an examination is relevant to any otherinvestigation conducted under this Module;(b) If a record of the statement was made under rule MIE-2.3.6; and(c) A report about the otherinvestigation is prepared under this Module, a copy of the record shall accompany the report relating to such otherinvestigation submitted to the CBB.Offences
MIE-2.3.10
(a) Aperson who refuses or fails to comply with the rules MIE-2.3.2 or MIE-2.3.4 (c) may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.(b) Aperson who:(i) Refuses or fails to take an oath or make an affirmation when required to do so by aninvestigator examining him under this Module;(ii) Refuses or fails to comply with a requirement of aninvestigator under rule MIE-2.3.6 (b) (i); or(c) Aperson who, in purported compliance with the provisions of this Module, or in the course of examination of theperson, furnishes information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.(d) It may be a defence to prosecution for an offence under paragraph (c) if the defendant proves that he believed on reasonable grounds that the information or statement was true and was not misleading.(e) Aperson who obstructs or hinders the CBB or anotherperson in the exercise of any power under this Module or the CBB Law, may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.Amended: July 2021Powers to Obtain Information
MIE-2.3.11
Power of Authority to order Production of Records, or Documents or Books
Without prejudice to rule MIE-2.3.1 and for the purpose of an
investigation under this Module, the CBB may in writing, require anyperson at a specified time and place to provide information or produce records, or documents, or books relating to any matter underinvestigation , and suchperson shall comply with that requirement.MIE-2.3.12
Application for Warrant to Seize Records, or Documents, or Books Not Produced
(a) Where the CBB has reasonable grounds to suspect that there is, on any particular premises, any record, or document, or book the production of which has been required under rule MIE-2.3.11, and:(i) Which has not been produced in compliance with that requirement; or(ii) Which the CBB has reasonable grounds to believe will not be produced in compliance with that requirement,the CBB may apply to a court for the issue of a warrant authorising the CBB to search the premises for such record, or document, or book, with or without compelling force:(iii) To enter and search the premises and to break open and search anything, whether a fixture or not, in the premises; and(iv) To take possession of or secure against interference, any record, or document, or book that appears to be a record, or document, or book, the production of which was so required.(b) The powers conferred under paragraph (a) are in addition and not in derogation of any other powers conferred by any other written law or rule of law.(c) In this Module, "premises" includes any structure, building, aircraft, vehicle or vessel.MIE-2.3.13
Powers Where Records, or Documents, or Books are Produced or Seized
(a) This rule shall apply where:(i) Records, or documents, or books are produced to the CBB under a requirement made under rule MIE-2.3.11;(ii) Under a warrant issued under rule MIE-2.3.12, the CBB or aperson named therein:• Takes possession of records, or documents, or books; or• Secures records, or documents, or books against interference; or(iii) Under a previous application of rule MIE-2.3.13 (f) of this section, records, or documents, or books are delivered into the possession of the CBB or aperson authorised by it.(b) If paragraph (a) (i) applies, the CBB may take possession of any of the records, or documents, or books.(c) The CBB or, where applicable, aperson referred to in paragraph (a) (ii) may:• Examine, and may make copies of or take extracts from, any of the records, or documents, or books;• Use or permit the use of any of the records, or documents, or books for the purposes of any proceedings; and• Retain possession of any of the records, or documents, or books for so long as is necessary.(i) For the purposes of exercising a power conferred by this rule (other than paragraph (e));(ii) For a decision to be made about whether or not any proceedings to which the records, or documents, or books concerned would be relevant should be instituted; or(iii) For such proceedings to be instituted and carried on.(d) Noperson shall be entitled as against the CBB or, where applicable, aperson referred to in paragraph (a) (ii) to claim a lien on any of the records, or documents, or books, but such a lien is not otherwise prejudiced.(e) While the records, or documents, or books are in the possession of the CBB or where applicable, theperson referred to in paragraph (a) (ii) the CBB orperson :(i) Shall permit anotherperson to inspect at all reasonable times such of the records, or documents, or books (if any) as the second-mentionedperson would be entitled to inspect if they were not in possession of the CBB or the first-mentionedperson; and(ii) May permit any otherperson to inspect any of the records, or documents, or books.(f) Unless paragraph (a) (ii) applies, aperson referred to in paragraph (a) (ii) may deliver any of the records, or documents, or books into the possession of the CBB or of aperson authorised by the CBB to receive them.(g) Where paragraphs (a) (i) or (ii) applies, the CBB, aperson referred to in paragraph (a) (ii), or aperson into whose possession the records, or documents, or books are delivered under paragraph (f) may require:(i) If paragraph (a) (i) applies, aperson who so produced any of the records, or documents, or books; or(ii) In any other case, aperson who was a party to the compilation of any of the records, or documents, or books, to explain to the best of his knowledge and belief any matter about the compilation of any of the records, or documents, or books, or to which any of the records, or documents, or books relate.MIE-2.3.14
Powers where Records, or Documents, or Books are not Produced
Where a
person fails to comply with a requirement imposed by the CBB under rule MIE-2.3.11 to produce any record, or document, or book, the CBB may require theperson to state to the best of his knowledge and belief:(a) The place where such record, or document, or book may be found; and(b) Theperson who last had possession, custody or control of such record, or document, or book and the place where thatperson may be found.MIE-2.3.15
Copies of or Extracts from Records, or Documents, or Books to be Admitted in Evidence
(a) Subject to this rule, a copy of or extract from a record, or document, or book referred to in this rule that is proved to be a true copy of the record, or document, or book, or of the relevant part of the record, or document, or book is admissible in evidence as if it were the original record, or document, or book or the relevant part of the original record, or document, or book.(b) For the purposes of paragraph (a), evidence that a copy of or extract from a record, or document, or book is a true copy of the record, or document, or book, or of a part of the record, or document, or book, may be given by aperson who has compared the copy or extract with the record, or document, or book, or the relevant part of the original record, or document, or book and may be given orally or by an affidavit sworn, or by a declaration made before aperson authorised to take affidavits or statutory declarations.MIE-2.3.16
Offences
(a) Aperson who refuses or fails to comply with any requirement imposed under rules MIE-2.3.11, MIE-2.3.13 (g), or MIE-2.3.14 may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(b) Aperson who in purported compliance with a requirement under this rule, furnishes information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(c) It may be a defence to the prosecution for an offence under paragraph (b) if the defendant proves that he believed on reasonable grounds that the information or statement was true and not misleading.(d) Anyperson who conceals, destroys, mutilates or alters any record, or document, or book relating to a matter that the CBB is investigating or about to investigate under this Module, or who, where such a record, or document, or book is within the territory of the Kingdom of Bahrain, takes or sends the record, or document, or book out of Bahrain, may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(e) Aperson who, obstructs or hinders the CBB in the exercise of any power under this rule, or obstructs or hinders aperson who is executing a warrant issued under rule MIE-2.3.12, may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(f) The occupier or theperson in charge of the premises that aperson enters under a warrant issued under rule MIE-2.3.12 who fails to provide to thatperson all reasonable facilities and assistance for the effective exercise of his powers under the warrant may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.Information and Records from Telecommunications Operators
MIE-2.3.17
Access to Records of Telecommunication Companies and Internet Service Providers
As per Article 123 of the CBB Law, if it appears to the
CMSD or its duly appointedinvestigator that the records, information, documents and data recorded in electronic format or otherwise is available, or likely to be available with the telecommunications service providers or internet service providers, and these are relevant to aninvestigation conducted by theCMSD , then theCMSD or its duly appointedinvestigator may request the Telecommunications Regulatory Authority of the Kingdom of Bahrain to use its powers under the telecommunication laws, rules and regulations to obtain such records or information, or documents or data. Such records, information, documents or data should be provided by such telecommunications service providers or internet service providers, who should promptly present such records, information, documents and data for the purpose of theCMSD's investigation .MIE-2.4 MIE-2.4 Investigation Report
MIE-2.4.1
The
investigator appointed by the CBB to conduct aninvestigation shall, on completion of the investigation, after taking into account all relevant findings, conclusions, facts and evidence, submit a report to the CBB, provided that theinvestigator shall submit an interim report pending completion ofinvestigations if he considers necessary in the interest of investors and thesecurities market, or as directed by the CBB.MIE-2.4.2
The investigation report shall be submitted to the
CMSD .MIE-2.4.3
The
CMSD may, after considering theinvestigation report and the facts and evidence of the case and if satisfied that there is contravention of the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, decide to initiate appropriate enforcement actions. This is without prejudice to the powers of the CBB to take interim and other enforcement actions before conducting formalinvestigations , or before receipt of a finalinvestigation report.MIE-2.4.4
Apart from initiating appropriate enforcement actions referred to in paragraph MIE-2.4.3, the
CMSD may make referrals to SROs or other regulators and authorities in the Kingdom of Bahrain, as well as to the overseas regulators and authorities, particularly in respect of contraventions which can be addressed by such other domestic or overseas regulators/authorities.Amended: July 2021MIE-2.5 MIE-2.5 Judicial Investigation
MIE-2.5.1
Article 115 of the CBB Law states that: "The officers of the Central Bank who are appointed by a resolution issued by the Minister of Justice and Islamic Affairs in agreement with the Governor, shall have the capacity of Judicial Investigation Officers with respect to criminal offences that fall under their jurisdiction and relevant to the duties assigned to them. The verbal process of such crimes prepared by the said officials should be referred to the public prosecution pursuant to a resolution to be issued by the Governor or any
person he may authorise".MIE-2.5.2
The CBB may suggest that the Minister of Justice and Islamic Affairs appoint any of the officers of the
CMSD as Judicial Investigation Officers with respect to criminal offences relating to thesecurities market or the offences covered by the scope of this Module. Judicial investigation undertaken by the officials of theCMSD , either jointly with the officers of the Ministry of Justice and Islamic Affairs, or otherwise, shall submit aninvestigation report to theCMSD , giving details of contraventions and offences of the CBB Law, rules and regulations, along with all relevant information and evidence.Amended: July 2021MIE-2.5.3
The
CMSD may, after considering theinvestigation report submitted to theCMSD officers who conducting the judicialinvestigation , and if satisfied that there is a contravention of the CBB Law, rules and regulations, decide to initiate appropriate enforcement actions.MIE-3 MIE-3 Enforcement
MIE-3.1 MIE-3.1 Enforcement
The CBB's General Approach to Enforcement
MIE-3.1.1
This section sets out the CBB's approach to enforcement, and the measures used by the CBB to address failures and contraventions by various market participants, including
capital market service providers , investors or any otherpersons involved in the non-compliance or contravention. The purpose of such measures is to encourage high standards of compliance by all those involved in the capital market, thus reducing risk to the Kingdom's financial sector in general, and the capital market in particular.Amended: July 2021MIE-3.1.2
Since most of the CBB's enforcement powers are derived from the CBB Law, this Module contains a large number of references to the Law. Users of the Module should therefore refer to the Law as well as to the Module where necessary. In the event of a dispute on interpretation between the Law and the description of an enforcement power in this Module, the provisions of the Law prevail.
MIE-3.1.3
The CBB's effective and proportionate use of its enforcement powers plays an important role in the pursuit of its regulatory objectives of protecting investors, maintaining confidence in the financial system, promoting public awareness and reducing risks and financial crime. For example, using enforcement helps to contribute to the protection of investors and to deter future contraventions of the CBB Law and other application requirements and market abuse. It can also be a particularly effective way, through publication of enforcement outcomes, of raising awareness of regulatory standards.
MIE-3.1.4
There are a number of principles underlying the CBB's approach to the exercise of its enforcement powers:
(a) The effectiveness of the regulatory regime depends to a significant extent on maintaining an open and cooperative relationship between the CBB and those it regulates.(b) The CBB will seek to exercise its enforcement powers in a manner that is transparent, proportionate, responsive to the issue and consistent with its publicly stated policies.(c) The CBB will seek to ensure fair treatment when exercising its enforcement powers.(d) The CBB will aim to enhance the market discipline of theperson who is the subject of its action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance, and where appropriate, to remedy the harm caused by the non-compliance.(e) The CBB will seek to exercise its enforcement powers in a non-discriminatory manner with an effort to treat similarly situatedpersons and entities in a similar manner.MIE-3.1.5
Where a
person has failed to comply with the requirements of the CBB Law, rules and regulations, or other relevant laws, rules and regulations, it may be appropriate to deal with this without the need for formal disciplinary or other enforcement action. The proactive supervision and monitoring of the capital market and an open and cooperative relationship between market participants and their regulators, will in some cases where a contravention has taken place, lead the CBB to decide against taking formal disciplinary action. However, in those cases, the CBB will expect the market participant or relevantperson to act promptly in taking the necessary remedial action agreed with its regulators orSROs , to deal with the CBB's concerns. If the market participant or relevantperson does not do this, the CBB may take disciplinary or other enforcement action in respect of the original contravention.MIE-3.1.6
The CBB favours an open, pragmatic and collaborative relationship with market participants, within the boundaries set by the CBB Law and Rulebook. Whilst the CBB wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective and timely enforcement of its requirements.
MIE-3.1.7
The CBB's approach is not to prescribe in detail the exact regulatory response for each and every contravention, as there may be several types of contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.
MIE-3.1.8
In deciding any given regulatory and enforcement response, the CBB will nonetheless consistently assess the individual circumstance of each contravention against the CBB Law and this Module. The CBB's overall approach is to take into account:
(a) The seriousness of the contravention concerned (including the risks posed to the capital market);(b) The compliance track record of theperson concerned (including the extent to which the contravention reflects systemic weaknesses, reckless conduct, or wilful violation); and(c) The measures that are most likely to achieve the desired result of remedying the contravention and preventing future contraventions.MIE-3.1.9
Such an approach reduces the risk of inappropriate enforcement actions, by allowing regulatory measures to be tailored to individual circumstances. By taking into account a
person's compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the CBB also aims to achieve an overall consistency in its regulatory actions.MIE-3.1.10
Underlying the CBB's approach in paragraph MIE-3.1.8 is the fundamental principle of proportionality. The enforcement measures contained in this Module are of varying severity, and will be used accordingly in keeping with the CBB's assessment of the contravention. Thus, the CBB will reserve its most serious enforcement measures — such as initiating prosecution for imposing criminal sanctions, cancellation of license or withdrawal of "fit and proper" status — for the most serious contraventions.
MIE-3.1.11
Where a significant element of judgement is required to assess compliance with a requirement, the CBB will usually discuss the matter with the person concerned, before using one of this Module's enforcement mechanisms. Conversely, where there are clear-cut contraventions of CBB requirements, then the CBB will usually move immediately to one or more of the enforcement mechanisms outlined in this Module. In most such cases, though, the CBB also expects to continue an active dialogue with the person concerned, aimed at remedying the contravention.
MIE-3.1.12
Except in the limited circumstances outlined below, the CBB will usually only apply an enforcement measure after the person concerned has been given a suitable opportunity to be heard and/or make representations.
Prohibition on Insurance
MIE-3.1.12A
To help the CBB achieve the purpose of this Module,
licensees and listed companies must 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 fines provided for in this Module.Added: July 2021Publicity
MIE-3.1.12B
The CBB will not as a matter of general policy publicise individual cases when it uses enforcement measures. However, in such cases the CBB may inform the licensee’s or listed company’s external auditor and – in the case of overseas operations – relevant overseas regulators.
Added: July 2021MIE-3.1.12C
In exceptional circumstances, as allowed by Article 132 of the CBB Law, the CBB may decide to publicise individual cases when the measures set out in MIE are used, where there is a strong case that doing so would help achieve the CBB’s supervisory objectives. In such instances, the CBB will usually allow the licensee, listed company or individual concerned the opportunity to make representations to the CBB before a public statement is issued.
Added: July 2021MIE-3.1.12D
With respect to the financial penalties provided Chapter MIE-4, licensees and listed companies are required to disclose in their annual report the amount of any such penalties paid to the CBB, together with a factual description of the reason(s) given by the CBB for the penalty.
Added: July 2021MIE-3.1.12E
Without prejudice to the above policy, the CBB may from time to time publish aggregate information on its use of measures set out in MIE, without identifying the licensees, listed companies or individuals concerned, unless their identities have previously been disclosed as provided for in Paragraphs MIE-3.1.12C or MIE-3.1.12D.
Added: July 2021MIE-3.1.12F
By their nature, penalties relating to placing licensees under administration and/or amending or cancelling of a license, are public acts, once applied. The CBB will in these instances generally issue a public statement explaining the circumstances of the case.
Added: July 2021Senior Management Responsibility
MIE-3.1.13
The CBB is committed to ensuring that senior managers of CBB licensees, listed companies, issuers of
securities and otherpersons fulfil their responsibilities. The CBB expects senior management to take responsibility for ensuring their organizations identify risks, develop appropriate systems and controls to manage those risks and ensure that the systems and controls are effective in practice. Where senior managers are themselves responsible for misconduct, the CBB will where appropriate, bring cases against individuals as well as organizations. The CBB believes that deterrence will most effectively be achieved by bringing home to such individuals the consequences of their actions.MIE-3.1.14
The CBB recognises that cases against individuals are very different in their nature from cases against corporate entities and the CBB is mindful that an individual will generally face greater risks from enforcement action in terms of financial implications, reputation and livelihood than would a corporate entity. However, taking action against individuals sends an important message about the CBB's regulatory objectives and priorities and the CBB considers that such cases have important deterrent values. The CBB is therefore committed to pursuing appropriate cases robustly, and will dedicate sufficient resources to them to achieve effective outcomes.
Cooperation
MIE-3.1.15
An important consideration before an enforcement
investigation and/or enforcement action is taken forward is the nature of acapital market service provider's , or otherperson's overall relationship with the CBB and whether, against that background, the use of enforcement procedures is likely to further the CBB's aims and objectives. So, for any similar set of facts, using enforcement procedures will be less likely if acapital market service provider , or any otherperson has built up over time a strong track record of taking its senior management responsibilities seriously and been open and communicative with the CBB.In addition, a
person 's conduct in response to the specific issue which has given rise to the question of whether enforcement procedures should be used will also be relevant. In this respect, relevant matters may include whether theperson has self-reported, helped the CBB establish the facts and/or taken remedial action such as addressing any systems and controls issues and compensating any consumers who have lost out. Such matters will not, however, necessarily mean that enforcement procedures will not be used. The CBB has to consider each case on its merits and in the wider regulatory context, and any such steps cannot automatically lead to an enforcement sanction. However, they may in any event be factors which will mitigate the penalty.Amended: July 2021MIE-3.1.16
In those cases where enforcement action is not taken and/or a formal
investigation is not commenced, the CBB will expect thecapital market service provider or otherperson to act promptly to take the necessary remedial action agreed with its regulators to deal with the CBB's concerns. In cases of failure to take prompt remedial action, the CBB may take disciplinary or other enforcement action in respect of the original contravention.Amended: July 2021Late Reporting or Non-submission of Reports to the CBB
MIE-3.1.17
The CBB attaches considerable importance to the timely submission of reports by
capital market service providers . This is because the information contained in such reports is essential to the CBB's assessment of whether a market participant is complying with the requirements and standards of the regulatory system. So in the majority of cases involving non-submission of reports or repeated failure to submit complete reports in time, the CBB considers that it will be appropriate to initiate enforcement actions.Amended: July 2021MIE-3.2 MIE-3.2 Interim Measures and Actions
MIE-3.2.1
In order to pursue the CBB's objectives and perform the duties specified by Articles 3 and 4 of the Law, the CBB needs to initiate appropriate enforcement measures swiftly before further damage is done and take remedial actions as early as possible, in order to protect the interest of the investors and the capital market.
MIE-3.2.2
The CBB's enforcement measures are intended to achieve compliance and therefore may, in certain cases, have to be applied in a timely and prompt manner without waiting for the
investigation to be completed. In such cases, pending the receipt of a finalinvestigation report, theCMSD will resort to interim enforcement actions in order to restrain future violation and also act as a remedial, so that the past unlawful conduct may be reversed at the earliest.MIE-3.2.3
Interim enforcement actions may be taken, based on the information/documents/reports available with the
CMSD , analysis and findings of theCMSD , interim findings of theinvestigation initiated by theCMSD , and reports from licensed exchanges and the Clearing, Settlement and Central Depository System and the clearing house, or any other appropriate source of documents or information or reports.Amended: July 2021MIE-3.2.4
In cases where the
CMSD takes interim measures, usually theCMSD will provide a post-decisional opportunity of a hearing to thepersons affected by such interim actions within a reasonable period of time, as expeditiously as possible. TheCMSD may, after taking into account the submissions made by thepersons concerned both during the hearing and in writing, modify or reconfirm or cancel or reverse the enforcement action, as may be deemed fit by theCBB Enforcement Decision Review Committee (EDRC).Amended: July 2021MIE-3.2.5
Interim enforcement actions shall be decided by the
CMSD , based on the available information, facts and evidence, including the preliminaryinvestigation report or interiminvestigation report, or any other information, data, report, facts or evidence available to theCMSD . Interim enforcement actions can also be decided by theEnforcement Decisions Review Committee on a reference made to it by theCMSD .Amended: July 2021MIE-3.2.6
Interim enforcement actions shall be applicable without prejudice to any further
investigation and enforcement actions that may be decided by theCMSD or theEnforcement Decisions Review Committee .Amended: July 2021Procedure
MIE-3.2.7
Based on the facts and evidence available, the
CMSD may at its discretion, decide on an interim enforcement action.MIE-3.2.8
In the course of the CMSD’s case examination or during the course of carrying out an
investigation , if it appears to the official of theCMSD conducting the examination orinvestigation , or the appointedinvestigator that an interim enforcement action is warranted, he shall submit the facts and evidence of the case to theCMSD , along with the proposal for interim enforcement action.Amended: July 2021MIE-3.2.9
If the
CMSD , during the course of its normal supervisory functions, finds that interim enforcement action is warranted, theCMSD shall evaluate the information, documents, data and evidence available, and initiate interim enforcement action, as may be deemed fit.MIE-3.2.10
The
CMSD shall issue the order to all the parties against whom interim enforcement action is taken and other relevant parties involved in the implementation of the order, includingcapital market service providers , investors or any other relevant parties.Amended: July 2021MIE-3.2.11
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.12
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.13
[This Paragraph has been deleted in July 2021]
Deleted: July 2021MIE-3.2.14
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.15
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.16
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.17
Interim enforcement actions shall be applicable without prejudice to any further enforcement actions that may be decided by the
CMSD orEDRC , and to any furtherinvestigation and enforcement proceedings and actions.Amended: July 2021MIE-3.3 MIE-3.3 Final Enforcement Actions
MIE-3.3.1
When there is clear-cut evidence to confirm contraventions of the CBB Law, CBB Rulebook or other related laws, rules and regulations, the CBB may implement one or more appropriate enforcement measures.
MIE-3.3.2
The CBB may implement one or more appropriate enforcement measures, where the CBB has evidence in the form of findings of the
CMSD investigation done by theinvestigators appointed by the CBB under Articles 121 or 115 of the CBB Law, along with the information, documents, statements of explanation and other evidence obtained duringinvestigation and also in the form of findings of theCMSD and when there is clear-cut evidence available, even without a formalinvestigation .Amended: July 2021MIE-3.3.3
If considered appropriate, the CBB may also rely on the documents and information obtained through other means such as information, reports, documents, statements of explanation obtained from the
SROs , members ofSROs , listed companies, issuers ofsecurities , any othercapital market service providers and other third parties, as per Articles 111, 112 and 113 of the CBB Law,inspection conducted under Article 114 of the CBB Law, and references received from other regulatory authorities with complete evidence etc., to initiate final enforcement actions.Amended: July 2021MIE-3.3.4
However, the CBB will usually apply a final enforcement action only after the concerned
person has been given notice of the charges of contravention and an opportunity to make his submissions in writing and/or during a personal hearing.MIE-3.4 MIE-3.4 Enforcement Proceedings
Enforcement Decisions Review Committee (EDRC)
MIE-3.4.1
For the purpose of taking enforcement decisions that are of material significance, the CBB has set up the
Enforcement Decisions Review Committee .The
EDRC shall be as constituted by a Directive of the Governor.Amended: July 2021MIE-3.4.2
The
EDRC exercises enforcement powers on behalf of the CBB and is separate from the CBB's executive management structure.Amended: July 2021MIE-3.4.3
The
EDRC may take the assistance of theCMSD staff, but they shall be separate from the staff who were involved in conducting theinvestigations and making recommendations to theEDRC . TheEDRC may also decide to take the assistance ofSROs and outside experts, if warranted.Amended: July 2021Scope of Work of the EDC
MIE-3.4.4
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.5
[This Paragraph has been deleted in July 2021].
Deleted: July 2021The Operation of the EDC
EDC Meetings and Composition of Panels
MIE-3.4.6
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.7
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Conflicts of Interest
MIE-3.4.8
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.9
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.10
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: General
MIE-3.4.11
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.12
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.13
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.14
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: Warning Notices
MIE-3.4.15
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.16
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.17
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: Representations
MIE-3.4.18
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.19
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.20
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.21
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.22
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.23
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.24
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: Enforcement orders
MIE-3.4.25
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Default Procedures
MIE-3.4.26
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.27
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.28
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.29
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.30
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.31
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.32
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.33
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Court Proceedings
MIE-3.4.34
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Review Proceedings
MIE-3.4.35
Where an
enforcement order is issued by theEDRC , a party may appeal such decision to the Appeals Committee of the CBB.Amended: July 2021MIE-3.4.36
The Appeals Committee shall be as constituted by a Directive of the Governor.
Amended: July 2021MIE-3.4.37
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.38
The scope of the Appeals Committee shall include but not be limited to determining:
(a) Whether theEDRC followed the correct procedures of theEDRC ;(b) Whether the penalty imposed by theEDRC is justified.(c) Evaluating any appeals to enforcement measures submitted, in conjunction with supporting evidence and documentation received from the relevant CBB Directorate and utilize experts internal or external to the CBB.(d) Issuing recommendations following an evaluation of the appeal and within 30 days of its referral to the Appeals Committee.Amended: July 2021MIE-3.5 MIE-3.5 Settlement
Introduction
MIE-3.5.1
(a) Aperson subject to enforcement action may agree to a financial penalty or other outcome, rather than contest formal action by the CBB.(b) The fact that he does so will not usually obviate the need for anenforcement order recording the CBB's decision to take that action. Where, however, theperson subject to enforcement action agrees not to contest the content of a proposedenforcement order , the decision to issue that order will be taken by theEDRC on matters which are before theEDRC , or by theCMSD on matters which have not been referred to or being considered by theEDRC .Amended: July 2021Procedure: General
MIE-3.5.2
A
person who is or may be subject to enforcement action may wish to discuss the proposed action with theCMSD through settlement discussions. TheCMSD shall refer the matter to theEDRC if the matter is subject to proceedings before theEDRC and decide on its own on other matters.Amended: July 2021MIE-3.5.3
Settlement discussions may take place at any time during the enforcement process if both parties agree. This might be before the giving of a
warning notice , before anenforcement order , or even after referral of the matter to the Court. But theCMSD would not normally agree to detailed settlement discussions until it has a sufficient understanding of the nature and gravity of the suspected misconduct or issue to make a reasonable assessment of the appropriate outcome. Settlement after anenforcement order is not encouraged.MIE-3.5.3A
The CBB reserves the right not to enter into settlement discussions where its examination of the nature of the contravention and/or the contravening party discourages this or where the matter was previously rejected under the settlement proceedings.
Added: July 2021MIE-3.5.3B
Entering into settlement discussions shall not prohibit the initiation of any proceedings, in so far as may be deemed necessary by the CBB for the purpose of issuance of interim measures to protect the interests of investors and to maintain the integrity of the securities markets.
Added: July 2021MIE-3.5.4
The
CBB and theperson concerned may agree that neither theCBB nor theperson concerned would seek to rely against the other on any admissions or statements made in the course of their settlement discussions, if the matter is considered subsequently by the Court.Amended: July 2021Procedure: Participation of Decision-Makers in Discussions
MIE-3.5.5
(a) TheEDRC may, but need not, participate in the discussions exploring possible settlement.(b) If theEDRC has not been involved in the discussions, but an agreement has been reached, they may ask to meet the relevantCMSD staff or theperson concerned, in order to assist in the consideration of the proposed settlement.Amended: July 2021MIE-3.5.6
The terms of any proposed settlement:
(a) Will be put in writing and be agreed byCMSD staff and theperson concerned;(b) May refer to a draft of the proposedwarning notices (if any) setting out the facts of the matter and theCMSD's conclusions;(c) May, depending upon the stage in the enforcement process at which agreement is reached, include an agreement by theperson concerned to:(i) waive and not exercise any rights under the CBB Law or otherwise to take note of, or access to material relied upon by theCMSD any secondary material which might undermine theCMSD decision to give thewarning notice ;(ii) waive and not exercise any rights under the CBB Law or otherwise to make representations to theCBB in respect of awarning notice ;(iii) not object to the giving of anenforcement order before the expiry of the 30 day period after the giving of awarning notice ;(iv) not dispute with theCMSD the facts and matters set out in awarning notice , orenforcement order , and to waive and not exercise any right under the CBB Law to refer the matter to the Court.(d) Will include that the person subject to the enforcement action accepts that it contravened relevant requirements and admits relevant facts regarding those contraventions in the settlement.(e) Will vary depending on the circumstances of the matter and the CBB settles only if the agreed terms of the settlement result in an acceptable policy and regulatory outcomes.Amended: July 2021MIE-3.5.7
The
EDRC may:(a) Accept the proposed settlement by deciding to give anenforcement order based on the terms of the settlement; or(b) Decline the proposed settlement; or(c) Recommend other terms.Amended: July 2021MIE-3.5.8
(a) In a matter where the CMSD is engaged in settlement discussions and theEDRC subsequently declines the proposed settlement, they may inviteCMSD staff and theperson concerned to enter into further discussions to try to achieve an outcome theEDRC would be prepared to endorse.(b) However, if the matter for settlement has been submitted to theEDRC for consideration, it will be for theEDRC to decide:(i) Whether to extend the period for representations in response to awarning notice ; or(ii) If representations have been made in response to awarning notice , whether to proceed to give anenforcement order .Amended: July 2021MIE-3.5.9
The CBB and other parties may agree to mediation as a way of facilitating settlement in appropriate cases.
Amended: July 2021MIE-3.6 MIE-3.6 Enforcement Measures and Actions
MIE-3.6.1
As it is neither practical nor effective to prescribe in detail the exact enforcement measures for each and every type of potential non-compliance or violation, the CBB will consistently apply the principles stated in paragraph MIE-3.1.4 to assess the individual circumstance of each contravention and decide on the appropriate type or types of enforcement actions that may be resorted to in respect of each case.
MIE-3.6.2
The type of enforcement actions, both interim and final, that can be applied on different categories of
persons involved could include but not be limited to the enforcement actions and measures specified in paragraphs MIE-3.6.3 to MIE-3.6.9.Members of SROs and other Capital Market Service Providers
MIE-3.6.3
Enforcement actions in respect of the members of
SROs and othercapital market service providers will mainly be governed by the CBB Law and the relevant volume of the CBB Rulebook and enforcement actions thereunder include:1) Formal warnings;2) [This Subparagraph was deleted in July 2021].3) Financial penalties as per Article 129 of the CBB Law;4) Placing a licensee under administration as per Article 136 of the CBB Law;5) Cancellation or amendment of license as per Article 48 of the CBB Law;In addition to the above, the CBB may also resort to the following enforcement actions under the CBB Law:
(a)i. Cease and Desist Order
An order prohibiting members ofSROs or othercapital market service providers from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the finalinvestigation and/or enforcement proceedings as a permanent injunction.ii. Freezing Accounts
An order restricting asecurities orsecurities cash account of a member of anSRO or othercapital market service provider with the licensed exchanges, clearing houses, central depositories, banks, brokerage firms, etc. This measure generally will be used as an interim measure.iii. This Subparagraph was deleted in July 2021].iv. Private Warnings
In certain cases despite concerns about aperson 's conduct or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make theperson aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where theperson has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to lead to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.(b) Amendment or Revocation of License Under Article 48
The CBB may amend or revoke a license of a member of anSRO or othercapital market service provider , for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.(c) Imposing Restrictions under Article 128
The CBB may impose administrative restrictions upon members ofSROs or othercapital market service providers , in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.(d) Imposing Financial Penalties under Article 129 of the CBB Law
The CBB may impose financial penalties as an enforcement action for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.(e) Appointing an Observer Member on the Board of the Licensee under Article 130
If imposing administrative restrictions prove to be futile, then the CBB may appoint an observer member on the Board of Directors of the member of anSRO or othercapital market service provider , for a specified period.(f) Suspension of a Licensee under Article 131
The CBB may suspend a member of anSRO or othercapital market service provider , who contravenes the provisions of the CBB Law, rules and regulations and terms and conditions of a license for a period not exceeding 12 months.(g) Public Censure under Article 132
The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.(h) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of offences which result in the violation of Articles 81 or 85 of the CBB Law, if members ofSROs or othercapital market service providers , are involved in such violations.(i) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.(j) Criminal Sanction under Article 168
Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."(k) Criminal Sanction under Article 169
Article 169 of the CBB Law states that "Without prejudice to any greater penalty stated under the Penal Code or any other law, a punishment by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, shall be imposed upon any official or employee of the licensee who acts or permitted an action in violation of Article (134) of this Decree, if he knows or should have known that the licensee is insolvent".(l) Criminal Sanction under Article 170
Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law: (1) Aperson shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Anyperson participates in such an offence shall be liable to the same penalty of the principal offender. (2) Aperson shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed any investigation carried out by the Central Bank or aninvestigator appointed by the Central Bank."(m) Criminal Sanction under Article 171
Article 171 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8), shall be liable to imprisonment and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty." This criminal sanction is applicable to members ofSROs or othercapital market service providers who violate Part 8 of the CBB Law.(n) Criminal Sanction under Article 172
Article 172 of the CBB Law states that "Any legalperson shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legalperson or anyperson who acts in such capacity."(o) Criminal Sanction under Article 163
Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or anyperson appointed by the Central Bank to conduct aninvestigation orinspection on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."(p) [This Subparagraph was deleted in July 2021].Amended: July 2021Disciplinary Action through Licensed Exchanges and Licensed Clearing Houses/Central Depositories (SROs)
MIE-3.6.4
SROs are required to establish a Disciplinary Committee for the purpose of deciding violations by the members or listed companies, or issuers ofSRO's business rules. A Disciplinary Committee shall decide on cases relating to any violation of laws, rules and regulations which regulate the licensed exchanges. Enforcement measures that can be imposed on members ofSROs and listed companies/issuers through the Disciplinary Committee of licensed exchanges may include:i. Warning;ii. Confiscation of all or part of the member's deposits with the licensed exchange;iii. Suspension of trading or clearing rights;iv. Suspension of membership rights;v. Cancellation of membership;vi. Financial penalties, fines and charges.The
CMSD may advise licensed exchanges, licensed clearing houses and central depositories within their scope of their respective powers, to take appropriate enforcement actions. These actions can be in addition to other enforcement actions which are taken by the CBB itself.Listed Companies
MIE-3.6.5
Listed companies are required to meet their obligations as per the CBB Law, rules and regulations and these obligations include the dissemination of information, filing of returns, notifications and periodic reports. For example, listed companies are required to monitor insiders' transactions and report to the
CMSD regarding any suspected case of abuse of inside information and file reports regarding insiders' transactions. If a listed company or an issuer fails to comply with or contravenes the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, the CBB may initiate appropriate enforcement actions. Such enforcement actions may include, but not be limited to:(a)i. Formal warning:
An order issuing a formal warning may be issued to a listed company in order to clearly set out the CBB's concerns to a listed company to ensure that the matter is viewed by the recipient with appropriate seriousness.ii. Cease and Desist Order:
An order prohibiting a listed company from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the finalinvestigation and/or enforcement proceedings as a permanent injunction.iii. [This Subparagraph was deleted in July 2021].iv. Private Warnings
In certain cases despite concerns about aperson 's behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make theperson aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where theperson has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to head to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.(b) Restraining offering of securities using powers under Article 81:
The CBB may direct a listed company or any other prospective issuer not to access the market for an offer or issue ofsecurities in the Kingdom for a certain period or until certain conditions are satisfied.(c) Cancellation of listing and suspension of trading:
Article 87 (a) of the CBB Law states that: "The Central Bank may decide to cancel the listing of anysecurities that contravene the requirements of the Listing Rules, or to suspend the trading of any listedsecurities facing exceptional circumstances that the Central Bank considers as sufficient grounds for the suspension of thesecurities .
The cancellation of listing or the suspension of trading shall be decided by the Governor."(d) Imposing restrictions under Article 128
The CBB may impose administrative restrictions upon listed companies in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.(e) Public censure under Article 132
The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.(f) Criminal sanction under Article 163
Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or anyperson appointed by the Central Bank to conduct aninvestigation orinspection on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."(g) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of violation of Articles 81 or 85 of the CBB Law.(h) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.(i) Criminal Sanction under Article 168
Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."(j) Criminal Sanction under Article 170
Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law:(1) Aperson shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Anyperson participates in such an offence shall be liable to the same penalty of the principal offender.(2) Aperson shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed anyinvestigation carried out by the Central Bank or aninvestigator appointed by the Central Bank."(k) Criminal Sanction under Article 172
Article 172 of the CBB Law states that "Any legalperson shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legalperson or anyperson who acts in such capacity."(l) Imposing Financial Penalties under Article 129 of the CBB Law
The CBB may impose financial penalties as an enforcement action for contravention of the CBB Law, rules and regulations.Amended: July 2021Licensed Exchanges, Clearing Houses and Central Depositories
MIE-3.6.6
As an
SRO , the licensed exchanges, clearing houses and depositories are required to:a) Actively perform market surveillance as a front-line regulator;b) Take disciplinary action for contraventions by members and listed companies/issuers through theSRO's Disciplinary Action Committee;c) Identify potential cases of unlawful transactions and take preventative actions;d) Report suspected cases of market abuse and manipulation to the CBB;e) Implement enforcement actions determined by the CBB.When an
SRO contravenes the provisions of the CBB Law, rules and regulations, as CBB licensees, the enforcement action applicable to all othercapital market service providers of the CBB will also be applicable to the licensed exchanges, clearing houses and central depositories. In addition to these enforcement actions, theseSROs will be subject to other enforcement actions stated in the Markets & Exchanges Module and the Clearing, Settlement & Central Depository Module. Such enforcement measures include:a) Cancellation or amendment of license;b) [This Subparagraph has been deleted in July 2021];c) Removal of officers from his office or employment;d) Financial penalties as per Article 129 of the CBB Law.Amended: July 2021Users of Capital Market Service Providers and Persons other than Licensees and Listed Companies
MIE-3.6.7
Users of
capital market service providers and other persons who are neither licensees nor listed companies must also not engage in conduct that would cause harm to capital markets or that would contravene the CBB Law, its regulations, resolutions or directives, or any other applicable laws relating to capital markets.(a) [This Subparagraph has been deleted in July 2021].(b) [This Subparagraph has been deleted in July 2021].(c) [This Subparagraph has been deleted in July 2021].Where the CBB discovers, suspects or identifies such conduct, it may take the following actions or measures:i. Warning:
A warning may be sent to relevantpersons clearly setting out the CBB's concerns and requesting them to stop or cease the particular conduct.
In certain cases, despite concerns about the behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to take formal action. This is consistent with the CBB’s risk-based approach. The purpose of the warning is to make the relevant persons aware of the issue and to permit the taking of full and immediate remedial action.ii. [This Subparagraph has been deleted in July 2021].iii. Restricting Accounts/Activities:
Instructing licensed exchanges, clearing houses, central depositories, brokerage firms, etc. to restrict the accounts of relevantpersons who fail to comply with the laws, regulations and rules relating to capital markets or to restrict such persons from conducting transactions or engaging in activities that are relevant to the accounts.iv. [This Subparagraph has been deleted in July 2021].v. [This Subparagraph has been deleted in July 2021].iv. [This Subparagraph has been deleted in July 2021].In addition to the above, the CBB may initiate proceedings as follows:(b) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of offences which result in the violation of Articles 81 or 85 of the CBB Law relating to issuing securities and preparing prospectuses.(c) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of insider trading offences which result in the violation of Article 100 of the CBB Law.(d) Criminal Sanction under Article 168
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences that result in a violation of Article 106 of the CBB Law.(e) Criminal Sanction under Article 170
The CBB may initiate proceedings for imposing criminal sanctions in respect of any forging, concealing or destroying of any document relating to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of the CBB Law.(f) Criminal Sanction under Article 171
The CBB may initiate proceedings in relation to Article 171 of the CBB Law concerning anyperson who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8) of the CBB Law.(g) Criminal Sanction under Article 172
The CBB may initiate proceedings in relation to Article 172 of the CBB Law concerning any legalperson , where any of the crimes stated in the CBB Law were committed in its name or for its account or by means of any of its methods and which resulted from the action or gross negligence or approval or under the cover of any member of the board of directors or management or any other official of that legalperson or anyperson who acts in such capacity.(h) [This Subparagraph has been deleted in July 2021].(i) [This Subparagraph has been deleted in July 2021].Amended: July 2021Restriction of Capital Market Service Providers, Auditors and Other Experts
MIE-3.6.8
The CBB may in respect of auditors of CBB licensees, listed companies, issuers of
securities or any other market participant, restrict the duties of such auditors and other experts, where the auditors and other experts failed to perform their duties specified under the CBB Law, rules and regulations. Any decision of the CBB in this regard may apply for a specified period or indefinite period until the CBB is satisfied that theperson will in future comply with the duties and responsibilities in question.MIE-3.6.9
The CBB may also restrict the activities that may be undertaken by
capital market service providers , lead managers, share registrars, underwriters and other professionals involved in capital market activities.MIE-4 MIE-4: Financial Penalties
MIE-4.1 MIE-4.1 CBB Policy
MIE-4.1.1
Under Chapter 2 "Procedures to be taken before penalties or administrative proceedings are applied" and Chapter 3 "Penalties and administrative proceedings" of Part 9 of the CBB Law, the CBB may impose financial penalties on licensees or listed companies or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law and its amendments (in particular Article 129). The CBB shall use judgement and will take into account relevant facts in determining the need to impose financial penalties. Financial penalties are thus normally preceded by the issuance of a written formal notice and/or Direction.
Added: July 2021MIE-4.1.2
The level of financial penalty applied is determined by the nature of the contravention and the amount of additional supervisory attention and resources taken up by licensees or listed companies or persons, referred to in paragraph (b) of Article (68 bis 1) of the CBB Law, the licensees behaviour and by limits set in the CBB Law. The CBB will apply the methodology set out in Appendix A to determine the size of the penalty. The CBB intends that the impact of a penalty should derive more from its signaling effect than from the actual amount of money involved.
Added: July 2021MIE-4.1.3
In accordance with Article 129 of the CBB Law, the maximum financial penalty levied for failing to comply with CBB Law, Regulations, Directives and other requirements is BD 100,000 per violation. The CBB may opt to limit the amount of the financial penalty and use other enforcement measures as outlined in this Module, such as imposing restrictions on a licensee or listed company or limiting the scope of operations.
Added: July 2021MIE-4.1.4
As indicated in Paragraph MIE-3.1.12D, the CBB requires disclosure by licensees and listed companies in their annual report of any financial penalties served on them, together with a factual description of the reasons given by the CBB for applying the penalty. In addition, the CBB may publicise the issuance of a financial penalty notice, where there is a strong case that doing so would help achieve the CBB's supervisory objectives, as mentioned in Article 132 of the pre-mentioned Law.
Added: July 2021MIE-4.1.5
Examples of the types of compliance failings that may lead to the serving of a financial penalty notice are outlined in Part 11 of the CBB Law and may include (but are not limited to):
(a) Failures to address persistent delays and/or significant inaccuracies in regulatory reporting to the CBB;(b) Repeated failures to respond to formal requests for information from the CBB, within the deadlines set;(c) The submission of information to the CBB known to be false or misleading; and(d) Major failures in maintaining adequate systems and controls in accordance with the CBB's requirements, subjecting investors to significant risk of financial loss.Added: July 2021MIE-4.1.6
In assessing whether to serve a financial written penalty notice, the CBB takes into account the following criteria:
(a) the seriousness of the contravention, in relation to the requirement(s) concerned;(b) the duration and/or frequency of the contravention, and the extent to which it reflects more widespread weaknesses in controls and/or management; the extent to which the contravention was deliberate or reckless;(c) the licensee's or listed company's past compliance record and conduct following the contravention; and(d) the scope of any other action taken by the CBB or other regulators against the licensee or listed company in response to the compliance failures in question.Additional criteria are set out in Appendix A.
Added: July 2021MIE-4.1.7
The imposition of a financial penalty does not preclude the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).
Added: July 2021MIE-4.1.8
A written notice of a financial penalty must be issued before imposing any financial penalty. The written notice must contain the following information:
(a) The violations committed by the licensee or listed company with respect to CBB Law; or the prudential Rulebook; or any Directions, warnings or formal requests for information; or violations of the terms and conditions of the license issued to the licensee;(b) Evidence or proof to support the above;(c) The level of financial penalty to be imposed; and(d) The grace period to be allowed to the licensee or listed company for challenging the intended penalty (which will not be less than 30 days).Added: July 2021MIE-4.1.9
The licensee or listed company may either pay the penalty or object within the above period. The CBB will consider any objection and make a formal resolution within 30 days of receiving the objection. Thereafter, the formal resolution and any accompanying penalties are final and must be paid within 30 days.
Added: July 2021MIE-4.2 MIE-4.2 Module AML (Anti-Money Laundering and Combating of Financial Crime)
MIE-4.2.1
Any financial penalties applied by the CBB as regards the implementation of its requirements set out under Module AML, are without prejudice to the criminal sanctions available to the Bahraini courts under the Decree – Law No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money. As with other financial penalties, the imposition of a financial penalty with regards to breaches of the requirements in Module AML does not prevent the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).
Added: July 2021MIE-4.3 MIE-4.3 Financial Penalties for Date Sensitive Requirements
MIE-4.3.1
Volume 6 (Capital Markets) Modules contain specific requirements where licensees and listed companies must comply with, by a precise date. As per MIE-3.1.17, the CBB attaches considerable importance to the timely submission of reports, and late reporting or non-submission of reports will prompt the CBB to consider initiating enforcement actions. In cases where a specific due date and licensees and listed companies are involved, the CBB will impose financial penalties which are based on a per diem basis.
Added: July 2021MIE-4.3.2
This Section applies to date sensitive requirements for:
(a) Reporting requirements included in Volume 6 Modules;(b) Public disclosure requirements included in Volume 6 Modules and any related regulations pursuant thereto;(c) The report of the external auditor required as per Paragraph AML-3.3.1B (d);(d) Annual licensing fees required as per Volume 6 Modules, and(e) Conduct of Shareholders' Meetings requirements included in Section HC-7.4.Added: July 2021MIE-4.3.3
For listed companies, financial penalties related to late filing or other date sensitive requirements are calculated as per the following per diem basis:
(a) Where the listed company’s total consolidated assets are less than or equal to BD 50 million, the financial penalty for late filing is BD 100 per day;(b) Where the listed company’s total consolidated assets are greater than BD 50 million but less than BD 250 million, the financial penalty for late filing is BD 200 per day;(c) Where the listed company’s total consolidated assets are greater than BD 250 million but less than or equal to BD 5 billion, the financial penalty is BD 400 per day;(d) Where the listed company’s total consolidated assets are greater than BD 5 billion, the financial penalty is BD 800 per day; and(e) For a newly listed company who is yet to provide audited financial statements, the financial penalty is BD 100 per day.Added: July 2021MIE-4.3.4
For
SROs and members ofSROs , the financial penalties related to late filing or other date sensitive requirements are calculated as per the following per diem basis:(a) ForSROs under Module MAE and Module CSD, the financial penalty for late filing is BD 100 per day;(b) For members ofSROs under Module MIR, the financial penalty for late filing is BD 50 per day.Added: July 2021MIE-4.3.5
For licensed crypto-asset service providers, the financial penalties related to late filing or other date sensitive requirements are outlined in Paragraph CRA-14.6.13 of the Crypto-Asset Module (CRA).
Added: July 2021MIE-4.3.6
The various deadlines for submission of reports and annual fees referred to in Volume 6 Modules are defined:
(a) In terms of a specified number of days or months following a given date, such as the last date of a calendar quarter;(b) A specified number of days or months after the occurrence of a specific event; or(c) A specific date.Added: July 2021MIE-4.3.7
In imposing financial penalties for date sensitive requirements, the following criteria apply:
(a) Where the due date falls on a weekend or a holiday as designated by the CBB, the first business day following the weekend or holiday will be considered as being the due date;(b) Where a due date is not complied with by the end of the day on which it is due, holidays and weekend days are included in the number of days the item is considered late;(c) For returns and other filings, the date received is the date recorded by the CBB's systems in case of returns filed electronically;(d) In the case of returns filed in hard copy, the CBB stamp is the date received;(e) All returns are to be sent to the respective Supervision Directorate and the annual fees to the Accounts Directorate, on or before the due date, to be considered filed on time;(f) A day ends at midnight in the case of returns that must be filed electronically, or at the close of CBB business day, in the case returns are filed in hard copy; and(g) An incomplete return, where completeness is determined in relation to the requirements of the relevant instructions and Volume 6 Modules, is considered 'not filed' until the CBB receives all necessary elements of the return.Added: July 2021MIE-4.3.8
The CBB does not require any particular method of delivery for returns and filings that are filed in hard copy. The use of the Bahrain postal services, private courier services or other methods of delivery is entirely at the discretion and risk of the licensee and listed company. For the payment of annual fees, licensees and listed companies must follow the requirements under Volume 6 Modules.
Added: July 2021MIE-4.3.9
A decision to impose a financial penalty for date sensitive requirements is unrelated to whether the CBB issues a reminder; it is the licensee's and listed company’s responsibility to file and disclose on time as per the requirements of Volume 6 (Capital Markets) Rulebook.
Added: July 2021MIE-4.4 MIE-4.4 Financial Penalties for Non-compliance with Blocking/Unblocking Requirements
MIE-4.4.1
The financial penalty for late execution of blocking/unblocking orders issued by the Court/Public Prosecution is BD 10 per day per customer account/claim. Such financial penalties will be charged to the
licensee through billing on a weekly basis.Added: July 2021MIE-4.5 MIE-4.5 Procedures for Financial Penalties
MIE-4.5.1
A written financial penalty notice will be addressed to the Chief Executive Officer or General Manager of the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law concerned. This written notification will describe the contravention concerned, the CBB's evidence supporting a financial penalty, and the factors justifying the level of penalty proposed. Only a Director or more senior member of the CBB's management may sign the notification.
Added: July 2021MIE-4.5.2
The licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law has 30 days from the notification's date of issuance to submit any objections it wishes to make to the CBB, in writing and addressed to the issuer of the original notification. If the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law decides not to submit objections, it has 30 calendar days from the notification's date of issuance in which to pay the penalty.
Added: July 2021MIE-4.5.3
Should the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law make representations challenging the proposed penalty, the CBB has 30 days from the issuance of those representations in which to re-examine the facts of the case and its conclusions. If the CBB confirms application of a penalty, payment is required within 30 calendar days of a final notice being issued.
Added: July 2021MIE-4.5.4
Failure to pay penalties within the required deadlines will be considered a breach of the CBB's regulatory requirements, and will also result in other measures being considered, as described elsewhere in this Module.
Added: July 2021MIE-4.5.5
In instances where a licensee or listed company anticipates that it will be unable to meet any date sensitive requirements prescribed by the Rulebook, it must provide a written notification to the CBB at least one week prior to the prescribed due date outlining the date sensitive requirements which it will be unable to comply with, along with a well justified reason for the non-compliance.
Added: July 2021MIE-4.6 MIE-4.6 Remedying a Compliance Failure
MIE-4.6.1
Payment of a financial penalty does not by itself absolve a licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law from remedying the compliance failure concerned. The CBB will expect the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law to address the contravention within a reasonable timescale, to be agreed on a case-by-case basis. Failure to do so will result in other measures being considered.
Added: July 2021Appendices
Appendix A - Methodology of Calculating Financial Penalties
I. Introduction
This appendix sets out the Central Bank of Bahrain's Capital Market Supervision Directorate’s approach in assessing and calculating/determining financial penalties.
The purpose of the financial penalties is to encourage a high standard of conduct and compliance by CBB licensees and listed companies, thereby reducing risk to investors and the rest of the financial sector.
The imposition of a financial penalty does not preclude the CBB from also using other enforcement measures to remedy the same violation.
II. The Scope of Application
In assessing whether to serve a financial penalty upon a licensee or listed company, the CBB shall consider the following additional criteria:
(a) The assessment of gain/benefit made or cost avoided and/or the level of risks posed to investors, financial position of the licensee or listed company, shareholders, stability of the financial sector and/or the reputation of the Kingdom.(b) If the licensee or listed company made any gain/benefit or avoided any costs by violating the CBB rules then the gain/benefit and/or the cost avoided will be used as a benchmark for calculating the fine amount subject to BD 100,000 cap for each violation. In addition, the customers impacted must be compensated in full. The scope of this section does not cover penalties for non-compliance with date sensitive requirements of Section MIE-4.3.(c) Fit and proper reassessment tests would take place for the approved persons deemed to be responsible for serious or repeated violations at the discretion and judgment of the CBB. The relevant approved person/(s) will be identified based on a review of relevant information including but not limited to the licensee’s records before the final decision is made.(d) Each incident of breaching a rule (CBB Law, regulations, resolutions, and Rulebook directives) will be considered a stand-alone violation.(e) If the CBB discovers that one or more breaches had been committed by the licensee or listed company in the past and had gone un-detected, then the CBB has the right, at the point of detection, to impose penalties for each of these past breaches.(f) If the gain/benefit made and/or cost avoided cannot be quantified, then the table below will be used to determine the penalty amount based on the seriousness of violations as determined by the CBB.(g) The factors used to determine the seriousness of the violation include, but are not limited to, the level of risks posed to the licensee's or listed company’s customers, financial position of the licensee or listed company, shareholders, stability of the financial sector and/or the reputation of the Kingdom. The CBB may consider other factors or circumstances as well.Table 1: Risk Rating of Violation and Related Penalty
Risk Rating Fine Amount (BD) 1 Low 1,000 to 10,000 2 Moderate 10,001 to 50,000 3 Serious 50,001 to 100,000 III. Internal Assessment by the CMSD
In deciding which level of risk is most appropriate (which will then determine the penalty amount in relation to the violation), various factors will undergo comprehensive assessment including but not limited to the following:
1) Impact of the violation;2) Nature of the violation;3) Factors showing whether the violation was deliberate; and4) Mitigating and aggravating factors.1. Impact of the violation
Factors relating to assessment of the impact of a violation include:
(a) The level of benefit gained or loss avoided, or intended to be gained or avoided, by the licensee or listed company as a result of the violation, either directly or indirectly;(b) The loss or risk of loss, as a whole, caused to customers, investors or other market users in general;(c) The loss or risk of loss caused to individual customers, investors or other market users;(d) Whether the violation had an effect on particularly vulnerable people, whether intentionally or otherwise;(e) The inconvenience or distress caused to investors; and(f) Whether the violation had an adverse effect on the financial sector and, if so, how serious that effect was. This may include its impact on the confidence in or damage caused to the financial sector. A violation is generally more serious when it causes or may cause extensive financial damage, or when it is likely to be particularly detrimental to investor or customer confidence.2. Nature of the violation
Factors relating to assessment of the nature of the violation include:
(a) Whether the violation revealed serious or systemic weaknesses in the licensee's or listed company’s procedures or in the management systems or internal controls relating to all or part of the licensee's or listed company’s business;(b) Whether the licensee's or listed company’s senior management was aware of the violation;(c) The nature and extent of any financial crime facilitated, occasioned or otherwise attributable to the violation;(d) The scope for any potential financial crime to be facilitated, occasioned or otherwise occurred as a result of the violation;(e) Whether the licensee or listed company failed to conduct its business with integrity; and(f) Whether the licensee or listed company, in committing the violation, took any steps to comply with CBB Law, regulations, resolutions, Rulebook directives, and the adequacy of such steps.3. Factors showing whether the violation was deliberate
Factors relating to assessment of whether the violation was deliberate include:
(a) The violation was intentional, in that the licensee's approved person(s), intended or foresaw that the likely or actual consequences of their actions or inaction would result in a violation and they failed to adequately mitigate that risk;(b) The licensee's approved person(s) knew that their actions were not in accordance with the licensee's internal policies and procedures;(c) The licensee's approved person(s) sought to conceal their misconduct;(d) The licensee's approved person(s) committed the violation in such a way as to avoid or reduce the risk that the violation would be discovered;(e) The licensee's approved person(s) were influenced to commit the violation by the belief that it would be difficult to detect;(f) The violation was repeated; and(g) In the context of a contravention of any rule or requirement imposed by or under CBB law, regulations, resolutions, Rulebook directives, the licensee or listed company obtained reasonable professional advice before the contravention occurred and failed to follow that advice. Obtaining professional advice does not remove a person's responsibility for compliance with applicable rules and requirements.4. Mitigating and aggravating factors
Mitigation and aggravating factors include:
(a) the conduct of the licensee or listed company in bringing (or failing to bring) quickly, effectively and completely the violation to the CBB's attention;(b) the degree of cooperation the licensee or listed company showed during the investigation of the violation. Correspondingly, if the licensee or listed company takes a passive stance towards the matter or avoids investigating the matter properly with the CBB, it is likely to increase the penalty payment and/or imposing other enforcement measures.(c) where the licensee's approved person(s) were aware of the violation or of the potential for a violation, whether they took any steps to stop the violation, and when these steps were taken;(d) any remedial steps taken by the licensee or listed company prior to the discovering of such violation by the CBB; for example, identifying whether customers or investors or other market users suffered loss and compensating them where they have; correcting any misleading statement or impression; taking disciplinary action against staff involved (if appropriate); and taking steps to ensure that similar problems do not arise in the future;(e) whether the licensee or listed company had previously been told about the CBB's concerns in relation to the issue, either by means of a written formal warning/notice and/or Direction;(f) whether the licensee or listed company had previously undertaken not to perform a particular act or engage in a particular behavior;(g) the previous disciplinary record and general compliance history of the licensee or listed company;(h) action taken against the licensee or listed company by other domestic or international regulatory authorities that is relevant to the violation in question.Added: July 2021AML — Anti-Money Laundering & Combating Financial Crime
AML-A AML-A Introduction
AML-A.1 AML-A.1 Purpose
Executive Summary
AML-A.1.1
This Module is a comprehensive framework of rules and guidance aimed at combating money laundering and terrorist financing and applies to all
Capital Market Licensees . In so doing, it helps implement the FATF Recommendations on combating money laundering and financing of terrorism and proliferation, issued by the Financial Action Task Force (FATF), that are relevant toCapital Market Licensees . It also helps implement IOSCO guidance in this area. The Module also contains measures relating to the combating of fraud in the capital market.Amended: January 2022
Amended: July 2016
October 2010AML-A.1.2
The Module requires
Capital Market Licensees to have effective anti-money laundering ('AML') policies and procedures, in addition to measures for combating the financing of terrorism ('CFT'). The Module contains detailed requirements relating to customer due diligence, reporting and the role and duties of the Money Laundering Reporting Officer (MLRO). Furthermore, examples of suspicious activity are provided, to assistCapital Market Licensees monitor transactions and fulfil their reporting obligations under Bahrain Law and this Module.Amended: January 2022
October 2010Legal Basis
AML-A.1.3
This Module contains the Central Bank of Bahrain ('CBB') Directive (as amended from time to time) regarding the combating money laundering and terrorism financing and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all
Capital Market Licensees .Amended: January 2022
Amended: July 2011
October 2010AML-A.1.4
For an explanation of the CBB's rule-making powers and different regulatory instruments, see section UG-1.1.
October 2010AML-A.2 AML-A.2 Module History
Evolution of Module
AML-A.2.1
This Module was first issued in October 2010. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
October 2010AML-A.2.2
Prior to the introduction of this Module, the CBB had issued various regulatory instruments containing requirements covering different aspects of financial crime. The CBB issued Ministerial Order No. 1 of 2004 with Respect to Directives Relating to the Prevention & Prohibition of Money Laundering at the Bahrain Stock Exchange (BSE) and this Order was applicable to the BSE, issuers of
Securities , brokerage firms and offices, registration offices, issue underwriters, establishments accredited with receiving money relating to the subscription ofSecurities , custodians ofSecurities , banks accredited for clearance of transactions carried out at the BSE, dealers inSecurities , and all other entities concerned with dealing inSecurities .October 2010AML-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes AML-A.1.3 07/2011 Clarified legal basis. AML-7.1 07/2011 Clarified the Rules dealing with substantial shareholdings. AML-4.2.3 10/2014 Updated method of submitting STRs. AML-4.4 10/2014 Updated relevant authorities information. AML 07/2016 Updated to reflect February 2012 update to FATF Recommendations. AML-4.2.3 07/2016 Updated instructions for STR. AML-1.2.9A 01/2017 Added guidance paragraph on CR printing AML-9.2.1AA 04/2017 Added Paragraph on Implementing and complying with the United Nations Security Council resolutions requirement. AML-1.1.2A 10/2017 Added new paragraph on the verification of identity and source of funds. AML-1.1.2B 10/2017 Added new paragraph on the verification of identity and source of funds. AML-1.2.7 10/2017 Amended paragraph. AML-1.2.8A 10/2017 Added new paragraph on legal entities or legal arrangements CDD. AML-2.2.10 – AML-2.2.11 10/2017 Amended paragraphs on On-going CSS and Transaction Monitoring. AML-3.1.4A 10/2017 Added paragraph on combining the MLRO or DMLRO position with any other position within the licensee. AML-B.2.4 01/2018 Amended paragraph. AML-1.8.1 01/2018 Amended paragraph. AML-1.10.1 01/2018 Deleted sub-paragraph (a). AML-4.2.6 01/2018 Amended paragraph. AML-9.1.4 01/2018 Amended paragraph. AML-9.2.2 01/2018 Deleted paragraph. AML-1.1.2 07/2018 Deleted Sub-paragraph (a). AML-1.10.2 07/2018 Amended Paragraph deleting cross reference. AML-1.10.3 07/2018 Deleted Paragraph. AML-1.10.9 07/2018 Deleted Paragraph. AML-1.10.1 01/2019 Amended references. AML-3.3.2 01/2019 Amended references. AML-3.3.4 — AML-3.3.5 01/2019 Amended references. AML-1.2.9A 10/2019 Amended reference. AML-1.9.2 10/2019 Amended authority name. AML-3.1.8 10/2019 Amended authority name. AML-3.2.1 10/2019 Amended authority name. AML-4.2.3 10/2019 Amended authority name. AML-4.4.2 10/2019 Amended authority name. AML-7.1.2 10/2019 Deleted Paragraph. AML-9.2.1AA 10/2019 Added a new Paragraph on Terrorist Financing. AML-B.1.1 01/2020 Added “ crypto-asset licensees”. AML-B.1.3 01/2020 Deleted Paragraph. AML-B.3 01/2020 Deleted Section. AML-C 01/2020 Added new Chapter “Risk Based Approach”. AML-1 01/2020 Rename the Chapter to “Customer Due Diligence”. AML-1.1.1 01/2020 Amended Paragraph on procedures approval. AML-1.1.2 01/2020 Added sub-paragraph (i). AML-1.1.14 – AML-1.1.16 01/2020 Added new paragraphs on “Suspicious Wallet Addresses”. AML-1.2.1 01/2020 Added sub-paragraph (n). AML-1.2.5 01/2020 Added new sub-paragraph (f). AML-1.3.4 01/2020 Added new paragraph. AML-1.4.7 01/2020 Added new paragraph. AML-1.5.4 01/2020 Deleted paragraph. AML-1.9 01/2020 Rename the section to “Shell financial Institutions”. AML-1.9.1 01/2020 Amended paragraph. AML-1.11 01/2020 Added new section “Enhanced Due Diligence for Correspondent Accounts” AML-2.2.1 01/2020 Amended Paragraph. AML-2A 01/2020 Added new chapter. AML-3.1.5 01/2020 Amended Paragraph. AML-3.1.5A 01/2020 Added Paragraph. AML-3.1.7 01/2020 Amended sub-Paragraph (a). AML-3.3.2 01/2020 Amended Paragraph. AML-3.3.5 01/2020 Amended Paragraph on report submission date. AML-3.3.2A – AML-3.3.2E 01/2020 Added Paragraphs. AML-6.1.1A – AML-6.1.1C 01/2020 Added Paragraphs. AML-8.1.1 01/2020 Deleted Paragraph. AML-8.1.1A 01/2020 Added Paragraph. AML-11.1.2 01/2020 Added Paragraph. AML-2.1.3 & AML-2.1.4 04/2020 Added new Paragraphs on KPIs compliance with AML/CFT requirements. AML-5.1.6A 01/2021 Added a new Paragraph on requirements to hire new employees. AML-A.1.3 01/2022 Amended Paragraph to replace financial crime with money laundering and terrorism financing. AML-C 01/2022 New revised risk-based approach (RBA). AML-1.1 01/2022 Amended Section to introduce additional rules for non-resident customers, amendments to customers onboarded prior to full completion of customer due diligence, digital onboarding etc. AML-1.2 01/2022 Amended Section to include E-KYC and electronic documents law requirements. AML-1.3.2 01/2022 Amended Paragraph on enhanced due diligence requirements for customers identified as having higher risk profile. AML-1.4 01/2022 Amended Section to introduce detailed requirements for digital onboarding and related requirements. AML-1.5.2 01/2022 Amended Paragraph on onboarding non-Bahraini PEPs using digital ID applications. AML-1.10.8A 01/2022 Added a new Paragraph on not applying simplified CDD in situations where the licensee has identified high ML/TF/PF risks. AML-2.2.5 01/2022 Amended Paragraph. AML-3.3.1B 01/2022 Amended Paragraph. AML-3.3.2 01/2022 Amended Paragraph. AML-3.3.5 01/2022 Amended Paragraph. AML-3.3.6 01/2022 Deleted Paragraph. AML-5.1.6A 01/2022 Deleted Paragraph. AML-9.2.5 01/2022 Amended reference to Paragraph. AML 01/2022 Changed Licensee name to Capital Market Licensees across Module. AML-C.2.9 01/2023 Minor amendment to Paragraph. AML-9.2.4(c) 01/2023 Added a new Sub-paragraph on reporting any frozen assets or actions taken. AML-1.1.17 10/2023 Amended Sub-Paragraph on the enhanced diligence for the non-resident accounts. AML-1.1.23 10/2023 Deleted Paragraph. AML-1.1.24 10/2023 Added a new Paragraph on CDD and Customer onboarding requirements. AML-1.4.14 10/2023 Deleted Paragraph. AML-1.12 10/2023 Added a new Section on reliance on third parties for customer due diligence. AML-1.2.1 01/2024 Amended Paragraph on customer due diligence. Superseded Requirements
AML-A.2.4
This Module supersedes the following provisions contained in Circulars or other regulatory instruments:
Circular/other references Provision Subject Resolution No. 1 of 2004 All In respect of the Directives Relating to the Prevention and Prohibition of Money Laundering at the Bahrain Stock Exchange October 2010AML-A.3 AML-A.3 Interaction with Other Modules
AML-A.3.1
All
Capital Market Licensees must comply with all the other relevant Modules in Volume 6 in addition to other applicable laws, rules and regulations.Amended: January 2022
October 2010AML-B AML-B Scope of Application
AML-B.1 AML-B.1 Scope of Application
AML-B.1.1
This Module contains the CBB's Directive relating to Anti-Money Laundering and Combating of Financial Crime and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive under this Module is applicable to all
Capital Market Licensees and relevantPersons , including but not limited to issuers ofSecurities or anyPerson acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, investment firms, collective investment undertakings, business trusts, listed companies,crypto-asset licensees , anyPerson acting for or on behalf of listed companies,Persons accredited with receiving money relating to the subscription ofSecurities , custodian ofSecurities , settlement banks, dealers inSecurities , share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts, credit rating agencies and any otherPerson concerned with dealing inSecurities , irrespective of whether suchPerson is aCapital Market Licensees or not. These rules are issued by way of a legally-binding Directive.Amended: January 2022
Amended: January 2020
Added: October 2010AML-B.1.2
Capital Market Licensees that are subsidiaries of an overseas based group may apply additional AML/CFT policies and procedures, provided they satisfy the minimum requirements contained in this Module.Amended: January 2022
Added: October 2010AML-B.1.3
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.1.4
The requirements of this Module are in addition to and supplement Decree Law No. (4) of 2001 with respect to the Prevention and Prohibition of the Laundering of Money; this Law was subsequently updated, with the issuance of Decree Law No. 54 of 2006 with respect to amending certain provisions of Decree No. 4 of 2001 (collectively, 'the AML Law'). The AML Law imposes obligations generally in relation to the prevention of money laundering and the combating of the financing of terrorism, to all
Persons resident in Bahrain (including financial services firms such asCapital Market Licensees ). AllCapital Market Licensees are therefore under the statutory obligations of that Law, in addition to the more specific requirements contained in this Module. Nothing in this Module is intended to restrict the application of the AML Law (a copy of which is contained in Part B of Volume 6 Capital Markets), under 'Supplementary Information'. Also included in Part B is a copy of Decree Law No. 58 of 2006 with respect to the protection of society from terrorism activities ('the anti-terrorism law').Amended: January 2022
Added: October 2010AML-B.2 AML-B.2 Overseas Subsidiaries and Branches
AML-B.2.1
Capital Market Licensees must apply the requirements in this Module to all their branches and subsidiaries operating both in the Kingdom of Bahrain and in foreign jurisdictions. Where local standards differ, the higher standard must be followed.Capital Market Licensees must pay particular attention to procedures in branches or subsidiaries in countries that do not or insufficiently apply theFATF Recommendations and do not have adequate AML/CFT procedures, systems and controls (see also Section AML-9.1).Amended: January 2022
Amended: July 2016
Added: October 2010AML-B.2.2
Where another jurisdiction's laws or regulations prevent a
Capital Market Licensee (or any of its foreign branches or subsidiaries) from applying the same standards contained in this Module or higher, theCapital Market Licensee must immediately inform the CBB in writing.Amended: January 2022
Added: October 2010AML-B.2.3
In such instances, the CBB will review alternatives with the
Capital Market Licensees . Should the CBB and theCapital Market Licensees be unable to reach agreement on the satisfactory implementation of this Module in a foreign subsidiary or branch, theCapital Market Licensees may be required by the CBB to cease the operations of the subsidiary or branch in the foreign jurisdiction in question.Amended: January 2022
Added: October 2010AML-B.2.4
Financial groups must implement groupwide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes, which must also be applicable, and appropriate to, all branches and subsidiaries of the financial group. These must include:
(a) The development of internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees;(b) An ongoing employee training programme;(c) An independent audit function to test the system;(d) Policies and procedures for sharing information required for the purposes of CDD and money laundering and terrorist financing risk management;(e) The provision at group-level compliance, audit, and/or AML/CFT functions of customer, account and transaction information from branches and subsidiaries when necessary for AML/CFT purposes; and(f) Adequate safeguards on the confidentiality and use of information exchanged.Amended: January 2018
Added: July 2016AML-B.3 AML-B.3 Definitions [This Section was deleted in January 2020]
Deleted: January 2020
Added: October 2010AML-B.3.1
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.2
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.3
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.4
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.5
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Amended: July 2016
Added: October 2010AML-B.3.6
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Amended: July 2016
Added: October 2010AML-B.3.7
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.8
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.9
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.10
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-C AML-C Risk Based Approach
AML-C.1 AML-C.1 Risk Based Approach
AML-C.1.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.6
Capital Market Licensees must perform enhanced measures where higher ML/TF/PF risks are identified to effectively manage and mitigate those higher risks.Added: January 2022AML-C.1.7
Capital Market Licensees must maintain and regularly review and update the documented risk assessment. The risk management and mitigation measures implemented by aCapital Market Licensee must be commensurate with the identified ML/TF/PF risks.Added: January 2022AML-C.1.8
Capital Market Licensees must allocate adequate financial, human and technical resources and expertise to effectively implement and take appropriate preventive measures to mitigate ML/TF/PF risks.Added: January 2022AML-C.2 AML-C.2 Risk Assessment
AML-C.2.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.5
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.6
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.7
Capital Market Licensees must ensure that it takes measures to identify, assess, monitor, manage and mitigate ML/TF/PF risks to which it is exposed and that the measures taken are commensurate with the nature, scale and complexities of its activities. The risk assessment must enable thelicensee to understand how, and to what extent, it is vulnerable to ML/TF/PF.Added: January 2022AML-C.2.8
In the context of the risk assessment, “proliferation financing risk” refers to the potential breach, non-implementation or evasion of the targeted financial sanctions obligations referred to in FATF Recommendation 7.
Added: January 2022AML-C.2.9
The risk assessment must be properly documented, regularly updated and communicated to the
capital market licensees senior management.Licensees must have in place policies, controls and procedures, which are approved by senior management, to enable them to manage and mitigate the risks that have been identified. In conducting its risk assessments, thecapital market licensees must consider quantitative and qualitative information obtained from the relevant internal and external sources to identify, manage and mitigate these risks. This must include consideration of the risk and threat assessments using, national risk assessments, sectorial risk assessments, crime statistics, typologies, risk indicators, red flags, guidance and advisories issued by inter-governmental organisations, national competent authorities and the FATF, and AML/CFT/CPF mutual evaluation and follow-up reports by the FATF or associated assessment bodies.Amended: January 2023
Added: January 2022AML-C.2.10
Capital Market Licensees must assess country/geographic risk, customer/investor risk, product/ service/ transactions risk and distribution channel risk taking into consideration the appropriate factors in identifying and assessing the ML/TF/PF risks, including the following:a) The nature, scale, diversity and complexity of its business, products and target markets;b) Products, services and transactions that inherently provide more anonymity, ability to pool underlying customers/funds, cash-based, face-to-face, non face-to-face, domestic or cross-border;c) The volume and size of its transactions, nature of activity and the profile of its customers;d) The proportion of customers identified as high risk;e) Its target markets and the jurisdictions it is exposed to, either through its own activities or the activities of customers, especially jurisdictions with relatively higher levels of corruption or organised crime, and/or deficient AML/CFT/CPF controls and listed by FATF;f) The complexity of the transaction chain (e.g. complex layers of intermediaries and sub intermediaries or distribution channels that may anonymise or obscure the chain of transactions) and types of distributors or intermediaries;g) The distribution channels, including the extent to which theCapital market licensee deals directly with the customer and the extent to which it relies (or is allowed to rely) on third parties to conduct CDD and the use of technology; andh) Internal audit, external audit or regulatory inspection findings.Added: January 2022Country/Geographic risk
AML-C.2.11
Country/geographic area risk, in conjunction with other risk factors, provides useful information as to potential ML/TF/PF risks. Factors that may be considered as indicators of higher risk include:
(a) Countries identified by credible sources, such as mutual evaluation or detailed assessment reports or published follow-up reports, as not having adequate AML/CFT/CPF systems;(b) Countries or geographic areas identified by credible sources as providing funding or support for terrorist activities, or that have designated terrorist organisations operating within their country;(c) Countries identified by credible sources as having significant levels of corruption or organized crime or other criminal activity, including source or transit countries for illegal drugs, human trafficking and smuggling and illegal gambling;(d) Countries subject to sanctions, embargoes or similar measures issued by international organisations such as the United Nations Organisation; and(e) Countries identified by credible sources as having weak governance, law enforcement, and regulatory regimes, including countries identified by the FATF statements as having weak AML/CFT/CPF regimes, and for which financial institutions should give special attention to business relationships and transactions.Added: January 2022Customer/Investor risk
AML-C.2.12
Categories of customers which may indicate a higher risk include:
(a) The business relationship is conducted in unusual circumstances (e.g. significant unexplained geographic distance between the financial institution and the customer).(b) Non-resident customers;(c) Legal persons or arrangements that are personal asset-holding vehicles;(d) Companies that have nominee shareholders or shares in bearer form;(e) Businesses that are cash-intensive;(f) The ownership structure of the company appears unusual or excessively complex given the nature of the company’s business;(g) Customer is sanctioned by the relevant national competent authority for non-compliance with the applicable AML/CFT/CPF regime and is not engaging in remediation to improve its compliance;(h) Customer is a PEP or customer’s family members, or close associates are PEPs (including where a beneficial owner of a customer is a PEP);(i) Customer resides in or whose primary source of income originates from high-risk jurisdictions;(j) Customer resides in countries considered to be uncooperative in providing beneficial ownership information; customer has been mentioned in negative news reports from credible media, particularly those related to predicate offences for AML/CFT/CPF or to financial crimes;(k) Customer’s transactions indicate a potential connection with criminal involvement, typologies or red flags provided in reports produced by the FATF or national competent authorities;(l) Customer is engaged in, or derives wealth or revenues from, a high-risk cash-intensive business;(m) The number of STRs and their potential concentration on particular client groups;(n) Customers who have sanction exposure; and(o) Customer has a non-transparent ownership structure.Added: January 2022Product/Service/Transactions risk
AML-C.2.13
An overall risk assessment should include determining the potential risks presented by product, service, transaction or the delivery channel of the
Capital market licensees . ACapital market licensees should assess, using an RBA, the extent to which the offering of its product, service, transaction or the delivery channel presents potential vulnerabilities to placement, layering or integration of criminal proceeds into the financial system.Added: January 2022AML-C.2.14
Determining the risks of product, service, transaction or the delivery channel offered to customers may include a consideration of their attributes, as well as any associated risk mitigation measures. Products and services that may indicate a higher risk include:
(a) Private banking;(b) Anonymous transactions (which may include cash);(c) Non-face-to-face business relationships or transactions;(d) Payment received from unknown or un-associated third parties;(e) Products or services that may inherently favour anonymity or obscure information about underlying customer transactions;(f) The geographical reach of the product or service offered, such as those emanating from higher risk jurisdictions;(g) Products with unusual complexity or structure and with no obvious economic purpose;(h) Products or services that permit the unrestricted or anonymous transfer of value (by payment or change of asset ownership) to an unrelated third party, particularly those residing in a higher risk jurisdiction; and(i) Use of new technologies or payment methods not used in the normal course of business by theconventional bank licensee .Added: January 2022Distribution channel risk
AML-C.2.15
A customer may request transactions that pose an inherently higher risk to the
conventional bank licensee . Factors that may be considered as indicators of higher risk include:(a) A request is made to transfer funds to a higher risk jurisdiction/country/region without a reasonable business purpose provided; and(b) A transaction is requested to be executed, where thelicensee is made aware that the transaction will be cleared/settled through an unregulated entity.Added: January 2022AML-C.2.16
Capital market licensees should analyse the specific risk factors, which arise from the use of intermediaries and their services. Intermediaries’ involvement may vary with respect to the activity they undertake and their relationship with theCapital market licensees .Capital market licensees should understand who the intermediary is and perform a risk assessment on the intermediary prior to establishing a business relationship.Licensees and intermediaries should establish clearly their respective responsibilities for compliance with applicable regulation.Added: January 2022AML-C.3 AML-C.3 [This Section was deleted in January 2022].
AML-C.3.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.3.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.3.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.5
Capital Market Licensees must implement Risk Based Approach (RBA) in establishing an AML/CFT/CPF program and conduct ML/TF/PF risk assessments prior to and during the establishment of a business relationship and, on an ongoing basis, throughout the course of its relationship with the customer. Thelicensee must establish and implement policies, procedures, tools and systems commensurate with the size, nature and complexity of its business operations to support its RBA.Added: January 2022AML-1 AML-1 Customer Due Diligence Requirements
AML-1.1 AML-1.1 General Requirements
Verification of Identity and Source of Funds
AML-1.1.1
Capital Market Licensees must establish effective systematic internal procedures for establishing and verifying the identity of their customers and the source of their funds. Such procedures must be set out in writing and approved by theCapital Market Licensees senior management and must be strictly adhered to.Amended: January 2022
Amended: January 2020
Amended: July 2016
Added: October 2010AML-1.1.2
Capital Market Licensees must implement the customer due diligence measures outlined in Chapter AML-1 when:(a) [This Sub-paragraph was deleted in July 2018];(b) Establishing business relations with a new or existing customer;(c) A change to the signatory or beneficiary of an existing account or business relationship is made;(d) Customer documentation standards change substantially;(e) TheCapital Market Licensees has doubts about the veracity or adequacy of previously obtained customer due diligence information;(f) A significant transaction takes place (as per rule AML-2.2.3);(g) There is a material change in the way that an account is operated or in the manner in which the business relationship is conducted;(h) There is a suspicion ofMoney Laundering or terrorist financing; or(i) Carrying outaccepted crypto-assets transfers and/or wire transfers irrespective of value and/or amount.Amended: January 2022
Amended: January 2020
Amended: July 2018
Added: October 2010AML-1.1.2A
Capital Market Licensees must understand, and as appropriate, obtain information on the purpose and intended nature of the business relationship.Amended: January 2022
Added: October 2017AML-1.1.2B
Capital Market Licensees must conduct ongoing due diligence on the business relationship, including:(a) Scrutinizing transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution's knowledge of the customer, their business and risk profile, including, where necessary, the source of funds; and(b) Ensuring that documents, data or information collected under the CDD process is kept up-to-date and relevant, by undertaking reviews of existing records, particularly for higher risk categories of customers.Amended: January 2022
Added: October 2017AML-1.1.2C
A
capital market licensee must also review and update the customers’ risk profile based on their level of ML/TF/PF risk upon onboarding and regularly throughout the life of the relationship. The risk management and mitigation measures implemented by acapital market licensee must be commensurate with the risk profile of the customer or type of customer.Added: January 2022AML-1.1.3
For the purposes of this Module, 'customer' includes counterparties such as financial markets counterparties, except where
Capital Market Licensees are acting as principals where simplified due diligence measures may apply. These simplified measures are set out in section AML-1.10.Amended: January 2022
October 2010AML-1.1.4
The CBB's specific minimum standards to be followed with respect to verifying customer identity and source of funds are contained in section AML-1.2. Enhanced requirements apply under certain high-risk situations: these requirements are contained in sections AML-1.3 to AML-1.7 inclusive. Additional requirements apply where a
Capital Market Licensee is relying on a professional intermediary to perform certain parts of the customer due diligence process: these are detailed in section AML-1.8. Simplified customer due diligence measures may apply in defined circumstances: these are set out in section AML-1.10.Amended: January 2022
October 2010Verification of Third Parties
AML-1.1.5
Capital Market Licensees must obtain a signed statement, in hard copy or through digital means from all new customers confirming whether or not the customer is acting on his own behalf or not. This undertaking must be obtained prior to conducting any transactions with the customer concerned.Amended: January 2022
Added: October 2010AML-1.1.6
Where a customer is acting on behalf of a third party, the
Capital Market Licensees must also obtain a signed statement from the third party, confirming they have given authority to the customer to act on their behalf. Where the third party is a legal person, theCapital Market Licensees must have sight of the original Board resolution (or other applicable document) authorising the customer to act on the third party's behalf and retain a certified copy.Amended: January 2022
Added: October 2010AML-1.1.7
Capital Market Licensees must establish and verify the identity of the customer and (where applicable) the party/parties on whose behalf the customer is acting, including the Beneficial Owner of the funds. Verification must take place in accordance with the requirements specified in this Chapter.Amended: January 2022
Added: October 2010AML-1.1.8
Where capital market services are provided to a minor or other person lacking full legal capacity, the normal identification procedures as set out in this Chapter must be followed. In the case of minors,
Capital Market Licensees must additionally verify the identity of the parent(s) or legal guardian(s). Where a third party on behalf of a person lacking full legal capacity wishes to open business relations, theCapital Market Licensee must establish the identity of that third party, as well as the person conducting the business.Amended: January 2022
Added: October 2010Anonymous and Nominee Accounts
AML-1.1.9
Capital Market Licensees must not establish or keep anonymous accounts or accounts in fictitious names. WhereCapital Market Licensees maintain a nominee account, which is controlled by or held for the benefit of another person, the identity of that person must be disclosed to theCapital Market Licensees and verified by it in accordance with the requirements specified in this Chapter.Amended: January 2022
Added: October 2010Timing of Verification
AML-1.1.10
Capital Market Licensees must not commence a business relationship or undertake a transaction with a customer before completion of the relevant customer due diligence (‘CDD’) measures specified in Chapter AML-1.Capital Market Licensees must also adopt risk management procedures with respect to the conditions under which a customer may utilise the business relationship prior to verification. However, verification may be completed after receipt of funds in the case of non face-to-face business, or the subsequent submission of CDD documents by the customer after undertaking initial customer due diligence provided that no disbursement of funds takes place until after the requirements of this Chapter have been fully met.Amended: January 2022
Added: October 2010Incomplete Customer Due Diligence
AML-1.1.11
Where a
Capital Market Licensee is unable to comply with the requirements specified in Chapter AML-1, it must consider whether to terminate the relationship or not proceed with the transaction. If it proceeds with the transaction (to avoid tipping off the customer), it should additionally consider whether it should file a Suspicious Transaction Report.Amended: January 2022
Added: October 2010AML-1.1.12
See also Chapter AML-4, which covers the filing of Suspicious Transaction Reports.
October 2010AML-1.1.13
The CBB will monitor the application of these requirements to
Capital Market Licensees existing customer base.Amended: January 2022
Added: October 2010Suspicious Wallet Addresses
AML-1.1.14
A
crypto-asset licensee must establish and implement policies for identification of wallet addresses that are suspected of ML/TF (suspicious wallet addresses).Added: January 2020AML-1.1.15
A
crypto-asset licensee must not establish or continue business relationship with or transact with suspicious wallet addresses referred to in Paragraph-1.1.14.Added: January 2020AML-1.1.16
Where a
crypto-asset licensee identifies or becomes aware of a suspicious wallet address, it must immediately file a Suspicious Transaction Report (STR) and also notify the CBB.Added: January 2020Non-Resident Accounts
AML-1.1.17
Capital Market Licensees that establish a business relationship or transact or deal with non-resident customers must have documented criteria for acceptance of business with such persons. For non-resident customers, assessed as high risk,licensees must ensure the following:(a) Ensure there is a viable economic reason for the business relationship;(b) Perform enhanced due diligence where required in accordance with Paragraph AML-1.1.24;(c) Obtain and document the country of residence for tax purposes where relevant;(d) Obtain evidence of banking relationships in the country of residence;(e) Obtain the reasons for dealing with licensee in Bahrain;(f) Obtain an indicative transaction volume and/or value of incoming funds; and(g) Test that the persons are contactable without unreasonable delays.Amended: October 2023
Added: January 2022AML-1.1.18
Capital Market Licensees must not accept non-residents customers from high risk jurisdictions subject to a call for action by FATF.Added: January 2022AML-1.1.19
Capital Market Licensees must take adequate precautions and risk mitigation measures before onboarding non-resident customers from high risk jurisdictions. Thelicensees must establish detailed assessments and criteria that take into consideration FATF mutual evaluations, FATF guidance, the country national risk assessments (NRAs) and other available guidance on onboarding and retaining non-resident customers from the following high-risk jurisdictions:(a) Jurisdictions under increased monitoring by FATF;(b) Countries upon which United Nations sanctions have been imposed except those referred to in Paragraph AML-1.1.18; and(c) Countries that are the subject of any other sanctions.Added: January 2022AML-1.1.20
Capital Market Licensees must establish systems and measures that are proportional to the risk relevant to each jurisdiction and this must be documented. Such a document must show the risks, mitigation measures for each jurisdiction and for each non-resident customer.Added: January 2022AML-1.1.21
Capital Market Licensees must establish a comprehensive documented policy and procedures describing also the tools, methodology and systems that support the licensee’s processes for:(a) The application of RBA;(b) Customer due diligence;(c) Ongoing transaction monitoring; and(d) Reporting in relation to their transactions or dealings with non-resident customers.Added: January 2022AML-1.1.22
Capital Market Licensees must ensure that only the official/government documents are accepted for the purpose of information in Subparagraphs AML-1.2.1 (a) to (f) in the case of non-resident customers.Added: January 2022AML-1.1.23
[This Paragraph has been deleted in October 2023].
Deleted: October 2023
Added: January 2022AML-1.1.24
Capital Market Licensees must follow the below CDD and customer onboarding requirements:Enhanced Due Diligence Digital Onboarding Bahrainis and GCC nationals (wherever they reside) and expatriates resident in Bahrain No Yes Others Yes Yes Added: October 2023AML-1.2 AML-1.2 Face-to-Face Business
Natural Persons
AML-1.2.1
If the customer is a natural
Person ,Capital Market Licensees must identify the person’s identity and obtain the following information before providing capital market services, as described in paragraph AML-1.1.2:(a) Full legal name and any other names used;(b) Full permanent address (i.e. the residential address of the customer; a post office box is insufficient);(c) Date of birth;(d) Nationality;(e) Passport number (if the customer is a passport holder);(f) Current CPR or Iqama number (for residents of Bahrain or GCC states) or government issued national identification proof;(g) Telephone/fax number and email address (where applicable);(h) Occupation or public position held (where applicable);(i) Employer's name and address (if self-employed, the nature of the self-employment);(j) Type of account, and nature and volume of anticipated business dealings with theCapital Market Licensees ;(k) Signature of the customer(s);(l) Source of funds;(m) Source ofSecurities ;(n) Reason for opening the account; and(o) Place of birth.Amended: January 2024
Amended: January 2022
Amended: January 2020
Added: October 2010AML-1.2.1A
Capital Market Licensees obtaining the information and customer signature electronically using digital applications must comply with the applicable laws governing the onboarding/business relationship including but not limited to the Electronic Transactions Law (Law No. 54 of 2018) for the purposes of obtaining signatures as required in Subparagraph AML-1.2.1 (k) above.Added: January 2022AML-1.2.2
See the Guidance Notes (filed under Supplementary Information in Part B of Volume 6) for further information on source of funds (rule AML-1.2.1 (l)) and CDD requirements for Bahrain residents (rule AML-1.2.1 (c) & (f)).
October 2010AML-1.2.3
Capital market licensees must verify the information in Paragraph AML-1.2.1 (a) to (f), by the following methods below; at least one of the copies of the identification documents mentioned in (a) and (b) below must include a clear photograph of the customer:(a) Confirmation of the date of birth and legal name, by use of the national E-KYC application and if this is not practical, obtaining a copy of a current valid official original identification document (e.g. birth certificate, passport, national identity card, CPR or Iqama);(b) Confirmation of the permanent residential address by use of the national E-KYC application and if this is not practical, obtaining a copy of a recent utility bill, bank statement or similar statement from another licensee or financial institution, or some form of official correspondence or official documentation card, such as national identity card or CPR, from a public/governmental authority, or a tenancy agreement or record of home visit by an official of the licensee; and(c) Where appropriate, direct contact with the customer by phone, letter or email to confirm relevant information, such as residential address information.Amended: January 2022
Added: October 2010AML-1.2.4
Any document copied or obtained for the purpose of identification verification in a face-to-face customer due diligence process must be an original. An authorised official of the
Capital Market Licensees must certify the copy, by writing on it the words 'original sighted', together with the date and his name and signature. Equivalent measures must be taken for electronic copies.Amended: January 2022
Added: October 2010AML-1.2.5
Identity documents which are not obtained by an authorised official of the
Capital Market Licensees in original form (e.g. due to a customer sending a copy by post following an initial meeting) must instead be certified (as per rule AML-1.2.4) by one of the following from a GCC or FATF member state:(a) A lawyer;(b) A notary;(c) A chartered/certified accountant;(d) An official of a government ministry;(e) An official of an embassy or consulate;(f) An official of another licensed financial institution or of an associate company of the licensee.Amended: January 2022
Amended: January 2020
Added: October 2010AML-1.2.6
The individual making the certification under rule AML-1.2.5 must give clear contact details (e.g. by attaching a business card or company stamp). The
Capital Market Licensee must verify the identity of thePerson providing the certification through checking membership of a professional organisation (for lawyers or accountants), or through checking against databases/websites, or by direct phone or email contact.Amended: January 2022
Added: October 2010Legal Entities or Legal Arrangements (such as trusts)
AML-1.2.7
If the customer is a legal entity or a legal arrangement such as a company or trust, the
Capital Market Licensee must obtain and record the following information from original identification documents, databases, or websites, in hard copy or electronic form, identify the customer and to take reasonable measures to verify its identity;(a) The entity's full name and other trading names used;(b) Registration number (or equivalent);(c) Legal form and status and proof of existence;(d) Registered address and trading address (including a branch where applicable);(e) Objectives and type of business activity;(f) Date and place of incorporation or establishment;(g) Telephone, fax number and email address;(h) Regulatory body or listing body (for regulated activities such as financial services and listed companies);(hh) The names of the relevant persons having a senior management position in the legal entity or legal arrangement;(i) Name of external auditor (where applicable);(j) Type of account, and nature and volume of anticipated business dealings with theCapital Market Licensee ;(k) Source of funds; and(l) Legal representative, such as Trustees or trusts.Amended: January 2022
Amended: October 2017
Added: October 2010AML-1.2.8
The information provided under rule AML-1.2.7 must be verified by obtaining certified copies of the following documents, as applicable (depending on the legal form of the entity):
(a) Certificate of incorporation and/or certificate of commercial registration or trust deed;(b) Partnership agreement;(c) Board resolution seeking the capital market services (only necessary in the case of private or unlisted companies);(d) Identification documentation of the authorised signatories of the account (certification not necessary for companies listed in a GCC/FATF state);(e) Copy of the latest financial report and accounts, audited where possible (audited copies do not need to be certified);(f) List ofPersons authorised to do business on behalf of the company and in the case of the opening of an account, a Board resolution (or other applicable document) authorising the namedPersons to operate the account (resolution only necessary for private or unlisted companies); and(g) Memorandum and Articles of Association.Amended: July 2016
Amended: April 2016
October 2010AML-1.2.8A
For customers that are legal persons,
Capital Market Licensees must identify and take reasonable measures to verify the identity ofbeneficial owners through the following information:(a) The identity of the natural person(s) who ultimately have a controlling ownership interest in a legal person, and(b) To the extent that there is doubt under (a) as to whether the person(s) with the controlling ownership interest is thebeneficial owner (s), or where no natural person exerts control of the legal person or arrangement through other means; and(c) Where no natural person is identified under (a) or (b) above, the identity of the relevant natural person who holds the position of senior managing official.Amended: January 2022
Added: October 2017AML-1.2.9
Documents obtained to satisfy the requirements in rule AML-1.2.8 above must be certified in the manner specified in rules AML-1.2.4 to AML-1.2.6.
October 2010AML-1.2.9A
For the purpose of Subparagraph AML-1.2.8(a), the requirement to obtain a certified copy of the commercial registration, may be satisfied by obtaining a commercial registration abstract printed directly from the Ministry of Industry, Commerce and Tourism's website, through "SIJILAT Commercial Registration Portal".
Amended: October 2019
Added: January 2017AML-1.2.10
The documentary requirements in rule AML-1.2.8 above do not apply in the case of listed companies from countries which are members of FATF/GCC: see section AML-1.8 below. Also, the documents listed in rule AML-1.2.8 above are not exhaustive: for customers from overseas jurisdictions, documents of an equivalent nature may be produced as satisfactory evidence of a customer's identity.
October 2010AML-1.2.11
Capital Market Licensees must also obtain and document the following due diligence information. These due diligence requirements must be incorporated in theCapital Market Licensees new business procedures:(a) Enquire as to the structure of the legal entity or trust sufficient to determine and verify the identity of the ultimate beneficial owner of the funds orSecurities , the ultimate provider of funds orSecurities (if different), and the ultimate controller of the funds orSecurities (if different);(b) Ascertain whether the legal entity has been or is in the process of being wound up, dissolved, struck off or terminated;(c) Obtain the names, country of residence and nationality of Directors or partners (only necessary for private or unlisted companies);(d) Require, through new customer documentation or other transparent means, updates on significant changes to corporate ownership and/or legal structure;(e) Obtain and verify the identity of shareholders holding 20% or more of the issued capital (where applicable). The requirement to verify the identity of these shareholders does not apply in the case of FATF/GCC listed companies;(f) In the case of trusts or similar arrangements, establish the identity of the settlor(s), trustee(s), and beneficiaries (including making such reasonable enquiries as to ascertain the identity of any other potential beneficiary, in addition to the named beneficiaries of the trust); and(g) Where aCapital Market Licensee has reasonable grounds for questioning the authenticity of the information supplied by a customer, conduct additional due diligence to confirm the above information.Amended: January 2022
Added: October 2010AML-1.2.12
For the purposes of rule AML-1.2.11, acceptable means of undertaking such due diligence might include taking bank references; visiting or contacting the company by telephone; undertaking a company search or other commercial enquiries; accessing public and private databases (such as stock exchange lists, if they are listed); making enquiries through a business information service or credit bureau; confirming a company's status with an appropriate legal or accounting firm; or undertaking other enquiries that are commercially reasonable.
October 2010AML-1.2.13
In cases where a
Capital Market Licensee is providing investment management services to a regulated mutual fund, and is not responsible for receiving investors' funds (being paid into the fund), it may limit its CDD to confirming that the administrator of the fund is subject to FATF-equivalent customer due diligence measures (see section AML-1.7 for applicable measures). Where there are reasonable grounds for believing that investors' funds being paid into the fund are not being adequately verified by the administrator, then theCapital Market Licensee should consider terminating its relationship with the fund.Amended: January 2022
Added: October 2010AML-1.3 AML-1.3 Enhanced Customer Due Diligence: General Requirements
AML-1.3.1
Enhanced customer due diligence must be performed on those customers identified as having a higher risk profile, and additional inquiries made or information obtained in respect of those customers.
October 2010AML-1.3.2
Capital Market licensees should examine, as far as reasonably possible, the background and purpose of all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic or lawful purpose. Where the risks of money laundering or terrorist financing are higher,capital Market licensees should conduct enhanced CDD measures, consistent with the risks identified. In particular, they should increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear unusual or suspicious. The additional inquiries or information referred to in Paragraph AML-1.3.1 include:(a) Obtaining additional information on the customer (e.g. occupation, volume of assets, information available through public databases, internet, etc.), and updating more regularly the identification data of customer and beneficial owner;(b) Obtaining additional information on the intended nature of the business relationship;(c) Obtaining information on the source of funds or source of wealth of the customer;(d) Obtaining information on the reasons for intended or performed transactions;(e) Obtaining the approval of senior management to commence or continue the business relationship;(f) Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination;(g) Taking specific measures to identify the source of the first payment in this account and applying RBA to ensure that there is a plausible explanation in any case where the first payment was not received from the same customer’s account;(h) Obtaining evidence of a person's permanent address through the use of a credit reference agency search, or through independent governmental database or by home visit;(i) Obtaining a personal reference (e.g. by an existing customer of theCapital Market Licensee );(j) Obtaining another licensed entity’s reference and contact with the concernedlicensee regarding the customer;(k) Obtaining documentation outlining the customer’s source of wealth;(l) Obtaining additional documentation outlining the customer’s source of income; and(m) Obtaining additional independent verification of employment or public position held.Amended: January 2022
Added: October 2010AML-1.3.3
In addition to the general rule contained in rule AML-1.3.1 above, special care is required in the circumstances specified in sections AML-1.4 to AML-1.8 inclusive.
October 2010AML-1.3.4
Additional enhanced due diligence measures for non-resident account holders may include the following:
(a) References provided by a regulated bank from a FATF country;(b) Certified copies of bank statements for a recent 3-month period; or(c) References provided by a known customer of the bank licensee.Added: January 2020AML-1.4 AML-1.4 Enhanced Customer Due Diligence: Non Face-to-Face Business and New Technologies
AML-1.4.1
Capital Market Licensees must establish specific procedures for verifying customer identity where no face-to-face contact takes place.Amended: January 2022
Added: October 2010AML-1.4.2
Where no face-to-face contact takes place,
Capital Market Licensees must take additional measures (to those specified in section AML-1.2), in order to mitigate the potentially higher risk associated with such business. In particular,Capital Market Licensees must take measures:(a) To ensure that the customer is thePerson they claim to be; and(b) To ensure that the address provided is genuinely the customer's.Amended: January 2022
Added: October 2010AML-1.4.3
There are a number of checks that can provide a
Capital Market Licensees with a reasonable degree of assurance as to the authenticity of the applicant. They include:(a) Telephone contact with the applicant on an independently verified home or business number;(b) With the customer's consent, contacting an employer to confirm employment via phone through a listed number or in writing;(c) Salary details appearing on recent bank statements.(d) Independent verification of employment (e.g.: through the use of a national E-KYC application, or public position held;(e) Carrying out additional searches (e.g. internet searches using independent and open sources) to better inform the customer risk profile;(f) Carrying out additional searches focused on financial crime risk indicator (i.e. negative news);(g) Evaluating the information provided with regard to the destination of fund and the reasons for the transaction;(h) Seeking and verifying additional information from the customer about the purpose and intended nature of the transaction or the business relationship; and(i) Increasing the frequency and intensity of transaction monitoring.Amended: January 2022
Added: October 2010AML-1.4.4
Capital market services provided using digital channels or internet pose greater challenges for customer identification and AML/CFT purposes.
Capital Market Licensees must identify and assess the money laundering or terrorist financing risks relevant to any new technology or channel and establish procedures to prevent the misuse of technological developments inMoney Laundering or terrorist financing schemes. The risk assessments must be consistent with the requirements in Section AML-C.2.Capital Market Licensees which provide screen based trading or online services to their customers must set-up programmes or systems to highlight unusual transactions to enable theCapital Market Licensees to report all such transactions.Amended: January 2022
Added: October 2010New Products, Practices and Technologies
AML-1.4.5
Capital Market Licensees must identify and assess the money laundering or terrorist financing risks that may arise in relation to:(a) The development of new products and new business practices, including new delivery mechanisms; and(b) The use of new or developing technologies for both new and pre-existing products.Amended: January 2022
Added: April 2016AML-1.4.6
For purposes of Paragraph AML-1.4.5, such a risk assessment must take place prior to the launch of the new products, business practices or the use of new or developing technologies.
Capital Market Licensees must take appropriate measures to manage and mitigate those risks.Amended: January 2022
Added: April 2016AML-1.4.7
Capital Market Licensees , while complying with the requirements of Paragraphs AML-1.4.5 and AML-1.4.6, must pay special attention to new products, new business practices, new delivery mechanisms and new or developing technologies that favor anonymity.Amended: January 2022
Added: January 2020Enhanced Monitoring
AML-1.4.8
Customers on boarded digitally must be subject to enhanced on-going account monitoring measures.
Added: January 2022AML-1.4.9
The CBB may require a
licensee to share the details of the enhanced monitoring and the on-going monitoring process for non face-to-face customer relationships.Added: January 2022Licensee’s digital ID applications
AML-1.4.10
Capital Market Licensees may use its digital ID applications that use secure audio-visual real time (live video conferencing/live photo selfies) communication means to identify the natural person.Added: January 2022AML-1.4.11
Capital Market Licensees must maintain a document available upon request for the use of its digital ID applications that includes all the following information:(a) A description of the nature of products and services for which the proprietary digital ID application is planned to be used with specific references to the rules in this Module for which it will be used;(b) A description of the systems and IT infrastructure that are planned to be used;(c) A description of the technology and applications that have the features for facial recognition or biometric recognition to authenticate independently and match the face and the customer identification information available with the licensee. The process and the features used in conjunction with video conferencing include, among others, face recognition, three-dimensional face matching techniques etc;(d) “Liveness” checks created in the course of the identification process;(e) A description of the governance arrangements related to this activity including the availability of specially trained personnel with sufficient level of seniority; and(f) Record keeping arrangements for electronic records to be maintained and the relative audit.Added: January 2022AML-1.4.12
Capital Market Licensees that intends to use its digital ID application to identify the customer and verify identity information must meet the following additional requirements:(a) The digital ID application must make use of secure audio visual real time (live video conferencing/ live photo selfies) technology to (i) identify the customer, (ii) verify his/her identity, and also (iii) ensure the data and documents provided are authentic;(b) The picture/sound quality must be adequate to facilitate unambiguous identification;(c) The digital ID application must include or be combined with capability to read and decrypt the information stored in the identification document’s machine readable zone (MRZ) for authenticity checks from independent and reliable sources;(d) Where the MRZ reader is with an outsourced provider, thelicensee must ensure that such party is authorized to carry out such services and the information is current and up to date and readily available such that thelicensee can check that the decrypted information matches the other information in the identification document;(e) The digital ID application has the features for allowing facial recognition or biometric recognition that can authenticate and match the face and the customer identification documents independently;(f) The digital ID solution has been tested by an independent expert covering the governance and control processes to ensure the integrity of the solution and underlying methodologies, technology and processes and risk mitigation. The report of the expert’s findings must be retained and available upon request;(g) The digital ID application must enable an ongoing process of retrieving and updating the digital files, identity attributes, or data fields which are subject to documented access rights and authorities for updating and changes; and(h) The digital ID application must have the geo-location features which must be used by thelicensee to ensure that it is able to identify any suspicious locations and to make additional inquiries if the location from which a customer is completing the onboarding process does not match the location of the customer based on the information and documentation submitted.Added: January 2022AML-1.4.13
Capital Market Licensees using its digital ID application must establish and implement an approved policy which lays down the governance, control mechanisms, systems and procedures for the CDD which include:(a) A description of the nature of products and services for which customer due diligence may be conducted through video conferencing or equivalent electronic means;(b) A description of the systems, controls and IT infrastructure planned to be used;(c) Governance mechanism related to this activity;(d) Specially trained personnel with sufficient level of seniority; and(e) Record keeping arrangements for electronic records to be maintained and the relative audit trail.Added: January 2022AML-1.4.14
[This Paragraph has been deleted in October 2023]
Deleted: October 2023
Added: January 2022AML-1.4.15
Capital Market Licensees must ensure that the information referred to in Paragraph AML-1.2.1 is collected in adherence to privacy laws and other applicable laws of the country of residence of the customer.Added: January 2022AML-1.4.16
Capital Market Licensees must ensure that the information referred to in Subparagraphs AML-1.2.1 (a) to (f) is obtained prior to commencing the digital verification such that:(a) Thelicensee can perform its due diligence prior to the digital interaction/communication and can raise targeted questions at such interaction/communication session; and(b) Thelicensee can verify the authenticity, validity and accuracy of such information through digital means (See Paragraph AML-1.4.18 below) or by use of the methods mentioned in Paragraph AML-1.2.3 and /or AML-1.4.3 as appropriate.Added: January 2022AML-1.4.17
Capital Market Licensees must also obtain the customer’s explicit consent to record the session and capture images as may be needed.Added: January 2022AML-1.4.18
Capital Market Licensees must verify the information in Paragraph AML-1.2.1 (a) to (f) by the following methods below:(a) Confirmation of the date of birth and legal name by digital reading and authenticating current valid passport or other official original identification using machine readable zone (MRZ) or other technology which has been approved under paragraph FC-1.4.10, unless the information was verified using national E-KYC application;(b) Performing real time video calls with the applicant to identify the person and match the person’s face and /other features through facial recognition or bio-metric means with the office documentation, (e.g. passport, CPR);(c) Matching the official identification document, (e.g. passport, CPR) and related information provided with the document captured/displayed on the live video call; and(d) Confirmation of the permanent residential address by, unless the information was verified using national E-KYC application capturing live, the recent utility bill, bank statement or similar statement from anotherlicensee or financial institution, or some form of official correspondence or official documentation card, such as national identity card or CPR, from a public/governmental authority, or a tenancy agreement or record of home visit by an official of thelicensee .Added: January 2022AML-1.4.19
For the purposes of Paragraph AML-1.4.18, actions taken for obtaining and verifying customer identity could include:
(a) Collection: Present and collect identity attributes and evidence, either in person and/or online (e.g., by filling out an online form, sending a selfie photo, uploading photos of documents such as passport or driver’s license, etc.);(b) Certification: Digital or physical inspection to ensure the document is authentic and its data or information is accurate (for example, checking physical security features, expiration dates, and verifying attributes via other services);(c) De-duplication: Establish that the identity attributes and evidence relate to a unique person in the ID system (e.g., via duplicate record searches, biometric recognition and/or deduplication algorithms);(d) Verification: Link the individual to the identity evidence provided (e.g., using biometric solutions like facial recognition and liveness detection); and(e) Enrolment in identity account and binding: Create the identity account and issue and link one or more authenticators with the identity account (e.g., passwords, one-time code (OTC) generator on a smartphone, etc.). This process enables authentication.Added: January 2022AML-1.4.20
Not all elements of a digital ID system are necessarily digital. Some elements of identity proofing and enrolment can be either digital or physical (documentary), or a combination, but binding and authentication must be digital.
Added: January 2022AML-1.4.21
Sufficient controls must be put in place to safeguard the data relating to customer information collected through the video conference and due regard must be paid to the requirements of the Personal Data Protection Law (PDPL). Additionally, controls must be put in place to minimize the increased impersonation fraud risk in such non face-to-face relationship where there is a chance that customer may not be who he claims he is.
Added: January 2022Overseas branches
AML-1.4.22
Where
Capital Market Licensees intend to use a digital ID application in a foreign jurisdiction in which it operates, it must ensure that the digital ID application meets with the requirements under Paragraph AML-B.2.1.Added: January 2022AML-1.5 AML-1.5 Enhanced Customer Due Diligence: Politically Exposed Persons ('PEPs')
AML-1.5.1
Capital Market Licensees must have appropriate risk management systems to determine whether a customer or beneficial owner is aPolitically Exposed Person ('PEP') , both at the time of establishing business relations and thereafter on a periodic basis.Capital Market Licensees must utilise publicly available databases and information to establish whether a customer is aPEP .Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.5.2
Capital Market Licensees must establish a client acceptance policy with regard toPEPs , taking into account the reputational and other risks involved. Senior management approval must be obtained before aPEP is accepted as a customer.Capital Market Licensees must not accept a non-Bahraini PEP as a customer based on customer due diligence undertaken using digital ID applications.Amended: January 2022
Added: October 2010AML-1.5.3
Where an existing customer is a
PEP , or subsequently becomes aPEP , enhanced monitoring and customer due diligence measures must include:(a) Analysis of complex financial structures, including trusts, foundations or international business corporations;(b) A written record in the customer file to establish that reasonable measures have been taken to establish both the source of wealth and the source of funds;(c) Development of a profile of anticipated customer activity, to be used in on-going monitoring;(d) Approval of senior management for allowing the customer relationship to continue; and(e) On-going account monitoring of thePEP's account by senior management (such as the MLRO).October 2010AML-1.5.3A
In cases of higher risk business relationships with such persons, mentioned in Paragraph AML-1.5.1,
Capital Market Licensees must apply, at a minimum, the measures referred to in (b), (d) and (e) of Paragraph AML-1.5.3.Amended: January 2022
Added: July 2016AML-1.5.3B
The requirements for all types of
PEP must also apply to family or close associates of suchPEPs .Added: July 2016AML-1.5.3C
For the purpose of Paragraph AML-1.5.3B, 'family' means spouse, father, mother, sons, daughters, sisters and brothers. 'Associates' are persons associated with a
PEP whether such association is due to the person being an employee or partner of thePEP or of a firm represented or owned by thePEP , or family links or otherwise.Added: July 2016AML-1.5.4
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Amended: July 2016
October 2010AML-1.6 AML-1.6 Enhanced Due Diligence: Charities, Clubs and Other Societies
AML-1.6.1
Capital market services must not be provided to charitable funds and religious, sporting, social, cooperative and professional and other societies, until an original certificate authenticated by the relevant Ministry confirming the identities of those purporting to act on their behalf (and authorising them to obtain the said service) has been obtained. For clubs and societies registered with the General Organisation for Youth and Sports (GOYS),
Capital Market Licensees must contact GOYS to clarify whether the account may be opened in accordance with the rules of GOYS.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.6.2
Capital Market Licensees are reminded that clubs and societies registered with GOYS may only have one account with banks in Bahrain.Amended: January 2022
Added: October 2010AML-1.6.3
Charities should be subject to enhanced transaction monitoring by
Capital Market Licensees .Capital Market Licensees should develop a profile of anticipated account activity (in terms of payee countries and recipient organizations in particular).Amended: January 2022
Added: October 2010AML-1.6.4
Capital Market Licensees must provide a monthly report of all payments and transfers of BD3,000 (or equivalent in foreign currencies) and above, from accounts held by charities registered in Bahrain. The report must be submitted to the CBB's Compliance Unit (see section AML-4.4 for contact address), giving details of the amount transferred, account name, number and beneficiary name account and bank details.Capital Market Licensees must ensure that such transfers are in accordance with the spending plans of the charity (in terms of amount, recipient and country).Amended: January 2022
Added: October 2010AML-1.6.5
Article 20 of Decree Law No. 21 of 1989 (issuing the Law of Social and Cultural Societies and Clubs and Private Organisations Operating in the Area of Youth and Sport and Private Institutions) provides that
Capital Market Licensees may not accept or process any incoming or outgoing wire transfers from or to any foreign country on behalf of charity and non-profit organisations licensed by the Ministry of Social Development, until an official letter by the Ministry authorising the receipt or remittance of the funds has been obtained by the concernedCapital Market Licensees .Amended: January 2022
Added: October 2010AML-1.6.6
The receipt of a Ministry letter mentioned in rule AML-1.6.5 above does not exempt the concerned
Capital Market Licensees from conducting normal CDD measures as outlined in other parts of this Module.Amended: January 2022
Added: October 2010AML-1.7 AML-1.7 Enhanced Due Diligence: 'Pooled Funds'
AML-1.7.1
Where
Capital Market Licensees receive pooled funds managed by professional intermediaries (such as investment and pension fund managers, stockbrokers and lawyers or authorized money transferors), they must apply CDD measures contained in section AML-1.8 to the professional intermediary. In addition,Capital Market Licensees must verify the identity of the beneficial owners of the funds where required as shown in rules AML-1.7.2 and AML-1.7.3 below.Amended: January 2022
Added: October 2010AML-1.7.2
Where funds pooled in an account are not co-mingled (i.e. where there are 'sub-accounts' attributable to each beneficiary), all beneficial owners must be identified by the
Capital Market Licensees and their identity verified in accordance with the requirements in section AML-1.2.Amended: January 2022
Added: October 2010AML-1.7.3
For accounts held by intermediaries, where such funds are co-mingled, the
Capital Market Licensees must make a reasonable effort (in the context of the nature and amount of the funds received) to look beyond the intermediary and determine the identity of the beneficial owners or underlying clients, particularly where funds are banked and then transferred onward to other financial institutions (e.g. in the case of accounts held on behalf of authorized money transferors). Where, however, the intermediary is subject to equivalent regulatory andMoney Laundering regulation and procedures (and, in particular, is subject to the same due diligence standards in respect of its client base) the CBB will not insist upon all beneficial owners being identified, provided the bank has undertaken reasonable measures to determine that the intermediary has engaged in a sound customer due diligence process, consistent with the requirements in section AML-1.8.Amended: January 2022
Added: October 2010AML-1.7.4
For accounts held by intermediaries from foreign jurisdictions, the intermediary must be subject to requirements to combat
Money Laundering and terrorist financing consistent with the FATF Recommendations and the intermediary must be supervised for compliance with those requirements. TheCapital Market Licensees must obtain documentary evidence to support the case for not carrying out customer due diligence measures beyond identifying the intermediary. TheCapital Market Licensees must satisfy itself that the intermediary has identified the underlying beneficiaries and has the systems and controls to allocate the assets in the pooled accounts to the relevant beneficiaries.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.7.5
Where the intermediary is not empowered to provide the required information on beneficial owners (e.g. lawyers bound by professional confidentiality rules) or where the intermediary is not subject to the same due diligence standards referred to above, a
Capital Market Licensees must not permit the intermediary to open an account or allow the account to continue to operate, unless specific permission has been obtained in writing from the CBB.Amended: January 2022
Added: October 2010AML-1.8 AML-1.8 Introduced Business from Professional Intermediaries
AML-1.8.1
A
Capital Market Licensees must only accept customers introduced to it by otherCapital Market Licensees , financial institutions or intermediaries, if it has satisfied itself that the introducer concerned is subject to FATF-equivalent measures and customer due diligence measures. WhereCapital Market Licensees delegate part of the customer due diligence measures to an introducer, the responsibility for meeting the requirements of Chapters 1 and 2 remains with theCapital Market Licensee , not the introducer.Amended: January 2022
Amended: January 2018
Added: October 2010AML-1.8.2
Capital Market Licensees may only accept introduced business if all of the following conditions are satisfied:(a) The customer due diligence measures applied by the introducer are consistent with those required by the FATF Recommendations;(b) A formal agreement is in place defining the respective roles of theCapital Market Licensees and the introducer in relation to customer due diligence measures. The agreement must specify that the customer due diligence measures of the introducer will comply with the FATF Recommendations;(c) The introducer is able to provide all relevant data pertaining to the identity of the customer and beneficial owner of the funds and, where applicable, the party/parties on whose behalf the customer is acting; also, the introducer has confirmed that theCapital Market Licensee will be allowed to verify the customer due diligence measures undertaken by the introducer at any stage; and(d) Written confirmation is provided by the introducer confirming that all customer due diligence measures required by the FATF Recommendations have been followed and the customer's identity established and verified. In addition, the confirmation must state that any identification documents or other customer due diligence material can be accessed by theCapital Market Licensee and that these documents will be kept for at least five years after the business relationship has ended.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.8.3
The
Capital Market Licensees must perform periodic reviews ensuring that any introducer on which it relies is in compliance with the FATF Recommendations. Where the introducer is resident in another jurisdiction, theCapital Market Licensees must also perform periodic reviews to verify whether the jurisdiction is in compliance with the FATF Recommendations.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.8.4
Should the
Capital Market Licensees not be satisfied that the introducer is in compliance with the requirements of the FATF Recommendations, theCapital Market Licensees must not accept further introductions or discontinue the business relationship with the introducer.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.9 AML-1.9 Shell Financial Institutions
Accounts with Shell Financial Institutions
AML-1.9.1
Capital Market Licensees must not establish business relations withshell financial institutions which have no physical presence or 'mind and management' in the jurisdiction in which they are licensed and which are unaffiliated with a regulated financial group.Capital Market Licensees must not knowingly establish relations with otherCapital Market Licensees or financial institutions that have relations withshell financial institutions .Amended: January 2022
Amended: January 2020
Amended: July 2016
Added: October 2010AML-1.9.2
Capital Market Licensees must make a Suspicious Transaction Report to the Financial Intelligence Directorate, Ministry of Interior and the Compliance Directorate of the CBB if they are approached by ashell financial institutions or an institution they suspect of being ashell financial institutions .Amended: January 2022
Amended: January 2020
Amended: October 2019
Added: October 2010AML-1.10 AML-1.10 Simplified Customer Due Diligence
AML-1.10.1
Capital Market Licensees may apply simplified customer due diligence measures, as described in paragraphs AML-1.10.2 to AML-1.10.8, if:(a) [This Subparagraph was deleted in January 2018];(b) The transaction concerns the sale of aSecurity listed on a licensed exchange, issued as a result of an initial public offering after January 2006, and the customer already holds an investor number and an allotment letter. Furthermore, the licensed exchange should have advised the broker (by circular) that all necessary customer due diligence information and copies of all original identification documents will be made available upon request without delay;(c) The customer is a company listed on a GCC or FATF member state stock exchange with equivalent disclosure standards to those of a licensed exchange;(d) The customer is a financial institution whose entire operations are subject to AML/CFT requirements consistent with the FATF Recommendations and it is supervised by a financial services supervisor in a FATF or GCC member state for compliance with those requirements;(e) The customer is a financial institution which is a subsidiary of a financial institution located in a FATF or GCC member state, and the AML/CFT requirements applied to its parent also apply to the subsidiary;(f) The customer is the Central Bank of Bahrain ('CBB'), a licensed exchange, or a licensee of the CBB; or(g) The customer is a Ministry of a GCC or FATF member state government, a company in which a GCC government is a majority shareholder, or a company established by decree in the GCC.Amended: January 2022
Amended: January 2019
Amended: January 2018
Amended: July 2016
Added: October 2010AML-1.10.2
For customers falling under category (b) in rule AML-1.10.1, the customer's name and contact information must be recorded. However, the verification, certification and due diligence requirements (contained in rules AML-1.2.3, AML-1.2.5, AML-1.2.6, AML-1.2.8, AML-1.2.9 and AML-1.2.11), may be dispensed with.
Amended: July 2018
October 2010AML-1.10.3
[This Paragraph was deleted in July 2018].
Deleted: July 2018
October 2010AML-1.10.4
For customers falling under categories (c) to (g) in rule AML-1.10.1, the information required under rule AML-1.2.7 (for legal entities) must be obtained. However, the verification, certification and due diligence requirements (contained in rules AML-1.2.3, AML-1.2.5, AML-1.2.6, AML-1.2.8, AML-1.2.9 and AML-1.2.11), may be dispensed with.
October 2010AML-1.10.5
Capital Market Licensees wishing to apply simplified due diligence measures as allowed for under categories (c) to (g) of rule AML-1.10.1 must retain documentary evidence supporting their categorization of the customer.Amended: January 2022
Added: October 2010AML-1.10.6
Examples of such documentary evidence may include a printout from a regulator's website, confirming the licensed status of an institution, and internal papers attesting to a review of the AML/CFT measures applied in a jurisdiction.
October 2010AML-1.10.7
Capital Market Licensees may use authenticated SWIFT messages as a basis for confirmation of the identity of a financial institution under rule AML-1.10.1 (d) and (e) where it is dealing as principal. For customers coming under rule AML-1.10.1 (d) and (e),Capital Market Licensees must also obtain and retain a written statement from the parent institution of the subsidiary concerned, confirming that the subsidiary is subject to the same AML/CFT measures as its parent.Amended: January 2022
Added: October 2010AML-1.10.8
Simplified customer due diligence measures must not be applied where a
Capital Market Licensee knows, suspects, or has reason to suspect, that the applicant is engaged inMoney Laundering or terrorism financing or that the transaction is carried out on behalf of anotherPerson engaged inMoney Laundering or terrorism financing.Amended: January 2022
Added: October 2010AML-1.10.8A
Simplified customer due diligence measures must not be applied in situations where the licensee has identified high ML/TF/PF risks.
Added: January 2022AML-1.10.9
[This Paragraph was deleted in July 2018].
Deleted: July 2018
October 2010AML-1.11 AML-1.11 Enhanced Due Diligence for Correspondent Accounts
AML-1.11.1
This Section, AML1.11, applies to a
Capital Market Licensee when it providescorrespondent account services or characteristic similar tocorrespondent account services .Amended: January 2022
Added: January 2020AML-1.11.2
When providing
correspondent account services ,Capital Market Licensee , must gather sufficient information (e.g. through a questionnaire) about theirrespondent financial institution to understand the nature of the respondent's business. Factors to consider to provide assurance that satisfactory measures are in place at therespondent financial institution includes:(a) Information about therespondent financial institution’s ownership structure and management;(b) Major business activities of therespondent financial institution and its location (i.e. whether it is located in a FATF compliant jurisdiction) as well as the location of its parent (where applicable);(c) Where the customers of therespondent financial institution are located;(d) Therespondent financial institution AML/CFT controls;(e) The purpose for which the account will be opened;(f) Confirmation that the respondent financial institution has verified the identity of any third party entities that will have direct access to the account without reference to the respondent financial institution (payable through account);(g) The extent to which the respondent financial institution performs on-going due diligence on customers with direct access to the account (payable through account), and the condition of regulation and supervision in the respondent financial institution’s country (e.g. from published FATF reports).Capital Market Licensees must take into account the country where the respondent financial institution is located and whether that country abides by the FATF Recommendations when establishing correspondent relationships with foreign entities.Capital Market Licensees must obtain where possible copies of the relevant laws and regulations concerning AML/CFT and satisfy themselves that the respondent financial institution have effective customer due diligence measures consistent with the FATF Recommendations;(h) Confirmation that the respondent financial institution is able to provide relevant customer identification data on request to theCapital Market Licensees ; and(i) Whether the respondent financial institution has been subject to a money laundering or terrorist financing investigation.Amended: January 2022
Added: January 2020AML-1.11.3
Capital Market Licensees must implement the following additional measures, prior to opening a correspondent account:(a) Complete a signed statement that outlines the respective responsibilities of each institution in relation to money laundering detection and monitoring responsibilities; and(b) Ensure that the correspondent relationship has the approval of senior management.Amended: January 2022
Added: January 2020AML-1.11.4
Where the
correspondent account services involve apayable through account ,Capital Market Licensees must be satisfied that:(a) Therespondent financial institution has performed appropriate measures at least equivalent to those specified in Sections AML-1.1 to AML-1.8 (Customer Due Diligence) on the third party having direct access to the payable-through account; and(b) Therespondent financial institution is able to perform ongoing monitoring of its business relations with that third party and is willing and able to provide CDD information to theCapital Market Licensees upon request.Amended: January 2022
Added: January 2020AML-1.11.5
Capital Market Licensees must document the basis for their satisfaction that the requirements in Paragraphs AML-1.11.2, AML-1.11.3 and AML-1.11.4 are met.Amended: January 2022
Added: January 2020AML-1.11.6
Capital Market Licensees must not enter into or continue correspondent account services relationship with another financial institution that does not have adequate controls against money laundering or terrorism financing activities, is not effectively supervised by the relevant authorities or is ashell financial institution .Capital Market Licensees must pay particular attention when entering into or continuing relationships with respondents located in jurisdictions that have poor KYC standards or have been identified by the FATF as being ‘non-cooperative’ in the fight against money laundering/terrorist financing.Amended: January 2022
Added: January 2020AML-1.11.7
Capital Market Licensees must also take appropriate measures when establishing acorrespondent account services relationship, to satisfy themselves that theirrespondent financial institutions do not permit their accounts to be used byshell financial institutions .Amended: January 2022
Added: January 2020AML-1.11.8
In the case of
correspondent account services relationships, theCapital Market Licensee generally does not have direct relationships with the customers of therespondent financial institution . Therefore, there is no expectation or requirement for theCapital Market Licensee to apply CDD on arespondent financial institution’s customer, which is, instead the responsibility of therespondent financial institution . Nonetheless, it is consistent with the risk-based approach for theCapital Market Licensee to have some general sense of therespondent financial institution’s customer base as part of ascertaining the risks associated with therespondent financial institution itself.Amended: January 2022
Added: January 2020AML-1.12 Reliance on Third Parties for Consumer Due Diligence
AML-1.12.1
Licensees are permitted to rely on third parties to perform elements of CDD measures and recordkeeping requirements stipulated in Chapter AML-1 related to customer and beneficial owner identity, verification of their identity and information on the purpose and intended nature of the business relationship with thelicensee , subject to complying with the below:(a)Licensees remain ultimately responsible for CDD measures;(b)Licensees immediately obtain the relevant CDD information from the third party upon onboarding clients;(c) There is an agreement with the third party for the arrangement with clear contractual terms on the obligations of the third party;(d) The third party without delay makes available the relevant documentation relating to the CDD requirements upon request;(e)Licensees ensure that the third party is a financial institution that is regulated and supervised for, and has measures in place for compliance with, CDD and recordkeeping requirements in line with FATF Recommendations 10 and 11; and(f) For third parties based abroad,licensees must consider the information available on the level of country risk.Added: October 2023AML-1.12.2
Where a
licensee relies on a third-party that is part of the same financial group, thelicensee can consider that:(a) The requirements under Subparagraphs AML-1.12.1 (d) and (e) are complied with through its group programme, provided the group satisfies the following conditions:(i) The group applies CDD and record keeping requirements consistent with FATF Recommendations 10, 11 and 12 and has in place internal controls in accordance with FATF Recommendation 18; and(ii) The implementation of CDD, record keeping and AML/CFT measures are supervised at a group level by a financial services regulatory authority for compliance with AML/CFT requirements consistent with standards set by the FATF.(b) The requirement under Subparagraph AML-1.12.1 (f) is complied with if the country risk is adequately mitigated by the group’s AML/CFT policies.Added: October 2023AML-1.12.3
This Section does not apply to outsourcing or agency arrangements in which the outsourced entity applies the CDD measures on behalf of the delegating
licensee , in accordance with its procedures.Added: October 2023AML-2 AML-2 AML/CFT Systems and Controls
AML-2.1 AML-2.1 General Requirements
AML-2.1.1
Capital Market Licensees must implement programmes against money laundering and terrorist financing which establish and maintain appropriate systems and controls for compliance with the requirements of this Module and which limit their vulnerability to financial crime. These systems and controls must be documented and approved and reviewed annually by the Board of theCapital Market Licensees . The documentation, and the Board's review and approval, must be made available upon request to the CBB.Amended: January 2022
Amended: July 2016
Added: October 2010AML-2.1.2
The above systems and controls, and associated documented policies and procedures should cover standards for customer acceptance, on-going monitoring of high-risk accounts, staff training and adequate screening procedures to ensure high standards when hiring employees.
October 2010AML-2.1.3
Capital Market Service Providers must incorporate Key Performance Indicators (KPIs) to ensure compliance with AML/CFT requirements by all staff. The performance against the KPIs must be adequately reflected in their annual performance evaluation and in their remuneration (See also Paragraph HC-10.5.3).Added: April 2020AML-2.1.4
In implementing the policies, procedures and monitoring tools for ensuring compliance with Paragraph AML-2.1.3,
Capital Market Service Providers should consider the following:(a) The business policies and practices should be designed to reduce incentives for staff to expose theCapital Market Service Providers to AML/CFT compliance risk;(b) The performance measures of departments/divisions/units and personnel should include measures to address AML/CFT compliance obligations;(c) AML/CFT compliance breaches and deficiencies should be attributed to the relevant departments/divisions/units and personnel within the organisation as appropriate;(d) Remuneration and bonuses should be adjusted for AML/CFT compliance breaches and deficiencies; and(e) Both quantitative measures and human judgement should play a role in determining any adjustments to the remuneration and bonuses resulting from the above.Added: April 2020AML-2.2 AML-2.2 On-going Customer Due Diligence and Transaction Monitoring
Risk Based Monitoring
AML-2.2.1
Capital Market Licensees must develop risk-based monitoring systems appropriate to the complexity of their business, their number of clients and types of transactions. These systems must be configured to identify significant or abnormal transactions or patterns of activity. Such systems must include limits on the number, types or size of transactions undertaken outside expected norms; and must include limits for cash and non-cash transactions including transactions inaccepted crypto-assets .Amended: January 2022
Amended: January 2020
Added: October 2010AML-2.2.2
Capital Market Licensees risk-based monitoring systems should therefore be configured to help identify:(a) Transactions which do not appear to have a clear purpose or which make no obvious economic sense;(b) Significant or large transactions not consistent with the normal or expected behaviour of a customer; and(c) Unusual patterns of activity (relative to other customers of the same profile or of similar types of transactions, for instance because of differences in terms of volumes, transaction type, or flows to or from certain countries), or activity outside the expected or regular pattern of a customer's account activity.Amended: January 2022
Added: October 2010Automated Transaction Monitoring
AML-2.2.3
Capital Market Licensees must consider the need to include automated transaction monitoring as part of their risk-based monitoring systems to spot abnormal or unusual flow of funds. In the absence of automated transaction monitoring systems, all transactions above BD6,000 must be viewed as 'significant' and be captured in a daily transactions report for monitoring by the MLRO or a relevant delegated official, and records retained by theCapital Market Licensees for five years after the date of the transaction.Amended: January 2022
Added: October 2010AML-2.2.4
The CBB would expect larger
Capital Market Licensees to include automated transaction monitoring as part of their risk-based monitoring systems. See also Chapters AML-3 and AML-6, regarding the responsibilities of the MLRO and record-keeping requirements. Where theCapital Market Licensee is not receiving funds — for instance where it is simply acting as agent on behalf of a principal, and the customer is directly remitting funds to the principal — then theCapital Market Licensee may agree with the principal that the latter should be responsible for the daily monitoring of such transactions.Amended: January 2022
Added: October 2010Unusual Transactions or Customer Behaviour
AML-2.2.5
Where a
Capital Market Licensee's risk-based monitoring systems identify significant or abnormal transactions (as defined in paragraph AML-2.2.2 and rule AML-2.2.3), it must verify the source of funds for those transactions, particularly where the transactions are above the transactions threshold of BD6,000. Furthermore,Capital Market Licensees must examine the background and purpose to those transactions and document their findings. In the case of one-off transactions where there is no ongoing account relationship, theCapital Market Licensees must file a Suspicious Transaction Report (STR) if it is unable to verify the source of funds to its satisfaction (see Chapter AML-4).Amended: January 2022
Added: October 2010AML-2.2.6
The investigations required under rule AML-2.2.5 must be carried out by the MLRO (or relevant delegated official). The documents relating to these findings must be maintained for five years from the date when the transaction was completed (see also rule AML-6.1.1 (b)).
October 2010AML-2.2.7
Capital Market Licensees must consider instances where there is a significant, unexpected or unexplained change in customer activity.Amended: January 2022
Added: October 2010AML-2.2.8
When an existing customer closes one account and opens another, the
Capital Market Licensees must review its customer identity information and update its records accordingly. Where the information available falls short of the requirements contained in Chapter AML-1, the missing or out-of-date information must be obtained and re-verified with the customer.Amended: January 2022
Added: October 2010AML-2.2.9
Once identification procedures have been satisfactorily completed and, as long as records concerning the customer are maintained in line with Chapters AML-1 and AML-6, no further evidence of identity is needed when transactions are subsequently undertaken within the expected level and type of activity for that customer, provided reasonably regular contact has been maintained between the parties and no doubts have arisen as to the customer's identity.
October 2010Ongoing Monitoring
AML-2.2.10
Capital Market Licensees must take reasonable steps to:(a) Scrutinize transactions undertaken throughout the course of that relationship to ensure that transactions being conducted are consistent with thecapital market licensee 's knowledge of the customer, their business risk and risk profile; and(b) Ensure that they receive and maintain up-to-date and relevant copies of the identification documents specified in Chapter AML-1, by undertaking reviews of existing records, particularly for higher risk categories of customers.Capital Market Licensees must require all customers to provide up-to-date identification documents in their standard terms and conditions of business.Amended: January 2022
Amended: October 2017
Added: October 2010AML-2.2.11
Capital Market Licensees must review and update their customer due diligence information at least every three years, particularly for higher risk categories of customers. If, upon performing such a review, copies of identification documents are more than 12 months out-of-date, theCapital Market Licensees must take steps to obtain updated copies as soon as possible.Amended: January 2022
Amended: October 2017
Added: October 2010AML-2.2.12
Capital Market Licensees must in addition to rules AML-2.2.10 and AML-2.2.11, maintain information and documents in respect to client transactions such as date of execution, value of transaction, type ofSecurities and identity of the counterparty.Amended: January 2022
Added: October 2010AML-2A AML-2A: Money Transfers and Accepted Crypto-asset Transfers
AML-2A.1 AML-2A.1 Applicability and CBB’s Approach to Transfer of Accepted Crypto-assets
AML-2A.1.1
The requirements of this Section, AML-2A.1, applies to
Capital Market Licensees (includingCrypto-asset licensees as well as third party service providers) if they act as anordering financial institution ,intermediary financial institution orbeneficiary financial institution .Amended: January 2022
Added: January 2020AML-2A.1.2
A third party service provider that provides
accepted crypto-asset transfers and/or electronic transfer of funds (wire transfer) on behalf of aCapital Market Licensee , irrespective of whether the third-party service provider is licensed by the CBB or not, must comply with the requirements of Paragraph AML-2A.1. ACapital Market Licensee is ultimately responsible for the functioning and activities of the third-party service provider and must ensure that the third party service provider meets all regulatory obligations as specified in this Section.Amended: January 2022
Added: January 2020CBB’s Approach to Transfer of Accepted Crypto-assets
AML-2A.1.3
As with financial payment methods,
accepted crypto-assets can be used to quickly move (transfer) funds globally and to facilitate a range of financial activities. Similar to mobile or internet based payment services and mechanism,accepted crypto-assets can be used to transfer funds in a wide geographical area with a large number of counterparties.Added: January 2020AML-2A.1.4
The CBB considers transactions involving transfer of
accepted crypto-assets as functionally analogous to wire transfer. Therefore,Capital Market Licensees (includingcrypto-asset licensees ), whenever their transaction, whether in fiat currency oraccepted crypto-assets , involves (i) a traditional wire transfer, or (ii) anaccepted crypto-asset transfer, must comply with the requirements of Paragraph AML-2A.2 unless stated otherwise.Amended: January 2022
Added: January 2020AML-2A.2 AML-2A.2 Transfer of Accepted Crypto-assets and Wire Transfer
Accepted Crypto-asset Transfer to be Considered as Cross Border Transfer
AML-2A.2.1
Capital Market Licensees (includingcrypto-asset licensees ) must consider all transfers ofaccepted crypto-assets as cross-border transfer rather than domestic transfer.Amended: January 2022
Added: January 2020Outward Transfers
AML-2A.2.2
Capital Market Licensees must include all requiredoriginator information and requiredbeneficiary information details with the accompanying transfer ofaccepted crypto-assets and/or wire transfer of funds they make on behalf of their customers.Amended: January 2022
Added: January 2020AML-2A.2.3
For purposes of this Section,
originator information refers to the information listed in Subparagraphs AML-2A.2.7 (a) to (c) and beneficiary information refers to the information listed in Subparagraphs AML-2A.2.7 (d) and (e).Added: January 2020Inward Transfers
AML-2A.2.4
Capital Market Licensees must:(a) Maintain records (in accordance with Chapter AML-6 of this Module) of alloriginators information received with an inward transfer; and(b) Carefully scrutinize inward transfers which do not containoriginator information (i.e. full name, address and account number or a unique customer identification number).Capital Market Licensees must presume that such transfers are ‘suspicious transactions’ and pass them to the MLRO for review for determination as to possible filing of STR, unless (i) theordering financial institution is able to promptly (i.e. within two business days) advise thelicensee in writing of the originator information upon thelicensee’s request (Refer to Paragraph AML-2A.2.5); or (ii) theordering financial institution and the licensee are acting on their own behalf (as principal).Amended: January 2022
Added: January 2020AML-2A.2.5
The period of 2 business days provided to
ordering financial institution by theCapital Market Licensees under Paragraph AML-2A.2.4(b)(i) to furnish theoriginator information is only applicable while undertaking fund transfer (traditional wire transfer) and must not be used in case of transfer ofaccepted crypto-assets .Amended: January 2022
Added: January 2020AML-2A.2.6
While undertaking accepted crypto-asset transfer, a
Capital Market Licensees must ensure that theordering financial institution transmits theoriginator andbeneficiary information immediately (Refer to Paragraph AML-2A.2.9).Amended: January 2022
Added: January 2020Accepted Crypto-asset Transfer and Cross Border Wire Transfer
AML-2A.2.7
Information accompanying all
accepted crypto-asset transfer as well as wire transfer must always contain:(a) The name of theoriginator ;(b) The originator account number (e.g. IBAN or crypto-asset wallet) where such an account is used to process the transaction;(c) The originator’s address, or national identity number, or customer identification number, or date and place of birth;(d) The name of thebeneficiary ; and(e) The beneficiary account number (e.g. IBAN or crypto-asset wallet) where such an account is used to process the transaction.Added: January 2020AML-2A.2.8
Where a
Capital Market Licensees undertakes a transfer ofaccepted crypto-asset , it is not necessary for the information referred to in Paragraph AML-2A.2.7 to be attached directly to theaccepted crypto-asset transfers itself. The information can be submitted either directly or indirectly.Amended: January 2022
Added: January 2020AML-2A.2.9
A
Capital Market Licensee while undertaking transfer ofaccepted crypto-asset must ensure that the requiredoriginator andbeneficiary information is transmitted immediately and securely.Amended: January 2022
Added: January 2020AML-2A.2.10
For the purposes of Paragraph AML-2A.2.9, “Securely” means that the provider of the information must protect it from unauthorized disclosure as well as ensure that the integrity and availability of the required information is maintained so as to facilitate recordkeeping and the use of such information by
financial institution . The term “immediately” means that the provider of the information must submit the required information simultaneously or concurrently with the transfer itself of theaccepted crypto-asset .Added: January 2020AML-2A.2.11
The CBB recognises that unlike traditional fiat currency wire transfer, not every
accepted crypto-asset transfer involves (or is bookended by) two institutions (crypto-asset entities or financial institution). In instances in which anaccepted crypto-asset transfer involves only one financial institution on either end of the transfer (e.g. when anordering financial institution sendsaccepted crypto-assets on behalf of its customers, theoriginator , to abeneficiary that is not a customer of abeneficiary financial institution but rather an individual user who receives theaccepted crypto-asset transfer using his/her own distributed ledger technology (DLT) software, such as an unhosted wallet), the financial institution must still ensure adherence to Paragraph AML-2A.2.7 for their customer. The CBB does not expect that financial institutions, when originating anaccepted crypto-asset transfer, would submit the required information to individual users who are not financial institutions. However, financial institutions receiving anaccepted crypto-asset transfer from an entity that is not a financial institution (e.g. from an individual accepted crypto-asset user using his/her own DLT software, such as an unhosted wallet), must obtain the required originator information from their customer.Added: January 2020Domestic Wire Transfer
AML-2A.2.12
Information accompanying domestic wire transfers must also include
originator information as indicated for cross-border wire transfers, unless this information can be made available to thebeneficiary financial institution and the CBB by other means. In this latter case, theordering financial institution need only include the account number or a unique transaction reference number, provided that this number or identifier will permit the transaction to be traced back to theoriginator or thebeneficiary .Added: January 2020AML-2A.2.13
For purposes of Paragraph AML-2A.2.12, the information should be made available by the
ordering financial institution within three business days of receiving the request either from thebeneficiary financial institution or from the CBB.Added: January 2020AML-2A.2.14
It is not necessary for the recipient institution to pass the originator information on to the
beneficiary . The obligation is discharged simply by notifying thebeneficiary financial institution of the originator information at the time the transfer is made.Added: January 2020Responsibilities of Ordering, Intermediary and Beneficiary Financial Institutions
Ordering Financial Institution
AML-2A.2.15
The
ordering financial institution must ensure that wire transfers as well asaccepted crypto-asset transfers contain required and accurate originator information, and requiredbeneficiary information.Added: January 2020AML-2A.2.16
The
ordering financial institution must maintain alloriginator andbeneficiary information collected in accordance with Paragraph AML-6.1.1.Added: January 2020AML-2A.2.17
The
ordering financial institution must not execute the wire transfer oraccepted crypto-asset transfer if it does not comply with the requirements of Paragraphs AML-2A.2.15 and AML-2A.2.16.Added: January 2020Intermediary Financial Institutions
AML-2A.2.18
For cross-border wire transfers and
accepted crypto-asset transfers, financial institutions processing an intermediary element of such chains of wire transfers and/oraccepted crypto-asset transfers must ensure that alloriginator andbeneficiary information that accompanies a wire transfer andaccepted crypto-asset transfer is retained with it.Added: January 2020AML-2A.2.19
Where technical limitations prevent the required
originator orbeneficiary information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, a record must be kept, for at least five years, by the receiving intermediary institution of all the information received from theordering financial institution or anotherintermediary financial institution .Added: January 2020AML-2A.2.20
An
intermediary financial institution must take reasonable measures to identify cross-border wire transfers andaccepted crypto-asset transfer that lack requiredoriginator information or requiredbeneficiary information.Added: January 2020AML-2A.2.21
An
intermediary financial institution must have effective risk-based policies and procedures for determining:(a) When to execute, reject, or suspend a traditional wire transfer lacking requiredoriginator or requiredbeneficiary information; and(b) The appropriate follow-up action.Added: January 2020Beneficiary Financial Institution
AML-2A.2.22
A
beneficiary financial institution must take reasonable measures to identify cross-border wire transfers as well asaccepted crypto-asset transfer that lack requiredoriginator or requiredbeneficiary information. Such measures may include post-event monitoring or real-time monitoring where feasible.Added: January 2020AML-2A.2.23
For wire transfers as well as
accepted crypto-asset transfer, abeneficiary financial institution must verify the identity of thebeneficiary , if the identity has not been previously verified, and maintain this information in accordance with Paragraph AML-6.1.1.Added: January 2020AML-2A.2.24
A
beneficiary financial institution must have effective risk-based policies and procedures for determining:(a) When to execute, reject, or suspend a traditional wire transfer lacking requiredoriginator or requiredbeneficiary information; and(b) The appropriate follow-up action.Added: January 2020AML-3 AML-3 Money Laundering Reporting Officer (MLRO)
AML-3.1 AML-3.1 Appointment of MLRO
AML-3.1.1
Capital Market Licensees must appoint a Money Laundering Reporting Officer ("MLRO"). The position of the MLRO is a controlled function and the MLRO is an approvedPerson .Amended: January 2022
Added: October 2010AML-3.1.2
For details of CBB's requirements regarding controlled functions and approved
Persons , see the relevant licensing Module, such as MAE, CSD, or MIR Module. Amongst other things, approvedPersons require CBB approval before being appointed, which is granted only if they are assessed as 'fit and proper' for the function in question. A completed Form 3 must accompany any request for CBB approval.October 2010AML-3.1.3
The position of the MLRO must not be combined with functions that create potential conflicts of interest, such as an internal auditor or business line head. The position of the MLRO may not be outsourced.
October 2010AML-3.1.4
Subject to rule AML-3.1.3, however, the position of the MLRO may otherwise be combined with other functions in the
Capital Market Licensees , such as that of Compliance Officer, in cases where the volume and geographical spread of the business is limited and, therefore, the demands of the function are not likely to require a full time resource. Rule AML-3.1.7 requires that the MLRO is a Director or employee of theCapital Market Licensees , so the function may not be outsourced to a third-party employee.Amended: January 2022
Added: October 2010AML-3.1.4A
For purposes of Paragraphs AML-3.1.3 and AML-3.1.4 above,
Capital Market Licensees must clearly state in the Application for Approved Person Status — Form 3 — when combining the MLRO or DMLRO position with any other position within theCapital Market Licensees .Added: January 2022AML-3.1.5
Unless exempted by the CBB, a
Capital Market Licensees must appoint deputy MLRO to act for the MLRO in his/her absence. The deputy MLRO must be resident in Bahrain unless otherwise agreed with the CBB.Amended: January 2022
Added: October 2010AML-3.1.5A
Where a
Capital Market Licensees seeks an exemption from appointment of Deputy MLRO, from the CBB, it must provide in writing, to the satisfaction of the CBB, the nature, scale and complexity of their business and the alternative arrangements that theCapital Market Licensees shall implement when the MLRO is not available to carry out thecontrolled function .Added: January 2022AML-3.1.6
Capital Market Licensees should note that although the MLRO may delegate some of his functions, either to other employees of theCapital Market Licensees or even (in the case of larger groups) to individuals performing similar functions for other group entities, the responsibility for compliance with the requirements of this Module remains with theCapital Market Licensees and the designated MLRO. The deputy MLRO should be able to support the MLRO discharge his responsibilities and to deputise for him in his absence.Amended: January 2022
Added: October 2010AML-3.1.7
So that he can carry out his functions effectively,
Capital Market Licensees must ensure that their MLRO:(a) Is a Director or a member of senior management of theCapital Market Licensees ;(b) Has a sufficient level of seniority within theCapital Market Licensees , has the authority to act without interference from business line management and has direct access to the Board and senior management (where necessary);(c) Has sufficient resources, including sufficient time and (if necessary) support staff, and has designated a replacement to carry out the function should the MLRO be unable to perform his duties;(d) Has unrestricted access to all transactional information relating to any financial services provided by theCapital Market Licensees to that customer, or any transactions conducted by theCapital Market Licensees on behalf of a customer;(e) Is provided with timely information needed to identify, analyze and effectively monitor customer accounts;(f) Has access to all customer due diligence information obtained by theCapital Market Licensees ; and(g) Is resident in Bahrain.Amended: January 2022
Added: October 2010AML-3.1.8
In addition,
Capital Market Licensees must ensure that their MLRO is able to:(a) Monitor the day-to-day operation of its policies and procedures relevant to this Module; and(b) Respond promptly to any reasonable request for information made by the Financial Intelligence Directorate, or the CBB.Amended: January 2022
Amended: October 2019
Added: October 2010AML-3.1.9
If the position of the MLRO falls vacant, the
Capital Market Licensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, theCapital Market Licensees must make immediate interim arrangements (including the appointment of an acting MLRO) to ensure continuity in the MLRO function's performance. These interim arrangements must be approved by the CBB. Any action taken by the Deputy MLRO will be regarded as having the same authority as if it had been done by the MLRO.Amended: January 2022
Added: October 2010AML-3.2 AML-3.2 Responsibilities of the MLRO
AML-3.2.1
The MLRO is responsible for:
(a) Establishing and maintaining theCapital Market Licensee 's AML/CFT policies and procedures;(b) Ensuring that theCapital Market Licensees complies with the AML Law, any other applicable AML/CFT legislation and this Module;(c) Ensuring day-to-day compliance with theCapital Market Licensee 's own internal AML/CFT policies and procedures;(d) Acting as theCapital Market Licensee 's main point of contact in respect of handling internal Suspicious Transaction Reports from theCapital Market Licensee 's staff (refer to section AML-4.1) and as the main contact for the Financial Intelligence Directorate, the CBB and other concerned bodies regarding AML/CFT;(e) Making external Suspicious Transaction Reports to the Financial Intelligence Directorate and the Compliance Directorate (refer to section AML-4.2);(f) Taking reasonable steps to establish and maintain adequate arrangements for staff awareness and training on AML/CFT matters (whether internal or external), as per Chapter AML-5;(g) Producing annual reports on the effectiveness of theCapital Market Licensee 's AML/CFT controls, for consideration by senior management, as per rule AML-3.3.3 and following-up on the status of any anomaly identified or remedial measure required by the CBB;(h) On-going monitoring of what may, in his opinion, constitute high-risk customer accounts; and(i) Ensuring that theCapital Market Licensee maintains all necessary CDD, transactions, STR and staff training records for the required periods (refer to section AML-6.1).Amended: January 2022
Amended: October 2019
Amended: July 2016
Added: October 2010AML-3.3 AML-3.3 Compliance Monitoring
Annual Compliance Review
AML-3.3.1
Capital Market Licensees must take appropriate steps to identify and assess their money laundering and terrorist financing risks (for customers, countries or geographic areas; and products, services, transactions or delivery channels). They must document those assessments in order to be able to demonstrate their basis, keep these assessments up to date, and have appropriate mechanisms to provide risk assessment information to the CBB. The nature and extent of any assessment of money laundering and terrorist financing risks must be appropriate to the nature and size of the business.Amended: January 2022
Added: July 2016AML-3.3.1A
Capital Market Licensees should always understand their money laundering and terrorist financing risks, but the CBB may determine that individual documented risk assessments are not required, if the specific risks inherent to the sector are clearly identified and understood.Amended: January 2022
Added: July 2016AML-3.3.1B
A
Capital Market Licensee must review the effectiveness of its AML/CFT procedures, systems and controls at least once each calendar year. The review must cover theCapital Market Licensees and its branches and subsidiaries both inside and outside the Kingdom of Bahrain. ACapital Market Licensee must monitor the implementation of those controls and enhance them if necessary. The scope of the review must include:(a) A report, containing the number of internal reports made in accordance with section AML-4.1, a breakdown of all the results of those internal reports and their outcomes for each segment of theCapital Market Licensee 's business, and an analysis of whether controls or training need to be enhanced;(b) A report, indicating the number of external reports made in accordance with section AML-4.2 and, where aCapital Market Licensee has made an internal report but not made an external report, noting why no external report was made;(c) A sample test of compliance with this Module's customer due diligence requirements; and(d) A report as to the quality of theCapital Market Licensee 's anti-money laundering procedures, systems and controls and compliance with the rules of alicensed exchange andlicensed clearing house orcentral depository , AML Law and this Module.Amended: January 2022
Amended: July 2016
Added: October 2010AML-3.3.2
The reports listed under rule AML-3.3.1B (a) and (b) must be made by the MLRO. The sample testing and report required under rule AML-3.3.1B (c) and (d) must be made by the
Capital Market Licensee 's external auditorsor a consultancy firm approved by the CBB.Amended: January 2022
Amended: January 2020
Amended: January 2019
Added: October 2010AML-3.3.2A
In order for a consultancy firm to be approved by the CBB for the purposes of Paragraph AML-3.3.2, such firm should provide the CBB’s Compliance Directorate with:
(a) A sample AML/CFT report prepared for a financial institution;(b) A list of other AML/CFT related work undertaken by the firm;(c) A list of other audit/review assignments undertaken, specifying the nature of the work done, date and name of the licensee; and(d) An outline of any assignment conducted for or in cooperation with an international audit firm.Added: January 2020AML-3.3.2B
The firm should indicate which personnel (by name) will work on the report (including, where appropriate, which individual will be the team leader) and demonstrate that all such persons have appropriate qualifications in one of the following areas:
(a) Audit;(b) Accounting;(c) Law; or(d) Banking/Finance.Added: January 2020AML-3.3.2C
Capital Market Licensees must ensure that the personnel conducting the review are qualified, skilled and have adequate experience to conduct such a review. At least two persons working on the report (one of whom should be the team leader) must have:(a) A minimum of 5 years professional experience dealing with AML/CFT issues; and(b) Formal AML/CFT training.Amended: January 2022
Added: January 2020AML-3.3.2D
Submission of a curriculum vitae for all personnel to be engaged on the report is encouraged for the purposes of evidencing the above requirements.
Added: January 2020AML-3.3.2E
Upon receipt of the above required information, the CBB Compliance Directorate will assess the firm and communicate to it whether it meets the criteria required to be approved by the CBB for this purpose. The CBB may also request any other information it considers necessary in order to conduct the assessment.
Added: January 2020AML-3.3.3
The reports listed under rule AML-3.3.1B must be submitted to the
Capital Market Licensee 's Board for it to review and commission any required remedial measures and copied to theCapital Market Licensee 'ssenior management .Amended: January 2022
Amended: July 2016
Added: October 2010AML-3.3.4
The purpose of the annual compliance review is to assist a
Capital Market Licensee 's Board and senior management to assess, amongst other things, whether internal and external reports are being made (as required under Chapter AML-4), and whether the overall number of such reports (which may otherwise appear satisfactory) does not conceal inadequate reporting in a particular segment of theCapital Market Licensee 's business (or, where relevant, in particular branches or subsidiaries).Capital Market Licensees should use their judgement as to how the reports listed under rule AML-3.3.1B (a) and (b) should be broken down in order to achieve this aim (e.g. by branches, departments, product lines, etc).Amended: January 2022
Amended: January 2019
Added: October 2010AML-3.3.5
Capital Market Licensees must instruct their external auditor to produce the report referred to in rule AML-3.3.1B (c) and (d). The report must be submitted to the CBB by the 30th of June of the following year. The findings of this review must be received and acted upon by theCapital Market Licensee .Amended: January 2022
Amended: January 2020
Amended: January 2019
Added: October 2010AML-3.3.6
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2010AML-4 AML-4 Suspicious Transaction Reporting
AML-4.1 AML-4.1 Internal Reporting
AML-4.1.1
Capital Market Licensees must implement procedures to ensure that staff who handle customer business (or are managerially responsible for such staff) make a report promptly to the MLRO if they know or suspect that a customer (or aPerson on whose behalf a customer may be acting) is engaged inMoney Laundering or terrorism financing, or if the transaction or the customer's conduct otherwise appears unusual or suspicious. These procedures must include arrangements for disciplining any member of staff who fails, without reasonable excuse, to make such a report.Amended: January 2022
Added: October 2010AML-4.1.2
Where
Capital Market Licensees internal processes provide for staff to consult with their line managers before sending a report to the MLRO, such processes must not be used to prevent reports reaching the MLRO, where staff have stated that they have knowledge or suspicion that a transaction may involveMoney Laundering or terrorist financing.Amended: January 2022
Added: October 2010AML-4.2 AML-4.2 External Reporting
AML-4.2.1
Capital Market Licensees must take reasonable steps to ensure that all reports made under section AML-4.1 are considered by the MLRO (or his duly authorised delegate). Having considered the report and any other relevant information, if the MLRO (or his duly authorised delegate), still suspects that aPerson has been engaged inMoney Laundering or terrorism financing, or the activity concerned is otherwise still regarded as suspicious, he must report the fact promptly to theRelevant Authorities . Where no report is made, the MLRO must document the reasons why.Amended: January 2022
Added: October 2010AML-4.2.2
To take reasonable steps, as required under rule AML-4.2.1,
Capital Market Licensees must:(a) Require the MLRO to consider reports made under Section AML-4.1 in the light of all relevant information accessible to or reasonably obtainable by the MLRO;(b) Permit the MLRO to have access to any information, including Know Your Customer information, in theCapital Market Licensee 's possession which could be relevant; and(c) Ensure that where the MLRO, or his duly authorised delegate, suspects that aPerson has been engaged inMoney Laundering or terrorist financing, a report is made by the MLRO which is not subject to the consent or approval of any otherPerson .Amended: January 2022
Added: October 2010AML-4.2.3
Reports to the
Relevant Authorities made under rule AML-4.2.1 must be sent to the Financial Intelligence Directorate at the Ministry of the Interior, and the CBB's Compliance Directorate using the Suspicious Transaction Reporting Online System (Online STR system). STRs in paper format will not be accepted.Amended: October 2019
Amended: July 2016
Amended: October 2014
October 2010AML-4.2.4
Capital Market Licensees must report all suspicious transactions or attempted transactions. This reporting requirement applies regardless of whether the transaction involves tax matters.Amended: January 2022
Added: October 2010AML-4.2.5
Capital Market Licensees must retain all relevant details of STRs submitted to theRelevant Authorities , for at least five years.Amended: January 2022
Amended: July 2016
Added: October 2010AML-4.2.6
In accordance with the AML Law,
Capital Market Licensees , their Directors, officers and employees:(a) Must not warn or inform ('tipping off') their customers, the beneficial owner or other subjects of the STR when information relating to them is being reported to theRelevant Authorities ; and(b) In cases whereCapital Market Licensees form a suspicion that transactions relate to money laundering or terrorist financing, they must take into account the risk of tipping-off when performing the CDD process. If theCapital Market Licensee reasonably believes that performing the CDD process will tip-off the customer or potential customer, it may choose not to pursue that process, and must file an STR.Amended: January 2022
Amended: January 2018
Amended: July 2016
Added: October 2010AML-4.3 AML-4.3 Reporting to the SRO
AML-4.3.1
The MLRO, whenever he becomes aware or believes, or has reason to believe that a client is involved in a
Money Laundering offence, shall in addition to the reporting in section AML-4.2, inform the SRO on which the transaction is taking place, or where theSecurities or cash is being held, in which case the SRO must, unless instructed otherwise by aRelevant Authority , stop the execution of the suspicious transaction and anySecurity deposited with the SRO or otherCapital Market Licensee .Amended: January 2022
Added: October 2010AML-4.4 AML-4.4 Contacting the Relevant Authorities
AML-4.4.1
Reports made by the MLRO or his duly authorised delegate under Section AML-4.2 must be sent electronically using the Suspicious Transaction Reporting Online System (Online STR system).
Amended: October 2014
October 2010AML-4.4.2
The
relevant authorities are:
Financial Intelligence Directorate (FID)
Ministry of Interior
P.O. Box 26698
Manama, Kingdom of Bahrain
Telephone: + 973 17 749397
Fax: + 973 17 715502
E-mail: bahrainfid@moipolice.bhDirector of Compliance Directorate
Central Bank of Bahrain
P.O. Box 27
Manama, Kingdom of Bahrain
Telephone: 17 547107
Fax: 17 535673
E-mail: Compliance@cbb.gov.bhAmended: October 2019
Added: October 2014AML-5 AML-5 Staff Training and Recruitment
AML-5.1 AML-5.1 General Requirements
AML-5.1.1
Capital Market Licensees must take reasonable steps to provide periodic training and information to ensure that staff who handle customer transactions, or are managerially responsible for such transactions, are made aware of:(a) Their responsibilities under the AML Law, this Module, and any other relevant AML/CFT laws and regulations;(b) The identity and responsibilities of the MLRO and his deputy;(c) The potential consequences, both individual and corporate, of any breach of the AML Law, this Module and any other relevant AML/CFT laws or regulations;(d) TheCapital Market Licensee 's current AML/CFT policies and procedures;(e)Money Laundering and terrorist financing typologies and trends;(f) The type of customer activity or transaction that may justify an internal report in accordance with section AML-4.1;(g) TheCapital Market Licensee 's procedures for making an internal report as per section AML-4.1; and(h) Customer due diligence measures with respect to establishing business relations with customers.Amended: January 2022
Added: October 2010AML-5.1.2
The information referred to in rule AML-5.1.1 must be brought to the attention of relevant new employees of
Capital Market Licensees and must remain available for reference by staff during their period of employment.Amended: January 2022
Added: October 2010AML-5.1.3
Relevant new employees must be given AML/CFT training within three months of joining a
Capital Market Licensee .Amended: January 2022
Added: October 2010AML-5.1.4
Capital Market Licensees must ensure that their AML/CFT training for relevant staff remains up-to-date and is appropriate given theCapital Market Licensee 's activities and customer base.Amended: January 2022
Added: October 2010AML-5.1.5
The CBB would normally expect AML/CFT training to be provided to relevant staff at least once a year.
October 2010AML-5.1.6
Capital Market Licensees must develop adequate screening procedures to ensure high standards when hiring employees. These procedures must include controls to prevent criminals or their associates from being employed byCapital Market Licensees .Amended: January 2022
Amended: July 2016
Added: October 2010AML-5.1.6A
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2021AML-6 AML-6 Record Keeping
AML-6.1 AML-6.1 General Requirements
CDD and Transaction Records
AML-6.1.1
Capital Market Licensees must comply with the record-keeping requirements contained in the AML Law and in the CBB Law.Capital Market Licensees must therefore retain adequate records (including accounting and identification records), for the following minimum periods:(a) For customers, in relation to evidence of identity and business relationship records (such as application forms, account files and business correspondence, including the results of any analysis undertaken (e.g. enquiries to establish the background and purpose of complex, unusual large transactions)), for at least five years after the customer relationship has ceased; and(b) For transactions, in relation to documents enabling a reconstitution of the transaction concerned, for at least five years after the transaction was completed.Amended: January 2022
Amended: July 2016
Added: October 2010AML-6.1.1A
For the purposes of Subparagraph AML-6.1.1(b),
crypto-asset licensees must maintain all records of transactions in such form or manner that individual transactions can be reconstructed swiftly and the records can associate the transactions to a natural person.Added: January 2020AML-6.1.1B
Crypto-asset licensees must maintain information obtained through enhanced customer due diligence (refer CRA-7.1.3 of Module CRA), including information relating to the identification of the relevant customers, the public keys (or equivalent identifiers), addresses or accounts involved (or equivalent identifiers), the nature and date of transaction and the amount transferred.Added: January 2020AML-6.1.1C
Crypto-asset licensees relying solely on the public information available on the blockchain or other type of distributed ledger underlying theaccepted crypto-asset for record keeping in not sufficient for compliance with AML-6.1.1 and AML-6.1.1A. The information available on the blockchain or other type of distributed ledger may enable to trace transactions back to a wallet, though may not readily link the wallet address to the name of the customer and the beneficial owner.Crypto-asset licensees must ensure that additional information necessary to associate the wallet address to a natural person is maintained.Added: January 2020Compliance Records
AML-6.1.2
Capital Market Licensees must retain copies of the reports produced for their annual compliance review, as specified in rule AML-3.3.1, for at least five years.Capital Market Licensees must also maintain for five years reports made to, or by, the MLRO made in accordance with sections AML-4.1 and AML-4.2, and records showing how these reports were dealt with and what action, if any, was taken as a consequence of those reports.Amended: January 2022
Added: October 2010AML-6.1.3
When required to deliver the original copy of a record concerning any transaction, or a document pertaining thereto before the expiry of the prescribed period, the
Capital Market Licensees shall observe the following:(a) They shall maintain a complete copy of the delivered record or documents until the end of the period prescribed for maintaining the original records or documents.(b) They shall maintain a record of the delivered documents.Amended: January 2022
Added: October 2010Training Records
AML-6.1.4
Capital Market Licensees must maintain for at least five years, records showing the dates when AML/CFT training was given, the nature of the training, and the names of the staff that received the training.Amended: January 2022
Added: October 2010Access
AML-6.1.5
All records required to be kept under this section must be made available for prompt and swift access by the
Relevant Authorities or other authorisedPersons .October 2010AML-7 AML-7 General Requirements in Relation to Securities
AML-7.1 AML-7.1 General Requirements in Respect of Substantial Shareholding
AML-7.1.1
Any
Person whose ownership alone or his ownership together with that of his minor children, or any other accounts under his disposal, or the ownership of any of his associate or affiliate companies amounts to 5% or more of any listedSecurity of a joint stock company, must notify the licensed exchange forthwith, which must in turn notify the CBB of this fact and the CBB may declare the name of thePerson who owns such stake.Amended: July 2011
October 2010AML-7.1.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019
Amended: July 2011
October 2010AML-7.1.3
All persons must obtain CBB prior written approval to execute any order that will bring their ownership alone or their ownership together with their minor children, or the accounts standing under their disposal to 10% or more in any listed
security . Any further increase of 1% or more shall also be subject to CBB prior written approval.Amended: July 2011
October 2010AML-7.1.4
Without prejudice to any greater penalty prescribed under the Prevention and Prohibition of the Money Laundering Law or any other law, a breach of the provisions of section AML-7.1 shall result in the cancellation of the transaction, and the
Person in breach must bear all costs arising in this connection.Amended: July 2011
October 2010AML-7.2 AML-7.2 Requirements for Listing
AML-7.2.1
No local or foreign company shall be listed on a Licensed Exchange, unless their documents of incorporation are complete and satisfy all legal requirements applicable in the Kingdom, or in their countries of incorporation to the extent that these are comparable to this Module, as the case may be.
October 2010AML-7.3 AML-7.3 Requirements for Offering
AML-7.3.1
No
Security shall be offered for public subscription in the Kingdom unless the issuing company is duly incorporated under the laws of the Kingdom, or the laws of its country of incorporation, as the case may be, satisfying all terms and conditions governing the public offering ofSecurities in the Kingdom, and abiding by the conditions and requirements stipulated under the Commercial Companies Law and the Disclosure Standards in force in the Kingdom.No
Security issued to the bearer shall be offered, listed, traded or deposited on a Licensed Exchange.October 2010AML-7.4 AML-7.4 Requirements for Deposit
AML-7.4.1
A
Security shall not be accepted in the Central Depository System unless its authenticity is approved by the concerned shares registrar and the client shall provide the Central Depository System with any amendment or change which may occur in such particulars.October 2010AML-8 AML-8 Acceptance of Cash
AML-8.1 AML-8.1 Acceptance of Cash
AML-8.1.1
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-8.1.1A
A
Capital Market Licensee , whether at the commencement of or during a business relationship, must not accept cash from a customer, whether for investment purpose or as payment for services provided by theCapital Market Licensee except for payment of one time or non-recurring fees (symbolic fees) with a value not exceeding Two Hundred Bahraini Dinars for the services provided by theCapital Market Licensee such as account opening fees, fees for providing statements, fees for printing documents and certificates of various types and such other services.Amended: January 2022
Added: January 2020AML-9 AML-9 NCCT Measures and Terrorist Financing
AML-9.1 AML-9.1 Special Measures for Non-Cooperative Countries or Territories ('NCCTs')
AML-9.1.1
Capital Market Licensees must give special attention to any dealings they may have with entities orPersons domiciled in countries or territories which are:(a) Identified by the FATF as being 'non-cooperative'; or(b) Notified toCapital Market Licensees from time-to-time by the CBB.Amended: January 2022
Added: October 2010AML-9.1.2
Whenever transactions with such parties have no apparent economic or visible lawful purpose, their background and purpose must be re-examined and the findings documented. If suspicions remain about the transaction, these must be reported to the
Relevant Authorities in accordance with section AML-4.2.October 2010AML-9.1.3
Capital Market Licensees must apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries where such measures are called for by the FATF. The type of enhanced due diligence measures applied must be effective and proportionate to the risks.Amended: January 2022
Added: July 2016AML-9.1.4
With regard to jurisdictions identified as NCCTs or those which in the opinion of the CBB, do not have adequate AML/CFT systems, the CBB reserves the right to:
(a) Refuse the establishment of subsidiaries or branches or representative offices of financial institutions from such jurisdictions;(b) Limit business relationships or financial transactions with such jurisdictions or persons in those jurisdictions;(c) Prohibit financial institutions from relying on third parties located in such jurisdictions to conduct elements of the CDD process;(d) Require financial institutions to review and amend, or if necessary terminate, correspondent relationships with financial institutions in such jurisdictions;(e) Require increased supervisory examination and/or external audit requirements for branches and subsidiaries of financial institutions based in such jurisdictions; or(f) Require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in such jurisdictions.Amended: January 2018
Added: July 2016AML-9.2 AML-9.2 Terrorist Financing
AML-9.2.1AA
Capital Market Licensees must implement and comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing.Capital Market Licensees must freeze, without delay, the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity either (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267(1999) and its successor resolutions as well as Resolution 2178(2014) or (ii) designated as pursuant to Resolution 1373(2001).Amended: January 2022
Amended: October 2019
Added: April 2017AML-9.2.1
Capital Market Licensees must comply in full with the provisions of the UN Security Council Anti-Terrorism Resolution No. 1373 of 2001 ('UNSCR 1373').Amended: January 2022
Added: October 2010AML-9.2.2
[This Paragraph was deleted in January 2018].
Deleted: January 2018
October 2010AML-9.2.3
A copy of UNSCR 1373 is included in Part B of Volume 6 (Capital Markets), under 'Supplementary Information' on the CBB Website.
October 2010AML-9.2.4
Capital Market Licensees must report to the CBB details of:(a) Funds or other financial assets or economic resources held with them which may be the subject of Article 1, Paragraphs (c) and (d) of UNSCR 1373;(b) All claims, whether actual or contingent, which theCapital Market Licensee has onPersons and entities which may be the subject of Article 1, Paragraphs (c) and (d) of UNSCR 1373; and(c) All assets frozen or actions taken in compliance with the prohibition requirements of the relevant UNSCRs, including attempted transactions.Amended: January 2023
Amended: January 2022
Added: October 2010AML-9.2.5
For the purposes of rule AML-9.2.4, 'funds or other financial resources' includes (but is not limited to) shares in any undertaking owned or controlled by the
Persons and entities referred to in Article 1, Paragraphs (c) and (d) of UNSCR 1373, and any associated dividends received by theCapital Market Licensees .Amended: January 2022
Added: October 2010AML-9.2.6
All reports or notifications under this section must be made to the CBB's Compliance Directorate.
October 2010AML-9.2.7
See section AML-4.3 for the Compliance Directorate's contact details.
October 2010AML-9.3 AML-9.3 Designated Persons and Entities
AML-9.3.1
Without prejudice to the general duty of all
Capital Market Licensees to exercise the utmost care when dealing withPersons or entities who might come under Article 1, Paragraphs (c) and (d) of UNSCR 1373,Capital Market Licensees must not deal with anyPersons or entities designated by the CBB as potentially linked to terrorist activity.Amended: January 2022
Added: October 2010AML-9.3.2
The CBB from time-to-time issues to
Capital Market Licensees lists of designatedPersons and entities believed linked to terrorism.Capital Market Licensees are required to verify that they have no dealings with these designatedPersons and entities, and report back their findings to the CBB. Names designated by the CBB includePersons and entities designated by the United Nations, under UN Security Council Resolution 1267 ('UNSCR 1267').Amended: January 2022
Added: October 2010AML-9.3.3
Capital Market Licensees must report to theRelevant Authorities , using the procedures contained in section AML-4.2, details of any accounts or other dealings with designatedPersons and entities, and comply with any subsequent directions issued by theRelevant Authorities .Amended: January 2022
Added: October 2010AML-10 AML-10 Enforcement Measures
AML-10.1 AML-10.1 Regulatory Penalties
AML-10.1.1
Without prejudice to any other penalty imposed by the CBB Law, the AML Law No. 4 or the Penal Code of the Kingdom of Bahrain, failure by a
Capital Market Licensees to comply with this Module or any direction given hereunder shall result in the levying by the CBB, without need of a court order and at the CBB's discretion, of a fine of up to BD20,000.Amended: January 2022
Added: October 2010AML-10.1.2
Module MIE provides further information on the CBB's general approach to enforcement and the criteria taken into account prior to imposing such fines (see section MIE-3.1). Other enforcement measures may also be applied by the CBB in response to a failure by a
Capital Market Licensees to comply with this Module; these other measures are also set out in Module MIE.Amended: January 2022
Added: October 2010AML-10.1.3
The CBB will endeavour to assist
Capital Market Licensees to interpret and apply the requirements of this Module.Capital Market Licensees may seek clarification on any issue by contacting the Compliance Directorate (see section AML-4.3 for contact details).Amended: January 2022
Added: October 2010AML-10.1.4
Without prejudice to the CBB's general powers under the law, the CBB may amend, clarify or issue further directions on any provision of this Module from time-to-time, by notice to its
Capital Market Licensees .Amended: January 2022
Added: October 2010AML-11 AML-11 AML/CFT Guidance and Best Practice
AML-11.1 AML-11.1 Guidance Provided by International Bodies
FATF Recommendations
AML-11.1.1
The Recommendations (see www.fatf-gafi.org) together with their associated interpretative notes and best practices papers issued by the Financial Action Task Force (FATF), provide the basic framework for combating
Money Laundering activities and the financing of terrorism.Amended: July 2016
October 2010AML-11.1.2
The
Relevant Authorities in Bahrain believe that the principles established by these Recommendations should be followed byCapital Market Licensees in all material respects, as representing best practice and prudence in this area.Amended: January 2022
Amended: July 2016
Added: October 2010Other Website References Relevant to AML/CFT
AML-11.1.3
The following lists a selection of other websites relevant to AML/CFT:
(a) The Middle East North Africa Financial Action Task Force: www.menafatf.org;(b) The Egmont Group: www.egmontgroup.org;(c) The United Nations: www.un.org/terrorism;(d) The UN Counter-Terrorism Committee: www.un.org/Docs/sc/committees/1373/;(e) The UN list of designated individuals: www.un.org/Docs/sc/committees/1267/1267ListEng.htm;(f) The Wolfsberg Group: www.wolfsberg-principles.com; and(g) The Association of Certified Anti-Money Laundering Specialists: www.acams.org.October 2010AML-12 AML-12 Fraud
AML-12.1 AML-12.1 General Requirements for the Detection and Prevention of Fraud
AML-12.1.1
Capital Market Licensees must ensure that they allocate appropriate resources and have in place systems and controls to deter, detect, and record instances of fraud or attempted fraud.Amended: January 2022
Added: October 2010AML-12.1.2
Fraud may arise from internal sources originating from changes or weaknesses to processes, products and internal systems and controls. Fraud can also arise from external sources, for instance through false invoicing or advance fee frauds. Further guidance — and occasional investor alerts — can be found on the CBB's website (www.cbb.gov.bh).
October 2010AML-12.1.3
Any actual or attempted fraud incident (however small) must be reported to the appropriate authorities (including the CBB) and followed up. Monitoring systems must be designed to measure fraud patterns that might reveal a series of related fraud incidents.
October 2010AML-12.1.4
Capital Market Licensees must ensure that aPerson of sufficient seniority is given overall responsibility for the prevention, detection and remedying of fraud within the organisation.Amended: January 2022
Added: October 2010AML-12.1.5
Capital Market Licensees must ensure the effective segregation of functions and responsibilities between different individuals and departments, such that the possibility of financial crime is reduced and that no single individual is able to initiate, process and control a transaction.Amended: January 2022
Added: October 2010AML-12.1.6
Capital Market Licensees must provide regular training to their management and staff, to make them aware of potential fraud risks.Amended: January 2022
Added: October 2010TC — Training and Competency
TC-A Introduction TC-A Introduction
TC-A.1 TC-A.1 Purpose
Executive Summary
TC-A.1.1
Module TC provides Rules and Guidance to
capital market licensees to ensure satisfactory levels of competence, in terms of an individual’s knowledge, skills, experience and professional qualifications.Capital market licensees are required to demonstrate thatapproved persons including individuals undertakingcontrolled functions are sufficiently competent, and are able to undertake their respective roles and responsibilities.Capital market licensees must maintain the competence to provide regulated services. Individuals occupying controlled functions as outlined in respective Modules of Volume 6, must, therefore, meet minimum levels of training and experience related to their functions.Added: January 2022TC-A.1.2
Capital market licensees andapproved persons should observe high standards of integrity and fair dealing, and be honest and straightforward in their dealings withclients .Capital market licensees should maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.Added: January 2022TC-A.1.3
The CBB’s Licensing Conditions require a
capital market licensee’s staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of thecapital market licensee in a sound and prudent manner. This condition requires thatcapital market licensees must ensure their employees meet any training and competency requirements specified by the CBB. Theapproved persons requirements, specified in Module MAE, Module CSD, Module MIR and Module CRA, sets forth the ‘fit and proper’ requirements in relation to competence, experience and expertise required byapproved persons ; this Chapter specifies various factors that the CBB takes into account when reaching such decision regarding approval of such persons to act asapproved persons by CBB.Added: January 2022Legal Basis
TC-A.1.4
This Module contains the CBB’s Directive (as amended from time to time) relating to training and competency and is issued under the powers available to the CBB under Articles 38 and 65(b) of the Central Bank of Bahrain and Financial Institutions Law 2006 (‘CBB Law’). The Directive in this Module is applicable to all
capital market licensees .Added: January 2022TC-A.1.5
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2022TC-A.2 TC-A.2 Module History
Evolution of the Module
TC-A.2.1
This Module was first issued in August 2021. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Added: January 2022TC-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes TC-B Scope of Application TC-B Scope of Application
TC-B.1 TC-B.1 Scope
TC-B.1.1
This Module applies to all
capital market licensees in the Kingdom of Bahrain. It covers the training and competency requirements forapproved persons (See Chapter TC-1).Added: January 2022TC-B.1.2
In the case of an overseas licensee or entity undertaking regulated business activities within the framework of CBB Rulebook Volume-6, the applicability of this Module is restricted to its Bahrain operations.
Added: January 2022TC-B.1.3
Persons authorised by the CBB as
approved persons prior to the issuance of Module TC need not reapply for authorisation.Added: January 2022TC-B.1.4
The requirements of this Module apply to
approved persons in connection with thecapital market licensee’s regulated services, or under a contract of service.Added: January 2022TC-B.1.5
In the case of outsourcing arrangements, the
capital market licensee should refer to the competency requirements, outlined in Appendix TC-1 forapproved persons , for assessing the suitability of the outsourcing provider.Added: January 2022TC-B.1.6
Capital market licensees must satisfy the CBB that individuals undertaking acontrolled function position for it or on its behalf are suitable and competent to carry out the tasks assigned to that position.Added: January 2022TC-B.1.7
In implementing this Module,
capital market licensees must ensure that individuals appointed/recruited to performcontrolled functions :(a) Hold suitable qualifications and experience appropriate to the nature of the business;(b) Remain competent for the work they do; and(c) Are appropriately supervised.Added: January 2022TC-1 Requirements for Controlled Functions TC-1 Requirements for Controlled Functions
TC-1.1 TC-1.1 Controlled Functions
TC-1.1.1
Individuals occupying
controlled functions in acapital market licensee must be qualified and suitably experienced for their specific roles and responsibilities. The approved persons are:(a) Board Member/Director;(b) Chief Executive or General Manager and their Deputies;(c) Chief Financial Officer and/or Head of Finance;(d) Chief Risk Officer/ Head of Risk Management;(e) Compliance Officer;(f) Chief Information Officer/Chief Technology Officer or Head of Information Technology;(g) Heads of Other Functions (as specified in respective Modules);(h) Money Laundering Reporting Officer (MLRO);(i) Registered Representative; and(j) Chief Information Security Officer (CISO).Added: January 2022TC-1.1.2
Paragraph TC-1.1.1 specifies the
controlled functions that are common to all categories ofcapital market licensees under Volume 6.Controlled functions specific to each category ofcapital market licensee is specified in MAE, CSD, MIR, and CRA Modules. It is the responsibility of thecapital market licensee to refer to the respective Module to ascertain whether a particular position is considered acontrolled function or not.Added: January 2022TC-1.1.3
A
capital market licensee must take reasonable steps to ensure that individuals holdingcontrolled functions are sufficiently knowledgeable about their respective fields of work to be able to guide and supervise operations that fall under their responsibilities. Competence must be assessed on the basis of experience and relevant qualifications described in Appendix TC-1 as a minimum. However, the CBB reserves the right to impose a higher level of competence as it deems necessary.Added: January 2022TC-1.1.4
The CBB may, at its sole discretion, grant exemption to an individual from the requirements relevant to experience and/or qualifications stipulated in Appendix TC-1, on the basis of an application made to it, provided that the
licensee is able to demonstrate, to the satisfaction of the CBB, that the individual under consideration possesses qualification and/or experience comparable to those prescribed in Appendix TC-1. The CBB shall review and consider all relevant facts and circumstances in granting the exemption.Added: January 2022TC-1.1.5
While granting the exemption referred to in Paragraph TC-1.1.4, the CBB may impose other conditions as deemed appropriate. Conditional exemptions so granted are specific to the facts and circumstances set forth in the application and in the context of the individual’s engagement with the
capital market licensee , and therefore, non-transferable. The individual may be required to meet the qualification and experience requirements if there are changes to his/her role.Added: January 2022Board Member/Director
TC-1.1.6
Board members/Directors collectively are responsible for the business performance and strategy of the
capital market licensee , as outlined in more details in Section HC-10.1Added: January 2022TC-1.1.7
When taken as a whole, the board of directors of a
capital market licensee must be able to demonstrate that it has the necessary skills and expertise, as outlined in Paragraph HC-10.1.Added: January 2022Chief Executive or General Manager and their Deputies
TC-1.1.8
The
chief executive officer orgeneral manager and their deputies (as appropriate) are responsible for the executive management and performance of thelicensee within the framework or delegated authorities set by the Board. This is outlined in more details in Paragraph HC-10.6.Added: January 2022Chief Financial Officer/Head of Finance
TC-1.1.9
The Chief Financial Officer/Head of Finance is responsible for directing the
capital market licensee’s finance function, including ensuring that the relevant accounting treatment is applied to all of the activities of thecapital market licensee in a timely manner.Added: January 2022Chief Risk Officer/ Head of Risk Management
TC-1.1.10
The Chief Risk Officer/ Head of Risk Management is responsible for the management and control of all risk exposures arising from the activities of the
capital market licensee .Added: January 2022Compliance Officer
TC-1.1.11
An employee of appropriate standing must be designated by the
capital market licensee for the position of compliance officer. The duties of the compliance officer, who must have Bahraini residency, include:(a) Having responsibility for oversight of thecapital market licensee’s compliance with the requirements of the CBB and other applicable laws and regulations;(b) Raising awareness and providing training for thecapital market licensee’s staff on compliance issues; and(c) Reporting to thecapital market licensee’s Board in respect of that responsibility.Added: January 2022Chief Information Officer/Chief Technology Officer or Head of Information Technology
TC-1.1.12
The Chief Information Officer/Chief Technology Officer/ or Head of Information Technology is responsible for establishing and implementing the overall information technology strategy, overseeing the day-to-day information technology operations, and managing the information technology risks of the financial institution.
Added: January 2022Heads of Other Functions
TC-1.1.13
Heads of other functions are responsible for tracking specific functional performance goals in addition to identifying, managing and reporting critical organisational issues upstream. Certain functions require dealing directly withclients while others do not. Both categories of functions, however, require specific qualifications and experience to meet the objectives as well as compliance requirements of thecapital market licensee .Added: January 2022TC-1.1.14
For purposes of Paragraph TC-1.1.13,
capital market licensees should contact the CBB if they require further clarification on whether a specific position falls under the definition of “Heads of other Functions”.Added: January 2022Money Laundering Reporting Officer (MLRO)
Registered Representative
TC-1.1.16
The registered representative is responsible for solicitation or handling of accounts or orders for the purchase or sale of securities, or other similar instruments for the accounts of customers of his employer.
Added: January 2022Chief Information Security Officer
TC-1.1.17
The Chief Information Security Officer (“CISO”) is responsible and accountable for the effective management of cyber security risks. A CISO is responsible for overseeing and implementing the
capital market licensees cyber security program and enforce its cyber security policy.Added: January 2022TC-1.2 TC-1.2 Continuous Professional Development Training (“CPD”)
CPD
TC-1.2.1
All individuals holding
controlled functions in acapital market licensee must undergo a minimum of 15 hours ofCPD per annum.Added: January 2022TC-1.2.2
Where a
capital market licensee , based on the nature, scale and complexity of its business, determines that anapproved person , by not undergoing the CPD programme for the specificcontrolled function , on an annual basis, shall not impair the functioning of thecapital market licensee , it should approach the CBB with the rationale and request for an exemption from the CPD requirement stipulated in Paragraph TC-1.2.1. The CBB may consider exempting theapproved person undertaking the specificcontrolled function from the CPD requirement altogether or may recommend that theapproved person undergoes the CPD programme at such other frequency (biennial, triennial etc.) as deemed necessary.Added: January 2022TC-1.2.3
The
capital market licensee must ensure that an individual appointed as anapproved person is supervised and undergoes appropriate review and assessment of his/her performance.Added: January 2022TC-1.2.4
The level of supervision should be proportionate to the level of competence demonstrated by the
approved person . Supervision shall include, as appropriate:(a) Reviewing and assessing work on a regular basis; and(b) Coaching and assessing performance against the competencies necessary for the role.Added: January 2022TC-1.2.5
Supervisors of
approved persons should have technical knowledge and relevant skills, e.g. coaching and assessment skills.Added: January 2022TC-2 General Requirements TC-2 General Requirements
TC-2.1 TC-2.1 Recruitment and Assessing Competency
Recruitment and Appointment
TC-2.1.1
If a
capital market licensee recruits or promotes an individual to undertake acontrolled function , it must satisfy itself, where appropriate, of such individual’s relevant qualifications and experience.Added: January 2022TC-2.1.2
For purposes of Paragraph TC-2.1.1,
capital market licensees must file Form 3 (Approved Persons) with the CBB and obtain the express written approval of the CBB for that person to occupy the desired position. In its application, thecapital market licensee must demonstrate to the CBB that full consideration has been given to the qualifications and core competencies forcontrolled functions as per Appendix TC-1 (See Article 65(b) of the CBB Law).Added: January 2022TC-2.1.3
While assessing the competency for the position of Board of Director, a
capital market licensee should give due weightage to relevant experience and expertise of the applicant. The applicant should demonstrate clear understanding of the licensee’s business and his/her ability to exercise strategic oversight over the business operations. In case where an applicant does not fulfil the educational qualification and minimum experience requirement stipulated in Appendix TC-1 (Board member/Director), thecapital market licensee may still consider the applicant for appointment provided the applicant demonstrates:(a) clear understanding of the licensee’s business operations;(b) ability to provide objective views to the Board on issues of strategy, business performance, risk management, financial control and other matters which has a bearing on the licensee’s performance;(c) leadership ability or has previously operated in a leadership position.Added: January 2022TC-2.1.4
For the purposes of Paragraph TC-2.1.3 above, where an applicant does not fulfil the educational and minimum experience requirements, the CBB may, at its sole discretion, waive some or all the educational and minimum experience requirements, should it determine that the applicant (board member) demonstrates qualitative attributes which fulfils the core competency requirements as stipulated in Appendix TC-1 and his/her appointment shall contribute effectively to the decision making and governance process of the
licensee .Added: January 2022TC-2.1.5
Capital market licensees should refer to their respective Module (MAE, CSD, MIR and CRA) providing detailed requirements on the appointment of individuals occupyingcontrolled functions (approved persons).Added: January 2022TC-2.1.6
A
capital market licensee proposing to recruit an individual has to satisfy itself of his/her relevant qualifications and experience. Thecapital market licensee should:(a) Take into account the knowledge and skills required for the role, in addition to the nature and the level of complexity of thecontrolled function ; and(b) Take reasonable steps to obtain sufficient information about the individual’s background, experience, training and qualifications.Added: January 2022Assessing Competency
TC-2.1.7
Capital market licensees must not allow an individual to undertake or supervise acontrolled function unless that individual has been assessed by thecapital market licensee as competent in accordance with this Section.Added: January 2022TC-2.1.8
In determining an individual’s competency,
capital market licensees may assess if the person is fit and proper in accordance with the requirements stipulated for authorisation ofapproved persons in MAE, CSD, MIR and CRA Modules.Added: January 2022TC-2.1.9
Capital market licensees must assess individuals as competent when they have demonstrated the ability to apply the knowledge and skills required to perform a specificcontrolled function .Added: January 2022TC-2.1.10
The assessment of competence shall depend on the nature and the level of complexity of the
controlled function . Such assessment of competence of new personnel may take into account the fact that an individual has been previously assessed as competent in a similarcontrolled function .Added: January 2022TC-2.1.11
If a
capital market licensee assesses an individual as competent in accordance with TC-2.1.9 to perform a specificcontrolled function , it does not necessarily mean that the individual is competent to undertake othercontrolled functions .Added: January 2022TC-2.1.12
A
capital market licensee should use methods of assessment that are appropriate to thecontrolled function and to the individual’s role.Added: January 2022TC-2.2 TC-2.2 Training and Maintaining Competence
TC-2.2.1
A
capital market licensee must annually determine the training needs of individuals undertakingcontrolled functions . It must develop a training plan to address these needs and ensure that training is planned, appropriately structured and evaluated.Added: January 2022TC-2.2.2
The assessment and training plan described in Paragraph TC-2.2.1 should be aimed at ensuring that the relevant
approved person maintains competence in thecontrolled function . An individual can develop skills and gain experience in a variety of ways. These could include on-the-job learning, individual study, and other methods. In almost every situation, and for most individuals, it is likely that competence will be developed most effectively by a mixture of training methods.Added: January 2022TC-2.2.3
The training plan of
capital market licensees must include a programme for continuous professional development training (“CPD”) for theircontrolled function .Added: January 2022TC-2.2.4
Approved persons may choose to fulfil their CPD requirements by attending courses, workshops, conferences and seminars at local or foreign training institutions.
Added: January 2022TC-2.2.5
The annual training required under Paragraph TC-2.2.1 must also include the quarterly updates, if any, to the CBB Volume 6 (Capital Markets) Rulebook, in areas relevant to each
controlled function .Added: January 2022TC-2.2.6
Capital market licensees should maintain appropriate training records for each individual.Licensees should note how the relevant training relates to and supports the individual’s role. Training records may be reviewed during supervisory visits to assess thecapital market licensee’s systems and to review how thelicensee ensures that its staff are competent and remain competent for their roles.Added: January 2022Maintaining Competence
TC-2.2.7
A
capital market licensee must make appropriate arrangements to ensure thatapproved persons maintain competence.Added: January 2022TC-2.2.8
A
capital market licensee should ensure that maintaining competence for anapproved person takes into account:(a) Application of technical knowledge;(b) Application and development of skills; and(c) Appropriate knowledge of relevant market changes and changes to products, legislation and regulation.Added: January 2022TC-2.2.9
A capital market licensee may utilise the CPD schemes of relevant professional bodies to demonstrate compliance with TC-2.2.1. See Appendix TC-2 for a list of CBB-recognised professional bodies. The list of professional bodies set out in Appendix TC-2 is not exhaustive. Capital market licensees may conduct CPD training through other professional bodies provided such other professional bodies are of good repute, have an established track record in training related to regulated activities, the trainers are professionally qualified, and the training program is interactive (self-study without assessment or evaluation is not acceptable). In-house training, seminars, conferences, further qualifications, product presentations, computer-based training and one-to-one tuition may also be considered to demonstrate compliance with TC-2.2.1.
Added: January 2022TC-2.3 TC-2.3 Transitional Period
TC-2.3.1
The requirements of Module TC for
capital market licensees are effective from the date of issuance of this Module.Added: January 2022TC-2.3.2
New applications for
approved persons are subject to the requirements of this Module (See Paragraph TC-B.1.3).Added: January 2022TC-2.3.3
Approved persons occupyingcontrolled functions at the time this Module is issued will be grandfathered and not subject to the requirements of this Module, with the exception of CPD requirements in Paragraph TC-1.2.1. However, should theapproved person move to anothercontrolled function , Paragraph TC-2.3.4 will apply.Added: January 2022TC-2.3.4
In instances, where an
approved person in onecapital market licensee moves to anothercapital market licensee and occupies the same position, the CBB will exercise its discretion on whether to grandfather such approved person from the required qualifications and competencies outlined in Appendix TC-1 into the newcapital market licensee . The grandfathering criteria used by the CBB will include a comparison of the scope and size of both positions. This will also apply in instances where an approved person in onecapital market licensee moves from one department to another within the samecapital market licensee .Added: January 2022TC-2.4 TC-2.4 Record Keeping
TC-2.4.1
A
capital market licensee must make and retain updated digital and/or manual records of:(a) The annual training plan for eachcontrolled function ;(b) Materials used to conduct in-house training courses;(c) List of participants attending such in-house training courses;(d) Results of evaluations conducted at the end of such training courses.(e) The criteria applied in assessing competence;(f) How and when the competence decision was arrived at; and(g) Record of CPD hours undertaken by eachapproved person .Added: January 2022TC-2.4.2
For purposes of Paragraph TC-2.4.1, the record keeping requirements apply to both current employees as well as to employees following termination of their services or employment with the
capital market licensee , for a minimum period of five years.Added: January 2022TC-2.4.3
A
capital market licensee must maintain records of its recruitment and appointment procedures forapproved persons for a minimum period of five years following termination of their services or employment with thecapital market licensee . Such procedures should be designed to adequately take into account proof of the candidates’ knowledge and skills and their previous activities and training.Added: January 2022TC-2.4.4
For purposes of Paragraph TC-2.4.3, the recruitment record keeping procedure should include, but is not limited to, the following:
(a) Results of the initial screening;(b) Results of any employment tests;(c) Results and details of any interviews conducted;(d) Background and references checks; and(e) Details of any professional qualifications.Added: January 2022Appendices
Appendix TC-1 Qualifications and Core Competencies of Controlled Functions
Role Core Competencies How can competence be demonstrated? Board Member/Director Board members should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Sufficient experience to demonstrate sound business decision-making;(c) Good understanding of the industry; and(d) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) An academic degree from a university at bachelor level or higher and/or a relevant professional qualification.; and(b) A minimum experience of 5 years in business and/or government/quasi government of which at least 3 years at a senior management levelOR(c) A minimum experience of 7 years in businessChief Executive or General Manager and their Deputies The Chief Executive or General Manager and their Deputies should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of the licensee’s business and the wider industry;(c) Good understanding of the industry’s regulatory environment;(d) Relevant experience and qualifications associated with such executive responsibilities; and(e) The necessary technical, professional and leadership capabilities which qualify him for this position.Competence could be demonstrated by: (a) A minimum experience of 5 years at senior management level in the financial industry and/or capital market industry; and(b) An academic degree from a university at bachelors level or higher preferably MBA, Masters in finance/accounting/economics/management or in any other subject related to financial services industry and/or capital market industry in addition to professional qualification(s) related to financial services industry and/or capital market industry.Chief Financial Officer/ Head of Finance The Chief Financial Officer/ Head of Finance should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Good understanding of business and the wider industry;(c) Strong understanding of the industry’s regulatory environment;(d) The relevant experience and qualifications to fulfil his responsibilities; and(e) Strong knowledge and understanding of international accounting standards and how they are applied in a business context, including IFRS.The Chief Financial Officer/ Head of Finance should have: (a) A minimum of 5 years of practical experience in a finance function; and(b) An academic degree from a university at bachelor level related to banking/finance/accounting/economics or higher in addition to professional qualification(s) related to banking/finance/accounting/economics and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Affiliate, The Association of Chartered Certified Accountants (ACCA);(ii) Certified Public Accountant (CPA), The Association of International Certified Professional Accountants (AICPA);(iii) AAOIFI’s Certified Islamic Professional Accountant (CIPA);(iv) Associate Chartered Accountant (ACA), Institute of Chartered Accountants in England and Wales (ICAEW); and/or(v) Chartered Financial Analyst (CFA).Heads of other Functions Heads of other Functions should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of the licensee’s business and the broader industry;(c) Good understanding of the industry’s regulatory environment; and(d) The relevant experience and qualifications to fulfil their responsibilities.Competence could be demonstrated by: (a) A minimum of 5 years of practical experience in a comparable function within the financial services and/or capital market industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) and other relevant certification(s) specific to this role. Such certifications may, depending on the function being fulfilled, include but are not limited to:(i) Chartered Financial Analyst (CFA);(ii) Certificate in Securities and Financial Derivatives;(iii) Certificate in Investment Management;(iv) Professional Certification in Accounting;(v) Equivalent certificates or qualifications from the BIBF or other institutions; and/or(vi) Securities Markets Regulation CertificationCompliance Officer A Compliance Officer should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) An appropriate level of experience and standing to demonstrate suitable independence from other functions within the capital market Licensee;(c) Good understanding of the industry; and(d) Strong understanding of the industry’s applicable regulatory requirements.Competence could be demonstrated by: (a) A minimum of 2 years of relevant experience in compliance in the financial services and capital markets industry, financial institution or financial market regulator;(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to accounting or finance and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) International Diploma in Governance, Risk and Compliance, International Compliance Association (ICA); and(ii) International Advanced Certificate in Compliance and Financial Crime offered by the International Compliance Association; and/or(iii) Any other relevant professional certification deemed suitable by the CBB.Money Laundering Reporting Officer (MLRO) The MLRO should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Understand the business of the licensee and how the Anti Money Laundering framework applies to it;(c) Demonstrate independence from the staff of the licensee who deal directly with customer; and(d) A thorough knowledge of the financial industry and be familiar with relevant FATF and applicable domestic regulatory requirements.Competency could be demonstrated by: (a) An MLRO should have a minimum experience of 2 years in anti-money laundering or anti-money laundering related role in the financial services industry.(b) The MLRO should have:(i) A degree from a university at bachelor level or higher or a relevant professional qualification; and(ii) Relevant certification(s) specific to this role. Such certifications may include but are not limited to:1) Certified Anti-Money Laundering Specialist Examination, Association of Certified Anti-Money Laundering (ACAMS);2) Diploma in Anti-Money Laundering, International Compliance Association (ICA);3) International Diploma in Financial Crime Prevention, International Compliance Association (ICA); and/or4) International Advanced Certificate in Compliance and Financial Crime, International Compliance Association (ICA).Registered Representative The Registered Representative should have thorough understanding of: (a) Regulatory framework and applicable rules and regulations;(b) Ethical framework, duties towards customers and employer, disclosure of conflict of interest, preservation of confidential information, best trade execution practice and separation of customer and proprietary trading.(c) Understanding of exchange trading and clearing process including order types and limits, margin requirements, execution strategies and trading cost.Competency could be demonstrated by: (a) A Registered Representative should have a minimum experience of 2 years in financial markets. Relevant experience in capital markets is preferred; and(b) A degree from a university at bachelor level or higher or a relevant professional qualification in accounting, finance, banking, or management. Such certification may include but are not limited to:(i) General Securities Representatives Qualification (Series -7) by Bahrain Institute of Banking and Finance; or(ii) Securities Market Regulation Certification Program (Series-79) by Bahrain Institute of Banking and Finance; or(iii) Trading and Financial Market Analysis by Bahrain Institute of Banking and Finance; or(iv) Certificate in Securities; or(v) Certificate in Securities and Financial Derivatives; or(vi) Certificate in investment management; or(vii) Chartered Financial Analyst (CFA); or(viii) Any other equivalent certification acceptable to the CBBChief Risk Officer/Head of Risk Management The Head of Risk Management should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) An appropriate level of experience and standing to demonstrate suitable independence from other functions within the licensee;(c) Good understanding of the licensee’s business and the wider industry;(d) Good understanding of the industry’s regulatory environment; and(e) The relevant experience and qualifications to fulfill his responsibilities.Competency could be demonstrated by: (a) A minimum of 5 years of practical experience in a financial institution of which at least 2 years in a risk management position within the financial market industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to risk management, accounting, finance or other relevant certification(s) specific to this role. Such certifications may include but are not limited to:(i) Associate in Risk Management (ARM), The Institutes;(ii) International Diploma in Risk Management, Institute of Risk Management qualifications (IRM);(iii) Financial Risk Manager (FRM), Global Association of Risk Professionals (GARP); and/or(iv) Professional Risk Manager (PRM), Professional Risk Managers’ International Association (PRIMA).(v) Any other equivalent certification acceptable to the CBBThe Chief Information Officer/Chief Technology Officer/ or Head of Information Technology The Chief Information Officer/Chief Technology Officer/ or Head of Information Technology should have: (a) A clear understanding of the management information system used by the licensee;(b) Ability to:(i) effectively manage, monitor and control all aspects of the information system operations;(ii) Ability to critically assess information system related issues and be able to come up with appropriate solutions to tackle the problem.
Strong technical and architectural skills along with knowledge of system analysis and design.Competency could be demonstrated by: (a) A minimum experience of 5 years in the field of information technology.;(b) An academic degree from a university at bachelor level or higher in information technology;, and(c) Relevant professional qualification/certification information technology specific to this role.Chief Information Security Office (CISO) The Chief Information Security Officer should have: (a) A clear understanding of the responsibility and accountability for effectively managing cyber-security threats;(b) Ability to implement and oversee a cyber-security program and enforce a cyber security policy; and(c) The relevant experience and qualification to fulfill his responsibilites.Competency could be demonstrated by: (a) A minimum experience of 5 years in the field of information technology and cyber security.;(b) An academic degree from a university at bachelor level or higher or relevant professional qualification in information technology, information security, cyber security or related field and(c) Relevant certification related to cyber/information security, data privacy or other relevant certification(s) specific to this role.Added: January 2022Appendix TC-2 Appendix TC-2 Professional Bodies and Qualifications
Relevant Professional Bodies
(a) Any accredited university(b) Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)(c) American Institute of Certified Public Accountants (AICPA), USA(d) Association Cambiste Internationale (ACI), France(e) Association of Certified Anti-Money Laundering Specialists (ACAMS), USA(f) Association of Chartered Certified Accountants (ACCA), UK(g) Bahrain Institute of Banking and Finance (BIBF), Bahrain(h) Chartered Financial Analyst (CFA) Institute , USA(i) Chartered Alternative Investment Analyst Association (CAIA)(j) Chartered Institute for Securities & Investment (CISI)(k) Institute of Chartered Accountants in England and Wales (ICAEW), UK(l) Institute of Internal Auditors (IIA);(m) Institute of Risk Management qualifications (IRM)(n) Insurance Institute of India (I.I.I), India(o) International Compliance Association (ICA), UK(p) Life Office Management Association (LOMA), USA(q) Society of Actuaries, USA(r) The Chartered Insurance Institute (CII), UK(s) The Institute and Faculty of Actuaries, UK(t) The Institutes, USAAdded: January 2022Ongoing Obligations
LIR — Listing Requirements
(to be issued)
DIS — Disclosure Requirements
(to be issued)
High Level Standards
HC — High-Level Controls (Corporate Governance)
HC-A HC-A Introduction
HC-A.1 HC-A.1 Purpose
Executive Summary
HC-A.1.1
This Module presents requirements that have to be met by
listed companies andCMSPs with respect to:(a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code; and(b) Best practice corporate governance principles in line with the recommendations of IOSCO and OECD.July 2011HC-A.1.2
This Module supplements various provisions relating to the Corporate Governance Code and other provisions contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ('Commercial Companies Law').
July 2011HC-A.1.3
The purpose of this Module is to establish best practice corporate principles in Bahrain, and to provide protection for shareholders and other company stakeholders through compliance with those principles.
July 2011HC-A.1.4
Whilst this Module follows best practice, it is nevertheless considered as the minimum standard to be applied.
July 2011The Corporate Governance Code and the Commercial Companies Law
HC-A.1.5
The Corporate Governance Code supplements the Commercial Companies Law. It does not replace the Commercial Companies Law but is intended to further that Law's objectives and to provide help in understanding, complying with, monitoring performance under, and ensuring fair disclosure under that Law.
July 2011HC-A.1.6
The Commercial Companies Law already mandates many corporate governance best practices. Examples are found in the Law's rules for board and shareholder meetings, its statement of directors' and officers' fiduciary duties, and its rules for company shares. The Corporate Governance Code refers to many of those principles, but it does not repeat or incorporate them all. Thus
CMSPs should be familiar with both the Commercial Companies Law and the Corporate Governance Code.July 2011HC-A.1.7
The Corporate Governance Code goes beyond the Commercial Companies Law's requirements on several points. Examples are the Code's recommendations that the Chairman of the board and the
CEO should not be the same person, and that at least 50% of the board of directors should benon-Executive Directors .July 2011Application of Module HC (Corporate Governance) to those CBB Licensees subject to Module HC in other CBB Rulebook Volumes
HC-A.1.8
The CBB, through the issuance of this Module HC (Corporate Governance) and the updating of Module HC in the other Volumes (1–4) have harmonized the requirements, so that there are only limited differences between the respective Modules as required by the regulated activity.
July 2011HC-A.1.9
For the purpose of this Module, the only significant difference between Module HC (Corporate Governance) and Module HC in other Volumes can be found in Chapter 7 (Communication between Board and Shareholders) so as to ensure the protection of shareholders, particularly among
listed companies .July 2011Structure of this Module
HC-A.1.10
This Module follows the structure of the Corporate Governance Code and each Chapter deals with one of the nine fundamental Principles of corporate governance. The numbered directives included in the Code are Rules for purposes of this Module. Recommendations under the Code have been included either as Rules or Guidance, depending on their applicability to
listed companies andCMSPs .July 2011HC-A.1.11
The Module also incorporates other high-level controls and policies that apply in particular to
listed companies andCMSPs .July 2011The Comply or Explain Principle
HC-A.1.12
This Module is issued as a Directive (as amended from time-to-time) in accordance with Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). In common with other Rulebook Modules, this Module contains a mixture of Rules and Guidance (see Module UG-1.2 for detailed explanation of Rules and Guidance). All Rulebook content that is categorised as a Rule must be complied with by those to whom the content is addressed. Other parts of this Module are Guidance; nonetheless every
listed company andCMSP to whom Module HC applies, is expected to comply with recommendations made as Guidance in Module HC or explain its non-compliance by way of an annual report to its shareholders and to the CBB (see Chapter HC-8).Amended: January 2012
July 2011Monitoring and Enforcement of Module HC
HC-A.1.13
Disclosure and transparency are underlying principles of Module HC. Disclosure is crucial to allow outside monitoring to function effectively. This Module looks to a combined monitoring system relying on the board, the
listed company andCMSP's shareholders and the CBB.July 2011HC-A.1.14
The
listed company andCMSP's board should support entrepreneurship but also ensure effective monitoring and control. Thus it is important that the board be composed of bothExecutive Directors andnon-Executive Directors , including fully independentnon-Executive Directors . It is the board's responsibility to see to the accuracy and completeness of thelisted company andCMSP's corporate governance guidelines and compliance with Module HC. Failure to comply with this Module is subject to enforcement measures as outlined in the respective Licensing or Listing Module.July 2011HC-A.1.15
Given the reliance of Module HC on a flexible "comply or explain" approach in respect of guidance, shareholders, and in particular larger shareholders and institutional investors, should play an important role in evaluating a
listed company orCMSP's corporate governance and should give weight to all relevant factors that come to their attention. Shareholders should carefully consider explanations given for deviations from Module HC and make reasoned judgments in each case. They should be prepared to enter into a dialogue with the board if they do not accept thelisted company orCMSP's position, bearing in mind in particular the size and complexity of thelisted company orCMSP and the nature of the risks and challenges it faces.July 2011Legal Basis
HC-A.1.16
This Module contains the CBB's Directive (as amended from time-to-time) relating to corporate governance and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to
listed companies andCMSPs (including, where relevant, approved persons or those undertaking controlled functions).July 2011HC-A.1.17
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
July 2011Effective Date
HC-A.1.18
This Module is effective on 1st September 2011. All
listed companies andCMSP's to which the Module HC applies should be in full compliance by the financial year end 2011. At everylisted company andCMSP's annual shareholder meeting held after 1st January 2011, corporate governance should be an item on the agenda for information and any questions from shareholders regarding thelisted company orCMSP's governance. Where possible, thelisted companies andCMSP should also have corporate governance guidelines in place at that time and should have a "comply or explain" report as described in paragraph HC-A.1.10.July 2011HC-A.2 HC-A.2 Module History
HC-A.2.1
This Module was first issued in July 2011 by the CBB, following the issuance of the Corporate Governance Code by the Ministry of Industry and Commerce in March 2010. This Module was drafted to be in line with the new Code and to include requirements that are considered best practice in the capital market. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.
July 2011HC-A.2.2
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes HC-A.1.12 01/2012 Changed Guidance to Rule. HC-B.3.2, HC-8.3.8 and HC-10.3.2 01/2012 Corrected typos. HC-1.2.2 01/2012 Amended to be consistent with other Volumes of the CBB Rulebook. HC-1.2.5 and HC-1.5.3 01/2012 Clarified that the chairman of the board may delegate specific duties dealt with in these Paragraphs. HC-1.4.5 01/2012 Changed Rule to Guidance to be aligned with other Volumes of the CBB Rulebook. HC-1.4.6A 01/2012 Added new Paragraph clarifying that the chairman must not be the same person as the CEO. HC-1.8.6 01/2012 Changed Rule to Guidance to be aligned with other Volumes of the CBB Rulebook. HC-2.2.3 01/2012 Aligned text with other Volumes of the CBB Rulebook. HC-3.2.1, HC-3.3.2, HC-4.2.2, HC-5.2.1. HC-5.3.3, HC-5.6.6, HC-6.2.1 and HC-7.5.1 01/2012 Amended to be in line with other Volumes of the CBB Rulebook. HC-8.3 01/2012 Clarification made on disclosure in annual report. HC-10.2.1A 01/2012 Added guidance for CMSPs. HC-10.8.2 01/2012 Corrected cross reference. Appendix A 01/2012 Amended criteria for audit committee member. HC-2.2.1 and HC-2.4.1 04/2013 Clarified scope of application for Rules. HC-7.4.5 04/2013 Clarified Guidance on election of board members. Appendices A, B and C 04/2013 Clarified requirement for written report on performance evaluation for various Board committees. HC-10.5.3 04/2020 Added a new Paragraph on KPIs compliance with AML/CFT requirements. HC-1.3.5 10/2022 Amended Paragraph on representation of women and men on Board of Directors. HC-8.3.3 10/2022 Added a new Sub-paragraph on the percentage of women and men on the Board. HC-B HC-B Scope of Application
HC-B.1 HC-B.1 Listed Companies and Capital Market Service Providers (CMSPs)
HC-B.1.1
The content of this Module, with the exception of Chapter 10 to
listed companies . Chapter 10 of this Module applies to allCMSPs who are notlisted companies .July 2011HC-B.1.2
Listed companies must comply with the rules stated in this module and comply to explain their adherence to the guidance.CMSPs must comply to explain their adherence to Chapter 10 of this Module.July 2011Overseas Capital Market Service Providers
HC-B.1.3
Overseas
listed companies andCMSPs must satisfy the CBB that equivalent arrangements are in place at the group entity level, and that these arrangements provide for effective corporate governance over activities conducted in Bahrain.July 2011HC-B.1.4
In assessing compliance with paragraph HC-B.1.3, the CBB will take into account regulatory requirements applicable to the group entity, as well as the governance and systems and controls arrangements actually implemented by the group entity and applied to the Bahrain operation.
July 2011HC-B.2 HC-B.2 Branches and Subsidiaries
HC-B.2.1
Bahraini
listed companies andCMSPs must ensure that, as a minimum, the same or equivalent provisions of this Module apply to their branches, whether located inside or outside the Kingdom of Bahrain, such that these are also subject to effective corporate governance. In instances where local jurisdictional requirements are more stringent than those applicable in this Module, the local requirements are to be applied.July 2011HC-B.2.2
Bahraini
listed companies andCMSPs must satisfy the CBB that activities conducted in subsidiaries and other group members are subject to the same or equivalent arrangements for ensuring effective corporate governance over their activities.July 2011HC-B.2.3
Where a listed companies or
CMSP is unable to satisfy the CBB that itssubsidiaries and other group members are subject to the same or equivalent arrangements, the CBB will assess the potential impact of risks — both financial and reputational — arising from inadequate corporate governance in the rest of the group of which it is a member. In such instances, the CBB may impose restrictions on dealings between thelisted company ,CMSP and other group members. Where weaknesses in controls are assessed by the CBB to pose a major threat to the stability of thelisted company orCMSP , then its authorisation may be called into question.July 2011HC-B.3 HC-B.3 Definitions
HC-B.3.1
Approved Person(s) —
Approved Persons are individuals holding certain specified positions inCBB licensees ; they must be approved by the CBB prior to taking on those positions and must demonstrate that they are fit and proper. This list of positions subject to the CBB'sApproved Persons regime vary according to the CBB license category, but generally cover directors and senior management, as well as certain other positions.Approved Persons requirements are specified in the relevant Rulebook Volume for the license category in question.July 2011HC-B.3.2
"Capital Market Service Provider" (hereinafter referred to as
CMSP ) means any person licensed, or authorised or involved in providing any activity specified under Article 80 of the CBB Law and includesSROs and their members. For the purposes of this Module,listed companies are not included in the definitions ofCMSP companies; they are subject to different requirements under this Module (CMSPs only have to comply with Chapter 10 whilelisted companies must comply with all Chapters other than Chapter 10).Amended: January 2012
July 2011HC-B.3.3
"CEO" means a company's Chief Executive Officer. The board shall determine that person's actual title, which may be "
CEO ", "Chief Executive Officer", "President", "Managing Director", or another title.July 2011HC-B.3.4
"Company" for the purpose of this Module means
listed company .July 2011HC-B.3.5
"Connected Party Transactions" means a transaction between the
CMSP and a 'connected person'.July 2011HC-B.3.6
"Connected Person(s)" means:
(a) The individual's spouse and his/her son, adopted son, stepson, daughter, adopted daughter, step-daughter, father, step-father, mother, step-mother, brother, step-brother, sister or step-sister, under his/her guardianship or control; or(b) A firm or corporation in which the individual or any persons mentioned in (a) has control of not less than 10% of the voting power in the firm or corporation, whether such control is exercised individually or jointly; or(c) Connected persons in relation to a firm or corporation means another firm or corporation in which the first-mentioned firm or corporation has control of not less than 10% of the voting power in that other firm or corporation.July 2011HC-B.3.7
"Controlled Functions" means a function carried on by an
approved person in relation to alisted company orCMSP that requires prior CBB approval, as per the relevant licensing Module.July 2011HC-B.3.8
"Controlling Shareholder" means any shareholder who holds 10% or more of the share capital or is able to exercise (or control the exercise of) 10% or more of the voting power in the company.
July 2011HC-B.3.9
"Executive Director" means a director who is an officer or employee, or is otherwise involved in the day-to-day management of either:
(a) The company;(b) Another company which is a controlling shareholder of the company;(c) Another company of which the company is a controlling shareholder; or(d) Another company which is controlled by a controlling shareholder.In this definition, the word "company" which is a controller of the
listed company orCMSP excludes sovereigns such as government owned entities and government ministries.July 2011HC-B.3.10
"Independent Director" means a director whom the board has specifically determined has no material relationship which could affect his independence of judgment, taking into account all known facts. The board should consider that, although a particular director meets the formal requirements, he may not be independent owing to specific circumstances of the person or the company, ownership structure of the company, or for any other reason. The board's determination should be a good faith finding after diligent review and full discussion.
Formal Requirements — "Independent director" means a director of the company who, or whose family shareholders either separately or together with him or each other, does not have any material pecuniary relationships or transactions with the company (not counting director's remuneration for this purpose) and in particular who, during the one year preceding the time in question met all the following conditions:(a) Was not an employee of the company;(b) Did not:(i) Make to, or receive from, the company payments of more than BD31,000 or equivalent (not counting director's remuneration);(ii) Own more than a 5% share or other ownership interest, directly or indirectly, in an entity that made to or received from the company payments of more than such amount;(iii) Act as a general partner, manager, director, or officer of a partnership or company that made to or received from the company payments of more than such amount;(iv) Have any significant contractual or business relationship with the company which could be seen to materially interfere with the person's capacity to act in an independent manner.(c) Did not own directly or indirectly (including for this purpose ownership by any family member or related person) 5% or more of the shares of any type or class of the company;(d) Was not engaged directly or indirectly as an auditor or professional adviser for the company; and(e) Was not an associate of a director or a member of senior management of the company.Volumes 1 and 2 CBB licensees should consult the guidance issued under the definition of "Independent Director" in the Glossary of Volumes 1 and 2 with respect to the CBB's interpretation of the above formal requirements.
July 2011HC-B.3.11
"
Listed Company " means a company who should have been admitted for trading of the official list of a licensed exchange in Bahrain.July 2011HC-B.3.12
"Non-Executive Director" means any director who is not an
Executive Director .July 2011HC-B.3.13
"Overseas Capital Market Service Providers" means a
CMSP that is incorporated and operates in an overseas jurisdiction and operates via branch presence, or such other equivalent license, in the Kingdom of Bahrain.July 2011HC-B.3.14
"Remuneration" means all types of compensation including but not limited to salary, fee and non-cash benefits such as grants of stocks, stock options or pension benefits.
July 2011HC-B.3.15
"Securities" means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:
(a)Shares in companies and otherSecurities equivalent to shares in companies or other entities, and depositary receipts in respect of shares;(b)Bonds or other forms of debt, including depositary receipts in respect of suchSecurities ;(c)Warrants ;(d)Units, rights or interests (however described) of theparticipants in a collective investment scheme;(e)Options, futures and any other derivative contracts relating to commodities that must be settled in cash, or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);(f)Options, futures and any other derivative contract relating to commodities that can be physically settled;(g) Units of Real Estate Investment Trusts (REITs);(h) Index tracking products including Islamic indices;(i) Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such instrument on an exchange; and(j) IslamicSecurities , being those financial instruments that are Shari'a compliant.July 2011HC-B.3.16
"Senior Manager/Management" refers to individuals occupying the position of CEO or head of function.
July 2011HC-B.3.17
"SRO" means a self-regulatory organisation being a
Licensed Exchange, Licensed Market Operator , or aLicensed Clearing House under Module MAE and/or Module CSD respectively.July 2011HC-B.3.18
"Subsidiary" means a company or other enterprise controlled by another company or enterprise (the parent or the holding company).
July 2011HC-1 HC-1 The Board
HC-1.1 HC-1.1 Principle
HC-1.1.1
With the exception of single person companies, all companies must have a Board of Directors ('the board'). All companies shall be headed by an effective, collegial and informed board.
July 2011HC-1.2 HC-1.2 Role and Responsibilities
HC-1.2.1
All directors must understand the board's role and responsibilities under the Commercial Companies Law or any other laws or regulations that may govern their responsibilities from time-to-time.
In particular, all directors must understand:
(a) The board's role as distinct from the role of the shareholders (who elect the board and whose interests the board serves); and the role of officers (whom the board appoints and oversees); and(b) The board's fiduciary duties of care and loyalty to the company and the shareholders (see section HC-2.1).July 2011HC-1.2.2
The board's role and responsibilities include but are not limited to:
(a) The overall business performance and strategy and business plan for the company;(b) Causing financial statements to be prepared which accurately disclose the company's financial position;(c) Monitoring management performance;(d) Convening and preparing the agenda for shareholder meetings;(e) Monitoring conflicts of interest and preventing abusive related party transactions;(f) Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning;(g) Aligning key executive and boardremuneration with the longer term interests of the company and its shareholders;(h) Ensuring a formal and trans-group board nomination and election process;(i) Ensuring the integrity of the corporation's accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards;(j) Assuring equitable treatment of shareholders including minority shareholders;(k) Ensuring compliance with the relevant rules and requirements relating to the issuing and offering ofsecurities ;(l) The ongoing obligations in respect of the listing requirements, including but not limited to issues relating to disclosure, dissemination of price sensitive information and other communication, and the prevention of market abuse and insider trading;(m) Compliance with the company's founding documentation, including but not limited to its Memorandum and Articles of Association and other relevant by-laws and resolutions;(n) Ensure that any loans provided by the company are approved by the board in accordance with their authority for such items, including the respective limits and other relevant terms; and(o) Providing approval in respect of the relevant fees, charges, subscriptions, commissions and other business and administrative sanctions, where relevant.Amended: January 2012
July 2011HC-1.2.3
The directors are responsible both individually and collectively for performing these responsibilities. Although the board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place.
July 2011HC-1.2.4
The precise functions reserved for the board and those delegated to management and committees will vary, dependent upon the business of the institution, its size and ownership structure. However, as a minimum, the board must establish and maintain a statement of its responsibilities for:
(a) The adoption and annual review of strategy;(b) The adoption and review of management structure and responsibilities;(c) The adoption and review of the systems and controls framework; and(d) Monitoring the implementation of strategy by management.July 2011HC-1.2.5
When a new director is inducted, the chairman of the board, or the company's legal counsel or compliance officer, or other individual delegated by the chairman of the board, should review the board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC (see also rule HC-4.5.1).
Amended: January 2012
July 2011HC-1.2.6
The company must 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.July 2011HC-1.2.7
The board is responsible for ensuring that the systems and controls framework, including the board structure and organisational structure of the company, is appropriate for its business and associated risks (see HC-1.2.4 c). The board must ensure that collectively it has sufficient expertise to identify, understand and measure the significant risks to which the company is exposed in its business activities.
July 2011HC-1.2.8
The board must adopt a formal board charter or other statement specifying matters which are reserved to it, which must include but need not be limited to the specific requirements and responsibilities of directors.
July 2011HC-1.3 HC-1.3 Decision-Making Process
HC-1.3.1
The board must be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.
July 2011HC-1.3.2
The chairman must take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.
July 2011HC-1.3.3
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.
July 2011HC-1.3.4
The chairman is responsible for the leadership of the board, and for the efficient functioning of the board. The chairman must 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 must receive the same board information. At the same time, directors have a legal duty to inform themselves and they must ensure that they receive adequate and timely information and must study it carefully.
July 2011HC-1.3.5
The board must have no more than 15 members and no less than 5 members; taking into consideration the representation of women and men in the formation of the board. The board must 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 must recommend changes in board size to the shareholders when a needed change requires amendment of the company’s Memorandum of Association. The company must disclose statistics regarding the composition of the board disaggregated by women and men in the company’s annual report.
Amended: October 2022
July 2011HC-1.3.6
Potential
non-Executive Directors should be made aware of their duties before their nomination, particularly as to the time commitment required. The Nominating Committee should regularly review the time commitment required from eachnon-Executive Director and should require eachnon-Executive Director to inform the Committee before he accepts any board appointments to another company. Without prejudice to other HC Volumes in the CBB Rulebook, one person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist (which includes having an interest in companies in the same line of business), and the board should not propose the election or re-election of any director who does.July 2011HC-1.3.7
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.
Meetings per year 75% Attendance requirement 4 3 5 4 6 5 7 5 8 6 9 7 10 8 July 2011HC-1.3.8
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).
July 2011HC-1.3.9
To meet its obligations under Rule HC-1.3.3 above, the full board should meet once every quarter to address the board's responsibilities for management oversight and performance monitoring. Furthermore, board rules should require members to step down if they are not actively participating in board meetings. Board members are reminded that non attendance at board meetings does not absolve them of their responsibilities as directors. It is important that each individual director should allocate adequate time and effort to discharge his responsibilities. All Directors are expected to contribute actively to the work of the board in order to discharge their responsibilities and should make every effort to attend board meetings where major issues are to be discussed. Companies are encouraged to amend their Articles of Association to provide for telephonic and videoconference meetings. Participation in board meetings by means of video or telephone conferencing is regarded as attendance and may be recorded as such.
July 2011HC-1.3.10
In the event that a board member has not attended at least 75% of board meetings in any given financial year, the company 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 (where relevant) of the CBB Law, is appropriate. Unless there are exceptional circumstances, it is likely that the CBB will take disciplinary action.
July 2011HC-1.4 HC-1.4 Independence of Judgment
HC-1.4.1
Every director must bring independent judgment to bear in decision making. No individual or group of directors must dominate the board's decision-making and no one individual should have unfettered powers of decision.
July 2011HC-1.4.2
Executive Directors must provide the board with all relevant business and financial information within their cognizance, and must recognise that their role as a director is different from their role as an officer.July 2011HC-1.4.3
Non-executive directors must be fully independent of management and must constructively scrutinise and challenge management, including the management performance ofexecutive directors .July 2011HC-1.4.4
At least half of a company's board should be
non-executive directors and at least three of those persons should beindependent directors . (Note the exception for controlled companies in paragraph HC-1.5.2.)July 2011HC-1.4.5
The chairman of the board should be be an
independent director and in any event must not be the same person as theCEO , so that there will be an appropriate balance of power and greater capacity of the board for independent decision-making.Amended: January 2012
July 2011HC-1.4.6
The board should review the independence of each director at least annually in light of interests disclosed by them. Each
independent director shall provide the board with all necessary and updated information for this purpose.July 2011HC-1.4.6A
The Chairman and/or Deputy Chairman must not be the same person as the Chief Executive Officer.
Added: January 2012HC-1.4.7
Where there is the potential for conflict of interest, or there is a need for impartiality, the board must assign a sufficient number of independent board members capable of exercising independent judgment.
July 2011HC-1.4.8
To facilitate free and open communication among
independent directors , each board meeting should be preceded or followed with a session at which onlyindependent directors are present, except as may otherwise be determined by theindependent directors themselves.July 2011HC-1.4.9
All decisions made by directors must be accurately recorded, including the details of any reservations or objections by any individual or group of directors, for both board meetings as well as any committee formed by the board.
July 2011HC-1.5 HC-1.5 Representation of All Shareholders
HC-1.5.1
Each director must consider himself as representing all shareholders and must act accordingly. The board must avoid having representatives of specific groups or interests within its membership and must not allow itself to become a battleground of vested interests. If the company has a
controlling shareholder (or a controlling group of shareholders acting in concert), the latter must recognise its or their specific responsibility to the other shareholders, which is direct and is separate from that of the board of directors.July 2011HC-1.5.2
In companies with a
controlling shareholder , at least one-third of the board must beindependent directors . Minority shareholders must generally look toindependent directors' diligent regard for their interests, in preference to seeking specific representation on the board.July 2011HC-1.5.3
In companies with a
controlling shareholder , both controlling and non-controlling shareholders should be aware ofcontrolling shareholders' specific responsibilities regarding their duty of loyalty to the company and conflicts of interest (see chapter HC-2) and also of rights that minority shareholders may have to elect specific directors under the Commercial Companies Law or if the company has adopted cumulative voting for directors. The chairman of the board or other individual delegated by the chairman of the board should take the lead in explaining this with the help of company lawyers.Amended: January 2012
July 2011HC-1.6 HC-1.6 Directors' Access to Independent Advice
HC-1.6.1
The board must ensure that individual directors have access to independent legal or other professional advice at the company's expense whenever they judge this necessary to discharge their responsibilities as directors and this must be in accordance with the company's policy approved by the company's board.
July 2011HC-1.6.2
Individual directors must also have access to the company's corporate secretary, who must have responsibility for reporting to the board on board procedures. Both the appointment and removal of the corporate secretary must be a matter for the board as a whole, not for the
CEO or any other officer.July 2011HC-1.6.3
Whenever a director has serious concerns which cannot be resolved concerning the running of the company or a proposed action, he should consider seeking independent advice and should ensure that the concerns are recorded in the board minutes and that any dissent from a board action is noted or delivered in writing
July 2011HC-1.6.4
Upon resignation, a
non-executive director should provide a written statement to the chairman, for circulation to the board, if he has any concerns such as those in paragraph HC-1.6.3.July 2011HC-1.7 HC-1.7 Directors' Communication with Management
HC-1.7.1
While management members other than those that are executive directors, are not entitled by right to attend board meetings, the board must 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.July 2011HC-1.7.2
Non-executive directors should have free access to the company's management beyond that provided in board meetings. Such access should be through the Chairman of the Audit Committee orCEO . The board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.July 2011HC-1.8 HC-1.8 Committees of the Board
HC-1.8.1
The board must create specialised committees when and as such committees are needed. In addition to the Audit, Remuneration and Nominating Committees described elsewhere in this Module, these may include an Executive Committee to review and make recommendations to the whole board on company actions, a Risk Committee, to identify and minimize specific risks, or an Insider or Prohibition of Market Abuse Committee to manage and provide oversight of the trading of directors and general compliance with market regulations, as well as any other committee required by the CBB or other regulations (e.g. TMA Module).
July 2011HC-1.8.2
The board or a committee may invite non-directors to participate in, but not vote at committee meetings so that the committee may gain the benefit of their advice and expertise in financial or other areas.
July 2011HC-1.8.3
Committees must act only within their mandates and therefore the board must not allow any committee to dominate or effectively replace the whole board in its decision-making responsibility.
July 2011HC-1.8.4
Committees may be combined provided that no conflict of interest might arise between the duties of such committees.
July 2011HC-1.8.5
Every committee must have a formal written charter similar in form to the model charters which are set forth in Appendices A, B and C of this Module for the Audit, Nominating and Remuneration Committees.
July 2011HC-1.8.6
The board should establish a corporate governance committee of at least three independent members which should be responsible for developing and recommending changes from time-to-time in the company's corporate governance policy framework.
Amended: January 2012
July 2011HC-1.8.7
The terms of reference, number of meetings and attendance at such meetings should be disclosed in respect of each committee in the annual report of the company.
July 2011HC-1.9 HC-1.9 Evaluation of the Board and Each Committee
HC-1.9.1
At least annually the board must conduct an evaluation of its performance and the performance of each committee and each individual director.
July 2011HC-1.9.2
The evaluation process must include:
(a) Assessing how the board operates, especially in light of chapter HC-1;(b) Evaluating the performance of each committee in light of its specific purposes and responsibilities, which shall include review of the self-evaluations undertaken by each committee;(c) Reviewing each director's work, his attendance at board and committee meetings, and his constructive involvement in discussions and decision-making; and(d) Reviewing the board's current composition against its desired composition with a view toward maintaining an appropriate balance of skills and experience and a view toward planned and progressive refreshing of the board.July 2011HC-1.9.3
While the evaluation is a responsibility of the entire board, it should be organised and assisted by an internal board committee and, when appropriate, with the help of external experts.
July 2011HC-1.9.4
The board should report to the shareholders, at each annual shareholder meeting, that evaluations have been done.
July 2011HC-2 HC-2 Directors and Officers Loyalty
HC-2.1 HC-2.1 Principle
HC-2.1.1
The directors and officers must have full loyalty to the company.
July 2011HC-2.2 HC-2.2 Personal Accountability
HC-2.2.1
Each member of the board must understand that under the Commercial Companies Law he is personally accountable to the company and the shareholders if he violates his legal duty of loyalty to the company, and that he can be personally sued by the company or the shareholders for such violations.
Amended: April 2013
July 2011HC-2.2.2
The duty of loyalty includes a duty not to use property of the company for his personal needs as though it was his own property, not to disclose confidential information of the company or use it for his personal profit, not to take business opportunities of the company for himself, not to compete in business with the company, and to serve the company's interest in any transactions with the company in which he has a personal interest.
July 2011HC-2.2.3
For purposes of Rule HC-2.2.2, a director or officer should be considered to have a "personal interest" in a transaction with the company if:
(a) He himself; or(b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or(c) Another company of which he is a director or controlling shareholder,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.)
Amended: January 2012
July 2011HC-2.3 HC-2.3 Avoidance of Conflicts of Interest
HC-2.3.1
Each director and officer must make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the company.
July 2011HC-2.3.2
The board must establish and disseminate to its members and management, policies and procedures for the identification, reporting, disclosure, prevention, or strict limitation of potential conflicts of interest. It is senior management's responsibility to implement these policies. In particular, the CBB requires that any decisions to enter into transactions, under which approved persons would have conflicts of interest that are material, should be formally and unanimously approved by the full board. Best practice would dictate that an approved person must:
(a) Not enter into competition with the company;(b) Not demand or accept substantial gifts from the company for himself or connected persons;(c) Not misuse the company's assets;(d) Not use the company's privileged information or take advantage of business opportunities to which it is entitled, for himself or his associates; and(e) Absent themselves from any discussions or decision-making that involves a subject where they are incapable of providing objective advice, or which involves a subject or (proposed) transaction where a conflict of interest exists.July 2011HC-2.4 HC-2.4 Disclosure of Conflicts of Interest
HC-2.4.1
Each director and officer must inform the entire board in writing of conflicts of interest immediately as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Commercial Companies Law. This disclosure must include all material facts in the case of a contract or transaction involving the director or officer. The directors and officers must 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 and that such information must be disclosed in the annual report.
Amended: April 2013
July 2011HC-2.4.2
The board should establish formal procedures for:
(a) Periodic disclosure and updating of information by each director and officer on his actual and potential conflicts of interest; and(b) Advance approval by disinterested directors or shareholders of all transactions in which a company director or officer has a personal interest. The board should require such advance approval in every case.July 2011HC-2.4.3
Any conflict transaction or contract that could be considered material should be tabled at a shareholders meeting for approval.
July 2011HC-2.5 HC-2.5 Disclosure of Conflicts of Interest to Shareholders
HC-2.5.1
The company must disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and must disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Commercial Companies Law.
July 2011HC-3 HC-3 Audit Committee and Financial Statements Certification
HC-3.1 HC-3.1 Principle
HC-3.1.1
The board must have rigorous controls for financial audit and reporting, internal controls, risk management and compliance with the law.
July 2011HC-3.2 HC-3.2 Audit Committee
HC-3.2.1
The board must establish an audit committee of at least three directors, of which the majority must be independent including the Chairman. The committee must:
(a) Review the company's accounting and financial practices;(b) Review the integrity of the company's financial and internal controls and financial statements;(c) Review the company's compliance with legal requirements;(d) Recommend the appointment, compensation and oversight of the company's external auditor;(e) Recommend the appointment of the internal auditor;(f) Approve the internal audit policies and any reports and plans made in terms of such policies;(g) [This Subparagraph was deleted in January 2012];(h) Unless otherwise designated to another committee, review the risk management policies and procedures as well as any reports and plans issued in terms of such policies;(i) Unless otherwise designated to another committee, review the key persons dealing and market abuse policies and procedures as well as any reports and plans issued in terms of such policies;(j) Review and approve the interim financial statements where the board is unable to hold a meeting for this purpose;(k) Recommend any additional or specific audit required in respect of the financial statements and other specific part of the business; and(l) Recommend and table for discussion a management letter to be provided to the external auditor.Amended: January 2012
July 2011HC-3.2.2
In its review of the systems and controls framework in Paragraph HC-3.2.1, the audit committee must:
(a) Make effective use of the work of external and internal auditors. The audit committee must ensure the integrity of the company's accounting and financial reporting systems through regular independent review (by internal and external audit). Audit findings must be used as an independent check on the information received from management about the company's operations and performance and the effectiveness of internal controls;(b) Make use of self-assessments, stress/scenario tests, and/or independent judgments made by external advisors. The board should appoint supporting committees, and engage senior management to assist the audit committee in the oversight of risk management; and(c) Ensure thatsenior management have put in place appropriate systems of control for the business of the company and the information needs of the board; in particular, there must be appropriate systems and functions for identifying as well as for monitoring risk, the financial position of the company, and compliance with applicable laws, regulations and best practice standards. The systems must produce information on a timely basis.July 2011HC-3.2.3
Companies should set up an internal audit function, which reports directly to the Audit Committee and administratively to the
CEO .July 2011HC-3.2.4
The
CEO must not be a member of the audit committeeJuly 2011HC-3.3 HC-3.3 Audit Committee Charter
HC-3.3.1
The audit committee must adopt a written charter which shall, at a minimum, state the duties outlined in rule HC-3.2.1 and the other matters included in Appendix A to this Module.
July 2011HC-3.3.2
A majority of the audit committee must have the financial literacy qualifications stated in Appendix A.
Amended: January 2012
July 2011HC-3.3.3
The board should adopt a "whistleblower" programme under which employees can confidentially raise concerns about possible improprieties in financial or legal matters. Under the programme, concerns may be communicated directly to any audit committee member or, alternatively, to an identified officer or employee who will report directly to the Audit Committee on this point.
July 2011HC-3.4 HC-3.4 CEO and CFO Certification of Financial Statements
HC-3.4.1
To encourage management accountability for the financial statements required by the directors, the company's
CEO and chief financial officer must state in writing to the audit committee and the board as a whole that the company's interim and annual financial statements as prepared in accordance with IAS and IFRS present a true and fair view, in all material respects (including providing adequate provisions), of the company's financial condition and results of operations in accordance with applicable accounting standards.July 2011HC-4 HC-4 Appointment, Training and Evaluation of the Board
HC-4.1 HC-4.1 Principle
HC-4.1.1
The company must have rigorous procedures for the appointment, training and evaluation of the board.
July 2011HC-4.2 HC-4.2 Nominating Committee
HC-4.2.1
The board must establish a Nominating Committee of at least three directors which must:
(a) Identify persons qualified to become members of the board of directors or Chief Executive Officer, Chief Financial Officer, Corporate Secretary and any other officers of the company considered appropriate by the board, with the exception of the appointment of the internal auditor which shall be the responsibility of the Audit Committee in accordance with rule HC-3.2.1 above;(b) Make recommendations to the whole board of directors, including recommendations of candidates for board membership (including renewals or reappointment) to be included by the board of directors on the agenda for the next annual shareholders meeting; and(c) Must review and make recommendations on board candidates proposed by those substantial shareholders eligible to propose a director to represent such shareholder on the board.July 2011HC-4.2.2
The committee must include only
independent directors or, alternatively, onlynon-executive directors of whom a majority must beindependent directors and the chairman must be anindependent director . This is consistent with international best practice and it recognises that the Nominating Committee must exercise judgment free from personal career conflicts of interest.Amended: January 2012
July 2011HC-4.2.3
The Nominating Committee should establish a reasonable timeframe to be included in its terms of reference sufficient for it to be able to perform its necessary due diligence in respect of the recommendations prior to such nominations being tabled at any shareholders meeting.
July 2011HC-4.3 HC-4.3 Nominating Committee Charter
HC-4.3.1
The Nominating Committee must adopt a formal written charter which must, at a minimum, state the duties outlined in rule HC-4.2.1 and paragraph HC-4.2.3 and the other matters included in Appendix B to this Module, as well as any relevant training and competency requirements required by regulatory authorities.
July 2011HC-4.4 HC-4.4 Board Nominations to Shareholders
HC-4.4.1
Each proposal by the board to the shareholders for election or re-election of a director must include:
(a) A recommendation from the board;(b) A summary of the advice of the Nominating Committee;(c) The term to be served, which may not exceed three years (but there need not be a limit on re-election for further terms);(d) Biographical details and professional qualifications;(e) In the case of anindependent director , a statement that the board has determined that the criteria ofindependent director has been met;(f) Any other directorships held;(g) Particulars of other positions which involve significant time commitments; and(h) Details of relationships between:(i) The candidate and the company (including any ownership therein); and(ii) The candidate and other directors of the company.July 2011HC-4.4.2
The chairman of the board should confirm to shareholders when proposing re-election of a director that, following a formal performance evaluation, the person's performance continues to be effective and continues to demonstrate commitment to the role. Any term beyond six years (e.g. two three-year terms) for a director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the board. Serving more than six years is relevant to the determination of a
non-executive director's independence.July 2011HC-4.5 HC-4.5 Induction and Training of Directors
HC-4.5.1
The chairman of the board must 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 must include meetings with
senior management , visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programmes, its internal and external auditors and legal counsel.July 2011HC-4.5.2
All continuing directors must be invited to attend orientation meetings and all directors must continually educate themselves as to the company's business and corporate governance.
July 2011HC-4.5.3
Management, in consultation with the chairman of the board, should hold programmes and presentations to directors with respect to the Commercial Companies Law, the company's Memorandum and Articles of Association, as well as the company's business and industry, which may include periodic attendance at conferences and management meetings. The Nominating Committee shall oversee directors' corporate governance educational activities.
July 2011HC-5 HC-5 Remuneration of Directors and Officers
HC-5.1 HC-5.1 Principle
HC-5.1.1
The company must remunerate directors and officers fairly and responsibly.
July 2011HC-5.2 HC-5.2 Remuneration Committee
HC-5.2.1
The board must establish a remuneration committee of at least three directors which must:
(a) Review the company'sremuneration policies for the board of directors and senior management (holdingcontrolled functions ), which must be approved by the shareholders and be consistent with the corporate values and strategy of the company;(b) Make recommendations regardingremuneration policies and amounts for specific persons to the whole board, taking account of totalremuneration including salaries, fees, expenses and employee benefits; and(c) Recommend board member remuneration based on their attendance and performance.Amended: January 2012
July 2011HC-5.2.2
Prior to any vote by the shareholders, the chairman of the board should ensure that full disclosure of all material facts has been made to the shareholders.
July 2011HC-5.2.3
The committee may be merged with the nominating committee.
July 2011HC-5.3 HC-5.3 Remuneration Committee Charter
HC-5.3.1
The committee must adopt a written charter which must, at a minimum, state the duties in Rule HC-5.2.1 and other matters in Appendix C of this Module.
July 2011HC-5.3.2
The committee should include only
independent directors or, alternatively, onlynon-executive directors of whom the majority areindependent directors and the chairman is anindependent director . This is consistent with international best practice and it recognises that the remuneration committee must exercise judgment free from personal career conflicts of interest.July 2011HC-5.3.3
[This Paragraph was deleted in January 2012].
Deleted: January 2012HC-5.4 HC-5.4 Standard for All Remuneration
HC-5.4.1
Remuneration of both directors and officers must be sufficient enough to attract, retain and motivate persons of the quality needed to run the company successfully, but the company must avoid paying more than is necessary for that purpose.July 2011HC-5.5 HC-5.5 Non-Executive Directors' Remuneration
HC-5.5.1
Remuneration ofnon-executive directors must not include performance-related elements such as grants of shares, share options or other deferred stock-related incentive schemes, bonuses, or pension benefits.July 2011HC-5.6 HC-5.6 Officers Remuneration
HC-5.6.1
Remuneration of officers must be structured so that a portion of the total is linked to the company and individual performance and aligns their interests with the interests of the shareholders.July 2011HC-5.6.2
Such rewards may include grants of shares, share options and other deferred stock-related incentive schemes, bonuses, and pension benefits which are not based on salary.
July 2011HC-5.6.3
If an officer is also a director, his
remuneration as an officer must take into account compensation received in his capacity as a director.July 2011HC-5.6.4
All share incentive plans must be approved by the shareholders.
July 2011HC-5.6.5
All performance-based incentives should be awarded under written objective performance standards which have been approved by the board and are designed to enhance shareholder and company value, and under which shares should not vest and options should not be exercisable within less than two years of the date of award of the incentive and include principles of deferred payment, claw back provisions and prevention of distribution during non-profit years, as well as other
remuneration principles issued by relevant industry supervisory bodies.July 2011HC-5.6.6
All policies for performance-based incentives should be approved by the shareholders, but the approval should be only of the plan itself, and not of the grant to specific individuals of benefits under the plan.
Amended: January 2012
July 2011HC-6 HC-6 Management Structure
HC-6.1 HC-6.1 Principle
HC-6.1.1
The board must establish a clear and efficient management structure.
July 2011HC-6.2 HC-6.2 Establishment of Management Structure
HC-6.2.1
The board must appoint officers whose authority must include management and operation of current activities of the company, reporting to and under the direction of the board. Unless otherwise exempted under the relevant licensing or listing Module, the officers must include at a minimum:
(a) ACEO ;(b) A chief financial officer;(c) A corporate secretary; and(d) An internal auditor;and must also include such other officers as the board considers appropriate, or as required by the relevant licensing or listing Module.
Amended: January 2012
July 2011HC-6.2.2
The board must ensure that the management structure caters for the following functions, where relevant:
(a) Anti-money laundering and combating financial crime;(b) Risk management; and(c) Shareholders and investor relations.July 2011HC-6.3 HC-6.3 Titles, Authorities, Duties and Reporting Responsibilities
HC-6.3.1
The board must adopt by-laws prescribing each senior officer's title, authorities, duties and internal reporting responsibilities. This must be done with the advice of the Nominating Committee and in consultation with the
CEO , to whom the other officers should normally report.July 2011HC-6.3.2
These provisions must include but should not be limited to the following:
(a) TheCEO must have authority to act generally in the company's name, representing the company's interests in concluding transactions on the company's behalf and giving instructions to other officers and company employees;(b) The chief financial officer must be responsible and accountable for:(i) The complete, timely, reliable and accurate preparation of the company's financial statements, in accordance with IAS and IFRS, and policies of the company (see also rule HC-3.4.1); and(ii) Presenting the board with a balanced and understandable assessment of the company's financial situation;(c) The corporate secretary's duties must include arranging, recording and following up on the actions, decisions and meetings of the board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose and shareholder and investor relations; and(d) The internal auditor's duties must include providing an independent and objective review of the efficiency of theCMSP's operations. This would include a review of the accuracy and reliability of the company's accounting records and financial reports, as well as a review of the adequacy and effectiveness of the company's risk management, control, and governance processes.July 2011HC-6.3.3
The board should also specify any limits which it wishes to set on the authority of the
CEO or other officers, such as monetary maximums for transactions which they may authorise without separate board approval.July 2011HC-6.3.4
The corporate secretary should be given general responsibility for reviewing the company'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.
July 2011HC-6.3.5
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 (including deputation while the CEO is unable to perform his functions). The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to theCEO .July 2011HC-7 HC-7 Communication between Board and Shareholders
HC-7.1 HC-7.1 Principle
HC-7.1.1
The company must communicate with shareholders, encourage their participation, and adhere to their rights.
July 2011HC-7.2 HC-7.2 Shareholders of the Same Type, Class and Series
HC-7.2.1
All shareholders of the same type, class and series must be treated equally.
July 2011HC-7.2.2
Within any type, series or class, all
shares must carry the same rights. All investors should be able to obtain information about the rights attached to all types, series or classes ofshares before they purchase. Any changes in voting rights must be subject to approval by those shareholders which are negatively affected.July 2011HC-7.2.3
Minority shareholders must be protected from abusive actions by, or in the interest of,
controlling shareholders acting either directly or indirectly, and must have effective means of redress.July 2011HC-7.2.4
The board and corporate secretary must encourage the attendance of shareholders at all shareholder meetings, in order for shareholders to exercise their right to vote at such meetings.
July 2011HC-7.2.5
Where shareholders are unable to attend, companies must make provision for such shareholder to vote by proxy, subject that such proxy is revocable and provides for two-way voting item by item (yes/no) and where proxies are provided to board members or senior management, that such proxy shall not exceed 5% of the eligible votes.
July 2011HC-7.2.6
Votes must be cast by custodians or nominees in a manner agreed upon with the beneficial owner of the
shares .July 2011HC-7.2.7
Impediments to cross border voting must be eliminated.
July 2011HC-7.2.8
Processes and procedures for general meetings must allow for equitable treatment of all
shareholders . Company procedures must not make it unduly difficult or expensive to cast votes.July 2011HC-7.3 HC-7.3 Shareholders' Rights
HC-7.3.1
The Corporate Governance framework of a company must protect and facilitate the exercise of shareholders' rights.
July 2011HC-7.3.2
Basic shareholders rights include but are not limited to:
(a) Secure methods of ownership registration;(b) The transfer of shares;(c) Obtaining relevant and material information on the corporation on a timely and regular basis;(d) Participating and voting in general shareholder meetings;(e) Electing and removing members of the board;(f) Sharing in the profits of the corporation;(g) Presentations by independent advisers; and(h) Participating in corporate events.July 2011HC-7.3.3
Shareholders must have the right to participate in, and to be sufficiently informed on decisions concerning fundamental corporate changes, such as:
(a) Amendments to the statutes, or articles of incorporation or similar governing documents of the company;(b) The authorization and approval of additional or new shares orsecurities ; and(c) Extraordinary transactions, including the transfer of all or substantially all assets that in effect result in the sale of the company, including but not limited to transactions falling under Module TMA.July 2011HC-7.4 HC-7.4 Conduct of Shareholders' Meetings
HC-7.4.1
The board must observe both the letter and the intent of the Commercial Companies Law's requirements for shareholder meetings. Among other things:
(a) Notices of meetings must be honest, accurate and not misleading. They must clearly state and, where necessary, explain the nature of the business of the meeting;(b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;(c) Notices of meetings must encourage shareholders to attend shareholder meetings, and if not possible, to participate by proxy and refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes," "no" or "abstain");(d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;(e) The board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;(f) In meetings where directors are to be elected or removed the board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;(g) The chairman of the meeting must encourage questions from shareholders, including questions regarding the company's corporate governance guidelines;(h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible, but not later than 30 days after the meeting;(i) Disclosure of all material facts must be made to the shareholders by the Chairman prior to any vote by the shareholders;(j) Disclosure must be made of the attendance of the board of directors at board meetings, as well as committee meetings, on an individual basis, including the outcome and any decisions taken at such meetings, together with any objections or reservations raised item by item;(k) As shareholder meetings are public meetings, the board and senior management must permit on request for members of the media to attend and report on shareholder meetings of the company; and(l) Any commercial material or notices to stakeholders shall also be provided to shareholders, particularly in relation to topics to be discussed at annual general meetings.July 2011HC-7.4.2
The company should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).
July 2011HC-7.4.3
The company should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.
July 2011HC-7.4.4
A company should maintain a company website. The company should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders meeting, and should post significant documents relating to meetings including the full text of notices and minutes. The company may also consider establishing an electronic means for shareholders' communications including appointment of proxies. For confidential information, the company should grant a controlled access to such information to its shareholders.
July 2011HC-7.4.5
In notices of meetings at which directors are to be elected or removed, the company should ensure that:
(a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and(b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the board.Amended: April 2013
July 2011HC-7.5 HC-7.5 Direct Shareholder Communication
HC-7.5.1
The chairman of the board (and other directors as appropriate) must maintain continuing personal contact with major shareholders to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the board as a whole. The chairman must discuss governance and strategy with major shareholders. Given the importance of market monitoring to enforce the "comply or explain" approach of this Module, the board should encourage investors, particularly institutional investors, to help in evaluating the company's corporate governance.
Amended: January 2012
July 2011HC-7.5.2
Institutional investors acting in a fiduciary capacity must disclose their overall corporate governance and voting policies with respect to their investments, including the procedures that they have in place for deciding on the use of their voting rights.
July 2011HC-7.5.3
Institutional investors acting in a fiduciary capacity must disclose how they manage material conflicts of interest that may affect the exercise of key ownership rights regarding their investments.
July 2011HC-7.6 HC-7.6 Controlling Shareholders
HC-7.6.1
In companies with one or more
controlling shareholders , the chairman and other directors must actively encourage thecontrolling shareholders to make considered use of their position and to fully respect the rights of minority shareholders.July 2011HC-8 HC-8 Corporate Governance Disclosure
HC-8.1 HC-8.1 Principle
HC-8.1.1
The company must disclose its corporate governance.
July 2011HC-8.2 HC-8.2 Disclosure of Corporate Governance Guidelines
HC-8.2.1
In each company:
(a) The board must adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the board. Such guidelines must include or refer to the principles and rules of Module HC;(b) The company's must publish the guidelines on its website.(c) At each annual shareholders' meeting the board must report on the company's compliance with its guidelines and Module HC, and explain the extent, if any, to which it has varied them or believes that any variance or non-compliance was justified; and(d) At each annual shareholders' meeting the board must also report on further items listed in rule HC-8.3.1.July 2011HC-8.3 HC-8.3 Disclosure as a Company
HC-8.3.1
The company must disclose in its annual report the following:
July 2011HC-8.3.2
Ownership of Shares:
(a) Distribution of ownership by nationality;(b) Distribution of ownership by size of shareholder;(c) Ownership by Government; and(d) Names of shareholders owning 5% or more and, if they act in concert, a description of the voting, shareholders' or other agreements among them relating to acting in concert, and of any other direct and indirect relationships among them or with the company or other shareholders.July 2011HC-8.3.3
Board, Board Members and Management:
(a) The 'mandate' of the board must be set out;(b) The types of material transactions that require board approval;(c) Names, their capacity of representation and detailed information about the directors, including directorships of other boards, positions, qualifications and experience (must describe each director as executive or non-executive);(d) Number and names of independent members;(e) Board terms and the start date of each term;(f) What the board does to induct/educate/orient new directors;(g) Director's ownership of shares;(h) Election system of directors and any termination arrangements;(i) Director's trading of company shares during the year;(j) Meeting dates and number of meetings held during the year;(k) Attendance of directors at each meeting;(l)Remuneration policy and aggregateremuneration to board members;(m) List of senior managers and profile of each;(n) Shareholding of senior managers;(o)Remuneration policy and aggregateremuneration paid to the executive management;(p) Details of stock options and performance-linked incentives available to executives;(q) Whether the board has adopted a written code of ethical business conduct, and if so a statement of how the board monitors compliance; and(r) The percentage of women and men on the board, where the absence of representation of either women or men must be stated.Amended: October 2022
Amended: January 2012
July 2011HC-8.3.4
Committees:
(a) Names of the board committees;(b) Functions of each committee;(c) Names of each director of each committee divided into independent and non-independent;(d) Minimum number of meetings per year;(e) Actual number of meetings;(f) Attendance of committees' members;(g) Aggregate members'remuneration ; and(h) Work of committees and any significant issues arising during the period.Amended: January 2012
July 2011HC-8.3.5
Corporate Governance:
(a) Reference to this Module and the Corporate Governance Code (CGC) and guidelines of the company; and(b) Changes on the companies corporate governance guidelines that took place during the year.(c) [This Subparagraph was deleted in January 2012]Amended: January 2012
July 2011HC-8.3.6
Auditors:
(a) [This Subparagraph was deleted in January 2012];(b) Audit fees;(c) Non-audit services provided by the external auditor and fees;(d) Reasons for any switching of auditors and re-appointing of auditors; and(e) Review of internal control processes and procedures.Amended: January 2012
July 2011HC-8.3.7
Financial Information:
Announcements of financial results must be in line with International Financial Reporting Standards and must include at least the following:
(a) Balance sheet, income statement, cash flow statement and changes in shareholders' equity;(b) External Auditor;(c) External Auditor's signature date;(d) Board approval date; and(e) The directors' responsibility with regard to the preparation of financial statements.July 2011HC-8.3.8
Conflict of interest:
(a) Any issues on conflicts of interest arising must be reported;(b) Describe any steps the board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest;(c) Approval process for related party transactions; and(d) Related party transactions.Amended: January 2012
July 2011HC-8.3.9
Board of Directors — whether or not the board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution.
July 2011HC-8.3.10
Other:
(a) Means of communication with shareholders and investors; and(b) Separate report on Management Discussion and Analysis, this must identify and comment on the management of principal risks and uncertainties faced by the business.HC-9 HC-9 Islamic Companies
HC-9.1 HC-9.1 Principle
HC-9.1.1
Companies which refer to themselves as "Islamic" must follow the principles of Islamic Shari'a.
July 2011HC-9.2 HC-9.2 Governance and Disclosure per Shari'a Principles
HC-9.2.1
Islamic companies which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. Companies which refer to themselves as "Islamic" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a principles. In ensuring compliance with Shari'a principles, each Islamic company must establish a Shari'a Supervisory Board consisting of at least three Shari'a scholars.
July 2011HC-9.2.2
In addition to its duties outlined in chapter HC-3 and Appendix A, the Audit Committee shall communicate and co-ordinate with the company's Corporate Governance Committee and the Shari'a Supervisory Board ("SSB") (where applicable) to ensure that information on compliance with Islamic Shari'a rules and principles is reported in a timely manner.
July 2011HC-9.2.3
The board shall set up a Corporate Governance Committee (see also chapter HC-8). In this case, the Committee shall comprise at least three directors to co-ordinate and integrate the implementation of the governance policy framework.
July 2011HC-9.2.4
The Corporate Governance Committee established under chapter HC-9 shall comprise at a minimum of:
(a) Anindependent director to chair the Corporate Governance Committee. The Chairman of the Corporate Governance Committee should not only possess the relevant skills, such as the ability to read and understand financial statements, but should also be able to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the Audit Committee;(b) A Shari'a scholar who is an SSB member for the purpose of leading the Corporate Governance Committee on Shari'a-related governance issues and also to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the SSB; and(c) Anindependent director who can offer different skills to the committee, such as legal expertise and business proficiency, which are considered particularly relevant by the board of directors for cultivating a good corporate governance culture, and deemed "fit and proper" by the CBB.July 2011HC-9.2.5
The Corporate Governance Committee shall be empowered to:
(a) Oversee and monitor the implementation of the governance policy framework by working together with the management, the Audit Committee and the SSB; and(b) Provide the board of directors with reports and recommendations based on its findings in the exercise of its functions.July 2011HC-10 HC-10 Capital Market Service Providers
HC-10.1 HC-10.1 The Board
HC-10.1.1
With respect to
CMSPs , the applicable guidance paragraphs are included in Chapter HC-10. The Comply or Explain Principle (see paragraph HC-A.1.10) applies to the content of Chapter HC-10. Notwithstanding this paragraph, the CBB may at any time provide notice to aCMSP that it must meet some or all of the requirements of this Module.July 2011HC-10.1.2
All
CMSP's should be headed by an effective, collegial and informed Board of Directors ("the board") and comply or explain its adherence to the provisions of this Chapter.July 2011Role and Responsibilities
HC-10.1.3
All directors should 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.
(a) The board's role as distinct from the role of the shareholders (who elect the board and whose interests the board serves) and the role of officers (whom the board appoints and oversees); and(b) The board's fiduciary duties of care and loyalty to theCMSP and the shareholders (see HC-10.2).July 2011HC-10.1.4
The board's role and responsibilities include but are not limited to:
(a) The overall business performance and strategy for theCMSP ;(b) Causing financial statements to be prepared which accurately disclose theCMSP's financial position;(c) Monitoring management performance;(d) Convening and preparing the agenda for shareholder meetings;(e) Monitoring conflicts of interest and preventing abusive related party transactions; and(f) Assuring equitable treatment of shareholders including minority shareholders.July 2011HC-10.1.5
The directors are responsible both individually and collectively for performing these responsibilities. Although the board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place.
July 2011HC-10.1.6
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.
July 2011HC-10.1.7
The
CMSP 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, hisremuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.July 2011HC-10.1.8
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.
July 2011Composition
HC-10.1.9
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
CMSP's Memorandum of Association.July 2011HC-10.1.10
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 eachnon-executive director and should require eachnon-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 re-election of any director who does.July 2011Decision Making Process
HC-10.1.11
The board should be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.
July 2011HC-10.1.12
The chairman should take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.
July 2011HC-10.1.13
The board should 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.
July 2011HC-10.1.14
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.
July 2011Directors' Communication with Management
HC-10.1.15
The board must 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.
July 2011HC-10.1.16
Non-executive directors should have free access to theCMSP'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.July 2011HC-10.2 HC-10.2 Directors and Officers' Loyalty
HC-10.2.1
Directors and officers shall have full loyalty to the
CMSP .July 2011Personal Accountability
HC-10.2.1A
Each director and officer must understand that under the Commercial Companies Law he is personally accountable to the company and the shareholders if he violates his legal duty of loyalty to the company, and that he can be personally sued by the company or the shareholders for such violations.
Added: January 2012HC-10.2.2
The duty of loyalty includes a duty not to use property of the
CMSP for his personal needs as though it was his own property, not to disclose confidential information of theCMSP or use it for his personal profit, not to take business opportunities of theCMSP for himself, not to compete in business with theCMSP , and to serve theCMSP's interest in any transactions with the company in which he has a personal interest.July 2011HC-10.2.3
For purposes of paragraph HC-10.2.3, a director or officer should be considered to have a "personal interest" in a transaction with the company if:
(a) He himself;(b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or(c) Another company of which he is a director or controller,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).
July 2011Avoidance of Conflicts of Interest
HC-10.2.4
Each director or officer should make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the
CMSP .July 2011Disclosure of Conflicts of Interest
HC-10.2.5
Each director or officer should inform the entire board of conflicts of interest as they arise and abstain from voting on the matter in accordance with the relevant provisions of the Commercial Companies Law. This disclosure should include all material facts in the case of a contract or transaction involving the director or officer. The director or officer should understand that any approval of a conflict transaction is effective only if all material facts are known to the authorizing persons and the conflicted person did not participate in the decision.
July 2011HC-10.2.6
The board should establish formal procedures for:
(a) Periodic disclosure and updating of information by each director or officer on his actual and potential conflicts of interest; and(b) Advance approval by directors or shareholders who do not have an interest in the transactions in which aCMSP's director or officer has a personal interest. The board should require such advance approval in every case.July 2011Disclosure of Conflicts of Interests to Shareholders
HC-10.2.7
The
CMSP should disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and should disclose to its shareholders any authorization of a conflict of interest contract or transaction in accordance with the Commercial Companies Law.July 2011HC-10.3 HC-10.3 Financial Statements Certification
HC-10.3.1
The board shall have rigorous controls for financial audit and reporting, internal control and compliance with law.
July 2011CEO and CFO Certification of Financial Statements
HC-10.3.2
To encourage management accountability for the financial statements required by the directors, the
CMSP's CEO and chief financial officer should state in writing to the audit committee and the board as a whole, that theCMSP's interim and annual financial statements present a true and fair view, in all material respects, of theCMSP's financial condition and results of operations in accordance with applicable accounting standards.Amended: January 2012
July 2011HC-10.4 HC-10.4 Appointment, Training and Evaluation of the Board
HC-10.4.1
The
CMSP should have rigorous procedures for appointment, training and evaluation of the board.July 2011Induction and Training of Directors
HC-10.4.2
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 programmes, its internal and external auditors and legal counsel.
July 2011HC-10.4.3
All continuing directors should be invited to attend orientation meetings and all directors should continually educate themselves as to the
CMSP's business and corporate governance.July 2011HC-10.4.4
Management, in consultation with the chairman of the board, should hold programmes and presentations to directors respecting the
CMSP's business and industry, which may include periodic attendance at conferences and management meetings. The board shall oversee directors' corporate governance educational activities.July 2011HC-10.5 HC-10.5 Officers' Remuneration
HC-10.5.1 HC-10.5.1
The
CMSP should remunerate approved persons fairly and responsibly.July 2011HC-10.5.3
The performance evaluation and remuneration of senior management and staff of the
Capital Market Service Provider should be based on the achievement of the Key Performance Indicators (KPIs) relevant to ensuring compliance with AML/CFT requirements as specified in Paragraphs AML-2.1.3 and AML-2.1.4.Added: April 2020HC-10.5.2
Remuneration of approved persons should be sufficient enough to attract, retain and motivate persons of the quality needed to run theCMSP successfully, but theCMSP should avoid paying more than is necessary for that purpose.July 2011Alignment of All Staff Remuneration with Compliance with AML/CFT Requirements
HC-10.6 HC-10.6 Management Structure
HC-10.6.1
The board should establish a clear and efficient management structure.
July 2011Establishment of Management Structure
HC-10.6.2
The board should appoint
senior management whose authority must include management and operation of current activities of theCMSP , reporting to and under the direction of the board. The senior managers should include at a minimum:(a) A CEO;(b) A Chief Financial Officer; and(c) A Compliance OfficerAnd where relevant, should also include such other
approved persons as the board considers appropriate as outlined in Paragraph HC-6.2.1 and HC-6.2.2 or as required in terms of the relevant rulebook Module in Volume 6.July 2011Titles, Authorities, Duties and Reporting Responsibilities
HC-10.6.3
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.
July 2011HC-10.6.4
These provisions should include but should not be limited to the following:
(a) The CEO should have authority to act generally in theCMSP's name, representing theCMSP's interests in concluding transactions on theCMSP's behalf and giving instructions to other senior managers andCMSP employees;(b) The chief financial officer should be responsible and accountable for:(i) The complete, timely, reliable and accurate preparation of theCMSP's financial statements, in accordance with the accounting standards and policies of theCMSP (see Paragraph — HC-10.3.2); and(ii) Presenting the board with a balanced and understandable assessment of theCMSP's financial situation;(c) The corporate secretary's duties (where appointed) should include arranging, recording and follow up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and(d) The internal auditor's duties (where appointed) should include providing an independent and objective review of the efficiency of theCMSP's operations. This would include a review of the accuracy and reliability of theCMSP's accounting records and financial reports as well as a review of the adequacy and effectiveness of theCMSP's risk management, control and governance processes.July 2011Titles, Authorities, Duties and Reporting Responsibilities
HC-10.6.5
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 authorize without separate board approval.
July 2011HC-10.6.6
The corporate secretary (where appointed) should be given general responsibility for reviewing the
CMSP'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.July 2011HC-10.6.7
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.
July 2011HC-10.7 HC-10.7 Communication between Board and Shareholders
HC-10.7.1
The
CMSP should communicate with shareholders, encourage their participation, and respect their rights.July 2011Conduct of Shareholders' Meetings
HC-10.7.2
The board should observe both the letter and the intent of the Commercial Companies Law's requirements for shareholder meetings. Among other things:
(a) Notices of meetings must be honest, accurate and not misleading They must clearly state and, where necessary, explain the nature of the business of the meeting;(b) Meetings must be held during normal business hours and at a place convenient for the greatest number of shareholders to attend;(c) Notices of meetings must encourage shareholders to attend shareholders meetings and if not possible, to participate by proxy and must refer to procedures for appointing a proxy and for directing the proxy how to vote on a particular resolution. The proxy agreement must list the agenda items and must specify the vote (such as "yes", "no", or "abstain");(d) Notices must ensure that all material information and documentation is provided to shareholders on each agenda item for any shareholder meeting, including but not limited to any recommendations or dissents of directors;(e) The board must propose a separate resolution at any meeting on each substantially separate issue, so that unrelated issues are not "bundled" together;(f) In meetings where directors are to be elected or removed, the board must ensure that each person is voted on separately, so that the shareholders can evaluate each person individually;(g) The chairman of the meeting must encourage questions from shareholders, including questions regarding theCMSP's corporate governance guidelines;(h) The minutes of the meeting must be made available to shareholders upon their request as soon as possible, but not later than 30 days after the meeting; and(i) Disclosure of all material facts must be made to the shareholders.July 2011HC-10.7.3
The
CMSP should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).July 2011HC-10.7.4
The
CMSP should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.July 2011HC-10.7.5
A
CMSP should maintain a company website. TheCMSP should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders meeting, and should post significant documents relating to meetings including the full text of notices and minutes. TheCMSP may also consider establishing an electronic means for shareholders communications including appointment of proxies. For confidential information, theCMSP should grant a controlled access to such information to its shareholders.July 2011HC-10.7.6
In notices of meetings at which directors are to be elected or removed, the
CMSP should ensure that:(a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and(b) The notice of the meeting should fairly represent the views of candidates.July 2011Direct Shareholder Communication
HC-10.7.7
The chairman of the board (and other directors as appropriate) must maintain continuing personal contact with controllers to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the board as a whole. The chairman must discuss governance and strategy with controllers. Given the importance of market monitoring to ensure the "comply or explain" approach of this Module, the board should encourage investors, particularly institutional investors, to help in evaluating the
CMSP's corporate governance.July 2011Controlling Shareholders
HC-10.7.8
In companies with one or more controlling shareholders, the chairman and other directors should actively encourage the controlling shareholders to make a considered use of their position and to fully respect the rights of minority shareholders.
July 2011HC-10.8 HC-10.8 Corporate Governance Disclosure
HC-10.8.1
The
CMSP should disclose its corporate governance.July 2011Disclosure of Corporate Governance Guidelines
HC-10.8.2
In each
CMSP :(a) The board shall adopt written corporate governance guidelines covering the matters stated in Module HC and other corporate governance matters deemed appropriate by the board. Such guidelines must include or refer to the principles and rules of Module HC;(c) At each annual shareholders' meeting the board should report on theCMSP's compliance with its guidelines and Module HC, and explain the extent if any to which it has varied them or believes that any variance or non-compliance was justified; and(d) At each annual shareholders' meeting the board should also report on further items listed in Section HC-8.3. Such information should be maintained on theCMSP's website or held at theCMSP's premises on behalf of the shareholders.Amended: April 2017
Amended: January 2012
July 2011HC-10.8.3
The CBB may issue a template as a guide for a
CMSP' s annual meeting corporate governance discussion.July 2011HC-10.9 HC-10.9 Islamic CMSPs
HC-10.9.1
Companies which refer to themselves as "Islamic" should follow the principles of Islamic Shari'a.
July 2011Governance and Disclosure per Shari'a Principle
HC-10.9.2
Islamic
CMSPs which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders.CMSPs which refer to themselves as "Islamic" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles. In ensuring compliance with Shari'a Principles, each IslamicCMSP should establish a Shari'a Supervisory Board consisting of at least three Shari'a scholars.July 2011Appendix A Appendix A Audit Committee
Committee Duties
The Committee's duties shall include those stated in Paragraph HC-3.2.1.
July 2011Committee Membership and Qualifications
The Committee shall have at least three members. Such members must have no conflict of interest with any other duties they have for the company.
A majority of the members of the committee including the Chairman shall be
Independent Directors and the CEO must not be a member of this committee.The board must satisfy itself that at least a majority of the committee has recent and relevant financial ability and experience, which includes:
(a) An ability to read and understand corporate financial statements including a company's balance sheet, income statement and cash flow statement and changes in shareholders' equity;(b) An understanding of the accounting principles which are applicable to the company's financial statements;(c) Experience in evaluating financial statements that have a level of accounting complexity comparable to that which can be expected in the company's business;(d) An understanding of internal controls and procedures for financial reporting; and(e) An understanding of the audit committee's controls and procedures for financial reporting.Amended: January 2012
July 2011Committee Duties and Responsibilities
In serving those duties, the Committee shall:
(a) Be responsible for the selection, appointment,remuneration , oversight and termination where appropriate of the external auditor, subject to ratification by the company's board and shareholders. The external auditor shall report directly to the committee;(b) Make a determination at least once each year of the external auditor's independence, including:(i) Determining whether its performance of any non-audit services compromised its independence (the committee may establish a formal policy specifying the types of non-audit services which are permissible) and;(ii) Obtaining from the external auditor a written report listing any relationships between the external auditor and the company or with any other person or entity that may compromise the auditor's independence;(c) Review and discuss with the external auditor the scope and results of its audit, any difficulties the auditor encountered including any restrictions on its access to requested information and any disagreements or difficulties encountered with management;(d) Review and discuss with management and the external auditor each annual and each quarterly financial statements of the company, including judgments made in connection with the financial statements;(e) Review and discuss and make recommendations regarding the selection, appointment and termination where appropriate of the head of internal audit and the budget allocated to the internal audit and compliance function, and monitor the responsiveness of management to the committee's recommendations and findings;(f) Review and discuss the adequacy of the company's internal auditing personnel and procedures and its internal controls and compliance procedures, and any risk management systems, and any changes in those;(g) Oversee the company's compliance with legal and regulatory requirements; and(h) Review and discuss possible improprieties in financial reporting or other matters, and ensure that arrangements are in place for independent investigation and follow-up regarding such matters.July 2011Committee Structure and Operations
The committee shall elect one member as its chair.
The committee shall meet at least four times a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire board.
The committee may meet without any other director or any officer of the company present. Only the committee may decide if a non-member of the committee should attend a particular meeting or a particular agenda item. Non-members who are not directors of the company may attend to provide their expertise, but may not vote. It is expected that the external auditor's lead representative will be invited to attend regularly but that this shall always be subject to the committee's decision.
The committee shall report regularly to the full board on its activities.
July 2011Committee Resources and Authority
The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, accounting or other advisors as it deems necessary or appropriate, without seeking the approval of the board or management. The company shall provide appropriate funding for the compensation of any such persons.
July 2011Committee Performance Evaluation
The committee shall prepare and review with the board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of written report provided at any regularly scheduled board meeting.
Amended: April 2013
July 2011Appendix B Appendix B Nominating Committee
Committee Duties
The committee's duties shall include those stated in rule HC-4.2.1.
July 2011Committee Duties and Responsibilities
In serving those duties with respect to board membership:
(a) The committee shall make recommendations to the board from time-to-time as to changes the committee believes to be desirable to the size and composition of the board or any committee of the board;(b) Whenever a vacancy arises (including a vacancy resulting from an increase in board size), the committee shall recommend to the board a person to fill the vacancy either through appointment by the board or through shareholder election;(c) In performing the above responsibilities, the committee shall consider any criteria approved by the board and such other factors as it deems appropriate. These may include judgment, specific skills, experience with other comparable businesses, the relation of a candidate's experience with that of other board members, and other factors;(d) The committee shall also consider all candidates for board membership recommended by the shareholders and any candidates proposed by management;(e) The committee shall identify board members qualified to fill vacancies on any committee of the board and recommend to the board that such person appoint the identified person(s) to such committee; and(f) Assuring that plans are in place for orderly succession of senior management.In serving those purposes with respect to officers the committee shall:
(a) Make recommendations to the board from time-to-time as to changes the committee believes to be desirable in the structure and job descriptions of the officers including theCEO , and prepare terms of reference for each vacancy stating the job responsibilities, qualifications needed and other relevant matters;(b) Recommend persons to fill specific officer vacancies includingCEO , considering criteria such as those referred to above;(c) Design a plan for succession and replacement of officers including replacement in the event of an emergency or other unforeseeable vacancy; and(d) If charged with responsibility with respect to company's corporate governance guidelines, the committee shall develop and recommend to the board corporate governance guidelines, and review those guidelines at least once a year.July 2011Committee Structure and Operations
The committee shall elect one member as its chair.
The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly scheduled meetings of the entire board.
July 2011Committee Resources and Authority
The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or search firms used to identify candidates, without seeking the approval of the board or management. The company shall provide appropriate funding for the compensation of any such persons.
July 2011Performance Evaluation
The committee shall preview and review with the board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of written report provided at any regularly scheduled board meeting.
Amended: April 2013
July 2011Appendix C Appendix C Remuneration Committee
Committee Duties
The committee's duties shall include those stated in rule HC-5.2.1.
July 2011Committee Duties and Responsibilities
In serving those duties the committee shall consider, and make specific recommendations to the board on, both
remuneration policy and individualremuneration packages for theCEO and other senior officers. Thisremuneration policy should cover at least:(a) The following components:(i) Salary;(ii) The specific terms of performance-related plans including any stock compensation, stock options, or other deferred-benefit compensation;(iii) Pension plans;(iv) Fringe benefits such as non-salary perquisites; and(v) Termination policies including any severance payment policies; and(b) Policy guidelines to be used for determiningremuneration in individual cases, including on:(i) The relative importance of each component;(ii) Specific criteria to be used in evaluating an officer's performance.The committee shall evaluate the
CEO's performance in light of corporate goals and objectives and may consider the company's performance and shareholder return relative to comparable companies, the value of awards toCEOs at comparable companies, and awards to theCEO in past years.The committee should also be responsible for retaining and overseeing outside consultants or firms for the purpose of determining director or officer
remuneration , administeringremuneration plans, or related matters.July 2011Committee Structure and Operations
The committee shall elect one member as its chair.
The committee shall meet at least twice a year. Its meetings may be scheduled in conjunction with regularly-scheduled meetings of the entire board.
July 2011Committee Resources and Authority
The committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate and approve the fees of outside legal, consulting or compensation firms used to evaluate the compensation of directors, the
CEO or other officers, without seeking the approval of the board or management. The company's shall provide appropriate funding for the compensation of any such persons.July 2011Performance Evaluation
The committee shall preview and review with the board an annual performance evaluation of the committee, which shall compare the committee's performance with the above requirements and shall recommend to the board any improvements deemed necessary or desirable to the committee's charter. The report must be in the form of written report provided at any regularly scheduled board meeting.
Amended: April 2013
July 2011Dispute Resolution and Investor Protection
DRA — Dispute Resolution, Arbitration and Disciplinary Proceedings
DRA-A DRA-A Introduction
DRA-A.1 DRA-A.1 Purpose
Executive Summary
DRA-A.1.1
This Module sets out the CBB's regulatory framework governing dispute resolution, complaints handling and arbitration mechanism in the capital market, as well as the disciplinary mechanism at
SROs .July 2010Legal Basis
DRA-A.1.2
Article 3 of the CBB Law specifies protection of the interests of the customers of financial institutions as one of the objectives of the CBB, and Article 4 of the CBB Law requires the CBB to, inter-alia, assume the responsibility for safeguarding the legitimate interests of licensees' customers.
July 2010DRA-A.1.3
Article 38 (a) mandates the Governor of the CBB to issue necessary directives to ensure the implementation of the CBB Law and regulations and the achievement of the objectives of the CBB. Article 38 (b) provides the CBB with the power to issue necessary directives to facilitate the understanding of CBB laws and regulations that aim to formulate the understanding and implementation of the CBB Law and regulations.
July 2010DRA-A.1.4
Article 48 (c) empowers the CBB to amend or revoke a license if the legitimate interests of the customers of a licensee required such amendment or cancellation.
July 2010DRA-A.1.5
Article 96 of the CBB Law that states: "Subject to the rules and laws of evidence and electronic transactions, any computer data, electronic files, recorded telephone calls, telex and facsimile correspondence may be used as evidence in disputes relating to securities".
July 2010DRA-A.2 DRA-A.2 Module History
Evolution of Module
DRA-A.2.1
This Module was first issued in March 2010. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
July 2010DRA-A.2.2
[This Paragraph was deleted in April 2020].
Deleted: April 2020
Added: July 2010DRA-A.2.3
[This Paragraph was deleted in April 2020].
Deleted: April 2020
Added: July 2010DRA-A.2.4
[This Paragraph was deleted in April 2020].
Deleted: April 2020
Added: July 2010DRA-A.2.5
[This Paragraph was deleted in April 2020].
Module Ref. Change Date Description of Changes DRA-4.1.6 01/2020 Amended Paragraphs on approval of the SRO’s policies and procedures. DRA-A.2.2, DRA-A.2.3, DRA-A.2.4 & DRA-A.2.5 04/2020 Deleted Paragraphs. DRA-B.2 04/2020 Deleted Section. DRA-4.1 04/2020 Amended Section. DRA-4.2.2 04/2020 Amended Paragraph on establishment and constitution of disciplinary appeals committee members. DRA-4.2.2A 04/2020 Added a new Paragraph. DRA-4.2.2B 04/2020 Added a new Paragraph. DRA-4.2.3 04/2020 Amended Paragraph. DRA-4.2.4 04/2020 Amended Paragraph. DRA-5.1.1 04/2020 Amended Paragraph. Superseded Requirements
DRA-A.3 DRA-A.3 Interaction with other Modules
DRA-A.3.1
All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.
July 2010DRA-B DRA-B Scope of Application
DRA-B.1 DRA-B.1 Scope of Application
Scope
DRA-B.1.1
This Module shall apply to complaints and disputes relating to:
(a) Any conduct or behaviour occurring within Bahrain; or any transaction or expected transaction done by or on behalf of anyperson(s) within Bahrain in relation tosecurities offered, issued or listed in Bahrain or elsewhere;(b) Any conduct or behaviour occurring outside Bahrain or any transaction or expected transaction done by or on behalf of anyperson(s) outside Bahrain in relation tosecurities offered, listed or issued in Bahrain;(c) Any conduct or behaviour occurring within Bahrain, or any transaction or expected transaction done by or on behalf of anyperson(s) within Bahrain in relation to:(i) Futures contracts, whether traded on a futures market in Bahrain or elsewhere; or(ii) Leveraged foreign exchange trading contracts, whether in Bahrain or elsewhere; and(d) Any conduct or behaviour occurring outside Bahrain; or any transaction or expected transaction done by or on behalf of anyperson(s) outside Bahrain in relation to:(i) Futures contracts traded on a futures market in Bahrain;(ii) Leveraged foreign exchange trading contracts in Bahrain; or(iii) Leveraged foreign exchange trading contracts that are accessible from Bahrain.July 2010DRA-B.1.2
This Module contains the CBB's Directive relating to dispute resolution, investors' complaints handling and arbitration mechanism and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive under this Module is applicable to all
Capital Market Service Providers (CMSPs ), market participants and relevantpersons , including but not limited to issuers ofsecurities or anyperson acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, members ofSROs , investment firms, collective investment undertakings, business trusts, listed companies, anyperson acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts and any otherperson who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether suchperson is a market participant or not. These rules are issued by way of a legally-binding Directive.July 2010DRA-B.2 DRA-B.2 [This Section was deleted in April 2020]
Deleted: April 2020
Added: July 2010DRA-B.2.1
"Arbitration Cell" means a division or employee(s) of an
SRO designated and authorized to receive petitions, coordinate and assist in the administration of arbitrations in terms of Chapter 3 of this Module.July 2010DRA-B.2.2
"Capital Market Service Provider" (hereinafter referred to as
CMSP ) means anyperson licensed, or authorised or involved in providing any activity specified under Article 80 of the CBB Law and includes a member of anSRO .July 2010DRA-B.2.3
"CMSD" means the Capital Markets Supervision Directorate of the Central Bank of Bahrain.
July 2010DRA-B.2.4
"Client Complaints" for the purposes of this Module, a
client complaint includes: "any complaint in relation to the provision of services by aCMSP in which the client alleges that he has suffered, or is likely to suffer financial prejudice as a result of the member orCMSP :(a) Contravening or failing to comply with any instruction given by the client, or any agreement or mandate entered into with the client;(b) Contravening or failing to comply with the rules and the directives;(c) Acting dishonestly, negligently or recklessly; or(d) Treating the client unreasonably, or unfairly".July 2010DRA-B.2.5
"Disciplinary Action Cell" means a division or employee of an
SRO designated and authorized to receive notification of a breach of rules of anSRO and to coordinate and assist in the administration of disciplinary proceedings in Chapter 4 of this Module.July 2010DRA-B.2.6
"Person" means unless the context requires otherwise, a natural or legal
person .July 2010DRA-B.2.7
"Securities" means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:
(a) Shares in companies and othersecurities equivalent to shares in companies or other entities, and depositary receipts in respect of shares;(b) Bonds or other forms of debt, including depositary receipts in respect of suchsecurities ;(c) Warrants;(d) Units, rights or interests (however described) of the participants in a collective investment scheme;(e) Options, futures and any other derivative contracts relating to commodities that must be settled in cash, or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);(f) Options, futures and any other derivative contract relating to commodities that can be physically settled;(g) Units to Real Estate Investment Trusts (REITs);(h) Index tracking products including Islamic indices;(i) Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such instrument on an exchange; and(j) Islamicsecurities , being those financial instruments that are Shari'a compliant.July 2010DRA-B.2.8
"Self-Regulatory Organizations (SROs)" means any organization licensed by the CBB under the Markets and Exchanges (MAE) Module, or the Clearing, Settlement and Central Depository (CSD) Module, or any other organization recognized as an
SRO by the CBB.July 2010DRA-1 DRA-1 Internal Dispute Resolution and Complaints
DRA-1.1 DRA-1.1 Internal Dispute Resolution and Redress of Complaints
DRA-1.1.1
All
CMSPs must have appropriate internal dispute resolution procedures and systems for effective handling of complaints made by clients and investors (IDR procedures and systems).July 2010Internal Dispute Resolution Requirements
DRA-1.1.2
All
CMSPs must have in place internal dispute resolution systems and procedures that are documented appropriately; and the clients and users of the services of theCMSPs are informed about its availability.July 2010Documenting Internal Dispute Resolution Procedures
DRA-1.1.3
In order to make internal dispute resolution procedures as transparent and accessible as possible and to assist with staff training and awareness, all
CMSPs must document their internal dispute resolution procedures. This includes setting out in writing:(a) The procedures and policies for:(i) Receiving complaints;(ii) Investigating complaints;(iii) Responding to complaints within appropriate time limits;(iv) Referring unresolved complaints to arbitration or other appropriate external dispute resolution mechanisms;(v) Recording information about complaints;(vi) Identifying and recording systemic issues;(b) The types of remedies available for resolving complaints; and(c) Internal structures and reporting requirements for complaint handling.CMSPs should provide a copy of the procedures to all relevant staff, so that they may be able to inform clients and users. A simple and easy-to-use guide to the procedures should also be made available to all clients and users of the services ofCMSPs , either on request, or when they want to make a complaint.July 2010Guiding Principles
DRA-1.1.4
Adherence to the following guiding principles is required for effective handling of complaints:
(a) Visibility:(i) How and where to complain should be well publicized to customers and other interests parties;(b) Accessibility:(i) A complaints handling process should be easily accessible to all clients;(ii) Process information should be readily accessible;(iii) Should include flexibility in the method of making complaints;(iv) Low cost telephone access should be available where possible;(v) Support for customers with special needs should be provided, such as interpreters;(vi) Information and assistance should be available on details of making and resolving a complaint;(vii) Supporting information should be easy to understand and use;(viii) Information and assistance in making a complaint should be made available;(c) Responsiveness:(i) Receipt of complaints should be acknowledged immediately;(ii) Complaints should be addressed promptly in accordance with its urgency;(iii) Customers should be treated with courtesy;(iv) Customers should be kept informed of the progress of their complaint;(d) Objectivity:1. Complaints should be addressed in an equitable objective and unbiased manner;2. General principles for objectivity in the complaints handling process include:(a) Openness:(i) Process should be clear and well publicized so that both staff and clients can understand;(b) Impartiality:(i) Avoiding bias to a customer, personnel or theCMSP ;(ii) Protect theperson the complaint is made against from bias;(iii) Emphasis should be placed on resolution not blame;(iv) Investigation should be carried out independently of theperson complained about;(c) Accessibility:(i) Should allow customer access to the process at any reasonable point in time;(ii) A joint response should be made when the complaint affects different supply chain participants;(d) Completeness:(i) Finding relevant facts, talking to both sides, establishing common ground and verifying explanations should occur wherever possible;(e) Equitability:(i) Give equal treatment to all people;(f) Sensitivity:(i) Each complaint treated on its merits and paying due care to individual circumstances;(g) Objectivity for personnel — complaints handling procedures should ensure those complained about are treated fairly which implies:(i) Informing them immediately and completely on complaints about performance;(ii) Giving them an opportunity to explain and providing appropriate support;(iii) Keeping them informed of the progress and result of the complaint investigation;(iv) Full details of the complaint are given to those the complaint is made against prior to interview;(v) Personnel should be assured they are supported by the process and should be encouraged to learn from the experience and develop a better understanding of the complaints process;(h) Separating complaints handling procedures from disciplinary procedures:(i) Complaints process should be separate to disciplinary process;(i) Confidentiality:(i) In addition to customer confidentiality the process should ensure confidentiality for staff who have a complaint made against them and the details should only be known to those directly concerned;(ii) Personal information should only be available for the purposes of addressing the complaints within theCMSP ;(iii) Should be actively protected for the discloser unless the customer consents otherwise;(iv) Protect the customer and customer's identity as far as is reasonable to avoid deterring complaints due to fear of inconvenience or discrimination;(j) Objectivity monitoring:(i)CMSPs should monitor responses to customers to ensure objectivity which could include random monitoring of resolved complaints;(k) Charges:(i) Process should be free of charge to customers;(l) Customer Focused Approach:(i)CMSPs should have a customer focused approach;(ii) Should be open to feedback including complaints;(iii) Should show commitment to resolving complaints;(m) Accountability:(i)CMSPs should ensure accountability for reporting on actions and decisions with respect to complaints handling is clearly established;(n) Continual improvement:(i) Continual improvement of the complaints handling process and the quality of products should be a permanent objective of theCMSP .July 2010Internal Complaint Handling Procedures
DRA-1.1.5
A
CMSPs internal complaint handling procedures must provide for:(a) The receipt of written complaints;(b)The appropriate investigation of complaints;(c) An appropriate decision-making process in relation to the response to a client complaint;(d) Notification of the decision to the client; and(e) The recording of complaints.July 2010DRA-1.1.6
A
CMSP's internal complaint handling procedures must be designed to ensure that:(a) All complaints are handled fairly, effectively and promptly;(b) Recurring or systemic problems are identified, investigated and remedied;(c) The number of unresolved complaints referred to theSRO and/or the CBB are minimized;(d) Complaints are investigated by an employee of sufficient competence who, where appropriate, was not directly involved in the matter which is the subject of a complaint;(e) The employee responsible for the resolution of complaints has the necessary authority to resolve complaints or has ready access to an employee who has the necessary authority; and(f) Relevant employees are aware of theCMSP's internal complaint handling procedures and comply with them.July 2010Timely Response to Complaints
DRA-1.1.7
A
CMSP must respond to a client complaint within 4 weeks of receiving the complaint, or provide the complainant with an appropriate explanation as to why theCMSP is not, at that time, in a position to respond and must indicate by when theCMSP will respond.If a
CMSP fails to respond to a client complaint as above, theCMSP will be liable for appropriate enforcement actions as per the Market Surveillance, Investigation and Enforcement (MIE) Module, including financial penalties.July 2010Redress
DRA-1.1.8
Where a
CMSP decides that redress in the form of compensation is appropriate in resolving a complaint, theCMSP must provide the complainant with fair compensation and must comply with any offer of compensation made by it which the complainant accepts.July 2010DRA-1.1.9
Where a
CMSP decides that redress in a form other than compensation is appropriate in resolving a complaint, it must provide the redress as soon as practicable.July 2010Recording of Complaints
DRA-1.1.10
A
CMSP must maintain a record of allclient complaints . The record of each complaint must include:(a) The identity of the complainant;(b) The substance of the complaint;(c) The status of the complaint, including whether resolved or not, and whether redress was provided, and whether referred to arbitration; and(d) All correspondence in relation to the complaint. Such records must be retained by theCMSP for a period of 10 years from the date of receipt of the complaint.July 2010Unresolved Client Complaints
DRA-1.1.11
(a) A client complaint will be deemed to be unresolved if the complainant is not satisfied with the resolution of the complaint proposed by theCMSP ; and(b) Where a complaint relates to a member of anSRO , the complainant may lodge an unresolved complaint, in writing, with theSRO giving full particulars of the matter concerned.July 2010DRA-1.2 DRA-1.2 Complaint against Listed Companies and Issuers of Securities
DRA-1.2.1
All listed companies and issuers of
securities must have internal procedures and systems for effective handling of investor complaints and their resolution.July 2010DRA-1.2.2
Investor complaints against issuers may, for example, relate to:
(a) Public/Further Offerings: Complaint regarding non-receipt of:(i) Allotment advice;(ii)Securities purchased through an Initial Public Offer;(iii) Refund order;(iv) Interest on delay redemption/refund amount;(v) Sales proceeds of fractional entitlement;(vi)Securities purchased through a rights offer.(b) Corporate Actions: Complaint regarding non-receipt of:(i) Dividend;(ii) Interest on Debentures, Bonds or other debt instruments;(iii)Securities on account of a bonus, de-merger, merger, stock split;(iv) Redemption amount.(c) Transfer ofSecurities : Complaint regarding non-receipt of:(i)Securities after dematerialization;(iiSecurities after transfer/transmission;(iii) Duplicate certificate relating tosecurities .(d) Miscellaneous: Complaint regarding non-receipt of copy of the Annual report or AGM/EGM notice.July 2010Unresolved Complaints
DRA-1.2.3
(a) An investor complaint will be deemed to be unresolved if the complainant is not satisfied with the resolution of the complaint proposed by the listed company/issuer ofsecurities ; and(b) A complainant may lodge an unresolved complaint, in writing, with the relevantSRO as per section DRA-2.1 giving full particulars of the matter concerned.July 2010DRA-2 DRA-2 Complaints to and Disciplinary Action at SRO
DRA-2.1 DRA-2.1 Complaints to Self-Regulatory Organizations
DRA-2.1.1
All
SROs shall have an appropriate mechanism to review complaints received against member firms and issuers ofsecurities and shall endeavour to facilitate resolution of the complaints.July 2010DRA-2.1.2
In order for an unresolved complaint to be considered by the
SRO , the complaint must be lodged with theSRO within 6 months of the receipt by the complainant of theCMSP's response referred to in rule DRA-1.1.7 or section DRA-1.2 and within 12 months of the conduct by theCMSP giving rise to the complaint.July 2010DRA-2.1.3
An unresolved complaint which is lodged subsequent to the period referred to in rule DRA-1.1.7 will be considered, provided that failure to lodge the complaint within the relevant period was through no fault of the customer.
July 2010DRA-2.1.4
The
SRO may request theCMSP and the complainant to provide copies of all relevant correspondence and documentation that is required to review the complaint. TheSRO shall also send a copy of the complaint to theCMSD for information and also send a report on the final resolution of the complaint.July 2010DRA-2.1.5
The
SRO shall endeavour to facilitate a resolution of the complaint between the member and the complainant.July 2010DRA-2.1.6
If the
SRO is unable to facilitate a resolution of the complaint within 4 weeks of lodgement of the complaint with it, theSRO shall refer the unresolved complaint to the Arbitration Committee of theSRO .July 2010Disputes that can be Brought before an SRO
DRA-2.1.7
All types of disputes with a
CMSP may be brought before and dealt with by anSRO (known as 'eligible disputes') subject to the following conditions:(a) TheCMSP involved in the dispute must be one which is subject to the jurisdiction of anSRO by reason of it being a member of anSRO , or an issuer whosesecurities are offered for trading (listed) on theSRO ;(b) The activity or dispute arises out of matters relevant to theCMSP complainant being or having been a client or shareholder of theCMSP ;(c) The activity to which the complaint relates must be subject to the jurisdiction of theSRO ;(d) TheCMSP has failed to resolve the complaint to the satisfaction of the complainant within 4 weeks of receiving it; and(e) TheCMSP about which the complaint is made must be a member or listed at the time of the act or omission to which the complaint relates and must continue to be a member or listed at the time when the complaint is referred to theSRO .July 2010DRA-2.1.8
All disputes which have not first been raised by a complainant with the
CMSP , so as to provide theCMSP with an opportunity to resolve the dispute, will be deemed a complaint and if lodged or attempted to be lodged with theSRO shall be referred back to theCMSP for its due consideration.July 2010DRA-2.1.9
The following complaints cannot be brought before an
SRO :(a) Commercial decisions not related to market transactions;(b) Pricing policies and other policies such as interest rates and fees;(c) Cases under investigation by any law enforcement agency, including cases where allegations of fraud or criminal activity have been made, and where the matter has been referred to the police for investigation;(d) Complaints that are more than 6 months old after theCMSP's final reply;(e) Complaints that have been settled privately or otherwise between the complainant and theCMSP ; and(f) Cases which have been subject to a court hearing and for which a court judgment and/or order has been passed.July 2010Dispute Submission to an SRO
DRA-2.1.10
To initiate an investigation of a dispute and to require an
SRO to resolve the dispute, a complainant must complete and submit the dispute to theSRO , along with the facts of the case and evidence in support of the claims made by the complainant.July 2010Time Limits for Making an Application
DRA-2.1.11
An application for initiating an investigation can only be made by the complainant:
(a) Upon showing that an attempt has been made to resolve the matter by theCMSPs internal dispute resolution procedure, but the matter has not been resolved to the satisfaction of both parties or after at least 4 weeks from the date the matter was referred to theCMSP , whichever is earlier; and(b) No later than a period of 6 months after theCMSP has provided its final reply to the complainant.July 2010DRA-2.1.12
In rule DRA-2.1.11, a final reply is a letter or other written document issued by the
CMSP to the complainant, which expressly states that it is theCMSP's final reply and which expressly informs the complainant that if he/she disagrees with theCMSP , he/she can contact theSRO for assistance within 6 months from the date of the said letter or other written document.There must be no outstanding issues between the
CMSP and the complainant and the contact particulars of theSRO must be provided in the said letter or other written document. For the avoidance of doubt, any dispute as to whether any letter or other written document constitutes the final reply from theCMSP would be solely determined by theSRO . TheSRO's determination would be binding on theCMSP and the complainant.July 2010Investigation of a Dispute
DRA-2.1.13
The
SRO shall be entitled to request all relevant data and materials relevant to the dispute from theCMSP and the complainant, and theCMSP and complainant shall provide to theSRO all such information and materials as are relevant to the dispute. Specifically, theSRO shall write to theCMSP , advising it of the dispute referred to it by the complainant and request all relevant data and information.July 2010DRA-2.1.14
The
CMSP shall respond to the request referred to in paragraph DRA-2.1.13 and provide a report compiled by theCMSP upon conclusion of its investigation into the dispute first raised to it by the complainant in full, the grounds of its decision and any other relevant information and documents relevant to the dispute.July 2010DRA-2.1.15
The
SRO shall conduct any interviews, if deemed necessary, in the sole discretion of theSRO , either via the telephone or inperson .July 2010DRA-2.1.16
The
SRO shall then consider whether to dismiss the dispute in accordance with paragraph DRA-2.1.18. If the dispute is not dismissed in accordance with paragraph DRA-2.1.18, the case shall be classified as an 'investigated dispute' and theSRO shall refer the investigated dispute to mediation.July 2010DRA-2.1.17
While the
SRO is conducting an investigation of a dispute, theSRO may nevertheless seek to promote a resolution of the dispute by agreement between the complainant and theCMSP .At all times while the dispute is being investigated by the
SRO , theCMSP and the complainant may seek an amicable resolution of the dispute.July 2010Dismissing Dispute without Mediation
DRA-2.1.18
The
SRO may, subject to the approval of theSRO's Chief Executive Officer, dismiss a dispute where:(a) The dispute is in the opinion of theSRO frivolous or vexatious;(b) The matter has previously been considered or excluded by a former scheme, but has not been adjudicated upon under paragraph DRA-2.1.22 and an award made under Chapter 3 (unless material new evidence likely to affect the outcome has subsequently become available).
For the avoidance of doubt, all cases which have been settled as set out in rule DRA-2.1.9 (f) or for which an award has been made by the adjudicators must be dismissed;(c) There are other compelling reasons why it is inappropriate for the dispute to be dealt with by theSRO ; or(d) The complainant is not cooperating.For the avoidance of doubt, all decisions made by the
SRO under this rule shall be final and conclusive and cannot be challenged by the complainant or theCMSP .July 2010Cooperation from Parties
DRA-2.1.19
The
SRO :(a) Shall receive the full cooperation and assistance of theCMSP and any representative of theCMSP in the investigation of the dispute;(b) May require from theCMSP and any representative of theCMSP all information relating to the subject matter of the dispute in its possession or control, or agreed to by parties in writing to be disclosed or which parties are compelled by law to disclose; and(c) Shall have the power to request theCMSP and/or such of theCMSP's representatives as it deems necessary to attend interviews or to provide written statements.The
CMSP shall provide theSRO with all relevant data, information and materials as are relevant to the dispute to enable theSRO to comprehensively mediate the dispute, and shall attend or ensure that its representative attends all such interviews as theSRO has requested theCMSP and/or its representative to attend. TheCMSP shall at all times comply, and shall ensure that all its officers, representatives and/or agents comply with all instructions and determinations made by theSRO and such officers and employees of theSRO are duly authorised.July 2010DRA-2.1.20
The
SRO shall endeavour to complete the deliberation within a reasonable time, taking into account the complexity of the dispute.July 2010Referring Dispute to Arbitration
DRA-2.1.21
Where the dispute is resolved by mediation, the
SRO shall record in writing the terms of the resolution reached by both parties. Where the dispute is not resolved by mediation, theCMSP or the complainant can opt to have the dispute proceed to Arbitration in the manner set out in Chapter 3.July 2010DRA-2.1.22
Where a dispute is not resolved by the
SRO through mediation, theCMSP will be informed and afforded a final opportunity to resolve the dispute. If theCMSP does not resolve the dispute, theSRO shall refer the matter to the Arbitration Committee and initiate Arbitration proceedings, as per Chapter 3 of this Module.July 2010DRA-2.2 DRA-2.2 Disciplinary Action at SRO Pursuant to Complaints
DRA-2.2.1
In addition to facilitating the resolution of complaints and providing an arbitration mechanism, all
SROs shall analyse complaints received together with all the relevant information, records and data available with theSROs , in order to detect potential cases of contraventions of the CBB Law and regulations,SRO's business rules and other applicable laws, rules and regulations by anyperson .July 2010DRA-2.2.2
If the analysis of the known facts and potential evidence indicates contraventions, the
SRO shall consider whether a sufficient, credible source of facts and evidence suggests contravention of the CBB Law, rules and regulations or business rules of theSRO . Some of the factors that could be considered by theSRO include, but are not limited to:(a) The laws or rules or regulations that could potentially be considered as having been contravened or violated;(b) The severity and/or seriousness of such contravention or violation;(c) The potential magnitude of such contravention or violation;(d) The potential losses involved or harm to an investor or investors;(e) Whether the affected group is particularly vulnerable or at risk; and(f) Whether the conduct is ongoing.July 2010DRA-2.2.3
After conducting an analysis referred to in rule DRA-2.2.2, the
SRO shall, based on the evidence and facts available, undertake an investigation for imposing disciplinary action as per Chapter 4 of this Module and simultaneously report the matter to theCMSD of the CBB.July 2010DRA-2.2.4
The
SRO shall conduct its own investigations and initiate disciplinary proceedings as per its business rules. This is without prejudice to any enforcement measures by the CBB or criminal prosecution.July 2010DRA-2.2.5
The
SRO's report to theCMSD shall include:(a) Facts of the case;(b) Laws, rules and regulations, or business rules of theSRO that could potentially have been contravened or violated;(c) Prima-facie conclusions and evidence available; and(d) Scope and nature of the investigation undertaken by theSRO .July 2010DRA-2.2.6
SROs shall complete the investigation referred to in rule DRA-2.2.4 and paragraph DRA-2.2.5 promptly and shall determine whether a reference to the disciplinary committee is required. The findings of the investigations and the conclusions arrived at after the investigation along with supporting facts and evidence shall be submitted to theCMSD within a period of 30 days from the date on which the matter was reported to the CBB, as per rule DRA-2.2.3.July 2010DRA-2.2.7
The
CMSD will consider any report referred to in rules DRA-2.2.3 and DRA-2.2.6 from theSRO , along with the information, records and data available with theCMSD for the purposes of market surveillance, investigation and enforcement functions, as per the Market Surveillance, Investigation and Enforcement Module (MIE Module).July 2010DRA-3 DRA-3 Arbitration
DRA-3.1 DRA-3.1 Arbitration Proceedings
DRA-3.1.1
An Arbitration Committee shall be established and constituted by a Directive of the Governor.
July 2010DRA-3.1.2
The Arbitration Committee shall be responsible for settling all disputes between
CMSPs and, betweenCMSPs and their customers relating to transactions executed through theSROs or regulated activities undertaken by theCMSPs .July 2010DRA-3.1.3
Trading on an exchange or transacting on an
SRO shall be deemed as an acceptance of arbitration and this fact shall be recorded in the documents of the transactions and customer agreement. The awards passed by the panel shall be binding upon both parties of a dispute.July 2010DRA-3.1.4
During the course of an arbitration under this Module, neither party may pursue any suit, action or proceedings against the other in respect of the dispute referred to arbitration under this Module.
July 2010DRA-3.1.5
All
SROs shall have anArbitration Cell and theArbitration Cell of theSRO shall receive the arbitration petition submitted to the Arbitration Committee by one of the parties to the dispute, subject to arbitration committee jurisdiction, after payment of the prescribed fee in full.July 2010DRA-3.1.6
The arbitration petition referred to in rule DRA-3.1.5 shall be registered upon receipt in a special register with serial numbers, commencing on the first day of the Gregorian year and ending on the last day thereof. The original petition must be filed with the fee receipt in a special record.
July 2010DRA-3.1.7
The petition shall contain the name, profession, domicile, place of residence, name of principals if the parties are employed by other
persons , the relief claimed, and items of evidence establishing the claim. A copy of all supporting documents must be attached and accompanied by a memorandum explaining the dispute.July 2010DRA-3.1.8
The
Arbitration Cell shall submit the arbitration petition, upon receipt, to the Chairman of the Arbitration Committee, in order to fix a date for hearing the dispute. TheArbitration Cell shall notify all parties of the date of the hearing, along with a copy of the arbitration petition.July 2010DRA-3.1.9
All documents relating to the arbitration and notices affected by the
Arbitration Cell shall be sent by registered mail.July 2010DRA-3.1.10
On the day the dispute is heard, the parties shall be in attendance in
person , or be represented by their respective representatives. In the event of non-appearance of one of the parties, the committee shall, if notice was duly served, proceed to issue the decision in his absence.July 2010Representation
DRA-3.1.11
(a) A party may attend arbitration proceedings inperson or be represented by any otherperson ;(b) Where a party is a body corporate or a partnership, it may be represented by a director or a partner (as the case may be) or any otherperson authorised by it;(c) A party shall send the name and address of its representative (if any) or otherperson (if any) authorised by it under (a) or (b) (as the case may be) to the other party, with a copy sent to theArbitration Cell for filing, as soon as reasonably practicable after they have been decided on; and(d) A party shall notify theArbitration Cell and the other party immediately of any change of its representative orperson authorised by it, or any change in the name or address of the representative orperson authorised by it.July 2010Oath and Affirmation
DRA-3.1.12
All evidence shall be given under oath or affirmation.
July 2010DRA-3.1.13
The members of the Arbitration Committee are to be paid such remuneration and allowances by the
SRO , as per the Directive of the Governor.July 2010Rules Relating to Arbitration Proceedings
DRA-3.1.14
(a) Despite other provisions of this Module, the Arbitration Committee:(i) May conduct the arbitration in such manner as the chairman of the Arbitration Committee considers appropriate and has the power to adopt, whenever possible, a simplified or expedited procedure (including interim relief) and to conduct proceedings to ensure the just, expeditious, economical and final determination of the dispute; and(ii) Shall ensure that the parties are treated with equality and that at any stage of the proceedings each party is given a full opportunity to present that party's case.(b) The Arbitration Committee may decide whether to hold hearings for the presentation of evidence by witnesses, including expert witnesses, or for oral argument, or to conduct proceedings only on the basis of documents and other materials;(c) All documents or information to be supplied to an Arbitration Committee shall be sent to theArbitration Cell for transmission to the Arbitration Committee, save where documents or information are submitted during a hearing;(d) All documents and information to be supplied to an Arbitration Committee shall be sent to theArbitration Cell as follows:(i) Where a party submits documents or information during a hearing, one copy shall be sent to theArbitration Cell by that party immediately after the hearing; and(ii) In all other cases, a party shall supply 2 sets of all documents or information to theArbitration Cell ; and(e) The Arbitration Committee may appoint any legally qualifiedperson to advise the Arbitration Committee on any matter relating to the arbitration.July 2010Record of Proceedings
DRA-3.1.15
Record of proceedings before an Arbitration Committee shall be taken by a staff member of the
Arbitration Cell .July 2010Statement of Claim
DRA-3.1.16
(a) Unless a statement of claim was contained in or attached to the arbitration petition, the claimant shall send his statement of claim to the respondent and to the Arbitration Committee within 14 days from the date of the arbitration petition;(b) A copy of the relevant customer contract shall be annexed or otherwise attached to the statement of claim;(c) The statement of claim shall include the following particulars:(i) The names and addresses of the parties;(ii) A statement of the facts supporting the claim;(iii) The points at issue;(iv) The remedy sought; and(v) Acknowledgement of receipt by the respondent.(d) The claimant may:(i) Annex or otherwise attach to the statement of claim all documents that the claimant considers relevant; or(ii) Add a reference to the documents or other evidence that the claimant intends to submit.July 2010Statement of Claim or Counter Claim
DRA-3.1.17
(a) The respondent shall send a statement of defence to the claimant and to the Arbitration Committee within 14 days from the date on which the statement of claim is sent to the respondent;(b) The statement of defence shall reply to the particulars of the statement of claim;(c) The respondent may:(i) Annex or otherwise attach to the statement of defence documents on which the respondent relies in defence; or(ii) Add a reference to the documents or other evidence that the respondent intends to submit.(d) In the statement of defence, or at a later stage in the arbitration proceedings if the Arbitration Committee decides that the delay is justified under the circumstances, the respondent may:(i) Make a counterclaim arising out of the same dispute; or(ii) Rely on a claim arising out of that dispute for the purpose of a set-off.(e) Rule DRA-3.1.16 applies to a counterclaim and a claim relied on for the purpose of a set-off in the same manner as it applies to a statement of claim.July 2010Amendments and Further Statements
DRA-3.1.18
(a) During the course of an arbitration, a party may amend or supplement that party's claim, defence or counterclaim except where the Arbitration Committee considers it inappropriate to allow this, having regard to:(i) Any delay involved;(ii) The likelihood of prejudice to the other party; or(iii) Any other relevant circumstances.(b) The Arbitration Committee may require or accept amendment to or supplement of a party's claim, defence or counterclaim, and shall fix the period for the sending of such amendment or supplement.July 2010Time Period for Sending Further Statements
DRA-3.1.19
The period fixed by an Arbitration Committee for the sending of any amendments or supplements under rule DRA-3.1.18 may not exceed 21 days from the date of such amendments or supplements, unless an extension is requested by a party and the Arbitration Committee is satisfied that such an extension is justified in the circumstances.
July 2010Evidence
DRA-3.1.20
Each party has the burden of proving the facts relied on to support that party's claim, defence or counterclaim.
July 2010DRA-3.1.21
The Arbitration Committee:
(a) Shall determine the admissibility, materiality, relevance and weight of any evidence; and(b) May admit evidence irrespective of the rules governing the admissibility of evidence in court if, in his opinion, the interest of justice is served by so doing.July 2010DRA-3.1.22
If the Arbitration Committee considers it appropriate, he may require a party to send to him and to the other party, within a period stipulated by him, a summary of the documents and other evidence which that party intends to present in support of the facts in issue set out in that party's statements.
July 2010Hearing of Witnesses
DRA-3.1.23
(a) If any witness is to be heard, each party shall send a notice to the Arbitration Committee and to the other party at least 14 days before the hearing specifying:(i) The name and address of the witness;(ii) The subject matter of the witness's testimony or, if the Arbitration Committee so requires, a transcript of the witness's statement or expert report; or(iii) The language in which the witness will give his testimony; and(b) The Arbitration Committee may arrange for translations or recordings to be made at a hearing as he considers appropriate;(c) The Arbitration Committee may require the retirement of any witness during the testimony of any other witness;(d) Evidence of a witness may also be presented in the form of a written statement signed by him; and(e) The Arbitration Committee is free to determine the manner in which a witness is examined.July 2010Default
DRA-3.1.24
(a) If, within the period fixed by the Arbitration Committee, the claimant fails to file a statement of claim without showing sufficient cause for such failure, the Arbitration Committee may make an order for the termination of the arbitration proceedings;(b) If, within the period fixed by the Arbitration Committee, the respondent fails to file a statement of defence without showing sufficient cause for such failure, the Arbitration Committee may make an order of favour of the claimant or make an order for the termination of the arbitration proceedings; and(c) If one of the parties, duly notified under these rules, fails to appear at a hearing or fails to produce any document in that party's possession when required to do so, without valid excuse, the Arbitration Committee may proceed with the arbitration and such proceedings are deemed to have been conducted in accordance with rule DRA-3.1.14.July 2010Consolidation of Proceedings
DRA-3.1.25
Where in relation to 2 or more arbitration proceedings it appears to the Chairman of the Arbitration Committee:
(a) That a common question of law or fact arises in both or all of them;(b) That the claims arise out of the same transaction or series of transactions; or(c) That it is desirable to make an order under this section for any other reason, the Chairman may order those arbitration proceedings;(i) To be consolidated on such terms as he thinks just; or(ii) To be heard immediately after one another; or(d) Order any of those arbitration proceedings to be stayed until after the determination of any other of them.July 2010Jurisdiction
DRA-3.1.26
(a) The Arbitration Committee has the power to rule on any objection by either party to its jurisdiction to hear the dispute;(b) No objection to the Arbitration Committee's jurisdiction may be raised after the sending of the statement of defence or, with respect to a counterclaim, after the sending of the reply to the counterclaim;(c) The Arbitration Committee may rule on an objection to its jurisdiction as a preliminary question or may proceed with the arbitration and rule on such an objection in his final award; and(d) Where applicable, an arbitration clause is treated as being independent of the other terms of a customer contract and any decision made by the Arbitration Committee or a court of law declaring that the customer contract is void does not of itself invalidate the arbitration clause.July 2010Rules Relating to Termination of Arbitration Proceedings
DRA-3.1.27
(a) If, before the award is made, the parties agree on a settlement of the dispute, the Arbitration Committee shall record the settlement in the form of an arbitration award on agreed terms;(b) The Arbitration Committee is not obliged to give reasons for an award made under (a);(c) An award made under (a) shall be signed by the Arbitration Committee, sent to the parties and lodged with theArbitration Cell for filing; and(d) An award made under (a) is final and binding on the parties.July 2010Termination of Proceedings
DRA-3.1.28
(a) If, before the award is made, the continuation of the arbitration proceedings becomes unnecessary or impossible for any reason other than by way of an agreement to settle between the parties, the Arbitration Committee may, either on its own initiative or at the request of a party, make an order for the termination of the arbitration proceedings;(b) The Arbitration Committee shall state in the order the reasons for the termination;(c) An order made under (a) shall be signed by the Arbitration Committee, sent to the parties and lodged with theArbitration Cell for filing; and(d) An order made under (a) is final and binding on the parties.July 2010Form and Effect of Awards
DRA-3.1.29
(a) An award shall:(i) Give reasons for the decision;(ii) Be signed by the Arbitration Committee; and(iii) Contain the date on which and the place where it was made;(b) In addition to making a final award, the Arbitration Committee has the power to make interim, interlocutory or partial awards during the course of an arbitration;(c) An award made by the Arbitration Committee under this section shall be sent to the parties and lodged with theArbitration Cell for filing;(d) The CBB:(i) Shall be notified by theArbitration Cell of any award made in respect of aCMSP ; and(ii) May make use of any findings made by an Arbitration Committee for the purposes of performing its functions under the CBB Law including, but without limitation, assessing whether theCMSP is a fit and properperson to be so licensed; and(f) An award made by the Arbitration Committee is final and binding on the parties.July 2010Correction of Awards
DRA-3.1.30
(a) Within 14 days after the receipt of the award, either party may, with notice to the other party, request the Arbitration Committee to correct in the award any errors in computation, any clerical or typographical errors or any errors of a similar nature;(b) If the Arbitration Committee considers the request made under (a) to be justified, he shall make the correction within 14 days after the receipt of the request;(c) The Arbitration Committee may, on its own initiative, correct any error of the type referred to in (a) within 28 days after the date of the award; and(d) Rule DRA-3.1.27 applies in relation to such corrections.July 2010Additional Awards
DRA-3.1.31
(a) Within 14 days after the receipt of an award, either party may, with notice to the other party, request the Arbitration Committee to make an additional award as to claims presented during the course of the arbitration but omitted from the award;(b) If the Arbitration Committee considers the request for an additional award to be justified and considers that the omission can be rectified without any further evidence, he may make the additional award within 14 days after the receipt of the request; and(c) Rule DRA-3.1.27 applies in relation to such additional award.July 2010Costs
DRA-3.1.32
(a) The Arbitration Committee shall make an order for costs whenever he makes an arbitration award, including an award on agreed terms, and an order for the termination of the arbitration proceedings;(b) Subject to (c), the costs of an arbitration are to be borne by the unsuccessful party;(c) The Arbitration Committee may apportion costs between the parties if it considers that apportionment is reasonable in the circumstances;(d) The order for costs shall specify:(i) The sum to be paid, which shall include:1. The amount of fees of the Arbitration Committee;2. Costs for legal advice or for other assistance such as translation, oral interpretation and note-taking required by the Arbitration Committee;3. Travel and other expenses or witnesses to the extent allowed by the Arbitration Committee; and4. The amount of administrative or other costs incurred by the Arbitration Committee and the arbitration panel;(ii) The parties to and by whom payment shall be made; and(iii) The time limit for making payment; and(e) A party against whom such an order is made shall make payment in accordance with the order.July 2010Deposits of Costs
DRA-3.1.33
(a) At any time during the arbitration proceedings, the Arbitration Committee may require any party to deposit with theArbitration Cell such sum or sums to defray the expenses of the arbitration if the Arbitration Committee considers it expedient to do so in the circumstances;(b) In determining the amount of any deposit, the Arbitration Committee shall take into account the amount in dispute, the complexity of the subject matter, the costs incurred or to be incurred by the Arbitration Committee, and other relevant circumstances of the case;(c) If payment of the required deposit is not made by the relevant party within 14 days after the receipt of the requirement, the Arbitration Committee may make an order for the termination of the arbitration proceedings; and(d) After the termination of proceedings, with the approval of the Arbitration Committee, theArbitration Cell :(i) Shall render an account to the parties of the total deposits received under these rules; and(ii) After all the costs required to be borne by a party have been paid, shall return any unexpended balance of the party's portion of the deposits to that party.July 2010Notice Period
DRA-3.1.34
(a) For the purposes of calculating a period of time under this Module:(i) The period begins to run on the day following the day when the document is sent or lodged;(ii) If the last day of the period is a public holiday or a day on which banks are not generally open for business, the period is extended until the first business day that follows; and(iii) Public holidays or days on which banks are not generally open for business occurring during the running of the period of time are included in calculating the period.July 2010Interest
DRA-3.1.35
The Arbitration Committee may order the payment of interest on any damages or costs, including the payment of compound interest if appropriate in the circumstances.
July 2010Destruction of Documents
DRA-3.1.36
The
Arbitration Cell and the Arbitration Committee may destroy any document relating to an arbitration sent to them under this Module after the expiry of a period of ten years after the following, whichever is the later:(a) The last correspondence relating to the arbitration received by theArbitration Cell ;(b) The making of an arbitration award by the Arbitration Committee; and(c) The making of an order for the termination of the arbitration proceedings.July 2010Confidentiality
DRA-3.1.37
(a) The Arbitration Committee may in its discretion determine that certain information relating to the arbitration is to be kept confidential; and(b) Such confidential information may not be disclosed by anyperson , other than the CBB, without the written consent of the Arbitration Committee.July 2010Applicable Law
DRA-3.1.38
(a) Kingdom of Bahrain Law applies to the arbitration proceedings;(b) The Arbitration Committee shall take into account the trade practice applicable to the transaction; and(c) Laws relating to arbitration in the Kingdom of Bahrain shall apply to an arbitration conducted under this Module, save for those matters that have been specifically provided for in this Module.July 2010DRA-3.1.39
(a) The Arbitration Committee, or if the arbitration proceedings have not commenced, the Chairman may modify the requirements of this Module in relation to the sending of documents or the length of time periods in particular cases where, in his opinion, it is expedient to do so in the interest of justice; and(b) A party who knows or reasonably ought to know that any provision of, or requirement under, this Module has not been complied with and yet proceeds with the arbitration without promptly stating his objection to such non-compliance is deemed to have waived his right to object.July 2010DRA-3.1.40
The Arbitration Committee shall decide on the dispute heard by it within a period not exceeding three months.
July 2010DRA-3.1.41
The Arbitration Committee shall, if required, undertake investigation in disputes heard by it, or may authorise one of its members, or one of the members of the
Arbitration Cell of theSRO to carry out the investigation.July 2010DRA-3.1.42
The Arbitration Committee shall make its decision on disputes heard before it, based on the evidence produced by the parties, and subject to the rules applicable at the
SRO . The decision shall be executed in accordance with the provisions of the Civil Procedure Law, as amended.July 2010DRA-3.1.43
Disputes shall cease before the Arbitration Committee, for the same reasons provided in the Civil Procedure Law, as amended, and shall have the same effect legally resulting from the cessation of the dispute.
July 2010DRA-3.1.44
Where in any hearing by the Arbitration Committee any question arises which is not within the jurisdiction of the Arbitration Committee, or a claim of forgery of any document is raised, or any criminal proceedings have been taken due to such forgery, the Arbitration Committee shall suspend its work pending the issue of final judgement thereon.
July 2010DRA-3.1.45
Deliberations on the decision shall be confidential, and no
person besides the member of the Arbitration Committee who attended the session hearings shall be entitled to participate. Decisions shall be adopted by majority vote. The decision shall be valid if signed by the majority of the members.July 2010DRA-3.1.46
The decision passed by the Arbitration Committee shall be in writing, and shall contain in particular, statements and documents of the parties, the reasons for the decision, and date and place of the decision. The decision shall be signed by the Arbitration Committee. However, the decision shall be valid if signed by the majority of the Arbitration Committee.
July 2010DRA-3.1.47
The
Arbitration Cell shall file the original decision of the Arbitration Committee and its attachments with the Court Clerks Section, within three days from the date of the announcement. The parties shall be notified of such filing.July 2010DRA-3.1.48
The concerned party may apply to the Chairman of the competent court to obtain a copy of the Arbitration Committee's decision, accompanied by an execution order.
July 2010DRA-3.1.49
The parties may, regardless of the situation of their dispute, apply to the Arbitration Committee to enter on the record any agreed settlement or other mutual agreement reached by them, to be signed by them or by their representatives. The written agreement shall, in this case, be attached to the Arbitration Committee record and the contents of the agreement shall be entered on the record.
July 2010DRA-4 DRA-4 Disciplinary Committees
DRA-4.1 DRA-4.1 Disciplinary Action
DRA-4.1.1
All
SROs must ensure compliance by the members of theSRO and issuers ofsecurities with its business rules and listing rules respectively.Amended: April 2020
Added: July 2010DRA-4.1.2
SROs must seek to detect rule breaches quickly, to take action to minimise the impact of the rule breach, and where possible to alert investors and other market participants of the breach. Potential rule breaches shall be uncovered through a range of activities, including the SROs surveillance and investigation functions, and research and data analysis, and from many sources including tip-offs and complaints received from the public and media commentary.Amended: April 2020
Added: July 2010DRA-4.1.3
(a) Disciplinary action is an important activity for theSROs as the frontline regulators of members and listed companies, but it is not an end in itself. Its principal purpose is to change future behaviour by demonstrating that breaches of the business rules and listing rules will be identified and the sanction imposed will have a cost or adverse impact on the companies and individuals concerned; and(b) Through disciplinary actions, theSRO shall seek to:(i) Deter future breaches by conveying clear messages that certain conduct is unacceptable and will not be tolerated by theSRO and that there are consequences to follow from a rule breach;(ii) Educate the market; and(iii) Ultimately influence and bring about change of attitude and behaviour towards an enhanced compliance culture and improved corporate governance.Amended: April 2020
Added: July 2010Disciplinary Committee
DRA-4.1.4
All
SROs must constitute a Disciplinary Committee. The Disciplinary Committee will be responsible for adjudicating on any alleged violation of the rules and regulations of theSRO and determine penalties to be imposed against the members of theSRO and issuers ofsecurities .Amended: April 2020
Added: July 2010Constitution of a Disciplinary Committee
DRA-4.1.5 DRA-4.1.5
The Disciplinary Committee must be constituted by a resolution of the Board of the
SRO . The constitution and membership of the Disciplinary Committee must be approved by the CBB. The Disciplinary Committee must be independent and separate from the SRO's executive management structure, consisting of a minimum of three members and must not have a member who is, or who within three years of the proposed appointment date was, a director, officer or employee of the SRO or a related corporation of the SRO.Amended: April 2020
Added: July 2010DRA-4.1.5A
The Disciplinary Committee members must comprise of persons with qualification in the area of law, finance, accounts, economics, management or administration and experience in financial services, including the securities market or any other relevant field. At least one member of the Disciplinary Committee must be legally qualified.
Added: April 2020DRA-4.1.5B
Prior to appointing a person as a member of the Disciplinary Committee, the SRO must obtain and assess the following information:
(a) a declaration that the person has not been involved in any act of fraud, dishonesty or found guilty of any economic or other offence excluding minor traffic offence;(b) a declaration that the person has not been disqualified by a court, regulator or other competent body; and(c) disclosure regarding the nature of association with securities market including names of family members (spouse, father, mother, sons, daughters, brothers or sisters) associated with securities market.Added: April 2020Terms of Reference of the Disciplinary Committee
DRA-4.1.6
The powers and functions and limitations thereon of the Disciplinary Committee are as follows:
(a) To exercise all the powers and functions of theSRO on all disciplinary matters relating to the members and issuers ofsecurities ;(b) Without prejudice to the generality of the foregoing:(i) To exercise all the powers and functions reserved to the Disciplinary Committee in the "Disciplinary Procedures" approved by theSRO's senior management from time-to-time;(ii) To convene and conduct hearings of charges against member(s) of anSRO or an issuer(s) of asecurity and to decide whether those charges are proven or not;(iii) To impose such penalty as the Disciplinary Committee may think fit on a member(s) of anSRO or an issuer(s) of asecurity , against whom charges are so proven, provided that such penalty shall be within the range of penalties set out in the rules of theSRO and the "Disciplinary Procedures" approved by theSRO's senior management from time-to-time;(iv) To summon member(s) of anSRO or an issuer(s) of asecurity and their employees to attend and make representations before the Disciplinary Committee;(v) To review the operation of the "Disciplinary Procedures" approved by the senior management from time-to-time on a regular basis and to report with recommendations to the board of anSRO on any proposals for the improvement of those procedures which the Disciplinary Committee considers necessary; and(vi) To request a member(s) of anSRO or an issuer(s) of asecurity or their employees to produce their books and records for inspection by the Disciplinary Committee;(c) To liaise with theCMSD as necessary in relation to its powers and duties, or as theCMSD may require;(d) To review the provisions of the rules of theSRO relating to the disciplinary matters of a member(s) of anSRO or an issuer(s) of asecurity from time-to-time and to consider and advise on any amendments to those provisions and to recommend such amendments as it sees fit for the approval of the board of theSRO and the CBB;(e) To submit written and/or oral reports to the board of theSRO or to theCMSD regarding its activities and proceedings as and when requested; and(f) To conform to any written and/or oral advice (which shall include any direction) that may from time-to-time be prescribed by the board of theSRO orCMSD .Amended: April 2020
Amended: January 2020
Added: July 2010Penalties
DRA-4.1.7
The following penalties can be imposed by the Disciplinary Committee:
(a) Reminder;(b) Warning;(c) Confiscation of all or part of theCMSP's guarantee;(d) Suspension of trading by violating companies for a period not exceeding four months;(e) Striking off the listed companies and unlisted companies, or the transfer of a listed company into an unlisted company whosesecurities are admitted for trading;(f) Suspension of aCMSP's membership for a period not exceeding four months;(g) Cancellation of membership of aCMSP , and any otherperson with a similar status membership; or(h) Any other penalty available, as per the rules of theSRO .Amended: April 2020
Added: July 2010DRA-4.1.8
Deliberations of the Disciplinary Committee must be confidential. Resolutions must be adopted by majority vote and the concerned parties must be notified not later than 15 calendar days following adoption of resolution(s).
Amended: April 2020
Added: July 2010DRA-4.1.9
The chief executive officer of the
SRO must refer the violation record to the Disciplinary Committee if an investigation has been carried out by theSRO , or where the violation has been referred by theCBB for investigation.Amended: April 2020
Added: July 2010DRA-4.1.10
Violations referred to disciplinary proceedings must be raised in the form of a statement, which must, at a minimum, contain the name and address of the defendant, date of the violation and a summarised description of the violation and the available evidence. The Disciplinary Committee must not consider any violation unless it is submitted in accordance with this method.
Amended: April 2020
Added: July 2010DRA-4.1.11
The record of the violation referred to in the Disciplinary Committee must be submitted to the Chairman of the Disciplinary Committee for fixing a date for the hearing by issuing an order to that effect. The
Disciplinary Action Cell must serve summons on the defendant, requiring him to appear on the date fixed for the hearing.Amended: April 2020
Added: July 2010DRA-4.1.12
A staff member of the
Disciplinary Action Cell must attend the hearing of the Disciplinary Committee, in order to keep the record under the supervision of the Chairman thereof. The record must contain names of members of the Disciplinary Committee, date, time and place of the hearing, names of parties who appear, or their representatives, all proceedings carried out in the hearing, and any statements and applications made by the parties. The Chairman and the staff of theDisciplinary Action Cell must sign the record.Amended: April 2020
Added: July 2010DRA-4.1.13
The defendant must appear on the date fixed for hearing the violation, and the committee must enable him to state his defence in respect thereof, after notifying him of the violation and of the supporting evidence.
Amended: April 2020
Added: July 2010DRA-4.1.14
If the defendant does not appear at the sitting fixed for hearing the violation, the committee may, if it is proved that the summons was duly served, proceed to hear and decide on the violations in his absence.
Amended: April 2020
Added: July 2010DRA-4.1.15
Records of investigations carried out prior to the disciplinary proceedings must be attached to the violation record. The Disciplinary Committee, if not satisfied with the investigation, may carry out its own investigation or order further investigations by the
SRO or by an independent professional firm.Amended: April 2020
Added: July 2010DRA-4.1.16
The Disciplinary Committee may, for the proof of any facts, rely on the evidence obtained from the investigations carried out in respect of the facts which constitute the violation, and may, at its absolute discretion, prefer one item of evidence to the other. The Disciplinary Committee shall may formulate its valuation according to its own satisfaction. The Disciplinary Committee must not base its decision on the personal knowledge of its members.
Amended: April 2020
Added: July 2010DRA-4.1.17
The members of the Disciplinary Committee must deliberate on the decision before issuing it. Every member must express his opinion in secret, and the decision must be taken by majority vote.
Amended: April 2020
Added: July 2010DRA-4.1.18
The decision passed by the Disciplinary Committee must be in writing. It must contain a review of the violation, statements and defence of the offender, proceedings carried out, reasons for the decision and the decree thereof, and date and place of issue of the decision. The draft decision must be signed by the Chairman and members of the Disciplinary Committee.
Amended: April 2020
Added: July 2010DRA-4.1.19
The Chairman of the Disciplinary Committee may pronounce the decision in a public hearing. The decision should be filed in the violation record, after pronouncement thereof.
Amended: April 2020
Added: July 2010DRA-4.1.20
[This Paragraph was deleted in April 2020].
Amended: April 2020
Added: July 2010DRA-4.1.21
[This Paragraph was deleted in April 2020].
Amended: April 2020
Added: July 2010DRA-4.1.22
The
Disciplinary Action Cell must, in the case of the defendant's non-appearance in the hearing, notify him of the decision within five days from the date of issue thereof.Amended: April 2020
Added: July 2010DRA-4.1.23
Service of all documents, decisions and notices relating to the disciplinary proceedings shall be effected by registered mail or any other acceptable means of correspondence including electronic means of correspondence.
Amended: April 2020
Added: July 2010DRA-4.1.24
Decisions of the Disciplinary Committee must be submitted to the CBB, in writing, as soon as possible after the decision has been made.
Added: April 2020DRA-4.2 DRA-4.2 Disciplinary Appeals Committee
DRA-.4.2.1
The decisions passed by the Disciplinary Committee of an
SRO referred to in section DRA-4.1 may be appealed to the Disciplinary Appeals Committee (DAC).July 2010DRA-4.2.2 DRA-4.2.2
The Disciplinary Appeals Committee, consisting of a minimum of three members, must be established and constituted by a Resolution of the Board of the SRO. The Disciplinary Appeals Committee must not have a member who is, or who within three years of the proposed appointment date was a director, officer or employee of the SRO or a related corporation of the SRO. The constitution and membership of the Disciplinary Appeals Committee must be approved by the CBB.
Amended: April 2020
Added: July 2010DRA-4.2.2A
The Disciplinary Appeals Committee members must comprise of persons with qualification in the area of law, finance, accounts, economics, management or administration and experience in financial services, including the securities market or any other relevant field. At least one member of the Disciplinary Appeals Committee must be legally qualified.
Added: April 2020DRA-4.2.2B
Prior to appointing a person as a member of the Disciplinary Appeals Committee, the SRO must obtain and assess the following information:
(a) a declaration that the person has not been involved in any act of fraud, dishonesty or found guilty of any economic or other offence excluding minor traffic offence;(b) a declaration that the person has not been disqualified by a court, regulator or other competent body; and(c) disclosure regarding the nature of association with securities market including names of family members (spouse, father, mother, sons, daughters, brothers or sisters) associated with securities market.Added: April 2020Terms of Reference of the Disciplinary Appeals Committee
DRA-4.2.3
The powers, functions and limitations thereon of the Disciplinary Appeals Committee are as follows:
(a) To exercise all the powers and functions relating to the referrals against the decisions of the Disciplinary Committee of theSROs ; and(b) Without prejudice to the generality of the foregoing:(i) To convene and conduct hearings of cases referred to it and to decide whether those referrals have been made on satisfactory grounds;(ii) To summon members ofSROs and issuers ofsecurities and their representatives or employees to attend and make representations before the Disciplinary Appeals Committee;(iii) To request members ofSROs and issuers ofsecurities or their representatives or employees to produce their books and records for inspection by the Disciplinary Appeals Committee;(iv) To remit the case back to the Disciplinary Committee for reconsideration where fresh evidence put up on referral is allowed; and(v) To dismiss the charges referred to it or to uphold the verdict of the Disciplinary Committee and, as the case may be, to impose the same or substitute a lesser or a greater penalty to that imposed by the Disciplinary Committee.Amended: April 2020
Added: July 2010DRA-4.2.4
Decisions of the Disciplinary Appeals Committee must be submitted to the CBB, in writing, as soon as possible after the conclusion of the proceeding.
Amended: April 2020
Added: July 2010DRA-5 DRA-5 Complaints to CBB
DRA-5.1 DRA-5.1 Complaints to CBB
DRA-5.1.1
Complaints from the public and customers of the CBB licensees are received by the CBB in the complaint forms available on the CBB's official website and such complaints which relate to potential cases of contravention of the CBB Law, rules and regulations, or
SROs' business rules are also used by the CBB for the purpose of the CBB's market surveillance, investigation and enforcement functions.Amended: April 2020
Added: July 2010International Co-operation
ICO — International Co-operation & Exchange of Information
Click here to download the PDF Version.
ICO — Cooperation & Exchange of Information with Overseas Authorities
ICO-A ICO-A Introduction
ICO-A.1 ICO-A.1 Purpose
Executive Summary
ICO-A.1.1
Module ICO sets out the regulatory framework for providing and securing mutual assistance and exchange of information with overseas authorities and exchanges for the purpose of enforcing and ensuring compliance with the respective laws and regulations of the CBB and the respective jurisdictions of the overseas authorities.
Adopted February 2009ICO-A.1.2
This Module imposes an obligation on capital market participants and intermediaries to provide information to the CBB as and when required by it in relation to overseas authorities covered under section ICO-B.1.
Adopted February 2009Legal Basis
ICO-A.1.3
Article 122 of the CBB Law provides the CBB with the power to provide assistance upon request by an overseas authority and to investigate and obtain information and documents for this purpose.
Adopted February 2009ICO-A.1.4
Article 111 of the CBB Law provides the CBB with the power to obtain information from licensees.
Adopted February 2009ICO-A.1.5
Article 112 of the CBB Law provides the CBB with the power to obtain information from others, including companies listed on a licensed exchange.
Adopted February 2009ICO-A.1.6
Article 123 of the CBB Law provides the CBB with the power to obtain information or documents in the possession of a third party and to compel such person to produce such information or dcuments and to take a copy or extract thereof.
Adopted February 2009ICO-A.1.7
This Module contains the CBB's Directives relating to the provision of information and documents pursuant to a request made by the CBB for providing and securing mutual assistance and exchange of information with overseas authorities and is issued under the powers available to the CBB under Articles 38 and 122 of the CBB Law. The Directive in this Module is applicable to all market participants and any persons who are in possession of information or documents, or who has information about the whereabouts of documents that are covered by the scope of this Module.
Adopted February 2009ICO-A.2 Module History
This Module was first issued in November 2008. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
Adopted February 2009ICO-A.3 Interaction with Other Modules
The obligations of CBB
licensees with respect to the maintenance of books, records and information shall be governed by the respective licensing framework provided under the relevant CBB Rulebook.Adopted February 2009ICO-B ICO-B Scope of Application
ICO-B.1 Scope
This Module shall apply to:
(a) Mutual assistance and exchange of information with signatories of the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMOU);(b) Mutual assistance and exchange of information pursuant to other multilateral or bilateral arrangements;(c) Mutual assistance and exchange of information with any overseas authority on a reciprocal basis based on a bilateral agreement or otherwise; and(d) Unsolicited assistance.Adopted February 2009ICO-B.2 ICO-B.2 Definitions
ICO-B.2.1
For the purpose of this Module, the following terms shall, unless the context determines otherwise, have the meanings assigned hereunder:
Adopted February 2009ICO-B.2.2
"Foreign or Overseas Authority" means:
(a) The authority involved in the regulation of the financial service markets in another country; or(b) Any foreign central bank or body with the authority of issuing money or responsible for supervising payment systems, clearances, or cheques and financial papers settlement.Adopted February 2009ICO-B.2.4
"IOSCO MMOU" means the International Organization of Securities Commissions Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information.
Adopted February 2009ICO-B.2.5
"Laws and Regulations" means the provisions of the laws of the jurisdictions of the overseas authorities, the regulations promulgated thereunder, and the other regulatory requirements that fall within the competence of the overseas authorities, concerning the following:
(a) Insider dealing, market manipulation, misrepresentation of material information and other fraudulent or manipulative practices relating to securities and derivatives, including solicitation practices, handling of investor funds and customer orders;(b) The registration, issuance, offer, or sale of securities and derivatives, and reporting requirements related thereto;(c) Market intermediaries, including investment and trading advisers who are required to be licenced or registered, collective investment schemes, brokers, dealers, and transfer agents; and(d) Markets, exchanges, and clearing and settlement entities.Adopted February 2009ICO-B.2.7
"Persons" means a natural or legal person, or unincorporated entity or association, including corporations and partnerships.
Adopted February 2009ICO-1 ICO-1 General Principles
ICO-1.1 ICO-1.1 General Principles
ICO-1.1.1
Mutual assistance and exchange of information and documents with an overseas authority, who is also a signatory to the IOSCO MMOU, shall be governed by the provisions of the IOSCO MMOU.
Adopted February 2009ICO-1.1.2
Mutual assistance and exchange of information and documents with an overseas authority, pursuant to a multilateral or bilateral arrangement to which the CBB and the overseas authority are parties, shall be governed by the respective multilateral or bilateral arrangements.
Adopted February 2009ICO-1.1.3
In respect of mutual assistance and the exchange of information and documents with an overseas authority who is not a party to the IOSCO MMOU, or any other multilateral or bilateral arrangement, the CBB may consider the following while deciding on the request received from an overseas authority for assistance:
(a) Whether the country or territory of the overseas authority is adopting the basis of reciprocity in its relation with the Kingdom;(b) The seriousness of the case and its importance to persons in the Kingdom;(c) Whether it is otherwise appropriate in the public interest to give the assistance requested.Adopted February 2009ICO-1.1.4
The CBB may decide to reject the request stated in paragraph ICO-1.1.3, unless the overseas authority undertakes to make contributions towards the cost of exercising such powers as the CBB considers appropriate.
Adopted February 2009Other Measures to Obtain Information
ICO-1.1.5
This Module does not prohibit the CBB from taking measures other than those identified herein to obtain information necessary to ensure enforcement of, or compliance with the laws and regulations applicable in the Kingdom of Bahrain.
Adopted February 2009ICO-1.1.6
This Module does not confer upon any person other than an overseas authority, the right or ability, directly or indirectly to obtain, suppress or exclude any information, or to challenge the execution of a request for assistance under this Module.
Adopted February 2009Complaints Regarding Violations
ICO-1.1.7
This Module does not restrict the ability of any person to provide unsolicited assistance to the CBB by way of provision of information, questions, complaints, or enforcement tips related to institutions or products operating or offered in Bahrain.
Adopted February 2009ICO-2 ICO-2 Scope of and Requests for Assistance
ICO-2.1 ICO-2.1 Scope and Basis of Assistance
ICO-2.1.1
The scope and basis of assistance in respect of mutual assistance and the exchange of information and documents with any overseas authority, who is a signatory to the IOSCO MMOU, shall be governed by the provisions of the IOSCO MMOU.
Adopted February 2009ICO-2.1.2
In respect of mutual assistance and the exchange of information and documents with any overseas authority, pursuant to a multilateral or bilateral arrangement to which the CBB and the overseas authority are parties, the scope and basis of assistance shall be governed by such arrangements, and in cases where such arrangements do not specify the scope or basis of assistance, the scope or basis of assistance shall be as set determined by the CBB.
Adopted February 2009ICO-2.2 ICO-2.2 Requests for Assistance
ICO-2.2.1
The procedures for the requests for assistance and execution of requests for assistance in respect of requests received from signatories to the IOSCO MMOU shall be as set out in the IOSCO MMOU.
Adopted February 2009ICO-2.2.2
The procedures for the requests for assistance and execution of requests for assistance in respect of requests received from an overseas authority, pursuant to a multilateral or bilateral arrangement to which the CBB and the overseas authority are parties, will be governed by the respective multilateral or bilateral arrangements.
Adopted February 2009ICO-2.2.3
Unless otherwise provided in the IOSCO MMOU or other multilateral or bilateral arrangements to which the CBB and overseas authority are a party, the CBB may determine the procedures for the execution of requests for assistance.
Adopted February 2009ICO-2.2.4
Upon request by the requesting overseas authority, the CBB may require the production of documents from any designated person or any other person who may possess the requested information or documents. Upon request, the CBB may obtain other information relevant to the request.
Adopted February 2009ICO-2.2.5
Upon request, the CBB may seek responses to questions and/or a statement (or where permissible, testimony under oath) from any person involved, directly or indirectly, in the activities that are the subject matter of the request for assistance or who is, or purported to be in possession of information that may assist in the execution of the request.
Adopted February 2009ICO-2.2.6
Information and documents requested will be gathered in accordance with the procedures applicable in the Kingdom of Bahrain and by persons designated by the CBB.
Adopted February 2009ICO-2.3 Information Provided by Licensees Directly to Overseas Authorities
When information has been provided by a CBB licensee directly to an overseas authority, the details of the request and the information provided must be sent to the CBB simultaneous to the provision of information to the overseas authority.
Adopted February 2009ICO-3 ICO-3 Confidentiality, Unsolicited Assistance and Penalties
ICO-3.1 Confidentiality
The CBB shall, unless otherwise required by law, keep confidential requests made, the contents of such requests and any matters arising under this Module, including correspondence between or among the CBB and overseas authorities.
Adopted February 2009ICO-3.2 ICO-3.2 Unsolicited Assistance
ICO-3.2.1
The CBB may provide, without prior request, overseas authorities with any information that it considers is likely to be of assistance to those overseas authorities.
Adopted February 2009ICO-3.2.2
Reciprocity requirements should not be a strict precondition for the exchange of information.
Adopted February 2009ICO-3.3 Penalties
Any person who fails to provide information or documents, or any material pursuant to a request made by the CBB, or by a CBB appointed investigator or inspector shall be liable to penalties prescribed under Part 11 of the CBB Law.
Adopted February 2009