• Part A

     

    Table of Contents
    Under development: completed Modules are listed here as and when they are issued. 'Old Style' regulatory instruments that remain in force can be accessed under 'CBB Capital Markets Regulations'.
     Module TitleModule
    Code
    Date last
    changed
     
    IntroductionUser's GuideUGApr 20PDF Version
    Executive SummaryES(to be issued) 
    InstitutionsMarkets and ExchangesMAEApr 22PDF Version
    Clearing, Settlement and DepositoryCSDJan 22PDF Version
    Market Intermediaries and RepresentativesMIROct 20PDF Version
    Crypto-AssetCRAOct 23PDF Version
    Collective Investment Undertakings[Replaced by Volume 7 in April 2012]CIUApr 12 
    Market StandardsOffering of SecuritiesOFSJan 21PDF Version
    Take-overs, Mergers and AcquisitionsTMAJan 24PDF Version
    Prohibition of Market Abuse and ManipulationMAMJul 21PDF Version
    Market Surveillance, Investigation & EnforcementMIEJul 21PDF Version
    Anti-Money Laundering & Combating Financial CrimeAMLJan 24PDF Version
    Training and CompetencyTCJan 22PDF Version
    Ongoing ObligationsListing RequirementsLIR(to be issued) 
    Disclosure RequirementsDIS(to be issued) 
    High Level StandardsHigh-Level Controls (Corporate Governance)HCOct 22PDF Version
    Dispute Resolution and Investor ProtectionDispute Resolution, Arbitration and Disciplinary ProceedingsDRAApr 20PDF Version
    International Co-operationInternational Co-operation & Exchange of InformationICOMar 09PDF Version

     

    • 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 and Islamic bank licensees respectively, were issued in July 2004 and January 2005; Volume 3, covering insurance licensees, was issued in April 2005; and Volume 4 (covering investment firm licensees), issued in April 2006. Volume 5 (covering specialised licensees) and Volume 6 (capital markets) are being issued progressively. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.

                Amended: April 2013

              • UG-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 2013

              • UG-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 their approved persons) that undertake relevant capital markets activity (as specified in the Scope of Application Chapters contained in each Volume 6 Module).

                Amended: April 2013

              • UG-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 2013

            • CBB'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 of CBB licensees), approved persons or registered 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 or registered 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 2016

          • UG-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 2013

              • UG-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 2013

            • Rulebook 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 2013

              • UG-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 2013

              • UG-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.bh

            • Queries

              • 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 Bahrain

                Tel: +973-17 547 413
                Fax: +973-17 530 228
                E-mail: rulebook@cbb.gov.bh
                Web: www.cbb.gov.bh

                Questions 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 2013

        • ANNEX CBB Rulebook Order Form [This form was deleted in April 2013]

          Deleted: April 2013

      • ES — 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 and licensed 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 and licensed 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 transparent markets;
                (b) To facilitate efficient markets 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 different market participants.

              • MAE-A.1.4

                Persons or entities undertaking functions falling within the meaning of licensed exchanges and licensed market operators require prior CBB approval. MAE-B.2 provides the definitions for licensed exchanges and licensed 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 of securities takes place;
                (b) Which provide listings of securities 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 in securities.

              • MAE-A.1.4A

                [This Parapgraph was deleted in April 2022].

                Deleted: April 2022
                Added: October 2017

            • Legal 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 a licensed 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 2016

              • MAE-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 2016

          • MAE-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 2013

              • MAE-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 a Clearing House or a Depository should refer to Module CSD (Clearing, Settlement and Central Depository) which sets forth the CBB requirements for the operating of and licensing requirements of a Clearing House and/or Depository, as well as Module MIR (Market Intermediaries and Representatives).

              Amended: April 2016

            • MAE-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 of securities on licensed exchanges.

              Amended: April 2016

            • MAE-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 2016

            • MAE-A.3.5

              Licensed exchanges and licensed 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 2016

            • MAE-A.3.6

              [This Paragraph was deleted in April 2016.]

              Deleted: April 2016

            • MAE-A.3.7

              [This Paragraph was deleted in April 2016.]

              Deleted: April 2016

            • MAE-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 2016

            • MAE-A.3.9

              Licensed exchanges, licensed market operators, market makers and issuers must in addition to complying with the market making provision under this Module refer to and comply with Module MIR (Market Intermediaries and Representatives) which sets forth the CBB requirements for market making.

              Added: January 2019

          • MAE-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 the licensed market operators as a self regulatory organisation (SRO) is required:

              (a) To maximise the regulatory effectiveness;
              (b) To permit flexibility to the licensed exchanges or the licensed 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 2016

            • MAE-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 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 regulations of the licensed exchanges or the licensed market operators, whereby any change in the rules, by-laws and regulations of the licensed exchange or the licensed market operator would need prior approval of CBB; and
              (e) Licensing, supervision, inspection, investigation and enforcement.
              Amended: April 2016

            • MAE-A.4.3

              The licensed exchange or the licensed 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 2016

            • MAE-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 to market facilities and information;
              (c) The provision of timely and accessible relevant market data; and
              (d) The efficient regulation of its members.
              Amended: April 2016

        • MAE-B MAE-B Purpose

          • MAE-B.1 MAE-B.1 Scope

            • MAE-B.1.1

              This Module shall apply to markets operated by a licensed exchange or licensed market operator in or from the Kingdom of Bahrain for the trading of securities, including commodities and/or futures contracts.

              Amended: April 2016

            • MAE-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 to markets and exchanges will be applicable to the Bahrain Bourse.

              Amended: April 2016

            • MAE-B.1.3

              [This Paragraph was deleted in April 2022].

              Deleted: April 2022
              Added: October 2017

          • MAE-B.2 Definitions

            [This Section was deleted and moved to the Glossary under Part B in July 2016.]

            Deleted: July 2016

        • MAE-1 MAE-1 Licensing

          • MAE-1.1 MAE-1.1 Requirement to be Licensed

            • MAE-1.1.1

              No person shall establish or operate a market, or hold himself out as operating a market in or from the Kingdom of Bahrain, unless the person is:

              (a) A licensed exchange;
              (b) A licensed market operator; or
              (c) An exempt exchange or market operator.
              Amended: April 2016

            • MAE-1.1.2

              No person in the Kingdom of Bahrain shall hold himself out:

              (a) As a licensed exchange unless he is a licensed exchange; or
              (b) As a licensed market operator unless he is a licensed market operator.

            • MAE-1.1.3

              Except with the written approval of the CBB, no person other than a licensed or exempt 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 2016

            • MAE-1.1.4

              No person may market any financial 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 offer financial services.
              Added: April 2013

            • MAE-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 2013

            • MAE-1.1.6

              Persons in breach of Paragraph MAE-1.1.4 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.

              Added: April 2013

          • MAE-1.2 MAE-1.2 Application for License

            • MAE-1.2.1

              A person may apply to the CBB to be:

              (a) Licensed as a licensed exchange;
              (b) Licensed as a licensed market operator; or
              (c) An exempt exchange or exempt 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 or licensed market operator under Article 39 of the CBB Law shall be made in Form 1 (Application for Approval as a licensed exchange or licensed 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 and market operations;
              (h) The proposed organisation structure and the powers and duties of the officials of the exchange or market operator;
              (i) The criteria for admission into the licensed exchange or the operator of various classes of members, the qualifications for membership, and the exclusion, suspension, expulsion and readmission of members 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 of market abuse, compliance arrangements, and such other rules as may be required by the CBB.
              Amended: April 2013

            • MAE-1.2.5

              The applications must include evidence that:

              (a) Any trading conducted will operate in an orderly, transparent and fair manner;
              (b) The licensed exchange or licensed market operator will be subject to regulation by the CBB;
              (c) The licensed exchange or licensed market operator has taken adequate measure to prudently manage any risks associated with its business and operations;
              (d) The licensed exchange or licensed 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) The licensed exchange or licensed market operator will enforce compliance by its members with its business rules and listing rules;
              (f) The business rules and listing rules of the licensed exchange or licensed market operator make satisfactory provisions for: an orderly, transparent and fair market trading through its facilities; and the proper rules and supervision of its members; and
              (g) The licensed exchange or licensed market operator has sufficient financial, human, and technical resources to establish and operate a fair and efficient system for market 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 2016

            • MAE-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 2016

            • MAE-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 2016

            • MAE-1.3.3

              The operations of the licensed exchange or licensed market operator may only commence after the CBB grants the license to the applicant.

              Amended: April 2016

            • MAE-1.3.4

              The CBB may license a person as a licensed exchange or license an overseas exchange as a licensed 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 the person may undertake;
              (b) The securities or futures contracts that may be traded on any market established or operated by the person; and
              (c) The nature of the investors or participants who may use, invest in or participate in the securities or futures contracts traded on any market established or operated by the person.
              Amended: April 2016

            • MAE-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 2016

            • MAE-1.3.6

              A licensed exchange or a licensed 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 any person operating any market from the requirement under MAE-1.1 to be a licensed exchange or a licensed market operator;
              (b) Declare that person to be an exempt 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 that person.
              Amended: April 2016

            • MAE-1.4.2

              An application to be exempted from the requirement under MAE-1.2 to be a licensed exchange or a licensed 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 a licensed 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 2016

            • MAE-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 the person may undertake;
              (b) The securities or futures contracts that may be traded on any market established or operated by the person; and
              (c) The nature of the investors or participants who may use, participate or invest in the securities or futures contracts traded on any market established or operated by the person.
              Amended: April 2016

            • MAE-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 the person under MAE-1.4.6 in relation to the securities or futures contracts that may be traded on any market established or operated by the person.

              Amended: April 2016

            • MAE-1.4.9

              An exempt market operator shall comply with all conditions or restrictions imposed on it under MAE-1.4.6, 1.4.7, or 1.4.8, as the case may be.

          • MAE-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) The person does not commence operating its market or, where it operates more than one market, all of its markets, within 6 months from the date on which it was granted the exemption;
              (b) The person ceases to operate its market or, where it operates more than one market, all of its markets;
              (c) The person 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 the person has operated in a manner that is contrary to the interests of the public;
              (e) The person 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 equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to, or in respect of, any property of the person;
              (g) The person 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 the person would be more appropriately regulated as a licensed exchange or a licensed market operator; or
              (i) Any information or document provided by the person to the CBB is false or misleading.
              Amended: April 2013

            • MAE-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 the person 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 the person an opportunity to be heard:

              (a) The person 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 equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to, or in respect of any property of the person; or
              (c) The person 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 its market if:

              (a) It has ceased to operate the market 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 the market 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 a market operated by the person, 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 2013

            • MAE-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 a licensed exchange or licensed market operator if:

              (a) The CBB is satisfied that the establishment of a market or exchange to be operated by a person will;
              (i) Develop the financial sector and enhance confidence therein; and
              (ii) Protect the interests of investors in the market and exchanges and enhance the Kingdom's credibility as an international financial centre; and
              (b) The CBB is satisfied that the person, having applied to be a licensed exchange or licensed market operator under this Module, is able to comply with the obligations or requirements imposed on licensed exchanges or licensed market operators.
              Amended: April 2013

            • MAE-1.6.2

              The CBB may have regard to the following matters in determining whether a licensed exchange or licensed 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 the market to be operated by the applicant;
              (b) The nature of the services provided, or to be provided, by the market to be operated by the applicant;
              (c) The nature of the securities or futures contracts traded, or to be traded, on the market to be operated by the applicant;
              (d) The nature of the investors or participants, or proposed investors or participants, who may use or have an interest in the market 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 of members) which the CBB, having regard to the the nature of the securities dealt with by it, may impose;
              (h) The proposed trading and settlement systems comply with up-to-date industry standards;
              (i) The persons who may be affected in the event that the applicant, or the market 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 2016

            • MAE-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 a market or exchange;
              (b) Made arrangements for the proper supervision of all transactions effected through the market 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 the market or exchange;
              (d) Insurance, a guarantee or compensation fund or other warranty plans in place to enable it to provide compensation, subject to the business rules, to clients; and
              (e) Made provisions, to the satisfaction of the CBB, for the clearing and settlement of transactions effected through the market 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 a licensed 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 or licensed market operator which intends to cease operating its market or, where it operates more than one market, all of its markets, must apply to the CBB to surrender its approval as a licensed exchange or licensed market operator, as the case may be.

              Amended: April 2016

            • MAE-1.7.2

              The CBB may, subject to MAE-1.8.1 cancel the license if it is satisfied that the licensed exchange or licensed market operator referred to in MAE-1.7.1 has ceased operating its market or all of its markets, as the case may be and that there are no pending obligations of the licensed exchange or licensed market operator or contracts traded.

            • MAE-1.7.3

              The licensed exchange or licensed market operator 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.

            • MAE-1.7.4

              Any objections received from any member, user or participant of the licensed exchange or licensed 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 a licensed exchange or licensed market operator if:

              (a) There exists criteria under MAE-1.2 that the licensed exchange or licensed market operator does not meet and on which grounds the CBB would refuse an application;
              (b) The licensed exchange or licensed market operator does not commence operating its market or, where it operates more than one market, all of its markets within 6 months from the date on which it was granted the license.
              (c) The licensed exchange or licensed market operator ceases to operate its market or, where it operates more than one market, all of its markets.
              (d) The licensed exchange or licensed 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) The licensed exchange or licensed market operator operates in a manner that is in the opinion of the CBB, contrary to the interests of the public or user; and
              (f) Any information or document knowingly or willingly provided by the licensed exchange or licensed market operator to the CBB is false or misleading.
              Amended: April 2013

            • MAE-1.8.2

              The CBB may not, subject to MAE-1.8.3, cancel any license that was granted to a licensed exchange or licensed 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 or licensed market operator on any of the following grounds without giving an opportunity to be heard:

              (a) The licensed exchange or licensed 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 equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the licensed exchange or licensed market operator; and
              (c) The licensed exchange or licensed 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 or licensed market operator shall be deemed to have ceased to operate its market if:

              (a) It has ceased to operate the market 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 the market under a direction issued by the CBB.
              Amended: July 2016
              Amended: April 2016

            • MAE-1.8.5

              Any cancellation of a license of a licensed exchange or licensed 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 a market 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 or licensed market operator, notification to the licensed exchange and an appeal against such a decision shall be governed by Article 48 of the CBB Law.

              Amended: July 2016

          • MAE-1.9 MAE-1.9 Annual Fees Payable by Licensed Exchange and Licensed Market Operator

            • MAE-1.9.1

              Every licensed exchange and licensed 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 2013

            • MAE-1.9.1A

              The following fee is currently prescribed for licensed exchanges and licensed market operators:

              Managing and operating markets and systems for trading in securities and financial instruments (fixed) BD15,000
              Amended: April 2016
              Added: April 2013

            • MAE-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 or licensed market operator failing to comply with Paragraph MAE-1.9.1 may be subject to financial penalties as prescribed by the CBB.

              Added: April 2016

          • MAE-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 2019

            • MAE-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 2017

            • MAE-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 2017

          • MAE-1.11 MAE-1.11 Place of Business

            • MAE-1.11.1

              No licensed exchange or licensed 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 the licensed exchange or licensed market operator is not an overseas 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 2016

        • MAE-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 or licensed market operator shall, in respect of every market it operates:

                (a) As far as is reasonably practicable, ensure that the market 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 the market and to protect the interests of the investing public;
                (e) Maintain business rules and, where appropriate, listing rules that make satisfactory provision for:
                (i) A fair, orderly and transparent market in securities and futures contracts that are traded through its facilities; and
                (ii) The proper regulation and supervision of its members;
                (f) Enforce compliance with its business rules and, where appropriate, its listing rules;
                (g) Have sufficient financial, human and system resources:
                (i) To operate a fair, orderly and transparent market;
                (ii) To meet contingencies or disasters; and
                (iii) To provide adequate security arrangements;
                (h) Ensure that it appoints or employs fit and proper persons 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 its members, shareholders, users and participants 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 all participants 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 2016

              • MAE-2.1.1A

                Licensed exchanges and licensed 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 2020

            • Notification Requirements

              • MAE-2.1.2

                A licensed exchange or licensed 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 the licensed exchange or licensed market operator in its application under MAE-1.2;
                (b) The carrying on of any business by the licensed exchange or licensed market operator other than:
                (i) The business of operating a market;
                (ii) A business incidental to operating a market; or
                (iii) Such business or class of businesses as the CBB may prescribe;
                (c) The acquisition by the licensed exchange or licensed market operator of a substantial shareholding in a corporation which does not carry on:
                (i) The business of operating a market;
                (ii) A business incidental to operating a market; or
                (iii) Such business or class of businesses as the CBB may prescribe;
                (d) The licensed exchange or licensed 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 a member of the licensed exchange or licensed market operator to meet its financial obligations to the licensed exchange or licensed market operator;
                (e) The licensed exchange or licensed market operator reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against a member of the licensed exchange or licensed 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 the licensed exchange or licensed market operator, whether in Bahrain or elsewhere;
                (h) Any disciplinary action taken against the licensed exchange or licensed 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 the licensed exchange or licensed market operator by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
                (j) A failure by the licensed exchange or licensed market operator to adhere to the trading days, hours or sessions of the licensed exchange or licensed market operator;
                (k) Any disruption of, delay in, suspension of, or termination in any trading procedure or trading practice of the licensed exchange or licensed market operator including those resulting from any system failure;
                (l) Any other matter that the CBB may specify by notice in writing to the licensed exchange or licensed market operator.
                Amended: April 2013

              • MAE-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 and licensed market operator an opportunity to be heard, issue directions to the licensed exchange or licensed 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 the licensed exchange or licensed market operator shall comply with such directions.
                Amended: April 2016
                Amended: April 2013

              • MAE-2.1.4

                Where a circumstance referred to in MAE-2.1.2 has occurred, the licensed exchange or licensed 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 the licensed exchange or licensed market operator has taken or intends to take.

                Amended: April 2016

              • MAE-2.1.5

                An exchange may levy on its members, participants and users such fees as it may deem necessary in the form of:

                (a) Membership fees; and/or
                (b) Listing fees
                Amended: April 2013

              • MAE-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 or licensed 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 the person establishing or operating an overseas market 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 the licensed exchange and the person operating an overseas market 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 or licensed 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 or licensed 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 or licensed 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 or licensed 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 or licensed 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 a licensed exchange or licensed market operator, or having an extraordinary interest in a licensed exchange or licensed 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 or licensed market operator must appoint another auditor.

              Amended: April 2016

            • MAE-2.3.6

              The licensed exchange or licensed 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 or licensed market operator's accounts are correct and reflect the actual state of affairs of the licensed exchange or licensed market operator according to the auditing standards prescribed by the CBB and whether the licensed exchange or licensed 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 or licensed 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 or licensed 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 or licensed 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 2016

            • MAE-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 2016

          • MAE-2.4 MAE-2.4 Obligation to Submit Periodic Reports

            • MAE-2.4.1

              A licensed exchange or licensed 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 the licensed exchange or licensed 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 the licensed exchange prepared in such form as may be approved by the CBB;
              (e) The following reports relating to the business of the licensed exchange or licensed 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 the licensed exchange is operating a futures market, 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 2013

            • MAE-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 or licensed 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 2013

            • IIS Reporting Requirements

              • MAE-2.4.3

                A licensed exchange or licensed 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 2013

              • MAE-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 2013

          • MAE-2.5 MAE-2.5 Obligation to Assist CBB

            • MAE-2.5.1

              A licensed exchange and licensed 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 the licensed exchange or licensed market operator; or
              (ii) In respect of such dealings in securities or trading in futures contracts; and
              (b) Such other information, as the CBB may require for the proper administration of this Module.
              Amended: April 2013

            • MAE-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 more person 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 and licensed market operator and its officers and employees must maintain, and aid in maintaining the confidentiality of all user information that:

              (a) Comes to the knowledge of the licensed exchange or licensed market operator, or any of its officers or employees; and
              (b) Is in possession of the licensed exchange or licensed 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 of user information for such purposes, or in such circumstances as the CBB may prescribe;
              (b) Any disclosure of user information which is authorised by the CBB to be disclosed or furnished; or
              (c) The disclosure of user 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 or licensed market operator from entering into a written agreement with a user which obliges the licensed exchange or licensed 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 a licensed exchange or licensed market operator, or its officers or employees for the following purposes or in the following circumstances:

              (a) The disclosure of user 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 user information is permitted for such purpose specified in writing by the user or, where the user is deceased, by his appointed personal representative;
              (c) The disclosure of user information is necessary for the execution by the licensed exchange or licensed market operator of a transaction in any securities or futures contracts or clearing or settlement of a transaction and such disclosure is made only to another user which is:
              (i) A party to the transaction; or
              (ii) A member of a licensed exchange or licensed market operator, or a designated clearing house through which that transaction is executed, cleared or settled;
              (d) The disclosure of user information is necessary:
              (i) In any disciplinary proceedings of the licensed exchange or licensed market operator, provided that reasonable steps are taken to ensure that user information disclosed to any third person is used strictly for the purpose for which the user information is disclosed; or
              (ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
              (e) The user information disclosed is already in the public domain;
              (f) The disclosure of user information is made in connection with:
              (i) The outsourcing or proposed outsourcing of any function of the licensed exchange or licensed market operator to a third party;
              (ii) The engagement or potential engagement of a third party by the licensed exchange or licensed market operator to create, install or maintain systems of the licensed exchange or licensed market operator; or
              (iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed exchange or licensed market operator under a contract for service;
              (g) The disclosure of user 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 for this purpose by the relevant authority; or
              (h) The disclosure of user 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 2013

            • MAE-2.7.2

              Where user information is disclosed under MAE-2.7.1 (f), the licensed exchange or licensed market operator shall:

              (a) Maintain a record of the circumstances relating to the disclosure of user 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 the licensed 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 the user information only insofar as this is necessary for the relevant purpose; and
              (c) Take reasonable steps to ensure that the user information disclosed is used by the person to whom the disclosure is made strictly for the relevant purpose, and that the user information is not disclosed by that person to any other person except with the consent of the licensed exchange or licensed market operator.
              Amended: April 2013

            • MAE-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, the user 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 the licensed exchange or licensed 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 or licensed 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, any market that the licensed exchange or licensed market operator operates information on:
              (i) All services of the licensed exchange or licensed market operator;
              (ii) All products available on the market operated by the licensed exchange or licensed 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 a participant of the licensed exchange or licensed market operator.
              Amended: April 2013

            • MAE-2.8.2

              In Paragraph MAE-2.8.1 "investor" means:

              (a) In the case where the licensed exchange is incorporated in Bahrain, any investor, whether in Bahrain or elsewhere; and
              (b) In the case of licensed 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 or licensed market operator shall take all reasonable measures to maintain the integrity and security of the transmission and storage of user information.

          • MAE-2.10 MAE-2.10 Business Continuity Plan

            • MAE-2.10.1

              A licensed exchange or licensed 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 any market it operates, in the event of any disruption to the operations of the market.

            • MAE-2.10.2

              A licensed exchange or licensed 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 or licensed 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 any market it operates.

            • MAE-2.10.4

              A licensed exchange or licensed 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 2017

            • MAE-2.11.2

              [This Paragraph was deleted in April 2022].

              Deleted: April 2022
              Added: October 2017

            • MAE-2.11.3

              [This Paragraph was deleted in April 2022].

              Deleted: April 2022
              Added: October 2017

            • MAE-2.11.4 MAE-2.11.4

              [This Paragraph was deleted in April 2022].

              Deleted: April 2022
              Added: October 2017

              • Appointment of Shari'a Advisor

                • MAE-2.11.5

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.6

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.7

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.8

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.9

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Type of Securities Eligible for Hosting

                • MAE-2.11.10

                  [This Paragraph was deleted in April 2022]..

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.11

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Permitted Equity Crowdfunding Issuers

                • MAE-2.11.12

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.13

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.14

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Overseas Equity Crowdfunding Issuers

                • MAE-2.11.15

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.16

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Limits to Funds Raised

                • MAE-2.11.17

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Amended: October 2018
                  Added: October 2017

              • Eligible Investors and Investment Limits

                • MAE-2.11.18

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.19

                  [This Paragraph was deleted in January 2019].

                  Deleted: January 2019
                  Added: October 2017

                • MAE-2.11.20

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.21

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Disclosure Requirements

                • MAE-2.11.22

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.23

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Warning Statement

                • MAE-2.11.24

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.25

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Investor Agreement

                • MAE-2.11.26

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.27

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Investor Money

                • MAE-2.11.28

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.29

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Cooling-off Period

                • MAE-2.11.29A

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: January 2019

              • Segregation of Client Assets

                • MAE-2.11.30

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.31

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Client Money

                • MAE-2.11.32

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Record-keeping

                • MAE-2.11.33

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Compliance

                • MAE-2.11.34

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.35

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Share Register

                • MAE-2.11.36

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.37

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.38

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.11.39

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

          • MAE-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 2017

            • MAE-2.12.2

              [This Paragraph was deleted in April 2022].

              Deleted: April 2022
              Added: October 2017

            • MAE-2.12.3 MAE-2.12.3

              [This Paragraph was deleted in April 2022].

              Deleted: April 2022
              Amended: January 2019
              Added: October 2017

              • Equity Crowdfunding Offering Statement Disclosure

                • MAE-2.12.4

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.5

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Offer Period

                • MAE-2.12.6

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Minimum Subscription

                • MAE-2.12.7

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.8

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Investment Commitment

                • MAE-2.12.9

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.10

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.11

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Oversubscription

                • MAE-2.12.12

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Allotment, Dispatch and Refund

                • MAE-2.12.13

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.14

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Reporting Requirements

                • MAE-2.12.15

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.16

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.17

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

              • Limits on Advertising

                • MAE-2.12.18

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.19

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

                • MAE-2.12.20

                  [This Paragraph was deleted in April 2022].

                  Deleted: April 2022
                  Added: October 2017

        • MAE-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 or licensed market operator shall make provision for in the business rules or listing rules of the licensed exchange or licensed market operator and the licensed exchange or licensed market operator shall make provision for those matters in its business rules or listing rules, as the case may be.

            • MAE-3.1.2

              A licensed exchange or licensed market operator shall provide the business rules and listing rules in conformity with law and relevant CBB regulations or directives.

            • MAE-3.1.3

              Any reference to an amendment to a business rule or listing 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 or listing 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 the licensed exchange or licensed 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 or licensed market operator shall in its business rules or in its listing 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, of persons to or from membership;
              (b) Continuing requirements for each member, including requirements:
              (i) That prohibit or prevent the member from engaging in improper conduct when dealing as an agent for the customers of the member on any market operated by the licensed exchange or licensed market operator;
              (ii) That prohibit or prevent the member from engaging in improper conduct when participating in any market operated by the licensed exchange or licensed market operator;
              (iii) On the financial condition of the member such as to provide reasonable assurance that all obligations arising out of the activities of the member in any market operated by the licensed exchange or licensed market operator will be met;
              (iv) That facilitate the monitoring by the licensed exchange or licensed market operator of the compliance of the member with the business rules of the licensed exchange or licensed market operator; and
              (v) That provide for the expulsion, suspension or disciplining of members for conduct inconsistent with just and equitable principles in the transaction of business, or for a contravention of the business rules of the licensed exchange or licensed market operator;
              (c) The class or classes of securities or futures contracts that may be traded on any market operated by the licensed exchange or licensed market operator;
              (d) The terms and conditions under which securities may be listed for quotation by the licensed exchange;
              (e) The terms and conditions relating to the calculation of the final settlement price, the daily price limits and the accumulation of positions of futures contracts traded on any market operated by the licensed exchange or licensed market operator;
              (f) The manner in which trades in securities or futures contracts are effected on any market operated by the licensed exchange or licensed market operator;
              (g) Where the licensed exchange or licensed 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 artificial market conditions in any market operated by the licensed exchange or licensed market operator;
              (i) The arrangements for the safe and efficient clearing and settlement of trades concluded on any market operated by the licensed exchange or licensed 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 a member, 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 a member, or any of its directors, officers, employees, or representatives, for or on behalf of the customer; or
              (ii) In respect of which the member was a trustee;
              (k) The dissemination of announcements by companies listed on any market operated by the licensed exchange or licensed market operator through a single and central facility; and
              (l) The carrying on of business of the licensed exchange or licensed market operator with due regard to the interests and protection of the investing public.
              Amended: April 2016
              Amended: April 2013

          • MAE-3.3 MAE-3.3 Amendment of Business Rules and Listing Rules

            • MAE-3.3.1

              A licensed exchange or licensed market operator which intends to amend its business rules or listing 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 its users and participants on the proposed amendment, unless the proposed amendment would have limited impact on its users and participants.

            • MAE-3.3.3

              Provided however that on receipt of the notification, if CBB is of the opinion that the users and the participants would be impacted by the amendments, it may require the licensed exchange to consult its users and participants.

            • 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 or licensed market operator, by notice in writing to the licensed exchange or licensed 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 or licensed 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 a licensed exchange or licensed market operator shall be deemed to be, and shall operate as, a binding contract:

              (a) Between the licensed exchange or licensed market operator and each member; and
              (b) Between each member and every other member.

            • MAE-3.4.2

              The licensed exchange or licensed market operator and each member shall be deemed to have agreed to observe and perform the provisions of the business rules that are in force for the time being, so far as those provisions are applicable to the licensed exchange or licensed market operator, or that member, 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 a member of a licensed exchange or licensed market operator which holds an appropriate license to trade such contracts, shall be determined from time-to-time by the licensed exchange or licensed market operator using such criteria or methodology as may be established by the licensed exchange or licensed 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 a person holding or controlling positions, separately or in combination, net long or net short, for the purchase or sale of any securities or contracts, including futures or options contracts.

            • MAE-3.5.3

              The licensed exchange or licensed market operator:

              (a) Shall require a person or any person acting for him pursuant to an express or implied agreement or understanding, who holds or controls net long or net short positions in any contract in excess of the position limits determined under Paragraph MAE-3.5.1, to trade under such conditions and restrictions as the licensed exchange or licensed market operator considers necessary to ensure compliance with the position limits determined under that Paragraph; and
              (b) May require the person referred to in MAE-3.5.3 (a) to do one or more of the following actions:
              (i) Cease any further increase in his position;
              (ii) Liquidate his position to comply with the position limits determined under Paragraph MAE-3.5.1 within such time as may be determined by the licensed exchange or licensed market operator; and
              (iii) Be subject to higher margin requirements in respect of his position.
              Amended: April 2013

          • MAE-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 or licensed market operator to comply with:

              (a) This Module;
              (b) Its business rules; or
              (c) Where applicable, its listing 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 or listing rules, so long as the failure does not substantially affect the rights of the person entitled to require compliance with the business rules or listing rules.

              Amended: April 2016

          • MAE-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 or licensed market operator must appoint a Compliance Officer. The Compliance Officer is responsible for discharging the obligations of the licensed exchange or the licensed 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 the securities market and the various applicable modules;
              (b) The Compliance Officer shall:
              (i) Monitor the transactions undertaken by their members or participants;
              (ii) Identify disorderly trading conditions or conduct that may involve market abuse;
              (iii) Identify and monitor transactions undertaken by insiders;
              (iv) Identify any breach of CBB Law, rules and regulations;
              (c) The licensed exchange or the licensed 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 of market abuse and shall provide full assistance to the latter in investigating and prosecuting market abuse occurring on or through the systems of the licensed exchange or licensed market operator.
              Amended: April 2013

          • MAE-3.9 MAE-3.9 Outsourcing

            • MAE-3.9.1

              The licensed exchange or the licensed 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) The licensed exchange or the licensed market operator retains the ultimate responsibility for the functions or activities that are outsourced;
              (d) The licensed exchange or the licensed market operator must notify the CBB and seek its approval before committing to an outsourcing arrangement;
              (e) The licensed exchange or the licensed 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 a member 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 the licensed exchange or the licensed market operator shall be returned by the outsource provider to the licensed exchange or the licensed 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 or licensed 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 2013

            • MAE-4.1.2

              The CBB may grant approval for a licensed exchange or licensed 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 the licensed exchange or licensed market operator.

              Amended: April 2016

          • MAE-4.2 MAE-4.2 Listing of Licensed Exchanges on Securities Market

            • MAE-4.2.1

              The securities of a licensed exchange shall not be listed for quotation on a securities market that is operated by the licensed exchange or any of its related companies unless the licensed exchange and the operator of the securities 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 the securities of the licensed exchange on the securities market.

            • MAE-4.2.2

              Where the securities of a licensed exchange are listed for quotation on a securities market operated by the licensed exchange or any of its related companies, the listing rules of the securities market shall be deemed to allow the CBB to act in place of the operator of the securities market in making decisions and taking action, or to require the operator of the securities market to make decisions and to take action on behalf of the CBB on:

              (a) The admission or removal of the licensed exchange to or from the official list of the securities market; and
              (b) Granting approval for the securities of the licensed exchange to be or stopping or suspending the securities of the licensed exchange from being listed for quotation or quoted on the securities market.

            • MAE-4.2.3

              The CBB may, by notice in writing to the operator of the securities market:

              (a) Modify the listing rules of the securities market for the purpose of their application to the listing for quotation or trading of the securities of the licensed exchange; or
              (b) Waive the application of any listing rule of the securities market to the licensed 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 a licensed exchange or licensed market operator, as the case may be;

              (a) In order to protect persons buying or selling the securities or contracts; or
              (b) In the interests of the public;

              the CBB may give notice in writing to the licensed exchange or licensed 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 or licensed market operator fails to take any action in relation to those securities or contracts on that market and the CBB continues to be of the opinion that it is necessary to prohibit trading in those securities or contracts on that market, the CBB may by notice in writing to the licensed exchange or licensed market operator, prohibit trading in those securities or contracts on that market for such period, as is specified in the notice.

            • MAE-4.3.3

              Where the CBB gives a notice to a licensed exchange or licensed 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 or participant, as the case may be; and
              (b) As soon as practicable, furnish to the licensed exchange or licensed market operator a written report setting out the reasons for giving the notice.
              Amended: July 2016

          • MAE-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 or licensed market operator to take such action as it considers necessary to maintain or restore orderly trading in securities or futures contracts or any class of securities or futures contracts.

            • MAE-4.4.2

              Without prejudice to MAE-4.4.1, these activities which the CBB may direct a licensed exchange or licensed market operator to take shall include:

              (a) Terminating or suspending trading on the licensed exchange or licensed market operator;
              (b) Confining trading to liquidation of securities or futures contracts positions;
              (c) Ordering the liquidation of all positions or any part thereof or the reduction in such positions;
              (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 which positions are to be liquidated;
              (h) Requiring any person to act in a specified manner in relation to trading in securities or futures contracts or any class of securities or futures contracts;
              (i) Requiring margins or additional margins for any securities or futures contracts; and
              (j) Modifying or suspending any of the business rules of the licensed exchange or licensed market operator.

            • MAE-4.4.3

              Where the licensed exchange or licensed 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 any securities or futures contract or class of securities or futures contracts to cater for the emergency;
              (b) Set limits that may apply to market 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 any securities or futures contracts or class of securities or futures contracts, or liquidation of any position in respect of any securities or futures contract or class of securities or futures contracts.
              Amended: April 2016

            • MAE-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 or securities;
              (b) Any major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such commodity or securities; 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 or licensed 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 financial position of the licensed exchange or licensed 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 the licensed exchange or licensed market operator, including any irregularity that affects or jeopardises or may affect or jeopardise, the funds or property of investors in securities or futures contracts,

              the auditor shall immediately send to the CBB a written report of the matter or the irregularity.

              Amended: April 2016

            • MAE-4.5.2

              An auditor of a licensed exchange or licensed market operator shall not be, in the absence of malice on his part, liable to any action for defamation at the suit of any person 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 or licensed 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 or licensed 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 the licensed exchange or licensed 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 or licensed 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 or licensed market operator must ensure that a licensee meets the following requirements prior to being registered as a market maker:

                (a) The licensee is incorporated in the Kingdom of Bahrain;
                (b) The licensee must be licensed by the CBB as a Bank or as an Investment Firm(Category 1 or Category 2) or as a Broker-Dealer under CBB Rulebook Volume 6; and
                (c) The licensee is a member of the licensed exchange or licensed market operator.
                Added: January 2019

              • MAE-4.6.2

                A licensed exchange or licensed market operator must formulate its own objective eligibility criteria for registration of market maker. The criteria, at the minimum, must include;

                (a) Capital requirement;
                (b) Infrastructure requirements;
                (c) Trading and market making experience;
                (d) Business continuity arrangements;
                (e) Risk management policy including settlement guarantee mechanism;
                (f) Rights and obligations of the market 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 2019

              • MAE-4.6.3

                A licensed exchange or licensed 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 practice market making;
                (b) Separation between market making and any other activities that the member is licensed to practice in terms of organisational, technical, financial and administrative arrangements. Evidence thereof may be submitted by the member through the following;
                (i) The adopted mechanism to separate the market making from other licensed activities;
                (ii) The staff assigned to perform market making activities;
                (iii) Experience and qualification of technical and administrative staff assigned to perform market making activities;
                (c) Details of risk management systems and internal control procedures.
                Added: January 2019

              • MAE-4.6.4

                A licensee, as specified in Paragraph MAE-4.6.1, desirous of undertaking market making activity must apply to the licensed exchange or licensed market operator for registration as a market maker.

                Added: January 2019

              • MAE-4.6.5

                A licensee must demonstrate to the satisfaction of the licensed exchange or licensed market operator that it is suitably qualified to undertake market making activity.

                Added: January 2019

              • MAE-4.6.6

                A licensed exchange or licensed market operator may, prior to issuing its consent for registration of a member as a market maker, may conduct on-site inspection of the member to ensure the availability of requisite systems, processes and infrastructure for undertaking market making activity.

                Added: January 2019

              • MAE-4.6.7

                If the licensed exchange or licensed market operator is satisfied that the member is eligible to carryout market making activities, the licensed exchange or licensed market operator may appoint the member as a market maker and enter into a market maker agreement with the member specifying the date of commencement of its term as market maker.

                Added: January 2019

              • MAE-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 the market maker;
                (b) Duration of the market maker agreement;
                (c) Conditions under which market maker agreement may be terminated;
                (d) Time window during trading hours that the market maker should be obliged to ensure presence on the order book;
                (e) The maximum spread between the bid and offer price that market maker should maintain; and
                (f) Minimum, maximum and normal order size with agreed specifications.
                Added: January 2019

            • Market Making Scheme

              • MAE-4.6.9

                A licensed exchange or licensed market operator must ensure that:

                (a) The market making scheme is objective, transparent, non-discretionary and non-discriminatory and must not give rise to disorderly market conditions or market abuse;
                (b) The transactions carried out under the market making scheme are solely for the purpose of enhancing liquidity and regularity of trading in illiquid securities;
                (c) The scheme does not compromise on market integrity and risk management;
                (d) All necessary systems and processes are in place to monitor market abuse and manipulation including collusion between members indulging in trades with an objective to enhance liquidity artificially;
                (e) The activities of a market 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 the market maker in terms of presence, size and spread under normal trading conditions are adhered to;
                (g) The number of market makers in a market 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 2019

              • MAE-4.6.10

                A licensed exchange or licensed market operator must put in place the internal procedures and controls to regulate the activity of market 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 a market maker;
                (c) The type and amount of settlement guarantees required for practising the activity of market making;
                (d) The obligations of a market maker in connection with providing liquidity;
                (e) Determine the list of securities eligible for market making;
                (f) Mechanism to identify the market maker's orders/trades in order to ensure separation between brokerage and market making activities performed by the member;
                (g) Reporting requirements by market makers and issuers; and
                (h) Disclosure requirements by market makers and issuers.
                Added: January 2019

              • MAE-4.6.11

                A licensed exchange or licensed market operator must review and approve the market making agreement entered between an issuer of listed security and a market maker. While assessing the market making agreement, the licensed exchange or licensed market operator must take into account the requirements contained in Section MIR-4.19.

                Added: January 2019

              • MAE-4.6.12

                A licensed exchange or licensed market operator must at all times ensure that a market 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 2019

              • MAE-4.6.13

                A licensed exchange or licensed market operator may lay down additional criteria for market makers as risk containment measure.

                Added: January 2019

            • Temporary Suspension of Market Making Activity

              • MAE-4.6.14

                A licensed exchange or licensed market operator must specify the exceptional circumstances wherein a market maker's obligation to provide liquidity on a regular and predictable basis does not apply.

                Added: January 2019

              • MAE-4.6.15

                A licensed exchange or licensed 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 the licensed exchange or licensed market operator system being significantly affected by delays and interruptions;
                (ii) force majeure or cyber sabotage.
                (c) Where the market 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 2019

              • MAE-4.6.16

                A licensed exchange or licensed 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 2019

              • MAE-4.6.17

                A licensed exchange or licensed 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 2019

            • Deregistration of Market Maker

              • MAE-4.6.18

                A licensed exchange or licensed market operator must set out the requirements for deregistration of a market maker.

                Added: January 2019

              • MAE-4.6.19

                A market maker intending to surrender its registration, must submit a written request and seek prior written approval from the licensed exchange or licensed market operator in the manner prescribed by the rules and regulations of the licensed exchange or licensed market operator.

                Added: January 2019

            • Suspension and Cancellation of Registration

              • MAE-4.6.20

                A licensed exchange or licensed market operator must restrict or suspend activities of market maker or cancel its registration where the market maker;

                (a) Is found involved in activities that are not commensurate with the responsibilities assigned to the market maker or are detrimental to the interest of markets and investors;
                (b) Fails to perform its duties in accordance with the applicable rules and regulations of the licensed exchange or licensed 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 2019

              • MAE-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 the markets or for the protection of investors, by notice in writing direct the licensed exchange or licensed market operator to restrict, suspend or cancel the registration of the market maker.

                Added: January 2019

              • MAE-4.6.22

                A licensed exchange or licensed market operator must disseminate to the markets as soon as possible the information relating to imposition of restriction, suspension or cancellation of registration on a market maker.

                Added: January 2019

            • Disclosure, Notification and Reporting

              • MAE-4.6.23

                A licensed exchange or licensed market operator must publish on its website the market making rules, the name of the members that have been registered as market makers, name of the issuer and market maker who have entered into market making agreement and the security in which the market maker undertakes market making.

                Added: January 2019

              • MAE-4.6.24

                A licensed exchange or licensed market operator must notify the CBB immediately in the following events:

                (a) Whenever a market maker agreement is entered into between a member and the licensed exchange or licensed market operator along with a copy of the agreement and details of the trading account number which the member uses for the purpose of market making;
                (b) Where a member has surrendered its registration as a market maker; and
                (c) The licensed exchange or licensed market operator takes disciplinary action, suspend activities or revokes the registration of a market maker.
                Added: January 2019

              • MAE-4.6.25

                A licensed exchange or licensed market operator must submit a monthly report, within 10 business days from the end of the month, summarizing the market making activities undertaken by market makers, in the format specified by the CBB.

                Added: January 2019

        • MAE-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 a licensed exchange by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of the licensed 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 the licensed exchange; or
              (b) Is in a position to control not less than 5% of the votes in the licensed exchange.

            • MAE-5.1.3

              In this Section:

              (a) A person 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 a licensed 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 the licensed exchange; and
              (c) An associate of another person 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 2016
              Amended: April 2013

            • MAE-5.1.4

              The CBB may grant its approval referred to in Paragraphs MAE-5.1.1 or MAE-5.1.2 subject to such conditions or restrictions as the CBB may deem fit.

              Amended: April 2016

          • MAE-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 natural person:
              (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 the licensed exchange;
              (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed 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 the licensed exchange; and
              (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper person for the purposes of Paragraph MAE-5.2.3 (a).
              Amended: April 2013

            • MAE-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 proper person to be a substantial shareholder;
              (b) Having regard to the applicant's likely influence, the licensed 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 2016

            • MAE-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 the licensed 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 the licensed exchange:

              (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
              (b) The licensed 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 the licensed exchange, the licensed 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 a person to whom a direction has been issued under Paragraph MAE-5.2.4 shall immediately return those shares to the licensed exchange, upon which the licensed exchange shall return to the person any payment received from him in respect of those shares.

            • MAE-5.2.7

              Any payment made by a licensed exchange in contravention of Paragraph MAE-5.2.5 (c) shall be deemed to be null and void, and a person to whom a direction has been issued under Paragraph MAE-5.2.4 shall immediately return the payment he has received to the licensed exchange.

            • MAE-5.2.8

              The CBB may exempt:

              (a) Any person or class of persons; or
              (b) Any class or description of shares or interests in shares;

              from the requirement under paragraph MAE-5.2.1 or MAE-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB.

          • MAE-5.3 MAE-5.3 Authorisation of Approved Persons

            • Prior Approval Requirements and Process

              Contents:

              •    MAE-5.3.1
              •    MAE-5.3.2
              •    MAE-5.3.3
              •    MAE-5.3.4
              •    MAE-5.3.5
              •    MAE-5.3.6
              •    MAE-5.3.7

              • MAE-5.3.1

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

                Amended: April 2016
                Amended: April 2013

              • MAE-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 or General Manager;
                (c) Head of function;
                (d) Compliance Officer; and
                (e) Money Laundering Reporting Officer (MLRO).
                Amended: April 2016
                Amended: April 2013

              • MAE-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 2016

              • MAE-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 2016

              • MAE-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 critical controlled functions.

                Added: April 2016

              • MAE-5.3.3

                The Chief Executive Officer or General Manager, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.

                Amended: April 2013

              • MAE-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 2013

              • MAE-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 2013

              • MAE-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 the member, its representatives, or participants;
                (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 the member;
                (iv) Identify any breach of CBB Law, rules and regulations; and
                (v) Identify any breach of the rules of the SRO.
                Added: April 2013

              • MAE-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 the licensed exchange.

                Amended: April 2013

              • MAE-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 2016

              • MAE-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 a controlled function is in relation to an existing licensee, 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 2016

              • MAE-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 the licensee, seeking approval for the proposed controlled 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 the licensee and all pages stamped on with the licensee's seal.
                Added: April 2016

              • MAE-5.3.7D

                For existing licensees applying for the appointment of a Board 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 2016

            • Fit and Proper Requirements

              • MAE-5.3.8

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

                Amended: April 2016
                Added: April 2013

              • MAE-5.3.8A

                Each applicant applying for approved person status and those individuals occupying approved 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, 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 the controlled function.
                Added: April 2016

              • MAE-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 a controlled function in one licensee may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger licensee.

                Added: April 2016

              • MAE-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 2016

              • MAE-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 2016

              • MAE-5.3.9

                Approved persons undertaking a controlled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking a controlled function and shall be subject, among all accepted market conducts, to the insider trading rules.

                Added: April 2013

              • MAE-5.3.10

                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 licensed exchange 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 licensed exchange; 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 licensed exchange in general, and interest in holding any listed securities or futures contracts in particular.
                Added: April 2013

              • MAE-5.3.11

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016
                Added: April 2013

              • MAE-5.3.12

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016
                Added: April 2013

              • MAE-5.3.13

                [This Paragraph was moved to Paragraph MAE-5.3.7B in April 2016.]

                Amended: April 2016
                Added: April 2013

            • Assessment of Application

              Contents:

              •    MAE-5.3.14
              •    MAE-5.3.15

              • 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 2013

              • MAE-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 2016

              • MAE-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 the licensee concerned, setting out the basis for the decision.

                Amended: April 2016
                Added: April 2013

            • Appeal Process

              • MAE-5.3.16

                Licensees or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved person status. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from submitting the appeal.

                Amended: April 2016
                Added: April 2013

              • MAE-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 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 the licensee of its decision within 30 calendar days from the date of submitting the appeal.

                Amended: April 2016
                Amended: April 2013

            • Notification Requirements and Process

              Contents:

              •    MAE-5.3.18
              •    MAE-5.3.19
              •    MAE-5.3.20

              • MAE-5.3.18

                A licensed exchange must immediately notify the CBB when an approved person ceases to hold a controlled function together with an explanation as to the reasons why. In such cases, their approved person status is automatically withdrawn by the CBB.

                Amended: April 2013

              • MAE-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 an approved person.

                Added: April 2016

              • MAE-5.3.19

                The licensed exchange shall provide for the composition and duties of the board of directors or any committee of a licensed exchange after obtaining CBB approval.

                Amended: April 2013

              • MAE-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 a licensed exchange.

                Amended: April 2013

            • Amendment of Authorisation

              • MAE-5.3.21

                A licensed exchange must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

                Added: April 2013

              • MAE-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 one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another licensed exchange, the first licensee should notify the CBB of that person's departure, and the new licensee should submit a request for approval under this Section.

                Added: April 2013

            • Cancellation 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 that licensed exchange to contravene the CBB Law, rules and regulations;
                (b) Has without reasonable excuse, failed to ensure compliance by the licensed exchange, or a person associated with that licensee 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 the approved person from his office or employment, and that licensee shall comply with such notice.

                Added: April 2013

              • MAE-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 the licensed exchange and/or licensed clearing house, as the case may be.

                Added: April 2013

              • MAE-5.3.25

                Subject to Paragraph MAE-5.3.26, the CBB shall not direct a licensee to remove an approved person from his office or employment without giving the approved person an opportunity to be heard.

                Added: April 2013

              • MAE-5.3.26

                The CBB may direct a licensee to remove an approved person from his office or employment under Paragraph MAE-5.3.23 on any of the following grounds, without giving the approved person an opportunity to be heard:

                (a) The approved person is an undischarged bankrupt whether in Bahrain or elsewhere;
                (b) The approved 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 2013

            • Criteria 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 the licensed exchange;
                (b) Ensured the compliance of the licensed exchange with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides its regulated activities;
                (c) Set out and ensured compliance with written policies on all operational areas of the licensed exchange, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed exchange in general;
                (d) Identified, monitored and addressed the risks associated with the business of the licensed exchange;
                (e) Ensured that the regulated activities of the licensed 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 the licensed 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 the licensed exchange to the CBB was complete and accurate.
                Added: April 2013

          • MAE-5.4 MAE-5.4 Business Transfer

            • MAE-5.4.1

              A licensed exchange or licensed market operator shall not transfer all or any part of its business to others without the prior written approval from the CBB.

              Amended: April 2016

            • MAE-5.4.2

              A licensed exchange or licensed 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 2016

            • MAE-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 the licensed exchange or licensed 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 a licensed 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 2016

            • MAE-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 a licensed exchange or licensed 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 the licensed exchange or licensed market operator, as the case may be and by the licensed exchange or licensed market operator itself if it is aware of such case.

              Amended: April 2013

            • MAE-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 or persons 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 or licensed 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 a licensed exchange or licensed 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 2016

            • MAE-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 a licensed exchange or licensed 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 the licensed exchange or licensed market operator of its decision within 30 days from the date of submitting the grievance.

              Amended: July 2016

            • MAE-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 a licensed exchange or licensed 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 or licensed 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 or licensed 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 any person 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 2016

            • MAE-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) A licensed exchange;
              (b) Any person acting on behalf of a licensed exchange; including:
              (i) Any director of the licensed exchange; or
              (ii) Any member of any committee established in the licensed 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 the licensed exchange or licensed market operator.

              Amended: April 2013

        • MAE-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 or licensed market operator:

              (a) Has wilfully contravened or wilfully caused that licensed exchange or licensed market operator to contravene:
              (i) The CBB Law or Module MAE;
              (ii) Where applicable, its business rules; or
              (iii) Where applicable, its listing rules;
              (b) Has without reasonable excuse, failed to ensure compliance by that licensed exchange or licensed market operator, a member of that licensed exchange or licensed market operator, or a person associated with that member with:
              (i) The CBB Law or Module MAE;
              (ii) Where applicable the business rules of that licensed exchange or licensed market operator; or
              (iii) Where applicable, the listing rules of that licensed exchange or licensed 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 or licensed market operator remove the officer from his office or employment, and that licensed exchange or licensed market operator shall comply with such notice.

              Amended: April 2016
              Amended: April 2013

            • MAE-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 or licensed 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 or licensed market operator to remove an officer from his office or employment without giving the licensed exchange or licensed market operator an opportunity to be heard.

            • MAE-8.1.4

              The CBB may direct a licensed exchange or licensed 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 the licensed exchange or licensed 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 2013

            • MAE-8.1.5

              Where the CBB directs a licensed exchange or licensed 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 or licensed 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 the licensed exchange or licensed market operator, as the case may be;
              (b) Ensure the compliance of the licensed exchange or licensed 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 the licensed exchange or licensed 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 the licensed exchange or licensed market operator;
              (d) Identify, monitor and address the risks associated with the business activities of the licensed exchange or licensed market operator, as the case may be;
              (e) Ensure that the business activities of the licensed exchange or licensed market operator, as the case may be, are subject to adequate internal audit;
              (f) Oversee the financial undertakings or exposure of the licensed exchange or licensed 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 the licensed exchange or licensed 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 the licensed exchange or the licensed market operator as the case may be, to the CBB is complete and accurate.
              Amended: April 2013

      • CSD — 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 and central 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 and central 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 and settlement 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 in securities transactions by use of contributions from depository participants' members, as well as by imposing adequate risk management techniques, including the requirement of cash cover and collateral;
                (d) To ensure finality of settlement;
                (e) To reduce cost of clearing and settlement 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 a securities 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 to securities 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 2016

              • CSD-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 and central 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 by licensees, and compulsory liquidation. The CBB is entitled to place a licensee under administration in the event of insolvency, cancellation or amendment of the license of the clearing house or central depository, and when it is in the best interests of the public to do so. Rules and regulations for placing a licensee under administration are set out in Articles 136143 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 2016

              • CSD-A.1.16

                This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

                Added: April 2016

              • CSD-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 2016

              • CSD-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 2016

              • CSD-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 2016

          • CSD-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 2013

              • CSD-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 and licensed 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 2016

            • CSD-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 and settlement services provided by a licensed clearing house in or from the Kingdom of Bahrain for the clearing and settlement of securities transactions; and
              (b) Custodial services for securities offered by a central 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 2016

        • CSD-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 a licensed clearing house or licensed central depository in the Kingdom of Bahrain, unless he has been licensed by the CBB under this section.

                Amended: April 2016

              • CSD-1.1.1A

                No person may market any financial 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 offer financial services.
                Added: April 2013

              • CSD-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 2013

              • CSD-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 2013

              • CSD-1.1.2

                No person shall establish, maintain, operate or hold himself out as intending to establish, maintain or operate a clearing house or central depository, without notifying the CBB of such intention at least 90 days prior to the establishment or commencement of operations of the clearing house or central 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 2016

              • CSD-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 2016

            • Persons 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 or licensed 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 2016

              • CSD-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 or licensed central depository at any time, on its own initiative or on the application of the licensed clearing house or licensed 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 2016

              • CSD-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 a licensed clearing house or licensed central depository, without giving the person an opportunity to be heard.

                Amended: April 2016

          • CSD-1.2 CSD-1.2 Licensing Process and Timeline

            • CSD-1.2.1

              A person may apply to the CBB to be:

              (a) A licensed clearing house (including the function of central depository); and
              (b) A licensed central depository.
              Amended: July 2016

            • CSD-1.2.2

              Unless otherwise approved, a person licensed as a clearing house or central depository, or either a licensed clearing house or licensed 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 or central 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 2013

            • CSD-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 2016

            • CSD-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 2016

            • CSD-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, the licensed 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 or central 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 a clearing house or central depository;
                (b) Made arrangements for the proper supervision of all transactions effected through the clearing house or central depository, so as to ensure compliance with the clearing house or central depository rules;
                (c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the records of transactions effected through the clearing house or central 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 and depository 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 a clearing house if:

                (a) The CBB is satisfied that the establishment of a clearing house to be operated by a person 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 the person, having applied to be a licensed clearing house under this Module, is able/will be able to comply with the obligations or requirements imposed on the clearing 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 the person 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 or settlement 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 2013

            • Criteria for Granting License of a Central Depository

              • CSD-1.2.16

                The CBB may license a person as a central depository if:

                (a) The CBB is satisfied that the establishment of a central depository to be operated by a person 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 the person, having applied to be a licensed central depository under this Module, is able/will be able to comply with the obligations or requirements imposed on the central 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 or central 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 or central depository shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the licensee.

              • CSD-1.3.3

                The CBB may, subject to paragraph CSD-1.3.2, cancel the license if it is satisfied that the licensed clearing house or licensed central depository has ceased operating and that there are no pending obligations of the licensed clearing house or licensed central depository or contracts traded.

                Amended: July 2016
                Amended: April 2016

              • CSD-1.3.4

                The licensed clearing house or licensed 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 2016

              • CSD-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 or licensed central depository if:

                (a) There exists a ground under which the CBB may refuse an application;
                (b) The licensed clearing house or licensed central depository is in the course of being wound up or otherwise dissolved;
                (c) The licensed clearing house or licensed central depository 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;
                (d) The licensed clearing house or licensed 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 the licensed clearing house or licensed central depository to the CBB is false or misleading.
                Amended: April 2016

              • CSD-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 or licensed central depository without giving the opportunity to be heard.

                Amended: April 2016

              • CSD-1.3.8

                The CBB may cancel a license that was granted to a licensed clearing house or licensed central depository on any of the following grounds without giving an opportunity to be heard:

                (a) The licensed clearing house or licensed central depository is in the course of being wound up or otherwise dissolved;
                (b) A receiver, a receiver and manager, or an equivalent person has been appointed, in relation to or in respect of any property of the licensed clearing house or licensed central depository; or
                (c) The licensed clearing house or licensed 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 2016

              • CSD-1.3.9

                A licensed clearing house or licensed central depository shall be deemed to have ceased to operate if:

                (a) It has ceased to offer its services as a licensed clearing house or licensed 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 a licensed clearing house or licensed central depository services under a direction issued by the CBB.
                Amended: April 2016

              • CSD-1.3.10

                Any cancellation of a license of a licensed clearing house or licensed central depository shall not operate so as to:

                (a) Avoid or affect any agreement, transaction or arrangement entered into by a licensed clearing house or licensed 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 2016

              • CSD-1.3.11

                Where the CBB cancels or amends a license of a licensed clearing house or licensed central depository, notification to the licensed clearing house or licensed central depository and an appeal against such a decision shall be governed by Article 48 of the CBB Law.

                Amended: July 2016
                Amended: April 2016

            • Publication 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 2017

              • CSD-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 or central depository.

                Added: July 2017

              • CSD-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 2017

          • CSD-1.4 CSD-1.4 Annual Fees

            • Annual Fees Payable by Clearing House and Central Depository

              • CSD-1.4.1

                Every licensed clearing house or central 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 2013

              • CSD-1.4.1A

                The following fee is currently prescribed for licensed clearing houses and licensed central depositories:

                Managing and operating clearing, settlement and central depository systems (fixed) BD10,000
                Amended: April 2016
                Added: April 2013

              • CSD-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 2014

              • CSD-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 2014

              • CSD-1.4.3

                A licensed clearing house or licensed central depository failing to comply with Paragraph CSD-1.4.1 may be subject to financial penalties as prescribed by the CBB.

                Added: April 2016

          • CSD-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) The person 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 the person 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 or central 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 equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the licensed clearing house or central 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 the person an opportunity to be heard:

              (a) The person 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 equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the person;
              (c) The person 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 or licensed 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 all positions or part thereof, or the reduction in such positions;
              (b) Altering conditions of delivery of transactions cleared or settled, or to be cleared or settled through the clearing or depository facility;
              (c) Fixing the settlement 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 or depository facility;
              (e) Modifying or suspending any of the business rules of the licensed clearing house or licensed central depository; or
              (f) Transferring the rights and obligations of that licensed clearing house or licensed central depository to another licensed clearing house and licensed central depository; and

              the licensed clearing house or licensed central depository shall comply with that direction.

              Amended: April 2016

            • CSD-1.5.7

              The CBB may modify any action taken by a licensed clearing house or licensed central depository, including the setting aside of that action.

              Amended: April 2016

            • CSD-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 the person, 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 or licensed 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 2016

            • CSD-1.6.2

              As an SRO, the objectives and functions of the licensed clearing house and licensed 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 2016

        • CSD-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 and settlement of transactions and for delivering securities to and receiving securities from clearing members and making payment to and receiving payment from clearing members in connection with any transaction.

            • Settlement Bank(s)

              • CSD-2.1.2

                The licensed clearing house may undertake the settlement function directly, or from time-to-time appoint settlement bank(s) to act as the settlement bank(s) for the settlement of the transactions.

                Amended: April 2016

              • CSD-2.1.3

                The appointed settlement bank(s) shall act as agent(s) of the licensed clearing house for the collection and payment for funds towards settlement obligations, margins and other dues.

                Amended: April 2016

            • Clearing 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 a settlement bank.

                Amended: April 2016

              • CSD-2.1.5

                The clearing members shall operate the designated bank accounts only for the purpose of payment of their monetary obligations to the licensed clearing house and/or the licensed exchange and receipt of monetary entitlements from the licensed clearing house or licensed exchange.

                Amended: April 2016

            • Settlement Bank to Act on Instructions of the Clearing House

              • CSD-2.1.6

                The licensed clearing house shall instruct the settlement banks to debit or credit the account maintained by the licensed clearing house and also the designated bank accounts of the clearing members. The settlement banks shall act on such instructions, which shall be deemed to be confirmed orders by the clearing members to debit and/or credit funds, as may be specified in the instructions from time-to-time.

                Amended: July 2016
                Amended: April 2016

              • CSD-2.1.7

                [This Paragraph was merged with CSD-2.1.6 in July 2016.]

                Amended: July 2016
                Amended: April 2016

              • CSD-2.1.8

                Clearing members shall authorise settlement banks to access their designated bank accounts for debiting and/or crediting their accounts electronically, on the instructions of the licensed exchange or licensed clearing house.

                Amended: April 2016

            • Settlement 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, the settlement bank shall forthwith report such instances of shortage to the officer of the licensed clearing house and licensed exchange designated for the purpose in a mutually agreed mode of communication.

                Amended: April 2016

          • CSD-2.2 CSD-2.2 Settlement by Clearing House

            • CSD-2.2.1

              All securities transactions shall be settled through the licensed clearing house, by delivery and payment by the clearing members to the licensed clearing house in accordance with the provisions contained in this Module, the rules of the licensed clearing house and relevant directives or provisions that the CBB may from time-to-time prescribe.

              Amended: April 2016

            • CSD-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 and settlement of transactions by or through the licensed 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 any security or securities.

            • 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 of settlement of all transactions contracts entered into or to be entered into in any security or securities by the clearing members through the licensed clearing house.

                Amended: April 2016

              • CSD-2.2.6

                All the clearing members, custodians, clearing banks, central depositories, depository participants and other persons having beneficial interest in settlement shall comply with the provisions contained in the rules and regulations of the licensed exchange and the rules of the licensed clearing house from time-to-time.

                Amended: April 2016

              • CSD-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 of securities and the transfer of securities by book entry;
                (d) Netting arrangements;
                (e) Securities lending, including repurchase agreements and other economically equivalent transactions;
                (f) Finality of settlement;
                (g) Margin trading and securities lending and borrowing;
                (h) Arrangements for achieving delivery versus payment;
                (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 2016

              • CSD-2.2.8

                The licensed clearing house shall maintain a settlement guarantee fund to guarantee settlement obligations of clearing members.

                Amended: April 2016

              • CSD-2.2.9

                The licensed clearing house shall deliver, at its discretion, securities which it has received from a clearing member to any other clearing member who is entitled to the same.

                Amended: April 2016

              • CSD-2.2.10

                The licensed clearing house shall determine the settlement obligations relating to delivery and receipt of securities by and between clearing members to be exchanged electronically through the clearing and settlement system of the licensed clearing house.

                Amended: April 2016

            • Timing of Settlement

              • CSD-2.2.11

                Final settlement should occur no later than the end of the settlement 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 2016

              • CSD-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 of depositories licensed by the CBB.

            • CSD-2.3.2

              A clearing member shall be required to maintain a designated account with one or more depositories.

              Amended: April 2016

          • CSD-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 a securities account.

              • CSD-2.4.2

                A depository participant which deals in deposited securities as principal shall, in relation to such dealing, open and maintain a securities account with the central depository.

                Amended: April 2016

              • CSD-2.4.3

                A central depository may establish different types of securities accounts for different classes of persons.

              • CSD-2.4.4

                Every securities account opened with a central depository shall be in the name of the beneficial owner of the deposited securities.

              • CSD-2.4.5

                The person opening the securities account shall make a declaration in such manner as may be specified in the rules of the central depository that he is the beneficial owner of deposited securities.

            • 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 deposited securities held in custody by, or registered in the name of the central depository for the securities holders at such time and in such manner as may be provided in the rules of the central 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 deposited securities for the time being held in custody by, or registered in the name of the central depository.

                Amended: April 2016

              • CSD-2.4.8

                A central depository shall, on receipt of a written notice under paragraph CSD-2.4.7 and upon payment 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 the persons referred to in Paragraph CSD-2.5.2 to be a depository participant for all or any of the following purposes:

              (a) To facilitate the deposit of securities;
              (b) To open, maintain and close securities accounts;
              (c) To make entries in securities accounts;
              (d) To collect such fees and charges imposed by the central depository as may be provided under these rules; or
              (e) Such other incidental and ancillary purposes as may be specified by the rules of the central depository.
              Amended: April 2016

            • CSD-2.5.2

              A central depository may appoint as a depository participant any of the following:

              (a) A stock exchange;
              (b) A clearing house or depository;
              (c) A bank licensed by the CBB;
              (d) [This Subparagraph was deleted in April 2016]; or
              (e) An investment 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 the central depository, in respect of such purposes, be authorised to give, divulge, reveal or disclose to the central depository any information or documents relating to a securities account.

              Amended: April 2016

            • Agreement Between Depository and Depository Participant

              • CSD-2.5.3

                A central depository shall enter into an agreement with one or more depository 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 a licensed exchange or market operator give notice to the public and its security holders of its intention to immobilise the securities.

              Amended: April 2016

            • CSD-2.6.2

              A listed company may from time-to-time after consultation with the licensed exchange prescribe that any security listed or quoted on the licensed exchange, or proposed to be listed or quoted on the licensed exchange or licensed market operator, be immobilised by depositing such security with the central depository.

              Amended: April 2016

            • CSD-2.6.3

              A central depository or its depository participant, as the case may be shall, within the period prescribed in the rules, after the deposit by any person of a certificate and the instruments of transfer in respect thereof, if any, lodge the certificate and instrument with the issuer of the security 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 the security underlying such certificate in the name of the central depository.

              • CSD-2.6.5

                Where an issuer refuses registration of a transfer, it shall serve on the transferor and the central 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, the issuer 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 such security, it discovers that:
                (i) There has been a duplication in the issuance of the certificate representing the security;
                (ii) Such certificate is a certificate issued in excess of the issued share capital of the issuer; or
                (iii) It has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of the security underlying such certificate.
                Amended: April 2016

              • CSD-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 a central depository, the issuer shall complete and deliver the appropriate certificate to the central 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 the securities received and the transfer lodged; or
                (b) The securities are invalid, not genuine.
                Added: April 2016

            • Issuance of Consolidated Statements

              • CSD-2.6.8

                A central depository may require an issuer of deposited securities to issue in the name of the central depository a consolidated statement for such securities.

              • 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 the central depository.

                Amended: April 2016

            • Withdrawal of Immobilised Securities

              • CSD-2.6.10

                A depositor may by an application to the central depository withdraw an immobilised security standing to the credit of his securities account.

                Amended: April 2016

              • CSD-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 a central depository or its depository participant, the central depository shall forthwith place such security under suspense with the issuer including:

                (a) The certificate representing the security; and
                (b) The instrument of transfer duly executed by the central depository or its depository participant, as the case may be,

                for the purpose of effecting the transfer in favour of the depositor.

                Amended: July 2016
                Amended: April 2016

              • CSD-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 for delivery 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 any security withdrawn from a central depository on a licensed exchange, unless such security is redeposited in a central 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-entry securities 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 and depository participant shall not, except in the case of any willful act, omission, neglect or default on the part of the central depository or its authorised depository participant, be liable for any loss, damage or liability suffered or incurred by any person in respect of dealing in any security.

                Amended: April 2016

          • CSD-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 a licensed exchange give notice to the public and its shareholders of its intention to dematerialise the securities. Any issue of such securities after this Module comes into effect shall be in dematerialised form.

                Amended: April 2016

              • CSD-2.7.2

                A listed company may from time-to-time after consultation with the licensed exchange prescribe that any security listed or quoted on the licensed exchange, or proposed to be listed or quoted on the licensed exchange, be dematerialised.

                Amended: April 2016

              • CSD-2.7.3

                On or after the dematerialisation date, every issuer of a security prescribed as a dematerialised security shall:

                (a) Surrender the physical register of securities holders to the central depository; and
                (b) Provide or instruct its registrar to provide information to the central depository of any securities holder who appears in the appropriate register as a holder of a certificate not already dematerialised by the central depository.
                Amended: April 2016

              • CSD-2.7.4

                A central depository shall maintain information of the holders of securities in a computerised record form, in accordance with the relevant provisions of Module AML (Anti-Money Laundering & Combating Financial Crime).

                Amended: April 2016

              • CSD-2.7.5

                No issuer shall after the dematerialisation date issue any certificate in respect of a dematerialised security.

                Amended: April 2016

              • CSD-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 the record of securities holders maintained by the central depository;
                (b) A transfer of securities from a transferee shall be deemed to be a reference to a book entry transfer performed by the central depository; and
                (c) Any certificate, instrument of transfer or any movable property representing any security which is used as prima facie evidence of ownership of the security shall be deemed to be a reference to a statement of account issued by the central depository.
                Amended: April 2016

            • Dealings Effected by Means of Electronic Process

              • CSD-2.7.7

                A dealing by a beneficial owner in respect of a dematerialised security shall be effected by means of an entry in the securities account of the beneficial owner.

                Amended: April 2016

              • CSD-2.7.8

                Transfer of securities shall be effected by beneficial 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 a securities account established and maintained directly by a central depository, be deemed to have been made by, or with the authority of, the central depository; and
              (b) In the case of a securities account established through and maintained by a depository participant on behalf of a central depository, be deemed to have been made by, or with the authority of, the depository participant.
              Amended: April 2016

            • Entries 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 a person, the identity of the person making the entry.

            • Record of an Entry Prima Facie Evidence

              • CSD-2.8.3

                A record of an entry in a securities account in respect of a dealing in deposited securities 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 deposited security may, in the manner and period prescribed by the rules of the central depository, request the central depository to issue him a record of the securities holders holding the aforementioned securities under their securities 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 deposited securities 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 2016

            • Charging 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 of securities, including the acceptance of a pledge by a beneficial owner and the responsibilities of the pledger in respect of effecting the pledge.

                Amended: April 2016

              • CSD-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"), a central depository or a depository participant, with or through whom the securities 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 the securities account.

                Amended: April 2016

              • CSD-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 2016

              • CSD-2.8.9

                Where a pledge over a deposited security has been discharged or released, the central depository or its depository participant, as the case may be, shall, upon receipt of a notice in writing from the pledgee confirming the same, release the pledge within the securities account of the pledger.

                Amended: April 2016

            • Securities in Suspense

              • CSD-2.8.10

                A central depository must specify that any deposited security in a securities account as being in suspense in any of the following circumstances:

                (a) Where the securities have not been made fully paid-up;
                (b) Where the central depository has reason to believe or is satisfied that there is a breach of the rules of the central depository, licensed exchange or licensed clearing house;
                (c) Where the central 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 that securities account of a securities holder is relevant to its investigations regarding the contravention;
                (d) Where the central depository has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of a deposited security;
                (e) Where the securities or interim certificates are lost and no other securities or certificates are given in lieu; or
                (f) Such other circumstances as may be prescribed by the CBB.
                Amended: April 2016

              • CSD-2.8.11

                In the case of a security that is specified in the securities 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 a security,

                shall be as prescribed by the suspension order.

                Amended: April 2016

              • CSD-2.8.12

                Where the central depository specifies that any deposited security in a securities account has been suspended, the central depository shall inform the securities account holder, issuer, the relevant depository participants and the relevant licensed exchange.

                Amended: April 2016

          • CSD-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 a person:

              (a) A market contract;
              (b) The rules of a licensed clearing house relating to the settlement of a market contract;
              (c) Any proceeding or other action taken under the rules of a licensed clearing house relating to the settlement of a market contract;
              (d) A market charge;
              (e) The default rules of a licensed clearing house or central depository; and
              (f) Any default proceedings.
              Amended: April 2016

            • CSD-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) The settlement in accordance with the rules of a licensed clearing house or licensed central depository of a market contract; or
              (b) Any default proceedings taken in pursuant to default rules.
              Amended: April 2016

        • CSD-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 and licensed central depository shall:

              (a) As far as is reasonably practicable, operate a safe and efficient clearing or central 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 or central 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) Maintain business rules that make satisfactory provision for:
              (i) The clearing or central 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 its business rules;
              (g) Have sufficient financial, human and system resources:
              (i) To operate a safe and efficient clearing or central depository facility;
              (ii) To meet contingencies or disasters; and
              (iii) To provide adequate security arrangements;
              (h) Ensure that it appoints or employs fit and proper persons as its chairman, chief executive officer, directors and key management officers;
              (i) Maintain efficient risk management and internal controls;
              (j) Maintain a record of all transactions effected through its clearing or central depository facility in such form and manner as the CBB may prescribe, including:
              (i) The extent to which the record 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 the record 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 2016

            • CSD-3.1.1A

              Licensed clearing houses and licensed 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 2020

            • CSD-3.1.2

              The CBB may by notice in writing, exempt any clearing or central depository facility operated by a licensed clearing house or licensed 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 2016

            • CSD-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 or licensed 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 the licensed clearing house or central depository.

              Amended: April 2016

            • CSD-3.1.5

              A licensed clearing house or licensed 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 2016

            • CSD-3.1.6

              Internal rules and procedures of a licensed clearing house or central 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 or central depository should be enforceable in the event of the insolvency of a member or depository participant.

              Amended: April 2016

            • Obligation to Submit Periodic Financial Reports

              • CSD-3.1.8

                A licensed clearing house or central depository shall submit to the CBB such reports in such form, manner and frequency as the CBB may prescribe. A licensed clearing house or central 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 the licensed clearing house or central 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 the licensed clearing house or central 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 the licensed clearing house or central 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 or licensed 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 2013

              • CSD-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 2013

            • Obligation to Maintain Transparency

              • CSD-3.1.10

                A licensed clearing house or licensed 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 2016

            • Obligation 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 2016

            • Obligation 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 the licensed clearing house or licensed 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 the licensed clearing house or licensed 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) The licensed clearing house or licensed 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 the licensed clearing house or licensed central depository to meet its financial obligations to the licensed clearing house or licensed central depository;
                (d) The licensed clearing house or licensed central depository reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against a member or depository participant of the licensed clearing house or licensed central depository; and
                (e) Any other matter that the CBB may prescribe by regulations or specify by notice in writing to the licensed clearing house or licensed central depository.
                Amended: April 2016

              • CSD-3.1.13

                A licensed clearing house or licensed 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 the licensed clearing house or licensed central depository, or any of its members or depository participants, whether in Bahrain or elsewhere;
                (b) Any disciplinary action taken against the licensed clearing house or licensed central depository, or any of its members or depository participants by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
                (c) Any significant change to the regulatory requirements imposed on the licensed clearing house or licensed 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 a settlement bank for the licensed clearing house;
                (e) Any failure by any party to debit or credit the relevant accounts for the purpose of the settlement of transactions, including the settlement of moneys, securities or physically delivered futures contracts; and
                (f) Any disruption of or delay in any clearing, settlement or central depository procedures of the licensed clearing house or licensed central depository, including those resulting from any system failure.
                Amended: April 2016

              • CSD-3.1.14

                Where a circumstance under Subparagraphs CSD-3.1.13 (a), (b), (e) or (f) has occurred, the licensed clearing house or licensed 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 the licensed clearing house or licensed central depository has taken, or intends to take.

                Amended: April 2016

              • CSD-3.1.15

                A licensed clearing house or licensed 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 a person establishing or operating another clearing facility or depository, notify the CBB of such intent to enter into negotiations.

                Amended: April 2016

              • CSD-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 the licensed clearing house or licensed central depository and the person 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 2016

              • CSD-3.1.17

                A licensed clearing house or licensed central depository shall seek the approval of the CBB prior to making any change to the financial resources that are available to the licensed clearing house or licensed 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 the licensed clearing house to support a default of its member'' shall not include margin trading facilities held with the licensed clearing house.
                Amended: April 2016

              • CSD-3.1.18

                A person operating a clearing facility or depository shall, no later than 7 days after the occurrence of any of the following circumstances, notify the CBB of:

                (a) A change of an approved person, in accordance with Section CSD-5.3;
                (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 or licensed central depository shall seek the approval of the CBB prior to accepting any new type of securities (e.g. equities or warrants) for clearing, settlement or deposit.

                Amended: April 2016

              • CSD-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 or licensed central depository to vary the timeframe for compliance with the obligations in this Module and substitute such timeframe.

                Amended: April 2016

              • CSD-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 2016

          • CSD-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 or licensed central depository and its officers and employees shall maintain, and aid in maintaining, confidentiality of all user information that:

              (a) Comes to the knowledge of the licensed clearing house or licensed central depository or any of its officers or employees; or
              (b) Is in the possession of the licensed clearing house or licensed central depository or any of its employees.
              Amended: April 2016

            • Exemption of Obligation to Maintain Confidentiality

              • CSD-3.2.2

                Rule CSD-3.2.1 shall not apply to:

                (a) The disclosure of user information for such purposes, or in such circumstances, as the CBB may prescribe;
                (b) Any disclosure of user information which is authorised by the CBB to be disclosed or furnished; or
                (c) The disclosure of user information pursuant to any requirement imposed under any written law or order of court in Bahrain.
                Amended: April 2016

              • CSD-3.2.3

                Rule CSD-3.2.1 shall not apply to the disclosure of user information by a licensed clearing house or licensed central depository, or its officers or employees, for the following purposes or in the following circumstances:

                (a) The disclosure of user 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 user information is permitted for such purpose specified in writing by the user or, where the user is deceased, by his appointed personal representative;
                (c) The user information is disclosed to the approved holding company of the licensed clearing house or licensed central depository;
                (d) The disclosure of user information is necessary for the execution by the licensed clearing house or licensed central depository of a transaction in any listed securities or futures contracts, or clearing or settlement of a transaction on a licensed exchange and such disclosure is made only to another user which is:
                (i) A party to the transaction; or
                (ii) A member of a licensed exchange or a licensed clearing house through which that transaction is executed, cleared or settled;
                (e) The disclosure of user information is necessary:
                (i) In any disciplinary proceedings of the licensed clearing house or licensed central depository, provided that reasonable steps are taken to ensure that user information disclosed to any third person is used strictly for the purpose for which the user information is disclosed; or
                (ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
                (f) The user information disclosed is already in the public domain;
                (g) The disclosure of user information is made in connection with an arrangement for protection against a default by a member or participant of the licensed clearing house or licensed central depository to another member or participant of the licensed clearing house or licensed central depository, who is identified by the licensed clearing house or licensed 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 of user information is made to a member or depository participant of the licensed clearing house or licensed central depository in connection with an arrangement for the transfer to that member or depository participant of any contract or position from another member of the licensed clearing house or licensed central depository who is in default;
                (j) The disclosure of user information is made in connection with:
                (i) The outsourcing or proposed outsourcing of any function of the licensed clearing house or licensed central depository to a third party after obtaining the approval of the CBB;
                (ii) The engagement or potential engagement of a third party by the licensed clearing house or licensed central depository to create, install or maintain systems of the licensed clearing house or licensed central depository; or
                (iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing house or licensed central depository under a contract for service;
                (k) The disclosure of user 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 of user 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 2016

              • CSD-3.2.4

                Where user information is disclosed under Subparagraphs CSD-3.2.3 (g), (h) or (i), the licensed clearing house or licensed central depository shall:

                (a) Maintain a record of:
                (i) The circumstances relating to the disclosure of user 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 the licensed clearing house or licensed central depository;
                D. The engagement of the third party; and
                E. The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing house or licensed central depository under a contract for service, and make the record available for inspection by the CBB.
                (b) Disclose the user information insofar as this is necessary for the relevant purpose; and
                (c) Take reasonable steps to ensure that user information disclosed is used by the person to whom the disclosure is made strictly for the relevant purpose, and that the user information is not disclosed by that person to any other person except with the consent of the licensed clearing house or licensed central depository.
                Amended: April 2016

              • CSD-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, the user information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.

                Amended: April 2016

              • CSD-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 the licensed clearing house or licensed 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 2016

              • CSD-3.2.7

                For the avoidance of doubt, nothing in this Section shall be construed as preventing a licensed clearing house or licensed central depository from entering into a written agreement with a user which obliges the licensed clearing house or licensed central depository to maintain a higher degree of confidentiality than that specified in this Section.

                Amended: April 2016

          • CSD-3.3 CSD-3.3 Business Continuity Plan

            • CSD-3.3.1

              A licensed clearing house or licensed 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 2016

            • CSD-3.3.2

              As part of a business continuity plan the licensed clearing house or licensed 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-up licensed clearing house data centre.
              Amended: April 2016

            • CSD-3.3.3

              A licensed clearing house or licensed 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 2016

            • CSD-3.3.4

              A licensed clearing house or licensed 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 2016

            • CSD-3.3.5

              A licensed clearing house or licensed 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 2016

          • CSD-3.4 CSD-3.4 Transmission and Storage of User Information

            • CSD-3.4.1

              A licensed clearing house or licensed central depository shall take all reasonable measures to maintain the integrity and security of the transmission and storage of its user information.

              Amended: April 2016

          • CSD-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 or licensed 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 2016

            • CSD-3.5.2

              The CBB may require the licensed clearing house or licensed 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 the licensed clearing house or licensed central depository shall furnish such information or documents as the CBB may require.

              Amended: April 2016

            • CSD-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 or licensed central depository, either grant the approval or notify the licensed clearing house or licensed 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 or licensed 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 2016

            • CSD-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 of securities 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 or licensed 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 the licensed clearing house or licensed 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, the licensed clearing house or licensed 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 2016

            • CSD-3.5.7

              The CBB shall not refuse to grant its approval without giving the licensed clearing house or licensed central depository an opportunity to be heard.

              Amended: April 2016

            • CSD-3.5.8

              The licensed clearing house or licensed 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 2016

          • CSD-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 or licensed central depository:

              (a) Audited financial reports; and
              (b) Quarterly internal audit reports.
              Amended: April 2016

            • CSD-3.6.2

              The licensed clearing house or licensed central depository shall carry out periodic visits to the offices of its members or depository 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 2016

            • CSD-3.6.3

              The board of directors of the licensed clearing house or licensed central depository may appoint a Disciplinary Action Committee (DAC) to deal with any matter relating to allegations of improper conduct from the clients of the members or depository participants and the issuers.

              Amended: April 2016

            • CSD-3.6.4

              The DAC is empowered to :

              (a) Suspend or expel a member or depository participant;
              (b) Declare a security as ineligible on the central depository system;
              (c) Freeze a member or depository participant account; and
              (d) Conduct inspections or call for records and issue notices.

            • CSD-3.6.5

              If a member or depository 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 or depository 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 2016

          • CSD-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 a market 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 the licensed 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, the licensed clearing house shall:

                (a) Account for all such money and assets on an aggregated basis, separate from all other money and assets received by the licensed 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 2016

            • Daily Computation of Customers' Money and Assets

              • CSD-3.7.4

                A licensed clearing house shall, at such intervals as the licensed clearing house determines appropriate, but no less frequently than once each business day, compute the total amount of customers' money and assets held by the licensed clearing house, including money that has been kept by the licensed 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 the licensed 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 designated clearing house;
                (ii) Deposited in a trust account or custody account and are not combined with the money and assets of the licensed 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 the licensed 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 other market contract.
                Amended: January 2022
                Amended: April 2016

              • CSD-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 2016

              • CSD-3.7.9

                The licensed central depository must enforce effective segregation of customer assets by custodians.

                Amended: April 2016

          • CSD-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 the licensed clearing house, the licensed 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 the licensed 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 the licensed clearing house, if the licensed 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 any market contract; and
              (b) The failure to use the money or assets to meet the obligations of the member may jeopardize the financial integrity of the licensed 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 2016

            • CSD-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); or
              ii. If the asset cannot be returned to the custody account, deposit an amount of money which is equivalent to the monetary value of the asset at the time of the contravention of rule CSD-3.7.3 (b) in a trust account referred to in rule CSD-3.7.3 (b) for the benefit of the customers of the member.
              Amended: April 2016

          • CSD-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 the licensed clearing house in the course of its clearing or settlement activities, including any money deposited in the trust account in any security, 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 2016

            • CSD-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 2016

            • CSD-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 the licensed clearing house is consistent with the principles of preserving principal and maintaining sufficient liquidity to meet the obligations of customers of members of the licensed clearing house;
              (b) That prudential measures have been adopted to manage the risks in respect of the licensed 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 2016

            • CSD-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 2016

          • CSD-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 of securities;
                (b) To facilitate registration of dealings in deposited securities;
                (c) To ensure the safe custody of certificates and other documents representing deposited securities;
                (d) To guard against falsification of any records 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 all securities deposited with the central depository.
                Amended: April 2016

              • CSD-3.10.2

                Every licensed central depository shall maintain the following records and documents, mainly:

                (a) Records of securities dematerialised and re-materialised;
                (b) The names of the transferor, transferee, and the dates of transfer of securities;
                (c) A register and an index of beneficial owners;
                (d) Records of instructions received from and sent to depository participants, issuers, issuers' agents and beneficial owners; and
                (e) Records of approval, notice, entry and cancellation of pledge or charge, as the case may be.
                Amended: April 2016

              • CSD-3.10.3

                A licensed central depository shall also keep such records and accounts, in sufficient detail, so as to show particulars of:

                (a) All monies received or paid by the licensed 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 other payments made or paid by the licensed central depository;
                (c) All assets and liabilities (including contingent liabilities) of the licensed 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 the persons executing such dealings and the person in whose favour such dealings are executed as the case may be.
                Amended: April 2016

              • CSD-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 a person, the identity of such person.

              • 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 2016

            • CSD-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 2016

        • CSD-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 or licensed central depository shall make provision for in the business rules of the licensed clearing house or licensed central depository.

              Amended: April 2016

            • CSD-4.1.2

              A licensed clearing house or licensed central depository shall, in line with CBB Law, and to the satisfaction of the CBB, make provision in its business rules for continuing requirements for each member or depository participant, including requirements that the member is a Category 1 Investment Firm licensed by the CBB.

              Amended: April 2016

            • CSD-4.1.3

              A licensed clearing house or licensed 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 or depository 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 the licensed clearing house and members relating to the clearing and settlement of transactions;
              (b) The legal obligations and rights of the licensed clearing house or central depository and members or depository participants relating to payments, including netting of obligations, distribution of entitlements, assumption of obligations and method of payment.
              Amended: April 2016

            • Business Rules of a Licensed Clearing House and Licensed Central Depository Have Effect as Contract

              • CSD-4.1.4

                The business rules of a licensed clearing house and licensed central depository shall be deemed to be, and shall operate as, a binding contract:

                (a) Between the licensed clearing house and licensed central depository and each issuer of securities;
                (b) Between the licensed clearing house and licensed central depository and each member or depository participant;
                (c) Between each issuer of securities and each member or depository participant; and
                (d) Between each member or depository participant and every other member or depository participant.
                Amended: April 2016

          • CSD-4.2 CSD-4.2 Content of Rules of Licensed Clearing Houses and Licensed Central Depositories

            • CSD-4.2.1

              A licensed clearing house and licensed central depository shall, in line with CBB Law, make provision in its business 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 the licensed clearing house or licensed 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 the licensed clearing house or licensed central depository;
              (iii) That facilitate the monitoring by the licensed clearing house or licensed central depository of the compliance of the member or depository participant with the business rules of the licensed clearing house or licensed central depository; or
              (iv) That provide for the expulsion, suspension or disciplining of the member or depository participant for a contravention of the business rules of the licensed clearing house or licensed 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 open market contracts to which the member or depository participant is a party;
              (e) The carrying on of business of the licensed clearing house or licensed central depository with due regard to the interests and protection of the investing public.
              (f) The granting of security interests to the clearing house or central depository or to other members or depository participants pursuant to the business rules, including a decertification of the collateral charged and the obligations secured;
              (g) The default rules which provide for the taking of proceeding or other action if a member or depository participant appears to be unable, or likely to become unable to meet his obligations in respect of all unsettled or open market 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 the central depository and each depository participant, and between members or depository participants, inter se.
              Amended: April 2016

            • CSD-4.2.2

              A licensed clearing house or licensed central depository shall not make any amendment to its business rules, unless it complies with such requirements as the CBB may prescribe.

              Amended: April 2016

          • CSD-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 a central depository;
              (b) The qualifications and standards for participation;
              (c) The process and criteria for the admission, suspension and termination of depository participants;
              (d) A decertification of the structure of the services;
              (i) The legal obligations and rights of the central depository and depository participants arising from the use of the services, including any indemnity;
              (ii) The legal obligations and rights of the central depository and depository participants relating to the holding of securities by the depository on behalf of depository participants, as recorded in accounts maintained by the central depository for depository participants;
              (iii) The decertification of the risk control mechanisms including system-operating caps, lines of credit, and depository participant funds;
              (iv) The criteria for determining the type of collateral, and for calculating the amount of the collateral, to be charged by a depository participant with respect to a collateral pool or a depository participant fund;
              (v) The process to be followed in the event of a depository participant suspension, and the realisation under the security interests and guarantees granted to the central 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 the central depository and depository participants relating to confidentiality and use of information; and
              (e) The class or classes of transactions that may be conducted on a central depository.
              Amended: April 2016

          • CSD-4.4 CSD-4.4 Amendment of Business Rules

            • CSD-4.4.1

              A licensed clearing house or licensed central depository which intends to amend its business 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 2016

            • CSD-4.4.2

              The licensed clearing house or licensed central depository shall, prior to notifying the CBB under rule CSD-4.4.1, consult its members and depository participants on the proposed amendment, unless the proposed amendment would have limited impact on its members or depository participants.

              Amended: April 2016

            • CSD-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 2016

            • CSD-4.4.4

              The CBB may, on its own initiative or on the application of the licensed clearing house or licensed central depository, by notice in writing to the licensed clearing house or licensed 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 2016

            • CSD-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 or licensed 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 2016

            • CSD-4.4.6

              The CBB may, in its discretion, by notice in writing to the licensed clearing house or licensed 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 2016

            • CSD-4.4.7

              This requirement shall not apply to any periodic amendment made by a licensed clearing house or licensed central depository to the initial margin requirement, or maintenance margin requirement of a market 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 any market contract.

              Amended: April 2016

            • CSD-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 or licensed central depository.

              Amended: April 2016

          • CSD-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 or licensed central depository to comply with this Module or its business 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, so long as the failure does not substantially affect the rights of any person entitled to require compliance with the business rules.

              Amended: April 2016

          • CSD-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 the licensed clearing house with the approval of the CBB, position limits in respect of any futures contract cleared by a member of the licensed clearing house.

            • CSD-4.6.2

              The position limits under rule CSD-4.6.1 may include limits on a person holding or controlling positions, 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 a person, or any person acting for him pursuant to an express or implied agreement or understanding, who holds or controls net long or net short positions in any futures contract in excess of the position limits determined under rule CSD-4.6.1 to trade under such conditions and restrictions as the licensed clearing house considers necessary to ensure compliance with the position limits determined under that paragraph; and
              (b) May require such person referred to in (a) above to do any one or more of the following actions:
              (i) Cease any further increase in his position;
              (ii) Liquidate his position to comply with the position limits determined under rule CSD-4.6.1, within such time as may be determined by the licensed clearing house; or
              (iii) Be subject to higher margin requirements in respect of his position.

            • 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 2016

            • CSD-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 a licensed clearing house or licensed central depository by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of the licensed clearing house or licensed central depository without first obtaining the approval of the CBB to enter into the agreement.

              Amended: April 2016

            • CSD-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 the licensed clearing house or licensed central depository; or
              (b) Is in a position to control not less than 5% of the votes in the licensed clearing house or licensed central depository.
              Amended: April 2016

            • CSD-5.1.3

              In this section:

              (a) A person holds a share if:
              1. He is deemed to have an interest in that share in terms of the Commercial Companies Law (CCL); or
              2. 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 a licensed clearing house or licensed 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 the licensed clearing house or licensed central depository; and
              (c) An associate of another person 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 2016

            • CSD-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 2016

          • CSD-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 natural person:
              (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 the licensed clearing house or the licensed central depository;
              (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed clearing house or the licensed 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 the licensed clearing house or the licensed central depository; and
              (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper person for the purposes of Subparagraph CSD-5.2.3 (a).
              Amended: April 2016

            • CSD-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 proper person to be a substantial shareholder;
              (b) Having regard to the applicant's likely influence, the licensed clearing house or licensed 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 2016

            • CSD-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 or licensed central depository in which a substantial shareholder of the licensed clearing house or licensed central depository has an interest.

              Amended: April 2016

            • CSD-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 the licensed clearing house or licensed central depository:

              (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
              (b) The licensed clearing house or licensed 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 the licensed clearing house or licensed central depository, the licensed clearing house or licensed central depository 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 2016

            • CSD-5.2.6

              Any issue of shares by a licensed clearing house or licensed central depository in contravention of Subparagraph CSD-5.2.5 (b) shall be deemed to be null and void, and a person to whom a direction has been issued under this paragraph shall immediately return those shares to the licensed clearing house or licensed central depository, upon which the licensed clearing house or licensed central depository shall return to the person any payment received from him in respect of those shares.

              Amended: April 2016

            • CSD-5.2.7

              Any payment made by a licensed clearing house or licensed central depository in contravention of rule CSD-5.2.5 (c) shall be deemed to be null and void, and a person to whom a direction has been issued under Paragraph CSD-5.2.6 shall immediately return the payment he has received to the licensed clearing house or licensed central depository.

              Amended: April 2016

            • CSD-5.2.8

              The CBB may exempt:

              (a) Any person or class of persons; or
              (b) Any class or decertification of shares or interests in shares,

              from rule CSD-5.2.1 or Paragraph CSD-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB.

              Amended: April 2016

          • CSD-5.3 CSD-5.3 Authorisation of Approved Persons

            • Prior Approval Requirements and Process

              Contents:

              •    CSD-5.3.1
              •    CSD-5.3.2
              •    CSD-5.3.3
              •    CSD-5.3.4
              •    CSD-5.3.5
              •    CSD-5.3.6
              •    CSD-5.3.7

              • CSD-5.3.1

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

                Amended: April 2016
                Amended: April 2013

              • CSD-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 or General Manager;
                (c) Head of function;
                (d) Compliance Officer; and
                (e) Money Laundering Reporting Officer (MLRO).
                Amended: April 2016
                Amended: April 2013

              • CSD-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 2016

              • CSD-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 2016

              • CSD-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 2016

              • CSD-5.3.3

                The Chief Executive Officer or General Manager, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.

                Amended: April 2013

              • CSD-5.3.4

                All persons wishing to undertake any of the controlled functions shall be subject to the fit and proper requirements.

                Amended: April 2013

              • CSD-5.3.5

                In accordance with Subparagraph CSD-5.3.2(d), every licensed clearing house or licensed central depository must appoint a compliance officer. The compliance officer is responsible for discharging the obligations of the licensee.

                Amended: April 2016
                Amended: April 2013

              • CSD-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 the member, its representatives, or participants;
                (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 the SRO.
                Amended: April 2013

              • CSD-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 or licensed central depository.

                Amended: April 2016
                Amended: April 2013

              • CSD-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 2016

              • CSD-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 a controlled function is in relation to an existing licensee, 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 2016

              • CSD-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 the licensee, seeking approval for the proposed controlled 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 the licensee and all pages stamped on with the licensee's seal.
                Added: April 2016

              • CSD-5.3.7D

                For existing licensees applying for the appointment of a Board 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 2016

            • Fit and Proper Requirements

              • CSD-5.3.8

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

                Amended: April 2016
                Amended: April 2013

              • CSD-5.3.8A

                Each applicant applying for approved person status and those individuals occupying approved 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, 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 the controlled function.
                Added: April 2016

              • CSD-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 a controlled function in one licensee may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger licensee.

                Added: April 2016

              • CSD-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 2016

              • CSD-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 2016

              • CSD-5.3.9

                Approved persons undertaking a controlled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking a controlled function and shall be subject, among all accepted market conducts, to the insider trading rules.

                Amended: April 2013

              • CSD-5.3.10

                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 licensed clearing house or licensed central depository 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 licensed clearing house or licensed central depository; 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 licensed clearing house or licensed central depository in general, and interest in holding any listed securities or futures contracts in particular.
                Amended: April 2013

              • CSD-5.3.11

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016
                Amended: April 2013

              • CSD-5.3.12

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016
                Amended: April 2013

              • CSD-5.3.13

                [This Paragraph was moved to Paragraph CSD-5.3.7B in April 2016.

                Deleted: April 2016
                Added: April 2013

            • Assessment of Application

              Contents:

              •    CSD-5.3.14
              •    CSD-5.3.15

              • 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 2013

              • CSD-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 2016

              • CSD-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 2016

            • Appeal Process

              • CSD-5.3.16

                Licensees or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved person status. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from submitting the appeal.

                Amended: April 2016
                Amended: April 2013

              • CSD-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 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 the licensee of its decision within 30 calendar days from the date of submitting the appeal.

                Amended: April 2016
                Amended: April 2013

            • Notification Requirements and Process

              Contents:

              •    CSD-5.3.18
              •    CSD-5.3.19
              •    CSD-5.3.20

              • CSD-5.3.18

                A licensed clearing house or licensed central depository must immediately notify the CBB when an approved person ceases to hold a controlled function together with an explanation as to the reasons why. In such cases, their approved person status is automatically withdrawn by the CBB.

                Amended: April 2016
                Added: April 2013

              • CSD-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 an approved person.

                Added: April 2016

              • CSD-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 or licensed central depository.

                Amended: April 2016
                Amended: April 2013

              • CSD-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 or licensed central depository.

                Amended: April 2016
                Amended: April 2013

            • Amendment of Authorisation

              • CSD-5.3.21

                A licensed clearing house or licensed central depository must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

                Amended: April 2016
                Added: April 2013

              • CSD-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 one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another licensee, the first licensee should notify the CBB of that person's departure, and the new licensee should submit a request for approval under this Section.

                Added: April 2013

            • Cancellation 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 that licensee to contravene the CBB Law, rules and regulations;
                (b) Has without reasonable excuse, failed to ensure compliance by the licensee, or a person associated with that licensee 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 the approved person from his office or employment, and that licensee shall comply with such notice.

                Added: April 2013

              • CSD-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 the licensed clearing house or or licensed central depository, as the case may be.

                Amended: April 2016
                Added: April 2013

              • CSD-5.3.25

                Subject to Paragraph CSD-5.3.26, the CBB shall not direct a licensee to remove an approved person from his office or employment without giving the approved person an opportunity to be heard.

                Added: April 2013

              • CSD-5.3.26

                The CBB may direct a licensee to remove an approved person from his office or employment under Paragraph CSD-5.3.23 on any of the following grounds, without giving the approved person an opportunity to be heard:

                (a) The approved person is an undischarged bankrupt whether in Bahrain or elsewhere;
                (b) The approved 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; and
                2. Punishable with imprisonment for a term of 3 months or more.
                Added: April 2013

            • Criteria 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 the approved person:

                (a) Ensured the proper functioning of the licensed clearing house or central depository;
                (b) Ensured the compliance of the licensed clearing house or central depository with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides its regulated activities;
                (c) Set out and ensured compliance with written policies on all operational areas of the licensed clearing house or central depository, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed clearing house or central depository in general;
                (d) Identified, monitored and addressed the risks associated with the business of the licensed clearing house or central depository;
                (e) Ensured that the regulated activities of the licensed clearing house or central depository were subject to adequate internal audit;
                (f) Oversaw the financial undertakings or exposure of the licensed clearing house or central 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 or central 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; and
                2. That every report, return or statement submitted by the licensed clearing house or central depository to the CBB was complete and accurate.
                Added: April 2013

          • CSD-5.4 CSD-5.4 Listing of Licensed Clearing House and Licensed Central Depository on Securities Market

            • CSD-5.4.1

              The securities of a licensed clearing house or a licensed central depository shall not be listed for quotation on a securities market that is operated by any of its related corporations, unless the licensed clearing house or licensed central depository and the operator of the securities 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 the securities of the licensed clearing house or licensed central depository.
              Amended: April 2016

            • CSD-5.4.2

              Where the securities of a licensed clearing house or licensed central depository are listed for quotation on a securities market operated by any of its related corporations, the listing rules of the securities market shall be deemed to allow the CBB to act in place of the operator of the securities market in making decisions and taking action, or to require the operator of the securities market to make decisions and to take action on behalf of the CBB, on:

              (a) The admission or removal of the licensed clearing house or licensed central depository, to or from the official list of the securities market; and
              (b) Granting approval for the securities of a licensed clearing house or licensed central depository to be, or stopping or suspending the securities of the licensed clearing house or licensed central depository from being listed for quotation or quoted on the securities market.
              Amended: April 2016

            • CSD-5.4.3

              The CBB may, by notice in writing to the operator of the securities market:

              (a) Modify the listing rules of the securities market for the purpose of their application to the listing of the securities of the licensed clearing house or licensed central depository for quotation or trading; or
              (b) Waive the application of any listing rule of the securities market to the licensed clearing house or licensed central depository.
              Amended: April 2016

        • CSD-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 or licensed central depository such conditions or restrictions as it deems fit by notice in writing, in addition to the obligations imposed on the licensed clearing house or licensed central depository under this Module, for the purposes of furthering the objectives specified in Section CSD-A.1.

              Amended: April 2016

            • CSD-6.1.2

              The CBB may, at any time, by notice in writing to the licensed clearing house or licensed central depository, vary any condition or restriction as it may deem fit.

              Amended: April 2016

            • CSD-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 the licensed clearing house or licensed 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 or participants who may use or participate in the licensed clearing house facility and licensed central depository.
              Amended: April 2016

          • CSD-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 or licensed central depository, and the licensed clearing house or licensed central depository shall comply with such directions, if the CBB considers it necessary or expedient:

              (a) For ensuring the safe and efficient clearing and settlement 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 2016

            • CSD-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 2016

          • CSD-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 or licensed central depository to take such action as it considers necessary to maintain or restore safe and efficient operations of the clearing facilities operated by the licensed clearing house and of the custodian services provided by the licensed central depository.

              Amended: April 2016

            • CSD-6.3.2

              Without prejudice to Paragraph CSD-6.3.1, the actions which the CBB may direct a licensed clearing house or licensed central depository to take include:

              (a) Ordering the liquidation of all positions or part thereof, or the reduction of such positions;
              (b) Altering conditions of delivery of transactions cleared or settled, or to be cleared or settled through the clearing facility;
              (c) Fixing the settlement 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 the business rules of the licensed clearing house or licensed central depository.
              Amended: April 2016

            • CSD-6.3.3

              Where a licensed clearing house or licensed 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 market positions 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 the licensed clearing house and the services offered by the licensed central depository.
              Amended: April 2016

            • CSD-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 or securities;
              (c) Any act of any government affecting a commodity or securities; 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 or licensed central depository under Paragraph CSD-6.3.1, including the setting aside of that action.

              Amended: April 2016

          • CSD-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 or licensed central depository to remove the officer from his office or employment, where the CBB is satisfied that an officer of a licensed clearing house or licensed central depository:

              (a) Has wilfully contravened or wilfully caused that licensed clearing house or licensed central depository to contravene this Module or its business rules;
              (b) Has, without reasonable excuse, failed to ensure compliance with this Module or the business rules of that licensed clearing house or licensed central depository, by that licensed clearing house or licensed central depository, or a member of that licensed clearing house or licensed central depository or a person 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 2016

            • CSD-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 or licensed 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 2016

            • CSD-6.4.3

              Subject to Paragraph CSD-6.4.4, the CBB shall not direct a licensed clearing house or licensed central depository to remove an officer from his office or employment, without giving the licensed clearing house or licensed central depository an opportunity to be heard.

              Amended: July 2016
              Amended: April 2016

            • CSD-6.4.4

              The CBB may direct a licensed clearing house or licensed 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 the licensed clearing house or licensed 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 2016

            • CSD-6.4.5

              Where the CBB directs a licensed clearing house or licensed 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 2016

            • CSD-6.4.6

              No criminal or civil liability shall be incurred by a licensed clearing house or licensed 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 2016

          • CSD-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 a licensed clearing house or licensed central depository has failed to discharge the duties or functions of his office, take into consideration whether that person has taken reasonable steps to discharge the following duties:

              (a) Ensure the proper functioning of the licensed clearing house or licensed central depository;
              (b) Ensure the compliance of the licensed clearing house or licensed 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 the licensed clearing house or licensed central depository, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed clearing house or licensed central depository;
              (d) Identify, monitor and address the risks associated with the business activities of the licensed clearing house or licensed central depository on an on-going basis;
              (e) Ensure that the business activities of the licensed clearing house or licensed central depository are subject to adequate internal audit;
              (f) Oversee the financial undertakings or exposure of the licensed clearing house or licensed central depository to risks of any nature, by setting out proper delegation limits and risk management controls; and
              (g) Ensure:
              (i) That the licensed clearing house or licensed central depository 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 the licensed clearing house or licensed central depository to the CBB is complete and accurate.
              Amended: April 2016

          • CSD-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 or licensed 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 the licensed clearing house or licensed 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 the licensed clearing house or licensed central depository, including any irregularity that affects or jeopardises, or may affect or jeopardise, the funds or property of investors.
              Amended: April 2016

            • CSD-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 or licensed 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 the licensed clearing house or licensed central depository;
              (c) A duty to carry out any other examination or establish any procedure in any particular case.
              Amended: April 2016

            • CSD-6.6.5

              The licensed clearing house or licensed 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 2016

          • CSD-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 the business rules of a licensed clearing house, or licensed central depository fails to do so, the Court may, on the application of the CBB, a licensed clearing house, or licensed central depository, or a person aggrieved by the failure, after giving the first-mentioned person an opportunity to be heard, make an order directing the first-mentioned person to comply, observe, enforce or give effect to those business rules.

              Amended: April 2016

            • CSD-6.7.2

              In this section, "person" includes a licensed clearing house and licensed central depository.

              Amended: April 2016

            • CSD-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 2016

          • CSD-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 or licensed central depository, or in the performance or purported performance of its functions under its business rules, shall be incurred by:

              (a) A licensed clearing house;
              (b) A licensed central depository; or
              (c) Any person acting on behalf of a licensed clearing house or licensed central depository, including any member of the board of directors of the licensed clearing house or licensed central depository.
              Amended: April 2016

            • CSD-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) Any person performing, by virtue of a delegation under the business rules of a licensed clearing house or licensed central depository, a function of the licensed clearing house or licensed central depository;
              (b) Any person acting on behalf of a person referred to hereinabove including a member of the board of directors of that person.
              Amended: April 2016

      • MIR 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 any regulated activities in or from the Kingdom of Bahrain.

                Adopted January 2010

              • MIR-A.1.2

                The MIR Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of members undertaking any regulated activities in or from the Kingdom of Bahrain. It sets out the CBB requirements for authorisation of the controlled functions within the members regarding the initial, as well as ongoing compliance requirements.

                Adopted January 2010

              • MIR-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 2010

              • MIR-A.1.4

                Persons or entities undertaking any regulated activities or functions require prior CBB licensing and/or authorisation. MIR-B.2 provides the definitions for members which are impacted by this Module. These include, but are not limited to entities providing the following regulated activities:

                (a) Undertaking or providing services related to arranging or trading in securities, whether as principal or as an agent;
                (b) Undertaking or providing any services related to the clearing, settlement of securities transactions, whether as principal or agent;
                (c) Undertaking or providing services related to the depositing of securities with a licensed depository.
                Adopted January 2010

          • MIR-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 2010

              • MIR-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 2010

              • MIR-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 of securities trading through the automated trading system at the BSE.

                Adopted January 2010

              • MIR-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 of securities and other entries in relation to securities, by means of the CSDR System and provides detailed provision and requirements to be a participant in the CSDR System.

                Adopted January 2010

              • MIR-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 2010

          • MIR-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 2010

            • MIR-A.3.2

              Market makers and issuers must in addition to complying with the market making provision under this Module refer to and comply with Module MAE (Markets and Exchanges) which sets forth the CBB requirements for registration of market maker.

              Added: January 2019

          • MIR-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 their members is required:

              (a) To maximise the regulatory effectiveness;
              (b) To permit flexibility to the SRO'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 2010

            • MIR-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 and securities 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 the business rules and by-laws of the SRO's whereby any changes in such business rules and by-laws would need prior approval of CBB; and
              (e) Licensing, supervision, inspection, investigation and enforcement on the SRO's and their members.
              Adopted January 2010

            • MIR-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 their members, including classification of its membership and requirements for each class or category of membership.
              Amended: July 2016
              Adopted January 2010

            • MIR-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 or clients' orders or transactions in accordance with the CBB Law, rules and regulations, as well as with the business rules of the licensed exchange;
              (b) Clearing, settling and depositing of investors or clients' securities in accordance with the licensed clearing house business rules;
              (c) Handling and the protection of their client'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 their clients and enhancing the public investors' confidence in the market; and
              (e) Providing any regulated activities undertaken by them in line with the industry standards and best international practices.
              Amended: July 2016
              Adopted January 2010

        • MIR-B MIR-B Scope

          • MIR-B.1 MIR-B.1 Scope

            • MIR-B.1.1

              This Module shall apply to any person undertaking any regulated activities as a member of an SRO (licensed exchange and/or licensed clearing house) in or from the Kingdom of Bahrain.

              Adopted January 2010

            • MIR-B.1.2

              This Module covers the authorisation requirements pertaining to external trading members and proprietary trading members as a separate category of membership under the licensed exchange.

              Added: July 2016

          • MIR-B.2 Definitions

            [This Section was deleted and moved to the Glossary under Part B in July 2016.]

            Deleted: July 2016

        • MIR-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 2010

            • MIR-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 underwriting securities or financing investments therein;
              2. Participating in incorporating of securities companies or increasing the capitals thereof.
              3. Forming and managing securities portfolios.
              4. Depositing, clearance and settlement of securities.
              5. Brokering in securities transactions.
              6.Providing advisory services related to securities.
              7. Any other regulated 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 the SRO, 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 the listing rules of a securities exchange) relating to the raising of funds by any entity;
              (b) To the person making an offer or invitation to the public:
              (i) To subscribe for or purchase securities; or
              (ii) To sell or otherwise dispose of securities, 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 any person, or inducing or attempting to induce any person to enter into or to offer to enter into any agreement for or with a view to acquiring, disposing of, subscribing for, or underwriting securities;
              "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 of securities or futures contracts; or
              (b) Foreign exchange trading or leveraged foreign exchange trading for the purpose of managing the client'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 the person providing the service has, under an arrangement with another person (the client), possession or control of securities of the client and carries out one or more of the following functions for the client:
              (a) Settlement of transactions relating to the securities;
              (b) Collecting or distributing dividends or other pecuniary benefits derived from ownership or possession of the securities;
              (c) Paying tax or other costs associated with the securities;
              (d) Exercising rights, including without limitation voting rights, attached to or derived from the securities;
              (e) Any other function necessary or incidental to the safeguarding or administration of the securities, but does not include:-
              (i) The regulated activities of a corporation which is a depository, as defined in Article (94) of the Law;
              (ii) The provision of regulated activities to a related corporation or associated person, so long as none of the securities is:-
              (A) Held on trust for another person by the related corporation or associated person;
              (B) Held as a result of any custodial regulated activities undertaken by the related corporation or associated person to another person; or
              (C) Beneficially owned by any person other than the related corporation or associated person;
              (iii) The provision of regulated 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 for securities or purchase of listed or to be listed on a securities exchange or such other securities as the CBB may prescribe; and
              (b) Where applicable, the continued holding of those securities, whether or not those securities 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-underwrite securities;
              (ii) To facilitate an acquisition of securities in accordance with the terms of a prospectus, to offer securities;
              (iii) To a licensed member undertaking regulated activities to deal in securities or provide securities financing, or a financial institution, to facilitate acquisitions or holdings of securities;
              (iv) By a listed company to its directors or employees to facilitate acquisitions or holdings'of its own securities;
              (v) By a member of a group of listed companies to another member of the group to facilitate acquisitions or holdings of securities 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 of securities;
              "trading in futures contracts" means (whether as principal or agent):-
              (a) 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 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 2010

            • MIR-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 2010

            • MIR-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 2010

            • MIR-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 2010

            • MIR-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) The person 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 2010

            • MIR-1.1.7

              This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

              Added: April 2016

            • MIR-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 2016

            • MIR-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 2016

            • MIR-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 2016

        • MIR-2 MIR-2 Licensing

          • MIR-2.1 MIR-2.1 Licensing Requirements

            • MIR-2.1.1

              No person shall undertake any of the regulated activities under section MIR-1.1, or hold himself out as undertaking any regulated activities through a licensed exchange or licensed clearing house in or from Bahrain, unless the person is licensed by the CBB and accepted as a member of an SRO.

              Amended: April 2013
              Adopted January 2010

            • MIR-2.1.2

              A person will be deemed to be undertaking business within or from Bahrain, if for example:

              (a) Such person is incorporated in Bahrain;
              (b) Such person uses an address situated in Bahrain for the correspondence;
              (c) Such person directly solicites clients who are resident within Bahrain; or
              (d) Such person utilises the services of a licensed exchange and/or licensed clearing house.
              Amended: April 2013
              Adopted January 2010

            • MIR-2.1.3

              Without prejudice to the generality of Article (89) of the CBB Law, no person other than a licensed member shall use, in any language a word or expression which may reasonably be understood to mean that such person is a licensed member, or is carrying out a regulated activity unless he is a licensed person.

              Amended: April 2013
              Adopted January 2010

            • MIR-2.1.4

              Except with the written approval of the CBB, no person other than a licensed member 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 2010

            • MIR-2.1.4A

              No person may market any financial 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 offer financial services.
              Added: April 2013

            • MIR-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 2013

            • MIR-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 2013

            • MIR-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 undertake regulated activities of the kind specified under section MIR-1.1. Such person shall obtain the membership of the SRO before undertaking such regulated activities.

              Amended: April 2013
              Adopted January 2010

            • MIR-2.1.6

              Where a person is licensed under Volume 4 to undertake regulated 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 above regulated activities.

              Amended: July 2016
              Adopted January 2010

            • MIR-2.1.7

              Depending on the type of regulated activities that a person 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 2010

          • MIR-2.2 MIR-2.2 Application for License

            • MIR-2.2.1

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

              Adopted January 2010

            • MIR-2.2.2

              Unless otherwise approved by the CBB, the person undertaking any regulated activities shall be established as a corporation subject to the Commercial Companies Law 2001.

              Adopted January 2010

            • MIR-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 2013

            • MIR-2.2.4

              Under this Module, a person may apply to the CBB to be:

              (1) A licensed discount broker;
              (2) A licensed broker;
              (3) [Deleted in April 2013];
              (4) A licensed broker-dealer;
              (5) A licensed clearing member;
              (6) [Deleted in April 2013];
              (7) [Deleted in April 2013];
              (8) An authorised external trading member; or
              (9) An authorised proprietary trading member.
              Amended: July 2016
              Amended: April 2013
              Adopted January 2010

            • MIR-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 an external trading member (provided it meets the requirements of Paragraph MIR-2.2.8A) or a proprietary trading member (as defined in the Glossary and provided it meets the requirements of Paragraph MIR-2.2.8C).

              Amended: July 2016
              Added: April 2013

            • MIR-2.2.5

              The licensed discount broker may undertake only collecting of the investors or clients order which is required to be executed on the licensed exchange through a licensed broker or broker-dealer.

              Amended: April 2013
              Adopted January 2010

            • MIR-2.2.6

              The licensed brokers may undertake:

              (a) Trading in securities as agent;
              (b) Arranging transactions in securities as an agent.
              Amended: April 2013
              Adopted January 2010

            • MIR-2.2.7

              [This Paragraph was deleted in April 2013]

              Deleted: April 2013

            • MIR-2.2.8

              The licensed broker-dealers may undertake:

              (a) Trading in securities as principal;
              (b) Trading in securities as agent;
              (c) Arranging transactions in securities as principal and agent;
              (d) Managing securities' portfolios;
              (e) Depositing of securities;
              (f) Advising on securities businesses;
              (g) Providing market research and analysis.
              Amended: April 2013
              Adopted January 2010

            • MIR-2.2.8A

              An external trading member accepted for membership by a licensed exchange and authorised by the CBB may undertake only the activities of a licensed broker 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. An external trading member may not conduct any business within the Kingdom of Bahrain.

              Amended: July 2016
              Added: April 2013

            • MIR-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 the licensed exchange together with the approval of membership of such exchange. An external trading member's primary regulator and supervisor is the licensed 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 a licensed exchange. External trading members are not eligible to be members of a licensed clearing house or central securities depository.

              Amended: July 2016
              Added: April 2013

            • MIR-2.2.8C

              In order to be authorised by the CBB, a proprietary trading member must submit the application made for membership of the licensed exchange together with the approval of membership of such exchange. A proprietary trading member's primary regulator and supervisor is the licensed 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 2013

            • MIR-2.2.9

              The licensed clearing member (general) may undertake any regulated activities stipulated under Module CSD in general, and in particular:

              (a) Facilitating the deposit of securities;
              (b) Clearing and settlement of securities transactions as principal;
              (c) Clearing and settlement of securities transactions as agent;
              (d) Facilitating registration of dealings in deposited securities;
              (e) Provide custody services to deposited securities;
              (f) Facilitating netting of transactions in deposited securities;
              (g) Facilitating securities 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 its members from undertaking part of the abovementioned regulated activities.

              Amended: April 2013
              Adopted January 2010

            • MIR-2.2.10

              The licensed member may combine two or more regulated activities, provided these fall within the regulated activities list for their member category, and such combinations are not restricted by the CBB or SRO.

              Amended: July 2016
              Amended: April 2013
              Adopted January 2010

            • MIR-2.2.11

              With the exception of external trading members and proprietary trading members, an application for a license as a member to undertake any regulated activity under Paragraph MIR-1.1.2 shall be made in Form 1 (Application for Approval as a Licensed Member) 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 for regulated activities undertaken;
              (h) The proposed organisation structure and the powers and duties of the persons performing controlled functions of the licensed member;
              (i) A copy of the application submitted to the licensed exchange or licensed 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) Where regulated activities would be outsourced, copies of contracts and arrangements for oversight of their activities; and
              (m) Arrangements for complying with business rules of the licensed exchange and/or licensed clearing house.
              Amended: April 2013
              Adopted January 2010

            • MIR-2.2.11A

              Any licensed exchange, that accepts an external 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 the licensed exchange for membership as an external 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 the external trading member's membership registration certificates with an exchange in its home and any other jurisdiction;
              (d) A copy of the external 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 2013

            • MIR-2.2.11B

              The acceptance as a member of an external trading member or proprietary trading member by a licensed exchange does not in any way remove the authority of the CBB to supervise and regulate external trading members or proprietary 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 an external trading member or proprietary trading member to comply with CBB rules and regulations at any stage should it deem it necessary.

              Added: April 2013

            • MIR-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 licensed member will be subject to regulation by the CBB and the business rules of the SRO;
              (c) The licensed member has taken adequate measures to prudently manage any risks associated with its business and operations;
              (d) The licensed member, in discharging its obligations, will not act contrary to the interests of the investing public, or to the requirements of the CBB;
              (e) The licensed member will enforce compliance by its employees or representatives with the business rules of the SRO, as the case may be;
              (f) The licensed member 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 licensed member has sufficient financial, human, and technical resources to undertake regulated activities in a fair, orderly, transparent manner and meet contingencies or disaster criteria.
              Amended: April 2013
              Adopted January 2010

            • MIR-2.2.12A

              External trading members and proprietary trading members must provide the details in Paragraph MIR-2.2.12 to the licensed exchange as part of its membership application.

              Added: April 2013

            • MIR-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 2013

            • MIR-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 the licensed exchange and/or licensed clearing house refuses to grant its approval, as the case may be.
              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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) The licensed exchange and/or licensed clearing house refuse to grant the applicant membership, as the case may be.
              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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 2010

            • Licensing 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 2010

              • MIR-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 2010

              • MIR-2.2.20

                The member shall not undertake any regulated activities before the CBB grants the license to the applicant.

                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.21

                The CBB may license a person as a licensed member, 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) The regulated activities that the person may undertake;
                (b) The securities 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 2010

              • MIR-2.2.22

                The CBB may, at any time, in consultation with the licensed exchange and/or licensed clearing house by notice in writing to the person, vary any condition or restriction or impose such further condition or restriction as it may think fit.

                Amended: April 2013
                Adopted January 2010

              • MIR-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 2010

              • MIR-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 2010

          • MIR 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 2013

            • MIR-2.3.2

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.3.3

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.3.4

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.3.5

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.3.6

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.3.7

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.3.8

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.3.9

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

          • MIR 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 2013

            • MIR-2.4.2

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

            • MIR-2.4.3

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

          • MIR 2.5 MIR 2.5 Criteria for Granting License

            • MIR-2.5.1

              The CBB may license a person as a member if:

              (a) The CBB is satisfied that the undertaking of regulated activities by the person will;
              1. Develop the capital market and enhance confidence therein;
              2. Develop the securities businesses or services and enhance the market liquidity; and
              3. Protect the interests of investors or users of the SRO (licensed exchange and/or licensed clearing house) and enhance the Kingdom's credibility as an international financial centre; and
              (b) The CBB is satisfied that the person, having applied to be a member under this Module, is able to comply with the obligations and requirements imposed on such member.
              Adopted January 2010

            • MIR-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 the regulated activities to be undertaken by the applicant;
              (b) The nature of the regulated activities undertaking, or to be undertaken, by the applicant;
              (c) The nature of the securities, futures contracts, products or instruments that the applicant will be involved in;
              (d) The nature of the investors, clients or participants, or proposed investors, clients or participants, who may use regulated 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 the securities, futures contracts, products or instruments dealt with by it, may impose;
              (h) The proposed securities businesses or services comply with up-to-date securities industry standards;
              (i) The persons 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 the SRO's (licensed exchange and/or clearing house) business rules and related requirements.
              Adopted January 2010

            • MIR-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 undertaking regulated activities;
              (b) Made arrangements for the proper supervision of all transactions effected through the SRO, so as to ensure compliance with the rules of the SRO;
              (c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the records of transactions effected through the SRO;
              (d) Insurance, a guarantee, or compensation fund, or other warranty plans placed by the SRO in respect of providing compensation, subject to the business rules of the SRO, to its clients; and
              (e) Made provisions, to the satisfaction of the CBB, for the clearing and settlement of transactions effected through a licensed clearing house and for the management of trade and settlement risk.
              Adopted January 2010

            • MIR-2.5.4

              [This Paragraph was deleted in July 2014.]

              Deleted: July 2014
              Adopted January 2010

            • MIR-2.5.5

              [This Paragraph was deleted in July 2014.]

              Deleted: July 2014
              Adopted January 2010

          • MIR 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 its regulated activities may apply to the CBB to surrender its approval as a member.

              Adopted January 2010

            • MIR-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 its regulated activities and that there are no pending obligations of the member or securities, contracts, products or instruments traded, cleared or settled.

              Adopted January 2010

            • MIR-2.6.3

              The licensed member shall publish a notice of its intention to cease to provide its regulated activities in an SRO 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 2010

            • MIR-2.6.4

              Any objections received from the SRO, investors or clients 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 2010

            • MIR-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 2010

          • MIR 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 licensed member, 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) The member does not commence undertaking its regulated activities within 6 months from the date on which it was granted the license;
              (c) The member ceases to undertake its regulated activities;
              (d) The member 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; or
              5. Any provision or requirements of the business rules and requirements of an SRO.
              (e) The licensed member undertaking regulated activities in a manner that is in the opinion of the CBB contrary to the market integrity and the interests of the public or clients;
              (f) Any information or document that is submitted to the CBB that the member knows is false or misleading; and
              (g) Any false or misleading information or document knowingly or willingly disseminated by the member to the market or its clients.
              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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) The member 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 equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the member;
              (c) The member 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 the member.
              Adopted January 2010

            • MIR-2.7.4

              For the purposes of paragraph MIR-2.7.1 (c), a member shall be deemed to have ceased to undertake its regulated activities if:

              (a) It has ceased to undertake its regulated activities for more than 30 days, unless it has obtained the prior approval of the CBB, or SRO to do so; or
              (b) It has ceased to undertake the regulated activities under a direction issued by the CBB, or SRO.
              Adopted January 2010

            • MIR-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 the member, 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 market contracts, agreements, transactions or arrangements.
              Adopted January 2010

            • MIR-2.7.6

              Where the CBB cancels or amends a license of a member, notification to the member and an appeal against such a decision shall be governed by Article 48 of the CBB Law.

              Adopted January 2010

          • MIR 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 2010

            • MIR-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 2013

            • MIR-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 2016

            • MIR-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 2016

            • MIR-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 2016

            • MIR-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 the licensed market operator. The Form ALF includes a declaration by the licensed 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 2016

            • MIR-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 2010

            • MIR-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 2016

          • MIR 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 2010

            • MIR-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 2017

            • MIR-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 2017

          • MIR 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 licensed member 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 2010

            • MIR-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 2010

        • MIR-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 a controlled function in a member and be registered with the SRO, as the case may be, prior to their final appointment.

              Amended: July 2016
              Amended: April 2016
              Amended: April 2013
              Adopted January 2010

            • MIR-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 or General 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 2010

            • MIR-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 2016

            • MIR-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 2016

            • MIR-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 critical controlled functions.

              Amended: July 2016
              Amended: April 2016
              Amended: July 2014
              Amended: April 2013
              Adopted January 2010

            • Fit and Proper Requirements

              • MIR-3.1.4

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

                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-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 a member from any of the requirements of rules MIR-3.1.2 and MIR-3.1.3.

                Amended: July 2016
                Adopted January 2010

              • MIR-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 2013

              • MIR-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 the business rules of the SRO and the various applicable Volume 6 Modules;
                (b) The Compliance Officer shall:
                (i) Monitor the transactions undertaken by the member, its representatives, or participants;
                (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 the member;
                (iv) Identify any breach of CBB Law, rules and regulations; and
                (v) Identify any breach of the rules of the SRO.
                Added: April 2013

              • MIR-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 the member.

                Added: April 2013

          • MIR-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 2010

            • MIR-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 2013

          • MIR-3.3 MIR-3.3 Fit and Proper

            • MIR-3.3.1

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

              Amended: April 2016
              Adopted January 2010

            • MIR-3.3.1A

              Each applicant applying for approved person status and those individuals occupying approved 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, 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 the controlled function.
              Amended: July 2016
              Added: April 2016

            • MIR-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 a controlled function in one member may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger member.

              Added: April 2016

            • MIR-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 2016

            • MIR-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 2016

            • MIR-3.3.2

              Approved persons undertaking a controlled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking a controlled function and shall be subject, among all accepted market conducts, to the insider trading rules.

              Adopted January 2010

            • MIR-3.3.3

              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 member 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 licensed member 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 member in general, and interest in holding any listed securities or futures contracts in particular.
              Amended: April 2013
              Adopted January 2010

            • General Guidance on 'Fit and Proper'

              • MIR-3.3.4

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016
                Adopted January 2010

          • MIR-3.4 MIR-3.4 Approved Persons

            • MIR-3.4.1

              [This Paragraph was deleted in April 2016.]

              Deleted: April 2016
              Adopted January 2010

            • Prior Approval Requirements and Process

              Contents:

              •    MIR-3.4.2
              •    MIR-3.4.3
              •    MIR-3.4.4

              • 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 2010

              • MIR-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 a controlled function is in relation to an existing member, 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 2010

              • MIR-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 the member, 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 the member's seal.
                Added: April 2016

              • MIR-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 2010

            • Assessment of Application

              Contents:

              •    MIR-3.4.5

              • 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 2016

              • MIR-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 2016

              • MIR-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 2010

            • Appeal Process

              • MIR-3.4.6

                Members or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved person status. The CBB shall decide on the appeal and notify the member of its decision within 30 calendar days from submitting the appeal.

                Amended: April 2016
                Adopted January 2010

              • MIR-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 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 the member of its decision within 30 calendar days from the date of submitting the appeal.

                Amended: April 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-3.4.8

                [This Paragraph was deleted in July 2016].

                Deleted: July 2016
                Amended: April 2016
                Adopted January 2010

              • MIR-3.4.9

                The member shall provide for the composition and duties of the board of directors or any committee of a member after obtaining CBB approval.

                Adopted January 2010

              • MIR-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 2010

            • Notification Requirements and Process

              Contents:

              •    MIR-3.4.11

              • MIR-3.4.11

                The member must immediately notify the CBB, licensed exchange and/or licensed clearing house when an approved person ceases to hold a controlled function together with an explanation as to the reasons why. In such cases, their approved person status is automatically withdrawn by the CBB.

                Amended: April 2016
                Adopted January 2010

              • MIR-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 an approved person

                Added: April 2016

          • MIR-3.5 MIR-3.5 Amendment of Authorisation

            • MIR-3.5.1

              A licensed member must seek prior CBB approval before an approved person may move from one controlled function to another within the same member.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another member, the first member should notify the CBB of that persons departure, and the new member should submit a request for approval under section MIR-3.1.

              Adopted January 2010

          • MIR-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 that member to contravene the CBB Law, rules and regulations;
              1. The business rules of an SRO; or
              2. Where applicable, the listing rules, trading rules, and clearing, settlement and depository rules of an SRO, as the case may be;
              (b) Has without reasonable excuse, failed to ensure compliance by the member, or a person associated with that member with:
              1. The CBB Law rules and regulations;
              2. The business rules of the SRO, or
              3. Where applicable, the listing rules, trading rules, and clearing, settlement and depository rules of the SRO;
              (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 that member shall comply with such notice.

              Amended: July 2016
              Amended: April 2013
              Adopted January 2010

            • MIR-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 the licensed exchange and/or licensed clearing house, as the case may be.

              Adopted January 2010

            • MIR-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 the member an opportunity to be heard.

              Adopted January 2010

            • MIR-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 the member or that particular person 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; and
              2. Punishable with imprisonment for a term of 3 months or more.
              Amended: April 2013
              Adopted January 2010

          • MIR-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 the member;
              (b) Ensured the compliance of the member with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides its regulated activities;
              (c) Set out and ensured compliance with written policies on all operational areas of the member, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the member in general, and rules of protection of its clients assets in particular;
              (d) Identified, monitored and addressed the risks associated with the business of the member;
              (e) Ensured that the regulated activities of the member were subject to adequate internal audit;
              (f) Oversaw the financial undertakings or exposure of the member to risks of any nature by setting out proper delegation limits and risk management controls; and
              (g) Ensured:
              1. That the member 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
              2. That every report, return or statement submitted by the member to the CBB was complete and accurate.
              Amended: April 2013
              Adopted January 2010

        • MIR-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 every regulated activity it undertakes:

              (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 the public investors;
              (d) Comply with the business rules of an SRO and, where appropriate, listing rules and clearing, settlement, depository rules of the licensed exchange and/or licensed clearing house, as the case may be, that make satisfactory provision for:
              1. A fair, orderly and transparent market in securities and futures contracts that are traded through the licensed exchange and/or licensed clearing house; and
              2. The proper internal regulation and controls, and the supervision of its employees and/or representatives;
              (e) Maintain proper arrangements to enforce compliance with the business rules of an SRO, listing rules, and/or clearing, settlement and central depository rules of the licensed exchange and/or licensed 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 the clients' assets safely and properly;
              4. To meet contingencies or disasters; and
              5. To provide adequate security arrangements;
              (g) Ensure that it appoints or employs fit and proper persons as approved persons 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 relevant SROs;
              (j) Ensure that its clients receive fair treatment without any unjustifiable favour or discrimination for each class of clients;
              (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 2010

            • MIR-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 2020

          • MIR-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 a regulated activity;
              2. A business incidental to undertaking a regulated activity;
              (c) The acquisition of a substantial shareholding in a corporation which does not carry on:
              1. The business of undertaking a regulated activity, whether in Bahrain or elsewhere;
              2. A business incidental to undertaking a regulated 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 its clients; or
              2. May affect the ability to meet its financial obligations to an SRO, 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 any persons performing controlled functions or where such persons are subject to an order or petition of bankruptcy or criminal prosecution;
              (f) Any civil or criminal legal proceeding taken against the member or any person performing a controlled function, whether in Bahrain or elsewhere;
              (g) Any disciplinary action against the member or any person 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 its clients in insider transactions or dealings;
              (k) Failure of any of its clients 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 an SRO, as the case may be;
              (m) Any other matter that is required to be notified, that the CBB or SRO may specify by notice in writing.
              Amended: April 2013
              Adopted January 2010

            • MIR-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 relevant SRO, and/or such member:

              (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); or
              2. 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); or
              2. 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 2010

            • MIR-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 the member has taken or intends to take, whether as per CBB or SRO requirements.

              Amended: July 2016
              Adopted January 2010

            • MIR-4.2.4

              A member shall, within a reasonable period of time prior to entering into negotiations to provide trading, or clearing arrangement with the person establishing or operating an overseas market or clearing facility, notify the CBB of such intent to enter into negotiations.

              Adopted January 2010

          • MIR-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 2010

            • MIR-4.3.2

              In assessing the location of a member's Head Office, the CBB will take into account the residency of its persons performing controlled functions. The CBB may require the majority of key decision-makers in executive management to be resident in Bahrain.

              Adopted January 2010

            • MIR-4.3.3

              [This Paragraph was deleted in July 2016].

              Deleted: July 2016
              Amended: April 2013
              Adopted January 2010

          • MIR-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 its members, which requirements shall be a part of their rulebook and which is approved by the CBB.

              Adopted January 2010

            • MIR-4.4.2

              The member must at all times maintain a level of financial resources and capital adequacy requirement required by the SRO, adequate for the level of business undertaken, or proposed to be undertaken.

              Adopted January 2010

            • MIR-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 its members 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 particular member.

              Adopted January 2010

            • MIR-4.4.4

              The SRO shall put in place a clearing and settlement system that promptly isolates the problem of a failing member by addressing its open proprietary positions and positions its holders on behalf of customers, or otherwise protects customers funds and assets from a member's default under the CBB Law, rules and regulations.

              Adopted January 2010

            • MIR-4.4.5

              The SRO must have a mechanism in place that is intended to monitor and evaluate continuously the risk of open positions or credit exposures that are sufficiently large to expose a risk to the market or to the clearing and settlement systems.

              Adopted January 2010

            • MIR-4.4.6

              The SRO shall use or design the clearing and settlement of securities 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 2010

          • MIR-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 each member is required to meet.

              Adopted January 2010

            • MIR-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 2010

            • MIR-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 2010

            • MIR-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 the member.

              Adopted January 2010

            • MIR-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 2010

          • MIR-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, or persons appointed by the CBB, at any time. Members must comply with the minimum record keeping requirements contained in the rulebook of the SRO and must comply with IAS (and relevant AAOIFI) standards.

              Adopted January 2010

            • MIR-4.6.2

              Every member shall ensure that all relevant books and other information, as may be required by the CBB and/or SRO for the purposes of this Module, be kept for a minimum of 10 years.

              Adopted January 2010

            • MIR-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 2010

            • MIR-4.6.4

              The members must prepare and submit quarterly prudential returns to be reviewed by the member's auditor before being submitted to the CBB.

              Adopted January 2010

            • MIR-4.6.5

              The members are required to submit the quarterly prudential returns (QPR) in the due timeframe. The members may apply in writing to the CBB for exemption from the requirements that the QPR be reviewed by the member's external auditor. This exemption would normally only be given where the member has established a track record of accurate and timely reporting, and there were no other supervisory issues of concern.

              Adopted January 2010

            • MIR-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 their clients.

              Adopted January 2010

          • MIR-4.7 MIR-4.7 Segregation and Handling of Clients' Assets

            • MIR-4.7.1

              For the purpose of this Module, "clients assets" means securities, money and other assets received or retained by, or deposited with a member in the course of its business for which it is liable to account to its client, and any securities, money or other assets accruing therefrom.

              Adopted January 2010

            • MIR-4.7.2

              The client assets are held or controlled by a member on behalf of a client if they are:

              (a) Directly held by the member;
              (b) Held in an account in the name of the member;
              (c) Held by a person, or in an account in the name of a person, controlled by the member; or
              (d) Held in an account with another person, controlled by the member.
              Adopted January 2010

            • MIR-4.7.3

              The CBB would consider a person to be controlled by a member if that person is inclined to act in accordance with the instructions of such members.

              Adopted January 2010

            • MIR-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 such members.

              Adopted January 2010

            • Segregation of Client Assets

              • MIR-4.7.5

                The member, or any person acting on its behalf, shall maintain sufficient systems and procedures in respect of the handling of securities, money or other assets, including but not limited to the requirement of maintaining books and records, segregation of the clients' securities, money and assets and the risk management and internal controls systems to address this requirement.

                Adopted January 2010

              • MIR-4.7.6

                A licensed member must hold client assets separate from its own at all times. The licensed member must, in connection with any clients' 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 2010

              • MIR-4.7.7

                A member may only use a client's assets for its own account, and/or for the account of any of its other clients if:

                (a) That client has given his express consent in writing;
                (b) The use of the client assets is restricted to the terms and conditions stipulated on the agreement agreed and signed by it; and
                (c) The agreement in which that client's consent is requested by the member gives clear information to him on:
                (i) The rights, obligations and responsibilities of the member and/or of the clients for whose account the member has been allowed to use the client's assets, with respect to the use of such assets; and
                (ii) The risks involved.
                Amended: January 2019
                Amended: April 2013
                Adopted January 2010

              • MIR-4.7.7A

                [This Paragraph was deleted in January 2019].

                Deleted: January 2019
                Added: April 2013

              • MIR-4.7.8

                A member should communicate to its clients in writing, at a minimum, the information regarding client 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 2010

              • MIR-4.7.9

                The member may maintain and hold the clients assets under the following agreements or arrangements:

                (a) Non discretionary securities account;
                (b) Discretionary accounts and portfolios;
                (c) Margin trading arrangements;
                (d) Depository and custody accounts;
                (e) Bank accounts related to the securities 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 and SRO.

                All the abovementioned arrangements shall be entered into by and in a duly signed agreement between the member and its clients.

                Adopted January 2010

            • Client Money

              • MIR-4.7.10

                The member must hold client money in a separate client bank account designated for the purpose of settlement of the client's transaction.

                Adopted January 2010

              • MIR-4.7.11

                A client bank account is an account maintained by the Settlement Bank or other designated licensed bank holding client money of one or more clients in a bank account designated as such, in accordance with the terms of agreement with the client/clients.

                Adopted January 2010

              • MIR-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 the member.

                Adopted January 2010

              • MIR-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 the SRO;
                (b) Whether it is a duly licensed bank in good regulatory standing;
                (c) The capital adequacy of the bank;
                (d) The amount of client 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 2010

              • MIR-4.7.14

                If a member holds or controls client assets which are not subject to the client asset provisions in an arrangement with a market counterparty, it must disclose to that market counterparty in writing that:

                (a) The protections conferred by the client asset protection rules do not apply to such client money;
                (b) As a consequence of (a), such client assets may be mixed with money belonging to the member, and may be used by the member in the course of the clearing and settling of the clients' securities transaction; and
                (c) In the event of insolvency, winding up of the member or other distribution event stipulated by the laws, rules and regulations, the clients assets shall not be considered as a part of the member's assets.
                Adopted January 2010

            • Transfer 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 a person who is a counterparty of the securities transaction, in accordance with the applicable clearing, settlement and central depository rules.

                Adopted January 2010

              • MIR-4.7.16

                The member must not hold money other than client money in a client 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 to clients as interest and which has not yet been withdrawn by the client or the member.
                Adopted January 2010

              • MIR-4.7.17

                If a member receives a mixed remittance (that is part client money and part other money), it must:

                (a) Pay the full sum into a client bank account; and
                (b) Pay the money that is not client money out of the client bank account within the same business day or otherwise as per provision of the agreement under rule MIR-4.7.7 (b).
                Adopted January 2010

            • Reconciliation

              • MIR-4.7.18

                A member must ensure that a system is implemented to perform reconciliations of both client securities account and client bank accounts after each transaction is executed for the benefit of that particular client. 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 2010

              • MIR-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 2010

              • MIR-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, the member must confirm such corrective action to the related clients and other counterparty's broker-dealers (if required).

                Amended: April 2013
                Adopted January 2010

            • Record-keeping

              • MIR-4.7.21

                Members must ensure that proper records, sufficient to show and explain the member's transactions and commitments in respect of its client 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 2010

            • Auditor Reports

              • MIR-4.7.22

                Members that hold or control client assets must arrange for their external auditor to report on the members' compliance with the requirements related to the holding and segregation of the client's assets requirements.

                Adopted January 2010

              • MIR-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 2010

              • MIR-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 2018

            • Client Agreements and Statements

              • MIR-4.7.24

                Before the member undertakes any regulated activities or services mentioned under paragraph MIR-1.1.2 they must notify the client 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 the client;
                2. Acknowledgements by the client;
                3. Clients' orders and instructions;
                4. Settlement and clearing services;
                5. Commission and charges;
                6. Information and advice;
                7. Undertaking of the client;
                8. Members responsibilities;
                9. The right to object to withdrawal or transfer of securities;
                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; and
                17. Law and jurisdiction.
                Adopted January 2010

              • MIR-4.7.25

                The specimen of the abovementioned agreement shall be provided in the business rules of the SRO, as the case may be. The specimen shall contain the minimum requirements and information.

                Adopted January 2010

          • MIR-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 2010

            • MIR-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 2010

            • MIR-4.8.3

              The member shall pay the fees of the auditor regardless of the manner in which such auditor is appointed.

              Adopted January 2010

            • MIR-4.8.4

              An auditor shall not be the chairman or a director in the member'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 a member, or having an extraordinary interest in a member as the SRO and/or CBB may determine.

              Adopted January 2010

            • MIR-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 2010

            • MIR-4.8.6

              The member shall provide the external auditor with all information and assistance necessary for carrying out his duties.

              Adopted January 2010

            • MIR-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 the member according to the auditing standards prescribed by the SRO and CBB, and whether the member has undertaken the auditor with any required information and clarification.

              Adopted January 2010

            • MIR-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 2010

            • MIR-4.8.9

              [This Paragraph was deleted in July 2014.]

              Deleted: July 2014
              Adopted January 2010

            • MIR-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 the SRO and CBB. Every member 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 2010

            • MIR-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 2010

          • MIR-4.9 MIR-4.9 Obligation to Submit Periodic Reports

            • MIR-4.9.1

              A licensed member shall submit to the CBB and SRO:

              (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 and directors' report; and
              2. 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; and
              4. 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 the member has discharged its responsibilities under the CBB Law and regulations and the rules of the SRO 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 2010

            • MIR-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 an SRO and/or CBB under this Module; or
              (c) Any other relevant laws or regulations.
              Adopted January 2010

            • MIR-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 2013

            • MIR-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 2013

          • MIR-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 financial position of the licensed 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 the licensed member, including any irregularity that affects or jeopardises or may affect or jeopardise, the assets and money of clients, then the auditor shall immediately send to the CBB and licensed exchange and/or licensed clearing house a written report of the matter or the irregularity.
              Adopted January 2010

            • MIR-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 any person in respect of any statement made in his report under paragraph MIR-4.10.1.

              Adopted January 2010

            • MIR-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 2010

            • MIR-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 the licensed 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 2010

            • MIR-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 2010

          • MIR-4.11 MIR-4.11 Obligation to Assist CBB

            • MIR-4.11.1

              A member shall provide such assistance to the CBB and/or SRO 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 the licensed member; or
              2. In respect of such dealings in securities 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 the clients assets.
              Amended: April 2013
              Adopted January 2010

            • MIR-4.11.2

              The CBB may at is discretion:

              (a) Call for the provision of additional information about the affairs of the member;
              (b) Carry out inspections of the office of the licensed member and inspect the books of accounts and other relevant books of the licensed member; and
              (c) Appoint one or more examiner or investigator to inquire into the affairs of the licensed member.
              Adopted January 2010

          • MIR-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 all clients or investors information that:

              (a) Comes to the knowledge of the member, or any of its officers, employees or representatives; and
              (b) Is in possession of the member, or any of its officers, employees or representatives.
              Adopted January 2010

            • MIR-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 an SRO 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 2010

            • MIR-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 or user which obliges the member to maintain a higher degree of confidentiality than that specified in this section.

              Adopted January 2010

            • Exceptions 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 a member, or its officers, employees or representatives for the following purposes or in the following circumstances:

                (a) The disclosure of investor or client 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 or client information is permitted for such purpose specified in writing by the investor or client or, where the investor or client is deceased, by his appointed personal representative;
                (c) The disclosure of investor or client information is necessary for the execution by the member of a transaction in any securities or futures contracts or clearing or settlement of a transaction, and such disclosure is made only to another user which is:
                1. A licensed exchange and/or licensed clearing house through which the transaction is traded or cleared or settled; or
                2. A counterparty licensed member through which that transaction is executed, cleared or settled;
                (d) The disclosure of investor or client information is necessary:
                1. In any disciplinary proceedings of the SRO, or securities regulator, provided that reasonable steps are taken to ensure that client information disclosed to any third person is used strictly for the purpose for which the client information is disclosed; or
                2. For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
                (e) The client information disclosed is already in the public domain;
                (f) The disclosure of client information is made in connection with:
                1. The outsourcing or proposed outsourcing of any service or activity of the member to a third party;
                2. The engagement or potential engagement of a third party by the member to create, install or maintain back-up or internal control systems of the member; or
                3. The appointment or engagement of an auditor, lawyer, consultant or other professional by the member under a contract for service;
                (g) The disclosure of client 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 deceased client; or
                2. The administration of the estate of a deceased client, including such disclosure as may be required for this purpose by the relevant authority;
                (h) The disclosure of client information is made in connection with:
                1. In the case where the client is an individual, the bankruptcy of a client or
                2. In the case where the client is a body corporate, the winding up or receivership of a client; or
                (i) The disclosure of client information is made to an issuer for the purpose of the issuer's regulatory submission.
                Amended: April 2013
                Adopted January 2010

              • MIR-4.12.5

                Where client information is disclosed under paragraph MIR-4.12.4 (f), the member shall:

                (a) Maintain a record of the circumstances relating to the disclosure of client 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 the member;
                2. In the case of the disclosure of information under paragraph MIR-4.12.4 (f), the engagement of the third party; and
                3. 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 the SRO and/or CBB;
                (b) Disclose the client information only insofar as this is necessary for the relevant purpose; and
                (c) Take reasonable steps to ensure that the client information disclosed is used by the entitled person to whom the disclosure is made strictly for the relevant purpose, and that the client information is not disclosed by that entitled person to any other person except with the consent of the SRO and/or CBB.
                Adopted January 2010

              • MIR-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, the client information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.

                Adopted January 2010

              • MIR-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 the member;
                (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 2010

          • MIR-4.13 MIR-4.13 Confirmation Requirements and Provision of Information to Clients

            • MIR-4.13.1

              A member shall confirm to its clients or participants the execution of a transaction, as well as the clearing, settlement and depository of securities in the manner and time prescribed by the rules of the SRO, (including the trading rules, and the clearing, settlement and depository rules of the licensed exchange and/or the licensed clearing house), as the case may be.

              Adopted January 2010

            • MIR-4.13.2

              A member shall provide its clients or participants with the periodic and ad hoc statements in the manner and time prescribed by the rules of the SRO, as the case may be.

              Adopted January 2010

            • MIR-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 that member:
              1. All regulated activities or services of the member;
              2. All products available on the regulated activities undertaken by the member;
              3. Applicable fees and charges;
              4. Applicable margin requirements; and
              5. Any arrangement that may be in place to compensate an investor who suffers pecuniary loss as a result of these regulated activities or insolvency of the member.
              Amended: April 2013
              Adopted January 2010

          • MIR-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 of client information related to the client's orders and transactions undertaken by it, in accordance with the rules of the SRO.

              Adopted January 2010

            • Records 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 the securities 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 an SRO, or another person in the member of an SRO group, and which are part of the member of an SRO's trading activities, or the trading activities of another person in the member of an SRO group;
                (e) Executing orders that result from decisions by the member of an SRO to deal on behalf of its client;
                (f) Placing orders with other entities for execution that result from decisions by the member of an SRO to deal on behalf of its client.
                Adopted January 2010

          • MIR-4.15 MIR-4.15 Business Continuity Plan

            • MIR-4.15.1

              A member, in accordance with the rules of the SRO, shall maintain by itself or through arrangements with the SRO, 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 any regulated activities it provides or undertakes, in the event of any disruption to its operations.

              Adopted January 2010

            • MIR-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 the SRO.

              Adopted January 2010

            • MIR-4.15.3

              A member shall immediately notify the SRO 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 2010

            • MIR-4.15.4

              A member shall, within 14 days or such longer period as the CBB may permit, inform the SRO 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 2010

          • MIR-4.16 MIR-4.16 Outsourcing

            • MIR-4.16.1

              A member shall not outsource any function related to any regulated activities without prior approval of the CBB, and/or SRO.

              Adopted January 2010

            • MIR-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 2010

            • MIR-4.16.3

              The member seeking to outsource functions related to any undertaking of regulated 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) The member retains the ultimate res'ponsibility for the functions or services that are outsourced;
              (d) The member must obtain the approval of the respective SRO and notify the CBB before committing to an outsourcing arrangement;
              (e) The member must maintain and regularly review contingency plans to enable him to set-up alternative arrangements should the outsourcing provider fail;
              (f) The member 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 the member and its clients shall be returned by the outsource provider to the member; and
              (j) For the entire duration of the outsourcing contact, this shall be subject to the confidentiality requirements in general, and information related to the clients or users in particular.
              Adopted January 2010

          • MIR-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 2013

            • MIR-4.17.2

              [This Paragraph was deleted in April 2013].

              Deleted: April 2013

          • MIR-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 the SRO; or

              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, listing rules, trading rules, or clearing, settlement and depository rules, so long as the failure does not substantially affect the rights of the person entitled to require compliance with such rules.

              Adopted January 2010

          • MIR-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 as market makers and issuers interested to enter into an agreement with market makers for the purpose of enhancing liquidity in the listed securities of the issuer.

              Added: January 2019

            • Liquidity Enhancement Practice

              • MIR-4.19.2

                Issuers, whose securities are already listed on a licensed exchange or licensed market operator and where the securities based on the criteria established by the licensed exchange or licensed market operator are eligible for market making, may enter into a market making agreement with a market 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 the market maker will trade on behalf of the issuer by buying and selling the issuer's securities with the sole purpose of enhancing liquidity and regularity of trading in the securities.

                Added: January 2019

              • MIR-4.19.4

                An issuer concurrently must not enter into market making agreement with more than one market maker for a listed security.

                Added: January 2019

            • Market Making Agreement

              • MIR-4.19.5

                The market making agreement must specify the conditions within which the market maker will trade on behalf of the issuer by buying and selling the issuer'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 the securities account and the bank account to ensure continuity of market making activity and the measures to be adopted when the balances in the two accounts are insufficient to enable trades under the market making agreement.

                Added: January 2019

              • MIR-4.19.8

                The market making agreement must establish the market maker's independence as a provider of liquidity

                Added: January 2019

              • MIR-4.19.9

                The market making agreement must establish the conditions for the remuneration payable by the issuer to the market 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 of issuer and market maker, the market making agreement may be extended for an additional period of 12 months provided the licensed exchange or licensed 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 the market making agreement with total independence from the issuer, and neither the market maker nor the issuer may request or give any type of instructions or guidance. In particular, the issuer must not instruct, guide or intervene in the trading activity and the market maker must have sole discretion as to the timing of transactions in the issuer's securities.

                Added: January 2019

              • MIR-4.19.12

                The market maker must have an internal organisational structure such that trading decisions concerning the market making activities are independent from the activities related to investment services, proprietary account, client account or any other services provided by the market maker.

                Added: January 2019

              • MIR-4.19.13

                Without prejudice to being reimbursed for the expense incurred towards market making, the remuneration method of the market maker must be consistent with the purpose of the activity and must not impair the market maker's independence.

                Added: January 2019

              • MIR-4.19.14

                An issuer must ensure that the remuneration method does not encourage the market maker to influence the security price and/or trading volume through trades in the security. 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 the market 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 the issuer and used solely for market making transactions.

                Added: January 2019

              • MIR-4.19.17

                When the market making agreement is terminated, regardless of the reason, the securities 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: The market maker will transfer the balance to another account designated by the issuer.
                b) Securities Account: The market maker must sell the securities in the securities account. Such sales must be performed in the issuer'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) The securities are transferred to another market maker entrusted with another market making agreement by the same issuer.
                b) The issuer, upon termination of market making agreement, may recover a number of securities, in which case that number may not exceed the number of securities initially deposited by the issuer.
                Added: January 2019

            • Non-withdrawal of Securities

              • MIR-4.19.19

                Unless the market making agreement is terminated, securities allocated by the issuer for the purpose of market making or securities acquired during the course of market making activity cannot be withdrawn from the securities account except as a result of transactions carried out under the market 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 the market.

                Added: January 2019

              • MIR-4.19.21

                Trades executed within the framework of market making agreement must not create artificial change in the securities price with respect to the market trend, or hamper the market'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 the licensed exchange or licensed market operator and in accordance with the trading rules.

                Added: January 2019

              • MIR-4.19.23

                Where a licensed exchange or licensed market operator allows for participation of market maker during pre-opening period, a market maker must ensure that its order during the pre-opening period does not have a material influence on the securities price.

                Added: January 2019

              • MIR-4.19.24

                The market maker and the issuer 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 the market maker by the issuer cannot be allocated for other purposes before the completion of the market making activity set forth in the market making agreement.

                Added: January 2019

              • MIR-4.19.26

                The issuer must not engage, directly or indirectly, in any other trades in its own security while the market making agreement is in force except for such transactions where the issuer 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 the issuer's shares, up until the end of offer period; and
                (b) During share repurchase programmes.
                Added: January 2019

              • MIR-4.19.28

                The issuer and/or the market 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 which issuers are subject to, an issuer that enters into a market making agreement must disclose the following by means of a public announcement as well as post it on its website:

                (a) Before the market making agreement comes into force, the identity of the market maker with which it has been arranged, the class of security and the licensed exchange or licensed market operator where the trades are to be made, the duration of the agreement, and the number of securities and the amount allocated to the securities account and bank account, respectively.
                (b) Each month and when the market making agreement is terminated, the issuer must disclose the transactions in own securities made under the market making agreement, detailing the total number of own securities that were purchased and the total number of own securities sold, the total amount of money paid and the total amount of money received, and the balance of the securities 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 the market making agreement, in addition to complying with the requirements of MIR-4.19.30(b), the issuer must disclose the termination immediately.
                Added: January 2019

              • MIR-4.19.31

                An issuer must submit, to the CBB, a copy of the signed market 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 the market making agreement and obtain written approval from the licensed exchange or licensed market operator. The approval must be obtained prior to commencement of market making activity.

                Added: January 2019

            • Termination of Market Making Agreement

              • MIR-4.19.33

                Where an issuer or a market maker, regardless of the reason, intends to terminate the market making activity with respect to the issuer's security, the market maker must submit a written request and seek prior approval from the licensed exchange or licensed market operator.

                Added: January 2019

              • MIR-4.19.34

                A market maker, in the manner prescribed by the rules and regulations of the licensed exchange or licensed market operator, must by way of a public announcement inform the market regarding the date of cessation of market making activity in the issuer'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. The market maker and the issuer must perform their respective obligations as specified in the market making agreement during this 30 days period. In particular, the market making activity must continue during the aforesaid period.

                Added: January 2019

            • Record Keeping

              • MIR-4.19.36

                An issuer and the market maker must maintain separate records of all the information pertaining to transactions under the market making agreement for a minimum period of 10 years.

                Added: January 2019

            • Disclosure to clients

              • MIR-4.19.37

                Where a member is registered as market maker, such member must disclose to its client the existence of the market maker agreement entered into between the licensed member and the licensed exchange and written consent must be obtained from the client stating his awareness of the market maker arrangement between the member and the licensed 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 of equity security must seek prior approval of shareholders at a general meeting before entering into a market making agreement.

                  Added: January 2019

                • MIR-4.19.39

                  An issuer may repurchase its own shares for the purpose of market making after obtaining shareholders' approval.

                  Added: January 2019

                • MIR-4.19.40

                  The maximum number of shares that an issuer can repurchase for the purpose of market making must not exceed 3% of the total issued shares.

                  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 of market making, the issuer must ensure that the share 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 the shares deposited in the securities account must remain suspended.

                  Added: January 2019

                • MIR-4.19.44

                  The issuer and the market 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 deposit shares into the securities account or deposits a number of shares that is insufficient to enable market making operation to commence under the agreement, there should be an initial period during which the market maker may only buy shares of the issuer until it attains the volume that is predetermined in the market making agreement. Such acquisition should be for the sole purpose of enabling the market maker to commence operations under the market making agreement and they should be performed in the issuer'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 the securities account referred to in Paragraph MIR-4.19.16.

                  Added: January 2019

                • MIR-4.19.47

                  The market maker should not sell any of the issuer's shares deposited in the securities account until the initial period concludes or until it attains the limits established in terms of number of shares or value of shares for the purpose of undertaking market making.

                  Added: January 2019

                • MIR-4.19.48

                  Where the initial period concludes and the minimum initial balance of shares in the securities account referred to in Paragraph MIR-4.19.16 has not been attained, the issuer and the market maker may:

                  a) Extend the initial period by a length of time not greater than the initially established period.
                  a) Terminate the agreement
                  b) Establish a lower number of shares
                  Added: 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 licensed member by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of the licensed member without first obtaining the approval of the CBB, to enter into the agreement.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 licensed member; or
              (b) Is in a position to control not less than 5% of the votes in the licensed member.
              Amended: April 2013
              Adopted January 2010

            • MIR-5.1.3

              In this section:

              (a) A person holds a share if:
              1. He is deemed to have an interest in that share in terms of the CBB Law, rules and regulations; or
              2. 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 licensed member 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 licensed member; and
              (c) An associate of another person 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 2010

            • MIR-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 2010

          • MIR-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. Its directors and chief executive officer; and
              4. Its principal business.
              (c) In the case where the applicant is a natural person:
              1. His nationality;
              2. His principal occupation; and
              3. 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 licensed member and/or in any other licensed members;
              (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed member;
              (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 the licensed member; and
              (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper person for the purposes of paragraph MIR-5.2.3 (a).
              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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 proper person to be a substantial shareholder;
              (b) Having regard to the applicant's likely influence, the licensed member 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 2010

            • MIR-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 licensed member has an interest. The licensed exchange and/or licensed clearing house shall be notified of such extent.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 licensed member:

              (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
              (b) The licensed member 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 licensed member 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 2010

            • MIR-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 a person to whom a direction has been issued under paragraph MIR-5.2.4 shall immediately return those shares to the licensed member, upon which the licensed member shall return to the person any payment received from him in respect of those shares.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 a person to whom a direction has been issued under paragraph MIR-5.2.4 shall immediately return the payment he has received to the licensed member.

              Amended: April 2013
              Adopted January 2010

            • MIR-5.2.8

              The CBB may exempt:

              (a) Any person or class of persons; 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 2010

        • MIR-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 licensed member 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 the member, and the member itself, if it is aware of such case, should notify the CBB as per rule MIR-6.1.3.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 a person or persons 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 2010

            • MIR-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 2010

            • MIR-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 licensed member 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 the SRO.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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 2010

            • MIR-6.1.7

              The controller or the person intending to take control over a licensed member, 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 2010

            • MIR-6.1.8

              The CBB shall decide on the grievance and notify the person intending to take control over the licensed member of its decision within 30 days from the date of submitting the grievance.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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 licensed member according to the criteria set by the CBB.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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 2010

            • MIR-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 any person 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 2010

            • MIR-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 2010

        • MIR-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 to regulated activities to others, without prior approval from the CBB.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 the licensed exchange and/or licensed clearing house, as the case may be.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 2010

            • MIR-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 2010

            • MIR-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 the member's users and clients;
              (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 2010

            • MIR-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 2010

            • MIR-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 2010

            • MIR-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 2010

        • MIR-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 a licensed 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 2010

        • MIR-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 any securities or futures contracts, or any class of securities or futures contracts that are undertaken by any licensed member.

              Amended: April 2013
              Adopted January 2010

            • MIR-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 the regulated activities undertaken by any member;
              (b) Ordering the liquidation of all positions or part thereof, or the reduction of such positions related to such member;
              (c) Set margin levels for transactions traded, cleared, or settled, or to be traded, cleared, or settled by or through such member to cater for the emergency;
              (d) Altering conditions of delivery of transaction cleared or settled, or to be cleared or settled through or by that member;
              (e) Fixing the settlement price at which transactions undertaken by such member 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 such member;
              (g) Modifying or suspending any transaction made by or through such member;
              (h) Requiring any member to act in a specified manner in relation to trading, clearing, settlement and depository in securities or futures contracts, or any class of securities or futures contracts.
              Amended: April 2013
              Adopted January 2010

            • MIR-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 a securities or commodity market;
              (b) Any major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such securities 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 2010

            • MIR-9.1.4

              The CBB may modify any action taken by a licensed exchange, licensed clearing house and/or licensed member under Paragraph MIR-9.1.2, including the setting aside of that action.

              Amended: April 2013
              Adopted January 2010

      • CRA 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 a crypto-asset exchange within or from the Kingdom of Bahrain. The key requirements relevant to these activities are outlined in this Module while the licensees 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 2019

              • CRA-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; and
                i) Training and Competency.
                Amended: April 2023
                Added: April 2019

            • Legal Basis

              • CRA-A.1.3

                This Module contains the CBB's Directive (as amended from time-to-time) relating to licensees providing regulated crypto-asset services (henceforth referred to as licensees) 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 2019

              • CRA-A.1.4

                For an explanation of the CBB's Rule-making powers and different regulatory instruments, see Section UG-1.1.

                Added: April 2019

          • CRA-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 2019

        • CRA-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 in crypto-assets. The CBB's Rules are aimed at minimising the risk and, in particular, the risk of financial crime and illegal use of crypto-assets.

              Added: April 2019

            • CRA-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 2019

            • CRA-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 as securities.

              Added: April 2023

            • CRA-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 for digital token has been growing at a rapid pace. While digital 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 a security or otherwise, based on the features of the digital token.

              Added: April 2023

            • CRA-B.1.5

              Chapters CRA-1 to CRA-14 apply to Category 1, 2, 3 and 4 licensees offering regulated crypto-asset services. Chapter CRA-15 contains applicable rules on digital tokens and the requirements applicable to digital token advisors and digital token issuers. The rules contained in Chapters CRA-1 to CRA-14 are not applicable to digital token issuers.

              Added: April 2023

            • CRA-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 2023

        • CRA-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 2019

            • CRA-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 2019

            • CRA-1.1.3

              [This Paragraph was deleted in April 2023].

               

              Deleted: April 2023
              Added: February 2019

            • CRA-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 2019

            • CRA-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 2019

            • Regulated 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 a client of an order to buy and/or sell one or more crypto-assets and the transmission of that order to a third party for execution.
                (b) Trading in crypto-assets as agent: Acting to conclude agreements to buy and/or sell for one or more crypto-assets on behalf of the clients.
                (c) Trading in crypto-assets as principal: Trading against proprietary capital resulting in conclusion of transactions in one or more crypto-assets.
                (d) Portfolio Management: Managing crypto-assets belonging to a client and the arrangement for their management are such that the licensee managing those crypto-assets has a discretion to invest in one or more crypto-assets.
                (e) Crypto-asset Custodian: safeguarding, storing, holding, maintaining custody of or arranging on behalf of clients for crypto-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 more crypto-assets. A "personal recommendation" means a recommendation presented as suitable for the client 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 particular crypto-asset, or hold a particular crypto-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 another crypto-asset,
                may be transacted in accordance with the Rules of the crypto-asset exchange.
                (i) Digital token advisor: advise and guide a digital token issuer on all matters relating to offering of digital tokens, trading of digital tokens as well as on the responsibilities and obligations of the digital token issuer pursuant to the provisions of applicable law, rules and regulations.
                Amended: April 2023
                Added: February 2019

              • CRA-1.1.6A

                Licensees intending to offer regulated crypto-asset services which were not included in its application for licence and/or additional services which are not part of the regulated 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 2023

            • Exclusions

              • 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 undertaking regulated crypto-asset services.
                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

            • Category 1

              • CRA-1.1.9

                Category 1 licensees may undertake one or more regulated crypto-asset service, as listed below:

                (a) Reception and transmission of orders;
                (b) Provide investment advice in relation to crypto-assets.
                Amended: April 2023
                Added: April 2019

              • CRA-1.1.10

                When undertaking the regulated crypto-asset services listed under Rule CRA- 1.1.9, Category 1 licensees:

                (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 a crypto-asset exchange.
                Added: February 2019

            • Category 2

              • CRA-1.1.11

                Category 2 licensees may undertake one or more regulated crypto-asset services, as listed below:

                (a) Trading in crypto-assets as agent;
                (b) Portfolio Management;
                (c) Crypto-asset custody;
                (d) Investment advice.
                Amended: April 2023
                Added: April 2019

              • CRA-1.1.12

                When undertaking the regulated crypto-asset services listed under Rule CRA- 1.1.11, Category 2 licensees may hold or control client asset and client money but must not deal from their own account ("dealing as principal") or operate a crypto-asset exchange.

                Added: February 2019

            • Category 3

              • CRA-1.1.13

                Category 3 licensees may undertake one or more regulated crypto-asset services, as listed below:

                (a) Trading in crypto-assets as agent;
                (b) Trading in crypto-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 2019

              • CRA-1.1.14

                When undertaking regulated crypto-asset services listed under Rule CRA-1.1.13, Category-3 licensees may hold or control client assets and client money, may deal on their own account ("dealing as principal") but must not operate a crypto-asset exchange.

                Added: April 2019

            • Category 4

              • CRA-1.1.15

                Category 4 licensees may undertake one or more regulated crypto-asset service, as listed below:

                (a) Operate a licensed crypto-asset exchange;
                (b) Crypto-asset custody service;
                (c) To act as a digital token advisor.
                Amended: April 2023
                Added: April 2019

              • CRA-1.1.16

                Licensees offering crypto-asset exchange service (licensed crypto-asset exchange) must not execute client orders against proprietary capital, or engage in matched principal trading.

                Added: April 2019

              • CRA-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 in digital tokens provided the CBB has provided the licensee with an approval to trade the digital token under the over-the-counter trading framework.

                Added: April 2023

              • CRA-1.1.17

                When undertaking the regulated crypto-asset services listed under Rule CRA-1.1.15, Category-4 licensees may hold or control client asset and client money.

                Added: April 2019

              • CRA-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 2019

              • CRA-1.1.19

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.1.20

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.1.21

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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, the regulated crypto-asset service licensee must continue to meet these criteria on an on-going basis.

                Added: April 2019

              • CRA-1.1.23

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.1.24

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.1.25

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Combining 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. a crypto 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 a crypto-asset exchange.

                Added: April 2023

              • CRA-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 licensed crypto 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 licensed crypto-asset exchange.
                Added: April 2023

          • CRA-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 2019

            • CRA-1.2.2

              This Paragraph was deleted in April 2023]

              Deleted: April 2023
              Added: April 2019

            • CRA-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 2019

            • CRA-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 proposed licensee;
              (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 proposed licensee;
              (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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • Licensing 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 2019

              • CRA-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 2019

              • CRA-1.2.13

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.2.14

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.2.15

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

            • Granting 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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

            • Readiness 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 2019

              • CRA-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 2019

              • CRA-1.2.25

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Commencement 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 proposed licensee;
                (b) [This Sub-paragraph was deleted in April 2023];
                (c) The licensee'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 the licensee'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 the licensee 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 the licensee and the third party.
                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-1.2.28

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

          • CRA-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 2019

              • CRA-1.3.2

                Licensees must satisfy the CBB that their clients' interests are to be safeguarded during and after the proposed cancellation.

                Added: April 2019

              • CRA-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 2019

            • Cancellation 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 the licensee. 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 2019

              • CRA-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 2019

              • CRA-1.3.6

                The CBB will only effect the cancellation once a licensee has discharged all its regulatory responsibilities to clients. Until such time, the CBB will retain all its regulatory powers towards the licensee and will direct the licensee so that no new regulated crypto-asset services may be undertaken whilst the licensee discharges its obligations to its clients.

                Amended: April 2023
                Added: April 2019

            • Amendment 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 2023

          • CRA-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 2019

            • CRA-1.4.2

              For the purposes of Paragraph CRA-1.4.1, the cost of publication must be borne by the Licensee.

              Added: April 2019

            • CRA-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 2019

          • CRA-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 2019

            • CRA-1.5.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-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 2019

            • CRA-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 Category
              Minimum Fees (BD)
              Maximum Fees (BD)
              1.
              Category-1
              2,000
              6,000
              2.
              Category-2
              3,000
              8,000
              3.
              Category-3
              4,000
              10,000
              4.
              Category-4
              5,000
              12,000
              Added: February 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-1.6.11

              For the first full year of operation, the licensee would calculate its fee as the floor amount. For future years, the licensee 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 2019

            • CRA-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 2019

            • CRA-1.6.13

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 a controlled function in a licensee. The approval from the CBB must be obtained prior to their appointment.

                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-1.7.3

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.7.4

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 the licensee appoints at least the following controlled functions (i) Directors, (ii) Chief Executive or General Manager, (iii) Compliance Officer and (iv) Money Laundering Reporting Officer.

                Amended: April 2023
                Added: April 2019

              • CRA-1.7.6

                Pursuant to CRA-1.7.5, a licensee seeking exemption from appointment of persons to specific controlled functions should provide in writing to the satisfaction of the CBB:

                (a) Nature, scale and complexity of their business and how performance of the controlled 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 2019

            • Fit and Proper

              • CRA-1.7.7

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

                Amended: April 2023
                Added: April 2019

              • CRA-1.7.8

                Each applicant applying for approved person status and those individuals occupying approved 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 2019

              • CRA-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 a controlled function with a licensee may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger licensee.

                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-1.7.8D

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

                Added: April 2023

              • CRA-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 2023

            • Prior 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 2023

              • CRA-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 a controlled function is in relation to an existing licensee, 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 2023

              • CRA-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 the licensee, 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 licensee and all pages stamped with the licensee’s seal.
                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

            • Assessment 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 2023

              • CRA-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 2023

              • CRA-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 the licensee concerned, setting out the basis for the decision.

                Added: April 2023

            • Appeal 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 for approved person status. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from submitting the appeal.

                Added: April 2023

              • CRA-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 the licensee of its decision within 30 calendar days from the date of submitting the appeal.

                Added: April 2023

            • Notification Requirements and Process

              • CRA-1.7.9

                Licensees must promptly notify the CBB in writing when a person undertaking a controlled function will no longer be carrying out that function together with an explanation as to the reasons for not undertaking the controlled function. In such cases, their approved person status is automatically withdrawn by the CBB. If a controlled function falls vacant, the 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, the licensee must make immediate interim arrangements to ensure continuity of the duties and responsibilities of the controlled 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 2019

              • CRA-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 2019

              • CRA-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 2023

            • Amendment of Authorisation

              • CRA-1.7.10B

                Licensees must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

                Added: April 2023

              • CRA-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 2023

            • Cancellation 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 2019

              • CRA-1.7.12

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.7.13

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.7.14

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.7.15

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.7.16

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-1.7.17

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-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 the licensee's compliance with the requirements of the CBB; and
                (b) Reporting to the licensee's Board in respect of that responsibility.
                Added: April 2019

        • CRA-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 regulated crypto-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 regulated crypto-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 2019

            • CRA-2.1.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-2.2.2

              The CBB requires the following approved persons occupying controlled 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 2019

            • CRA-2.2.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 the licensee.

              Added: April 2019

            • CRA-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 the licensee; or
              (b) Is in a position to control not less than 5% of the votes in the licensee.
              Added: April 2019

          • CRA-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's approved person's requirements.

              Added: April 2019

            • CRA-2.4.2

              The definition of controlled functions as well as the CBB’s approved person requirements are contained in Section CRA-1.7.

              Amended: April 2023
              Added: April 2019

            • CRA-2.4.3

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

              Added: April 2019

          • CRA-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 2019

            • CRA-2.5.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-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 2023

          • CRA-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 2019

            • CRA-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 2019

            • CRA-2.6.3

              Licensees must maintain systems and controls that are adequate to address the risks of financial crime occurring in the licensee. These systems and controls must meet the minimum requirements contained in Module AML of the CBB Rulebook Volume 6.

              Amended: April 2023
              Added: February 2019

            • CRA-2.6.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-2.6.5

              Licensees must, in connection with any client 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 2019

            • CRA-2.6.6

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-2.6.7

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: February 2019

          • CRA-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 2019

            • CRA-2.7.2

              Applicants must submit details of their proposed external auditor to the CBB as part of their license application.

              Added: April 2019

          • CRA-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 2019

            • General 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 of clients contained in Chapter CRA-4 and CRA-12.

                Added: April 2019

            • Additional 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 2019

              • CRA-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 2019

        • CRA-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 2019

              • CRA-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 2019

              • CRA-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 the licensee and its ongoing operations.

                Added: April 2019

              • CRA-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 the licensee's total assets, including the position, size, liquidity, risk exposure, and price volatility of each type of crypto asset;
                (b) the composition of the licensee's total liabilities, including the size and repayment timing of each type of liability;
                (c) the actual and expected volume of the licensee's crypto asset business activity;
                (d) the liquidity position of the licensee;
                (e) the types of products or services to be offered by the licensee;
                (f) there is a change in the business of the licensee that the CBB considers material;
                (g) the licensee 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 the licensee to sell or hedge out its position within a short period without incurring material losses under normal market conditions; and
                (i) the licensee 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 2019

              • CRA-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, the licensee 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 2019

          • CRA-3.2 CRA-3.2 Key Requirements

            • CRA-3.2.1

              Licensees dealing in crypto assets as principal and thereby taking proprietary positions in crypto 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 2019

            • CRA-3.2.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-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 a licensee has been granted approval to increase its paid-up capital, confirmation from its external auditor stating that the amount has been deposited in the licensee's bank account will subsequently be required.

              Amended: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-3.3.2

              Liquid assets comprise of cash, cash equivalents, and placements or deposits maturing within 30 days.

              Added: April 2019

        • CRA-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, a licensee 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 to crypto-assets;
              (e) Act with due skill, care and diligence in all dealings with clients;
              (f) Identify clients' specific requirements in relation to the services about which they are enquiring;
              (g) Provide sufficient information to enable clients to make informed decisions when purchasing services offered to them;
              (h) Provide sufficient and timely documentation to clients to confirm that their transaction arrangements are in place and provide all necessary information about their rights and responsibilities;
              (i) Maintain fair treatment of clients through the lifetime of the client relationships, and ensure that clients are kept informed of important events and are not mislead;
              (j) Ensure complaints from clients are dealt with fairly and promptly;
              (k) Take appropriate measures to safeguard any money and crypto-assets handled on behalf of clients and maintain confidentiality of client 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 2019

            • CRA-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 2020

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2023

            • CRA-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 involving crypto- 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 of crypto-assets through multiple transactions to more accurately identify the source and destination of these crypto- assets.
              Added: April 2023

            • CRA-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 2023

            • Suitability 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 than accredited 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 2023

              • CRA-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 2023

            • Transaction 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 2023

          • CRA-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 auditing crypto-asset related businesses.

              Amended: April 2023
              Added: April 2019

            • CRA-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 2023

            • CRA-4.2.1B

              The licensee must pay the fees of the auditor regardless of the manner in which such auditor is appointed.

              Added: April 2023

            • CRA-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 a licensee, or having an extraordinary interest in a licensee.

              Added: April 2023

            • CRA-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 2023

            • CRA-4.2.1E

              Licensees must provide the external auditor with all information and assistance necessary for carrying out his duties.

              Added: April 2023

            • CRA-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 the licensee has provided the auditor with all required information and clarifications.

              Added: April 2023

            • CRA-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 2023

            • CRA-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 2019

            • Annual 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 the licensee'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 2019

            • Annual 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 2019

            • Reviewed (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 the licensee’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 2023

          • CRA-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 2019

            • CRA-4.3.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-4.3.2A

              Licensees are allowed to undertake spot trading (spot market) in crypto-assets.

              Added: April 2023

            • CRA-4.3.2B

              The CBB may, at its sole discretion, allow a licensee to list and conduct trading activities in derivatives of crypto-assets such as, but not limited to, futures, options, indices, contract for difference (CFD’s), swaps etc provided the CBB is satisfied that the licensee 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 2023

            • CRA-4.3.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-4.3.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-4.3.5

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • Crypto-asset Listing Policy

              • CRA-4.3.6

                Licensees must establish and adopt a board approved crypto-asset listing policy in accordance with the framework stipulated in this Section.

                Added: April 2023

              • CRA-4.3.7

                Licensees must, prior to commencement of business operations, provide a copy of the crypto-asset listing policy to the CBB. Unless the CBB raises specific concerns with respect to the board approved crypto-asset listing policy, licensees may implement the policy and self-certify crypto-assets for listing on its platform.

                Added: April 2023

              • CRA-4.3.8

                Prior to listing a crypto-asset, a licensee must notify the CBB of its intent to list the crypto-asset, provide the findings of the risk assessment undertaken in accordance with Paragraph CRA- 4.3.14 along with the board resolution approving the crypto-asset. The licensee must confirm in its notification to CBB that the proposed new crypto-asset complies with the requirements of its crypto-asset listing policy.

                Added: April 2023

              • CRA-4.3.9

                Licensees must provide a list of all the crypto-assets listed on its platform no later than 10 days from the end of each quarter.

                Added: April 2023

              • CRA-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 the crypto-asset on its platform.

                Added: April 2023

              • CRA-4.3.11

                The crypto-asset listing policy should help establish a mechanism for approval of a crypto-asset only if the licensee unambiguously concludes that the listing and trading of the crypto-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 2023

              • CRA-4.3.12

                Licensees must not list crypto-assets that facilitate or may facilitate the obfuscation or concealment of the identity of a client or counterparty or crypto-assets that are designed to, or substantially used to circumvent laws and regulations. Licensees must ensure that they only list crypto-assets to which they have in place the necessary AML monitoring capabilities.

                Added: April 2023

              • CRA-4.3.13

                Licensees must ensure that:

                (a) Decisions to approve or disapprove each new crypto-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 the licensee’s board members, shareholders employees, their families, or any other party;
                (c) Records are readily available for the CBB’s review, of the crypto-asset listing policy’s application to each crypto-asset. This includes the final approval for listing of a crypto-asset, the documents reviewed including an assessment of all associated material risks in connection with each crypto-asset approval or disapproval, such as reviews and sign-offs by various departments of the licensee, such as the legal, compliance, cybersecurity, and operations department etc.;
                (d) The crypto-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 its crypto-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 its crypto-asset listing policy without the prior written approval of its Board. A copy of the revised crypto-asset listing policy along with the written Board approval must be submitted to the CBB.
                Added: April 2023

            • Risk Assessment

              • CRA-4.3.14

                Licensees must establish criteria and undertake a comprehensive risk assessment of the crypto-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 the crypto-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) the crypto-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 the crypto-asset and the relevant trading pairs, if any;
                (vii) Whether the crypto-asset has any in-built anonymization functions; and
                (viii) Crypto-asset exchanges on which the crypto-asset is traded.
                (c) Operational risks associated with a crypto-asset. This includes the resulting demands on the licensee’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 the licensee;
                (d) Risks associated with any technology or systems enhancements or modification requirements necessary to ensure timely adoption or listing of any new crypto-asset;
                (e) Risks related to cybersecurity: Whether the crypto-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 the crypto-asset: Whether licensees are able to demonstrate the origin and destination of the specific crypto-asset, whether the crypto-asset enables the identification of counterparties to each trade, and whether transactions in the crypto-asset can be adequately monitored;
                (g) Market risks, including minimum market capitalisation, price volatility, concentration of crypto-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 a crypto-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 new crypto-asset;
                (j) Legal risks associated with the new crypto-asset, including any pending or potential civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of the new crypto-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 the crypto-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 2023

            • Periodic Monitoring

              • CRA-4.3.15

                Licensees must have policies and procedures in place to monitor the listed crypto-assets to ensure that continued use of the crypto-asset remains prudent. This includes:

                (a) Periodic re-evaluation of crypto-assets, including whether material changes have occurred, with a frequency and level of scrutiny tailored to the risk level of individual crypto-assets, provided that the frequency of re-evaluation must at a minimum be annual;
                (b) Implementation of control measures to manage risks associated with individual crypto-assets; and
                (c) The existence of a process for de-listing of crypto-assets, including notice to affected clients and counterparties in the case of such de-listing.
                Added: April 2023

            • Disclosure

              • 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 a crypto-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 2023

              • CRA-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 2023

              • CRA-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, the licensees, based on the instruction of the CBB, must delist the crypto-asset. In such scenarios, the licensee shall remain responsible for orderly settlement of trade and any liability arising due to the delisting of the crypto-asset.

                Added: April 2023

          • CRA-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 2019

            • CRA-4.4.2

              Licensees must ensure their compliance with the applicable laws and regulations in the jurisdictions to which they provide regulated crypto-asset services.

              Amended: April 2023
              Added: April 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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. A licensee 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 the licensee for the said purpose.

              Amended: April 2023
              Added: April 2019

            • CRA-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 2023

            • CRA-4.4.8

              Licensees must not allow a single client to open multiple accounts.

              Added: April 2023

            • CRA-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 the licensee on a periodic basis and in light of any material change in the client’s financial situation.

              Added: April 2023

          • CRA-4.5 CRA-4.5 Client Protection

            • Segregation and Handling of Clients' Assets

              • CRA-4.5.1

                Licensees undertaking regulated crypto-asset service and authorised to hold clients’ assets must apply the same standards and comply with the requirements of segregation and handling of clients’ assets Rules set out in this Section.

                Amended: April 2023
                Added: April 2019

              • CRA-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 the licensee and any crypto-assets, money or other assets accruing therefrom.

                Added: April 2023

              • CRA-4.5.2

                For purposes of safeguarding client's rights in relation to crypto-assets and client money which are held or controlled by the licensee, a licensee must hold clients' money and/or to crypto-assets in specially created and segregated accounts. These accounts must be identified separately from any other accounts used to hold money and/or to crypto-assets belonging to the licensee.

                Amended: April 2023
                Added: February 2019

              • CRA-4.5.3

                A licensee must obtain a written declaration from the entities with whom the licensee has deposited client 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 2019

            • Client Money Client Money

              • CRA-4.5.4

                A licensee must properly handle and safeguard client money. The arrangement to handle and safeguard client 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 of client 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 in crypto-assets carried out by the licensee for the client, being the client on whose behalf it is being held;
                (iii) Paying money that the client owes to the licensee in respect of the conduct of regulated 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 2019

              • CRA-4.5.5

                Client money must be received by the licensee directly into a client bank account.

                Added: April 2019

              • CRA-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 not client money, within one business day of becoming so aware, that amount of money should be paid out of the client bank account.

                Added: April 2023

            • Reconciliation 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 the licensee with the balance on that account as set out in the statement issued by the entity with whom the licensee has deposited clients' money.

                Added: April 2019

              • CRA-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 the licensee with the total of the corresponding credit balances in respect of each of its clients as recorded by the license.

                Added: April 2019

              • CRA-4.5.7A

                Licensees must ensure that the client 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 2023

            • Risk 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 with crypto-asset products and services including at a minimum, the following:

                (a) A crypto-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 of crypto-assets;
                (c) transactions in crypto-assets may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable;
                (d) some crypto-asset transactions may be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that the client initiates the transaction;
                (e) the value of crypto-assets may be derived from the continued willingness of market participants to exchange fiat currency for crypto-asset, which may result in the potential for permanent and total loss of value of a particular crypto-asset should the market for that crypto-asset disappear;
                (f) the volatility and unpredictability of the price of crypto-assets relative to fiat currency may result in significant loss over a short period of time;
                (g) [This Subparagraph was deleted in April 2023];
                (h) the nature of crypto-assets means that any technological difficulties experienced by the licensee may prevent the access or use of a client's crypto-assets; and
                (i) any investor protection mechanism.
                Amended: April 2023
                Added: April 2019

            • Disclosure of General Terms and Conditions

              • CRA-4.5.9

                When registering a new client, and prior to entering into transactions with such client, a licensee 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) the client's liability for unauthorized crypto-asset transactions;
                (b) the client's right to stop payment of a preauthorized crypto-asset transfer and the procedure to initiate such a stop-payment order;
                (c) under what circumstances the licensee will disclose information concerning the client's account to third parties;
                (d) the client's right to receive periodic account statements from the licensee;
                (e) the client's right to receive a confirmation note or other evidence of a transaction;
                (f) the client's right to prior notice of a change in the licensee's rules or policies or terms and conditions; and
                (g) [This Subparagraph was deleted in April 2023].
                (h) cybersecurity risks associated with crypto-assets including the risk of partial or full loss of crypto-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 2019

              • CRA-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 route client’s order and source liquidity (e.g. whether they pass or route orders to an exchange to execute). Where the licensee routes client 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 in crypto-assets as principal, and if so, whether, it may trade against client’s position; and
                (c) How it determines the prices of the crypto-assets it quotes to clients.
                Added: April 2023

            • Disclosure of the Terms of Transactions

              • CRA-4.5.10

                Prior to each transaction in a crypto-asset with a client, a licensee must furnish to the client 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 the crypto-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 2019

            • Acknowledgement 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 2019

            • Confirmation 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 the licensee, including a telephone number established by the licensee to answer questions and register complaints;
                Added: April 2019

              • CRA-4.5.12A

                Where a client undertakes more than one transaction, the licensee 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 2023

              • CRA-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 2023

              • CRA-4.5.13

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Prevention 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 2019

              • CRA-4.5.14A

                A client account must be considered dormant if the client 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 2023

              • CRA-4.5.14B

                If a client wishes to make his/her account active after 12 continuous months or thereafter, the licensee 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 as client, 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 2023

            • Client Agreements and Statements

              • CRA-4.5.15

                Licensees must not provide a regulated crypto-asset service to a client as mentioned unless there is a client agreement entered into between the licensee and the client containing the key information specified in Rule CRA-4.5.16.

                Amended: April 2023
                Added: April 2019

              • CRA-4.5.16

                The client agreement referred to in Rule CRA-4.5.15 must include:

                (a) the name and address of the licensee;
                (b) the regulatory status of the licensee;
                (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 the licensee will impose those fees, costs and other charges;
                (e) sufficient details of the service that the licensee will provide, including where relevant, information about any product or other restrictions applying to the licensee in the provision of its services and how such restrictions impact on the service offered by the licensee; 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 the licensee's complaints handling procedures or dispute resolution procedure; and
                (i) the crypto-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 2019

              • CRA-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 a licensee 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 2023

            • Monthly 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, the licensee 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 2023

              • CRA-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 the licensee;
                (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 of crypto-assets during the month;
                (g) The quantity, and, in so far as readily ascertainable, the market price and total value of each crypto-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 2023

            • Duty 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 2023

              • CRA-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 2023

              • CRA-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 of crypto-assets held on behalf of the client is nil.
                Added: April 2023

            • No Restriction on Withdrawal of Client Assets

              • CRA-4.5.22

                Where a client requests for withdrawal of client assets, a licensee, 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 the client assets held under its control.

                Added: April 2023

          • CRA-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 2019

            • CRA-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 2023

            • CRA-4.6.2

              Licensees must not advertise its products, services, or activities in the Kingdom of Bahrain without including the name of the licensee and a statement that the licensee is "Licensed by the CBB as a crypto-asset service provider (Licensing category-...)".

              Amended: April 2023
              Added: April 2019

            • CRA-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 2019

            • CRA-4.6.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-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 each crypto-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 a crypto-asset or any other material information);
              (e) The rights and obligations of the licensee 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 and crypto-assets;
              (h) Where applicable, client’s liability for unauthorised crypto asset transactions;
              (i) Client’s right to stop transfer of a preauthorised crypto-asset and the procedure for initiating such a stop-transfer order;
              (j) Circumstances under which the licensee may disclose the client’s confidential information to third parties, including regulators;
              (k) Client’s right to prior notice of any change in the licensee’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 2023

            • Promotion

              • 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 2023

          • CRA-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 2019

            • CRA-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) the licensee'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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 the licensee'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 2019

            • Response of Complaints

              • CRA-4.7.6

                Licensees must acknowledge in writing customer written complaints within 5 working days of receipt.

                Added: April 2019

              • CRA-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 the licensee is not, at that time, in a position to respond and must indicate by when the licensee will respond.

                Amended: April 2023
                Added: April 2019

            • Redress

              • CRA-4.7.8

                Licensees must decide and communicate how it proposes to provide the customer with redress. Where appropriate, the licensee must explain the options open to the customer and the procedures necessary to obtain the redress.

                Added: April 2019

              • CRA-4.7.9

                Where a licensee decides that redress in the form of compensation is appropriate, the licensee must provide the complainant with fair compensation and must comply with any offer of compensation made by it which the complainant accepts.

                Added: April 2019

              • CRA-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 2019

              • CRA-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 the licensee.

                Amended: April 2023
                Added: April 2019

            • Reporting 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 the licensee 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 2019

              • CRA-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 2019

            • Record 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 2023

          • CRA-4.8 CRA-4.8 Professional Indemnity Coverage

            • Key Provisions

              • CRA-4.8.1

                Licensees handling client asset and/or client 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 2019

              • CRA-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 2019

              • CRA-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 the licensee's business by the licensee or any person employed by it or otherwise acting for it, including consultants under a contract for service with the licensee;
                (b) covers legal defence costs which may arise in consequence of any negligent act, error or omission in the conduct of the licensee's business by the licensee or any person employed by it or otherwise acting for it, including consultants under a contract for service with the licensee;
                (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 the licensee, or otherwise acting for it, including consultants under a contract for service with the licensee; and
                (d) covers loss of and damage to documents and records belonging to the licensee or which are in the care, custody or control of the licensee or for which the licensee 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 2019

              • CRA-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 2019

              • CRA-4.8.5

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 the licensee, provided the terms of the policy explicitly provide indemnity coverage with respect to the licensee and meets the requirements of Paragraphs CRA-4.8.1, CRA-4.8.2 and CRA-4.8.3.

                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-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 2019

          • CRA-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 2019

            • Obligation 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 2019

            • Records of Telephone conversations and Electronic Communications

              • CRA-4.9.3

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

          • CRA-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 2019

            • Dividends

              • 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 2019

              • CRA-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 the licensee's business volumes, profitability, expenses and performance.

                Added: April 2019

              • CRA-4.10.4

                To facilitate the prior approval required under Paragraph CRA-4.10.2, licensees must provide the CBB with:

                (a) The licensee's intended percentage and amount of proposed dividends for the coming year;
                (b) A letter of no objection from the licensee'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 the licensee.
                Amended: April 2023
                Added: April 2019

          • CRA-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 the licensee 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 2019

            • CRA-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 of regulated crypto-asset services undertaken in the course of the business.

              Added: April 2019

            • CRA-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 the licensee'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 out regulated crypto-asset services to comply with the licensee's legal and regulatory obligations.
              Added: April 2019

            • CRA-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 2019

            • CRA 4.11.5

              The CBB may exempt a licensee from the requirements Paragraph CRA-4.11.4(c) if the licensee 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 2019

            • CRA-4.11.6

              The CBB may, at its discretion, allow the compliance officer of a licensee to also act as the licensee's Money Laundering Reporting Officer, provided the licensee 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 2019

          • CRA-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 2019

              • CRA-4.12.2

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-4.12.3

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Suspension of trading and delisting

              • CRA-4.12.4

                Where a licensed crypto-asset exchange decides to delist or suspend the trading of one or more crypto-assets, it must notify the CBB with the rationale for the suspension or delisting of the crypto-asset.

                Amended: April 2023
                Added: April 2019

              • CRA-4.12.5

                Without prejudice to the right of the CBB to demand suspension or delisting of a crypto-asset from trading, a licensed crypto-asset exchange must suspend or delist from trading a crypto-asset which no longer complies with the Rules of the licensed crypto-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 2019

              • CRA-4.12.6

                Where a licensed crypto-asset exchange decides to suspends or delists from trading a crypto-asset, it must by way of a public announcement inform the clients' regarding the date of suspension or delisting of the crypto-asset.

                Amended: April 2023
                Added: April 2019

              • CRA-4.12.7

                Where a llicensed crypto-asset exchange has suspended or delisted a crypto-asset from trading, the CBB may require that other licensees, which fall under its jurisdiction and trade the same crypto-asset, also suspend or delist that crypto-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 or crypto-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 2019

            • Order Matching

              • CRA-4.12.8

                A licensed crypto-asset exchange must ensure expedient and accurate verification of trades and matching settlement instructions.

                Added: April 2019

              • CRA-4.12.9

                A licensed crypto-asset exchange must ensure that it has necessary systems and controls to verify the existence of funds and crypto-assets, as applicable, of clients submitting orders.

                Amended: April 2023
                Added: April 2019

            • Pre-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 of crypto-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 the crypto-assets; and
                (c) any other information relating to crypto-assets which would promote transparency relating to trading.
                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

            • Post-trade transparency

              • CRA-4.12.12

                A licensed crypto-asset exchange must disclose the price, volume and time of the transactions executed in respect of crypto-assets to the public as close to real-time as is technically possible on a non-discretionary basis. A licensed crypto-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 2019

            • Client 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 in crypto-assets which are carried out through their systems.

                Amended: April 2023
                Added: April 2019

              • CRA-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 the crypto- 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 2019

              • CRA-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 2019

              • CRA-4.12.16

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-4.12.17

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Exchange 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 2019

              • CRA-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 a crypto-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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

            • Settlement

              • CRA-4.12.25

                A licensed crypto-asset exchange must establish procedures that enable the confirmation of relevant details of transactions in crypto-assets.

                Amended: April 2023
                Added: April 2019

              • CRA-4.12.26

                A licensed crypto-asset exchange's settlement procedures must clearly define the point at which settlement is final.

                Added: April 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-4.12.29

                A licensed crypto-asset exchange must minimize and strictly control the credit and liquidity risk arising from money settlements.

                Added: April 2019

              • CRA-4.12.30

                A licensed crypto-asset exchange must clearly state its obligations with respect to the delivery of crypto-assets and should identify, monitor, and manage the risks associated with such delivery.

                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-4.12.32

                A licensed crypto-asset exchange must establish a system that monitors settlement failures of transactions in crypto-assets. Upon occurrence of such events, the licensed crypto-asset exchange must immediately report to the CBB, details of the settlement failure and any other relevant information.

                Amended: April 2023
                Added: April 2019

            • Rules 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 any crypto-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 2019

              • CRA 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 2019

              • CRA-4.12.35

                The Rules must, inter alia, include Sections on:

                (a) the administration of the licensed crypto-asset exchange, including but not limited to governance, compliance and risk management;
                (b) how the licensed crypto-asset exchange operates, including the client on boarding procedure, the procedure for the listing of crypto-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 licensed crypto-asset exchange can take against its clients.
                Amended: April 2023
                Added: April 2019

            • Inability 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 2019

            • Actions or Measures

              • CRA-4.12.37

                Where a licensed crypto-asset exchange has taken any action against any of its clients, including the suspension of the client from trading, the blacklisting or expelling of a client or any other action, in respect of a breach of its rules, that licensed crypto-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 licensed crypto-asset exchange; and
                (d) The reasons for taking that action or measure.
                Amended: April 2023
                Added: April 2019

        • CRA-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 2019

            • CRA-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 of crypto-assets: Systems and controls to mitigate the risk of misuse of crypto-assets, setting out how:
              (vii) The origin of crypto-asset is determined, in case of an incoming transaction; and
              (viii) The destination of crypto-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 each crypto-asset; and
              (iv) Risk of financial crime.
              Amended: April 2023
              Added: April 2019

            • CRA-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 2019

            • System 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 2023

              • CRA-5.1.5

                Licensees must continuously monitor the utilisation of their system resources against a set of pre-defined thresholds. Such monitoring must facilitate the licensee in carrying out capacity management to ensure IT resources are adequate to meet current and future business needs.

                Added: April 2023

              • CRA-5.1.6

                Licensees must conduct regular testing of resilience of its IT systems to meet its business requirements.

                Added: April 2023

              • CRA-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 2023

          • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • IT System Audit

              • CRA-5.2.6

                [This Paragraph was deleted in January 2020].

                Amended: January 2020
                Added: April 2019

              • CRA-5.2.7

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: January 2020

              • CRA-5.2.8

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: January 2020

              • CRA-5.2.9

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: January 2020

          • CRA-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 2019

            • CRA-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 to clients, 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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-5.3.6

              Licensees must conduct regular security tests of their systems, network, and connections.

              Amended: January 2020
              Added: April 2019

          • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • Password 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 2019

              • CRA-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 its crypto-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 2019

            • Off 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 2019

            • Air 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 2019

            • Password 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 2019

              • CRA-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 2019

            • Private 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. A licensee 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 to crypto-assets is tightly restricted among approved persons, no single approved 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 2023

            • Private 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 a licensee 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 2023

          • CRA-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 2019

            • CRA-5.5.2

              Licensees must develop, implement and maintain effective transaction monitoring systems to determine the origin of a crypto-asset, to monitor its destination and to apply strong “know your transaction” measures which enable the licensees to have complete granular data centric information about the transactions conducted by a client.

              Added: April 2023

            • CRA-5.5.3

              Licensees must be vigilant and establish internal processes and indicators to identify crypto-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 2023

          • CRA-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 2019

            • CRA-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 2019

            • CRA-5.6.3

              Licensees should have a programme of planned systems outages to provide for adequate opportunities to perform updates and testing.

              Added: April 2019

          • CRA-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 2019

            • CRA-5.7.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-5.7.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 the licensee'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 external cyber security risks by, at a minimum, identifying the information stored on the licensee's systems, the sensitivity of such information, and how and by whom such information may be accessed;
                (b) protect the licensee'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 2019

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 2023

            • Roles 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 the licensee's overall risk management framework.

                Amended: January 2020
                Added: April 2019

              • CRA-5.8.3

                In discharging its oversight functions, the board must:

                (a) ensure that the licensee's strategy, policy and risk management approach relating to cyber security are presented for the board's deliberation and approval;
                (b) ensure that the approved cyber security risk policies and procedures are implemented by the management;
                (c) monitor the effectiveness of the implementation of the licensee'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 of cyber 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 of cyber 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 of cyber security threats, and understand the potential impact of such threats to the licensee.
                (h) Ensure that the management continues to promote awareness on cyber resilience at all levels within the entity;
                (i) Ensure that the impact of cyber 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 of cyber security threats and understand the potential impact of such threats to the licensee.
                Amended: April 2023
                Amended: January 2020
                Added: April 2019

            • Roles 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 of cyber security risk exposure and its impact on the licensee. These policies and procedures must take into account the following:
                (i) The sensitivity and confidentiality of data which the licensee maintains;
                (ii) Vulnerabilities of the licensee's information systems and operating environment across the licensee; and
                (iii) The existing and emerging cyber security threats.
                (b) ensuring that employees, agents (where relevant) and third party service providers are aware and understand the cyber security risk policies and procedures, the possible impact of various cyber security threats and their respective roles in managing such threats;
                (c) recommending to the board on appropriate strategies and measures to manage cyber 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 emerging cyber security threats and their potential impact on the entity.
                Amended: April 2023
                Amended: January 2020
                Added: April 2019

              • CRA-5.8.4A

                Management must ensure that:

                (a) The licensee has identified clear internal ownership and classification for all information assets and data;
                (b) The licensee 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 the licensee’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 2023

              • CRA-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 2023

            • Cyber 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 the licensee;
                (b) The primary cyber security threats and challenges facing the licensee;
                (c) The licensee’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 2023

              • CRA-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 2023

            • Cyber Security Risk Policy

              • CRA-5.8.5

                Licensees must implement a written cyber security risk policy setting out the licensee's Board approved policies and related procedures that are approved by senior management, for the protection of its electronic systems and client data stored on those systems. This policy must be reviewed and approved by the licensee's board of directors at least annually. The cyber security policy, among others, must address the following areas:

                (a) A statement of the licensee’s overall cyber risk tolerance as aligned with the licensee’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 manage cyber 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 of cyber 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 the licensee's cyber security risk policy;
                (f) Communication procedures that will be activated by the licensee 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 and cyber 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 the licensee, as applicable;
                (xiii) incident response; and
                (xiv) System audit.
                Amended: April 2023
                Amended: January 2020
                Added: April 2019

            • Cyber Security Risk Measure

              • CRA-5.8.6

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-5.8.7

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Prevention

              • CRA-5.8.8

                A licensee must conduct regular assessments as part of the licensee's compliance programme to identify potential vulnerabilities and cyber 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 2019

              • CRA-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 a licensee deals with, systems and technologies adopted, business processes and outsourcing arrangements.

                Added: April 2019

              • CRA-5.8.10

                A licensee must develop and implement preventive measures to minimise the licensee's exposure to cyber security risk.

                Added: April 2019

              • CRA-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 and malware 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 2019

              • CRA-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 the licensee’s network or which do not meet the minimum-security requirements defined for licensee 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 2023

              • CRA-5.8.11B

                Licensees must set up anti-spam and anti-spoofing measures to authenticate the licensee’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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 the licensee’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 the licensee;
                (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 that licensees 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 2023

              • CRA-5.8.12

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-5.8.13

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Cyber 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 the licensee, 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 the licensee where applicable; and
                (f) Examples of cyber threats from recent cyber-attacks on other organisations.
                Added: April 2023

              • CRA-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 2023

              • CRA-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 the licensee’s risk tolerance levels.

                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-5.8.13H

                The CBB may require additional third-party security reviews to be performed as needed.

                Added: April 2023

              • CRA-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 2023

            • Cyber Incident Detection and Management

              • CRA-5.8.14

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 the licensee’s asset inventory and network diagrams.

                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-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 the licensee’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 2023

              • CRA-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 the licensee’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 2023

              • CRA-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 2023

              • CRA-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, the licensee 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 2023

              • CRA-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 the licensee.
                (b) Severity 2 incident has or will cause some degradation of critical services and there is medium impact on public confidence in the licensee.
                (c) Severity 3 incident has little or no impact to critical services and there is no visible impact on public confidence in the licensee.
                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-5.8.15

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Amended: January 2020
                Added: April 2019

              • CRA-5.8.16

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Amended: January 2020
                Added: April 2019

              • CRA-5.8.17

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Amended: January 2020
                Added: April 2019

              • CRA-5.8.18

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-5.8.19

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Amended: January 2020
                Added: April 2019

              • CRA-5.8.19A

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: January 2020

              • CRA-5.8.20

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 the licensee will require to return to full service and operations.

                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-5.8.20D

                Licensees must ensure that all critical systems are able to recover from a cyber security breach within the licensee’s defined RTO in order to provide important services or some level of minimum services for a temporary period of time.

                Added: April 2023

              • CRA-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 2023

              • CRA -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 2023

              • CRA-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 2023

              • CRA-5.8.21

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 a cyber security incident breach.

                Amended: April 2023
                Added: April 2019

            • Chief 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 the licensee's cyber security program and enforcing its cyber security policy. The CISO must report to an independent risk management function or the licensee must incorporate the responsibilities of cyber security risk into the risk management function.

                Amended: April 2023
                Added: April 2019

              • CRA-5.8.24

                [This Paragraph was deleted in January 2020]

                Deleted: January 2020
                Added: April 2019

            • IT System Audit

              • CRA-5.8.25

                [This Paragraph was deleted in January 2020]

                Deleted: January 2020
                Added: April 2019

              • CRA-5.8.25A

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: January 2020

              • CRA-5.8.26

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-5.8.27

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Amended: January 2020
                Added: April 2019

            • Application Security

            • Personnel and Intelligence

            • Cyber Risk Insurance

              • CRA-5.8.28

                A licensee, based on the assessment of cyber security risk exposure and with an objective to mitigate cyber 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 the licensee.

                Added: January 2020

              • CRA-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 the licensee’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 the licensee.
                Amended: April 2023
                Added: January 2020

            • Training 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 2023

              • CRA-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 2023

              • CRA-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 the licensee.
                Added: April 2023

            • Reporting 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 2023

              • CRA-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 2023

                • CRA-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 2023

                • CRA-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 2023

          • CRA-5.9 Cyber Hygiene Practices

            • Multi Factor Authentication

              • CRA-5.9.1

                Licensees must ensure that every client account is secured to prevent any unauthorized access to or use of client account.

                Added: October 2023

              • CRA-5.9.2

                Licensees must use multi-factor authentication (two or more factors) to authenticate the identity and authorisation of clients with whom it conducts business. Licensees must, at a minimum, establish adequate security features for client 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 2023

              • CRA-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 2023

              • CRA-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 2023

        • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 the licensee, or the licensee being required to inject more capital.

              Amended: April 2023
              Added: April 2019

            • CRA-6.1.5

              The Board of Directors must also ensure that there is adequate documentation of the licensee's risk management framework.

              Added: April 2019

            • Systems 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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 including cyber security risk;
                (e) Outsourcing risk;
                (f) Group risk; and
                (g) Any additional categories relevant to its business.
                Amended: April 2023
                Added: April 2019

              • CRA-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 the licensee's risk strategy; and
                (d) Direct communication with the Board of Directors, independently from the licensee's senior management, regarding concerns, where specific risk developments affect or may affect the licensee, without prejudice to the responsibilities of the Board of Board in its supervisory and/or managerial functions.
                Amended: April 2023
                Added: April 2019

              • CRA-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 the licensee 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 the regulated crypto-asset services undertaken in the course of that business.

                Amended: April 2023
                Added: April 2019

              • CRA-6.1.12

                Where a licensee is granted an exemption referred to in Paragraph CRA-6.1.11, the licensee 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 2019

          • CRA-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 the licensee.

              Amended: April 2023
              Added: April 2019

            • CRA-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 2019

          • CRA-6.3 CRA-6.3 Market Risk

            • CRA-6.3.1

              Licensees must document their framework for the proactive management of market risk for accepted crypto-assets. This policy must be approved by the Board of Directors and regularly reviewed by the senior management of the licensee.

              Amended: April 2023
              Added: April 2019

            • CRA-6.3.2

              Licensees must ensure that clients, before undertaking transactions, pre-fund their accounts.

              Added: April 2023

            • CRA-6.3.3

              Licensees must not provide any financial assistance to clients to acquire or undertake a transaction in crypto-assets.

              Added: April 2023

          • CRA-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 the licensee.

              Amended: April 2023
              Added: April 2019

            • CRA-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 2019

          • CRA-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 the licensee.

              Amended: April 2023
              Added: April 2019

            • CRA-6.5.2

              Licensees must consider the impact of operational risks on their financial resources and solvency.

              Added: April 2019

            • CRA-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 2023

            • CRA-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 2023

            • CRA-6.5.3

              Licensees' business continuity planning, risk identification and reporting must cover reasonably foreseeable external events and their likely impact on the licensee and its business portfolio.

              Added: April 2019

            • CRA-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 2019

            • Business 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 the Licensee's services in the event of an emergency or other disruption to the Licensee'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 the Licensee'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 the Licensee, 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 the Licensee and storing of the information off site; and
                (e) Identify third parties that are necessary to the continued operations of the Licensee's business.
                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 the Licensee, its counterparties, or the market.

                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

          • CRA-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 2019

            • CRA-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 2019

            • CRA-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; and
              ii. 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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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 2019

            • CRA-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; and
              b. 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 the licensee 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 2019

            • CRA-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; and
              c) 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 2019

            • CRA-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 2019

        • CRA-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 2019

            • CRA-7.1.1A

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: January 2020

            • CRA-7.1.2

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: April 2019

            • CRA-7.1.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Amended: January 2020
              Added: April 2019

            • CRA-7.1.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-7.1.5

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Amended: January 2020
              Added: April 2019

        • CRA-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 of crypto-assets as specified in Paragraph CRA-1.1.6(e).

              Amended: April 2023
              Added: April 2019

            • CRA-8.1.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-8.1.3

              A licensee which undertakes safeguarding, storing, holding or maintaining custody of crypto-assets must have systems and controls in place to:

              (a) Ensure the proper safeguarding of crypto-assets;
              (b) Ensure that such safe custody of crypto-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 2019

            • CRA-8.1.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-8.1.5

              To the extent a licensee stores, holds, or maintains custody or control of crypto-asset on behalf of a client, such licensee must hold crypto-asset of the same type and amount as that which is owed or obligated to such other client.

              Amended: April 2023
              Added: April 2019

            • CRA-8.1.6

              A licensee is prohibited from selling, transferring, assigning, lending, hypothecating, pledging, or otherwise using or encumbering crypto-asset stored, held, or maintained by, or under the custody or control of, such licensee on behalf of a client except for the sale, transfer, or assignment of such crypto-asset at the direction of the client.

              Amended: April 2023
              Added: April 2019

            • CRA-8.1.7

              A licensee that maintains custody or control of crypto-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, the licensee 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 the licensee’s other activities.

              Added: April 2023

            • CRA-8.1.8

              A licensee that maintains custody or control of crypto-assets on behalf of a client must store, at a minimum, 90% of client’s crypto-assets in cold wallets to minimise exposure to losses arising from a compromise or hacking. The requirement to hold 90% of client’s crypto-assets in cold wallet is to be calculated separately for each crypto-asset that is listed on the licensee’s platform and not at aggregate level.

              Added: April 2023

            • CRA-8.1.9

              A licensee must have a documented policy detailing the mechanism for the transfer of crypto-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 2023

            • Multi-Signature Arrangement

              • CRA-8.1.10

                A licensee that maintains custody or control of crypto-assets must not, at any time, permit arrangements whereby just a party or signatory is able to completely authorise the movement, transfer or withdrawal of crypto 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 the crypto assets held under custody by the licensee.

                Added: April 2023

              • CRA-8.1.11

                Licensees that maintain custody or control of crypto-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 of crypto-assets held under custody.

                Added: April 2023

            • Other Requirements

              • CRA-8.1.12

                Licensees that maintain custody or control of crypto-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 of crypto 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 2023

              • CRA-8.1.13

                Licensees that maintain custody or control of crypto-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 the crypto 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 the licensee will take to protect client’s crypto assets in the event of such incidents. Licensees must also have the ability to immediately halt all further transactions with regard to the crypto assets.

                Added: April 2023

            • Forks 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 2023

              • CRA-8.1.15

                Where a licensee supports a new protocol, it must ensure that changes in the underlying protocol of a crypto-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 2023

              • CRA-8.1.16

                Where a licensee supports a new protocol, a licensee must ensure that their clients are able to deposit and withdraw crypto-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 2023

              • CRA-8.1.17

                Where the underlying protocol of a crypto-asset is changed, and the older version of the crypto-asset is no longer compatible with the new version and/or there is an entirely new and separate version of the crypto-asset (hard fork), a licensee, where it supports a new protocol, must ensure that client balances on the old version are reconciled with the new version of the crypto-asset. This includes availability of reverse compatibility for as long as required. A licensee must maintain transparent lines of communication with their clients on how they are managing clients crypto-asset holdings in such a scenario.

                Added: April 2023

              • CRA-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 relevant crypto-asset. Additionally, licensees must ensure that, where they seek to offer services in relation to the crypto-asset associated with the new version of the underlying protocol, this new crypto-asset meets the requirements for a crypto-asset and that they notify the CBB well in advance of offering the new crypto-asset as part of their activities.

                Added: April 2023

          • CRA-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 of crypto-assets.

              Amended: April 2023
              Added: April 2019

            • CRA-8.2.2

              Licensees may implement the following three types of custodial arrangements or any other type of custodial arrangement that is acceptable to the CBB:

              (a) The licensee is wholly responsible for custody of client’s crypto-assets and provides this service “in-house” through its own crypto-assets wallet solution. Such an arrangement includes scenarios where a licensee provides its own in-house proprietary wallet for clients to store any crypto-assets bought through that licensee or transferred into the wallet from other sources.
              (b) The licensee is wholly responsible for the custody of client’s crypto-assets but outsources this service to a third party crypto-asset custodian. Such an arrangement includes the scenario where a licensee 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) The licensee wholly allows clients to “self-custodise” their accepted crypto-assets. Such an arrangement includes scenarios where licensees require clients to self-custodise their crypto-assets. Such licensees only provide the platform for clients to buy and sell crypto-assets. Clients are required to source and use their own third party crypto-asset custodians (which the licensee have no control over or responsibility for). This arrangement also includes the scenario where licensees provide an in-house wallet service for clients, but also allow clients to transfer their crypto-assets out of this wallet to another wallet from a third-party wallet provider chosen by the client (and which the licensee does not control).
              Amended: April 2023
              Added: April 2019

            • Third 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 of crypto-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 2019

              • CRA-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 party crypto-asset custodian, and once a crypto-asset has been lodged by the licensee with the third party crypto-asset custodian, the crypto-asset custodian's performance of its services to the licensee;
                (b) The arrangements, including cyber security measures, for holding and safeguarding crypto-assets;
                (c) An appropriate legal opinion as to the protection of crypto-assets in the event of insolvency of the custodian;
                (d) Whether the third party crypto-asset custodian is regulated and by whom;
                (e) The capital or financial resources of the third party crypto-asset custodian;
                (f) The credit rating of the third party crypto-asset custodian; and
                (g) Any other activities undertaken by the third party crypto-asset custodian and, if relevant, any affiliated company
                Amended: April 2023
                Added: April 2019

              • CRA-8.2.5

                When assessing the suitability of the third party crypto-asset custodian, the licensee must ensure that the third party crypto-asset custodian will provide protections equivalent to the protections specified in this Section and applicable client asset and client money protection rules as specified in Chapter CRA-4.5.

                Amended: April 2023
                Added: April 2019

              • CRA-8.2.6

                A licensee that safeguards, stores, holds or maintains custody of crypto-assets with a third party crypto-asset custodian, must establish and maintain a system for assessing the appropriateness of its selection of the crypto-asset custodian and assess the continued appointment of that crypto-asset custodian periodically as often as is reasonable. The licensee 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 the crypto-asset custodian.

                Amended: April 2023
                Added: April 2019

              • CRA-8.2.7

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Self-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 safeguarding crypto-assets falls wholly upon clients, and that the crypto-assets face the constant risk of being stolen by malicious actors. As such, licensees requiring clients to self-custodise crypto-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 2019

              • CRA-8.2.9

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

          • CRA-8.3 CRA-8.3 Crypto Wallets

            • CRA-8.3.1

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-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 holds crypto-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 hold crypto-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 their crypto-assets. In addition, there is a risk that should the custodial wallet provider cease operations or get hacked, clients may lose their crypto-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 their crypto-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 their crypto-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 2019

            • CRA-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 2019

            • CRA-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 the crypto-assets.

              Amended: April 2023
              Added: April 2019

            • CRA-8.3.5

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-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 of crypto-assets held on behalf of clients. Wallet storage technology and any upgrades should be tested comprehensively before deployment to ensure reliability. A licensee 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 client crypto-assets to a new storage location as appropriate.

              Added: April 2023

            • CRA-8.3.7

              Licensees must have, or where the licensee 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 for crypto-asset to guard against loss arising from theft, fraud and other dishonest acts, professional misconduct or omissions. In this regard, a licensee must:

              (a) Continuously monitor major developments (such as technological changes or the evolution of security threats) relevant to all crypto-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 of crypto-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 2023

            • CRA-8.3.8

              Where the licensee appoints a third-party crypto-asset custodian, the licensee must ensure that such custodian implements the above requirements.

              Added: April 2023

          • CRA-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 all crypto-assets held by the licensee, or its appointed third party custodian, and reconcile the result to the records of the licensee;
                (c) Reconcile individual client balances with the licensee’s records of crypto-assets balances held in client accounts; and
                (d) Where the licensee 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 2019

            • Client Reporting

              • CRA-8.4.2

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-8.4.3

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Record Keeping

              • CRA-8.4.4

                A licensee must ensure that proper records of the client's custody account which it holds or receives, or arranges for another to hold or receive, on behalf of the client, are made and retained for a period of ten years after the account is closed.

                Added: April 2019

              • CRA-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 of crypto-assets held and movements in each account; and
                (g) The date of opening and where applicable, closure.
                Amended: April 2023
                Added: April 2019

        • CRA-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 2019

        • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 of crypto-asset, and the percentage of all client orders executed through the use of each liquidity partner.

                Added: April 2023

              • CRA-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 2023

            • Annual License Fee

              • CRA-10.1.4

                Licensees must complete and submit the Direct Debit Authorisation Form by 15th September and Form ALF (Annual License Fee) no later than 15th October to the CBB (ref. CRA-1.6.8 and CRA-1.6.9).

                Added: April 2019

            • 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, 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 2019

              • CRA-10.1.6

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Reports Prepared by External Auditors

              • CRA-10.1.7

                Licensees that hold or control client 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 2019

            • Onsite 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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-10.1.11

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

          • CRA-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 2019

              • CRA-10.2.2

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

                Added: April 2019

              • CRA-10.2.3

                Where a licensee 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 2019

            • Matters 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) The licensee failing to satisfy one or more of the requirements specified in this Module;
                (b) Any matter which could have a significant adverse impact on the licensee's reputation;
                (c) Any matter which could affect the licensee's ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of the licensee;
                (d) Any matter in respect of the licensee that could result in material financial consequences to the financial system or to other licensees;
                (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 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. Such notification must be immediately made to the CBB.
                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-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 the licensee.

                Added: April 2019

            • Legal, 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 the licensee and is significant in relation to the licensee's financial resources or its reputation.

                Amended: April 2023
                Added: April 2019

              • CRA-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 the licensee that would prevent the licensee 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 2019

            • Fraud, 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 the licensee's regulated activities; or
                (e) Any conflicts of interest.
                Amended: April 2023
                Added: April 2019

            • Insolvency, 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 the licensee or a substantial shareholder of the licensee;
                (b) An application to dissolve a substantial shareholder of the licensee or to strike the licensee off the Register of crypto-asset licensee;
                (c) The presentation of a petition for the winding up of a substantial shareholder of the licensee;
                (d) The making of any proposals, or the making of, a composition or arrangement with any one or more of the licensee'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 the licensee;
                (f) The appointment of a receiver for a substantial shareholder of the licensee (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 the licensee under the applicable Bankruptcy laws.
                Amended: April 2023
                Added: April 2019

            • External 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 2019

            • Approved Persons

              • CRA-10.2.12

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-10.2.13

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-10.2.14

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-10.2.15

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

          • CRA-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 2019

              • CRA-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 2019

            • Change 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 the licensee's principal place of business in Bahrain, and that of its branches, if any.

                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-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 the licensee.

                Amended: April 2023
                Added: April 2019

            • Change 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 2019

            • Change 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 a licensee has been granted approval to increase its paid-up capital, confirmation from the external auditor stating that the amount has been deposited in the licensee's bank account or otherwise reflected in the licensee's accounts will subsequently be required.

                Amended: April 2023
                Added: April 2019

            • Client 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 2019

            • Licensed 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 2019

              • CRA-10.3.10

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

                Added: April 2019

              • CRA-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 2019

            • Carrying 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 2019

              • CRA-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 2019

              • CRA-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 2019

            • Mergers, 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 2019

              • CRA-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 2019

            • Outsourcing Arrangements

              • CRA-10.3.17

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Matters 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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

            • Dividend Distribution

              • CRA-10.3.22

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • External Auditor

              • CRA-10.3.23

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Approved Persons

              • CRA-10.3.24

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-10.3.25

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-10.3.26

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Withdrawals

              • 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 2019

        • CRA-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 2019

            • CRA-11.1.2

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

              Added: April 2019

            • CRA-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 the licensee.

              Added: April 2019

            • Information Requested on Behalf of other Supervisors

              • CRA-11.1.4

                [This Paragraph was deleted in April 2023]

                Deleted: April 2023
                Added: April 2019

          • CRA-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 2019

            • CRA-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 2019

            • CRA-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 the licensee.

              Added: April 2019

            • CRA-11.2.4

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

              Added: April 2019

          • CRA-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 the licensee; 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 2019

            • CRA-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 2019

            • CRA-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 2019

          • CRA-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 the licensee. 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 of licensees), or when the CBB has a particular reason for visiting a licensee;
              (b) Appointees of the CBB may also make onsite visits at the premises of the licensee. 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 of Appointed Experts (refer to Section CRA-11.5).
              (c) The CBB may request the licensee 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 require licensees 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 the licensee such as a change in control.
              Amended: April 2023
              Added: April 2019

            • CRA-11.4.2

              When seeking meetings with a licensee or access to the licensee’s premises, the CBB or the CBB appointee will access to a licensee’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 the licensee’s premises without prior notice.

              Amended: April 2023
              Added: April 2019

            • CRA-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 the licensee'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 the licensee's possession or control as as requested or required;
              (d) Print information in the licensee'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 the licensee at the licensee'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 2019

            • CRA-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 2019

            • CRA-11.4.5

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 and appointed experts.

                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-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 of licensees in order to assist it in assessing their compliance with CBB requirements.

                Amended: April 2023
                Added: April 2019

              • CRA-11.5.4

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-11.5.5

                Appointed experts must not be the same firm appointed as external auditor of the licensee.

                Amended: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-11.5.7

                The appointment will be made in writing, and made directly with the appointed experts concerned. A separate letter is sent to the licensee, notifying them of the appointment. At the CBB’s discretion, a trilateral meeting may be held at any point, involving the CBB and representatives of the licensee and the appointed 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 2019

              • CRA-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 2019

              • CRA-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 the licensee’s group structure). The report produced by the appointed experts is the property of the CBB

                Amended: April 2023
                Added: April 2019

              • CRA-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 particular licensee (i.e. create a conflict of interest).

                Added: April 2019

              • CRA-11.5.11

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

                Added: April 2019

            • The 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 a licensee’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 2019

              • CRA-11.5.13

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

                Amended: April 2023
                Added: April 2019

              • CRA-11.5.14

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-11.5.15

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-11.5.16

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-11.5.17

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Other 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 concerned licensee, or that the interests of customers are at risk because of adverse changes in the financial position or in the management or other resources of the licensee. Notwithstanding the above, it is primarily the licensee's responsibility to report such matters to the CBB.

                Added: April 2019

              • CRA-11.5.19

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-11.5.20

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Permitted Disclosure by the CBB

              • CRA-11.5.21

                Appointed experts must keep all information relating to the licensee 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 2019

            • Trilateral Meeting

              • CRA-11.5.22

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

        • CRA-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 2019

            • CRA-12.1.2

              This Section shall apply to all licensees offering regulated crypto-asset services except for Section CRA-12.5 which shall apply solely to licensees executing clients' orders.

              Added: April 2019

          • CRA-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 2019

              • CRA-12.2.2

                Licensees must establish, implement and maintain effective organisational and administrative arrangements appropriate to the size of the licensee 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 2019

              • CRA-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 the licensee or the group of which the licensee forms part, or from the performance of services and activities, and the duty the licensee owes to a client; or between the differing interests of two or more of its clients, to whom the licensee owes in each case a duty.

                Added: April 2019

              • CRA-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 the licensee 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 the licensee, 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 2019

              • CRA-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 2019

              • CRA-12.2.6

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.2.7

                Licensees must keep and regularly update a record of the situations or service carried out by or on behalf of the licensee 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 ongoing regulated 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 2019

            • Operational Independence

              • CRA-12.2.8

                Licensees must take all appropriate steps to identify, and to prevent or manage conflicts of interest between the licensee, 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 a licensee’s own remuneration and other incentive structures.

                Amended: April 2023
                Added: April 2019

              • CRA-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 the licensee including the segregation of duties within that licensee 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 2019

            • Remuneration 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 the licensee and be periodically reviewed, at least annually.

                Added: April 2019

              • CRA-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 the licensee 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 the licensee's interest to the potential detriment of its clients.
                Amended: April 2023
                Added: April 2019

            • Inducements 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 the licensee'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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

            • Personal 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 the licensee.

                Added: April 2019

                • CRA-12.2.18

                  Licensees must have a written policy governing employee dealing in crypto-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 2023

                • CRA-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 2023

                • CRA-12.2.20

                  The written policy governing employee’s dealing in crypto-assets must specify the conditions under which an employee may deal in crypto-assets for their own account and related accounts (in particular, those who possess non-public information must be prohibited from dealing in the relevant crypto-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 2023

                • CRA-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 the licensee’s other clients.

                  Added: April 2023

                • CRA-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 2023

          • CRA-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 the crypto-asset or regulated 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 the crypto-asset or regulated 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 any crypto-asset or regulated 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 those crypto-assets or regulated crypto-asset services in which the licensee 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 2019

              • CRA-12.3.2

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-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 2019

              • CRA-12.3.4

                Where a licensee deals with a person who is acting for a client under a power of attorney, the licensee 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 2019

              • CRA-12.3.5

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Assessment of Clients' Suitability and Appropriateness

              • CRA-12.3.6

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Suitability

              • CRA-12.3.7

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.8

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.9

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.10

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.11

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.12

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.13

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.14

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

            • Appropriateness

              • CRA-12.3.15

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.16

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-12.3.17

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

          • CRA-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 the regulated crypto-asset services are to be conducted.

                Added: April 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

            • Client 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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-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 2019

          • CRA-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 2019

            • CRA-12.5.2

              Whenever there is a specific instruction from a client, the licensee must execute the order following the specific instruction. The licensee 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 2019

            • Order 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 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-12.5.6

                Licensees must notify clients of any material changes to its order execution arrangements or order execution policy.

                Added: April 2019

            • Monitoring and Review

              • CRA-12.5.7

                A licensee must review, at least on an annual basis, its order execution policy and order execution arrangements.

                Added: April 2019

              • CRA-12.5.8

                A licensee must demonstrate to its clients, at their request, that it has executed their orders in accordance with the licensee's order execution policy and it must also ensure that it is able to demonstrate to the CBB upon request that the licensee is in compliance with this Module.

                Amended: April 2023
                Added: April 2019

            • Client 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 the licensee.

                Added: April 2019

              • CRA-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 2019

              • CRA-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 2019

              • CRA-12.5.12

                Where a licensee has aggregated transactions for own account with one or more clients' orders, such licensee must not allocate the related trades in a way that is detrimental to a Client.

                Added: April 2019

              • CRA-12.5.13

                Where a licensee aggregates a client order, with a transaction for own account and the aggregated order is partially executed, the licensee must allocate the related trades to the client in priority to itself, except where the licensee 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 2019

            • Selection 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 2019

        • CRA-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 2019

            • CBB’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 2023

              • CRA-13.1.1B

                Licensees and issuers 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 contravention
                Added: April 2023

            • Policies 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 2023

              • CRA-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 2023

            • Market 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 2023

              • CRA-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 2023

              • CRA-13.1.2

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-13.1.3

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

              • CRA-13.1.4

                [This Paragraph was deleted in April 2023].

                Deleted: April 2023
                Added: April 2019

          • CRA-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 2019

            • CRA-13.2.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.5

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.6

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.7

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.8

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.9

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.10

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.11

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.2.12

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-13.3.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.3.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.3.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-13.4.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.4.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.4.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.4.5

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-13.5.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.5.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.5.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-13.6.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-13.6.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

            • CRA-13.7.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

          • CRA-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 2019

          • CRA-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 2019

            • CRA-13.9.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

        • CRA-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 2019

            • CRA-14.1.2

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.3

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.4

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.5

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.6

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.7

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.8

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.9

              [This Paragraph was deleted in April 2023].

              Deleted: April 2023
              Added: April 2019

            • CRA-14.1.10

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          • CRA-14.2 CRA-14.2 [This Section was deleted in April 2023]

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          • CRA-14.7 CRA-14.7 [This Section was deleted in April 2023]

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        • Appendix -1 CYBER SECURITY INCIDENT REPORTING TEMPLATE

          [Appendix -1 was deleted in April 2023]

          Deleted: April 2023
          Amended: January 2020
          Added: April 2019

        • Appendix -2 Methodology for calculating financial penalties

          [Appendix -2 was deleted in April 2023]

          Deleted: April 2023
          Added: April 2019

        • CRA-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 2023

            • Digital Tokens

              • CRA-15.1.2

                All offers of digital tokens which exhibit the characteristics of a security are regulated by the CBB.

                Added: April 2023

              • CRA-15.1.3

                While determining whether a digital token qualifies as a security, the CBB will examine the underlying economic purpose of the digital token, its structure and characteristics, including the rights attached to the digital token. For the avoidance of doubt, a digital 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 the digital token in respect of any money that is lent to the issuer by the digital token holder, its maturity is fixed, is redeemable at maturity and gives entitlement to share in interest distributed by the digital token issuer.
                Added: April 2023

              • CRA-15.1.4

                In order to determine whether a digital token is considered a security, the CBB shall, amongst other things, take into consideration the following:

                (a) Does it give the digital token holder an entitlement against the digital 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 the digital token represent a monetary claim on the digital token issuer?
                (c) Is the digital token transferable?
                (d) Does it confer decision power on the project of the digital token issuer?
                Added: April 2023

              • CRA-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. A digital token shall be considered a security if it is either a utility token or an asset token and exhibits the following characteristic:

                (a) Utility tokens: A utility 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.
                A utility token shall not be treated as a security if its sole purpose is to confer digital access rights to an application or a service, and if the utility 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: An asset token shall be treated as a security 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 2023

            • Initial Assessment

              • CRA-15.1.6

                Potential digital token issuers seeking to undertake a digital 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, potential digital token issuers should provide necessary details, including details about the issuer and description of the project, to the CBB to determine suitability of the digital token for issuance.

                Added: April 2023

            • CBB’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 the digital tokens or the market in general.

                Added: April 2023

              • CRA-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 2023

            • General Requirements

              • CRA-15.1.9

                The digital token issuer must meet the following requirements for a digital token offering:

                (a) The digital 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) The digital token issuer must ensure no conflict of interest arises during the issuance of digital tokens;
                (c) The digital token issuer must protect and act in the best interests of digital token holders as well as provide equal treatment to all digital token holders;
                (d) The digital token issuer must adhere to the offering and issuing timetable contained in the whitepaper, or as amended, subject to the CBB’s written approval;
                (e) The maturity period of a digital token exhibiting characteristics of a debt security must not exceed 5 years;
                (f) For any single offering of digital token, the digital tokens must have identical terms and conditions of issuance, including having the same price; and
                (g) The offer period for a digital 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 2023

              • CRA-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 the digital token issue.

                Added: April 2023

            • Moratorium on Equity Interest

              • CRA-15.1.11

                Founders and senior management of the digital token issuer must, in aggregate, own at least 50% equity holding in the digital token issuer, on the date of the issuance of the digital tokens.

                Added: April 2023

              • CRA-15.1.12

                Post issuance of the digital tokens, the founders and senior management of the digital 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 tokens

                Added: April 2023

            • Cooling-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 the digital 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 2023

              • CRA-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 the digital token; and
                (b) Any other charges imposed at the time of purchase of the digital token.
                Added: April 2023

            • Soft 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 higher soft cap.

                Added: April 2023

              • CRA-15.1.16

                Where a digital token offer fails to reach the soft cap as set in the whitepaper, the digital token advisor must within five (5) business days from the closure of the digital token offering:

                (a) Send each investor a notification about the failure to reach the soft cap and refund the subscription amount and other charges that the investor paid for the digital token offer; and
                (b) Report the failure to reach the soft cap, the refund made and cancellation of the digital token offer to the CBB.
                Added: April 2023

            • Oversubscription

              • CRA-15.1.17

                If a digital token offering is over-subscribed after the closing of the offering period, the digital token advisor must make allotment in accordance with the pre-determined basis which must be described in the whitepaper. The digital token advisor must not make allotment in excess of the limit stated in the whitepaper and any excess subscription amounts received from investors must be refunded to investors within 3 business days from the date of allotment.

                Added: April 2023

            • Release of Funds

              • CRA-15.1.18

                The digital token issuer and the digital token advisor must enter into an agreement with provisions, among other matters, on the schedule of release of proceeds (if stated in the whitepaper), the progress report that will be required before each release of proceeds, and that the digital token advisor will return the said proceeds to the investors in case the soft cap of the digital token offer is not reached or in a pro-rata basis in case the project is not completed by the digital token issuer.

                Added: April 2023

              • CRA-15.1.19

                The banking arrangement for the purpose of managing subscription money between the digital token issuer and the digital token advisor must be dissolved upon completion of fund transfer process, unless the digital token offering failed to meet the soft cap target or the project is not completed by the digital token issuer with notification to the CBB.

                Added: April 2023

              • CRA-15.1.20

                If the digital token issuer is not able to complete the project, the appointed digital token advisor must:

                (a) Immediately notify the CBB regarding the non-completion of the project by the digital 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 2023

            • Allotment

              • 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 the whitepaper. The subscription results must be announced on the digital token advisor’s platform.

                Added: April 2023

            • Approval Requirements

              • CRA-15.1.22

                A digital token issuer must submit the application along with the draft whitepaper and other documents as specified in Paragraph CRA-15.1.28, through its digital 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 2023

              • CRA-15.1.23

                The digital token issuer must demonstrate to the CBB that the gross proceeds to be raised from the digital token offering would be sufficient to undertake the project or business as proposed in the whitepaper.

                Added: April 2023

              • CRA-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 2023

              • CRA-15.1.25

                The CBB’s approval for an offer of digital tokens does not mean that it has approved the appropriateness of the digital token issuer’s project or authenticated the financial and technical information presented in the whitepaper.

                Added: April 2023

            • Suspension 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 the digital token issuer, do any or all of the following:

                (a) Revoke the CBB’s approval;
                (b) Issue a direction to suspend the digital token offering; or
                (c) Issue a direction to defer the implementation of the digital token offering.
                Added: April 2023

              • CRA-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) The digital 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) The digital token issuer has failed to comply with any terms or conditions imposed by the CBB and/or the digital token advisor;
                (c) The application, including the whitepaper, 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 the digital token issuer’s corporate governance record or with the integrity of any of the digital token issuer’s directors and senior management.
                Added: April 2023

            • Documentation Requirements

              • CRA-15.1.28

                A digital token issuer, through its appointed digital token advisor, must provide the CBB the following documents:

                (a) A draft whitepaper 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 the digital token issuer’s Board of Directors’ resolution approving the issuance of digital 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 the digital 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 the digital token offering;
                (i) A declaration by the digital token advisor confirming its responsibility for carrying out due diligence on the digital token issuer and assessing accuracy of the information contained in the whitepaper 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 the digital token offering requirements (Appendix CRA-3);
                (k) A copy of the duly signed declaration by the legal advisor for the digital token offer, based on a due diligence exercise of all applicable laws, facts and arrangements, including enforceability of the rights relating to the digital tokens, as appropriate (Appendix CRA-4); and
                (l) Any other information as required by the CBB.
                Added: April 2023

            • Registration 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 2023

            • Contents of the Whitepaper

              • CRA-15.1.30

                The whitepaper must contain, in both the Arabic and English language, all the information concerning the digital token issuer and the proposed digital token offering that would enable investors to make an informed investment decision and understand the risks relating to the offering. The information in the whitepaper must, at a minimum, include the following:

                (a) A detailed description of the digital 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 the digital token issuer;
                (d) The key characteristics of the digital token including the rights, conditions, function and obligations attached to the digital 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 of digital token holders in the event of insolvency or liquidation of the digital token issuer;
                (f) A detailed description of the digital token offering, including but not limited to:
                (g) The number of digital tokens to be issued;
                (h) The digital 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 the digital token;
                (m) The risks relating to the digital token issuer, the digital tokens, the digital 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 the digital token issuer in accordance with CRA15.1.28(d); and
                (h) The offering timetable.
                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-15.1.33

                The whitepaper must be prepared in accordance with the template provided in Appendix CRA-1.

                Added: April 2023

              • CRA-15.1.34

                The CBB, prior to approving an application for offering of digital tokens, shall assess whether the information provided in the whitepaper is complete and comprehensible. The whitepaper should be drawn up by the digital token issuer under the guidance of the digital token advisor prior to being submitted to the CBB.

                Added: April 2023

              • CRA-15.1.35

                Along with the whitepaper, a summary of the whitepaper must be made available to investors both in the Arabic and English language.

                Added: April 2023

              • CRA-15.1.36

                The digital token issuer must describe in the whitepaper the procedures for collection and management of the funds raised through the digital token offering. The digital 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 2023

              • CRA-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 the digital token offering;
                (c) It must ensure that the funds collected cannot be transferred to the digital token issuer unless the soft cap threshold is reached; and
                (d) It must ensure that the funds collected can be transferred to the digital token issuer or used by the digital token issuer only if the drawdown conditions provided for by the digital token issuer in the whitepaper are met.
                Added: April 2023

            • Responsibility for Reliability and Accuracy of the Whitepaper

              • CRA-15.1.38

                The whitepaper and the supplementary whitepaper must include a duly signed Board of Directors responsibility statement. The signature on the whitepaper and the supplementary whitepaper by the Board of Directors must be preceded by a declaration specifying that, to their knowledge, the information presented in the whitepaper 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 2023

            • Validity 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 offer digital tokens based on such whitepaper, unless approved by the CBB.

                Added: April 2023

            • Supplementary Whitepaper

              • CRA-15.1.40

                Where a digital token issuer or digital token advisor becomes aware of new facts which have a significant influence on the investment decision, after the whitepaper has been approved by the CBB, but before the closing of the offer period, the digital token issuer must immediately notify the CBB and furnish a supplementary whitepaper to the CBB. At a minimum, a supplementary whitepaper 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 the whitepaper if the matter had arisen at the time the whitepaper was prepared;
                (b) There has been a material change affecting a matter disclosed in the whitepaper;
                (c) The whitepaper contains a statement or information that is false or misleading;
                (d) The whitepaper 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 2023

              • CRA-15.1.41

                Where a digital token issuer files a supplementary whitepaper with the CBB, it must immediately inform investors about the filing of a supplementary whitepaper by announcing it on the digital token advisor’s platform, as well as on its own website.

                Added: April 2023

              • CRA-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 2023

              • CRA-15.1.43

                A supplementary whitepaper must conform to the following requirements:

                (a) The order of the information appearing in the supplementary whitepaper must be consistent with that of the original whitepaper;
                (b) Clear identification of the items/paragraphs it supplements or replaces;
                (c) A statement that it is to be read in conjunction with the original whitepaper; and
                (d) A responsibility statement from the Board of Directors of the digital token issuer.
                Added: April 2023

              • CRA-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 2023

              • CRA-15.1.45

                The supplementary whitepaper must be published and disseminated in manner as the original whitepaper. The document must contain the word “Supplementary Whitepaper” on the first page and describe the changes in relation to the original whitepaper.

                Added: April 2023

              • CRA-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 supplementary whitepaper 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 2023

            • Dissemination 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 of digital token offering.

                Added: April 2023

              • CRA-15.1.48

                The whitepaper must be effectively disseminated by posting it in an easily identifiable and accessible manner on the platform of the digital token advisor, as well as on the website of the digital token issuer in a downloadable format.

                Added: April 2023

              • CRA-15.1.49

                The whitepaper or the supplementary whitepaper, as disseminated and made available to the public by the digital token advisor, must be identical to the version approved by the CBB and must not undergo changes by the digital token issuer or the digital token advisor subsequent to the CBB’s approval.

                Added: April 2023

            • Marketing 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 2023

              • CRA-15.1.51

                A digital token issuer must not engage any third-party individual(s) or entity, other than the digital token advisor, to endorse or represent the digital token issuer with the intended purpose of marketing, promoting, gaining publicity or soliciting funds for its digital token offering.

                Added: April 2023

              • CRA-15.1.52

                The draft marketing material must be submitted to the CBB for approval and must:

                (a) Indicate where the investor can obtain the whitepaper 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 the digital token offering; and
                (f) Contain information that is consistent and does not contradict with the information provided in the whitepaper.
                Added: April 2023

              • CRA-15.1.53

                If, after the approval of the whitepaper by the CBB, the digital 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 2023

              • CRA-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 supplementary whitepaper.

                Added: April 2023

            • Fees 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 a digital 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 2023

              • CRA-15.1.56

                An application for approval of a digital token offering and review of the documents related to the digital token offering will not be regarded as complete or submitted until the fee has been paid in full.

                Added: April 2023

          • CRA-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 a digital 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, the digital 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 the digital tokens;
                (f) Retain all relevant documents and agreements related to the digital token offering for a period of five (5) years; and
                (g) Be liable towards its digital 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 2023

            • Governance 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 2023

              • CRA-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 2023

              • CRA-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 2023

              • CRA-15.2.5

                The Board must:

                (a) Act honestly and in good faith in the best interests of the digital 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 the digital 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 the digital 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 the digital token issuer’s compliance with the AML/CFT requirements; and
                (j) Adopt a management structure commensurate with the digital token issuer’s size, complexity, structure and risk profile.
                Added: April 2023

              • CRA-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 the digital token issuer’s business to enable them to discharge their function in a diligent manner.
                Added: April 2023

              • CRA-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 2023

              • CRA-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 the digital 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 2023

              • CRA-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 of digital tokens; and
                (b) The digital token advisor for any subsequent appointment to its board or senior management.
                Added: April 2023

            • Digital Token Advisor Requirements

              • CRA-15.2.10

                Prior to appointing a digital token advisor, the digital token issuer should review the ability of the digital token advisor to provide the service. While determining the suitability of a digital token advisor, the digital 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 2023

              • CRA-15.2.11

                A digital token issuer must enter into a formal agreement with the digital 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 the digital token advisor under the CBB rules in this regard.

                Added: April 2023

            • Repurchase of Digital Tokens

              • CRA-15.2.12

                If a digital token issuer has disclosed a digital token repurchase mechanism in the whitepaper, it may, after its digital tokens have been traded for a full year, carry out a repurchase (buyback) of its digital 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 2023

              • CRA-15.2.13

                A digital token issuer must immediately cancel the digital tokens that it acquires under the digital token repurchase plan.

                Added: April 2023

            • Periodic 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 the digital token advisor’s platform.

                Added: April 2023

              • CRA-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 the digital token advisor’s platform within 60 days from the end of the financial year.

                Added: April 2023

              • CRA-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 of digital tokens issued and in circulation;
                (b) Status of the utilisation of the digital token’s proceeds by the digital 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 2023

              • CRA-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 2023

              • CRA-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 2023

            • Disclosure of Material Information

              • CRA-15.2.19

                A digital token issuer must immediately disclose information regarding any material matter/event on the appointed digital 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 2023

              • CRA-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 the digital 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 the digital 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 the digital 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's digital tokens on the trading platform; and
                (m) Announcement of suspension or termination of trading of the digital tokens on the trading platform.
                Added: April 2023

              • CRA-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 appointed digital token advisor’s platform.

                Added: April 2023

              • CRA-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, the digital 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 2023

            • Power 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 of digital 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 2023

              • CRA-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 necessary
                Added: April 2023

          • CRA-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 a digital token advisor to a digital token issuer.

              Added: April 2023

            • CRA-15.3.2

              Digital token issuers must appoint either a category-3 or a category-4 crypto-asset licensee as digital token advisor. The digital token advisor must ensure that the digital 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 2023

            • Independence and Avoidance of Conflict of Interest

              • CRA-15.3.3

                A digital token advisor must be independent from the digital token issuer. A confirmation in writing of its independence must be submitted to the CBB. A digital token advisor will not be considered independent by the CBB if:

                (a) It has ownership interest in the digital token issuer or any other company within the digital token issuer’s group;
                (b) It has a business relationship with, or financial interest in, the digital token issuer or any other entity in the digital token issuer’s group that would give the digital token advisor, or the digital token advisor’s group, a material interest in the outcome of the transaction; or
                (c) A director or employee of the appointed digital token advisor or another entity in the appointed digital token advisor’s group, has a material interest in the digital token issuer or any other entity in the digital token issuer’s group.
                Added: April 2023

              • CRA-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 2023

              • CRA-15.3.5

                A digital token advisor is prohibited from providing direct or indirect financial assistance to investors, to invest in digital tokens.

                Added: April 2023

            • Obligations of Digital Token Advisor

              • CRA-15.3.6

                A digital token advisor must:

                (a) Ensure that the digital token issuer satisfies all the requirements as applicable for offering of digital tokens;
                (b) Advise and guide the digital 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 the digital token issuer’s compliance with the requirements of Chapter CRA-15 including as to whether the digital 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 the digital token offer, in a timely manner;
                (f) Carry out due diligence on a digital token issuer including:
                (i) Understanding and verifying the business and project of the digital token issuer to ensure that the digital 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 the digital token issuer;
                (iii) Understand the features of the digital token to be issued by the digital token issuer and the rights attached to it;
                (iv) Assess the digital token issuer’s whitepaper as well as other documents as stated in Chapter CRA-15. In assessing the digital token issuer’s whitepaper as well as other documents, the digital 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 a whitepaper; and
                (h) Act as liaison between the digital token issuer and the CBB on all matters arising in connection with the registration of the whitepaper or the trading of the issuer’s digital token on the crypto-asset exchange platform.
                Added: April 2023

              • CRA-15.3.7

                In addition to the obligations set out in Paragraph CRA-15.3.6, a digital token advisor must:

                (a) Make the digital token issuer’s whitepaper accessible to investors through its electronic platform;
                (b) Must make available through its electronic platform all relevant information relating to a digital token issuer including any material changes that are affecting the digital token issuer or the digital token issuer’s project;
                (c) Take reasonable steps in monitoring the drawdowns by digital token issuer and that it has been utilised for the purposes stated in the whitepaper;
                (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 of digital 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 the digital 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 the digital 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 2023

              • CRA-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 the digital 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 the digital 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 the digital token offering or the digital token issuer.
                Added: April 2023

            • Supplementary Whitepaper

              • CRA-15.3.9

                Where a supplementary whitepaper has been submitted by a digital token issuer to the CBB, the digital token advisor must notify the subscribers for the digital token regarding the filing of the supplementary whitepaper with the CBB and that the supplementary whitepaper will be made available on the electronic platform upon approval of the CBB.

                Added: April 2023

              • CRA-15.3.10

                Upon approval of the CBB, the supplementary whitepaper must be made available on the electronic platform of the digital token advisor.

                Added: April 2023

              • CRA-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 2023

            • Register of Initial Digital Token Holders

              • CRA-15.3.12

                A digital token advisor must maintain a register of initial digital token holders who subscribed for the digital tokens during the offer period and enter into the register the total amount of digital tokens subscribed by each digital token holder.

                Added: April 2023

            • Record 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 of digital token holders and any monies or digital tokens held in relation to them.

                Added: April 2023

              • CRA-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 2023

            • Custody of Digital Tokens

              • CRA-15.3.15

                The digital token advisor must maintain custody of the digital tokens issued by the digital 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 2023

              • CRA-15.3.16

                A digital token advisor must ensure digital 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 2023

            • Investor 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 2023

              • CRA-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 2023

              • CRA-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 2023

            • Fund 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 the digital token offering which must include:

                (a) The subscription money (client money) be received into a client money account with a retail 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 the licensee and not to the licensee:
                (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 the licensee received it from its clients;
                (iv) Not used for licensee’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 the licensee’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 2023

          • CRA-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-4 crypto-asset exchange licensee, wherein buyer and seller orders are automatically matched by the matching engine and the crypto-asset exchange does not buy or sell digital 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 the digital tokens issued and listed on its platform.
              Added: April 2023

            • CRA-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 2023

            • Over-the-counter Trading

              • CRA-15.4.3

                Category-3 and category-4 crypto-asset licensees must establish written rules for over-the-counter trading of digital tokens and publish them on its trading platform.

                Added: April 2023

              • CRA-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 2023

              • CRA-15.4.5

                Category-3 and category-4 crypto-asset licensees engaging in over-the-counter trading of digital tokens with clients on its trading platform must collect in advance from a client the full amount of the purchase price or the digital tokens to be sold.

                Added: April 2023

              • CRA-15.4.6

                Category-3 and category-4 crypto-asset licensees undertaking over-the-counter trading of digital tokens must open a dedicated account at a licensed bank in Kingdom of Bahrain for the collection and payment of funds.

                Added: April 2023

              • CRA-15.4.7

                Category-3 and category-4 crypto-asset licensees engaging in over-the-counter trading of digital tokens must provide two-way, buy and sell, quotes.

                Added: April 2023

              • CRA-15.4.8

                Category-3, and category-4 crypto-asset licensees, undertaking over-the-counter trading of digital 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 2023

              • CRA-15.4.9

                Where a category-3, category-4 crypto-asset licensee engages in over-the-counter trading of digital tokens with its clients on its trading platform, the aggregate trading volume of the purchases and sales of any single digital token on any single business day must not exceed 50 percent of the issued quantity of that digital token.

                Added: April 2023

              • CRA-15.4.10

                Category-3 and category-4 crypto-asset licensees undertaking over-the-counter trading of a digital 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 2023

              • CRA-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 2023

              • CRA-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 each digital token on that day.

                Added: April 2023

              • CRA-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 2023

              • CRA-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 2023

    • Market 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 2014

              • OFS-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 to issuers of securities 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.2.3

                This 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 2014

          • OFS-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, the issuer of securities and the licensed exchanges or the licensed market operators as a self-regulatory organisation (SRO) is required:

                (a) To maximise the regulatory effectiveness;
                (b) To permit flexibility to the licensed exchanges or the licensed 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 2014

              • OFS-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 capital market;
                (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 other capital 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 2014

            • Responsibility of SROs

              • OFS-A.2.3

                The licensed exchange or the licensed 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 2014

              • OFS-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 to market facilities and information;
                (c) Provide timely and accessible relevant market 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 to issuers;
                (g) Report any non-compliance to the regulator; and
                (h) Take disciplinary action against any contravention by listed companies.
                January 2014

            • Responsibility of Issuers and Advisors

              • OFS-A.2.5

                The issuer of securities 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 2014

              • OFS-A.2.6

                The main responsibility for the issuer of securities 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 the prospectus 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 the prospectus, or offering documents;
                (c) Ensure fair and equal treatment of all subscribers, allottees and holders of each type of securities 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 all capital 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 2014

          • OFS-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 2014

              • OFS-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 2017

        • OFS-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 2014

            • OFS-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 those securities by him or another person with whom he has made arrangements for that issue, sale or allotment 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 or allotment of those securities within Bahrain.
              January 2014

            • OFS-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 those securities by him or another person with whom he has made arrangements for that issue, sale or allotment 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 or allotment of those securities within Bahrain.
              January 2014

        • OFS-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 issue securities."

              January 2014

            • OFS-1.1.2

              Before securities can be issued, a person must meet the criteria detailed in this Module for:

              (a) The various types of securities that can be issued; and
              (b) The specific requirements pertaining to issuer eligibility.
              January 2014

          • OFS-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 of joint stock companies incorporated in the Kingdom of Bahrain;
              (b) Equity securities of non-Bahraini companies that are approved by the CBB;
              (c) Bonds and debt securities approved for offering and listing by the CBB;
              (d) Shari'a compliant securities 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 other securities approved by the CBB including but not limited to futures and other derivatives on currencies and commodities.
              January 2014

            • OFS-1.2.2

              For the purpose of Rule OFS-1.2.1 (f) "any other securities" includes those defined as securities 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 a security from time-to-time.

              January 2014

            • OFS-1.2.3

              For the purpose of this Module, equity securities include:

              (a) Voting and non-voting shares;
              (b) Participating and non-participating shares;
              (c) Preference shares, whether convertible or non-convertible, accumulated or non-accumulated and redeemable, or irredeemable; and
              (d) Any class of securities being part of the shareholders' equity fund being represented in the form of shares.
              January 2014

          • OFS-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 of securities;
              (h) Listing of closed or private companies;
              (i) Global Depository Receipts; or
              (j) Other offering approved by the CBB.
              January 2014

          • OFS-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 a collective investment undertaking and offered or marketed subject to CBB Rulebook Volume 7;
              (b) Securities offered, allotted, or to be allotted in connection with securities offered because of a take-over, merger, acquisition and share 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 existing shareholders if dividends are paid out in the form of shares of the same class;
              (d) Securities utilised for lending and borrowing transactions concluded under the CBB Rules and the relevant licensed exchange's requirements for such transaction; and
              (e) An offering of ordinary shares by means of an equity crowdfunding offer by an equity crowdfunding issuer through a crowdfunding platform operated by a licensed crowdfunding platform operator and subject to the requirements of Module MAE of the CBB Rulebook Volume 6.
              Amended: October 2017
              January 2014

            • OFS-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 2014

            • Structured 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 the issuer, in addition to the general requirements for exempt offers laid out below:

                (a) The marketing may only relate to offers to accredited investors who are existing account holders of the issuer 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 base prospectus which is filed with the CBB; and
                (d) An approval of the issuer'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 2014

              • OFS-1.4.4

                The offering document of any securities to be offered exclusively outside Bahrain, and marketed through a roadshow, must contain the following prominent statement under the heading "Important Notice", of the prospectus (or such other offering 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 this prospectus must be read by the addressee only and must not be issued, passed to, or made available to the public generally."

                January 2014

              • OFS-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 2014

            • Filing 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 a roadshow, the issuer and or his advisor or marketing agent is required to provide prior notification to the CBB of such roadshow and to file a copy of the prospectus with the Capital Markets Supervision Directorate (CMSD).

                January 2014

              • OFS-1.4.7

                The offering document for any securities not to be offered in or from Bahrain but to be marketed in Bahrain as part of a roadshow, must contain the following prominent statement on the cover page of the offering 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 2014

          • OFS-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 all issuers and/or all types of offers. The CBB reserves the right to add to, amend or vary such requirements, depending on the nature of the issuer and/or the offering to be made. Specific exemptions may be granted to small and medium enterprises.

              January 2014

            • OFS-1.5.2

              The issuers of any securities 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, the issuer 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 the issuer (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 as receiving bank and paying agent that is approved by the CBB;
              (g) Its appointed capital 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 any securities without meeting the CBB's requirements for that type of securities offering with respect to the final allocation or allotment;
              (i) Must ensure that they adhere to the utilisation of proceeds statement in the prospectus and obtain the securities holders consent and CBB prior approval for any alteration thereto;
              (j) When considering the currency of issue, that it may issue securities 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 of securities or through the offering and relevant appointments or transactions;
              (l) Must protect and act in the interests of securities holders;
              (m) Must provide equal treatment to all securities subscribers and/or holders for each issue of securities. No discrimination among subscribers and/or holders in any form or by any means may be made by the issuer. Special attention of the issuer in this context shall be drawn particularly to the subscription or offer price of the securities;
              (n) Must adhere to the issuing timetable contained in its offering documents, or as amended upon the CBB approval;
              (o) The issuer 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 the offering document;
              (p) The founders, promoters, or the Board of Directors of the issuer 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) The founders, promoters, or the Board of Directors of the issuer must not establish any restrictions on the rights of the securities 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 an issuer 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). An issuer may not offer a substitution of one investment for another unless such subsitution is part of an approved corporate event conducted on a licensed exchange; and
              (t) The securities issued by the issuer must have a registered International Securities Identification Number (ISIN) issued by a national numbering agent.
              January 2014

            • OFS-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 backed securities being issued or offered.
              January 2014

            • OFS-1.5.4

              The founders of the public shareholding company or listed company are not entitled to dispose of their shareholding for a period of 1 year, starting from the date of listing on a licensed exchange.

              January 2014

            • OFS-1.5.5

              Unless otherwise permitted by the CBB, securities issued after the effective date of this Module must be in dematerialised form and the issuer is required to designate the clearing house, or depository facilities in which such securities are deposited.

              January 2014

            • OFS-1.5.6

              All securities issued under this Module must be in registered form and no bearer securities may be issued without CBB permission.

              January 2014

            • OFS-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 the issuer is fully incorporated and the proceeds are placed with the Board of Directors.

              January 2014

            • OFS-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 2014

          • OFS-1.6 OFS-1.6 Eligibility to Issue and Offer Equity Securities

            • Issuing of Equity Securities to the Public

              • OFS-1.6.1

                Issuers of equity securities to the public must meet the following additional eligibility criteria in order to obtain approval from the CBB:

                (a) The issuer, 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) Existing issuers intending to list on a main board of a licensed exchange, should have 100 or more shareholders who are not employees or associated persons. New issuers must have 100 or more shareholders after the completion of the initial public offering or public offering;
                (c) The issuer must issue to the above mentioned shareholders free float of at least 10% of the total issued outstanding shares. 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) For equity securities issued at a premium, the issue shall be underwritten by an independent underwriter through the conclusion of a firm commitment and irrevocable underwriting agreement; and
                (f) Each type of securities issued shall be equal in respect of rights and obligations, particularly in respect of voting and receipt of dividends and/or profits.
                January 2014

              • OFS-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 2014

              • OFS-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 2014

              • OFS-1.6.4

                The ownership of equity securities of the issuer must not be restricted otherwise than in accordance with the issuer's Memorandum and Articles of Association, or the applicable laws, rules and regulations.

                January 2014

              • OFS-1.6.5

                The founders of the issuer must confirm and submit bank certificates to the CBB that their contribution in the share capital of the issuer is paid before the CBB grants its approval to issue its securities to the public.

                January 2014

              • OFS-1.6.6

                The issuer's preliminary contract must include the details as specified in this Module.

                January 2014

              • OFS-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 an issuer's project if such project is required to be financed by the total proceeds of the issue together with such finance.

                January 2014

              • OFS-1.6.8

                For listed or existing issuers, the issuance and offering of additional and/or new equity securities must obtain the approval of the General Assembly of its shareholders, in accordance with the issuer's Memorandum and Articles of Association or such other applicable laws, rules and regulations.

                January 2014

            • CBB'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 the issuer's securities or public investors in general.

                January 2014

              • OFS-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 2014

              • OFS-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 2014

              • OFS-1.6.12

                The founders do not have the right to re-apply for the issuance of securities before addressing the reasons for the rejection or the lapse of six months from the date of the CBB's rejection decision.

                January 2014

          • OFS-1.7 OFS-1.7 Eligibility to Issue and Offer Debt Securities

            • OFS-1.7.1

              Any issuer of debt 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 2014

            • OFS-1.7.2

              Issuers of debt securities must ensure that the issuance of debt securities is approved by the General Assembly, or any other equivalent body in accordance with the Memorandum and Articles of Association of the issuer and/or originator.

              January 2014

            • OFS-1.7.3

              Any change, alteration, or modification in the issued debt securities' rights, obligations, terms and conditions is subject to the approval of the debt securities holders meeting. The trustee is responsible for preparing and presenting at the debt 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 the issuer in this respect.

              January 2014

            • OFS-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 the issuer and every condition to the contrary must be null and void.

              January 2014

            • OFS-1.7.5

              The debt securities must be freely transferable.

              January 2014

            • OFS-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 2014

            • OFS-1.7.7

              If the issuer of debt securities is a listed company, any convertible debt securities issue must first be offered to the existing shareholders unless a whitewash resolution is passed by the shareholders' General Assembly.

              January 2014

            • OFS-1.7.8

              Debt securities to which options, warrants or similar rights to subscribe or purchase equity securities or debt securities are attached, must also comply with the requirements applicable to such options, warrants or similar rights.

              January 2014

            • OFS-1.7.9

              The issuer may issue discount debt securities that may be sold at its redemption value at the time of issuance.

              January 2014

            • OFS-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-sell debt securities to the public. The eligible primary dealer must be a CBB licensee under Volumes 1 or 2 and be a member of a licensed exchange.

              January 2014

            • OFS-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 2014

            • OFS-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 2014

            • OFS-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, the issuer must provide asset valuation reports prepared by at least two independent valuers and submit these to the CBB and be disclosed in the offering documents, or made available for inspection by potential subscribers.

              January 2014

            • OFS-1.7.15

              The issuer of public offers of debt securities must provide the depository arrangements through which the issued debt securities can be maintained.

              January 2014

            • OFS-1.7.16

              The issuer must confirm to the CBB that it will maintain a paying agent at an address in the Kingdom of Bahrain until the date on which no debt securities are outstanding, unless the issuer performs that function himself.

              January 2014

            • OFS-1.7.17

              If debt securities are:

              (a) Redeemable by the issuer, either in whole or in part, by an issue of shares;
              (b) Convertible into shares, either in whole or in part, by the holder; or
              (c) Issued in conjunction with separate options to subscribe for shares;

              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 the issuer, and whether the holders of the debt securities and/or options have any participating rights in the event of a takeover offer for the issuer.

              January 2014

          • OFS-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-backed securities (certificates), the issuer must be a single purpose entity (vehicle) (SPV).

              January 2014

            • OFS-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, other classes of debt securities may be issued by the SPV, backed by separate pools of similar assets.

              January 2014

            • OFS-1.8.3

              The audited financial statements requirements for previous years' statements do not apply to issuers of asset-backed securities (SPVs), but are required for the issue's originator and/or guarantor, as the case may be.

              January 2014

            • OFS-1.8.4

              Where an issue of asset-backed securities is backed by equity securities:

              (a) Those securities must be listed on an exchange;
              (b) The equity securities must represent minority interests in and must not confer legal or management control of the companies issuing the equity securities; and
              (c) Where options or conversion rights relating to equity securities are used to back an issue, these requirements apply in respect of the securities resulting from the exercise of those options or rights.
              January 2014

            • OFS-1.8.5

              There must be, until the date on which no debt securities are outstanding, an eligible independent trustee representing the interests of the holders of the asset-backed securities and with the right of access to appropriate, timely information relating to the assets.

              January 2014

            • OFS-1.8.6

              If the issuer issues debt 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 a trustee representing them before offering the debt securities for subscription. The issuer 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 the issuer. The issuer 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 2014

          • OFS-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, the issuer must be a single purpose entity (vehicle) (SPV).

              January 2014

            • OFS-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 an issuer 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 private debt securities.
              January 2014

            • OFS-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 2014

            • OFS-1.9.4

              The issuer of Islamic debt securities must comply with Shari'a principles and the Shari'a pronouncement report.

              January 2014

            • OFS-1.9.5

              The Shari'a advisor appointed in accordance with Rule OFS-1.9.2 must advise the issuer on all aspects of the Islamic securities, including documentation, structuring, investment, as well as other administrative and operational matters in relation to the Islamic securities, and ensure compliance with applicable Shari'a principles.

              January 2014

            • OFS-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. The issuer 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 the offering document.

              January 2014

            • OFS-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 2014

            • OFS-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 tradable securities 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 2014

            • OFS-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 2014

          • OFS-1.10 OFS-1.10 Eligibility to Issue Convertible Debt Securities

            • OFS-1.10.1

              All convertible debt securities which are convertible into equity securities or outstanding securities of the issuer, or a company in the same group as the issuer for which an issuance or offering is to be sought, must comply both with the requirements applicable to the debt securities for which an issuance is sought, and with the requirements applicable to the underlying equity securities to which such convertible debt securities relate. In the event of any conflict or inconsistency between the various requirements, those applicable to such equity securities prevail.

              January 2014

            • OFS-1.10.2

              Where convertible debt securities are convertible into equity securities of a listed issuer, these convertible debt securities must also be listed on the same licensed exchange.

              January 2014

            • OFS-1.10.3

              Convertible debt securities which are convertible into assets, properties, or securities other than equity securities may be listed only if the CBB and the licensed exchange are satisfied that holders have the necessary information available to form an opinion concerning the value of the other property to which such convertible debt securities relate. This principle does not apply to an issue of convertible debt securities by a state or a supranational.

              January 2014

            • OFS-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 convertible debt securities.

              January 2014

            • OFS-1.10.5

              The issuer's shareholders must have priority right to subscribe for the convertible debt securities if they express their desire to do so within a period not exceeding 15 days from the date of calling them to exercise such right. The shareholder may use his priority to subscribe for such debt securities in excess of his share in the issuer's capital if the offered debt securities allow this.

              Amended: April 2014
              January 2014

            • OFS-1.10.6

              The issuer must not distribute bonus equity securities or profits from the reserve or issue new convertible debt securities, except after taking the necessary measures to safeguard the rights of the holders of the convertible debt securities who elect to convert them into equity securities, by granting them bonus shares or profits from the reserve or some of these debt securities as if they were shareholders.

              January 2014

            • OFS-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 2014

          • OFS-1.11 OFS-1.11 Eligibility to Issue Warrants and Other Securities

            • Warrants

              • OFS-1.11.1

                Where the issuer directly issues warrants, he must satisfy the requirements relating to the underlying securities in accordance with this Module.

                January 2014

            • Structured Warrants

              • OFS-1.11.2

                Structured warrants or such similar instruments must be issued by a third-party issuer 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 2014

              • OFS-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 listed securities.
                January 2014

            • Placement 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 the structured warrants or other instruments.

                January 2014

              • OFS-1.11.5

                The minimum board lot size, the issue size, issue price and any other details for structured warrants based on listed or quoted securities are subject to the licensed exchange business rules.

                January 2014

            • Tenure 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 2014

            • Exercise Settlement

              • OFS-1.11.7

                On exercise, structured warrants must cash settled unless the CBB has approved physical settlement where the underlying securities are cash or cash equivalent securities. The settlement method must be specified in the offering document. The issuer thereafter must not have an option to elect for settlement either in shares or cash upon exercise of the structured warrants.

                January 2014

              • OFS-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 the offering document and or term sheet. The settlement price must be either:

                (a) The average of the closing prices of the underlying securities (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 underlying securities on the market day immediately before the exercise/expiry date; and
                (c) For securities regarded as illiquid, a cash settlement price determination agreed between the issuer and the CBB for that particular security.
                January 2014

            • Conversion Ratio

              • OFS-1.11.9

                For the exercise of structured warrants based on individual securities, the conversion ratio must avoid using fractions of securities.

                January 2014

            • Adjustments

              • 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 each structured warrant carries the right to sell or purchase, in the event of any capitalisation issue, rights issue, distribution or the like relating to the underlying securities.

                January 2014

            • Designated Market Maker

              • OFS-1.11.12

                If there is a designated market maker in respect of the issue, the CBB together with the licensed exchange must be satisfied that the designated market maker's obligations are being fulfilled.

                January 2014

            • Underlying Securities

              • OFS-1.11.13

                Necessary arrangements must be made for the underlying securities to be held by a trustee or custodian to meet the exercise of all obligations of the outstanding warrants.

                January 2014

              • OFS-1.11.14

                Where the warrants relate to securities issued by a third party, the declaration by the issuer 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 2014

              • OFS-1.11.15

                In the case of warrants related to anything other than securities, the declaration in Paragraph OFS-1.11.14 should be appropriately modified.

                January 2014

              • OFS-1.11.16

                Where the issue of warrants is guaranteed, the information requirements which apply to the issuer must also be applied to the guarantor, depending on whether the guarantor is listed or is the guarantor of other listed securities.

                January 2014

              • OFS-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 the warrants.

                January 2014

          • OFS-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 2014

            • OFS-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 the issuer at the general meeting authorising the issue of the security;
              (e) The resolution(s) of the board of directors; and
              (f) Notice(s) of shareholders meeting.
              January 2014

          • OFS-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 and offering document.

              January 2014

            • OFS-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 and offering document, and appropriate evidence must be given to the CBB that there has been no material adverse change in the financial condition of the issuer or the guarantor, in the case of a guaranteed issue since the end of the period last reported on by the external auditor.

              January 2014

            • OFS-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 the issuer and guarantor, in the case of a guaranteed issue;
              (b) Certificate entitling the issuer and the guarantor, in the case of guaranteed issue, to commence business; and
              (c) Notice(s) of shareholders meeting.
              January 2014

          • OFS-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 to overseas issuers, subject to the additional requirements, modifications or exceptions below.

              Amended: April 2014
              January 2014

            • OFS-1.14.2

              The CBB reserves the right, in its absolute discretion, to refuse any issuing, offering or listing application of securities of an overseas issuer if:

              (a) It believes that it is not in the public interest to approve such application; or
              (b) The overseas issuer's securities, particularly equity 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 overseas issuer is incorporated or otherwise established in a jurisdiction where the standards of securities holders' protection are at least equivalent to those provided in Bahrain.
              Amended: April 2014
              January 2014

            • OFS-1.14.3

              In the case of registered securities, provision must be made for a depository or securities 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 2014

            • OFS-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 2014

            • OFS-1.14.5

              The following modifications apply:

              (a) The references in this Module to "Directors" must be read as references to members of the overseas issuer's governing body;
              (b) The issuing and offering documents must be signed by at least two members of the governing body of the overseas 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 the overseas 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 2014

            • OFS-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 an overseas 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 an offering document or listing application which incorporates equivalent continuing obligations to those imposed by that other market or exchange.

              Amended: April 2014
              January 2014

            • OFS-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 the securities 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 2014

            • OFS-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 2014

            • OFS-1.14.9

              The external auditor must be independent, both of the overseas issuer and of any other company concerned.

              Amended: April 2014
              January 2014

            • OFS-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 2014

            • OFS-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 2014

            • OFS-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 2014

        • OFS-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 2014

            • OFS-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 2014

          • OFS-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 unlisted issuer of its own securities;
              (b) Initial Offer for Sale: An offer for sale to the public by or on behalf of existing companies or unlisted issuers or its securities holders or part of its securities holders, whose securities are already in issue or subscribed;
              (c) Subsequent Public Offer: An offer for subscription to the public by or on behalf of a listed issuer of its own securities other than by a rights issue, after obtaining the approval on waiving of the pre-emptive rights of the existing securities holders;
              (d) Rights Issue: A rights issue offer by way of exercising the pre-emptive rights by existing holders of securities which enables those holders to subscribe to those securities in proportion to their existing holding, or otherwise on the basis of allotment approved by those holders;
              (e) Private Placement: Private placement is an offer to accredited investors, as defined in this Module, selected or accepted by the issuer or the appointed lead manager for obtaining subscriptions for securities of an issue, or for obtaining subscription for sale of securities by an underwriter or lead manager;
              (f) Employee Share Benefit Plan: Offering of securities which is made by the issuer on the exercise of options granted to or for the benefit of management and/or employees, after obtaining the approval of securities holders and the CBB;
              (g) Capitalisation Issue: A capitalisation issue is an allotment of further securities to existing securities holders, credited as fully paid-up out of the issuer'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 of securities as consideration, other than cash, in a transaction or in connection with a takeover or merger or the division of an issuer;
              (i) Swapping, Exchange or Substitution of Securities: Securities issued through an exchange or a substitution, swapping or conversion of securities into other classes of securities;
              (j) Initial Listings for Publicly Traded Companies: For non-Bahraini issuers whose securities are issued in other markets, or listed on another regulated exchange and who wish to list on a licensed 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 their securities to the public and list.
              January 2014

          • OFS-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 or issuer and follow the requirements outlined in Appendix OFS-1.

              January 2014

            • Corporate Governance

              • OFS-2.3.2

                Issuers of securities in a public offering must confirm to the CBB before the registration of the offering 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 2014

              • OFS-2.3.3

                The issuer must meet the following requirements in order for a public offer to be approved by the CBB:

                (a) The issuer is a duly incorporated entity under the laws of the Kingdom of Bahrain, or in case of an overseas issuer, under the laws of its place of incorporation;
                (b) The issuer operates in conformity with its Memorandum and Articles of Association or equivalent constitutional documents;
                (c) The securities are freely transferable and free from any encumbrances;
                (d) The offered securities are to be listed on a licensed exchange in the Kingdom of Bahrain, and there are adequate assurances between the issuer and the licensed 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) The issuer has made the appointment of the eligible advisors, as per this Module including the appointment of a listing agent to liaise with the licensed exchange and the CBB where the CBB deems necessary; and
                (h) The issuer meets such other requirement as determined by the CBB from time to time.
                Amended: October 2017
                January 2014

              • OFS-2.3.4

                The issuer must appoint a lead manager for any public offer.

                January 2014

              • OFS-2.3.5

                An issuer in an initial 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 2014

            • Underwriting

              • 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 proposed offering price; or
                (b) The lead manager has established the issue price through a book building mechanism; and
                (c) The lead manager has signed a declaration of due diligence and has submitted a declaration confirming to the issuer and the CBB that the issue will be fully subscribed, which declaration must be included in the offering document.
                January 2014

              • OFS-2.3.7

                Where the issue is to be underwritten, full details of the underwriter and the underwriting arrangement must be disclosed in the prospectus and the full underwriting agreement as signed by the parties must be made available for inspection by the subscribers.

                January 2014

              • OFS-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 the securities to be issued and market conditions.

                January 2014

              • OFS-2.3.9

                Where the issue is underwritten the:

                (a) Underwriter must not be a related party; and
                (b) Lead manager and/or underwriter must directly or through an authorised market maker, establish a price stabilisation mechanism for the securities for a period of at least six months starting from the first day of trading on a licensed exchange. The CBB may require a longer period of price stabilisation where it considers it necessary.
                January 2014

              • OFS-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 2014

              • OFS-2.3.11

                In respect of public offers of debt securities, where the issue is to be underwritten or sold through primary dealer arrangements, full details of the underwriter, primary dealer, the underwriting arrangement and/or primary dealer arrangements must be disclosed in the prospectus and the underwriting agreement must made available for inspection by the subscribers.

                January 2014

            • Book Building

              • OFS-2.3.12

                The preliminary/red herring prospectus containing all the information except the information regarding the price at which the securities are offered, must be filed with the CBB prior to it being used in any manner by the issuer or its advisors.

                January 2014

              • OFS-2.3.13

                The lead manager and/or the underwriter to the issue must be nominated by the issuer as a book runner and his name must be disclosed in the prospectus.

                Amended: October 2017
                January 2014

              • OFS-2.3.14

                The preliminary/red herring prospectus to be circulated may indicate the price band within which the securities are being offered for subscription.

                January 2014

              • OFS-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 to securities under the placement portion.

                January 2014

              • OFS-2.3.16

                On receipt of the information, the book runner and the issuer must determine the price at which the securities are to be offered to the public.

                January 2014

              • OFS-2.3.17

                The book runner and other appointed advisors associated with the book building process must maintain records of the book building process and the CBB has the right to inspect and obtain a copy of such records.

                January 2014

              • OFS-2.3.18

                Details of the outcome of the book building process must be disclosed in the prospectus 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 2017

              • OFS-2.3.19

                The issuer, lead manager and/or underwriter must consider the outcome of the book 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 the prospectus.

                Added: October 2017

          • OFS-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 2014

            • OFS-2.4.2

              A private offer must only be made to accredited investors and must be for a minimum investment of USD 100,000.00. A private offer, excluding those offers made by way of private equity, is limited to a take up by less than 100 accredited investors.

              January 2014

            • OFS-2.4.3

              Any subsequent issues or offering of securities by a publicly listed issuer, for its own securities, must first be offered to its existing shareholders (rights offering) and then to the public. Any listed issuer that would like to make a private placement must obtain CBB approval and the approval of the shareholders' General Assembly.

              January 2014

            • OFS-2.4.4

              Issuers must combine all offers of securities 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 2014

            • OFS-2.4.5

              In order for the CBB not to regard the offer as a public offer, the issuer must exercise reasonable care to ensure that the purchasers of securities are not acquiring them for resale, redistribution to other investors within a period not less than one year.

              January 2014

            • OFS-2.4.6

              The issuer, lead manager and any appointed advisor to the private placement offer must not disseminate or make available any information related to the private 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 these securities.

              January 2014

            • OFS-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 the issuer or the investor. The private 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 2014

            • OFS-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 2014

          • OFS-2.5 OFS-2.5 Rights Offering

            • OFS-2.5.1

              Rights offerings of listed equity securities are subject to the eligibility criteria under this Module.

              January 2014

            • OFS-2.5.2

              The CBB may only grant its approval for a rights issue where the General Assembly of the issuer has issued a resolution approving such offer.

              January 2014

            • OFS-2.5.3

              An offering period of a rights 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 2014

            • OFS-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 2014

            • OFS-2.5.5

              If the rights offering is made at a high share premium or above the market price on a licensed exchange, such issue shall be subject to the underwriting requirement under Subparagraph OFS-1.6.1 (e).

              January 2014

            • OFS-2.5.6

              The content of the rights offering document must meet the minimum requirements provided in Appendix OFS-1, where relevant.

              January 2014

            • OFS-2.5.7

              To accommodate for the possibility of under subscription by the existing shareholders, issuers must prepare rights offering documents in line with public offering documents to avoid any delay regarding the approval of a further public offering where the rights issues are not fully underwritten or taken up.

              January 2014

            • OFS-2.5.8

              If the rights issue is not fully subscribed or fully underwritten and thereafter is made to the public, the prospectus requirements of Section OFS-5.1 apply in relation to the offering document.

              January 2014

            • OFS-2.5.9

              Any announcement made by the issuer or his advisors prior to receiving the approval of the CBB must clearly state that the rights issue is subject to the approval of the CBB.

              January 2014

            • OFS-2.5.10

              The issuer must disclose the price, terms and the purpose of the rights issue, as well as the financial circumstances that call for the rights issue.

              January 2014

            • OFS-2.5.11

              The offering period for a rights issue must be at least 15 calendar days.

              January 2014

            • OFS-2.5.12

              A rights issue which allows holders of securities to participate in proportion or pro rata to the amount of existing shares held, must allow for renunciation, in part or whole, in favour of a third party at the option of the entitled shareholders.

              January 2014

            • OFS-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 entitled shareholders, unless the issuer made the necessary arrangements with a licensed exchange to trade the rights, subject to such renunciation.

              January 2014

            • OFS-2.5.14

              Subsequent to a rights issue, the issuer 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 per share.

              January 2014

          • OFS-2.6 OFS-2.6 Employee Stock Option Plan

            • OFS-2.6.1

              Any employee stock option plan of a listed issuer utilising its equity securities requires CBB approval.

              January 2014

            • OFS-2.6.2

              The issuer may reserve up to 10% of its total issued securities, for its directors and employees through an employee stock option plan.

              January 2014

            • OFS-2.6.3

              The employee stock option plan must be approved by the shareholders at the General Assembly. The issuer must provide the shareholders' 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 2014

            • OFS-2.6.4

              The employee stock option plan must contain provisions relating to:

              (a) The persons to whom securities may be issued or sold under the plan ("participants");
              (b) The total number and/or amount of the securities to be issued or purchased on a licensed exchange;
              (c) Entitlement in terms of number and amount of securities 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 allotted securities, if applicable; and
              (g) The voting, dividend, transfer and other rights, including those arising from the liquidation of the company attached to the securities.
              January 2014

            • OFS-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 2014

            • OFS-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 are trustees of the plan, or have a direct or indirect interest in the plan, the circular must disclose the interest.

              January 2014

            • OFS-2.6.7

              All listed companies' securities held on behalf of the employees under an employee stock option plan or employee share benefit plan, must be held in trust by a trustee subject to the prior written approval of the CBB. The securities account opened and maintained at a licensed central depository for this purpose must be clearly identified as a trust account for the employee stock option plan or employee share benefit plan accordingly. Where employees are eligible to trade in the securities of the issuer held on their behalf in an employee stock option plan, the directors, executive management and any other key persons must not be eligible to hold the position of trustee of such plan.

              Amended: October 2017
              January 2014

            • Transitional Arrangement

              [This Sub-Heading was deleted in July 2018].

              Deleted: July 2018

              • OFS-2.6.7A

                [This Paragraph was deleted in July 2018].

                Deleted: July 2018

            • OFS-2.6.8

              Unless the securities subject to the same plan are identical with other securities, they must be separately designated.

              January 2014

            • OFS-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 2014

            • OFS-2.6.10

              The issue of securities as consideration for an acquisition will not be regarded as a circumstance requiring adjustment.

              January 2014

            • OFS-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 2014

            • OFS-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 2014

            • OFS-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 2014

            • OFS-2.6.14

              The holders or the owners of securities issued or subsequently issued under any employee share benefit plan, whether the issuer or the directors of the issuer are trustee of the plan or not, are subject to the provisions related to prohibition of abuse of inside information and insider trading laws including but not limited to those set out in Module MAM of CBB Rulebook Volume 6.

              January 2014

        • OFS-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 2014

            • Definition 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 a Capital Market Advisory Service Provider by the CBB from time to time.
                Amended: October 2017
                January 2014

          • OFS-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 2014

              • OFS-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 2014

              • OFS-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 2014

            • Ability 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 2014

            • Controlled 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 the prospectus or offering documents.

                January 2014

              • OFS-3.2.6

                All persons proposed to undertake any controlled functions and any other persons recruited or employed by the capital 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 2014

              • OFS-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 2014

            • Appointment, 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 2014

              • OFS-3.2.9

                The acceptance of the appointment by the advisor must be made in the form of an official written confirmation.

                January 2014

              • OFS-3.2.10

                The name of the appointed advisors must be prominently disclosed in the offering document and in all advertising materials.

                January 2014

              • OFS-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 2014

              • OFS-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 2014

            • Transparency and Disclosure

              • OFS-3.2.13

                Where a prospectus or offering document includes a statement purporting to be made by, or based on a statement made by an expert, the prospectus or offering document must not be issued unless:

                (a) The expert has, before the approval and registration of the prospectus or offering document, as the case may be, provided his written consent to the issue thereof; and
                (b) There appears in the prospectus or offering document, a statement that the expert has given such consent.
                January 2014

              • OFS-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 or offering document.

                January 2014

              • OFS-3.2.15

                The appointed advisor must disclose in the prospectus and/or offering documents, whether it has any capital of the issuer under option, or agreed conditionally or unconditionally to be put under option, including:

                (a) The title and amount of securities covered by the options;
                (b) The exercise price;
                (c) The purchase price, if any; and
                (d) The expiration date of the options.
                January 2014

              • OFS-3.2.16

                Where options have been granted, or agreed to be granted to all the holders of shares or debt securities, or of any class thereof, or to any appointed advisor, or to employees under the employees' share benefit plan, a general disclosure of such fact may be made.

                January 2014

              • OFS-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-linked securities, or subscription rights granted or to be granted to any appointed advisor. Such information must indicate:

                (a) The amount of outstanding equity-linked securities 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 the share 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 2014

              • OFS-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 the securities holders must approve a separate resolution of the rights or options through a majority of disinterested securities holders;
                (b) It must be implemented, exercised and/or allocated separately from the process of the related offering of securities, i.e. either before or after the offering period; and
                (c) For issuers under formation, the implementation, exercising and or allocation of the required securities must take place only after the publication of the issuer's incorporation order in the Official Gazette.
                January 2014

            • Independency 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 of equity securities of the issuer or any other company within the issuer's group;
                (b) He has a business relationship with, or financial interest in the issuer or any other entity in the issuer'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 the issuer, other than the offering or listing in which he is appointed as an appointed advisor, or to another entity in the issuer'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 the issuer or any other entity in the issuer's group.
                Amended: July 2018
                January 2014

              • OFS-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 2014

            • Confidentiality 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 2014

              • OFS-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 of insider trading, in their capacity as a temporary insider.

                January 2014

            • Reporting 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 2014

            • Declaration 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 2014

            • CBB 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 2014

          • OFS-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 2014

            • Role and Responsibilities of the Lead Manager

              • OFS-3.3.2

                All issuers must engage a CBB licensee to act as a lead manager or to fulfil the obligations of a lead manager as defined in this Section.

                January 2014

              • OFS-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 a securities offering to the CBB;
                (b) Report to the CBB on the due diligence undertaken in respect of the issue and the issuer;
                (c) Make a declaration that is provided to the CBB and included in the offering document, that the offering 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 the offering document that the offering 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 2014

              • OFS-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 2014

              • OFS-3.3.5

                The lead manager is expected to also assist the issuer with the appointment of other advisors.

                January 2014

              • OFS-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 the issuer 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 the securities listing application for obtaining the CBB approval is made separately from the application for the offering of securities, 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 the issuer is sufficiently set up to comply with the continuing listing obligations under the licensed 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 2014

              • OFS-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 relevant issuer.
                January 2014

            • E-Subscription

              • OFS-3.3.8

                In line with Articles 83 and 178 of the CBB Law and the dematerialisation of securities 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 2014

          • OFS-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 the prospectus or offering document.

              January 2014

            • OFS-3.4.2

              Other than for newly-established issuers, financial projections, forecasts, or estimates of future operating results are not required to be included in offering documents, unless otherwise stated in this Module or by the CBB. However, if the issuer decides to disclose such information, it has to justify its projections adequately. The issuer should provide an explanation as to how the projections were calculated, taking into account all assumptions and risks.

              January 2014

            • OFS-3.4.3

              Where the projections of financial statements, or forecasted financial information are disclosed in the prospectus or offering 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 the offering 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 2014

            • OFS-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 2014

            • OFS-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 the issuer'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, the issuer 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 2014

            • OFS-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 2014

            • Eligibility

              • 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 2014

          • OFS-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 appoint trustees to whom the ownership of the trust property must be transferred.

              January 2014

            • Eligibility

              • 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 domiciled trustees, they must be registered in their own jurisdiction and be acceptable to the CBB.

                January 2014

            • Appointment of Trustee

              • OFS-3.5.3

                Every issuer of debt securities must make provision in those debt securities, or in a trust deed relating to those debt securities, for the appointment of a trustee corporation as trustee for the holders of the debt securities within a maximum of one month from the allotment date.

                January 2014

            • Independence

              • OFS-3.5.4

                A trustee corporation must not be appointed, hold office or act as trustee for the holders of debt securities of a borrowing corporation if that trustee corporation is:

                (a) A shareholder who beneficially holds shares 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 those debt 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 2014

              • OFS-3.5.5

                The trustee must be independent of the issuer, or any of the issuer'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 the issuer.

                January 2014

              • OFS-3.5.6

                An issuer may remove a trustee 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 2014

            • Contents 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, the debt securities or the relevant trust deed must contain a limitation on the amount that the borrowing corporation may borrow, pursuant to those debt securities or that deed and must contain covenants by the borrowing corporation, or if the debt 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 the trustee or any auditor or director appointed by the trustee 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 issued debt securities give notice:
                (i) To each of the holders of those debt securities at his address as specified in the register of debt 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 those debt securities; and
                (iii) Call a meeting of the holders of those debt securities to consider the accounts and balance sheet which were last submitted to the trustee for the holders of the debt securities by the borrowing corporation, and to give to the trustee directions in relation to the exercise of the trustee'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 the trustee, or such other person as appointed on behalf of the holders of those debt securities present at the meeting.
                Amended: July 2018
                January 2014

              • OFS-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 of shares received for the conversion of each convertible security, or changes to the pricing mechanism for the conversion of the convertible security, except where these changes are adjustments pursuant to capitalisation issues, rights issues, or consolidation or sub-division of shares or capital reduction exercises.
                January 2014

              • OFS-3.5.9

                Any changes in the terms of convertible securities must be clearly determined and disclosed in the trust deed and offering document/listing document/circular, or any other documents issued in relation to the proposal.

                January 2014

              • OFS-3.5.10

                Once determined, the terms and conditions of the convertible securities may not be altered unless approved by the holders of the securities and the CBB.

                January 2014

            • Retirement of Trustees

              • OFS-3.5.11

                A trustee for the holders of debt securities must not cease to be the trustee until a corporation qualified for appointment as trustee for the holders of debt securities has been appointed and has taken office as such. The holders of the securities and the CBB must be informed immediately of this event.

                January 2014

              • OFS-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 a trustee for the holders of the debt securities upon retirement or otherwise, the successor may be appointed in accordance with such provision.

                January 2014

              • OFS-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 retiring trustee, the borrowing corporation may appoint a successor which is qualified for appointment.

                January 2014

              • OFS-3.5.14

                Notwithstanding anything in any debt securities or trust deed, a borrowing corporation may, with the consent of an existing trustee for the holders of the debt securities, appoint as successor to the existing trustee any corporation which is qualified for such appointment.

                January 2014

              • OFS-3.5.15

                Where the trustee for the holders of the debt 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 the trustee for the holders of the debt securities in place of the trustee which has ceased to exist or to be qualified, which has failed or refused to act as trustee, or which is disqualified.

                January 2014

              • OFS-3.5.16

                Where a successor is appointed to be a trustee in place of any trustee, the successor must immediately after the appointment submit to the holders of the securities and the CBB notice of such appointment.

                January 2014

            • Roles and Responsibilities of the Trustees

              • OFS-3.5.17

                A trustee for the holders of debt 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 or security 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 each prospectus relating to the debt securities does not contain any matter which is inconsistent with the terms of the debt 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 the debt 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 the debt securities or the trust deed;
                (e) Except where it is satisfied that the breach will not materially prejudice the collateral or the security, if any, for the debt securities or the interests of the holders of the debt 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 the trustee to remedy any breach of the covenants, terms and provisions of the debt securities or the trust deed, place the matter before a meeting of holders of the debt securities and submit such proposals for the protection of their interest as the trustee 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 2014

              • OFS-3.5.18

                Where a trustee for the holders of the debt 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 or security 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 2014

              • OFS-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 the trustee and/or issuer or the CBB considers necessary for the protection of the interests of the holders of the debt securities; or
                (b) If the CBB so requires, direct the trustee to apply to the court for an order; and the trustee shall act in accordance with the court order.
                January 2014

              • OFS-3.5.20

                Where:

                (a) After due enquiry, the trustee 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 or security 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 2014

            • Powers of the Trustee to Apply to Court

              • OFS-3.5.21

                A trustee for the holders of debt securities may apply to the court:

                (a) For directions in relation to any matter arising in connection with the performance of the functions of the trustee; or
                (b) To determine any question in relation to the interests of the holders of debt securities.
                January 2014

              • OFS-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 or security given when the offer or invitation in respect of the debt securities was made to the public, and if no security was given must consider the position of the holders of the debt securities as unsecured creditors of the borrowing corporation.

                January 2014

              • OFS-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 2014

            • Obligations 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 relevant prospectus); and
                (b) At the end of each succeeding period thereafter, being a period of 3 months or such shorter time as the trustee 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 2014

              • OFS-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 the debt 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 debt securities or any trust deed;
                (c) Whether or not any event has happened which has caused or could cause the debt securities 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 or security or charge included in or created by the debt securities 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 debt securities 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 the debt securities of the borrowing corporation, and has secured the guarantee by a charge over its assets in favour of the trustee for the holders of the debt securities of the borrowing corporation.
                January 2014

              • OFS-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 of debt securities to:

                (a) Furnish in writing to the trustee, within 30 days 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 the security of the charge is indeterminate, furnish the trustee in writing within 10 days after the advance, particulars of the amount or amounts actually advanced.
                Amended: April 2014
                January 2014

              • OFS-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 2014

              • OFS-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 the trustee deems necessary to keep the CBB informed about the compliance with those requirements.

                January 2014

              • OFS-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 2014

              • OFS-3.5.30

                Where:

                (a) The directors of a borrowing corporation do not submit to the trustee 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 the trustee 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 2014

            • Obligations 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 2014

              • OFS-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 2014

          • OFS-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 2014

              • OFS-3.6.2

                For the purpose of this Module, the definition, role and requirements related to the underwriter also apply to co-underwriters.

                January 2014

              • OFS-3.6.3

                The CBB may investigate the financial suitability of a proposed underwriter and may reject the appointment of the underwriter and/or the application for offering if it is not satisfied as to the underwriter's ability to meet its commitment under the proposed underwriting agreement and its potential impact in its capital adequacy.

                January 2014

            • Firm Commitment Underwriting

              • OFS-3.6.4

                Where an underwriter has been appointed and the securities are not fully subscribed during the offering period, the underwriter must purchase the balance of the securities through a firm commitment underwriting arrangement.

                January 2014

              • OFS-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 of securities application.

                January 2014

              • OFS-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 2014

              • OFS-3.6.7

                The underwriter may appoint or form an underwriting group for any underwritten issue.

                January 2014

              • OFS-3.6.8

                The underwriter must comply with the CBB Law, rules and regulations, including Volume 6 of the CBB Rulebook, and the issuer's Memorandum and Articles of Association, particularly in respect of the eligibility of the expected subscribers to acquire the issuer's securities and related disclosure requirements.

                Amended: October 2017
                January 2014

              • OFS-3.6.9

                After the approval of the offering documents (including the underwriting agreement) neither the issuer nor any advisor or person acting on its behalf, nor the underwriter or any person acting on its behalf, has the right to change any provision or commitments stipulated in the underwriting agreement.

                January 2014

              • OFS-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 2014

              • OFS-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 the underwriter, before considering such amendment.

                January 2014

            • Firm 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 than firm commitment underwriting, in the following cases:

                (a) Offering of securities below the average market price during the last six months; or
                (b) Offering of securities at the flat par value.
                January 2014

              • OFS-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 the underwriter to resell to investors.

                January 2014

              • OFS-3.6.14

                In case of issues which are exempted from firm commitment underwriting arrangements (non-public offers), the CBB may accept partial underwriting commitment arrangements, or best-efforts underwriting.

                January 2014

            • Disclosure

              • OFS-3.6.15

                The name of the underwriter and the terms of the underwriting agreement must be prominently disclosed in the offering document and in the application for approval.

                January 2014

              • OFS-3.6.16

                A summary of the underwriting agreement or arrangements must be provided in the prospectus or offering document, including but not limited to the cost of underwriting and other related fees and charges.

                January 2014

              • OFS-3.6.17

                The underwriter is required to provide sufficient and adequate information to the CBB and disclose the same in the prospectus or offering documents as to the method, bases, mechanism, assumptions, and all other related information used to reach the offering price.

                January 2014

              • OFS-3.6.18

                In cases where the offering price is determined by the underwriter 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 the prospectus or offering document.

                January 2014

              • OFS-3.6.19

                The underwriting agreement must be provided as a document available for inspection to the subscriber.

                January 2014

              • OFS-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 2017

              • OFS-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 2017

          • OFS-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 2014

            • OFS-3.7.2

              For an issue of debt securities, the issuer must appoint and maintain a paying agent, or where appropriate, a central depository in Bahrain until all outstanding obligations relating to those securities have been met, unless the issuer itself performs these functions.

              January 2014

            • OFS-3.7.3

              The paying agent must provide facilities for obtaining new debt securities, in accordance with the terms and conditions of the debt securities, to replace those debt securities which have been damaged, lost, stolen, or destroyed, and for all other purposes provided for in the terms and conditions of the debt securities, trust deed and/or offering documents.

              January 2014

            • OFS-3.7.4

              The paying agent must undertake responsibility for timely disbursement of funds made available by the issuer or the trustee, as the case may be, to investors in accordance with the terms of the security and the timelines stipulated by the CBB.

              January 2014

            • OFS-3.7.5

              The paying agent must notify the CBB immediately when the issuer, originator and/or guarantor delays in meeting any required payments, whether in whole or in part.

              January 2014

            • OFS-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 2014

          • OFS-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 the Islamic securities and ensure compliance with applicable Shari'a principles.

              January 2014

            • OFS-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 2014

            • OFS-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 2014

            • OFS-3.8.4

              The Shari'a advisor must be independent of the issuer. The issuer 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 2014

          • OFS-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 the offering document and in any advertisement or announcement.

              January 2014

            • OFS-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 2014

          • OFS-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 2014

            • OFS-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 2014

            • OFS-3.10.3

              The issuer, lead manager, and the receiving bank must designate a separate bank account for each issue of securities. The name(s) of the designated bank(s) must be provided in detail in the offering document.

              January 2014

            • OFS-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 the issuer or lead manager.

              January 2014

            • OFS-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 the prospectus or offering 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 the receiving bank before implementing such change or alteration.

              January 2014

            • OFS-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 the offering document was made available to the subscriber.

              January 2014

            • OFS-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. The receiving bank in cooperation and coordination with the issuer or lead manager is responsible for the avoidance of any duplicate applications for the same beneficiary (subscriber).

              January 2014

            • OFS-3.10.8

              The receiving bank must adhere to the laws, rules and regulations related to anti-money laundering and financial crime.

              January 2014

            • OFS-3.10.9

              The receiving bank must not transfer the issue's total proceeds in whole or part to the Board of Directors of the issuer, without receiving the CBB's approval on the allotment and the receiving bank is required to notify and provide the CBB with a bank certificate or transfer notice upon the transfer of such proceeds.

              January 2014

            • OFS-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 the offering document. Such costs, fees, or charges must be provided and displayed for the subscribers in a clear and readable place in the offering document.

              January 2014

            • OFS-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 the issuer or lead manager.

              January 2014

            • OFS-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 the issuer 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 2014

            • OFS-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 2014

          • OFS-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, all issuers of securities must appoint a securities ownership transfer agent to perform the required function of the issuer in respect of the creation, maintenance and update of the securities register in terms of this Module.

              January 2014

            • OFS-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 the issuer 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 a prospectus or offering document which includes a statement purporting to be made by, or based on a statement made by an expert, the prospectus or offering document must not be issued unless:

              (a) The expert has given and has not before the registration of the prospectus or offering 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 the prospectus or offering 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 the issuer in Bahrain or, if the issuer has no registered office in Bahrain, at the address in Bahrain specified in the offering 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 30 days prior to commencement of the intended offering period.

              Amended: April 2014
              January 2014

            • OFS-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 2014

            • OFS-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 2014

          • OFS-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 the issuer'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 of securities 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 existing issuers, or a draft copy thereof for issuers under formation;
              (g) A draft of the offering 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 the issuer 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 the issuer's external auditor unqualified report on the annual audited financial statements, or interim period reviewed financial statements prepared by the issuer's external auditor;
              (l) A copy of the audited financial statements, including the balance sheet, income statement, cash flow statement and change in shareholders' 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 the issuer, if applicable;
              (n) A copy of at least two independent valuer's reports if the proposed offering of securities 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 2014

            • Lead 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 the issuer and in relation to the external market or industry in which it operates;
                (c) An analysis of the macroeconomic factors affecting the issuer or the underlying securities being offered;
                (d) Due consideration for the reasonableness of the issuer's business strategy and related business plan and budgets where appropriate;
                (e) In the case of asset-backed securities, warrants and Islamic 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 2014

            • Issue 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 2014

              • OFS-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) The issuer, 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 the issuer or in the offering documents;
                (d) Information otherwise specified by the CBB has not been provided;
                (e) If the offer is associated with a listing on a licensed exchange, the CBB may consider that admission to listing of the securities may be detrimental to the fair, orderly and efficient operation of the Bahraini securities market or to the reputation of CBB;
                (f) A security is already admitted to listing on another market and the issuer is in breach of listing 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 2014

              • OFS-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 2014

              • OFS-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 2014

              • OFS-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 2014

          • OFS-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 2014

            • Public Offering

              • OFS-4.3.2

                For public offerings, the following additional requirements and documentation are required:

                (a) A draft of the summary prospectus to be published in two daily local newspapers, one in Arabic and the other in English, at least 5 days before the start of the offering period;
                (b) If the offer is subject to the listing requirements, the issuer 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 a licensed 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 the securities under the proposed offer are already listed on an exchange, details of the current listing requirements and performance of the securities;
                (f) If the securities under the proposed offer have been placed through private 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 the securities;
                (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 of securities and foreign listings, the issuer is required to provide the CBB with a draft of agreements or contracts related to the depositing of securities and registration arrangements.
                Amended: April 2014
                January 2014

            • Rights Offering

              • OFS-4.3.3

                An application to the CBB for a rights issue by a listed issuer 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 the rights issue offering document.
                January 2014

            • Private Placement

              • OFS-4.3.4

                An application for private placement of any securities must include the following additional information and documents:

                (a) A confirmation from the issuer 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 the accredited investor status confirmation; and
                (c) A list of the expected accredited investors, if available at the time of submission.
                January 2014

            • Employee 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 2014

            • Capitalisation 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 2014

              • OFS-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 2014

            • Consideration Issue

              • OFS-4.3.8

                An application for a consideration issue by a listed issuer, or listing applicant through which an issue of securities as a consideration other than cash in a transaction, or in connection with a take-over or merger or the division of an issuer is subject to the Take-over, Mergers Acquisitions and Share Repurchases (TMA) Module.

                January 2014

            • Swapping, 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 of securities.

                January 2014

            • Applications 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 an initial public offering, or an initial offer for sale of securities, as mentioned above.

                January 2014

            • Issuing 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, or initial offer for sale of securities, 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 2014

            • Debt 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 the debt securities;
                (b) A copy of any collateralising instruments or details of underlying assets;
                (c) A copy of any intended guarantees provided to holders of debt securities; and
                (d) A copy of the underlying asset valuation report produced by at least two independent valuers.
                January 2014

            • Warrants 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 of warrants and other certificates.

                January 2014

            • Islamic 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 the transaction is in compliance with the principles of Shari'a;
                (b) A copy of the trust deed or other document securing the Shari'a compliant securities together with any trustees 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 2014

            • Assets-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-backed securities; and
                (b) A copy of the underlying asset valuation report produced by at least two independent valuers.
                January 2014

            • Offers 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 by overseas 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 the securities;
                (c) Detailed information on listing requirements and securities performance on the home or other market(s);
                (d) Confirmation by the overseas 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 of securities, as stipulated in this Module;
                (e) An appointment of a listing agent where the securities are to be listed on a licensed exchange; and
                (f) The issuer to bear the costs of any investigation or inspection by the CBB.
                January 2014

              • OFS-4.3.17

                The CBB may grant exemptions to any overseas issuer's application, depending upon the type of offer and type of securities on a case-by-case basis.

                January 2014

            • Other 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 2014

              • OFS-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 2014

          • OFS-4.4 OFS-4.4 Preliminary/Red Herring Prospectus to be Made Public

            • OFS-4.4.1

              The draft offering document or red herring prospectus filed with the CBB must be made public for a period of 15 days from the date of filing the offering document with the CBB.

              Amended: April 2014
              January 2014

            • OFS-4.4.2

              The lead manager must, while filing the draft offering document with the CBB:

              (a) File the draft offering document with the stock exchanges where the securities are proposed to be listed; and
              (b) Make copies of the draft offering document available to the public, host the draft and final offering documents on the websites of the issuer, lead manager and underwriters 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 2014

            • OFS-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 2014

            • No Complaints Certificate

              • OFS-4.4.4

                After a period of 21 days from the date the draft offering 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 draft offering document or not, and highlight those amendments.

                Amended: April 2014
                January 2014

        • OFS-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 of securities. The prospectus 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 2014

            • OFS-5.1.2

              Issuers of securities, 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 2014

            • Material Information

              • OFS-5.1.3

                The issuer must disclose any information that would be material to an investor's investment decision.

                January 2014

              • OFS-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 the prospectus so that investors may make an informed assessment.

                January 2014

              • OFS-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 of securities for which an offering or listing is sought;
                (b) Necessary to enable a person who invests or seeks to invest in securities to make an informed assessment of the activities, assets, liabilities, financial position, management and prospects of the issuer, and of its profits and losses and the rights attached to such securities; and
                (c) The implicit risk associated with such investment.
                January 2014

              • OFS-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 issued securities.

                January 2014

            • Omission 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 2014

              • OFS-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 the issuer;
                (b) Such information required in the prospectus represents a competitive advantage for the issuer, 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 the issuer, 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 the securities in question.
                January 2014

              • OFS-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 2014

            • Replacement and Supplementary Document

              • OFS-5.1.10

                A supplementary or replacement prospectus is a prospectus that has the same wording as the original prospectus, except for the provision of new or additional information, or the correction of deficiencies in the original prospectus.

                January 2014

              • OFS-5.1.11

                A supplementary or replacement prospectus must be submitted to the CBB as soon as practicable if, during the validity period of a prospectus, the issuer becomes aware that the prospectus is deficient or outdated in that:

                (a) The prospectus contains a material statement that is false or misleading;
                (b) There is a material omission from the prospectus;
                (c) There has been a significant change affecting information in the prospectus; or
                (d) A significant new matter has arisen, and the prospectus content requirements would have required information on that matter to have been included in the prospectus, if the matter had arisen when the prospectus was being prepared.
                January 2014

              • OFS-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 2014

              • OFS-5.1.13

                The supplementary or replacement prospectus may be used to correct, update or add to the original prospectus at any time before the date of the CBB approval and/or start of the offering period.

                January 2014

              • OFS-5.1.14

                All supplementary or replacement prospectuses must contain the following:

                (a) A statement that it is a supplementary or replacement prospectus;
                (b) An identification of the prospectus it supplements or replaces;
                (c) An identification of any previous supplementary or replacement prospectus in relation to the same offer;
                (d) A statement that it is to be read together with the prospectus, as well as any previous supplementary or replacement prospectus; and
                (e) A responsibility statement from the board of directors of the issuer.
                January 2014

              • OFS-5.1.15

                All supplementary and/or replacement prospectuses must clearly indicate the changes and revisions made.

                January 2014

              • OFS-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 2014

            • CBB 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 replacement prospectus containing at least the minimum information set out in this Module;
                (b) A declaration by the issuer and the lead manager that the changes to the supplementary and/or replacement prospectus are free from false or misleading statements, or information biased towards any of its present shareholders and future investors;
                (c) A declaration by the issuer and the lead manager that the changes to the supplementary and/or replacement prospectus do not omit any material information; and
                (d) A declaration by the issuer and the lead manager that the changes to the supplementary and/or replacement prospectus are to the best of their knowledge in accordance with all the applicable laws, rules and regulations.
                January 2014

            • Announcement

              • OFS-5.1.18

                For public offers, the issuer must inform the public of the changes and make the supplementary and/or replacement prospectus available to it. In accordance with Article 84 of CBB Law of 2006, issuers of securities must publish a summary of the supplementary and/or replacement prospectus in two daily local newspapers, one in Arabic and the other in English and disclose the material amendments therein.

                January 2014

            • Equivalent Information

              • OFS-5.1.19

                For Bahraini issuers who made an offer or listed their securities outside Bahrain, and for overseas issuers who made an offer or listed their securities in Bahrain, all information of importance to shareholders made public about the issuer in other markets must be made public in Bahrain, whether or not disclosure of such information would otherwise be required by the CBB.

                January 2014

            • Presentation

              • 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 2014

            • Validity 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 offer securities based on such prospectus, unless approved by the CBB.

                January 2014

            • Preliminary or Red Herring Prospectuses

              • OFS-5.1.22

                When a draft prospectus is submitted to the CBB or to any appointed advisor, the final offering price is not required to be disclosed. The offering price must however be included in the final printed proof prospectus and before the start of the offering period is set.

                January 2014

            • Responsibility 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 2014

              • OFS-5.1.24

                The following persons are responsible for the reliability and accuracy of the prospectus or offering documents:

                (a) The issuer of the securities covered by the prospectus;
                (b) The board of directors of the issuer of the securities;
                (c) The lead manager of the securities offered; and
                (d) Any other appointed advisor or person whose name appears in the prospectus or offering document each in their respective capacity according to the declaration made by him.
                January 2014

            • Consent 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 2014

            • Registration 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 2014

            • Documents 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 the prospectus as being available for inspection.

                January 2014

            • Preparation of the Prospectus

              • OFS-5.1.28

                The issuer, lead manager, or any other appointed advisors or persons involved in the preparation of any offering documents must ensure that the content and the statements included in such documents will meet, but not be limited to the following requirements:

                (a) The prospectus 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 the prospectus, instead of including such facts in the main body of the prospectus;
                (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 2014

              • OFS-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 2014

              • OFS-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 2014

            • Use 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 the offering document has been published in one Arabic and one English language daily newspaper published in Bahrain.
                January 2014

          • OFS-5.2 OFS-5.2 Contents of the Prospectus

            • Specific Content for Equity Securities

              • OFS-5.2.1

                An offering document in respect of equity securities must contain the minimum content requirements of this Section and be prepared in accordance with Appendix 1.

                January 2014

            • Front 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 the issuer;
                (b) Type and amount of securities;
                (c) Date of the offering document;
                (d) Date of expiry of validity of the prospectus;
                (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 the underwriter, if any;
                (h) Face or par value of the securities;
                (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 2014

              • OFS-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 2014

              • OFS-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 2014

            • Inside 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 2014

              • OFS-5.2.6

                The abovementioned standard responsibility statement must be duly signed by the issuer's board of directors.

                January 2014

              • OFS-5.2.7

                The standard responsibility statement must be produced in the prospectus and the same must be submitted to the CBB.

                January 2014

              • OFS-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 the prospectus itself the actual reasons and justification.

                January 2014

              • OFS-5.2.9

                In addition to the information required to be included on the front and inside cover pages of the prospectus, the prospectus 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 the issuer, 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) Major shareholders 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 of shares;
                (iii) Dividend policy;
                (iv) Listing of shares;
                (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-subscription allotment;
                (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 2014

          • OFS-5.3 OFS-5.3 Additional and Specific Content for Debt Securities

            • OFS-5.3.1

              An offering document in respect of debt securities must contain the minimum content requirements of this section and be prepared in accordance with Appendix 3.

              January 2014

            • Front 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 the issuer;
                (b) Full name and registration number of the originator;
                (c) Logo and full name of the guarantor, if any;
                (d) Type and amount of debt securities;
                (e) Date of the offering document;
                (f) Date of the expiry of the validity of the prospectus;
                (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 the underwriter, if any;
                (k) Logo and full name of the trustee;
                (l) Rating of debt 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 2014

            • Inside 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 2014

              • OFS-5.3.4

                The abovementioned standard responsibility statement must be duly signed by the issuer's/originator's board of directors.

                January 2014

              • OFS-5.3.5

                The standard responsibility statement must be produced in the offering document and the same must be submitted to the CBB.

                January 2014

              • OFS-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 the offering document itself, the actual reasons and justifications.

                January 2014

              • OFS-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, the offering documents of debt 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 the debt securities by the issuer; and
                (xxviii) Utilisation of proceeds;
                (j) The following minimum information must be provided for:
                (i) Details of the issuer (for all issues);
                (ii) Details of the originator (if different from the issuer);
                (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;
                •   Major shareholders 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) The debt securities;
                (iii) No prior market for the debt securities;
                (iv) Market value of the debt securities;
                (v) Fluctuation of interest rates;
                (vi) Inflation risks;
                (vii) Partial early redemption of the debt securities;
                (viii) Legal investment considerations;
                (ix) Investment in the debt 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 the issuer'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) The issuer;
                (xx) Bankruptcy risk;
                (xxi) Dependence on key personnel;
                (xxii) No recourse to shareholder;
                (xxiii) No operational history;
                (xxiv) Limitation on enforcement of security 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 of debt securities;
                (ii) Ranking of debt securities;
                (iii) Issue price;
                (iv) Interest/coupon/profit rate/ income;
                (v) Minimum subscription required of the debt 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 the debt securities;
                (vii) Form and denomination of debt securities on issuance;
                (viii) Underwriting arrangements;
                (ix) Events of default;
                (x) Details of any security for the debt securities;
                (xi) Rating assigned to debt securities (together with a description of the rating);
                (xii) Type of listing that is sought;
                (xiii) Summary of rights conferred upon the holders of debt securities;
                (xiv) Governing law — any special legislation under which the debt 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 Islamic debt 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 2014

          • OFS-5.4 OFS-5.4 Additional and Specific Content for Convertible Securities

            • OFS-5.4.1

              The issuer of convertible securities must disclose in the offering document the extent to which the shareholder may subscribe for the convertible securities.

              January 2014

            • OFS-5.4.2

              For the purpose of this Section, securities may be converted into other types of securities, or these can be converted into another class of the same securities. The conversion of securities may also take place within the same securities issuer's company and/or group, or in relation to another company or group.

              January 2014

            • OFS-5.4.3

              In the case of convertible securities which are exchangeable for securities of another company, an issuer must submit to the CBB the annual report and accounts of that other company unless that company is listed or adequate information is otherwise available.

              January 2014

            • OFS-5.4.4

              If the debt securities are convertible into equity or are issued with warrants, whether or not detachable, the following detailed information (where applicable) must be made available:

              (a) Mode of conversion;
              (b) Number of warrants;
              (c) Conversion period;
              (d) Price of warrants;
              (e) Conversion ratio;
              (f) Rights attached to warrants;
              (g) Conversion price;
              (h) Warrant exercise period; and
              (i) Warrant exercise price.
              January 2014

          • OFS-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 the offering document, a description of the assets used to back the asset-backed securities, 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 such security, the ratio of the amount of the assets to the value or amount of such security 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 the issuer 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 the issuer 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 the issuer of the securities 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 its securities are listed need be disclosed in respect of the obligor and the guarantor (if applicable);
              (xiv) Any relationship between the issuer, guarantor and obligor, if any, must be included. The principal terms and conditions of the obligations must be stated, except where the obligations are debt 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 of equity securities, the information under section OFS-5.2 should be included in respect of those securities.
              (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 the issuer proposes to or may issue further debt securities backed by the same assets, a prominent statement to that effect and unless those further debt securities are fungible with or are subordinated to any class of existing listed debt security, a statement that the prior approval of the holders of that class 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 the issuer;
              (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 the issuer's obligations to holders of the securities;
              (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 the issuer to the holders of the class of debt securities in question;
              (viii) Any fees payable by the issuer;
              (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 the issuer; 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 the issuer does not intend to publish annual reports and accounts and that the trust deed constituting the issue requires the issuer to provide written confirmation to the trustee (or equivalent), on an annual basis, that no event or default or other matter which is required to be brought to the trustee's attention has occurred.
              January 2014

            • OFS-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 issued securities, whether classified as asset-back securities or otherwise.

              January 2014

          • OFS-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, or issuer, 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 2014

            • OFS-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 2014

            • OFS-5.6.3

              SPVs are responsible to meet all ongoing obligations related to the securities issued.

              January 2014

            • Additional Issue

              • OFS-5.6.4

                In the case of an issuer wishing to issue more debt securities which are:

                (a) Backed by the same assets;
                (b) Not freely exchangeable with existing classes of debt securities; or
                (c) Not subordinated to existing classes of debt securities;

                then the issuer must inform the debt security holders of the existing classes.

                January 2014

          • OFS-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 the issuer that the vehicle issuing the securities will remain subject to proper Shari'a review, until the maturity date of the security; and
              (c) A copy of the trust deed or other document securing or constituting the Islamic securities.
              January 2014

            • Appointed Shari'a Advisors

              • OFS-5.7.2

                The offering document must contain the identity of the appointed advisors, including the Shari'a advisor.

                January 2014

            • Shari'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 2014

          • OFS-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 the issuer and guarantor (if any) to fulfil the obligations specified under the terms of the issue; and
              (b) The risks, rights and obligations associated with the warrants.
              January 2014

            • OFS-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 the issuer and its guarantor (if any);
              (c) Financial information on the entity whose securities are the subject of the issue of warrants;
              (d) Whether the issuer has authority to issue further warrants; and
              (e) If the warrants are not fully covered by the underlying securities held by a trustee, a declaration that the issuer has appropriate risk management capabilities to manage the warrants issue.
              January 2014

            • OFS-5.8.3

              In the case of warrants relating to equity or debt securities, the offering document must contain at the minimum:

              (a) The names of the regulated exchange (if any) on which equity securities are already listed or traded;
              (b) The name, registered office and, if different, head office of the issuer;
              (c) The country of incorporation of the issuer; and
              (d) The title of the securities including nominal value.
              January 2014

            • OFS-5.8.4

              Additional information to be contained in the offering document, where warrants offer rights to acquire securities:

              (a) In the case of warrants offering rights to acquire equity securities:
              (i) A statement regarding tax on the income from the shares withheld at source in the country of origin;
              (ii) A statement whether the issuer assumes responsibility for the withholding of tax at source;
              (ii) Arrangements for transfer of the shares and (where permitted) any restrictions on their free transferability (for example, provisions requiring transfers to be approved); and
              (iv) A statement whether the shares are in registered or bearer form.
              (b) In the case of warrants offering rights to acquire debt securities:
              (i) A statement regarding tax on the income from the debt securities withheld at source in the country of origin;
              (ii) A statement whether the issuer assumes responsibility for the withholding of tax at source;
              (iii) A statement whether the debt securities are in registered or bearer form; and
              (iv) Details of any arrangements for transfer of the securities and any restrictions on the free transferability of the debt securities.
              January 2014

            • OFS-5.8.5

              Where any security represents 10 percent or more of the total value of the securities underlying the warrant, a table showing the price range of each such security for each of the last three years must be included.

              January 2014

            • OFS-5.8.6

              In the case of warrants relating to indices, the offering 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 2014

            • OFS-5.8.7

              In the case of warrants relating to other types of securities, assets or variables, the offering document must contain at the minimum:

              (a) A description of the securities, 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 relevant securities, assets or variables are published.
              January 2014

          • OFS-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 of securities must meet the requirements of the particular security, 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 for private placement as outlined in this Section.

              January 2014

            • Confirmation as Accredited Investor

              • OFS-5.9.2

                The issuer must obtain a signed confirmation from its investors as to their status as accredited investors using the "Accredited Investors" Form (Appendix 11).

                January 2014

              • OFS-5.9.3

                The issuer must submit a copy of the status confirmation contained in Rule OFS-5.9.2 on submission of the offering document.

                January 2014

            • Suitability 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 2014

              • OFS-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 the securities for their individual requirements; and
                (b) There may be a lack of liquidity and lack of public market for the securities on offer.
                January 2014

              • OFS-5.9.6

                Issuers must ensure that all relevant financial and risk information is placed in the offering document to allow investors to make an informed decision.

                January 2014

            • Utilisation 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 the offering document, and such condition must be clearly stated in the prospectus under the related section 'Use of Proceeds'. Any usage of funds that is not as stated in the offering 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 2014

              • OFS-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 the issuer of selling shareholders, 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 per security.

                January 2014

              • OFS-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 the issuer. If any of the securities are to be offered for the account of an existing holder of securities in the issuer, the PPM must indicate the portion of expenses incurred by him.

                January 2014

              • OFS-5.9.10

                Any private placement of securities 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 the issuer or the investor. The above disclosures of fees and utilisation of proceeds must be made prominently and clearly for the attention of investors.

                January 2014

          • OFS-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 to security holder's rights.
                January 2014

              • OFS-5.10.2

                Where issuing and offering is sought for debt securities of an issuer 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 the issuer of the relevant debt securities.

                January 2014

              • OFS-5.10.3

                An offering document issued in relation to a guaranteed issue must contain the same information regarding the guarantor as that regarding the issuer, so that, where appropriate the "issuer" should be read as applying equally to the guarantor.

                January 2014

              • OFS-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 2014

        • OFS-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 draft prospectus, together with a completed prospectus checklist (Appendix OFS-7). The CBB will not commence its review of a draft prospectus unless the prospectus is complete and attached with all required documents and information, as stipulated under Paragraph OFS-6.1.5.

              January 2014

            • OFS-6.1.2

              Once the CBB has completed its review of the draft prospectus and notified the issuer accordingly, the issuer is required to make any changes determined by the CBB and to submit the printed proof of the prospectus to the CBB for registration.

              January 2014

            • Registration

              • OFS-6.1.3

                A copy of the prospectus submitted for registration must be signed by each director of the issuer.

                January 2014

              • OFS-6.1.4

                If the prospectus is signed by an agent or alternate director, the printer's proof prospectus and the printed prospectuses must disclose this to be the case under the place where the respective director is meant to have signed the prospectus.

                January 2014

              • OFS-6.1.5

                The printed proof copy of the prospectus must be accompanied by the following:

                (a) An application for registration of the prospectus;
                (b) Any fees payable to the CBB as per Appendix OFS-6 and Section OFS-8.2;
                (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 the prospectus, 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 the issuer, 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 the prospectus on their behalf;
                (i) Letter of confirmation from the issuer and/or lead manager, that the printed proof copy of the prospectus has incorporated all changes as required by the CBB; and
                (j) Letter of confirmation from the issuer, lead manager, or other appointed advisors that the final printed copy of the prospectus will be the same as the printed proof of the prospectus registered with the CBB.
                January 2014

        • OFS-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) The prospectus 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 the offering period;
              (d) The availability of a sufficient number of final printed copies of the prospectus or offering document being not later than the date of the commencement of the offering 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 the prospectus or offering document, appointment of the advisors or any information related to the issuer 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 the offering period.
              January 2014

            • Timetable 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 the offering period:

                (a) In relation to a public offer, the CBB must be notified at least 10 days before the intended record date;
                (b) The offering document and public announcement must disclose the record date; and
                (c) Once announced, the issuer must not make any subsequent alterations to the record date.
                Amended: April 2014
                January 2014

            • Offer 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) For equity 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 of shares or in the case of a rights issue, 5 days from the issue of an announcement stipulating the issue is fully subscribed;
                (c) For other securities 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 of securities, the offering period must not extend beyond the validity of the date of the prospectus or offering document, which is a period of 6 months; and
                (e) Must not allow for the closing of the offering 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 2014

            • Offer Price

              • OFS-7.1.4

                An issuer, when stating an offer price must also make reference to and provide a description in the prospectus or offering document of the bookbuilding, underwriting, price stabilisation or other relevant price factors.

                January 2014

              • OFS-7.1.5

                Where an issuer is making a public offer following a rights share offering or a private offer, it may price the offers differently for the public offer or private placement. In such cases, the differential pricing must also consider the market trends and the justification for the price difference must be outlined in the offering document. The CBB will determine whether the differential pricing is in the best interests of the investors and the market in general.

                January 2014

            • Listings

              • OFS-7.1.6

                Where the securities are to be listed on a licensed 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 2014

              • OFS-7.1.7

                Where the offering document states that the offer will be listed on issue, the CBB may prevent allotment from taking place where the issuer has not obtained the authority to list from the licensed exchange at the time of issue, and order that the issuer refund any monies paid by subscribers in respect of such issue.

                January 2014

              • OFS-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 the offering period, and that the date for commencement of trading on a licensed exchange is within a maximum of 15 calendar days from the closing date of the offering period. Immediately upon the signing of the listing agreement with the licensed 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 2017

              • OFS-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 2017

          • OFS-7.2 OFS-7.2 Announcement

            • OFS-7.2.1

              No person may make a public offer of securities unless a summary of the offering document has been published in two local daily newspapers, one in Arabic and one in English.

              January 2014

            • OFS-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 2014

            • OFS-7.2.3

              The offering document must be made available to the public at least 5 calendar days prior to the commencement of the offering period and at the same time as publishing the summary of the offering document.

              January 2014

            • OFS-7.2.4

              The offering document available to the public must be identical to the printed proof version approved by the CBB.

              January 2014

            • OFS-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 the issuer, lead manager and receiving bank for public offering and, if applicable, at the offices of the principal advisor or other designated advisor placing or selling the securities; and
              (c) If available in electronic form, it is available on the issuer's, lead manager's or other principal advisor's website.
              January 2014

            • OFS-7.2.6

              Announcements for a public offering must:

              (a) Contain a prominent statement to the effect that the advertisement is not an offering document and investors should not subscribe for any securities, except on the basis of information in the offering document;
              (b) Indicate the date of approval by the CBB of the offering document;
              (c) Indicate how the offering 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 the offering document.
              January 2014

            • OFS-7.2.7

              An issuer and its affiliated employees and professional advisors are prohibited from stating or disseminating any statements during the offering period that may lead to:

              (a) Encouragement of subscription for the securities;
              (b) Inducement of a particular person to deal in the securities;
              (c) Sale or purchase of the securities; or
              (c) Raising, lowering, maintaining or stabilising the market price of the securities in conjunction with dissemination or statement of misleading information.
              January 2014

            • OFS-7.2.8

              No announcement, advertisement or promotion of an offer of securities that would constitute or induce a person to subscribe for such securities may be made without meeting the requirements of Paragraph OFS-5.1.28.

              January 2014

          • OFS-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 the offering documents in accordance with this Module;
              (c) There is a change in circumstances of the issuer or conditions;
              (d) If the offering period is fixed or extended to be close to the date of the next declaration of the issuer'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 printed offering document, or the imposition of additional cost or charges which have not been stipulated in the offering document;
              (f) The raising of new litigation or a court order related to the issuer 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 2014

            • OFS-7.3.2

              The CBB may, by an order in writing, prevent any further use of a prospectus or offering document or issue, sale or allotment of securities connected to an offer where the issuer 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 2014

          • OFS-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 approved receiving bank, until the final allotment of such securities has been approved by the CBB.

                January 2014

              • OFS-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 the offering period and must include the final allotment basis. The declared allotment basis must not be subject to any change thereafter.

                Amended: October 2017
                January 2014

              • OFS-7.4.3

                The issuer must allot or allocate securities within 6 calendar days of the closing date of the offer in accordance with the allotment basis stipulated in the offering 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 2014

            • Under-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 unsubscribed shares for those issues which are not fully underwritten.

                January 2014

              • OFS-7.4.5

                In the event that the issue is not underwritten no allotment may be made of any securities unless the subscription received is, at least equal to the minimum subscription amount set out in the offering document.

                January 2014

              • OFS-7.4.6

                If a public offering of equity securities has not been fully subscribed and the offer is underwritten, the underwriter must purchase the unsubscribed shares and after obtaining the CBB approval, may then re-offer or resell the unsubscribed shares. For the avoidance of doubt, any unsubscribed shares that might be re-offered or re-sold to a related company of the underwriter 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 the underwriter.

                Amended: October 2017
                January 2014

              • OFS-7.4.7

                If a rights offering of equity securities which is underwritten has not been fully subscribed during the offering period, the underwriter may either re-offer the unsubscribed shares to the public or purchase the unsubcribed shares.

                January 2014

              • OFS-7.4.8

                If a public offering of debt securities or other which is underwritten has not been fully subscribed for during the offering period, the underwriters must purchase the unsubscribed securities and after obtaining the CBB approval, may then resell these securities.

                January 2014

            • Over-subscription

              • OFS-7.4.9

                If an offer of securities is over-subscribed after the closing of the offering period, the issuer must allot the shares in accordance with the pre-determined basis of allotment which must be described in the offering document or otherwise approved by the CBB.

                January 2014

              • OFS-7.4.10

                Issuers and lead managers must make sure conditions relating to allotment basis and minimum subscription amounts are in compliance with the Memorandum and Articles of Association, or equivalent constitutional documents of the issuer, as well as in accordance with the applicable laws, rules and regulations.

                January 2014

            • General Guidance on the Allotment

              • OFS-7.4.11

                The basis of allotment of any securities offered, must be clearly stated in the offering document.

                January 2014

              • OFS-7.4.12

                While exercising the allotment of securities the issuer, lead manager, or any appointed advisor must ensure that:

                (a) For any new public offering of equity securities, no subscriber is allotted more than 10% of the total shares offered;
                (b) All subscribers are treated equally and in accordance with the allotment 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 the issuer or the promoters in any public offer to the parties who received firm allotment;
                (d) No shareholder of the issuer 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 total securities allotted must in any case not exceed the total securities offered and approved by the General Assembly and the issuer, lead manager and any other appointed advisor must establish the allotment basis to avoid such possibility;
                (f) Allotment of securities must avoid allocation of any securities fraction, and therefore the issuer must provide provisions related to the possibility of fractions of securities remaining after final allotment; and
                (g) For any rights issue, the pro-rata allotment basis must be applied, or otherwise the General Assembly of securities holders must have approved such other allotment basis.
                January 2014

            • Over-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 2014

              • OFS-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 2014

              • OFS-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 2014

              • OFS-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 2014

              • Trading of Underwritten Securities Subscribed by the Underwriter

                • OFS-7.4.17

                  Where the underwriter has subscribed for, or purchased securities under an underwriting or sub-underwriting agreement following the under-subscription of the offering of securities, any intention to sell those securities in the ordinary course of trading on a licensed exchange shall, in the interest of maintaining market integrity, not be sold against any price stabilisation fund or the designated market maker as the buying counterparty.

                  Added: October 2017

          • OFS-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 dispatch securities within a maximum of 9 calendar days from the closing date of the offering period.

              Amended: January 2018
              Amended: October 2017
              January 2014

            • OFS-7.5.2

              A record for such refunding and dispatching must be maintained for further reference and CBB inspection requirements.

              January 2014

            • OFS-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 2014

            • Dematerialised 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 the issuer is required to designate the clearing house, or depository facility in which such securities will be deposited.

                January 2014

              • OFS-7.5.5

                For the purposes of Article 178 of the CBB Law and Volume 6, dematerialised securities shall mean securities issued and entered in the registry in an electronic format and dematerialisation means the conversion of a security certificate from a physical form to an electronic form for securities that have already been issued before the effective date of this Module.

                January 2014

              • OFS-7.5.6

                For the purposes of dematerialisation, each subscriber or shareholder will have to open an account with a licensed clearing house or a licensed central depository, acceptable to the CBB, and then request for dematerialisation of his certificates through the depository.

                January 2014

              • OFS-7.5.7

                The dispatching of the dematerialised securities must be done in accordance with the CSD Module and SROs business rules.

                January 2014

              • OFS-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 the licensed clearing house and or licensed central depository, rather than through the issuing of a physical share certificate.

                January 2014

            • Physical 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 and class of the security;
                (c) The name of the issuer and the authority under which it was incorporated;
                (d) The address of the registered office of the issuer;
                (e) The name and address of the clearing house, central depository institution, and/or securities ownership transfer agent, if it is different from the registered office of the issuer;
                (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 the issuer, be supported by facsimile signatures only;
                (h) Where only the seal is used without supporting signatures, the method or system of control by the issuer on the application of the seal must be approved by the auditor of the issuer, and a copy of such approval forwarded to the CBB;
                (i) The certificate security must be designed so that the paper quality and watermark forgery and/or alterations are easily detectable;
                (j) The printing of securities certificates must only be entrusted to recognised securities printers; and
                (k) The size of the certificate is prescribed by the clearing house and/or central depository, which is used by the issuers.
                January 2014

              • OFS-7.5.10

                [This Paragraph was deleted in October 2017]

                Deleted: October 2017
                January 2014

        • OFS-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 2014

          • OFS-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 2014

            • OFS-8.2.2

              An application for approval or reviewing an offering document related to an offering of securities will not be regarded as complete or submitted until the fee has been paid in full.

              January 2014

            • OFS-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 2014

      • TMA — 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 and share repurchases are to be conducted and sets forth special requirements relating to timing and mode of offer, announcements, documentaton and disclosure of adequate information to enable shareholders to make an informed decision as to the merits of an offer relating to a takeover, merger or acquisition.

                Amended: October 2019

              • TMA-A.1.2

                The general principles contained in the Module represent the overarching principles relevant to takeovers, mergers and share repurchases. In addition to the general principles, each chapter contains a series of rules, some of which are effectively expansions of the general principles and examples of their application and others are rules of procedure designed to govern specific types of takeovers, mergers or share repurchases.

                Amended: October 2019

              • TMA-A.1.3

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-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 2019

              • TMA-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 2019

            • Legal 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 2024

              • TMA-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 99100 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 5256 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 5258.

            • Role of the CBB

              • TMA-A.1.13

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-A.1.14

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-A.1.15

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-A.1.16

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

          • TMA-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 DateDescription of Changes
              TMA-3.1.404/2013Guidance Paragraph deleted on mandatory offer limit.
              Module TMA10/2019Restructured the whole Module TMA (including moving definitions to the glossary and also the appendices under Part B of the CBB Rulebook Volume 6)
              TMA-2.201/2022Amended paragraphs in the Section.
              TMA-2.301/2022Amended paragraphs in the Section.
              TMA-2.7.701/2022Amended paragraph.
              TMA-2.7.801/2022Deleted paragraph.
              TMA-2.8.101/2022Amended paragraph.
              TMA-2.11.101/2022Amended paragraph.
              TMA-2.14.101/2022Deleted paragraph.
              TMA-2.18.101/2022Amended paragraph.
              TMA-2.18.201/2022Amended paragraph.
              TMA-2.1901/2022Amended paragraphs in the Section.
              TMA-2.20.601/2022Amended paragraph.
              TMA-3.401/2022New revised Section.
              TMA-A.1.11A01/2024Added a new Paragraph on Module legal basis.
              TMA-2.201/2024Amended 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 2019

            • TMA-A.3.2

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-A.3.3

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-A.3.4

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-A.3.5

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-A.3.6

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-A.3.7

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-A.3.8

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

        • TMA-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 an offer for, takeover or merger or acquisition of a controlling interest in a company whose primary listing of its ordinary equity securities is on a licensed exchange in the Kingdom of Bahrain.

              Amended: October 2019

            • TMA-B.1.2

              The Module applies to take-overs, mergers, acquisitions and share repurchases affecting:

              (a) Bahrain domiciled publicly listed company whose ordinary voting equity securities are listed on a licensed exchange in Bahrain are the potential targets for takeovers, mergers and acquisitions; or
              (b) Overseas company whose primary listing of its ordinary voting equity securities is on a licensed exchange in Bahrain.
              Amended: October 2019

            • TMA-B.1.3

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-B.1.4

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-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 2019

            • TMA-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 2013

            • TMA-B.1.7

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-B.1.8

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • Exemptions

              • TMA-B.1.9

                Module TMA does not apply to offers of equity securities for the following:

                (a) Offers for non-voting, non-equity capital unless required by this Module;
                (b) An exempt share repurchase;
                (c) An offer document filed with the CBB under Module OFS for the sole purpose of issuing or listing securities that are convertible to equity securities and do not confer, directly or indirectly, a voting right to the holder of such securities;
                (d) The relevant person has or had, at any time, financial instruments that are convertible to equity securities and do not confer, directly or indirectly, a voting right;
                (e) The relevant person is not subject to Module TMA under CBB Law;
                (f) An exempt fund manager or an exempt 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 2013

              • TMA-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 the offeree company as well as those acting in concert and their professional 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 2019

              • TMA-B.1.14

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-B.1.15

                The primary responsibility for ensuring compliance with the Module rests with parties involved in a take-over, merger, acquisition, or share repurchase and their professional 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 other professional advisers; or parties who otherwise participate in, act in concert or are connected with, transactions to which the Module applies.
                Amended: October 2019

              • TMA-B.1.16

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

            • Penalty 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 2019

          • TMA-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 2019

          • TMA-1.1.2

            Equal Treatment to all Shareholders: All relevant persons including any persons acting in concert in relation to an offer must treat all holders of each class of securities of an offeree company in a fair and equitable manner demonstrating no bias to a single, group or class of shareholders.

            Amended: October 2019

          • TMA-1.1.3

            Duties of Directors with Personal Interests: Directors of an offeror and the offeree 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 the offeree company must give careful consideration before they enter into any commitment with an offeror 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 2019

          • TMA-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 2019

          • TMA-1.1.5

            Information to All Shareholders: During the course of an offer, or when an offer is in contemplation, neither an offeror, nor the offeree 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 the offeree company to a bona fide potential offeror or vice versa.

            Amended: October 2019

          • TMA-1.1.6

            Standards of Care in Documents: All relevant persons including any persons acting in concert in relation to an offer must, as with a prospectus act with due skill, care and diligence in relation to all matters connected with an offer including but not limited to matters relating to standards of research and analysis, public announcements, documentation, information being given to shareholders and the appointment of advisers, among others.

            Amended: October 2019

          • TMA-1.1.7

            Announcements: An offeror must announce an offer only after careful and responsible consideration. The same applies to making acquisitions which may lead to an obligation to make a mandatory offer. In either case the offeror and its advisers must be satisfied that it can and will continue to be able to implement the offer in full.

            Amended: October 2019

          • TMA-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 2019

          • TMA-1.1.9

            Full and Prompt Disclosure and Prevention of a False Market: All relevant persons including any persons acting in concert in relation to an offer must ensure that all information provided in offer, announcements and related documentation is clear, fair and not misleading, and appropriate to the information needs of the readers. All persons concerned with offers 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 their professional adviser(s) involved in an offer covered by this Module must take care that statements are not made which may mislead shareholders or the market.

            Amended: October 2019

          • TMA-1.1.10

            No Frustration of Bona Fide Offer: At no time after a bona fide offer has been communicated to the board of the offeree company, or after the board of the offeree company has reason to believe that a bona fide offer might be imminent, may the board of the offeree 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 fide offer being frustrated or in the shareholders being denied an opportunity to decide on its merits.

            Amended: October 2019

          • TMA-1.1.11

            Secrecy before Announcements: At any time before the offer or during the offer, the management of all relevant persons including any persons acting in concert in relation to an offer and professional adviser(s) must maintain secrecy and confidentiality of the offer.

            Amended: October 2019

          • TMA-1.1.12

            Limitation On Directors' Actions: The boards of an offeror and the offeree company and their respective advisers and associates have a duty to act in the best interests of the shareholders of the offeror and offeree company respectively, and these General Principles and the Rules may impinge on the freedom of action of boards and persons involved in offers. 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 the offeree 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 2019

          • TMA-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 an offer.

            Amended: October 2019

          • TMA-1.1.14

            Appointment of Professional Adviser(s): An offeree board which receives an offer or is approached with a view to an offer being made, should in the interest of its shareholders, seek professional advice by a professional adviser(s).

            Amended: October 2019
            Amended: April 2013

          • TMA-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 2019

          • TMA-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 2019

          • TMA-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 relevant licensed exchange.

            Amended: October 2019
            Amended: April 2013

        • TMA-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 the offeree company in writing.

            • Identity of Offeror

              • TMA-2.1.2

                If the offer or an approach with a view to an offer being made is not made by the ultimate offeror or potential offeror, the identity of that person must be disclosed at the outset to the board of the offeree 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 2019

            • Seriousness of Offeror

              • TMA-2.1.3

                The board of the offeree company when approached is entitled to be satisfied that the offeror is, or will be, in a position to implement the offer in full. An offeror, upon receiving a request from the board of the offeree company, must provide reasonable information to verify that the offeror is, or will be, in a position to implement the offer 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 an offer or contemplated offer 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 2019

          • TMA-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 an offer being made, must, in the interests of shareholders, appoint an independent professional adviser to advise the board as to whether the financial terms of the offer 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 the offeree board circular along with the recommendation of the offeree company’s board regarding acceptance and voting, where applicable, of the offer. The board must announce the appointment of the professional adviser in the initial announcement of the offer or possible offer, or as soon thereafter as the appointment is made.

                Amended: January 2024
                Amended: January 2022
                Amended: October 2019

              • TMA-2.2.1A

                For the purposes of Paragraph TMA-2.2.1, the offeree company’s board, prior to appointment of an independent professional adviser, must ensure that the independent professional 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 2022

              • TMA-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/or
                d) Restructuring exercises involving listed companies.
                Added: January 2022

              • TMA-2.2.2

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-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 the offer or recommendation being made, then it must be stated in the offeree 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 2019

              • TMA-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 2024

              • TMA-2.2.4

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

            • In-Eligible Professional Adviser(s)

              • TMA-2.2.5

                A person shall not be appointed as an independent professional adviser if the person is a related company to the offeror or offeree or who has, or had, a significant connection, financial or otherwise, with either the offeror or the offeree 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 2019

              • TMA-2.2.5A

                For the purposes of Paragraph TMA-2.2.5, a professional adviser would not generally be considered independent if the professional adviser:

                (a) holds voting rights in the offeror or the offeree at any time during the preceding 12 months from the beginning of the offer 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 the offeror or offeree 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 the offer period;
                (c) has a business relationship with the offeror or the offeree, at any time during the preceding 12 months from the beginning of the offer 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 the offeror or the offeree;
                (e) has a representative from either the offeror or the offeree on its board;
                (f) is or will be involved in the financing of the offer;
                (g) is a substantial creditor of either the offeror or the offeree, 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 2022

              • TMA-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 the professional adviser to the offeror or the offeree represents more than 10 per cent of the loan outstanding in the offeror or the offeree; or
                (b) the loan (including hire purchase, leasing, corporate bonds and Islamic financing) extended by the professional adviser to the offeror or the offeree represents more than 10 per cent of the latest audited shareholders’ funds of the professional adviser; or
                (c) the professional adviser is a lead banker in a syndicated loan (including Islamic financing) extended to the offeror or the offeree, at any time during the period of 12 months preceding the beginning of the offer period.
                Added: January 2022

              • TMA-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 a professional adviser who has had a recent advisory relationship with an offeror or offeree to give advice. In such cases, the CBB should be consulted. Also, a professional 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 the professional 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 2022

            • TMA-2.2.6

              [This Paragraph was deleted in January 2024].

              Deleted: January 2024
              Amended: October 2019

            • Independent 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 the offeree company’s board and their interest and they must not vote on the resolution to be adopted in regards of the offer, and if possible, the offeree company board should establish an independent committee of the board to discharge the board’s responsibilities in relation to the offer. If it is not possible to form an independent committee, responsibility for representing the interests of independent shareholders must reside primarily with the professional adviser. In case of doubt the CBB must be consulted.

                Added: January 2024

              • TMA-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 any offer or possible offer for consideration by the independent committee other than, in the case of a director of the offeree company, as a shareholder of the offeree company.

                Amended: January 2024
                Amended: October 2019

            • Shareholder 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 2019

            • Approval of Delistings by Independent Shareholders

              • TMA-2.2.9

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Amended: October 2019

            • Board of Offeror Company

              • TMA-2.2.10

                Where an offeror is a listed company, and the offer being made is a reverse takeover or when the directors of the offeror are faced with a conflict of interest, the board of the offeror must appoint an independent adviser and obtain professional independent advice as to whether the making of the offer is in the interests of the offeror’s shareholders. The advice must be obtained before announcing an offer or revised offer. The offer or revised offer must also be made subject to the approval of the shareholders of the offeror in a general meeting. The advice must be in writing and sent to the shareholders with the notice of the meeting. If an offeror considers that these requirements should not apply, where for example the offer is not material to the offeror, it may apply to the CBB for a waiver of these requirements.

                Amended: January 2024
                Amended: October 2019

              • TMA-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; or
                c) a common controlling shareholder in both companies is a director of or has a nominee director in either company.
                Added: January 2024

            • TMA-2.2.11

              [This Paragraph was deleted in January 2024].

              Deleted: January 2024
              Amended: October 2019

            • TMA-2.2.12

              [This Paragraph was deleted in January 2024].

              Deleted: January 2024
              Amended: October 2019

            • TMA-2.2.13

              [This Paragraph was deleted in January 2024].

              Deleted: January 2024
              Amended: October 2019

          • TMA-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 potential offeror is considering making an offer 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 the offeror or potential offeror. The offeror or potential offeror should, therefore, keep a close watch on the offeree company's share price and volume for signs of unusual movement.

                Amended: October 2019

            • Announcements 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 possible offer 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 2019

            • Suspension of Trading

              • TMA-2.3.4

                When an announcement is required under this Section, the listed company(ies) being the offeror or the offeree company, as the case may be, must notify the CBB and the licensed exchange immediately that an announcement is imminent and if there is any possibility that an uninformed market for shares of the offeror or the offeree 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 the offeree company from making an announcement or requesting the licensed exchange to grant a temporary suspension of trading at any time the board thinks appropriate. The CBB or the licensed 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 an offeree or offeror.

                Amended: October 2019

            • Announcements of Certain Purchases

              • TMA-2.3.5

                Acquisitions of voting rights of the offeree company by an offeror or by any person acting in concert with the offeror may give rise to an obligation to make a cash offer, to increase an offer or to make a mandatory 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 2019

              • TMA-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 the offer, whether through equity or debt, or to organize a consortium to make the offer.

              • TMA-2.3.7

                Where the offeror or offeree 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 the offeror and the offeree to make an announcement in accordance with this Module and the offeror or offeree must comply with the time stipulated in the instruction.

                Amended: October 2019

            • Publication of an Announcement about an Offer or Possible Offer

              • TMA-2.3.8

                When an offer or possible offer is announced, the announcement must be in accordance with Appendix B in Part B of the CBB Rulebook Volume 6 and be sent to the licensed exchange and published in two local daily newspapers in Bahrain, one in Arabic, or Arabic and the other in English.

                Amended: October 2019

              • TMA-2.3.9

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-2.3.10

                An offeror or potential offeror must make an announcement under the following conditions:

                (a) Before an approach has been made to the offeree company, the offeree company is in the subject of rumour or speculation about a possible offer.
                (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 potential offeror or persons acting 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 a mandatory 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 2019

            • Announcement 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 an offer, the primary responsibility for making an announcement will normally rest with the board of the offeree company. The offeree company must, therefore, keep a close watch on its share price and volume.

                The board of the offeree company must make an announcement to the licensed exchange and market and inform its shareholders immediately upon the occurrence of the following conditions:

                (a) A firm intention to make an offer has been notified to the board of the offeree company from an authorised source, irrespective of the attitude of the board of the offeree company;
                (b) When following an approach to the offeree company, whether there is a firm intention to make an offer or not, the offeree company is the subject of rumour or speculation about a possible offer or there is unusual movement in its share price or in the volume of share turnover;
                (c) When negotiations or discussions about a potential offer 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 potential offeror 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 potential offerors, and
                (i) The company is the subject of rumour or speculation about a possible offer, 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 or offeror are about to be approached.
                Amended: October 2019
                Amended: April 2013

              • TMA-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 the offer, whether such acceptances or undertakings are revocable, and if so, the conditions under which such acceptances or undertakings may be revoked.

                Amended: October 2019

            • Firm Intention to Make an Offer by Offeror

              • TMA-2.3.13

                An offeror must announce a firm intention to make an offer where such offeror has every reason to believe that it can and will continue to be able to implement the offer.

                Amended: October 2019

              • TMA-2.3.14

                The announcement of a firm intention to make an offer must state the following:

                (a) Terms of the offer;
                (b) Identity of the offeror and, where the offeror 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 the offeree company:
                (i) Which the offeror owns or over which it has control or direction;
                (ii) Which is owned or controlled or directed by any person acting in concert with the offeror;
                (iii) In respect of which the offeror or any person acting in concert with it has received an irrevocable commitment to accept the offer; and
                (iv) In respect of which the offeror or any person acting in concert with it holds convertible securities, warrants or options;
                (d) Details of any outstanding derivative in respect of securities in the offeree company entered into by the offeror or any person acting in concert with it;
                (e) All conditions (including normal conditions relating to acceptance, listing and change in capital) to which the offer is subject;
                (f) Details of any arrangement (whether by way of option, indemnity or otherwise) in relation to shares of the offeror or the offeree company and which might be material to the offer. Details of any relevant securities of the offeree company in which the offeror or any person acting 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 the offeree company which the offeror 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 the offer or the posting of it is subject;
                (i) Details of any agreements or arrangements to which the offeror 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 2013

              • TMA-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 the offeror to satisfy the full implementation and acceptance of the offer.

                Amended: January 2022
                Amended: October 2019

              • TMA-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 the offer.

                Added: January 2022

              • TMA-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 potential offeror, or its directors, or officials or advisors, and not immediately withdrawn, then the potential offeror will be bound by the statement if an offer for the offeree 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 exchange offer), the potential offeror will not be allowed subsequently to make an offer for the offeree company at a lower price (taking the price of any securities concerned at the date of announcement of the firm intention to make the offer), unless there has occurred an event which the potential offeror 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 an offer 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 potential offeror or the offeree company that talks are taking place or that a potential offeror is considering making an offer 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 that offer or possible offer within one month, an announcement must be made setting out the progress of the talks or the consideration of a possible offer. This obligation continues, and announcements will be required monthly, until announcement of firm intention to make an offer or of a decision not to proceed with an offer. When talks are terminated or a potential offeror decides not to proceed with an offer, clear and unambiguous announcement must be made to that effect.

                Amended: October 2019

            • Statements 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 2019

              • TMA-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 subsequently acting in concert with either of them, may within six months from the date of the statement:

                (a) Announce an offer or possible offer for the offeree company, including a partial offer;
                (b) Acquire any interest in shares of the offeree company if any such person is obliged under TMA-3.1 to make a mandatory offer;
                (c) Acquire any interest, or procure an irrevocable commitment in respect of, shares of the offeree company if the shares in which such person, together with any persons acting 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 the offeree company;
                (d) Make any statement which raises or confirms the possibility that an offer might be made for the offeree company; or
                (e) Proceed with actions to make a possible offer, for the offeree company, where knowledge of the possible offer might be extended outside the potential offeror and immediate advisors.
                Amended: October 2019

              • TMA-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 persons acting in concert and that they are continuing to consider making an offer.

                Amended: October 2019

              • TMA-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 an offeree company or the board of an offeree company has reason to believe that a bona-fide offer may be imminent, no action which could effectively result in an offer being frustrated, or in the shareholders of the offeree company being denied an opportunity to decide on the merits of an offer, shall be taken by the board of the offeree company in relation to the affairs of the company without the approval of the shareholders of the offeree company in general meeting. In particular the offeree 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 the offeree 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 the offeree company or any subsidiary or associated company to purchase or redeem any shares in the offeree 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 2019

          • TMA-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, the offeror cannot withdraw the offer and must continue to implement it unless the offer 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 first offeror, the CBB may consent to the withdrawal of the announced offer. This should not carry any additional conditions other than those necessary for the implementation of such announced offer.

            • TMA-2.5.4

              If an offeror is permitted to withdraw from an offer, or an offer is waived because of non-fulfilment of a condition, the offeror 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 announced offer.

          • 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 potential offeror must be furnished equally and promptly to any other bona fide offeror or potential offeror.

              Amended: October 2019

            • TMA-2.6.2

              If the offer or potential offer is a management buy-out or similar transaction, the information which this Paragraph requires to be given to a competing or potential offeror is:

              (a) The information generated by the offeree company (including the management of the offeree company acting in their capacity as such) which is passed to external providers or potential providers of finance (whether equity or debt) to the offeror or potential offeror; and
              (b) Any other information that is material in the context of making an offer insofar as the board of the offeree 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 the offeree company who are involved in making the offer to cooperate with the independent directors of the offeree company and its advisers in the assembly of information.

              Amended: October 2019
              Amended: April 2013

            • TMA-2.6.3

              The information related to an offer should be provided by the offeree company to the ultimate offeror or potential offeror, the identity of which must be disclosed to the directors of the offeree company.

              Amended: October 2019

            • Mutual Due Diligence Review

              • TMA-2.6.4

                Where the consideration under an offer includes exchange of securities, the offeror and the offeree company may, subject to such terms and conditions as may be agreed between the offeror and offeree company under a confidentiality agreement, undertake mutual due diligence (mutual due diligence review) of each other's business.

                Added: October 2019

              • TMA-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 the offeree company to enter into a mutual due diligence review agreement.

                Added: October 2019

          • TMA 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 an offer. 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 the offer.

                Amended: October 2019

              • TMA-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 the offeror in these respects towards the shareholders of the offeree company is no less than the offeror's obligation towards its own shareholders. In particular, whether or not the offer consideration is cash, information must be given about the offeror.

                Amended: October 2019

              • TMA-2.7.3

                The offer document must include a heading stating: "If you are in doubt about any aspect of this offer, 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 2019

            • Subsequent 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 the offer 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 the offer; and
                (f) Arrangements in relation to dealings.
                Amended: October 2019
                Amended: April 2013

            • Offer Document Time Limit

              • TMA-2.7.6

                The offer document must be sent to the offeree company by or on behalf of the offeror within 21 calendar days of the date of the announcement of the terms of the offer. The CBB's consent is required if the offer document may not be posted within this period.

                Amended: October 2019

            • Timing 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 the offer accompanied by the offer document to all its shareholders within a maximum period of 21 calendar days from the date of receipt of the offer document. The CBB’s written approval is required if the offeree board circular may not be sent to the shareholders within the abovementioned period. The offeree board circular must include the views of the offeree company’s board or its independent committee on the offer and the written advice of its professional adviser as to whether the offer is, or is not, fair and reasonable and the reasons thereof.

                Amended: January 2022
                Amended: October 2019

              • TMA-2.7.8

                [This Paragraph was deleted in January 2022]

                Deleted: January 2022
                Amended: October 2019

            • Prospectus Standard

              • TMA-2.7.9

                Each document issued or statement made in relation to an offer or possible offer or during an offer 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 the offeror, the offeree 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 the offer period, and must notify shareholders of any material changes as soon as possible.

                Amended: October 2019

            • Directors' 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 2019

              • TMA-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 2019

              • TMA-2.7.12

                The directors of the offeree company should comment on the statement in the offer document regarding the offeror's intentions in respect of the offeree 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 2019

            • Documents 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 the offeree board circular is published, until the end of the offer period. The offer document and the offeree 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 the offeror or the offeree company or equivalent documents;
                (b) Audited consolidated accounts of the offeror or the offeree 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 of offeree 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 the offeror or the offeree company;
                (e) Written consents of the professional advisers;
                (f) All material contracts in relation to the offer;
                (g) Where a profit forecast has been made, the reports of the auditors or consultant accountants and of the professional advisers in addition to the letters giving the consent of the auditors or consultant accountants and of the professional 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 the offeror or offeree company (as appropriate) or any of their respective associates;
                (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 the offer 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 the offer;
                (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 the offer 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 2019

          • TMA-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 the offer; the board receives promptly details of all dealings in relevant securities made by the offeree company or its associates 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 the offer 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 the offer 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 the offeree company (including its employees) comply with the relevant provisions of Insiders as stipulated in the CBB Law and in the offeree’s policy on insiders.
              Amended: January 2022
              Amended: October 2019
              Amended: April 2013

            • TMA-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 2019

            • TMA-2.8.3

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-2.8.4

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019

            • TMA-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 2019

            • Resignation of Directors of Offeree Company

              • TMA-2.8.6

                Once a bona-fide offer has been communicated to the board of the offeree company or the board of the offeree company has reason to believe that a bona-fide offer is imminent, except with the consent of the CBB, the directors of an offeree company or any of its subsidiaries must not resign until the first closing date of the offer, or the date when the offer becomes or is declared unconditional, whichever is the later. Resignation of directors of the offeree company must be made in accordance with the offeree company's Memorandum and Articles of Association.

                Amended: October 2019

            • Prompt 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 an offer period so that shareholders can freely exercise their voting and other rights.

                Added: October 2019

          • TMA-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 the offeree 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 to offeree shareholders with regards to an offer;
              (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 their offer 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 the offeror or the offeree; 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 2019

            • TMA-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 2019

            • TMA-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 2019

            • TMA-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 2019

              • TMA-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 2019

            • Continuing 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 the offer and that the professional advisers and accountants who reported on the forecast have indicated that they have no objection to their reports continuing to apply.

                Amended: October 2019

            • Statements 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 2019

              • TMA-2.9.11

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-2.9.12

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

            • When a Forecast Relates to a Period which has Commenced

              • TMA-2.9.13

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

            • Merger 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 proposed takeover or merger 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 2013

          • TMA-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 independent valuer 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 relevant takeover or merger transaction.

              Amended: October 2019

            • TMA-2.10.2

              Valuation of assets documents provided by the offeror or the offeree 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 2019

              • TMA-2.10.5

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-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 2013

            • Opinion 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 2019

              • TMA-2.10.8

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-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 2019

          • TMA-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 2022

            • Publication 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 2019

          • TMA-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 comparable offer 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 2019

          • TMA-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 the offeree company has convertible securities outstanding, the offeror must make an appropriate offer or proposal to the holders of the convertible securities to ensure that their interests are safeguarded. Holders of convertible securities must be treated equally.

                Amended: October 2019

            • Professional Independent Advice

              • TMA-2.13.2

                The board of the offeree company must obtain professional independent advice in writing on the offer 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 the offer or proposal.

                Amended: October 2019

            • Dispatch 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 the offer document is posted to other shareholders, but if this is not practicable the CBB should be consulted and the offer or proposal should be dispatched as soon as possible thereafter.

                Amended: October 2019

            • Conditions of Appropriate Offers

              • TMA-2.13.4

                The offer or proposal required by TMA-2.13.1 must be made conditional on the offer 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/or offer documents in respect of such securities, as the case may be.

                Amended: October 2019

            • Warrants, 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 2019

          • TMA-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 2019

              • TMA-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 2019

            • Offering Period

              • TMA-2.14.2

                Where an offer document and the offeree board circular are distributed on different dates, the offer 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 2019

            • Final 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 initial offer document was posted. The CBB's consent will normally be granted only if a competing offer has been announced (in which case both or all offerors will normally be bound by the timetable established by the posting of the competing offer document which is posted later).The consent of the CBB, in such cases, will only be given in very exceptional circumstances.

                Amended: October 2019

            • Compulsory Acquisition

              • TMA-2.14.4

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Amended: October 2019

            • Time 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 the offer becomes or is declared unconditional as to acceptances, whichever is the later.

                Amended: October 2019

          • TMA-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, the offeror revises its terms, all offeree company shareholders, whether or not they have already accepted the offer, will be entitled to the revised terms. A revised offer must be kept open for at least 15 calendar days following the date on which the revised offer document is posted. Therefore, no revised offer document may be posted in the 15 calendar days ending on the last day the offer is able to become unconditional as to acceptances.

                Amended: October 2019

            • New Conditions for Improved Offers

              • TMA-2.15.2

                An offeror may introduce new improved conditions to be attached to a revised offer, but only to the extent necessary to implement the revised offer and subject to the consent of the CBB.

                Amended: October 2019

            • Reintroduction 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 alternative offer has closed, an offeror will not be precluded from reintroducing that alternative at a later date. Reintroduction constitutes a revision of the offer and is, therefore, subject to the requirements of, and only permitted as provided in, this Section.

                Amended: October 2019

              • TMA-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 competing offerors and the board of the offeree 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 the offer has not become unconditional as to acceptances by that date. Such entitlement to withdraw will be exercisable until the offer becomes unconditional as to acceptances. However, on the 60th day (or any date beyond which the offeror has stated that its offer will not be extended) the final time for the withdrawal must coincide with the final time for the lodgement of acceptances.

              Amended: October 2019

          • TMA-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 the offeror, 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 potential offer 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 an offeror improving his offer 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, the offeror or the offeree company, must state where appropriate, that the directors of the offeror and/or the offeree 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 "the offer will not be extended beyond a specified date unless it is unconditional as to acceptances" ("no extension statements") are included in documents sent to offeree company shareholders, or are made by or on behalf of an offeror, its directors, officials or advisers, and not withdrawn immediately if incorrect, only in extremely exceptional circumstances will the offeror be allowed subsequently to extend its offer beyond the stated date except where the right to do so has been specifically reserved.

                Amended: October 2019

            • No 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 "our offer remains at BHD X per share and it will not be raised" ("no increase statements") are included in documents sent to offeree company shareholders, or are made by or on behalf of an offeror, its directors, officials or advisers, and not withdrawn immediately if incorrect, only in extremely exceptional circumstances will the offeror be allowed subsequently to amend the terms of its offer in any way even if the amendment would not result in an increase of the value of the offer (e.g. the introduction of a lower paper alternative) except where the right to do so has been specifically reserved.

                Amended: October 2019

              • TMA-2.17.6

                An offeror or offeree company must not make statements about the level of support received from shareholders or other persons, unless they have clearly stated their intentions to the offeror or offeree company, or advisors, as appropriate. CBB will require statements made to be verified, which could include the shareholder confirming their support in writing to the offeror or its advisors, which will then be treated as a letter of intent/consent, as the case may be.

                Amended: October 2019

              • TMA-2.17.7

                Shareholders must not be pressured by any means or by any party involved in an offer to accept or reject such offer through information, documents, advertisements or statements.

                Amended: October 2019

            • Advertisements

              • 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 potential offer is prohibited unless they fall within the following categories:

                (a) Product advertisements not having an effect on an offer or potential offer, CBB must be consulted if there is any doubt;
                (b) Corporate image advertisements not having an effect on an offer or potential offer;
                (c) Advertisements in relation to non-controversial information about an offer, such as the value of an offer or closing dates;
                (d) Advertisements in relation to preliminary or interim results;
                (e) Advertisements comprising a tender offer; or
                (f) [This Subparagraph was deleted in October 2019]
                (g) Advertisements published with the specific prior consent of CBB.
                Amended: October 2019

              • TMA-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 the professional 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 2019

              • TMA-2.17.11

                [This Paragraph was deleted in October 2019]

                Deleted: October 2019

          • TMA-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 the offer 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 2019

              • TMA-2.18.2

                For the purpose of Paragraph TMA-2.18.1, the offeror must forward such announcement to the CBB and the licensed exchange and offeree company and publish the announcement on the website of the licensed exchange before trading hours at the licensed exchange in Bahrain.

                Amended: January 2022
                Amended: October 2019

              • TMA-2.18.3

                The announcement must state the number of shares and rights over shares:

                (a) For which acceptances of the offer have been received;
                (b) Held, controlled, or directed by the offeror or persons acting in concert with it before the offer period; and
                (c) Acquired or agreed to be acquired during the offer period by the offeror or any persons acting in concert with it.
                Amended: October 2019
                Amended: April 2013

              • TMA-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 the offeror wishes to make any other statement about acceptance levels in any announcement made.

                Amended: October 2019

              • TMA-2.18.5

                The offeror must send copies of the certificate issued by the designated receiving bank to the CBB, the licensed exchange and the offeree company's professional advisor as soon as possible after it is issued.

                Amended: October 2019

              • TMA-2.18.6

                If statements are made during an offer by an offeror or its advisors, either orally or written, about level of acceptances of the offer or number or percentages of shareholders who have accepted the offer, 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 the offer.

                Amended: October 2019

              • TMA-2.18.8

                When the offeree company has the intention to make an announcement on the level of withdrawals of acceptance of an offer, 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 2019

              • TMA-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 the licensed exchange to suspend dealings in the offeree company's shares and, where appropriate, in the offeror's shares until the relevant information and documents are provided.

                Amended: October 2019

              • TMA-2.18.11

                If an offeror has been declared unconditional as to acceptance, but the offeror fails to comply with any of the requirements of this Section by the close of trading at the licensed exchange in Bahrain on the relevant day, the CBB shall have the right to grant the acceptors the right of withdrawal from the offer.

                Amended: October 2019

              • TMA-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 the offer is still unconditional as to acceptances and complies with this Section.

                Amended: October 2019

          • TMA-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 the offeror until the offer has become or has been declared unconditional. Such shares must be paid by the offeror in accordance with the terms of payment as stipulated in the offer document.

                Amended: October 2019

            • Withdrawn or Lapsed Offers

              • TMA-2.19.2

                If an offer is withdrawn or lapses, the offeror 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, those offeree company shareholders who accepted the offer.

                Amended: October 2019

              • TMA-2.19.3

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Added: October 2019

              • TMA-2.19.4

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Added: October 2019

              • TMA-2.19.5

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Added: October 2019

            • Payment 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 the offer.

                Amended: January 2022
                Added: October 2019

              • TMA-2.19.7

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Added: October 2019

              • TMA-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 the offer.

                Added: January 2022

              • TMA-2.19.9

                An offeror, on its own or together with person acting in concert, must not exercise the voting rights attached to the shares received through acceptances of the take-over offer prior to full settlement of the consideration.

                Added: January 2022

          • TMA-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 the offeror, who is engaged in the offer and who has confidential price-sensitive information concerning an actual or contemplated offer or revised offer between the time when there is reason to suppose that an approach or an offer or revised offer is contemplated and the announcement of the approach, the offer, the revised offer, or of the termination of the discussions where an announcement of the offer has been made public.

                Amended: October 2019

              • TMA-2.20.2

                Such restrictions do not apply to persons acting in concert with an offeror in respect of dealings where the securities of such dealings are excluded from the offer or where there are no-profit arrangements in place.

                Amended: October 2019

              • TMA-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 the offeror except where the proposed offer is not price-sensitive in relation to such securities.

                Amended: October 2019

              • TMA-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 2019

              • TMA-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 2019

              • TMA-2.20.6

                A person is considered to have access to confidential price-sensitive information concerning an offer or contemplated offer if the person:

                (a) Is a director or employee of one of the companies or entities concerned or engaged in the offer or potential offer including, but not limited to, the offeror, the offeree or any person acting in concert with the offeror or offeree;
                (b) An advisor, including professional adviser, to one of the companies or persons concerned or engaged in the offer or potential offer;
                (c) In a position to have received and has actually received information through a confidential relationship;
                (d) Connected persons and companies controlled by the offeror 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 2019

            • No-Profit Arrangement

              • TMA-2.20.7

                Arrangements made by a potential offeror with a person acting in concert, where securities in the offeree company are acquired by the person acting in concert and the offeror 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 2019

            • Restrictions on Dealings during an Offer

              • TMA-2.20.8

                The offeror and persons acting in concert with it must not sell any securities in the offeree company during the offer 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 2019

              • TMA-2.20.9

                The CBB will not provide its consent for the sale of securities by an offeror and persons acting in concert with it where a mandatory offer is being made.

                Amended: October 2019

              • TMA-2.20.10

                After an announcement of an intention to sell the securities of the offeree company has been made, neither the offeror nor persons acting in concert with it can make further purchases and only in exceptional circumstances will the CBB allow the offeror to raise the offer price.

                Amended: October 2019

              • TMA-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 the offer price.

                Amended: October 2019

              • TMA-2.20.12

                An offeror or other persons shall be restricted from dealing or procuring other persons to deal, if the offeror has been supplied by the offeree company with confidential price sensitive information during offer discussions.

                Amended: October 2019

              • TMA-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 the offeree company's shares provided that such arrangements are not effective prior to the date when the offer becomes or is declared unconditional. If an offeror wishes to make such arrangements in order to hold less than 75% (or such percentage as may be relevant in the event that the licensed exchange has accepted that a percentage other than 20% of the offeree company's shares needs to be in public hands to maintain the listing of the offeree company's shares) of the offeree company's shares, the consent of the CBB is required.

                Amended: October 2019

              • TMA-2.20.14

                Directors and professional advisers to a company who have interests in securities in that company that is party to an offer, 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 2019

            • Restriction on Dealings by Offeror during Non-Cash Offers

              • TMA-2.20.15

                Where the consideration under an offer includes securities of the offeror or a person acting in concert with it, neither the offeror nor any person acting in concert with it may deal in any such securities during the offer period.

                Amended: October 2019

            • Restrictions 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 the offers has lapsed, then neither that offeror nor any person acting in concert with that offeror may acquire any interest in shares in the offeree company at a price higher than that made available under its lapsed offer.

                Amended: October 2019

              • TMA-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 2019

              • TMA-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 the offer lapsed.

                Amended: October 2019

            • Dealings After Termination of Discussions

              • TMA-2.20.19

                If following an announcement that offer discussions are taking place, or that an approach or offer is being contemplated, discussions are then terminated or the offeror then decides not to proceed with an offer, an announcement of the position must take place before any dealings in securities of the offeree company take place by any person privy to confidential information.

                Amended: October 2019

            • Dealings 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 an offeree 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) Purchase offeree company securities or deal in convertible securities, warrants, options or derivatives in respect of such securities 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 the offeree 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 2019

            • Gathering 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 2019

          • TMA-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 the offeree company, and by any associates, for their own account or for the account of discretionary investment clients account during an offer period must be publicly disclosed.

                Amended: October 2019

              • TMA-2.21.2

                [This Paragraph was deleted in October 2019].

                Deleted: October 2019

              • TMA-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, the Exempt fund manager is an associate by virtue of sub-paragraph (f) of the definition of associate, the exempt fund manager must disclose publicly, in addition to disclosing privately.

                Amended: October 2019

            • Dealings 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 the offeree company, and by any associates, for the account of non-discretionary investment clients (other than an offeror, the offeree company and any associates) must be privately disclosed.

                Amended: October 2019

            • Discretionary 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 2019

            • Connected Exempt Principal Traders

              • TMA-2.21.6

                Dealings in relevant securities by an exempt principal trader connected with an offeror or the offeree company must be aggregated and disclosed to the licensed exchange before trading hours at the licensed 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 2019

              • TMA-2.21.7

                For the purposes of this Section, the disclosure shall consider the following:

                (a) Disclosure shall be made before trading hours at the licensed 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 all offerors and the offeree company or their respective professional advisers while also disclosing to the CBB and also, in respect of dealings in listed securities, to the licensed 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 2013

          • TMA-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) The offeror and any person acting in concert with it has bought for cash during the offer period and within 6 months prior to its commencement, an interest in shares of any class under offer in the offeree 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 the offeror or any person acting in concert with it for shares of the class during the offer period and within 6 months prior to the commencement.

              Amended: October 2019
              Amended: April 2013

          • TMA-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 2019

              • TMA-2.23.2

                [This Paragraph was moved to Paragraph TMA-2.23.5A in October 2019].

                Amended: October 2019

            • Acquisitions 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 an offeror or any person acting in concert with it has acquired an interest in shares in the offeree company:

                (a) Within the three month period prior to the commencement of the offer period; or
                (b) During the period, if any, between an announcement made by the offeror and the commencement of the offer period.
                Amended: October 2019

            • Acquisitions 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 the offer closes for acceptance, an offeror or any person acting in concert with it acquires any interest in shares at above the offer price, it shall increase its offer to not less than the highest price paid for the interest in shares acquired in such circumstances.

                Amended: October 2019

              • TMA-2.23.5

                Immediately after the acquisition of shares at above the offer price, the offeror must announce that a revised offer will be made in accordance with this Section. This announcement must state the number of shares concerned and the price paid.

                Amended: October 2019

              • TMA-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 2019

            • Offers 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 a licensed exchange, the current value of the offer 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 the offer involves a combination of cash and securities and further purchases of the offeree company's shares oblige the offeror to increase the value of the offer, the offeror must endeavour, as far as practicable, to effect such increase while maintaining the same ratio of cash to securities as is represented by the offer.

                Amended: October 2019

          • TMA-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 2019

            • TMA-2.24.2

              [This Section was moved to Section TMA-2.19 in October 2019]

              Amended: October 2019

            • TMA-2.24.3

              [This Section was moved to Section TMA-2.19 in October 2019]

              Amended: October 2019

            • Payment of Consideration

              [This Section was moved to Section TMA-2.19 in October 2019]

              • TMA-2.24.4

                [This Section was moved to Section TMA-2.19 in October 2019]

                Amended: October 2019

              • TMA-2.24.5

                [This Section was moved to Section TMA-2.19 in October 2019]

                Amended: October 2019

          • TMA-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 persons acting 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 the offeree company; or enter into arrangements concerning acceptance of an offer either during an offer or when one is reasonably in contemplation, if there are favourable conditions attached which are not being extended to all shareholders.

              Amended: October 2019

            • TMA-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, revised offer or successful competing offer. An irrevocable commitment to accept an offer combined with an option to put the shares to the offeror should the offer fail will also be regarded as such an arrangement.

              Amended: October 2019

            • TMA-2.25.3

              Two-tier offers where shareholders who accept the offer before a stipulated cutoff date would receive a higher consideration than those who accept the offer after the cut-off date will be regarded as arrangements with special conditions. A two-tier offer that offers to pay a higher offer price if a certain level of acceptances is reached will not be regarded as an arrangement with special conditions if the higher offer price is payable to all accepting shareholders.

              Amended: October 2019

            • TMA-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 an offer. 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 2019

            • TMA-2.25.5

              The CBB should be consulted if the management of the offeree company is to remain financially interested in the business after the offer 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 2019

          • TMA-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) The offer 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 2019

            • TMA-2.26.2

              The terms for the appointment of a proxy must be set out in the offer document.

              Added: October 2019

        • TMA-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 are acting 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 2019

              • TMA-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 persons acting in concert with him, hold shares.

                Amended: October 2019

              • TMA-3.1.3

                Offers for different classes of equity share capital should be consulted in advance in such cases.

                Amended: October 2019

            • Creeping 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 the voting rights of a company may be permitted to acquire additional shares carrying not more than 1% of such voting rights in any period of 6 months without incurring an obligation to make a mandatory offer. Within this 1% band, dispositions of voting rights may be netted off against acquisitions thereof. If such person, or together with persons acting in concert, intend to acquire such additional shares, the CBB must be consulted in advance.

                  Added: October 2019

              • Effect of Disposal

                • TMA-3.1.3B

                  Any person, or together with persons acting in concert, holding not less than 30% of the voting rights of a company disposes of voting 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 a mandatory 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; or
                  b) 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 2019

              • Holding 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 the voting 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's voting rights for any period of 6 months thereafter.

                  Added: October 2019

                • TMA-3.1.3D

                  A person or group of persons acting in concert, holding more than 50% of the voting rights of a company will normally be free to acquire further shares without incurring any obligation under TMA-3.1 to make a mandatory offer subject to Paragraph TMA-3.1.3E.

                  Added: October 2019

              • Acquisition 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 2019

            • Placing and Other Arrangements

              • TMA 3.1.4

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • TMA-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 2019

              • TMA-3.1.6

                An offer will not be required under Paragraph TMA-3.1.1 where control of the offeree company is acquired as a result of a voluntary 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 2019

              • TMA-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 carrying voting rights in which he is interested to 30% or more then the CBB must be consulted.

                Amended: October 2019

              • TMA-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 person acting in concert is interested in and shares already borrowed or lent by him or any person acting in concert would result in a mandatory offer.

                Amended: October 2019

            • Conditions and Consents

              • TMA-3.1.9

                Except with the consent of CBB:

                (a) An offeror shall not include any other condition in a mandatory offer other than the condition that the offer is subject to the offeror having received acceptances which would result in the offeror and all persons acting in concert with the offeror holding in aggregate more than 50% of the voting rights; and
                (b) No acquisition of any voting rights in shares which would give rise to a requirement for a mandatory offer may be made, if it is dependent on the passing of a resolution at any meeting of the shareholders of the offeror or upon any other conditions, consents or arrangements.
                Amended: October 2019
                Amended: April 2013

              • TMA-3.1.9A

                An offer made under TMA-3.1 should normally be unconditional when the offeror and persons acting in concert with it hold more than 50% of the voting rights before the offer.

                Added: October 2019

            • Nature of Consideration

              • TMA-3.1.10

                The consideration to be paid, or provided, for the acquisition of the voting rights to which the mandatory offer relates shall consist solely of cash, securities, or a combination thereof at not less than the highest price paid by the offeror or any person acting in concert with it for shares of that class of the offeree company during the offer period and within 6 months prior to its commencement.

                Amended: October 2019

              • TMA-3.1.11

                The cash offer, securities or a combination thereof for the purpose of Paragraph TMA-3.1.10 must remain open after the offer has become or is declared unconditional for not less than 15 days thereafter.

                Amended: October 2019

              • TMA-3.1.12

                When directors sell shares to an offeror which result in the offeror having to make a mandatory offer, the directors must ensure that the offeror fulfils his obligation under this Module.

                Amended: October 2019

              • TMA-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 the takeover offer becomes or is declared unconditional as to acceptances, whichever is the later.

                Amended: October 2019

              • TMA-3.1.14

                Until the offer document has been posted, no offeror, or persons acting in concert, may be appointed to the board of the offeree company or any of its subsidiaries, or exercise or procure the exercise of the votes attaching to any shares in the offeree company.

                Amended: October 2019

            • Whitewash Resolution/Exemption from Mandatory Offer

              • TMA-3.1.15

                Relevant persons in an offer subject to the mandatory offer requirement may apply to the CBB to waive the obligation under the procedure set out for mandatory offers, if the mandatory 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 2019

              • TMA-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 2019

              • TMA-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 parties acting 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) The offeror, parties acting in concert, and parties not independent from them must abstain from voting on the whitewash resolution;
                (d) The offeror, and parties acting in concert, have not acquired and will not acquire any shares or instruments convertible into options, in respect of shares of the offeree 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 independent professional adviser shall be appointed by the offeree company to provide its independent shareholders with advice on the whitewash resolution;
                (f) The offeree 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) The offeror obtains the CBB's approval in advance.
                Amended: October 2019
                Amended: April 2013

              • TMA-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 2019

              • TMA-3.1.20

                An announcement must be made by the offeree company giving the result of the meeting and the number and percentage of offeree company shares that the offeror has become entitled to as a result subsequent to the meeting at which the proposals are considered by shareholders.

                Amended: October 2019

              • TMA-3.1.21

                Immediately following the approval of the proposals at the shareholders' meeting, the offeror will be free to acquire shares in the offeree company, subject to provisions under Module TMA.

                Amended: October 2019

            • Prompt Registration of Transfers

              • TMA-3.1.22

                [This Paragraph was moved to Paragraph TMA-2.8.7 in October 2019]

                Amended: October 2019

          • TMA-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 an offer which could not result in the offeror and persons acting in concert with it being interested in shares carrying 30% or more of the voting rights of a company.

                Amended: October 2019

              • TMA-3.2.2

                Consent will not normally be granted in the case of an offer which could result in the offeror 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 2019

            • Acquisition Prior to the Offer

              • TMA-3.2.3

                In the case of a partial offer which could result in the offeror and persons acting 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 the offeror or persons acting in concert with it have acquired, selectively or in significant numbers, voting rights in the offeree company during the 6 months preceding the application for consent or if voting rights have been acquired at any time after the partial offer was reasonably in contemplation.

                Amended: October 2019

            • Acquisitions During and After the Offer

              • TMA-3.2.4

                In all partial offers, the offeror and persons acting in concert with it must not acquire any interest in shares in the offeree company during the offer period.

                Amended: October 2019

              • TMA-3.2.5

                The offeror or any person acting in concert with the offeror, or any person who is subsequently acting in concert with any of them in the course of the partial offer, must not acquire any interest in shares during the 12-month period following the end of the offer period, except with the consent of CBB.

                Amended: October 2019

            • Offer for between 30% and 50%

              • TMA-3.2.6

                Any partial offer which could result in the offeror 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 the offer, 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 the offeror and persons acting in concert with it. This requirement may be waived if over 50% of the voting rights of the offeree company are held by one independent shareholder who has indicated his approval.

                Amended: October 2019

            • Control Position Warning

              • TMA-3.2.7

                In the case of a partial offer which could result in the offeror holding more than 50% of the voting rights of the offeree company, then this must be included in a prominent manner in the offer document.

                Amended: October 2019

              • TMA-3.2.8

                Where a partial offer made for a company with more than one class of equity share capital could result in the offeror and persons acting in concert with it being interested in shares carrying 30% or more of the voting rights, a comparable offer must be made for each class.

                Amended: October 2019

            • Precise 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 the offer may not be declared unconditional as to acceptances unless acceptances are received for not less than that number.

                Amended: October 2019

            • Pro 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 the offeror 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 2019

              • TMA-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 a take-over offer for the voting shares of a company made by a person when he has not incurred an obligation to make a mandatory offer for the offeree company under TMA-3.1.1.

              Amended: October 2019

            • TMA-3.3.2

              A voluntary offer must be conditional upon the offeror receiving acceptances in respect of voting rights which, together with voting rights acquired or agreed to be acquired before or during the offer, will result in the offeror and person acting in concert with it holding more than 50% of the voting rights.

              Amended: October 2019

            • TMA-3.3.3

              A voluntary offer must not be made subject to conditions whose fulfilment depends on the subjective interpretation or judgement by the offeror or lies in the offeror'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, the offeror may, with the consent of the CBB, be permitted to withdraw its offer.

              Amended: October 2019

            • TMA-3.3.6

              Subject to Paragraph TMA-3.1.6, if during an offer period of a non-mandatory offer, the offeror is obliged under Paragraph TMA-3.1.1 to make a mandatory offer, CBB should be consulted in advance. Under such circumstances, the offeror is required to make an announcement.

              Amended: October 2019

            • TMA-3.3.7

              Voluntary offers made must, in respect of each class of equity securities involved, be in cash or securities or a combination thereof at not less than the highest price paid by the offeror or any person acting in concert with it for voting rights of the offeree company during the offer period and within 6 months prior to its commencement.

              Amended: October 2019

            • Pre-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 the offeror or of the offeree company (as the case may be) or the fulfillment of which is in their hands.

                Amended: October 2019

              • TMA-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 the offeree company (as the case may be).

                Amended: October 2019

              • TMA-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) The offer is publicly recommended by the board of the offeree 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 2013

              • TMA-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 the offer 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 the offeror in the context of the offer. The acceptance condition is not subject to this provision.

                Amended: October 2019

              • TMA-3.3.14

                Following the announcement of a firm intention to make an offer, an offeror must use all reasonable efforts to ensure the satisfaction of any conditions or pre-conditions to which the offer is subject.

                Amended: October 2019

            • Invoking Offeree Protection Conditions

              • TMA-3.3.15

                An offeree company must not invoke, or cause or permit the offeror to invoke, any condition to an offer unless the circumstances which give rise to the right to invoke the condition are of material significance to the shareholders in the offeree company in the context of the offer.

                Amended: October 2019

          • TMA-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 2019

              • TMA-3.4.2

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Amended: October 2019

              • TMA-3.4.3

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Amended: October 2019

              • TMA-3.4.4

                Where an offeror or offeror and persons acting in concert:

                (a) made an offer for all the shares in an offeree 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 the offer receives 90% or more acceptances, acquire the remaining shares of the offeree 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 the dissenting shareholders subject to TMA-3.4.9.

                Added: January 2022

              • TMA-3.4.5

                Where the offeror or offeree and persons acting in concert, pursuant to an offer, intends to exercise the compulsory acquisition right, the offeror must state in the offer 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 2022

              • TMA-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 the offer by the offeror and persons acting in concert.

                Added: January 2022

              • TMA-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 the offer is declared unconditional in all respects;
                (b) accompanied by a copy of a declaration by the offeror that the conditions for giving the notice are satisfied; and
                (c) delivered to the dissenting shareholders in person or by registered post.
                Added: January 2022

              • TMA-3.4.8

                Where the offeror, despite best efforts, fails to deliver the compulsory acquisition notice, either in person or by registered post to dissenting shareholders, and therefore the offeror contemplates alternative methods to serve the notice, including by electronic means, the offeror must consult the CBB prior to initiating any measures to serve the notice by an alternative method.

                Added: January 2022

              • TMA-3.4.9

                Where a notice for compulsory acquisition is issued by an offeror to dissenting shareholders, and dissenting 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 2022

              • TMA-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 the dissenting shareholders, the funds or other consideration for the shares to which the notice for compulsory acquisition relates.

                Added: January 2022

              • TMA-3.4.11

                The offeror must complete the compulsory acquisition settlement process for the dissenting shareholders after the sixty days period (duration during which dissenting 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 2022

              • TMA-3.4.12

                The offeror must acquire the shares to which the notice for compulsory acquisition relates on the same terms as the offer.

                Added: January 2022

              • TMA-3.4.13

                Where alternative considerations were offered to shareholders, an offeror must provide the dissenting shareholders the right to select their preferred consideration and specify the time period available to make the selection. While offering alternative considerations to the dissenting shareholders, the offeror must state in the offer document which of those considerations will apply to the shares of dissenting shareholders in the event the dissenting shareholders fails to make the selection within the specified time.

                Added: January 2022

            • Right of Sell-Out by Dissenting Shareholders

              • TMA-3.4.14

                Where an offeror or offeree and persons acting in concert:

                (a) made an offer for all the shares in an offeree company; and
                (b) in pursuance to the offer having received 90% or higher level of acceptance of the offer shares to which the offer relates,

                dissenting shareholders may, send a request to the offeror, requiring the offeror to acquire his/her shares within three months beginning immediately after the day on which the offer receives 90% or more acceptances. The offeror is bound to acquire those shares on the terms of the take-over offer within three months from the date of receiving the request from the dissenting shareholders.

                Added: January 2022

              • TMA-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 persons acting in concert on the date of the offer must not be taken into consideration.

                Added: January 2022

              • TMA-3.4.16

                An offeror, upon achieving 90% or higher acceptance level specified in Paragraph TMA-3.4.14(b), must give all dissenting shareholders who have not accepted the offer, 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 the dissenting shareholders.

                Added: January 2022

              • TMA-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 2022

              • TMA-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 the offeror that the conditions for giving the notice are satisfied; and
                (b) delivered to the dissenting shareholders in person or by registered post.
                Added: January 2022

              • TMA-3.4.19

                Where the offeror, despite best efforts, fails to deliver the sell-out right notice, either in person or by registered post to dissenting shareholders, and therefore the offeror contemplates alternative methods to serve the notice, including by electronic means, the offeror must consult the CBB prior to initiating any measures to serve the sell out right notice by alternative method.

                Added: January 2022

              • TMA-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 2022

              • TMA-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 the offeror.

                Added: January 2022

              • TMA-3.4.22

                Sell-out right does not apply if the offeror has given the dissenting shareholders a notice for compulsory acquisition pursuant to Paragraph TMA-3.4.4.

                Added: January 2022

            • Acknowledgement 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 the offeror, either to exercise the right of compulsory acquisition or to inform about the sell-out right of the dissenting shareholders, the offeror should put in place necessary measures to ensure that dissenting shareholders who receive the letter duly acknowledge its receipt.

                Added: January 2022

            • Delisting 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 the offeror or sell out right exercised by dissenting shareholders, the offeree company must apply to the CBB to delist from the licensed exchange.

                Added: January 2022

              • TMA-3.4.25

                In cases where the offeror and persons acting in concert do not receive acceptances of 90% or more of the offer shares of the offeree company, the CBB may approve an application to delist the offeree company after the offer subject to the following:

                (a) the offeree company convenes a general meeting to obtain shareholders approval on the delisting of the shares of the offeree company; and
                (b) the resolution to delist has been approved by at least 75% of the votes attaching to the disinterested shares that are cast either in person or by proxy at the meeting. The offeror and any persons acting in concert with the offeror must abstain from voting on the resolution.
                Added: January 2022

          • TMA-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 the offeror, nor any person who acted in concert with the offeror in the course of the original offer, nor any person who is subsequently acting in concert with any of them, may within 12 months from the date on which such offer is withdrawn or lapses either:

                (a) Announce an offer or possible offer for the offeree company (including a partial offer which could result in the offeror and persons acting in concert with it being interested in shares carrying 30% or more of the voting rights of the offeree company);
                (b) Acquire any interest in shares of the offeree company if the offeror or any such person would thereby become obliged to make an offer as per Section TMA-3.1;
                (c) Acquire any interest in, or procure an irrevocable commitment in respect of, shares of the offeree company if the shares in which such person, together with any persons acting 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 the offeree company;
                (d) Make any statement which raises or confirms the possibility that an offer might be made for the offeree company; or
                (e) Take any steps in connection with a possible offer for the offeree company where knowledge of the possible offer might be extended outside those who need to know in the offeror and its immediate advisers.
                Amended: October 2019

            • Restrictions 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 the offeror and persons acting 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 the offeree company whether or not the offer has become or been declared wholly unconditional. When such an offer 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 the offeree company which has not become or been declared wholly unconditional.
                Amended: October 2019

              • TMA-3.6.3

                The restrictions in Paragraph TMA-3.6.1 will not normally apply following a partial offer which could only result in the offeror and persons acting in concert with it being interested in shares carrying less than 30% of the voting rights of the offeree company.

                Amended: October 2019

            • Delay 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 person acting in concert with him may, within 6 months of the closure of any previous offer made by him to the shareholders of that company which became or was declared wholly unconditional, make a second offer 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 previous offer. For this purpose the value of a securities exchange offer shall be calculated as at the date the offer closed. In addition, special deals with favourable conditions attached may not be entered into during this 6-month period.

                Amended: October 2019

            • Restrictions 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 competing offers and has lapsed, neither that offeror, nor any person acting in concert with that offeror, may acquire any interest in shares in the offeree company on more favourable terms than those made available under its lapsed offer until each of the competing offers has either been declared unconditional in all respects or has itself lapsed. For these purposes, the value of the lapsed offer shall be calculated as at the day the offer lapsed.

                Amended: October 2019

        • TMA-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 2019

              • TMA-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 a mandatory offer. If so the CBB should be consulted at the earliest opportunity.

                Amended: October 2019

              • TMA-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 a mandatory 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 the share repurchase are disclosed in the repurchasing company's offer document;
                (b) The share repurchase is approved in accordance with applicable shareholder approval requirements by those shareholders who could not become obliged to make a mandatory offer as a result of the share repurchase; and
                (c) For the purpose of this Section, dealings in relevant securities include share repurchases of the relevant securities of a repurchasing company.
                Amended: October 2019
                Amended: April 2013

            • Shareholders' Approval

              • TMA-4.1.4

                During the course of an offer, or even before the date of the offer if the board of the offeree company has reason to believe that a bona fide offer might be imminent, no redemption or purchase by the offeree 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 the offer or anticipated offer. 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 2019

            • Disclosure

              • 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 2019

            • Disclosure in the Offeree Board Circular

              • TMA-4.1.6

                The offeree board circular must state the amount of relevant securities of the offeree company which the offeree company has purchased during the period commencing 6 months prior to the offer 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 2019

            • Redemption or Purchase of Securities by the Offeror Company

              • TMA-4.1.7

                The offer document must state (in the case of a securities exchange offer only) the amount of relevant securities of the offeror which the offeror has purchased during the period commencing 6 months prior to the offer period and the details of any such purchases, including dates and prices.

                Amended: October 2019

            • Repurchase 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 2019

              • TMA-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 a licensed exchange; or
                (d) For any other purpose with CBB approval.
                Amended: October 2019
                Amended: April 2013

              • TMA-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 2019

        • Appendices 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 2013

          • Appendix 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 company

              Details 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 2013

            • Shareholdings 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 2013

            • Market 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 2013

            • Offeror'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 2013

            • Financial 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 2013

            • Offering 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 2013

          • Appendix 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 2013

            • Shareholdings 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 2013

            • Share 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 2013

            • Financial 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 2013

            • Director'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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

            • Legal 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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-A.1.9

                Part 11 of the CBB Law (Articles 160172) 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 2010

              • MAM-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 2010

          • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

          • MAM-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 2010

          • MAM-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 the licensed market operators or licensed clearing houses or depositories as a self regulatory organisation (SRO) is required:

              (a) To maximise the regulatory effectiveness;
              (b) To permit flexibility to the licensed exchanges or the licensed 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 2010

            • MAM-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 the licensed exchanges or the licensed market operators, licensed clearing houses or depositories, whereby any change in the rules, by-laws and regulations of the SROs would need prior approval of the CBB.
              November 2010

            • MAM-A.4.3

              The licensed exchange or the licensed market operator or clearing house or depository 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 2010

            • MAM-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 2010

            • Role 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 2010

            • Market 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 manipulation
                Identities 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 2010

              • MAM-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 2010

        • MAM-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 2010

            • MAM-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 2010

          • MAM-B.2 MAM-B.2 Definitions

            For the purpose of this Module, the following definitions shall apply:

            November 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-B.2.5

              "CMSD" means the Capital Markets Supervision Directorate of the Central Bank of Bahrain.

              November 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-B.2.18

              "Profit" includes the avoidance of any loss.

              November 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 other securities 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 such securities;
              (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) Islamic securities, being those financial instruments that are Shari'a compliant.
              November 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-B.2.25

              "Temporary Insider" means any person who is an insider, but not a permanent insider.

              November 2010

            • MAM-B.2.26

              "Person" means unless the context requires otherwise, a natural or legal person.

              November 2010

        • MAM-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 2010

            • MAM-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 2010

          • MAM-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 market

              Having 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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

        • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-2.6.3

              Exception for underwriters specified under rules MAM-2.6.1 and MAM-2.6.2 will not be applicable to underwriters or their representatives who are identified as insiders for the dealings in the secondary market.

              November 2010

          • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-2.11.2

              Nothing in this section shall affect the application of sections MAM-2.2 or MAM-2.3 in relation to the principal.

              November 2010

          • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • Trading 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 2010

              • MAM-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 2010

            • Scope 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 2010

              • MAM-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 2010

          • MAM-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 2010

            • Changes 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 2010

            • Obligations 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 2010

              • MAM-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 2010

              • MAM-2.15.5

                Any violations of this Module or the requirement of a licensed exchange shall be reported immediately to the CBB.

                November 2010

            • Annual 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 2010

            • Written 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 2010

              • MAM-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 2010

              • MAM-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 2010

            • Obligations 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 2010

              • MAM-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 2010

            • Obligations 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 2010

              • MAM-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 2010

              • MAM-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 2010

        • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

            • Employment 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 2010

          • MAM-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 2010

          • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

          • MAM-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 2010

            • Bucketing

              • 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 2010

            • Manipulation 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 2010

            • Fraudulently 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 2010

              • MAM-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 2010

            • Employment 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 2010

            • Dissemination 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 2010

          • MAM-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 2010

            • Insider 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 2010

              • MAM-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 2010

              • MAM-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 2010

            • Improper 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 2010

              • MAM-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 2010

            • Misuse 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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

            • Manipulating 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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

              • MAM-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 2010

            • Manipulating 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 2010

              • MAM-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 2010

              • MAM-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 2010

            • Misleading 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 2010

              • MAM-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 2010

              • MAM-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 2010

          • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

        • MAM-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 2010

            • MAM-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 2010

          • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

            • MAM-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 2010

        • MAM-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 2010

            • MAM-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 2010

      • MIE — 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 2021

            • The 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 conduct investigations 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 2021

              • MIE-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 2021

              • MIE-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 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."
                Amended: July 2021

              • MIE-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 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."
                Amended: July 2021

              • MIE-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 judicial investigations with the Ministry of Justice and Islamic Affairs.

                Amended: July 2021

              • MIE-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 in investigations 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 2021

              • MIE-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 2021

              • MIE-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 2021

          • MIE-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 2021

              • MIE-A.2.3

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-A.2.4

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-A.2.5

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Superseded 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 the licensed exchanges or the licensed 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 the licensed exchanges or the licensed market operators in their functioning;
              (d) To minimise the regulatory cost; and
              (e) To maintain market integrity and investor confidence.
              Amended: July 2021

            • MIE-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 the licensed exchanges, licensed market operators, licensed clearing houses and depositories and other SROs and other capital market service providers;
              (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 business rules of the licensed exchanges or the licensed market operators, licensed clearing houses or depositories, whereby any change in the rules, by-laws and regulations of the SROs would need prior approval of the CBB; and
              (e) Ensuring that the licensed exchanges and licensed market operators, licensed clearing houses and depositories, members of SROs and other capital 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 2021

            • MIE-A.4.3

              The licensed exchange or the licensed market operator or licensed clearing house or central depository 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.

            • 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 to market facilities and information;
              (d) Promote the provision of timely and accessible market 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 an SRO'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 the licensed clearing houses and depositories under the Clearing, Settlement and Central Depository (CSD) Module, these SROs 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) Conduct inspections or investigations as the CBB may require the SRO to do and submit its Inspection and Investigation Report, along with the facts, documents and evidence supporting the outcome of such inspection or investigation;
              (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 the SROs Disciplinary Action Committees.

            • Role of Other Capital Market Service Providers

              • MIE-A.4.6

                All capital market service providers 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, 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 manipulation
                Identities 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 2021

              • MIE-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 the CMSD as soon as it becomes available.

                Persons making reports therefore, do not need to have all the required information before reporting to 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 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 the securities 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 the capital market service provideror another person in the capital market service provider group, and which are part of the capital market service provider's trading activities, or the trading activities of another person in the capital market service provider group;
                (e) Executing orders that result from decisions by the capital market service provider to deal on behalf of its client;
                (f) Placing orders with other entities for execution that result from decisions by the capital 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 2021

              • MIE-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 2021

        • MIE-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 any person(s) within Bahrain in relation to securities 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 any person(s) outside Bahrain in relation to securities 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 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 conduct or behaviour 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.

              • 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 of securities or any person 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, 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, credit rating agencies 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.

                Amended: July 2021

          • MIE-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 the securities 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 2021

              • MIE-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 2021

              • MIE-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 other capital 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 2021

          • MIE-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 (SROs), including licensed exchanges, licensed clearing houses and depositories, and related parties;
              (b) Members of SROs and related parties;
              (c) Listed companies and issuers of securities;
              (d) Any other person who is in the possession of information or documents relevant for the purpose of conducting specific preliminary investigations by the CBB.
              Amended: July 2021

            • Type 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 a capital 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 a capital 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 relevant person.
                Amended: July 2021

              • MIE-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.

              • MIE-1.2.4

                As per Articles 111 and 112 of the CBB Law, the CBB may demand any information, documents, statistics or reports from any licensee, listed company or any person who has issued debt instruments in the Kingdom within a specified time.

                Amended: July 2021

            • 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 a capital market service provider to disclose to the CBB in relation to any acquisition or disposal of securities or futures contracts:
                (i) The name of the person from or through whom or on whose behalf the securities or futures contracts were acquired; or
                (ii) The name of the person to or through whom or on whose behalf the securities 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 a person who has acquired, held or disposed of securities or futures contracts to disclose to the CBB whether he acquired, held or disposed of those securities or futures contracts, as the case may be, as custodian or trustee for, or on behalf of, another person (whether or not as a nominee), and if so:
                (i) The name of that other person; and
                (ii) The nature of any instructions given to the first-mentioned person 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 of securities, 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 a securities market or futures market to disclose to the CBB in relation to any dealing in securities on that securities 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 2021

            • Exercise 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 in securities of, or made available by, a company or an issuer of securities;
                (ii) A person may have contravened any of the provisions of the Prohibition of Market Abuse and Manipulation (MAM) Module in relation to securities of, or made available by, a company; or
                (iii) A person may have contravened any of the provisions of the Disclosure Standards or Take-overs, Mergers, & Acquisitions (TMA) Module in relation to securities 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, in securities of or made available by, the company or the issuer of securities.

                Amended: July 2021

              • MIE-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 in securities of, or made available by, a company or an issuer of securities;
                (ii) Any advice given or any report or analysis issued or published concerning such securities, by any capital market service provider to deal in securities, or a representative of such a holder;
                (iii) The financial position of any business carried on by a person who is or has been (either alone or together with another person or other persons) the holder of a capital market service provider to deal in securities and who has dealt or given advice or issued or published a report or an analysis concerning such securities;
                (iv) The financial position of any business carried on by a nominee controlled by a person referred to in paragraph (iii) or jointly controlled by two or more persons at least one of whom is a person referred to in that paragraph; or
                (v) An audit of, or any report of an auditor concerning any book of the capital market service provider to deal in securities, being a book relating to dealings in such securities.

                the CBB may require the person to disclose to the CBB the information that the person has about the matter.

                Amended: July 2021

            • Exercise 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) A person 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 a person 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 the capital 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 a person who is or has been (either alone or together with any person or other persons) the capital 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 a person referred to in paragraph (iii) or jointly controlled by two or more persons, at least one of whom is a person referred to in that paragraph; or
                (v) An audit of, or any report of an auditor concerning any book of the capital 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 the person to disclose to the CBB the information that the person has about that matter.
                Amended: July 2021

            • Self-Incrimination

              • MIE-1.2.8

                (a) A person 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 a person 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 the person 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 any person 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) Any person 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) A person 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 current investigation, or an investigation 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) A person 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 2021

            • Copies 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 a person 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 a person 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 an inspection under the MAE Module or CSD Module, either an overall inspection or a special purpose inspection 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 such inspection 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 such SRO, or any other applicable laws, rules and regulations, the concerned SRO shall, apart from taking action based on its own findings and investigations on the matter, refer the potential contraventions to the CBB. Such referrals shall contain or be followed by a detailed investigation report on the matter and the evidence obtained by the SRO.
              (g) Investigation Report
              The CBB may require a licensed exchange, market operator, licensed clearing house or central depository to conduct an investigation 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 detailed investigation report on the matter required by the CBB to be investigated, along with the evidence collected during the investigation, for the findings and conclusions of such investigation.
              (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 from persons 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 2021

          • MIE-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 respective capital market service provider for the purpose of the CBB's market surveillance, investigation and enforcement function.

              Amended: July 2021

            • MIE-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 from persons 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 a capital market service provider to the CBB or to an SRO (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 a capital 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 an inspection and use the information obtained through such inspection.
              (e) Additional Responsibilities to Auditors
              As per Article 63 of the CBB Law, the CBB may request from the external auditors of a capital 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 a capital market service provider or for the purposes of the CBB’s market surveillance, investigation and enforcement functions.
              Amended: July 2021

          • MIE-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 any person 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 of securities.

            • 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 of securities to provide such information as the CBB deems necessary within the time specified by the CBB.
              (b) Inspection
              The CBB may conduct an inspection and use the information obtained through such inspection 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 of securities 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 of securities 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 2021

          • MIE-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 2021

          • MIE-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 2021

          • MIE-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 2021

          • MIE-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 relevant person 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 by persons 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 and investigation 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 an investigator and/or enforcement action.

            • MIE-1.9.4

              The CBB shall:

              a) Require persons 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 particular persons;
              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 the persons referred to in rule MIE-1.9.1;
              f) Take into account the expected benefit to the persons referred to in rule MIE-1.9.1; and
              g) 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 the persons 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 the CMSD, to evaluate the potential evidences indicating suspicions of contraventions.

              Amended: July 2021

          • MIE-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) Whether SROs or other authorities might be better suited to investigate the conduct.
              Amended: July 2021

            • MIE-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 preliminary investigation of the potential cases of contravention shall be undertaken. Approval of the Director of the CMSD shall be sought for opening a preliminary investigation.

              Amended: July 2021

          • MIE-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 an investigation 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, the CMSD, 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 the person producing such a document, or any other relevant person 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 the CMSD, 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 preliminary investigation referred to in section MIE-1.11, may enter and inspect the premises, offices, or locations of any capital market service provider to obtain any information or necessary documents or data.

                Amended: July 2021

              • MIE-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 any person 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 CMSD 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 preliminary investigation conducted by the CBB to:

                (a) Allow the staff of the CMSD or the authorised CBB staff to have access to the premises, offices and locations occupied by such persons at all reasonable times for the purpose of preliminary investigation.
                (b) Extend the staff of the CMSD 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 such person, required for the purposes of the preliminary investigation.
                (c) Provide to such staff of the CMSD or the authorised CBB staff copies of any books, records, documents, information, data and explanation which in the opinion of the staff of the CMSD are relevant to the preliminary investigation.

              • 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 any SRO, or member of an SRO or any other capital market service provider, to obtain any information, or documents, or data, then the CMSD shall seek approval for formal investigation, and the CMSD investigator appointed to conduct the formal investigation 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 any person employed by any SRO, or member of an SRO or any other capital 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 2021

              • MIE-1.12.8

                The CMSD should evaluate the facts and evidence gathered during the preliminary investigation to determine whether it is appropriate to:

                (a) Open a formal investigation considering the factors mentioned in section MIE-2.2.4; or
                (b) Close the preliminary investigation without any recommendation for enforcement actions; or
                (c) Initiate appropriate enforcement actions, without opening up a formal investigation, based on the findings of the preliminary investigation, and facts and evidence of the case.
                Amended: July 2021

              • MIE-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, the CMSD shall evaluate and initiate appropriate interim enforcement measures that are required to be taken, pending the outcome of the formal investigations on the case.

              • MIE-1.12.10

                After determining the outcome of the preliminary investigation and recommended course of interim or final enforcement measures, the CMSD staff authorised to conduct the preliminary investigation shall submit the preliminary investigation report containing the findings of the preliminary investigation, facts and evidence of the case along with the recommended course of action, based on the outcome of the preliminary investigation mentioned in rule MIE-1.12.7.

                Amended: July 2021

              • MIE-1.12.11

                The CMSD shall decide on the course of action of the preliminary investigation 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 the CMSD 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 any capital market service provider, or any market participant, or any other relevant person 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 or securities 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 individual securities or issuers or an SRO, or any member of an SRO or any other capital market service provider, or market participants or any relevant persons.
              (c) Imposition of Trading Limits, Margins and Trading Restrictions
              The CMSD 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 any securities, 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 the securities market.
              Amended: July 2021

        • MIE-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 such investigation 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 in securities are being dealt with in a manner detrimental to the investors or the securities market in violation of the CBB Law, rules and regulations; or
              (v) to investigate whether any capital market service provider, or any person associated with the securities market, or any other person 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) Any person 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 the CMSD or an investigator appointed by the CBB to conduct a formal investigation.
              Amended: July 2021

            • MIE-2.1.2

              When necessary, the CMSD may appoint one or more qualified investigators to conduct an investigation 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 the capital market service provider;
              (b) A particular aspect of the businesses of the capital market service provider;
              (c) The ownership or control of the capital market service provider;
              (d) Whether the capital market service provider is practicing the very business licensed thereto, and assessing to what extent the capital 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 the capital 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 an investigation, where necessary, on the business of any member of a group or company to which the capital market service provider under investigation is a party. The capital market service provider under investigation must be notified in writing of the decision to investigate its business.

              Amended: July 2021

            • MIE-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 in securities are being dealt with in a manner detrimental to the investors or the securities market in violation of the CBB Law, rules and regulations; or
              (iv) Whether a capital market service provider, or any person associated with the securities market, or any other person has violated any of the provisions of the CBB Law, or the rules, regulations or directives issued thereunder or business rules of SROs.
              Amended: July 2021

            • Self-Incrimination and Savings for Advocates and Solicitors

              • MIE-2.1.4

                (a) A person is not excused from disclosing information to the CBB or, as the case may be, an investigator 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 a person 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, an investigator appointed by the CBB to conduct a formal investigation, 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 the person to whom, or by or on behalf of whom, that privileged communication was made.
                Amended: July 2021

          • MIE-2.2 MIE-2.2 Ordering a Formal Investigation

            • Appointment of Investigator

              • MIE-2.2.1

                (a) The CMSD may, at any time by order in writing, direct any official of the CMSD specified in the order to conduct a formal investigation into the affairs of any SRO, or member of an SROor listed company or issuer of securities, or any other capital market service provider or persons associated with the securities market or any other person, and to report thereon to the CBB, as per Article 121 of the CBB Law.
                (b) The CMSD may also appoint, with the approval of the Governor, any professional firm to conduct such formal investigation referred to in paragraph (a) of this rule.
                Amended: July 2021

              • MIE-2.2.2

                Before it proceeds with an investigation, the CMSD will satisfy itself that there are grounds to investigate under the statutory provisions that give the CBB powers to appoint investigators. If the statutory test is met, it will decide whether to carry out an investigation after considering all the relevant circumstances. To assist its consideration of cases, the CMSD 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. The CMSD's assessment will include considering whether using alternative procedures is more appropriate, taking into account the overall circumstances of the person 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 preliminary investigation opened under section MIE-1.11 can be converted into a formal investigation based on the findings, facts and evidence gathered during the preliminary investigation. Secondly, prior to completion of the preliminary investigation, it may be determined that it would be appropriate to order a formal investigation on the case. Thirdly, a formal investigation can also be ordered without any history of a preliminary investigation 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 formal investigation, 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's securities market.
                (d) Whether an action would provide an opportunity for the CBB to address violative conduct targeted to a specific market participant, or group of persons that might not otherwise be familiar with the CBB, or the protections afforded by the securities 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 of securities fraud or misconduct.
                (h) The magnitude of the potential violations involved in the investigation, 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) for capital market service providers, whether the conduct involved officers, directors, or senior management;
                (x) Whether gatekeepers (such as accountants or attorneys) or securities 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 the investigation;
                (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 of persons;
                (ix) Travel requirements.
                (j) Whether there is an urgent need to file an enforcement action, such as an investigation into ongoing fraud or conduct that poses a threat of imminent harm to investigators.
                Amended: July 2021

            • Investigation 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 2021

              • MIE-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 appoint investigators 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 formal investigation into a licensing condition concern is appropriate.

                Amended: July 2021

              • MIE-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 formal investigations into market misconduct, the CBB will take into account whether another regulatory authority or an SRO 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 2021

            • Sources 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 of securities 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) Any person who is in possession of information or documents relevant to an investigation conducted by the Central Bank or its duly appointed investigator, should promptly present such information or documents upon request by the Central Bank or its duly appointed investigator.
                (ii) If the Central Bank or its duly appointed investigator receives a document according to the requirement imposed under this Chapter, it may:
                •  Take copies or extracts from such document.
                •  Require the person producing the document, or any other relevant person, to provide an explanation of the contents of the document.
                (iii) If the person 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 appointed investigator, 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 authorised person, 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 authorised investigators 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 any person 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 any person 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 an investigation under this Module, the CMSD or its duly appointed investigator may, in writing, require a person:
                (i) To give the CMSD or its duly appointed investigator all reasonable assistance in connection with the investigation; and
                (ii) To appear before an officer of the CMSD or its duly appointed investigator 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, a person (referred to in this Module as the examinee) appears before another person (referred to in this Module as the investigator) for examination.

            • Requirements Made of Examinee

              • MIE-2.3.4

                (a) Pursuant to the powers provided under Article 123(b) of the CBB Law, the investigator 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) The investigator may require the examinee to answer a question that is put to the examinee at the examination and is relevant to a matter that the CMSD 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 the investigator may give directions as to who may be present during the examination or part thereof.
                (b) A person shall not be present at the examination unless he is:
                (i) The investigator or the examinee;
                (ii) A person approved by the CMSD 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) The investigator 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) The investigator may require the examinee to read the record, or to have it read to him, and may require him to sign it; and
                (ii) The investigator 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 the investigator 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 a person 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 a person under rule MIE-2.3.7 (a), the person, or any other person 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 a person, 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 a person 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 2021

            • Copies 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, the person and any other person 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 other investigation 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 other investigation is prepared under this Module, a copy of the record shall accompany the report relating to such other investigation submitted to the CBB.

            • Offences

              • MIE-2.3.10

                (a) A person 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) A person who:
                (i) Refuses or fails to take an oath or make an affirmation when required to do so by an investigator examining him under this Module;
                (ii) Refuses or fails to comply with a requirement of an investigator under rule MIE-2.3.6 (b) (i); or
                (iii) Refuses or fails to comply with rules MIE-2.3.7 (b) or MIE-2.3.8;
                may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.
                (c) A person who, in purported compliance with the provisions of this Module, or in the course of examination of the person, 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) A person who obstructs or hinders the CBB or another person 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 2021

            • Powers 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 any person at a specified time and place to provide information or produce records, or documents, or books relating to any matter under investigation, and such person 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 a person 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 a person 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, a person 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) No person shall be entitled as against the CBB or, where applicable, a person 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, the person referred to in paragraph (a) (ii) the CBB or person:
                (i) Shall permit another person to inspect at all reasonable times such of the records, or documents, or books (if any) as the second-mentioned person would be entitled to inspect if they were not in possession of the CBB or the first-mentioned person; and
                (ii) May permit any other person to inspect any of the records, or documents, or books.
                (f) Unless paragraph (a) (ii) applies, a person referred to in paragraph (a) (ii) may deliver any of the records, or documents, or books into the possession of the CBB or of a person authorised by the CBB to receive them.
                (g) Where paragraphs (a) (i) or (ii) applies, the CBB, a person referred to in paragraph (a) (ii), or a person into whose possession the records, or documents, or books are delivered under paragraph (f) may require:
                (i) If paragraph (a) (i) applies, a person who so produced any of the records, or documents, or books; or
                (ii) In any other case, a person 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 the person 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) The person who last had possession, custody or control of such record, or document, or book and the place where that person 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 a person 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 a person authorised to take affidavits or statutory declarations.

              • MIE-2.3.16

                Offences

                (a) A person 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) A person 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) Any person 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) A person who, obstructs or hinders the CBB in the exercise of any power under this rule, or obstructs or hinders a person 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 the person in charge of the premises that a person enters under a warrant issued under rule MIE-2.3.12 who fails to provide to that person 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 appointed investigator 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 an investigation conducted by the CMSD, then the CMSD or its duly appointed investigator 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 the CMSD's investigation.

          • MIE-2.4 MIE-2.4 Investigation Report

            • MIE-2.4.1

              The investigator appointed by the CBB to conduct an investigation 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 the investigator shall submit an interim report pending completion of investigations if he considers necessary in the interest of investors and the securities 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 the investigation 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 formal investigations, or before receipt of a final investigation 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 2021

          • MIE-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 the securities market or the offences covered by the scope of this Module. Judicial investigation undertaken by the officials of the CMSD, either jointly with the officers of the Ministry of Justice and Islamic Affairs, or otherwise, shall submit an investigation report to the CMSD, giving details of contraventions and offences of the CBB Law, rules and regulations, along with all relevant information and evidence.

              Amended: July 2021

            • MIE-2.5.3

              The CMSD may, after considering the investigation report submitted to the CMSD officers who conducting the judicial investigation, 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 other persons 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 2021

              • MIE-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 the person 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 situated persons 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 relevant person to act promptly in taking the necessary remedial action agreed with its regulators or SROs, to deal with the CBB's concerns. If the market participant or relevant person 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 the person 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 2021

            • Publicity

              • 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 2021

              • MIE-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 2021

              • MIE-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 2021

              • MIE-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 2021

              • MIE-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 2021

            • Senior Management Responsibility

              • MIE-3.1.13

                The CBB is committed to ensuring that senior managers of CBB licensees, listed companies, issuers of securities and other persons 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 a capital market service provider's, or other person'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 a capital market service provider, or any other person 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 the person 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 2021

              • MIE-3.1.16

                In those cases where enforcement action is not taken and/or a formal investigation is not commenced, the CBB will expect the capital market service provider or other person 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 2021

            • Late 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 2021

          • MIE-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 final investigation report, the CMSD 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 the CMSD, interim findings of the investigation initiated by the CMSD, 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 2021

            • MIE-3.2.4

              In cases where the CMSD takes interim measures, usually the CMSD will provide a post-decisional opportunity of a hearing to the persons affected by such interim actions within a reasonable period of time, as expeditiously as possible. The CMSD may, after taking into account the submissions made by the persons concerned both during the hearing and in writing, modify or reconfirm or cancel or reverse the enforcement action, as may be deemed fit by the CBB Enforcement Decision Review Committee (EDRC).

              Amended: July 2021

            • MIE-3.2.5

              Interim enforcement actions shall be decided by the CMSD, based on the available information, facts and evidence, including the preliminary investigation report or interim investigation report, or any other information, data, report, facts or evidence available to the CMSD. Interim enforcement actions can also be decided by the Enforcement Decisions Review Committee on a reference made to it by the CMSD.

              Amended: July 2021

            • MIE-3.2.6

              Interim enforcement actions shall be applicable without prejudice to any further investigation and enforcement actions that may be decided by the CMSD or the Enforcement Decisions Review Committee.

              Amended: July 2021

            • Procedure

              • 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 the CMSD conducting the examination or investigation, or the appointed investigator that an interim enforcement action is warranted, he shall submit the facts and evidence of the case to the CMSD, along with the proposal for interim enforcement action.

                Amended: July 2021

              • MIE-3.2.9

                If the CMSD, during the course of its normal supervisory functions, finds that interim enforcement action is warranted, the CMSD 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, including capital market service providers, investors or any other relevant parties.

                Amended: July 2021

              • MIE-3.2.11

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.2.12

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.2.13

                [This Paragraph has been deleted in July 2021]

                Deleted: July 2021

              • MIE-3.2.14

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.2.15

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.2.16

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.2.17

                Interim enforcement actions shall be applicable without prejudice to any further enforcement actions that may be decided by the CMSD or EDRC, and to any further investigation and enforcement proceedings and actions.

                Amended: July 2021

          • MIE-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 the investigators 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 during investigation and also in the form of findings of the CMSD and when there is clear-cut evidence available, even without a formal investigation.

              Amended: July 2021

            • MIE-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 of SROs, listed companies, issuers of securities, any other capital 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 2021

            • MIE-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 2021

              • MIE-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 2021

              • MIE-3.4.3

                The EDRC may take the assistance of the CMSD staff, but they shall be separate from the staff who were involved in conducting the investigations and making recommendations to the EDRC. The EDRC may also decide to take the assistance of SROs and outside experts, if warranted.

                Amended: July 2021

            • Scope of Work of the EDC

              • MIE-3.4.4

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.5

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • The Operation of the EDC

              • EDC Meetings and Composition of Panels

                • MIE-3.4.6

                  [This Paragraph has been deleted in July 2021].

                  Deleted: July 2021

                • MIE-3.4.7

                  [This Paragraph has been deleted in July 2021].

                  Deleted: July 2021

            • Conflicts of Interest

              • MIE-3.4.8

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.9

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.10

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Procedure: General

              • MIE-3.4.11

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.12

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.13

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.14

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Procedure: Warning Notices

              • MIE-3.4.15

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.16

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.17

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Procedure: Representations

              • MIE-3.4.18

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.19

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.20

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.21

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.22

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.23

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.24

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Procedure: Enforcement orders

              • MIE-3.4.25

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Default Procedures

              • MIE-3.4.26

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.27

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.28

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.29

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.30

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.31

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.32

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.33

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Court Proceedings

              • MIE-3.4.34

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

            • Review Proceedings

              • MIE-3.4.35

                Where an enforcement order is issued by the EDRC, a party may appeal such decision to the Appeals Committee of the CBB.

                Amended: July 2021

              • MIE-3.4.36

                The Appeals Committee shall be as constituted by a Directive of the Governor.

                Amended: July 2021

              • MIE-3.4.37

                [This Paragraph has been deleted in July 2021].

                Deleted: July 2021

              • MIE-3.4.38

                The scope of the Appeals Committee shall include but not be limited to determining:

                (a) Whether the EDRC followed the correct procedures of the EDRC;
                (b) Whether the penalty imposed by the EDRC 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 2021

          • MIE-3.5 MIE-3.5 Settlement

            • Introduction

              • MIE-3.5.1

                (a) A person 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 an enforcement order recording the CBB's decision to take that action. Where, however, the person subject to enforcement action agrees not to contest the content of a proposed enforcement order, the decision to issue that order will be taken by the EDRC on matters which are before the EDRC, or by the CMSD on matters which have not been referred to or being considered by the EDRC.
                Amended: July 2021

            • Procedure: General

              • MIE-3.5.2

                A person who is or may be subject to enforcement action may wish to discuss the proposed action with the CMSD through settlement discussions. The CMSD shall refer the matter to the EDRC if the matter is subject to proceedings before the EDRC and decide on its own on other matters.

                Amended: July 2021

              • MIE-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 an enforcement order, or even after referral of the matter to the Court. But the CMSD 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 an enforcement 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 2021

              • MIE-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 2021

              • MIE-3.5.4

                The CBB and the person concerned may agree that neither the CBB nor the person 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 2021

            • Procedure: Participation of Decision-Makers in Discussions

              • MIE-3.5.5

                (a) The EDRC may, but need not, participate in the discussions exploring possible settlement.
                (b) If the EDRC has not been involved in the discussions, but an agreement has been reached, they may ask to meet the relevant CMSD staff or the person concerned, in order to assist in the consideration of the proposed settlement.
                Amended: July 2021

              • MIE-3.5.6

                The terms of any proposed settlement:

                (a) Will be put in writing and be agreed by CMSD staff and the person concerned;
                (b) May refer to a draft of the proposed warning notices (if any) setting out the facts of the matter and the CMSD's conclusions;
                (c) May, depending upon the stage in the enforcement process at which agreement is reached, include an agreement by the person 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 the CMSD any secondary material which might undermine the CMSD decision to give the warning notice;
                (ii) waive and not exercise any rights under the CBB Law or otherwise to make representations to the CBB in respect of a warning notice;
                (iii) not object to the giving of an enforcement order before the expiry of the 30 day period after the giving of a warning notice;
                (iv) not dispute with the CMSD the facts and matters set out in a warning notice, or enforcement 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 2021

              • MIE-3.5.7

                The EDRC may:

                (a) Accept the proposed settlement by deciding to give an enforcement order based on the terms of the settlement; or
                (b) Decline the proposed settlement; or
                (c) Recommend other terms.
                Amended: July 2021

              • MIE-3.5.8

                (a) In a matter where the CMSD is engaged in settlement discussions and the EDRC subsequently declines the proposed settlement, they may invite CMSD staff and the person concerned to enter into further discussions to try to achieve an outcome the EDRC would be prepared to endorse.
                (b) However, if the matter for settlement has been submitted to the EDRC for consideration, it will be for the EDRC to decide:
                (i) Whether to extend the period for representations in response to a warning notice; or
                (ii) If representations have been made in response to a warning notice, whether to proceed to give an enforcement order.
                Amended: July 2021

              • MIE-3.5.9

                The CBB and other parties may agree to mediation as a way of facilitating settlement in appropriate cases.

                Amended: July 2021

          • MIE-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 other capital 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;
                6) Taking enforcement action(s) directly against Approved Persons under Article 65 of the CBB Law;
                7) Criminal sanctions under Articles 163, 169, 170 and 171 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 of SROs or other capital 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 final investigation and/or enforcement proceedings as a permanent injunction.
                ii. Freezing Accounts

                An order restricting a securities or securities cash account of a member of an SRO or other capital 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 a person'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 the person 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 the person 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 an SRO or other capital 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 of SROs or other capital 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 an SRO or other capital market service provider, for a specified period.
                (f) Suspension of a Licensee under Article 131

                The CBB may suspend a member of an SRO or other capital 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 of SROs or other capital 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, 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."
                (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) A person 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 current investigation or an investigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Any person participates in such an offence shall be liable to the same penalty of the principal offender. (2) A person 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 an investigator 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, a person 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 of SROs or other capital 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 legal person 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 legal person or any person 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 any person appointed by the Central Bank to conduct an investigation or inspection 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 2021

            • Disciplinary 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 of SRO'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 of SROs 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 final investigation 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 a person'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 the person 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 the person 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 of securities 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 any securities that contravene the requirements of the Listing Rules, or to suspend the trading of any listed securities facing exceptional circumstances that the Central Bank considers as sufficient grounds for the suspension of the securities.

                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 any person appointed by the Central Bank to conduct an investigation or inspection 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, 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."
                (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) A person 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 current investigation or an investigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Any person participates in such an offence shall be liable to the same penalty of the principal offender.
                (2) A person 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 an investigator appointed by the Central Bank."
                (k) Criminal Sanction under Article 172

                Article 172 of the CBB Law states that "Any legal person 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 legal person or any person 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 2021

            • Licensed 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 the SRO'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 other capital 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, these SROs 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 2021

            • Users 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 relevant persons 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 relevant persons 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 current investigation or an investigation 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 any person 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 legal person, 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 legal person or any person 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 2021

            • Restriction 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 the person 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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

          • MIE-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 2021

          • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-4.3.4

              For SROs and members of SROs, the financial penalties related to late filing or other date sensitive requirements are calculated as per the following per diem basis:

              (a) For SROs under Module MAE and Module CSD, the financial penalty for late filing is BD 100 per day;
              (b) For members of SROs under Module MIR, the financial penalty for late filing is BD 50 per day.
              Added: July 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

          • MIE-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 2021

          • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

            • MIE-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 2021

          • MIE-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 2021

        • Appendices

          • 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; and
            4) 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 2021

      • AML — 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 to Capital 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 2010

              • AML-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 assist Capital Market Licensees monitor transactions and fulfil their reporting obligations under Bahrain Law and this Module.

                Amended: January 2022
                October 2010

            • Legal 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 2010

              • AML-A.1.4

                For an explanation of the CBB's rule-making powers and different regulatory instruments, see section UG-1.1.

                October 2010

          • AML-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 2010

              • AML-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 of Securities, custodians of Securities, banks accredited for clearance of transactions carried out at the BSE, dealers in Securities, and all other entities concerned with dealing in Securities.

                October 2010

              • AML-A.2.3

                A list of recent changes made to this Module is detailed in the table below:

                Module Ref.Change DateDescription of Changes
                AML-A.1.307/2011Clarified legal basis.
                AML-7.107/2011Clarified the Rules dealing with substantial shareholdings.
                AML-4.2.310/2014Updated method of submitting STRs.
                AML-4.410/2014Updated relevant authorities information.
                AML07/2016Updated to reflect February 2012 update to FATF Recommendations.
                AML-4.2.307/2016Updated instructions for STR.
                AML-1.2.9A01/2017Added guidance paragraph on CR printing
                AML-9.2.1AA04/2017Added Paragraph on Implementing and complying with the United Nations Security Council resolutions requirement.
                AML-1.1.2A10/2017Added new paragraph on the verification of identity and source of funds.
                AML-1.1.2B10/2017Added new paragraph on the verification of identity and source of funds.
                AML-1.2.710/2017Amended paragraph.
                AML-1.2.8A10/2017Added new paragraph on legal entities or legal arrangements CDD.
                AML-2.2.10 – AML-2.2.1110/2017Amended paragraphs on On-going CSS and Transaction Monitoring.
                AML-3.1.4A10/2017Added paragraph on combining the MLRO or DMLRO position with any other position within the licensee.
                AML-B.2.401/2018Amended paragraph.
                AML-1.8.101/2018Amended paragraph.
                AML-1.10.101/2018Deleted sub-paragraph (a).
                AML-4.2.601/2018Amended paragraph.
                AML-9.1.401/2018Amended paragraph.
                AML-9.2.201/2018Deleted paragraph.
                AML-1.1.207/2018Deleted Sub-paragraph (a).
                AML-1.10.207/2018Amended Paragraph deleting cross reference.
                AML-1.10.307/2018Deleted Paragraph.
                AML-1.10.907/2018Deleted Paragraph.
                AML-1.10.101/2019Amended references.
                AML-3.3.201/2019Amended references.
                AML-3.3.4 — AML-3.3.501/2019Amended references.
                AML-1.2.9A10/2019Amended reference.
                AML-1.9.210/2019Amended authority name.
                AML-3.1.810/2019Amended authority name.
                AML-3.2.110/2019Amended authority name.
                AML-4.2.310/2019Amended authority name.
                AML-4.4.210/2019Amended authority name.
                AML-7.1.210/2019Deleted Paragraph.
                AML-9.2.1AA10/2019Added a new Paragraph on Terrorist Financing.
                AML-B.1.101/2020Added “ crypto-asset licensees”.
                AML-B.1.301/2020Deleted Paragraph.
                AML-B.301/2020Deleted Section.
                AML-C01/2020Added new Chapter “Risk Based Approach”.
                AML-101/2020Rename the Chapter to “Customer Due Diligence”.
                AML-1.1.101/2020Amended Paragraph on procedures approval.
                AML-1.1.201/2020Added sub-paragraph (i).
                AML-1.1.14 – AML-1.1.1601/2020Added new paragraphs on “Suspicious Wallet Addresses”.
                AML-1.2.101/2020Added sub-paragraph (n).
                AML-1.2.501/2020Added new sub-paragraph (f).
                AML-1.3.401/2020Added new paragraph.
                AML-1.4.701/2020Added new paragraph.
                AML-1.5.401/2020Deleted paragraph.
                AML-1.901/2020Rename the section to “Shell financial Institutions”.
                AML-1.9.101/2020Amended paragraph.
                AML-1.1101/2020Added new section “Enhanced Due Diligence for Correspondent Accounts”
                AML-2.2.101/2020Amended Paragraph.
                AML-2A01/2020Added new chapter.
                AML-3.1.501/2020Amended Paragraph.
                AML-3.1.5A01/2020Added Paragraph.
                AML-3.1.701/2020Amended sub-Paragraph (a).
                AML-3.3.201/2020Amended Paragraph.
                AML-3.3.501/2020Amended Paragraph on report submission date.
                AML-3.3.2A – AML-3.3.2E01/2020Added Paragraphs.
                AML-6.1.1A – AML-6.1.1C01/2020Added Paragraphs.
                AML-8.1.101/2020Deleted Paragraph.
                AML-8.1.1A01/2020Added Paragraph.
                AML-11.1.201/2020Added Paragraph.
                AML-2.1.3 & AML-2.1.404/2020Added new Paragraphs on KPIs compliance with AML/CFT requirements.
                AML-5.1.6A01/2021Added a new Paragraph on requirements to hire new employees.
                AML-A.1.301/2022Amended Paragraph to replace financial crime with money laundering and terrorism financing.
                AML-C01/2022New revised risk-based approach (RBA).
                AML-1.101/2022Amended 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-1.201/2022Amended Section to include E-KYC and electronic documents law requirements.
                AML-1.3.201/2022Amended Paragraph on enhanced due diligence requirements for customers identified as having higher risk profile.
                AML-1.401/2022Amended Section to introduce detailed requirements for digital onboarding and related requirements.
                AML-1.5.201/2022Amended Paragraph on onboarding non-Bahraini PEPs using digital ID applications.
                AML-1.10.8A01/2022Added a new Paragraph on not applying simplified CDD in situations where the licensee has identified high ML/TF/PF risks.
                AML-2.2.501/2022Amended Paragraph.
                AML-3.3.1B01/2022Amended Paragraph.
                AML-3.3.201/2022Amended Paragraph.
                AML-3.3.501/2022Amended Paragraph.
                AML-3.3.601/2022Deleted Paragraph.
                AML-5.1.6A01/2022Deleted Paragraph.
                AML-9.2.501/2022Amended reference to Paragraph.
                AML01/2022Changed Licensee name to Capital Market Licensees across Module.
                AML-C.2.901/2023Minor amendment to Paragraph.
                AML-9.2.4(c)01/2023Added a new Sub-paragraph on reporting any frozen assets or actions taken.
                AML-1.1.1710/2023Amended Sub-Paragraph on the enhanced diligence for the non-resident accounts.
                AML-1.1.2310/2023Deleted Paragraph.
                AML-1.1.2410/2023Added a new Paragraph on CDD and Customer onboarding requirements.
                AML-1.4.1410/2023Deleted Paragraph.
                AML-1.1210/2023Added a new Section on reliance on third parties for customer due diligence.
                AML-1.2.101/2024Amended 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 2010

          • AML-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 2010

        • AML-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 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, collective investment undertakings, business trusts, listed companies, crypto-asset licensees, any Person acting for or on behalf of listed companies, Persons accredited with receiving money relating to the subscription of Securities, custodian of Securities, settlement banks, dealers in Securities, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts, credit rating agencies and any other Person concerned with dealing in Securities, irrespective of whether such Person is a Capital Market Licensees or not. These rules are issued by way of a legally-binding Directive.

              Amended: January 2022
              Amended: January 2020
              Added: October 2010

            • AML-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 2010

            • AML-B.1.3

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-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 as Capital Market Licensees). All Capital 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 2010

          • AML-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 the FATF 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 2010

            • AML-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, the Capital Market Licensee must immediately inform the CBB in writing.

              Amended: January 2022
              Added: October 2010

            • AML-B.2.3

              In such instances, the CBB will review alternatives with the Capital Market Licensees. Should the CBB and the Capital Market Licensees be unable to reach agreement on the satisfactory implementation of this Module in a foreign subsidiary or branch, the Capital 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 2010

            • AML-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 2016

          • AML-B.3 AML-B.3 Definitions [This Section was deleted in January 2020]

            Deleted: January 2020
            Added: October 2010

            • AML-B.3.1

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-B.3.2

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-B.3.3

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-B.3.4

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-B.3.5

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Amended: July 2016
              Added: October 2010

            • AML-B.3.6

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Amended: July 2016
              Added: October 2010

            • AML-B.3.7

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-B.3.8

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-B.3.9

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

            • AML-B.3.10

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Added: October 2010

        • AML-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 2020

            • AML-C.1.2

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.1.3

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.1.4

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-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 2022

            • AML-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 a Capital Market Licensee must be commensurate with the identified ML/TF/PF risks.

               

              Added: January 2022

            • AML-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 2022

          • AML-C.2 AML-C.2 Risk Assessment

            • AML-C.2.1

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.2.2

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.2.3

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.2.4

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.2.5

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.2.6

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-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 the licensee to understand how, and to what extent, it is vulnerable to ML/TF/PF.

               

              Added: January 2022

            • AML-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 2022

            • AML-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, the capital 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 2022

            • AML-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 the Capital 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; and
              h) Internal audit, external audit or regulatory inspection findings.

               

              Added: January 2022

            • Country/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 2022

            • Customer/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 2022

            • Product/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. A Capital 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 2022

              • AML-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 the conventional bank licensee.

                 

                Added: January 2022

            • Distribution 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 the licensee is made aware that the transaction will be cleared/settled through an unregulated entity.

                 

                Added: January 2022

              • AML-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 the Capital 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 2022

          • AML-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 2020

            • AML-C.3.2

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

            • AML-C.3.3

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2020

          • AML-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. The licensee 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 2022

        • AML-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 the Capital Market Licensees senior management and must be strictly adhered to.

                Amended: January 2022
                Amended: January 2020
                Amended: July 2016
                Added: October 2010

              • AML-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) The Capital 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 of Money Laundering or terrorist financing; or
                (i) Carrying out accepted crypto-assets transfers and/or wire transfers irrespective of value and/or amount.
                Amended: January 2022
                Amended: January 2020
                Amended: July 2018
                Added: October 2010

              • AML-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 2017

              • AML-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 2017

              • AML-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 a capital market licensee must be commensurate with the risk profile of the customer or type of customer.

                 

                Added: January 2022

              • AML-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 2010

              • AML-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 2010

            • Verification 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 2010

              • AML-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, the Capital 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 2010

              • AML-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 2010

              • AML-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, the Capital Market Licensee must establish the identity of that third party, as well as the person conducting the business.

                Amended: January 2022
                Added: October 2010

            • Anonymous and Nominee Accounts

              • AML-1.1.9

                Capital Market Licensees must not establish or keep anonymous accounts or accounts in fictitious names. Where Capital 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 the Capital Market Licensees and verified by it in accordance with the requirements specified in this Chapter.

                Amended: January 2022
                Added: October 2010

            • Timing 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 2010

            • Incomplete 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 2010

              • AML-1.1.12

                See also Chapter AML-4, which covers the filing of Suspicious Transaction Reports.

                October 2010

              • AML-1.1.13

                The CBB will monitor the application of these requirements to Capital Market Licensees existing customer base.

                Amended: January 2022
                Added: October 2010

            • Suspicious 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 2020

              • AML-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 2020

              • AML-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 2020

            • Non-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 2022

              • AML-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 2022

              • AML-1.1.19

                Capital Market Licensees must take adequate precautions and risk mitigation measures before onboarding non-resident customers from high risk jurisdictions. The licensees 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 2022

              • AML-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 2022

              • AML-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 2022

              • AML-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 2022

              • AML-1.1.23

                [This Paragraph has been deleted in October 2023].

                Deleted: October 2023
                Added: January 2022

              • AML-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 2023

          • AML-1.2 AML-1.2 Face-to-Face Business

            • Natural Persons

              • AML-1.2.1

                If the customer is a natural PersonCapital 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 the Capital Market Licensees;
                (k) Signature of the customer(s);
                (l) Source of funds;
                (m) Source of Securities;
                (n) Reason for opening the account; and
                (o) Place of birth.
                Amended: January 2024
                Amended: January 2022
                Amended: January 2020
                Added: October 2010

              • AML-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 2022

              • AML-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 2010

              • AML-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 2010

              • AML-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 2010

              • AML-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 2010

              • AML-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 the Person 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 2010

            • Legal 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 the Capital Market Licensee;
                (k) Source of funds; and
                (l) Legal representative, such as Trustees or trusts.
                Amended: January 2022
                Amended: October 2017
                Added: October 2010

              • AML-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 of Persons 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 named Persons 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 2010

              • AML-1.2.8A

                For customers that are legal persons, Capital Market Licensees must identify and take reasonable measures to verify the identity of beneficial 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 the beneficial 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 2017

              • AML-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 2010

              • AML-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 2017

              • AML-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 2010

              • AML-1.2.11

                Capital Market Licensees must also obtain and document the following due diligence information. These due diligence requirements must be incorporated in the Capital 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 or Securities, the ultimate provider of funds or Securities (if different), and the ultimate controller of the funds or Securities (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 a Capital 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 2010

              • AML-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 2010

              • AML-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 the Capital Market Licensee should consider terminating its relationship with the fund.

                Amended: January 2022
                Added: October 2010

          • AML-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 2010

            • AML-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 the Capital Market Licensee);
              (j) Obtaining another licensed entity’s reference and contact with the concerned licensee 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 2010

            • AML-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 2010

            • AML-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 2020

          • AML-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 2010

            • AML-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 the Person they claim to be; and
              (b) To ensure that the address provided is genuinely the customer's.
              Amended: January 2022
              Added: October 2010

            • AML-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 2010

            • AML-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 in Money 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 the Capital Market Licensees to report all such transactions.

              Amended: January 2022
              Added: October 2010

            • New 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 2016

              • AML-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 2016

              • AML-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 2020

            • Enhanced Monitoring

              • AML-1.4.8

                Customers on boarded digitally must be subject to enhanced on-going account monitoring measures.

                 

                Added: January 2022

              • AML-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 2022

            • Licensee’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 2022

              • AML-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 2022

              • AML-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, the licensee 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 the licensee 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 the licensee 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 2022

              • AML-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 2022

              • AML-1.4.14

                [This Paragraph has been deleted in October 2023]

                Deleted: October 2023
                Added: January 2022

              • AML-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 2022

              • AML-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) The licensee can perform its due diligence prior to the digital interaction/communication and can raise targeted questions at such interaction/communication session; and
                (b) The licensee 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 2022

              • AML-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 2022

              • AML-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 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.

                 

                Added: January 2022

              • AML-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 2022

              • AML-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 2022

              • AML-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 2022

            • Overseas 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 2022

          • AML-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 a Politically 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 a PEP.

              Amended: January 2022
              Amended: July 2016
              Added: October 2010

            • AML-1.5.2

              Capital Market Licensees must establish a client acceptance policy with regard to PEPs, taking into account the reputational and other risks involved. Senior management approval must be obtained before a PEP 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 2010

            • AML-1.5.3

              Where an existing customer is a PEP, or subsequently becomes a PEP, 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 the PEP's account by senior management (such as the MLRO).
              October 2010

            • AML-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 2016

            • AML-1.5.3B

              The requirements for all types of PEP must also apply to family or close associates of such PEPs.

              Added: July 2016

            • AML-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 the PEP or of a firm represented or owned by the PEP, or family links or otherwise.

              Added: July 2016

            • AML-1.5.4

              [This Paragraph was deleted in January 2020].

              Deleted: January 2020
              Amended: July 2016
              October 2010

          • AML-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 2010

            • AML-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 2010

            • AML-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 2010

            • AML-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 2010

            • AML-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 concerned Capital Market Licensees.

              Amended: January 2022
              Added: October 2010

            • AML-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 2010

          • AML-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 2010

            • AML-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 2010

            • AML-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 and Money 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 2010

            • AML-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. The Capital Market Licensees must obtain documentary evidence to support the case for not carrying out customer due diligence measures beyond identifying the intermediary. The Capital 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 2010

            • AML-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 2010

          • AML-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 other Capital 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. Where Capital 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 the Capital Market Licensee, not the introducer.

              Amended: January 2022
              Amended: January 2018
              Added: October 2010

            • AML-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 the Capital 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 the Capital 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 the Capital 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 2010

            • AML-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, the Capital 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 2010

            • AML-1.8.4

              Should the Capital Market Licensees not be satisfied that the introducer is in compliance with the requirements of the FATF Recommendations, the Capital Market Licensees must not accept further introductions or discontinue the business relationship with the introducer.

              Amended: January 2022
              Amended: July 2016
              Added: October 2010

          • AML-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 with shell 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 other Capital Market Licensees or financial institutions that have relations with shell financial institutions.

                Amended: January 2022
                Amended: January 2020
                Amended: July 2016
                Added: October 2010

              • AML-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 a shell financial institutions or an institution they suspect of being a shell financial institutions.

                Amended: January 2022
                Amended: January 2020
                Amended: October 2019
                Added: October 2010

          • AML-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 a Security 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 2010

            • AML-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 2010

            • AML-1.10.3

              [This Paragraph was deleted in July 2018].

              Deleted: July 2018
              October 2010

            • AML-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 2010

            • AML-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 2010

            • AML-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 2010

            • AML-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 in Money Laundering or terrorism financing or that the transaction is carried out on behalf of another Person engaged in Money Laundering or terrorism financing.

              Amended: January 2022
              Added: October 2010

            • AML-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 2022

            • AML-1.10.9

              [This Paragraph was deleted in July 2018].

              Deleted: July 2018
              October 2010

          • AML-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 provides correspondent account services or characteristic similar to correspondent account services.

              Amended: January 2022
              Added: January 2020

            • AML-1.11.2

              When providing correspondent account services, Capital Market Licensee, must gather sufficient information (e.g. through a questionnaire) about their respondent financial institution to understand the nature of the respondent's business. Factors to consider to provide assurance that satisfactory measures are in place at the respondent financial institution includes:

              (a) Information about the respondent financial institution’s ownership structure and management;
              (b) Major business activities of the respondent 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 the respondent financial institution are located;
              (d) The respondent 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 the Capital 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 2020

            • AML-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 2020

            • AML-1.11.4

              Where the correspondent account services involve a payable through account, Capital Market Licensees must be satisfied that:

              (a) The respondent 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) The respondent 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 the Capital Market Licensees upon request.
              Amended: January 2022
              Added: January 2020

            • AML-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 2020

            • AML-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 a shell 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 2020

            • AML-1.11.7

              Capital Market Licensees must also take appropriate measures when establishing a correspondent account services relationship, to satisfy themselves that their respondent financial institutions do not permit their accounts to be used by shell financial institutions.

              Amended: January 2022
              Added: January 2020

            • AML-1.11.8

              In the case of correspondent account services relationships, the Capital Market Licensee generally does not have direct relationships with the customers of the respondent financial institution. Therefore, there is no expectation or requirement for the Capital Market Licensee to apply CDD on a respondent financial institution’s customer, which is, instead the responsibility of the respondent financial institution. Nonetheless, it is consistent with the risk-based approach for the Capital Market Licensee to have some general sense of the respondent financial institution’s customer base as part of ascertaining the risks associated with the respondent financial institution itself.

              Amended: January 2022
              Added: January 2020

          • AML-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 the licensee, 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 2023

            • AML-1.12.2

              Where a licensee relies on a third-party that is part of the same financial group, the licensee 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 2023

            • AML-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 2023

        • AML-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 the Capital 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 2010

            • AML-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 2010

            • AML-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 2020

            • AML-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 the Capital 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 2020

          • AML-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 in accepted crypto-assets.

                Amended: January 2022
                Amended: January 2020
                Added: October 2010

              • AML-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 2010

            • Automated 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 the Capital Market Licensees for five years after the date of the transaction.

                Amended: January 2022
                Added: October 2010

              • AML-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 the Capital 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 the Capital 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 2010

            • Unusual 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, the Capital 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 2010

              • AML-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 2010

              • AML-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 2010

              • AML-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 2010

              • AML-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 2010

            • Ongoing 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 the capital 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 2010

              • AML-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, the Capital Market Licensees must take steps to obtain updated copies as soon as possible.

                Amended: January 2022
                Amended: October 2017
                Added: October 2010

              • AML-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 of Securities and identity of the counterparty.

                Amended: January 2022
                Added: October 2010

          • AML-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 (including Crypto-asset licensees as well as third party service providers) if they act as an ordering financial institution, intermediary financial institution or beneficiary financial institution.

                Amended: January 2022
                Added: January 2020

              • AML-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 a Capital 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. A Capital 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 2020

              • CBB’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 2020

                • AML-2A.1.4

                  The CBB considers transactions involving transfer of accepted crypto-assets as functionally analogous to wire transfer. Therefore, Capital Market Licensees (including crypto-asset licensees), whenever their transaction, whether in fiat currency or accepted crypto-assets, involves (i) a traditional wire transfer, or (ii) an accepted crypto-asset transfer, must comply with the requirements of Paragraph AML-2A.2 unless stated otherwise.

                  Amended: January 2022
                  Added: January 2020

            • AML-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 (including crypto-asset licensees) must consider all transfers of accepted crypto-assets as cross-border transfer rather than domestic transfer.

                  Amended: January 2022
                  Added: January 2020

              • Outward Transfers

                • AML-2A.2.2

                  Capital Market Licensees must include all required originator information and required beneficiary information details with the accompanying transfer of accepted crypto-assets and/or wire transfer of funds they make on behalf of their customers.

                  Amended: January 2022
                  Added: January 2020

                • AML-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 2020

              • Inward Transfers

                • AML-2A.2.4

                  Capital Market Licensees must:

                  (a) Maintain records (in accordance with Chapter AML-6 of this Module) of all originators information received with an inward transfer; and
                  (b) Carefully scrutinize inward transfers which do not contain originator 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) the ordering financial institution is able to promptly (i.e. within two business days) advise the licensee in writing of the originator information upon the licensee’s request (Refer to Paragraph AML-2A.2.5); or (ii) the ordering financial institution and the licensee are acting on their own behalf (as principal).
                  Amended: January 2022
                  Added: January 2020

                • AML-2A.2.5

                  The period of 2 business days provided to ordering financial institution by the Capital Market Licensees under Paragraph AML-2A.2.4(b)(i) to furnish the originator information is only applicable while undertaking fund transfer (traditional wire transfer) and must not be used in case of transfer of accepted crypto-assets.

                  Amended: January 2022
                  Added: January 2020

                • AML-2A.2.6

                  While undertaking accepted crypto-asset transfer, a Capital Market Licensees must ensure that the ordering financial institution transmits the originator and beneficiary information immediately (Refer to Paragraph AML-2A.2.9).

                  Amended: January 2022
                  Added: January 2020

              • Accepted 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 the originator;
                  (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 the beneficiary; 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 2020

                • AML-2A.2.8

                  Where a Capital Market Licensees undertakes a transfer of accepted crypto-asset, it is not necessary for the information referred to in Paragraph AML-2A.2.7 to be attached directly to the accepted crypto-asset transfers itself. The information can be submitted either directly or indirectly.

                  Amended: January 2022
                  Added: January 2020

                • AML-2A.2.9

                  A Capital Market Licensee while undertaking transfer of accepted crypto-asset must ensure that the required originator and beneficiary information is transmitted immediately and securely.

                  Amended: January 2022
                  Added: January 2020

                • AML-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 the accepted crypto-asset.

                  Added: January 2020

                • AML-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 an accepted crypto-asset transfer involves only one financial institution on either end of the transfer (e.g. when an ordering financial institution sends accepted crypto-assets on behalf of its customers, the originator, to a beneficiary that is not a customer of a beneficiary financial institution but rather an individual user who receives the accepted 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 an accepted crypto-asset transfer, would submit the required information to individual users who are not financial institutions. However, financial institutions receiving an accepted 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 2020

              • Domestic 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 the beneficiary financial institution and the CBB by other means. In this latter case, the ordering 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 the originator or the beneficiary.

                  Added: January 2020

                • AML-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 the beneficiary financial institution or from the CBB.

                  Added: January 2020

                • AML-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 the beneficiary financial institution of the originator information at the time the transfer is made.

                  Added: January 2020

              • Responsibilities 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 as accepted crypto-asset transfers contain required and accurate originator information, and required beneficiary information.

                    Added: January 2020

                  • AML-2A.2.16

                    The ordering financial institution must maintain all originator and beneficiary information collected in accordance with Paragraph AML-6.1.1.

                    Added: January 2020

                  • AML-2A.2.17

                    The ordering financial institution must not execute the wire transfer or accepted crypto-asset transfer if it does not comply with the requirements of Paragraphs AML-2A.2.15 and AML-2A.2.16.

                    Added: January 2020

                • Intermediary 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/or accepted crypto-asset transfers must ensure that all originator and beneficiary information that accompanies a wire transfer and accepted crypto-asset transfer is retained with it.

                    Added: January 2020

                  • AML-2A.2.19

                    Where technical limitations prevent the required originator or beneficiary 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 the ordering financial institution or another intermediary financial institution.

                    Added: January 2020

                  • AML-2A.2.20

                    An intermediary financial institution must take reasonable measures to identify cross-border wire transfers and accepted crypto-asset transfer that lack required originator information or required beneficiary information.

                    Added: January 2020

                  • AML-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 required originator or required beneficiary information; and
                    (b) The appropriate follow-up action.
                    Added: January 2020

                • Beneficiary Financial Institution

                  • AML-2A.2.22

                    A beneficiary financial institution must take reasonable measures to identify cross-border wire transfers as well as accepted crypto-asset transfer that lack required originator or required beneficiary information. Such measures may include post-event monitoring or real-time monitoring where feasible.

                    Added: January 2020

                  • AML-2A.2.23

                    For wire transfers as well as accepted crypto-asset transfer, a beneficiary financial institution must verify the identity of the beneficiary, if the identity has not been previously verified, and maintain this information in accordance with Paragraph AML-6.1.1.

                    Added: January 2020

                  • AML-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 required originator or required beneficiary information; and
                    (b) The appropriate follow-up action.
                    Added: January 2020

        • AML-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 approved Person.

              Amended: January 2022
              Added: October 2010

            • AML-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, approved Persons 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 2010

            • AML-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 2010

            • AML-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 the Capital Market Licensees, so the function may not be outsourced to a third-party employee.

              Amended: January 2022
              Added: October 2010

            • AML-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 the Capital Market Licensees.

              Added: January 2022

            • AML-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 2010

            • AML-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 the Capital Market Licensees shall implement when the MLRO is not available to carry out the controlled function.

              Added: January 2022

            • AML-3.1.6

              Capital Market Licensees should note that although the MLRO may delegate some of his functions, either to other employees of the Capital 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 the Capital 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 2010

            • AML-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 the Capital Market Licensees;
              (b) Has a sufficient level of seniority within the Capital 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 the Capital Market Licensees to that customer, or any transactions conducted by the Capital 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 the Capital Market Licensees; and
              (g) Is resident in Bahrain.
              Amended: January 2022
              Added: October 2010

            • AML-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 2010

            • AML-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, the Capital 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 2010

          • AML-3.2 AML-3.2 Responsibilities of the MLRO

            • AML-3.2.1

              The MLRO is responsible for:

              (a) Establishing and maintaining the Capital Market Licensee's AML/CFT policies and procedures;
              (b) Ensuring that the Capital Market Licensees complies with the AML Law, any other applicable AML/CFT legislation and this Module;
              (c) Ensuring day-to-day compliance with the Capital Market Licensee's own internal AML/CFT policies and procedures;
              (d) Acting as the Capital Market Licensee's main point of contact in respect of handling internal Suspicious Transaction Reports from the Capital 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 the Capital 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 the Capital 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 2010

          • AML-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 2016

              • AML-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 2016

              • AML-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 the Capital Market Licensees and its branches and subsidiaries both inside and outside the Kingdom of Bahrain. A Capital 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 the Capital 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 a Capital 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 the Capital Market Licensee's anti-money laundering procedures, systems and controls and compliance with the rules of a licensed exchange and licensed clearing house or central depository, AML Law and this Module.
                Amended: January 2022
                Amended: July 2016
                Added: October 2010

              • AML-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 auditors or a consultancy firm approved by the CBB.

                Amended: January 2022
                Amended: January 2020
                Amended: January 2019
                Added: October 2010

              • AML-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 2020

              • AML-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 2020

              • AML-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 2020

              • AML-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 2020

              • AML-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 2020

              • AML-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 the Capital Market Licensee's senior management.

                Amended: January 2022
                Amended: July 2016
                Added: October 2010

              • AML-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 the Capital 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 2010

              • AML-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 the Capital Market Licensee.

                Amended: January 2022
                Amended: January 2020
                Amended: January 2019
                Added: October 2010

              • AML-3.3.6

                [This Paragraph was deleted in January 2022].

                Deleted: January 2022
                Added: October 2010

        • AML-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 a Person on whose behalf a customer may be acting) is engaged in Money 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 2010

            • AML-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 involve Money Laundering or terrorist financing.

              Amended: January 2022
              Added: October 2010

          • AML-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 a Person has been engaged in Money Laundering or terrorism financing, or the activity concerned is otherwise still regarded as suspicious, he must report the fact promptly to the Relevant Authorities. Where no report is made, the MLRO must document the reasons why.

              Amended: January 2022
              Added: October 2010

            • AML-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 the Capital Market Licensee's possession which could be relevant; and
              (c) Ensure that where the MLRO, or his duly authorised delegate, suspects that a Person has been engaged in Money Laundering or terrorist financing, a report is made by the MLRO which is not subject to the consent or approval of any other Person.
              Amended: January 2022
              Added: October 2010

            • AML-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 2010

            • AML-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 2010

            • AML-4.2.5

              Capital Market Licensees must retain all relevant details of STRs submitted to the Relevant Authorities, for at least five years.

              Amended: January 2022
              Amended: July 2016
              Added: October 2010

            • AML-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 the Relevant Authorities; and
              (b) In cases where Capital 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 the Capital 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 2010

          • AML-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 the Securities or cash is being held, in which case the SRO must, unless instructed otherwise by a Relevant Authority, stop the execution of the suspicious transaction and any Security deposited with the SRO or other Capital Market Licensee.

              Amended: January 2022
              Added: October 2010

          • AML-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 2010

            • AML-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.bh

              Director 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.bh

              Amended: October 2019
              Added: October 2014

        • AML-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) The Capital 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) The Capital 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 2010

            • AML-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 2010

            • AML-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 2010

            • AML-5.1.4

              Capital Market Licensees must ensure that their AML/CFT training for relevant staff remains up-to-date and is appropriate given the Capital Market Licensee's activities and customer base.

              Amended: January 2022
              Added: October 2010

            • AML-5.1.5

              The CBB would normally expect AML/CFT training to be provided to relevant staff at least once a year.

              October 2010

            • AML-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 by Capital Market Licensees.

              Amended: January 2022
              Amended: July 2016
              Added: October 2010

            • AML-5.1.6A

              [This Paragraph was deleted in January 2022].

              Deleted: January 2022
              Added: January 2021

        • AML-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 2010

              • AML-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 2020

              • AML-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 2020

              • AML-6.1.1C

                Crypto-asset licensees relying solely on the public information available on the blockchain or other type of distributed ledger underlying the accepted 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 2020

            • Compliance 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 2010

              • AML-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 2010

            • Training 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 2010

            • Access

              • 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 authorised Persons.

                October 2010

        • AML-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 listed Security 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 the Person who owns such stake.

              Amended: July 2011
              October 2010

            • AML-7.1.2

              [This Paragraph was deleted in October 2019].

              Deleted: October 2019
              Amended: July 2011
              October 2010

            • AML-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 2010

            • AML-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 2010

          • AML-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 2010

          • AML-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 of Securities 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 2010

          • AML-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 2010

        • AML-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 2010

            • AML-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 the Capital 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 the Capital 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 2020

        • AML-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 or Persons domiciled in countries or territories which are:

              (a) Identified by the FATF as being 'non-cooperative'; or
              (b) Notified to Capital Market Licensees from time-to-time by the CBB.
              Amended: January 2022
              Added: October 2010

            • AML-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 2010

            • AML-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 2016

            • AML-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 2016

          • AML-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 2017

            • AML-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 2010

            • AML-9.2.2

              [This Paragraph was deleted in January 2018].

              Deleted: January 2018
              October 2010

            • AML-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 2010

            • AML-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 the Capital Market Licensee has on Persons 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 2010

            • AML-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 the Capital Market Licensees.

              Amended: January 2022
              Added: October 2010

            • AML-9.2.6

              All reports or notifications under this section must be made to the CBB's Compliance Directorate.

              October 2010

            • AML-9.2.7

              See section AML-4.3 for the Compliance Directorate's contact details.

              October 2010

          • AML-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 with Persons or entities who might come under Article 1, Paragraphs (c) and (d) of UNSCR 1373, Capital Market Licensees must not deal with any Persons or entities designated by the CBB as potentially linked to terrorist activity.

              Amended: January 2022
              Added: October 2010

            • AML-9.3.2

              The CBB from time-to-time issues to Capital Market Licensees lists of designated Persons and entities believed linked to terrorism. Capital Market Licensees are required to verify that they have no dealings with these designated Persons and entities, and report back their findings to the CBB. Names designated by the CBB include Persons and entities designated by the United Nations, under UN Security Council Resolution 1267 ('UNSCR 1267').

              Amended: January 2022
              Added: October 2010

            • AML-9.3.3

              Capital Market Licensees must report to the Relevant Authorities, using the procedures contained in section AML-4.2, details of any accounts or other dealings with designated Persons and entities, and comply with any subsequent directions issued by the Relevant Authorities.

              Amended: January 2022
              Added: October 2010

        • AML-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 2010

            • AML-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 2010

            • AML-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 2010

            • AML-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 2010

        • AML-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 2010

              • AML-11.1.2

                The Relevant Authorities in Bahrain believe that the principles established by these Recommendations should be followed by Capital Market Licensees in all material respects, as representing best practice and prudence in this area.

                Amended: January 2022
                Amended: July 2016
                Added: October 2010

        • AML-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 2010

            • AML-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 2010

            • AML-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 2010

            • AML-12.1.4

              Capital Market Licensees must ensure that a Person of sufficient seniority is given overall responsibility for the prevention, detection and remedying of fraud within the organisation.

              Amended: January 2022
              Added: October 2010

            • AML-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 2010

            • AML-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 2010

      • TC — 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 that approved persons including individuals undertaking controlled 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 2022

              • TC-A.1.2

                Capital market licensees and approved persons should observe high standards of integrity and fair dealing, and be honest and straightforward in their dealings with clients. Capital market licensees should maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.

                Added: January 2022

              • TC-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 the capital market licensee in a sound and prudent manner. This condition requires that capital market licensees must ensure their employees meet any training and competency requirements specified by the CBB. The approved 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 by approved persons; this Chapter specifies various factors that the CBB takes into account when reaching such decision regarding approval of such persons to act as approved persons by CBB.

                Added: January 2022

            • Legal 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 2022

              • TC-A.1.5

                For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.

                Added: January 2022

          • TC-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 2022

              • TC-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 for approved persons (See Chapter TC-1).

              Added: January 2022

            • TC-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 2022

            • TC-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 2022

            • TC-B.1.4

              The requirements of this Module apply to approved persons in connection with the capital market licensee’s regulated services, or under a contract of service.

              Added: January 2022

            • TC-B.1.5

              In the case of outsourcing arrangements, the capital market licensee should refer to the competency requirements, outlined in Appendix TC-1 for approved persons, for assessing the suitability of the outsourcing provider.

              Added: January 2022

            • TC-B.1.6

              Capital market licensees must satisfy the CBB that individuals undertaking a controlled function position for it or on its behalf are suitable and competent to carry out the tasks assigned to that position.

              Added: January 2022

            • TC-B.1.7

              In implementing this Module, capital market licensees must ensure that individuals appointed/recruited to perform controlled 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 2022

        • TC-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 a capital 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 2022

            • TC-1.1.2

              Paragraph TC-1.1.1 specifies the controlled functions that are common to all categories of capital market licensees under Volume 6. Controlled functions specific to each category of capital market licensee is specified in MAE, CSD, MIR, and CRA Modules. It is the responsibility of the capital market licensee to refer to the respective Module to ascertain whether a particular position is considered a controlled function or not.

              Added: January 2022

            • TC-1.1.3

              A capital market licensee must take reasonable steps to ensure that individuals holding controlled 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 2022

            • TC-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 2022

            • TC-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 2022

            • Board 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-10.1

                Added: January 2022

              • TC-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 2022

            • Chief Executive or General Manager and their Deputies

              • TC-1.1.8

                The chief executive officer or general manager and their deputies (as appropriate) are responsible for the executive management and performance of the licensee within the framework or delegated authorities set by the Board. This is outlined in more details in Paragraph HC-10.6.

                Added: January 2022

            • Chief 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 the capital market licensee in a timely manner.

                Added: January 2022

            • Chief 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 2022

            • Compliance 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 the capital market licensee’s compliance with the requirements of the CBB and other applicable laws and regulations;
                (b) Raising awareness and providing training for the capital market licensee’s staff on compliance issues; and
                (c) Reporting to the capital market licensee’s Board in respect of that responsibility.
                Added: January 2022

            • Chief 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 2022

            • Heads 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 with clients while others do not. Both categories of functions, however, require specific qualifications and experience to meet the objectives as well as compliance requirements of the capital market licensee.

                Added: January 2022

              • TC-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 2022

            • Money Laundering Reporting Officer (MLRO)

              • TC-1.1.15

                The attributes and responsibilities of the MLRO are described more fully in Sections AML 3.1 and AML-3.2.

                Added: January 2022

            • 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 2022

            • Chief 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 2022

          • TC-1.2 TC-1.2 Continuous Professional Development Training (“CPD”)

            • CPD

              • TC-1.2.1

                All individuals holding controlled functions in a capital market licensee must undergo a minimum of 15 hours of CPD per annum.

                Added: January 2022

              • TC-1.2.2

                Where a capital market licensee, based on the nature, scale and complexity of its business, determines that an approved person, by not undergoing the CPD programme for the specific controlled function, on an annual basis, shall not impair the functioning of the capital 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 the approved person undertaking the specific controlled function from the CPD requirement altogether or may recommend that the approved person undergoes the CPD programme at such other frequency (biennial, triennial etc.) as deemed necessary.

                Added: January 2022

              • TC-1.2.3

                The capital market licensee must ensure that an individual appointed as an approved person is supervised and undergoes appropriate review and assessment of his/her performance.

                Added: January 2022

              • TC-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 2022

              • TC-1.2.5

                Supervisors of approved persons should have technical knowledge and relevant skills, e.g. coaching and assessment skills.

                Added: January 2022

        • TC-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 a controlled function, it must satisfy itself, where appropriate, of such individual’s relevant qualifications and experience.

                Added: January 2022

              • TC-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, the capital market licensee must demonstrate to the CBB that full consideration has been given to the qualifications and core competencies for controlled functions as per Appendix TC-1 (See Article 65(b) of the CBB Law).

                Added: January 2022

              • TC-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), the capital 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 2022

              • TC-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 2022

              • TC-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 occupying controlled functions (approved persons).

                Added: January 2022

              • TC-2.1.6

                A capital market licensee proposing to recruit an individual has to satisfy itself of his/her relevant qualifications and experience. The capital 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 the controlled function; and
                (b) Take reasonable steps to obtain sufficient information about the individual’s background, experience, training and qualifications.
                Added: January 2022

            • Assessing Competency

              • TC-2.1.7

                Capital market licensees must not allow an individual to undertake or supervise a controlled function unless that individual has been assessed by the capital market licensee as competent in accordance with this Section.

                Added: January 2022

              • TC-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 of approved persons in MAE, CSD, MIR and CRA Modules.

                Added: January 2022

              • TC-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 specific controlled function.

                Added: January 2022

              • TC-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 similar controlled function.

                Added: January 2022

              • TC-2.1.11

                If a capital market licensee assesses an individual as competent in accordance with TC-2.1.9 to perform a specific controlled function, it does not necessarily mean that the individual is competent to undertake other controlled functions.

                Added: January 2022

              • TC-2.1.12

                A capital market licensee should use methods of assessment that are appropriate to the controlled function and to the individual’s role.

                Added: January 2022

          • TC-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 undertaking controlled functions. It must develop a training plan to address these needs and ensure that training is planned, appropriately structured and evaluated.

              Added: January 2022

            • TC-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 the controlled 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 2022

            • TC-2.2.3

              The training plan of capital market licensees must include a programme for continuous professional development training (“CPD”) for their controlled function.

              Added: January 2022

            • TC-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 2022

            • TC-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 2022

            • TC-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 the capital market licensee’s systems and to review how the licensee ensures that its staff are competent and remain competent for their roles.

              Added: January 2022

            • Maintaining Competence

              • TC-2.2.7

                A capital market licensee must make appropriate arrangements to ensure that approved persons maintain competence.

                Added: January 2022

              • TC-2.2.8

                A capital market licensee should ensure that maintaining competence for an approved 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 2022

              • TC-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 2022

          • TC-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 2022

            • TC-2.3.2

              New applications for approved persons are subject to the requirements of this Module (See Paragraph TC-B.1.3).

              Added: January 2022

            • TC-2.3.3

              Approved persons occupying controlled 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 the approved person move to another controlled function, Paragraph TC-2.3.4 will apply.

              Added: January 2022

            • TC-2.3.4

              In instances, where an approved person in one capital market licensee moves to another capital 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 new capital 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 one capital market licensee moves from one department to another within the same capital market licensee.

              Added: January 2022

          • TC-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 each controlled 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 each approved person.
              Added: January 2022

            • TC-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 2022

            • TC-2.4.3

              A capital market licensee must maintain records of its recruitment and appointment procedures for approved persons for a minimum period of five years following termination of their services or employment with the capital 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 2022

            • TC-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 2022

        • Appendices

          • 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 level
            OR
            (c) A minimum experience of 7 years in business
            Chief 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 Certification
            Compliance 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/or
            4) 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 CBB
            Chief 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 CBB
            The 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 2022

          • Appendix 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, USA
              Added: January 2022

    • Ongoing 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 and CMSPs 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 2011

              • HC-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 2011

              • HC-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 2011

              • HC-A.1.4

                Whilst this Module follows best practice, it is nevertheless considered as the minimum standard to be applied.

                July 2011

            • The 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 2011

              • HC-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 2011

              • HC-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 be non-Executive Directors.

                July 2011

            • Application 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 2011

              • HC-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 2011

            • Structure 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 and CMSPs.

                July 2011

              • HC-A.1.11

                The Module also incorporates other high-level controls and policies that apply in particular to listed companies and CMSPs.

                July 2011

            • The 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 and CMSP 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 2011

            • Monitoring 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 and CMSP's shareholders and the CBB.

                July 2011

              • HC-A.1.14

                The listed company and CMSP's board should support entrepreneurship but also ensure effective monitoring and control. Thus it is important that the board be composed of both Executive Directors and non-Executive Directors, including fully independent non-Executive Directors. It is the board's responsibility to see to the accuracy and completeness of the listed company and CMSP'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 2011

              • HC-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 or CMSP'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 the listed company or CMSP's position, bearing in mind in particular the size and complexity of the listed company or CMSP and the nature of the risks and challenges it faces.

                July 2011

            • Legal 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 and CMSPs (including, where relevant, approved persons or those undertaking controlled functions).

                July 2011

              • HC-A.1.17

                For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.

                July 2011

            • Effective Date

              • HC-A.1.18

                This Module is effective on 1st September 2011. All listed companies and CMSP's to which the Module HC applies should be in full compliance by the financial year end 2011. At every listed company and CMSP'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 the listed company or CMSP's governance. Where possible, the listed companies and CMSP 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 2011

          • HC-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 2011

            • HC-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 all CMSPs who are not listed companies.

              July 2011

            • HC-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 2011

            • Overseas Capital Market Service Providers

              • HC-B.1.3

                Overseas listed companies and CMSPs 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 2011

              • HC-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 2011

          • HC-B.2 HC-B.2 Branches and Subsidiaries

            • HC-B.2.1

              Bahraini listed companies and CMSPs 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 2011

            • HC-B.2.2

              Bahraini listed companies and CMSPs 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 2011

            • HC-B.2.3

              Where a listed companies or CMSP is unable to satisfy the CBB that its subsidiaries 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 the listed company, CMSP and other group members. Where weaknesses in controls are assessed by the CBB to pose a major threat to the stability of the listed company or CMSP, then its authorisation may be called into question.

              July 2011

          • HC-B.3 HC-B.3 Definitions

            • HC-B.3.1

              Approved Person(s)Approved Persons are individuals holding certain specified positions in CBB 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's Approved 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 2011

            • HC-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 includes SROs and their members. For the purposes of this Module, listed companies are not included in the definitions of CMSP companies; they are subject to different requirements under this Module (CMSPs only have to comply with Chapter 10 while listed companies must comply with all Chapters other than Chapter 10).

              Amended: January 2012
              July 2011

            • HC-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 2011

            • HC-B.3.4

              "Company" for the purpose of this Module means listed company.

              July 2011

            • HC-B.3.5

              "Connected Party Transactions" means a transaction between the CMSP and a 'connected person'.

              July 2011

            • HC-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 2011

            • HC-B.3.7

              "Controlled Functions" means a function carried on by an approved person in relation to a listed company or CMSP that requires prior CBB approval, as per the relevant licensing Module.

              July 2011

            • HC-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 2011

            • HC-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 or CMSP excludes sovereigns such as government owned entities and government ministries.

              July 2011

            • HC-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 2011

            • HC-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 2011

            • HC-B.3.12

              "Non-Executive Director" means any director who is not an Executive Director.

              July 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 other Securities 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 such Securities;
              (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 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) Islamic Securities, being those financial instruments that are Shari'a compliant.
              July 2011

            • HC-B.3.16

              "Senior Manager/Management" refers to individuals occupying the position of CEO or head of function.

              July 2011

            • HC-B.3.17

              "SRO" means a self-regulatory organisation being a Licensed Exchange, Licensed Market Operator, or a Licensed Clearing House under Module MAE and/or Module CSD respectively.

              July 2011

            • HC-B.3.18

              "Subsidiary" means a company or other enterprise controlled by another company or enterprise (the parent or the holding company).

              July 2011

        • HC-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 2011

          • HC-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 2011

            • HC-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 board remuneration 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 of securities;
              (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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 each non-Executive Director and should require each non-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-1.4.3

              Non-executive directors must be fully independent of management and must constructively scrutinise and challenge management, including the management performance of executive directors.

              July 2011

            • HC-1.4.4

              At least half of a company's board should be non-executive directors and at least three of those persons should be independent directors. (Note the exception for controlled companies in paragraph HC-1.5.2.)

              July 2011

            • HC-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 the CEO, so that there will be an appropriate balance of power and greater capacity of the board for independent decision-making.

              Amended: January 2012
              July 2011

            • HC-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 2011

            • HC-1.4.6A

              The Chairman and/or Deputy Chairman must not be the same person as the Chief Executive Officer.

              Added: January 2012

            • HC-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 2011

            • HC-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 only independent directors are present, except as may otherwise be determined by the independent directors themselves.

              July 2011

            • HC-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 2011

          • HC-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 2011

            • HC-1.5.2

              In companies with a controlling shareholder, at least one-third of the board must be independent directors. Minority shareholders must generally look to independent directors' diligent regard for their interests, in preference to seeking specific representation on the board.

              July 2011

            • HC-1.5.3

              In companies with a controlling shareholder, both controlling and non-controlling shareholders should be aware of controlling 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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-1.8.4

              Committees may be combined provided that no conflict of interest might arise between the duties of such committees.

              July 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-1.9.4

              The board should report to the shareholders, at each annual shareholder meeting, that evaluations have been done.

              July 2011

        • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-2.4.3

              Any conflict transaction or contract that could be considered material should be tabled at a shareholders meeting for approval.

              July 2011

          • HC-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 2011

        • HC-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 2011

          • HC-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 2011

            • HC-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 that senior 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 2011

            • HC-3.2.3

              Companies should set up an internal audit function, which reports directly to the Audit Committee and administratively to the CEO.

              July 2011

            • HC-3.2.4

              The CEO must not be a member of the audit committee

              July 2011

          • HC-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 2011

            • HC-3.3.2

              A majority of the audit committee must have the financial literacy qualifications stated in Appendix A.

              Amended: January 2012
              July 2011

            • HC-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 2011

          • HC-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 2011

        • HC-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 2011

          • HC-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 2011

            • HC-4.2.2

              The committee must include only independent directors or, alternatively, only non-executive directors of whom a majority must be independent directors and the chairman must be an independent 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 2011

            • HC-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 2011

          • HC-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 2011

          • HC-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 an independent director, a statement that the board has determined that the criteria of independent 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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

        • HC-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 2011

          • HC-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's remuneration policies for the board of directors and senior management (holding controlled functions), which must be approved by the shareholders and be consistent with the corporate values and strategy of the company;
              (b) Make recommendations regarding remuneration policies and amounts for specific persons to the whole board, taking account of total remuneration including salaries, fees, expenses and employee benefits; and
              (c) Recommend board member remuneration based on their attendance and performance.
              Amended: January 2012
              July 2011

            • HC-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 2011

            • HC-5.2.3

              The committee may be merged with the nominating committee.

              July 2011

          • HC-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 2011

            • HC-5.3.2

              The committee should include only independent directors or, alternatively, only non-executive directors of whom the majority are independent directors and the chairman is an independent 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 2011

            • HC-5.3.3

              [This Paragraph was deleted in January 2012].

              Deleted: January 2012

          • HC-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 2011

          • HC-5.5 HC-5.5 Non-Executive Directors' Remuneration

            • HC-5.5.1

              Remuneration of non-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-5.6.4

              All share incentive plans must be approved by the shareholders.

              July 2011

            • HC-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 2011

            • HC-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 2011

        • HC-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 2011

          • HC-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) A CEO;
              (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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-6.3.2

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

              (a) The CEO 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 the CMSP'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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 the CEO.

              July 2011

        • HC-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 2011

          • HC-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 2011

            • HC-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 of shares before they purchase. Any changes in voting rights must be subject to approval by those shareholders which are negatively affected.

              July 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-7.2.6

              Votes must be cast by custodians or nominees in a manner agreed upon with the beneficial owner of the shares.

              July 2011

            • HC-7.2.7

              Impediments to cross border voting must be eliminated.

              July 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 or securities; 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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 the controlling shareholders to make considered use of their position and to fully respect the rights of minority shareholders.

              July 2011

        • HC-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 2011

          • HC-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 2011

          • HC-8.3 HC-8.3 Disclosure as a Company

            • HC-8.3.1

              The company must disclose in its annual report the following:

              July 2011

            • HC-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 2011

            • HC-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 aggregate remuneration to board members;
              (m) List of senior managers and profile of each;
              (n) Shareholding of senior managers;
              (o) Remuneration policy and aggregate remuneration 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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-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 2011

          • HC-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 2011

            • HC-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 2011

            • HC-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 2011

            • HC-9.2.4

              The Corporate Governance Committee established under chapter HC-9 shall comprise at a minimum of:

              (a) An independent 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) An independent 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 2011

            • HC-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 2011

        • HC-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 a CMSP that it must meet some or all of the requirements of this Module.

              July 2011

            • HC-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 2011

            • Role 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 the CMSP and the shareholders (see HC-10.2).
                July 2011

              • HC-10.1.4

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

                (a) The overall business performance and strategy for the CMSP;
                (b) Causing financial statements to be prepared which accurately disclose the CMSP'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 2011

              • HC-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 2011

              • HC-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 2011

              • HC-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, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

                July 2011

              • HC-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 2011

            • Composition

              • 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 2011

              • HC-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 each non-executive director and should require each non-executive director to inform the board before he accepts any board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the board should not propose the election or re-election of any director who does.

                July 2011

            • Decision 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 2011

              • HC-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 2011

              • HC-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 2011

              • HC-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 2011

            • Directors' 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 2011

              • HC-10.1.16

                Non-executive directors should have free access to the CMSP'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 2011

          • HC-10.2 HC-10.2 Directors and Officers' Loyalty

            • HC-10.2.1

              Directors and officers shall have full loyalty to the CMSP.

              July 2011

            • Personal 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 2012

              • HC-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 the CMSP or use it for his personal profit, not to take business opportunities of the CMSP for himself, not to compete in business with the CMSP, and to serve the CMSP's interest in any transactions with the company in which he has a personal interest.

                July 2011

              • HC-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 2011

            • Avoidance 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 2011

            • Disclosure 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 2011

              • HC-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 a CMSP's director or officer has a personal interest. The board should require such advance approval in every case.
                July 2011

            • Disclosure 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 2011

          • HC-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 2011

            • CEO 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 the CMSP's interim and annual financial statements present a true and fair view, in all material respects, of the CMSP's financial condition and results of operations in accordance with applicable accounting standards.

                Amended: January 2012
                July 2011

          • HC-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 2011

            • Induction 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 2011

              • HC-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 2011

              • HC-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 2011

          • HC-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 2011

              • HC-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 2020

              • HC-10.5.2

                Remuneration of approved persons should be sufficient enough to attract, retain and motivate persons of the quality needed to run the CMSP successfully, but the CMSP should avoid paying more than is necessary for that purpose.

                July 2011

              • Alignment 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 2011

            • Establishment of Management Structure

              • HC-10.6.2

                The board should appoint senior management whose authority must include management and operation of current activities of the CMSP, 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 Officer

                And 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 2011

            • Titles, 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 2011

              • HC-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 the CMSP's name, representing the CMSP's interests in concluding transactions on the CMSP's behalf and giving instructions to other senior managers and CMSP employees;
                (b) The chief financial officer should be responsible and accountable for:
                (i) The complete, timely, reliable and accurate preparation of the CMSP's financial statements, in accordance with the accounting standards and policies of the CMSP (see Paragraph — HC-10.3.2); and
                (ii) Presenting the board with a balanced and understandable assessment of the CMSP'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 the CMSP's operations. This would include a review of the accuracy and reliability of the CMSP's accounting records and financial reports as well as a review of the adequacy and effectiveness of the CMSP's risk management, control and governance processes.
                July 2011

            • Titles, 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 2011

              • HC-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 2011

              • HC-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 2011

          • HC-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 2011

            • Conduct 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 the CMSP'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 2011

              • HC-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 2011

              • HC-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 2011

              • HC-10.7.5

                A CMSP should maintain a company website. The CMSP 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 CMSP may also consider establishing an electronic means for shareholders communications including appointment of proxies. For confidential information, the CMSP should grant a controlled access to such information to its shareholders.

                July 2011

              • HC-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 2011

            • Direct 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 2011

            • Controlling 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 2011

          • HC-10.8 HC-10.8 Corporate Governance Disclosure

            • HC-10.8.1

              The CMSP should disclose its corporate governance.

              July 2011

            • Disclosure 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;
                (b) The CMSP should publish the guidelines on its website, (see HC-10.7.5);
                (c) At each annual shareholders' meeting the board should report on the CMSP'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 the CMSP's website or held at the CMSP's premises on behalf of the shareholders.
                Amended: April 2017
                Amended: January 2012
                July 2011

              • HC-10.8.3

                The CBB may issue a template as a guide for a CMSP's annual meeting corporate governance discussion.

                July 2011

          • HC-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 2011

            • Governance 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 Islamic CMSP should establish a Shari'a Supervisory Board consisting of at least three Shari'a scholars.

                July 2011

        • Appendix A Appendix A Audit Committee

          • Committee Duties

            The Committee's duties shall include those stated in Paragraph HC-3.2.1.

            July 2011

          • Committee 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 2011

          • Committee 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 2011

          • Committee 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 2011

          • Committee 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 2011

          • Committee 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 2011

        • Appendix B Appendix B Nominating Committee

          • Committee Duties

            The committee's duties shall include those stated in rule HC-4.2.1.

            July 2011

          • Committee 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 the CEO, 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 including CEO, 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 2011

          • Committee 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 2011

          • Committee 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 2011

          • Performance 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 2011

        • Appendix C Appendix C Remuneration Committee

          • Committee Duties

            The committee's duties shall include those stated in rule HC-5.2.1.

            July 2011

          • Committee Duties and Responsibilities

            In serving those duties the committee shall consider, and make specific recommendations to the board on, both remuneration policy and individual remuneration packages for the CEO and other senior officers. This remuneration 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 determining remuneration 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 to CEOs at comparable companies, and awards to the CEO 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, administering remuneration plans, or related matters.

            July 2011

          • Committee 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 2011

          • Committee 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 2011

          • Performance 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 2011

    • Dispute 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 2010

            • Legal 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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

          • DRA-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 2010

              • DRA-A.2.2

                [This Paragraph was deleted in April 2020].

                Deleted: April 2020
                Added: July 2010

              • DRA-A.2.3

                [This Paragraph was deleted in April 2020].

                Deleted: April 2020
                Added: July 2010

              • DRA-A.2.4

                [This Paragraph was deleted in April 2020].

                Deleted: April 2020
                Added: July 2010

              • DRA-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.2.6

                This Module supersedes the following provisions contained in circulars or other regulatory instruments:

                Circular/ other references Provision Subject
                BSE Internal Regulation Chapter 7
                (Articles 56 to 72)
                Disputes and arbitration
                  Chapter 8
                (Articles 73 to 92)
                Disciplinary Board
                     
                     
                     

          • 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 2010

        • DRA-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 any person(s) within Bahrain in relation to securities 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 any person(s) outside Bahrain in relation to securities 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 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 conduct or behaviour 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.
                July 2010

              • DRA-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 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, members of SROs, investment firms, collective investment undertakings, 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.

                July 2010

          • DRA-B.2 DRA-B.2 [This Section was deleted in April 2020]

            Deleted: April 2020
            Added: July 2010

            • DRA-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 2010

            • DRA-B.2.2

              "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 includes a member of an SRO.

              July 2010

            • DRA-B.2.3

              "CMSD" means the Capital Markets Supervision Directorate of the Central Bank of Bahrain.

              July 2010

            • DRA-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 a CMSP in which the client alleges that he has suffered, or is likely to suffer financial prejudice as a result of the member or CMSP:

              (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 2010

            • DRA-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 an SRO and to coordinate and assist in the administration of disciplinary proceedings in Chapter 4 of this Module.

              July 2010

            • DRA-B.2.6

              "Person" means unless the context requires otherwise, a natural or legal person.

              July 2010

            • DRA-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 other securities 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 such securities;
              (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) Islamic securities, being those financial instruments that are Shari'a compliant.
              July 2010

            • DRA-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 2010

        • DRA-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 2010

            • Internal 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 the CMSPs are informed about its availability.

                July 2010

            • Documenting 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 of CMSPs, either on request, or when they want to make a complaint.
                July 2010

            • Guiding 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 the CMSP;
                (ii) Protect the person the complaint is made against from bias;
                (iii) Emphasis should be placed on resolution not blame;
                (iv) Investigation should be carried out independently of the person 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 the CMSP;
                (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 the CMSP.
                July 2010

            • Internal 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 2010

              • DRA-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 the SRO 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 the CMSP's internal complaint handling procedures and comply with them.
                July 2010

            • Timely 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 the CMSP is not, at that time, in a position to respond and must indicate by when the CMSP will respond.

                If a CMSP fails to respond to a client complaint as above, the CMSP will be liable for appropriate enforcement actions as per the Market Surveillance, Investigation and Enforcement (MIE) Module, including financial penalties.

                July 2010

            • Redress

              • DRA-1.1.8

                Where a CMSP decides that redress in the form of compensation is appropriate in resolving a complaint, the CMSP must provide the complainant with fair compensation and must comply with any offer of compensation made by it which the complainant accepts.

                July 2010

              • DRA-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 2010

            • Recording of Complaints

              • DRA-1.1.10

                A CMSP 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 whether referred to arbitration; and
                (d) All correspondence in relation to the complaint. Such records must be retained by the CMSP for a period of 10 years from the date of receipt of the complaint.
                July 2010

            • Unresolved 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 the CMSP; and
                (b) Where a complaint relates to a member of an SRO, the complainant may lodge an unresolved complaint, in writing, with the SRO giving full particulars of the matter concerned.
                July 2010

          • DRA-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 2010

            • DRA-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 of Securities: Complaint regarding non-receipt of:
              (i) Securities after dematerialization;
              (ii Securities after transfer/transmission;
              (iii) Duplicate certificate relating to securities.
              (d) Miscellaneous: Complaint regarding non-receipt of copy of the Annual report or AGM/EGM notice.
              July 2010

            • Unresolved 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 of securities; and
                (b) A complainant may lodge an unresolved complaint, in writing, with the relevant SRO as per section DRA-2.1 giving full particulars of the matter concerned.
                July 2010

        • DRA-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 of securities and shall endeavour to facilitate resolution of the complaints.

              July 2010

            • DRA-2.1.2

              In order for an unresolved complaint to be considered by the SRO, the complaint must be lodged with the SRO within 6 months of the receipt by the complainant of the CMSP's response referred to in rule DRA-1.1.7 or section DRA-1.2 and within 12 months of the conduct by the CMSP giving rise to the complaint.

              July 2010

            • DRA-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 2010

            • DRA-2.1.4

              The SRO may request the CMSP and the complainant to provide copies of all relevant correspondence and documentation that is required to review the complaint. The SRO shall also send a copy of the complaint to the CMSD for information and also send a report on the final resolution of the complaint.

              July 2010

            • DRA-2.1.5

              The SRO shall endeavour to facilitate a resolution of the complaint between the member and the complainant.

              July 2010

            • DRA-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, the SRO shall refer the unresolved complaint to the Arbitration Committee of the SRO.

              July 2010

            • Disputes 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 an SRO (known as 'eligible disputes') subject to the following conditions:

                (a) The CMSP involved in the dispute must be one which is subject to the jurisdiction of an SRO by reason of it being a member of an SRO, or an issuer whose securities are offered for trading (listed) on the SRO;
                (b) The activity or dispute arises out of matters relevant to the CMSP complainant being or having been a client or shareholder of the CMSP;
                (c) The activity to which the complaint relates must be subject to the jurisdiction of the SRO;
                (d) The CMSP has failed to resolve the complaint to the satisfaction of the complainant within 4 weeks of receiving it; and
                (e) The CMSP 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 the SRO.
                July 2010

              • DRA-2.1.8

                All disputes which have not first been raised by a complainant with the CMSP, so as to provide the CMSP with an opportunity to resolve the dispute, will be deemed a complaint and if lodged or attempted to be lodged with the SRO shall be referred back to the CMSP for its due consideration.

                July 2010

              • DRA-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 the CMSP's final reply;
                (e) Complaints that have been settled privately or otherwise between the complainant and the CMSP; and
                (f) Cases which have been subject to a court hearing and for which a court judgment and/or order has been passed.
                July 2010

            • Dispute 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 the SRO, along with the facts of the case and evidence in support of the claims made by the complainant.

                July 2010

            • Time 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 the CMSPs 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 the CMSP, whichever is earlier; and
                (b) No later than a period of 6 months after the CMSP has provided its final reply to the complainant.
                July 2010

              • DRA-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 the CMSP's final reply and which expressly informs the complainant that if he/she disagrees with the CMSP, he/she can contact the SRO 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 the SRO 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 the CMSP would be solely determined by the SRO. The SRO's determination would be binding on the CMSP and the complainant.

                July 2010

            • Investigation of a Dispute

              • DRA-2.1.13

                The SRO shall be entitled to request all relevant data and materials relevant to the dispute from the CMSP and the complainant, and the CMSP and complainant shall provide to the SRO all such information and materials as are relevant to the dispute. Specifically, the SRO shall write to the CMSP, advising it of the dispute referred to it by the complainant and request all relevant data and information.

                July 2010

              • DRA-2.1.14

                The CMSP shall respond to the request referred to in paragraph DRA-2.1.13 and provide a report compiled by the CMSP 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 2010

              • DRA-2.1.15

                The SRO shall conduct any interviews, if deemed necessary, in the sole discretion of the SRO, either via the telephone or in person.

                July 2010

              • DRA-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 the SRO shall refer the investigated dispute to mediation.

                July 2010

              • DRA-2.1.17

                While the SRO is conducting an investigation of a dispute, the SRO may nevertheless seek to promote a resolution of the dispute by agreement between the complainant and the CMSP.

                At all times while the dispute is being investigated by the SRO, the CMSP and the complainant may seek an amicable resolution of the dispute.

                July 2010

            • Dismissing Dispute without Mediation

              • DRA-2.1.18

                The SRO may, subject to the approval of the SRO's Chief Executive Officer, dismiss a dispute where:

                (a) The dispute is in the opinion of the SRO 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 the SRO; 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 the CMSP.

                July 2010

            • Cooperation from Parties

              • DRA-2.1.19

                The SRO:

                (a) Shall receive the full cooperation and assistance of the CMSP and any representative of the CMSP in the investigation of the dispute;
                (b) May require from the CMSP and any representative of the CMSP 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 the CMSP and/or such of the CMSP's representatives as it deems necessary to attend interviews or to provide written statements.

                The CMSP shall provide the SRO with all relevant data, information and materials as are relevant to the dispute to enable the SRO to comprehensively mediate the dispute, and shall attend or ensure that its representative attends all such interviews as the SRO has requested the CMSP and/or its representative to attend. The CMSP shall at all times comply, and shall ensure that all its officers, representatives and/or agents comply with all instructions and determinations made by the SRO and such officers and employees of the SRO are duly authorised.

                July 2010

              • DRA-2.1.20

                The SRO shall endeavour to complete the deliberation within a reasonable time, taking into account the complexity of the dispute.

                July 2010

            • Referring 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, the CMSP or the complainant can opt to have the dispute proceed to Arbitration in the manner set out in Chapter 3.

                July 2010

              • DRA-2.1.22

                Where a dispute is not resolved by the SRO through mediation, the CMSP will be informed and afforded a final opportunity to resolve the dispute. If the CMSP does not resolve the dispute, the SRO shall refer the matter to the Arbitration Committee and initiate Arbitration proceedings, as per Chapter 3 of this Module.

                July 2010

          • DRA-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 the SROs, 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 any person.

              July 2010

            • DRA-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 the SRO. Some of the factors that could be considered by the SRO 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 2010

            • DRA-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 the CMSD of the CBB.

              July 2010

            • DRA-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 2010

            • DRA-2.2.5

              The SRO's report to the CMSD shall include:

              (a) Facts of the case;
              (b) Laws, rules and regulations, or business rules of the SRO 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 the SRO.
              July 2010

            • DRA-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 the CMSD 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 2010

            • DRA-2.2.7

              The CMSD will consider any report referred to in rules DRA-2.2.3 and DRA-2.2.6 from the SRO, along with the information, records and data available with the CMSD for the purposes of market surveillance, investigation and enforcement functions, as per the Market Surveillance, Investigation and Enforcement Module (MIE Module).

              July 2010

        • DRA-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 2010

            • DRA-3.1.2

              The Arbitration Committee shall be responsible for settling all disputes between CMSPs and, between CMSPs and their customers relating to transactions executed through the SROs or regulated activities undertaken by the CMSPs.

              July 2010

            • DRA-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 2010

            • DRA-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 2010

            • DRA-3.1.5

              All SROs shall have an Arbitration Cell and the Arbitration Cell of the SRO 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 2010

            • DRA-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 2010

            • DRA-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 2010

            • DRA-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. The Arbitration Cell shall notify all parties of the date of the hearing, along with a copy of the arbitration petition.

              July 2010

            • DRA-3.1.9

              All documents relating to the arbitration and notices affected by the Arbitration Cell shall be sent by registered mail.

              July 2010

            • DRA-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 2010

            • Representation

              • DRA-3.1.11

                (a) A party may attend arbitration proceedings in person or be represented by any other person;
                (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 other person authorised by it;
                (c) A party shall send the name and address of its representative (if any) or other person (if any) authorised by it under (a) or (b) (as the case may be) to the other party, with a copy sent to the Arbitration Cell for filing, as soon as reasonably practicable after they have been decided on; and
                (d) A party shall notify the Arbitration Cell and the other party immediately of any change of its representative or person authorised by it, or any change in the name or address of the representative or person authorised by it.
                July 2010

            • Oath and Affirmation

              • DRA-3.1.12

                All evidence shall be given under oath or affirmation.

                July 2010

              • DRA-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 2010

            • Rules 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 the Arbitration 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 the Arbitration Cell as follows:
                (i) Where a party submits documents or information during a hearing, one copy shall be sent to the Arbitration 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 the Arbitration Cell; and
                (e) The Arbitration Committee may appoint any legally qualified person to advise the Arbitration Committee on any matter relating to the arbitration.
                July 2010

            • Record 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 2010

            • Statement 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 2010

            • Statement 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 2010

            • Amendments 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 2010

            • Time 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 2010

            • Evidence

              • 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 2010

              • DRA-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 2010

              • DRA-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 2010

            • Hearing 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 2010

            • Default

              • 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 2010

            • Consolidation 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 2010

            • Jurisdiction

              • 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 2010

            • Rules 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 the Arbitration Cell for filing; and
                (d) An award made under (a) is final and binding on the parties.
                July 2010

            • Termination 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 the Arbitration Cell for filing; and
                (d) An order made under (a) is final and binding on the parties.
                July 2010

            • Form 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 the Arbitration Cell for filing;
                (d) The CBB:
                (i) Shall be notified by the Arbitration Cell of any award made in respect of a CMSP; 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 the CMSP is a fit and proper person to be so licensed; and
                (f) An award made by the Arbitration Committee is final and binding on the parties.
                July 2010

            • Correction 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 2010

            • Additional 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 2010

            • Costs

              • 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; and
                4. 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 2010

            • Deposits of Costs

              • DRA-3.1.33

                (a) At any time during the arbitration proceedings, the Arbitration Committee may require any party to deposit with the Arbitration 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, the Arbitration 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 2010

            • Notice 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 2010

            • Interest

              • 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 2010

            • Destruction 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 the Arbitration 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 2010

            • Confidentiality

              • 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 any person, other than the CBB, without the written consent of the Arbitration Committee.
                July 2010

            • Applicable 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 2010

              • DRA-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 2010

              • DRA-3.1.40

                The Arbitration Committee shall decide on the dispute heard by it within a period not exceeding three months.

                July 2010

              • DRA-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 the SRO to carry out the investigation.

                July 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

        • DRA-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 the SRO and issuers of securities with its business rules and listing rules respectively.

              Amended: April 2020
              Added: July 2010

            • DRA-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 2010

            • DRA-4.1.3

              (a) Disciplinary action is an important activity for the SROs 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, the SRO shall seek to:
              (i) Deter future breaches by conveying clear messages that certain conduct is unacceptable and will not be tolerated by the SRO 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 2010

            • Disciplinary 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 the SRO and determine penalties to be imposed against the members of the SRO and issuers of securities.

                Amended: April 2020
                Added: July 2010

            • Constitution 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 2010

                • DRA-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 2020

                • DRA-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 2020

            • Terms 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 the SRO on all disciplinary matters relating to the members and issuers of securities;
                (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 the SRO's senior management from time-to-time;
                (ii) To convene and conduct hearings of charges against member(s) of an SRO or an issuer(s) of a security 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 an SRO or an issuer(s) of a security, against whom charges are so proven, provided that such penalty shall be within the range of penalties set out in the rules of the SRO and the "Disciplinary Procedures" approved by the SRO's senior management from time-to-time;
                (iv) To summon member(s) of an SRO or an issuer(s) of a security 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 an SRO on any proposals for the improvement of those procedures which the Disciplinary Committee considers necessary; and
                (vi) To request a member(s) of an SRO or an issuer(s) of a security or their employees to produce their books and records for inspection by the Disciplinary Committee;
                (c) To liaise with the CMSD as necessary in relation to its powers and duties, or as the CMSD may require;
                (d) To review the provisions of the rules of the SRO relating to the disciplinary matters of a member(s) of an SRO or an issuer(s) of a security 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 the SRO and the CBB;
                (e) To submit written and/or oral reports to the board of the SRO or to the CMSD 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 the SRO or CMSD.
                Amended: April 2020
                Amended: January 2020
                Added: July 2010

            • Penalties

              • 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 the CMSP'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 whose securities are admitted for trading;
                (f) Suspension of a CMSP's membership for a period not exceeding four months;
                (g) Cancellation of membership of a CMSP, and any other person with a similar status membership; or
                (h) Any other penalty available, as per the rules of the SRO.
                Amended: April 2020
                Added: July 2010

              • DRA-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 2010

              • DRA-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 the SRO, or where the violation has been referred by the CBB for investigation.

                Amended: April 2020
                Added: July 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 the Disciplinary Action Cell must sign the record.

                Amended: April 2020
                Added: July 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-4.1.20

                [This Paragraph was deleted in April 2020].

                Amended: April 2020
                Added: July 2010

              • DRA-4.1.21

                [This Paragraph was deleted in April 2020].

                Amended: April 2020
                Added: July 2010

              • DRA-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 2010

              • DRA-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 2010

              • DRA-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 2020

          • DRA-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 2010

            • DRA-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 2010

              • DRA-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 2020

              • DRA-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 2020

            • Terms 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 the SROs; 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 of SROs and issuers of securities and their representatives or employees to attend and make representations before the Disciplinary Appeals Committee;
                (iii) To request members of SROs and issuers of securities 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 2010

              • DRA-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 2010

        • DRA-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 2010

    • International 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 2009

                • ICO-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 2009

              • Legal 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 2009

                • ICO-A.1.4

                  Article 111 of the CBB Law provides the CBB with the power to obtain information from licensees.

                  Adopted February 2009

                • ICO-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 2009

                • ICO-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 2009

                • ICO-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 2009

            • ICO-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 2009

            • ICO-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 2009

          • ICO-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 2009

            • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

              • ICO-B.2.7

                "Persons" means a natural or legal person, or unincorporated entity or association, including corporations and partnerships.

                Adopted February 2009

          • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

              • Other 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 2009

                • ICO-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 2009

              • Complaints 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 2009

          • ICO-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 2009

              • ICO-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 2009

            • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

              • ICO-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 2009

            • ICO-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 2009

          • ICO-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 2009

            • ICO-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 2009

              • ICO-3.2.2

                Reciprocity requirements should not be a strict precondition for the exchange of information.

                Adopted February 2009

            • ICO-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