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  • CIU-B CIU-B Scope of Application

    • CIU-B.1 CIU-B.1 Application

      • CIU-B.1.1

        Module CIU applies to all relevant persons, with respect to collective investment undertakings ('CIUs') that are:

        (i) Domiciled in the Kingdom of Bahrain (irrespective of the jurisdiction in which they are offered); and
        (ii) Domiciled in an overseas jurisdiction, and offered to investors resident in Bahrain.

      • CIU-B.1.2

        The terms relevant persons, collective investment undertakings, Bahrain domiciled CIUs and overseas domiciled CIUs are as defined in Sections CIU-B.2, CIU-B.3 and CIU-B.4 respectively.

      • CIU-B.1.3

        No person may establish a Bahrain domiciled CIU, unless the CIU is either authorised or registered, as required under this Module.

      • CIU-B.1.4

        No person may offer CIU holdings to investors resident in the Kingdom of Bahrain, unless the CIU concerned is either authorised or registered, as required under this Module.

      • CIU-B.1.5

        For the purposes of this Module, 'offering' CIU holdings means, by way of business, soliciting investors to purchase holdings, by whatever means. (These may include, but are not limited to, advertising in print or other media, or use of the telephone, face-to-face contact, e-mail or internet.) Such activity would be viewed as offering holdings to investors resident in Bahrain, where it could reasonably be viewed as addressed to Bahrain residents (e.g. advertising in Bahrain print media, or addressing communications to Bahrain residents).

      • CIU-B.1.6

        For the purposes of this Module, holdings mean the unit of measurement of the beneficial interest of participants in a CIU, by whatever name it is called (including 'units' and, in the case of investment trusts or companies, shares). Each holding (which may be in fractions of a holding) represents a right to the assets of the CIU.

    • CIU-B.2 CIU-B.2 Relevant Persons

      • CIU-B.2.1

        A relevant person, for the purpose of Module CIU, is any person:

        (a) Acting as the operator, manager, administrator, or custodian of a CIU subject to this Module; or
        (b) Offering CIU holdings to investors resident within the Kingdom of Bahrain.

      • CIU-B.2.2

        CIUs subject to this Module are those defined in Rule CIU-B.1.1, namely, CIUs that are:

        (i) Domiciled in the Kingdom of Bahrain (irrespective of the jurisdiction in which they are offered); and
        (ii) Domiciled in an overseas jurisdiction, and offered to investors resident in Bahrain.

      • CIU-B.2.3

        Note that relevant persons undertaking in Bahrain the activity of an operator, manager, administrator or custodian, are also required to hold an appropriate CBB license, in addition to complying with the requirements contained in this Module. These licensing requirements can be found in CBB Rulebook Volumes 1, 2 and 4 (which deal, respectively, with conventional bank licensees, Islamic bank licensees, and investment firm licensees).

      • CIU-B.2.4

        Conversely, relevant persons undertaking outside Bahrain the activity of an operator, manager, administrator or custodian are not required to hold a CBB license, in addition to complying with the requirements contained in this Module. However, to be authorised, Bahrain domiciled retail CIUs and Bahrain domiciled expert CIUs must satisfy the administration and custody requirements prescribed in this Module (see Section CIU-1.4).

      • CIU-B.2.5

        The activity of offering CIU holdings to investors resident in Bahrain is a regulated activity (that of dealing in financial instruments). As such, it requires the appropriate CBB license to be held (see CBB Rulebook Volumes 1, 2 and 4). It is therefore not possible to offer CIU holdings to investors resident in Bahrain, on a 'cross-border' basis from outside Bahrain. Where an overseas operator of a CIU wishes to offer an overseas domiciled CIU to investors resident in Bahrain, they must themselves hold the appropriate CBB license or appoint an appropriate CBB licensee as their distributor — see also Rule CIU-4.1.5.

    • CIU-B.3 CIU-B.3 Collective Investment Undertakings ('CIUs')

      • CIU-B.3.1

        Collective investment undertakings ('CIUs') are undertakings:

        (i) The sole object of which is the collective investment of capital raised from the public in financial instruments or other assets and which operates on the basis of risk-spreading; and
        (ii) The holdings of which are re-purchased or redeemed, directly or indirectly, out of those undertakings' assets.

      • CIU-B.3.2

        In the case of CIUs whose holdings are listed and traded on a stock exchange (such as a closed-ended fund), actions taken by the CIU to align the stock exchange value of its holdings and its net asset value is taken as equivalent to the repurchase or redemption specified in Rule CIU-B.3.1(ii). The definition thus recognises both open-ended funds and closed-ended funds: unit trusts, investment trusts, mutual funds, SICAV and collective investment schemes are all examples of CIUs. As further specified in Section CIU-B.4, CIUs may be constituted under contract law (as common funds managed by management companies); trust law (as unit trusts); or under statute (as investment companies).

      • CIU-B.3.3

        Closed-ended funds are CIUs with a limited number of holdings. Where the fund vehicle is a company, holdings can take the form of shares. New holdings are rarely issued after the fund is launched and are not normally redeemable until the fund liquidates. Typically an investor can acquire or dispose of holdings in a closed-ended fund by buying or selling them on a secondary market, from a market intermediary or other investor, rather than by dealing with the CIU itself.

      • CIU-B.3.4

        The following arrangements do not fall within the definition given in Rule CIU-B.3.1 above:

        (a) A contract of insurance, insurance linked investment products or investments managed as part of a takaful contract of insurance;
        (b) Unrestricted or restricted investment accounts offered by Islamic bank licensees;
        (c) Unilateral arrangements to hold or manage assets on a discretionary basis;
        (d) Arrangements entirely between bodies corporate who are members of the same group, or entirely between family members;
        (e) Pension, annuity and other employee benefit products, organised and managed for the benefit of employees or for another corporate body, which are governed by separate laws of the Kingdom of Bahrain (e.g. GOSI);
        (f) Structured products;
        (g) Cash savings schemes; and
        (h) Special Purpose Vehicles used to issue debt securities.

      • CIU-B.3.5

        Where a person is in any doubt as to whether a particular product or structure falls within the definition of a CIU given in Rule CIU-B.3.1 above, they must refer the matter to the CBB.

      • CIU-B.3.6

        Where a CIU is structured as a series of separate offerings, such as an umbrella fund with a series of sub-funds, whereby each is a separate offering and financially independent of others established within the same legal vehicle, each sub-fund shall be treated as a separate CIU.

      • CIU-B.3.7

        The consequence of Rule CIU-B.3.5 above is that each sub-fund, or separate offering, requires a separate authorisation or registration (as the case may be), and the operator of the CIU in question — together with the directors or trustees of the CIU (as appropriate) — are required to ensure that each sub-fund or separate offering complies with the applicable rules prescribed in this Module.

    • CIU-B.4 CIU-B.4 Bahrain and Overseas Domiciled CIUs

      • CIU-B.4.1

        Bahrain domiciled CIUs are undertakings where the legal form of the CIU is established under the laws of the Kingdom of Bahrain.

      • CIU-B.4.2

        Bahrain domiciled CIUs may be constituted either as:

        (a) Common funds, established under the law of contract;
        (b) Trusts, established under trust law; or
        (c) Investment companies, established under company law.

      • CIU-B.4.3

        Bahrain domiciled retail CIUs and Bahrain domiciled expert CIUs must be authorised by the CBB prior to being established. Bahrain domiciled exempt CIUs are required only to register with the CBB (see Section CIU-3.2). Definitions of retail CIUs, expert CIUs and exempt CIUs are provided in Section CIU-B.5.

      • CIU-B.4.4

        Overseas domiciled CIUs are undertakings that fall outside the definition provided in Rule CIU-B.4.1.

      • CIU-B.4.5

        Overseas domiciled CIUs are only impacted by the requirements contained in this Module, if they are offered to investors resident in the Kingdom of Bahrain (see Section CIU-B.1).

      • CIU-B.4.6

        Overseas domiciled CIUs must be authorised by the CBB prior to being offered to investors resident in the Kingdom of Bahrain, unless they are domiciled in a recognised jurisdiction, in which case they are only require to register with the CBB (see Section CIU-B.6). Overseas domiciled exempt CIUs, regardless of the jurisdiction in which they are domiciled, are required only to register with the CBB (see Section CIU-B.6).

    • CIU-B.5 CIU-B.5 Categories of CIUs

      • Retail CIUs

        • CIU-B.5.1

          Retail CIUs are CIUs that may be offered to all types of investors.

        • CIU-B.5.2

          The requirements in this Module are framed such that retail CIUs are subject to relatively detailed requirements, including restrictions on the types of financial instruments or other assets that may be held in the CIU, in order to limit risks to the general investor.

      • Expert CIUs

        • CIU-B.5.3

          Expert CIUs are CIUs that may be offered only to expert investors, and impose a minimum initial investment of USD 10,000 (or equivalent in foreign currency).

        • CIU-B.5.4

          Expert CIUs are subject to less restrictive requirements than retail CIUs: specifically, expert CIUs have greater investment flexibility, notably in terms of asset classes and risk concentration limits. They therefore potentially offer higher risks and are therefore only suitable for expert investors, who are better able to assess those risks than less sophisticated investors.

        • CIU-B.5.5

          The minimum initial investment requirement specified in Rule CIU-B.5.3 means that the first payment made by an investor into the CIU must be at least USD 10,000 (or its equivalent in foreign currency). Subsequent investments may be for smaller amounts.

        • CIU-B.5.6

          Expert investors are:

          (a) Individuals holding financial assets (either singly or jointly with their spouse) of USD 100,000 or more;
          (b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 100,000; or
          (c) Governments, supranational organisations, central banks or other national monetary authorities, local authorities and state organisations.
          Amended: July 2007

      • Exempt CIUs

        • CIU-B.5.7

          Exempt CIUs are largely unregulated CIUs that may be offered only to accredited investors, and impose a minimum initial investment of USD 100,000 (or equivalent in foreign currency).

        • CIU-B.5.8

          Exempt CIUs are only regulated to the extent that they must register with the CBB prior to being offered to investors; may only be offered to accredited investors; and are subject only to high-level disclosure and reporting requirements. They are not subject to any restrictions on their investment policies, as a result of which they may exhibit high risk characteristics, such as high levels of leverage and the taking of large speculative positions. Because of this, exempt CIUs may only be offered to a highly restricted investor base (i.e. those defined as accredited investors).

        • CIU-B.5.9

          The minimum initial investment requirement specificed in Rule CIU-B.5.7 means that the first payment made by an investor into the CIU must be at least USD 100,000 (or its equivalent in foreign currency). Subsequent investments may be for smaller amounts.

        • CIU-B.5.10

          Accredited investors are:

          (a) Individuals holding financial assets (either singly or jointly with their spouse) of USD 1,000,000 or more;
          (b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 1,000,000; or
          (c) Governments, supranational organisations, central banks or other national monetary authorities, and state organisations whose main activity is to invest in financial instruments (such as state pension funds).
          Amended: July 2007

        • CIU-B.5.11

          Note that the definition of accredited investors, compared to that of expert investors, not only imposes higher liquid asset thresholds, but also prevents local authorities, as well as state organisations whose main activity is not related to investing in financial instruments, from investing in exempt funds. Investors that satisfy the definition of accredited investor also satisfy the definition of expert investor.

      • Overseas Domiciled CIUs

        • CIU-B.5.12

          Overseas domiciled CIUs are classified as retail CIUs, expert CIUs, or exempt CIUs, depending on whether they fall under the same or equivalent definitions as those provided in Rules CIU-B.5.1, CIU-B.5.3 and CIU-B.5.7.

        • CIU-B.5.13

          If a relevant person is in doubt as to which of the definitions provided in Rules CIU-B.5.1, CIU-B.5.3 and CIU-B.5.7 an overseas domiciled CIU satisfies, that person must consult with the CBB to confirm the classification of the CIU in question.

    • CIU-B.6 CIU-B.6 Recognised Jurisdictions

      • CIU-B.6.1

        Overseas domiciled retail CIUs and overseas domiciled expert CIUs included in the CBB's list of recognized jurisdictions (as defined in Rule CIU-B.6.3) are required only to register with the CBB, rather than be authorised, prior to their being offered to investors resident in the Kingdom of Bahrain.

      • CIU-B.6.2

        Overseas domiciled CIUs that are not included in the CBB's list of recognised jurisdictions are required to seek authorisation from the CBB prior to their being offered within the Kingdom of Bahrain. Exempt CIUs, regardless of their jurisdiction of domicile, are required only to be registered with CBB, prior to their being offered within the Kingdom of Bahrain.

      • CIU-B.6.3

        Recognised jurisdictions for the purposes of this Module are:

        Jurisdiction Fund Type
        Australia A retail fund established and registered under the Managed Investment CIU provisions of the Corporations Act (Chapter 5 C) 2001 where the Australian Securities and Investments Commission ('ASIC') has approved the constitution of the CIU.
        Bermuda An "investment fund" authorized by the Bermuda Monetary Authority as defined under section 3 of the Investment Funds Act 2006
        Canada A mutual fund which has been authorised by any of the 13 respective Canadian provincial regulatory authorities in accordance with National Instrument 81-101 and National Instrument 81-102 issued by the Canadian Securities Administrators (CSA).
        Cayman Islands A mutual fund that is licensed by the Cayman Islands Monetary Authority under the Mutual Funds Law (2003 Revision) and the Mutual Funds (Amendment) Regulations 2006.
        European Economic Area (see list below) A UCITS compliant fund or CIU, authorised by the relevant EEA State's regulator as a UCITS fund or CIU.
        Other GCC countries (see list below) Any fund incorporated in another GCC member state, authorised and supervised by the central bank or other appropriate regulatory authority, to a standard equivalent to those in this Module.
        Guernsey Any authorised CIU (within the meaning of the Collective Investment CIUs (Class A) Rules 2002, as amended by the Collective Investment CIUs (Class A) Rules 2000 (Amendment) Rules 2003), managed in and authorised under the law of Guernsey.
        Ireland The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above): non-UCIT funds licensed by the Financial Regulator under the Investment Funds, Companies and Miscellaneous Provisions Act 2005.
        Isle of Man Any CIU which is an authorised CIU within the meaning of the Financial Supervision Act 1988 (an Act of Tynwald) (as last amended by the Corporate Service Providers Act 2000), where the CIU is managed in and authorised under the law of the Isle of Man.
        Jersey Any CIU which is a recognised fund within the meaning of the Collective Investment Funds (Recognised Funds) (Rules) (Jersey) Order 2003, managed in and authorised under the law of Jersey.
        Luxembourg The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above): (a) Undertaking for Collective Investments (UCIs) as registered under Part II of the Law of 1988 Relating to Undertakings for Collective Investment; and (b) Funds registered under the Law Of 13th February, 2007 Relating To Specialised Investment Funds.
        New Zealand A unit trust authorised under the Unit Trusts Act 1960 and in accordance with the interpretation of section 2 of that act.
        Singapore A collective investment CIU authorised by the Monetary Authority of Singapore under section 286 of the Securities and Futures Act, and whose units may be offered to the general public.
        South Africa A collective investment CIU which is registered with the Financial Services Board under the Collective Investment CIUs Control Act (Act 45 of 2002) of 2002 ("CISCA").
        Switzerland A securities fund which corresponds to a UCITs fund in accordance with the Swiss Investment Fund Act and where the manager is licensed by the Swiss Federal Banking Commission.
        United Kingdom The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above):
        (a) Unit trust CIUs authorised under section 243 of the Financial Services and Markets Act 2000 (FSMA), authorised open ended investment companies incorporated by virtue of regulations made under section 262 of FSMA in respect of which an authorisation order is in force; and
        (b) Authorised Qualified Investor CIUs whether in the form of a unit trust or an investment company with variable capital.
        United States of America A collective investment CIU registered under the Investment Company Act of 1940, which has also registered the offering of its securities under the Securities Act of 1933 and where the registration statement has become effective in accordance with the Securities and Exchange Commission's Regulations and the Operator is registered with the SEC.
        EEA Member States are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom
        GCC Member States (besides Bahrain) are Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.