CIU-1.6 CIU-1.6 Investments
Risk Management
CIU-1.6.1
Bahrain domiciled retail CIUs must operate on the principle of risk spreading and must maintain and implement investment and risk management policies aimed at the prudent control of risks.CIU-1.6.2
The
prospectus must summarise the policies and limits which theBahrain domiciled retail CIU will apply, including (but not limited to):(a) The type of assets which theCIU may invest in;(b) The aggregate limits for each asset class;(c) Permitted individual exposures under each asset class; and(d) A description of remedial measures to be taken in the event of limit exceptions.CIU-1.6.3
If the investment and risk management policies specified in Rule CIU-1.6.2 are breached, the
Bahrain domiciled retail CIU must take all necessary steps to remedy the situation immediately, taking into account the interests of theCIU's participants .Investment Limits
CIU-1.6.4
Subject to Rule CIU-1.6.6,
Bahrain domiciled retail CIUs may only invest in the assets specified and in accordance with the limits prescribed in Appendix D.CIU-1.6.5
In the case of an umbrella fund (as defined in Rule CIU-B.3.5), the limits referred to in Rule CIU-1.6.4 are applicable to each sub-fund.
CIU-1.6.6
The limits prescribed in Appendix D do not apply until the expiry of a period of six months after the date of initial offering of the
CIU .CIU-1.6.7
Where the limits specified in Appendix D are breached, the
Bahrain domiciled retail CIU must report the fact as soon as it becomes aware of the situation to the CBB.CIU-1.6.8
The CBB may authorise a
CIU to widen its investment policy to allow investments in financial assets other than those specified in Appendix D, if it is satisfied that such assets are sufficiently liquid and the interests of theCIU participants are not prejudiced. The CBB may similarly also authorise limits beyond those specified in Appendix D, if it is satisfied that such relief is in the interests of theCIU participants . Where such approvals are given, the fact must be notified toCIU participants as an amendment to theprospectus (andsimplified prospectus where applicable).CIU-1.6.9
If the name or particulars of a
Bahrain domiciled retail CIU indicates a specific objective, asset class, geographic region or market, theCIU must invest at least 60% of its assets in investments that reflect the specific objective, asset class, region or market. The remaining balance of theCIU's assets may only be held in cash or cash equivalents.Derivative Transactions
CIU-1.6.10
Subject to the conditions below, a
Bahrain domiciled retail CIU may enter into permitted financial derivative transactions provided that:(a) The underlying positions continue to satisfy Rule CIU-1.6.4 (and the limits specified in Appendix D);(b) The transactions are consistent with the stated investment objectives;(c) The counterparties are licensed financial institutions or recognised exchanges or clearing houses;(d) The instrument constituting theCIU and itsprospectus clearly specify the use and rationale of such transactions (i.e. for hedging purposes or for achieving investment goals), as well as a clear description of the associated risks, including that of volatility in net asset values;(e) The derivative positions and balances are capable of independent and reliable daily valuations and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the initiative of theCIU ;(f) The transactions are subject to sound and documented risk management policies and practices; and(g) The arrangement is consistent with good market practice.Significant Influence
CIU-1.6.11
Bahrain domiciled retail CIUs may not acquire securities issued by arelevant person , without prior written CBB approval.CIU-1.6.12
Exemption from Rule CIU-1.6.11 will normally only be given by CBB in cases where a
Bahrain domiciled retail CIU is pursuing a market index strategy, such that it is obliged to invest in arelevant person's securities in order to replicate a market index.Other Restrictions
CIU-1.6.13
Bahrain domiciled retail CIUs may not:(a) Assume, guarantee, endorse or otherwise become directly or contingently liable for the obligations or indebtedness of any person, except in accordance with itsprospectus or instrument constituting theCIU ;(b) Acquire any asset which involves the assumption of any liability which is unlimited;(c) Invest in any security (of any class) in a company or other undertaking, if any director or officer of theCIU (or of anyrelevant person and its affiliates) individually owns more than ½ % of the total nominal amount of all the issued securities of that class, or collectively the directors or officers of theCIU (or of anyrelevant person and its affiliates) own more than 5% of those securities. This prohibition shall also apply where the ownership of the directors or officers specified above is in the parent, subsidiary or other associated undertaking of the company in which theCIU is to make the investment; and(d) Invest in otherCIUs of the sameoperator .
