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  • CIU-3 CIU-3 Bahrain Domiciled Exempt CIUs

    • CIU-3.1 CIU-3.1 Exemption Conditions

      • Promotion

        • CIU-3.1.1

          Bahrain domiciled exempt CIUs may only be offered to accredited investors (as defined in Rule CIU-B.5.10), when offered within the Kingdom of Bahrain. They may not be promoted through mass communication channels (such as the press, radio or television).

          Amended: July 2007

        • CIU-3.1.2

          Bahrain domiciled exempt CIUs, if offered to non-resident investors, are required to comply with any applicable local laws and regulations in the jurisdiction concerned. These may be more or less restrictive than the restriction contained in Rule CIU-3.1.1.

        • CIU-3.1.3

          A Bahrain domiciled exempt CIU must be able to demonstrate that each of its participants falls within the definition of an accredited investor. They should also be able to demonstrate that the additional risks potentially represented by a Bahrain domiciled exempt CIU have been clearly communicated and understood by their participants.

        • CIU-3.1.4

          To help demonstrate compliance with Rule CIU-3.1.3, Bahrain domiciled exempt CIUs should be able to provide a written confirmation from each participant, stating that they satisfy the definition of an accredited investor and confirming they understand the higher risks involved in an exempt CIU. The CBB also expects supporting documentation to be kept, demonstrating that the minimum financial asset threshold specified in Rule CIU-B.5.10 has been satisfied, such as a copy of a bank or broker’s statement. Where the investor’s initial investment matches or exceeds the financial asset threshold, this may by itself be taken as evidence that the client meets the minimum financial asset threshold.

          Amended: July 2007

      • Disclosures

        • CIU-3.1.5

          Bahrain domiciled exempt CIUs must not quote the CBB as the regulator of the CIU in any document or material, and must clearly display a statement to the fact that the CIU is considered an exempt CIU for the purposes of the CBB's CIU regulations.

        • CIU-3.1.6

          Bahrain domiciled exempt CIUs must disclose all relevant features of the CIU in their prospectus (including but not limited to their investment strategy; extent of any leverage; key risks; and expenses, fees and charges).

      • Relevant Persons

        • CIU-3.1.7

          Bahrain domiciled exempt CIUs must delegate the administration and safe-keeping of their assets to an administrator/custodian (with the two functions either undertaken by a single institution or two separate institutions). These functions must be undertaken by one or more licensed institutions acceptable to the CBB for the role. The administrator / custodian must:

          (a) Be independent of the CIU's operator;
          (b) Act solely in the interests of the CIU's participants;
          (c) Have sufficient financial and other resources in order to undertake properly its function as administrator / custodian of the CIU; and
          (d) Accept liability to the CIU and its participants, for any loss suffered by them as a result of its unjustifiable failure to perform its obligations adequately.

        • CIU-3.1.8

          The CBB would normally expect the administrator/custodian required under Rule CIU-3.1.7 to be a CBB licensee (although 'hub and spoke' arrangements are allowed — see Paragraph CIU-1.4.10). However, with respect to Bahrain domiciled exempt CIUs, the CBB may additionally consider allowing non-CBB licensees to be used, on a case-by-case basis, where there is a strong rationale for doing so (e.g. prime broking arangements for hedge funds).

      • Auditors

        • CIU-3.1.9

          Bahrain domiciled exempt CIUs must appoint an auditor resident in Bahrain, and acceptable to the CBB.

      • Record-Keeping

        • CIU-3.1.10

          Bahrain domiciled exempt CIUs must make and retain for 5 years such records that enable:

          (a) The CIU and its relevant persons, as appropriate, to comply with the rules in Chapter CIU-3; and
          (b) The CIU to demonstrate at any time that such compliance has been achieved.

        • CIU-3.1.11

          The obligation under Rule CIU-3.1.10 is additional to any record-keeping requirements that may apply as a result of applicable laws (such as the commercial companies laws), and any regulatory requirements that may apply to relevant persons that are licensed institutions (such as the CBB's record-keeping requirements applicable to CBB licensees).

        • CIU-3.1.12

          Bahrain domiciled exempt CIUs and their relevant persons are reminded that they must also comply with all applicable AML/CFT laws and regulations. Relevant persons that are CBB licensees are required to comply with the relevant CBB Rulebook Volume in this respect.

    • CIU-3.2 CIU-3.2 Registration Requirements

      • Registration Requirement

        • CIU-3.2.1

          Bahrain domiciled exempt CIUs must be registered with the CBB prior to their being offered to investors.

        • CIU-3.2.2

          Bahrain domiciled exempt CIUs are not subject to the CBB's authorisation or on-going supervisory requirements. The registration requirement is to allow the CBB to monitor developments in the financial services sector.

        • CIU-3.2.3

          An application for registration may only be made by one of the following:

          (a) The operator of the CIU; or
          (b) The directors or trustees of the CIU (as appropriate).

        • CIU-3.2.4

          An applicant may appoint a representative — such as the CIU's proposed administrator/custodian, or 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 registration process, when seeking clarification of any issues.

        • CIU-3.2.5

          An application for registration under Rule CIU-3.2.1 involving an overseas operator will only be considered if the overseas operator has a suitable track record in operating CIUs.

      • Registration Process

        • CIU-3.2.6

          An application for registration under Rule CIU-3.2.1 must be made using a Form CIU (R) (Application for Registration of a CIU), submitted under a formal cover letter signed by two authorised signatories of the applicant.

        • CIU-3.2.7

          The application must identify an individual who should be capable of being contacted by the CBB by post, telephone, fax and/or e-mail.

        • CIU-3.2.8

          The CBB's review of registration applications is mainly limited to satisfying itself that the exemption conditions specified in Section CIU-3.1 are likely to be complied with. CBB does not review the proposed structure or operations in detail, although it reserves the right to seek appropriate confirmations or additional information from the applicant. The CBB takes a decision on an application for registration made under Rule CIU-3.2.1 within 15 calendar days of the application being received and assessed by the CBB as complete.

      • Granting or refusal of registration

        • CIU-3.2.9

          To be registered, an applicant must demonstrate that it will comply with the exemption conditions specified in Section CIU-3.1. Should the application for registration be accepted, the CBB will notify the applicant in writing of the fact. The registration may be subject to additional conditions being met.

        • CIU-3.2.10

          The CBB may refuse to register a Bahrain domiciled exempt CIU, if in its opinion:

          (a) The exemption requirements in Section CIU-3.1 are unlikely to be 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 investors.

        • CIU-3.2.11

          Where the CBB proposes to refuse an application for registration, it must give the applicant written notice to that effect. Applicants have 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.

      • Fees Payable to CBB

        • CIU-3.2.12

          Each application for registration made under Rule CIU-3.2.1 must be accompanied by a BD 100 processing fee. This fee is non-refundable.

        • CIU-3.2.13

          Each Bahrain domiciled exempt CIU registered by CBB is subject to an annual fee of BD 2,000. In the case of umbrella funds, each sub-fund is also charged BD 2,000 a year.

        • CIU-3.2.14

          Where the fee specified in Rule CIU-3.2.13 is paid, it exempts those Bahrain domiciled exempt CIUs wishing to list on the Bahrain Stock Exchange ('BSE') from having to pay the listing fee normally levied by the BSE.

    • CIU-3.3 CIU-3.3 Reporting Requirements

      • Notifications to the CBB

        • CIU-3.3.1

          Bahrain domiciled exempt CIUs must file with the CBB Form CIU (QS), the CIU Quarterly Statistical Return, within the deadline specified on the return.

        • CIU-3.3.2

          All annual and interim reports produced by a Bahrain domiciled exempt CIU must be filed with CBB (within four months of the period end for annual reports and two months of the period end for interim reports).

        • CIU-3.3.3

          Bahrain domiciled exempt CIUs must notify the CBB in a timely manner of any intention to merge, transfer, wind up or suspend dealings in the CIU.

    • CIU-3.4 CIU-3.4 De-registration

      • CIU-3.4.1

        Bahrain domiciled exempt CIUs must give at least one months' written notice to CIU participants of their intention to de-register the CIU, together with an explanation for wishing to do so, and the options available to CIU participants (such options to include, if possible, a right to switch without charge into another CIU). A copy of this notice must be provided to the CBB at the time it is issued to CIU participants.

      • CIU-3.4.2

        Once the CIU's assets have been distributed to the CIU's participants, or switched to another CIU, the Bahrain domiciled exempt CIU must confirm the fact to the CBB and request that it be taken off the CBB register of exempt CIUs.

      • CIU-3.4.3

        In the meantime, the Bahrain domiciled exempt CIU should keep the CBB informed about their timetable and progress made in either transferring CIU participants into another CIU, or returning moneys due to them.

      • CIU-3.4.4

        CBB may cancel the registration of a CIU if in its opinion:

        (a) Any of the applicable requirements contained in Module CIU are not met;
        (b) False or misleading information has been provided to the CBB, or significant 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 investors or the CIU's participants.

      • CIU-3.4.5

        Where the CBB proposes to cancel a CIU's registration, it shall give the CIU concerned a written notice of its intention to do so and the reasons for such action. The CIU has 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.