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  • 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.