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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 1^st 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 136–143 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 1^st 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 24^th 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 1^st 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 15^th September and Form ALF (Annual License Fee) no later than 15^th 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
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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
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CRA-14.1.3
[This Paragraph was deleted in April 2023].

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CRA-14.1.4
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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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
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CRA-14.1.10
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.1.11
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.1.12
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.1.13
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.1.14
[This Paragraph was deleted in April 2023].

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CRA-14.2 CRA-14.2 [This Section was deleted in April 2023]

CRA-14.2.1
[This Paragraph was deleted in April 2023].

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CRA-14.2.2
[This Paragraph was deleted in April 2023].

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CRA-14.2.3
[This Paragraph was deleted in April 2023].

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CRA-14.2.4
[This Paragraph was deleted in April 2023].

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CRA-14.2.5
[This Paragraph was deleted in April 2023].

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CRA-14.2.6
[This Paragraph was deleted in April 2023].

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CRA-14.3 CRA-14.3 [This Section was deleted in April 2023]

CRA-14.3.1
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.3.2
[This Paragraph was deleted in April 2023].

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CRA-14.3.3
[This Paragraph was deleted in April 2023].

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CRA-14.3.4
[This Paragraph was deleted in April 2023].

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CRA-14.3.5
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.3.6
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.3.7
[This Paragraph was deleted in April 2023].

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CRA-14.4 CRA-14.4 [This Section was deleted in April 2023]

CRA-14.4.1
[This Paragraph was deleted in April 2023].

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CRA-14.4.2
[This Paragraph was deleted in April 2023].

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CRA-14.4.3
[This Paragraph was deleted in April 2023].

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CRA-14.4.4
[This Paragraph was deleted in April 2023].

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CRA-14.4.5
[This Paragraph was deleted in April 2023].

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CRA-14.5 CRA-14.5 [This Section was deleted in April 2023]

CRA-14.5.1
[This Paragraph was deleted in April 2023].

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CRA-14.5.2
[This Paragraph was deleted in April 2023].

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CRA-14.5.3
[This Paragraph was deleted in April 2023].

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CRA-14.5.4
[This Paragraph was deleted in April 2023].

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CRA-14.5.6
[This Paragraph was deleted in April 2023].

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CRA-14.5.7
[This Paragraph was deleted in April 2023].

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CRA-14.5.8
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.5.8
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.5.9
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.5.10
[This Paragraph was deleted in April 2023].

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CRA-14.6 CRA-14.6 [This Section was deleted in April 2023]

CRA-14.6.1
[This Paragraph was deleted in April 2023].

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CRA-14.6.2
[This Paragraph was deleted in April 2023].

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CRA-14.6.3
[This Paragraph was deleted in April 2023].

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CRA-14.6.4
[This Paragraph was deleted in April 2023].

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CRA-14.6.5
[This Paragraph was deleted in April 2023].

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CRA-14.6.6
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.6.7
[This Paragraph was deleted in April 2023].

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CRA-14.6.8
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.6.9
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.6.10
[This Paragraph was deleted in April 2023].

Deleted: April 2023
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CRA-14.6.11
[This Paragraph 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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CRA-14.10 CRA-14.10 [This Section was deleted in April 2023]

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Appendix -1 CYBER SECURITY INCIDENT REPORTING TEMPLATE
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Amended: January 2020
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Appendix -2 Methodology for calculating financial penalties
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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

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

Licensed discount broker (fixed)	BD100
Licensed clearing member (fixed)	BD300

Location:

Institutions

MAE — Markets and Exchanges

MAE-A MAE-A Introduction

MAE-A.1 MAE-A.1 Purpose

Executive Summary

MAE-A.1.1

MAE-A.1.2

MAE-A.1.3

MAE-A.1.4

MAE-A.1.4A

Legal Basis

MAE-A.1.5

MAE-A.1.6

MAE-A.1.7

MAE-A.1.8

MAE-A.2 MAE-A.2 Module History

Evolution of Module

MAE-A.2.1

MAE-A.2.2

Superseded Requirements

MAE-A.2.3

MAE-A.3 MAE-A.3 Interaction with Other Modules

MAE-A.3.1

MAE-A.3.2

MAE-A.3.3

MAE-A.3.4

MAE-A.3.5

MAE-A.3.6

MAE-A.3.7

MAE-A.3.8

MAE-A.3.9

MAE-A.4 MAE-A.4 Division of Responsibilities

MAE-A.4.1

MAE-A.4.2

MAE-A.4.3

MAE-A.4.4

MAE-B MAE-B Purpose

MAE-B.1 MAE-B.1 Scope

MAE-B.1.1

MAE-B.1.2

MAE-B.1.3

MAE-B.2 Definitions

MAE-1 MAE-1 Licensing

MAE-1.1 MAE-1.1 Requirement to be Licensed

MAE-1.1.1

MAE-1.1.2

MAE-1.1.3

MAE-1.1.4

MAE-1.1.5

MAE-1.1.6

MAE-1.2 MAE-1.2 Application for License

MAE-1.2.1

MAE-1.2.2

MAE-1.2.3

MAE-1.2.4

MAE-1.2.5

MAE-1.2.6

MAE-1.2.7

MAE-1.2.8

MAE-1.2.9

MAE-1.3 MAE-1.3 Licensing of Exchanges and Market Operators

MAE-1.3.1

MAE-1.3.2

MAE-1.3.2A

MAE-1.3.3

MAE-1.3.4

MAE-1.3.5

MAE-1.3.6

MAE-1.3.7

MAE-1.4 MAE-1.4 Exemption of Exchanges and Market Operators

MAE-1.4.1

MAE-1.4.2

MAE-1.4.3

MAE-1.4.4

MAE-1.4.5

MAE-1.4.6

MAE-1.4.7

MAE-1.4.8

MAE-1.4.9