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:

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.

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.

CSD-A.1.16

This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

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.

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.

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.

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.

CSD-A.2.1A

A list of recent changes made to this Module is provided below:

CSD-A.2.2

This Module supersedes the following provisions contained in circulars or other regulatory instruments:

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.

CSD-1.1.1A

No person may market any financial services in the Kingdom of Bahrain unless:

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.

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.

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.

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.

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.

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.

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.

CSD-1.2.13

The applicant must also demonstrate to the satisfaction of the CBB that it has:

CSD-1.2.14

The CBB may license a person as a clearing house if:

CSD-1.2.15

This Paragraph has been left blank.

CSD-1.2.16

The CBB may license a person as a central depository if:

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-1.3.1

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.

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.

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.

CSD-1.3.6

The CBB may cancel any license held by a licensed clearing house or licensed central depository if:

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.

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:

CSD-1.3.9

A licensed clearing house or licensed central depository shall be deemed to have ceased to operate if:

CSD-1.3.10

Any cancellation of a license of a licensed clearing house or licensed central depository shall not operate so as to:

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.

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.

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.

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.

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.

CSD-1.4.1A

The following fee is currently prescribed for licensed clearing houses and licensed central depositories:

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.

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.

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.

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.

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.

CSD-2.1.4

Every clearing member of the licensed clearing house shall maintain a designated bank account with a settlement bank.

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.

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.

CSD-2.1.7

[This Paragraph was merged with CSD-2.1.6 in July 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.

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.

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.

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.

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.

CSD-2.2.7

Key aspects of the settlement process that the legal framework should support include the following:

CSD-2.2.8

The licensed clearing house shall maintain a settlement guarantee fund to guarantee settlement obligations of clearing members.

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.

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.

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.

CSD-2.2.13

The settlement system of a licensed clearing house must be able to effect:

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.

CSD-2.2.17

In line with Article 108 of the CBB Law:

CSD-2.2.18

In line with Article 109 of the CBB Law:

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.

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.

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.

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-2.5.3

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-2.6.4

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:

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:

CSD-2.6.7A

The central depository may refuse entry of the certificates deposited where prima facie:

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.

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.

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:

for the purpose of effecting the transfer in favour of the depositor.

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:

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.

CSD-2.6.14

A central depository shall, in relation to deposited securities which are registered in its name:

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.

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.

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.

CSD-2.7.3

On or after the dematerialisation date, every issuer of a security prescribed as a dematerialised security shall:

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).

CSD-2.7.5

No issuer shall after the dematerialisation date issue any certificate in respect of a dematerialised security.

CSD-2.7.6

With effect from the dematerialisation date, a reference in respect of a dematerialised security, to:

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.

CSD-2.7.8

Transfer of securities shall be effected by beneficial owners or their authorised nominees.

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.

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.

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.

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.

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.

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.

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.

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:

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:

shall be as prescribed by the suspension order.

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.

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:

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:

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.

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.

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:

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:

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:

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:

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.

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.

CSD-3.1.16

In rule CSD-3.1.15, ''co-operative arrangement'' shall not include:

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

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:

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.

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.

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.

CSD-3.2.2

Rule CSD-3.2.1 shall not apply to:

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:

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:

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.

CSD-3.2.6

In Paragraphs CSD-3.2.4 and CSD-3.2.5, ''relevant purpose'' means:

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.

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:

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:

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.

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:

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.

CSD-3.7.9

The licensed central depository must enforce effective segregation of customer assets by custodians.

CSD-3.10.1

A licensed central depository shall provide or cause to be provided all such facilities as may be necessary:

CSD-3.10.2

Every licensed central depository shall maintain the following records and documents, mainly:

CSD-3.10.3

A licensed central depository shall also keep such records and accounts, in sufficient detail, so as to show particulars of:

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-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:

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.

CSD-5.3.2

Controlled functions are those functions occupied by board members and persons in executive positions and include:

CSD-5.3.2A

For the purpose of this Module, the following positions are considered as head of function:

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.

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.

CSD-5.3.3

The Chief Executive Officer or General Manager, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.

CSD-5.3.4

All persons wishing to undertake any of the controlled functions shall be subject to the fit and proper requirements.

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.

CSD-5.3.6

In accordance with Paragraph CSD-5.3.5:

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.

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.

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.

CSD-5.3.7C

When submitting Form 3, licensees must ensure that the Form 3 is:

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.

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.

CSD-5.3.8A

Each applicant applying for approved person status and those individuals occupying approved person positions must comply with the following conditions:

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.

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:

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.

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.

CSD-5.3.10

In determining where there may be a conflict of interest arising, factors that may be considered will include whether:

CSD-5.3.11

[This Paragraph was deleted in April 2016.]

CSD-5.3.12

[This Paragraph was deleted in April 2016.]

CSD-5.3.13

[This Paragraph was moved to Paragraph CSD-5.3.7B in April 2016.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

CSD-5.3.23

Where the CBB is satisfied that an approved person:

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.

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.

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.

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:

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: