Market Standards
OFS — Offering of Securities
OFS-A OFS-A Introduction
OFS-A.1 OFS-A.1 Purpose
Legal Basis
OFS-A.1.1
Module OFS formulates the regulatory framework of the Central Bank of Bahrain ('CBB') to govern the issuing and offering of
securities in/from the Kingdom of Bahrain. It incorporates the requirements of Articles 80-85, 96 and 166 of the CBB Law. These regulations are issued pursuant to the authority of CBB under Article 37 to establish and enforce rules, while meeting the specific requirements of Part 4 of the Central Bank of Bahrain and Financial Institutions Law of 2006 ('CBB Law').January 2014OFS-A.1.2
This Module contains the CBB's Directive (as amended from time to time) relating to the issuing and offering of
securities and is issued under the powers available to the CBB under Article 38 of the CBB Law, together with the abovementioned provisions of the CBB Law. The Directive in this Module is applicable to all market participants and relevant persons, including but not limited toissuers ofsecurities or any person acting on their behalf,licensed exchanges ,licensed market operators ,licensed clearing houses , depositories, market intermediaries, business trusts, listed companies, any person acting for or on behalf of listed companies,shareholders of listed companies,securities ownership transfer agents, lead managers,underwriters , professional advisors, listing agents, auditors, financial analysts and any other person who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether such person is a market participant or not. OFS-A.2.3This Module should be read in conjunction with Resolution No.(16) of 2013 with respect to Financial Services Marketed in the Kingdom of Bahrain and Resolution No (1) of 2007 (as amended from time to time) with respect to determining fees categories due for licensees and services provided by the CBB.
Amended: January 2021
January 2014OFS-A.2 OFS-A.2 Division of Responsibilities
Responsibility of the CBB
OFS-A.2.1
A clear division of responsibilities between the CBB as the
securities regulator, theissuer ofsecurities and thelicensed exchanges or thelicensed market operators as a self-regulatory organisation (SRO) is required:(a) To maximise the regulatory effectiveness;(b) To permit flexibility to thelicensed exchanges or thelicensed 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.January 2014OFS-A.2.2
As a regulator, the CBB's role is as follows:
(a) Regulatory supervision;(b) Maintaining and promoting fairness, efficiency and transparency within the capitalmarket ;(c) Enhancing the efficiency of the capital-raising process;(d) Ensuring full, timely and accurate disclosure of financial and other information material to investors;(e) Ensuring fair and equal treatment to all securities, subscribers, allottees, and holders;(f) Ensuring adherence to international accounting, reporting and auditing standards;(g) Ensuring that the issuer of securities, the licensed exchanges, licensed market operators, licensed clearing houses, depositories' institutions, and othercapital market advisory services providers and members of SROs have appropriate systems and procedures for ensuring compliance with the CBB Law and disclosure requirements by listed companies and issuers; and(h) Facilitating the introduction of a broad range of capital market products and services.January 2014Responsibility of SROs
OFS-A.2.3
The
licensed exchange or thelicensed market operator established as an SRO must comply with the requirements laid down under the CBB Law, this Module and other applicable laws and regulations.January 2014OFS-A.2.4
As an SRO, the main objective of the exchange or the operator would be to:
(a) Promote fairness and investor protection;(b) Ensure fair access tomarket facilities and information;(c) Provide timely and accessible relevantmarket data;(d) Ensure the efficient regulation of its members;(e) Ensure compliance with CBB Law, listing rules and disclosure requirements by listed companies and issuers;(f) Ensure immediate dissemination and publication of relevant information related toissuers ;(g) Report any non-compliance to the regulator; and(h) Take disciplinary action against any contravention by listed companies.January 2014Responsibility of Issuers and Advisors
OFS-A.2.5
The
issuer ofsecurities in/from Bahrain or any person acting on its behalf must comply with the requirements laid down under the CBB Law, this Module and the other applicable laws, rules and regulations.January 2014OFS-A.2.6
The main responsibility for the
issuer ofsecurities or any other person acting on its behalf is to:(a) Adhere to the CBB Law, rules and regulations and any other applicable laws, rules and regulations;(b) Ensure and accept responsibility for the information contained in theprospectus or other offering documents and that these documents do not contain any false or misleading information or data and omissions likely to affect the importance and completeness of theprospectus , or offering documents;(c) Ensure fair and equal treatment of all subscribers, allottees and holders of each type ofsecurities issued by it ;(d) Use an effective and efficient mechanism for capital raising for financing their businesses or any expansions thereof;(e) Using the most professional capital market advisory services provider; and(f) Ensure adherence of allcapital market advisory services providers involved to all requirements regarding protecting and maintaining the subscribers money, in accordance with the applicable laws, rules and regulations.January 2014OFS-A.3 OFS-A.3 Module History
Evolution of Module
OFS-A.3.1
This Module was first issued in January 2014 by the CBB. 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.
January 2014OFS-A.3.2
The most recent changes made to this Module are detailed in the table below:
Module Ref. Change Date Description of Changes OFS-1.6.11, OFS-1.10.5, OFS-3.5.26, OFS-4.1.1, OFS-4.3.2, OFS-4.4.1, OFS-4.4.4, OFS-7.1.2, OFS-7.1.3 04/2014 Added links to Glossary for the words 'days' and 'licensed exchange'. OFS-1.14 04/2014 Corrected reference to Glossary for the term 'overseas issuer(s)'. OFS-3.2.6 04/2016 Added reference to securities market regulation certification and other qualifications. OFS-3.3.8 04/2016 Corrected cross reference to CBB Law. OFS-1.4.1(e) 10/2017 Amended sub-paragraph based on changes made to the definitions section. OFS-7.5.1 01/2018 Amended Paragraph. OFS-2.6.7A 07/2018 Deleted Paragraph. OFS-3.2.19(c) 07/2018 Amended sub-paragraph. OFS-3.4.6(a) 07/2018 Amended sub-paragraph. OFS-3.5.7(c) 07/2018 Amended sub-paragraph. OFS-A.1.2 01/2021 Added reference to Resolution No (1) of 2007. OFS-8.2.3 01/2021 Amended the fee schedule as per Resolution No (2) of 2020. Superseded Requirements
OFS-A.3.3
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/other references Provision Subject BSE Resolution No. 4 of 1992 All Prospectus Requirements ODG/407/03 Disclosure Standards Chapter 1 Prospectus and ongoing disclosure requirements in relation to equity securities ODG/74/04 Guidelines for the Issuing, Offering and Listing of Debt securities All parts Issue, offer and listing of debt securities EDBS/KH/0688/2008 on Private Placement of Securities Issued by or Promoted by Banks Licensed in Bahrain. All parts Private placement requirements EDFIS/C/039/2017 Module Issuance of the Amended Offering of Securities Module — Volume 6 Amended: October 2017OFS-B OFS-B Scope of Application
OFS-B.1 OFS-B.1 Scope
OFS-B.1.1
In accordance with Article 81 of the CBB Law, this Module applies to all types of
securities issued and offered in/from Bahrain, whether offered publicly or privately.January 2014OFS-B.1.2
A person makes an offer "in the Kingdom of Bahrain" when;
(a) It is made to another person in the Kingdom which upon acceptance would give rise to a contract for the issue, sale,allotment or allocation of thosesecurities by him or another person with whom he has made arrangements for that issue, sale orallotment within Bahrain, regardless of whether such acceptance actually takes place; or(b) He invites personally or through an agent, another person in the Kingdom to make an offer which upon acceptance would give rise to the issue, sale orallotment of thosesecurities within Bahrain.January 2014OFS-B.1.3
A person makes an offer "from the Kingdom of Bahrain" when;
(a) It is made to another person outside the Kingdom which upon acceptance would give rise to a contract for the issue, sale,allotment or allocation of thosesecurities by him or another person with whom he has made arrangements for that issue, sale orallotment within Bahrain, regardless of whether such acceptance actually takes place; or(b) He invites personally or through an agent, another person outside the Kingdom to make an offer which upon acceptance would give rise to the issue, sale orallotment of thosesecurities within Bahrain.January 2014OFS-1 OFS-1 Issuance of Securities
OFS-1.1 OFS-1.1 General Eligibility
OFS-1.1.1
Article 81 of the CBB Law states that: "no person may issue any
securities in the Kingdom unless the Central Bank of Bahrain's written approval is granted. The CBB shall specify the information and documents that are required for obtaining permission to issuesecurities ."January 2014OFS-1.1.2
Before
securities can be issued, a person must meet the criteria detailed in this Module for:(a) The various types ofsecurities that can be issued; and(b) The specific requirements pertaining toissuer eligibility.January 2014OFS-1.2 OFS-1.2 Types of Securities
OFS-1.2.1
In accordance with Article 86 of the CBB Law of 2006, the following types of
securities may be offered to the public:(a)Equity securities ofjoint stock companies incorporated in the Kingdom of Bahrain;(b)Equity securities of non-Bahraini companies that are approved by the CBB;(c)Bonds anddebt securities approved for offering and listing by the CBB;(d) Shari'a compliantsecurities approved for offering and listing by the CBB;(e)Securities issued by corporations situated within the jurisdiction of any of the states who is a member of the Gulf Cooperation Council; and(f) Any othersecurities approved by the CBB including but not limited to futures and other derivatives on currencies and commodities.January 2014OFS-1.2.2
For the purpose of Rule OFS-1.2.1 (f) "any other
securities " includes those defined assecurities not already included in Rule OFS-1.2.1 (a), (b), (c), (d) and (e) as well as any other financial investment approved by the CBB as asecurity from time-to-time.January 2014OFS-1.2.3
For the purpose of this Module,
equity securities include:(a) Voting and non-votingshares ;(b) Participating and non-participatingshares ;(c) Preferenceshares , whether convertible or non-convertible, accumulated or non-accumulated and redeemable, or irredeemable; and(d) Anyclass ofsecurities being part of theshareholders' equity fund being represented in the form ofshares .January 2014OFS-1.3 OFS-1.3 Types of Offer
OFS-1.3.1
This Module applies to the following types of offer of
securities :(a) Public offering (including Initial Public Offering (IPO));(b) Rights offering;(c) Private placement;(d) Employee share benefit scheme;(e) Capitalisation issue;(f) Consideration issue;(g) Exchange, swapping or substitution ofsecurities ;(h) Listing of closed or private companies;(i) Global Depository Receipts; or(j) Other offering approved by the CBB.January 2014OFS-1.4 OFS-1.4 Exempt Offers
OFS-1.4.1
The following offerings are exempt from this Module:
(a)Securities approved or authorised as part of acollective investment undertaking and offered or marketed subject to CBB Rulebook Volume 7;(b)Securities offered, allotted, or to be allotted in connection withsecurities offered because of a take-over, merger, acquisition andshare repurchase by means of an exchange offer; these are subject to Module TMA;(c)Equity securities offered, allotted or to be allotted free of charge to existingshareholders if dividends are paid out in the form ofshares of the sameclass ;(d)Securities utilised for lending and borrowing transactions concluded under the CBB Rules and the relevantlicensed exchange's requirements for such transaction; and(e) An offering of ordinary shares by means of anequity crowdfunding offer by anequity crowdfunding issuer through acrowdfunding platform operated by a licensedcrowdfunding platform operator and subject to the requirements of Module MAE of the CBB Rulebook Volume 6.Amended: October 2017
January 2014OFS-1.4.2
An offer made outside Bahrain, but marketed from within Bahrain is subject to the filing requirement as laid out in this Module.
January 2014Structured Products
OFS-1.4.3
Where structured products are offered outside but marketed inside the Kingdom of Bahrain, the following must be adhered to by the
issuer and any advisor or agent acting on behalf of theissuer , in addition to the general requirements for exempt offers laid out below:(a) The marketing may only relate to offers toaccredited investors who are existing account holders of theissuer or its agent (dealer);(b) The securities related to the structured product is in registered form;(c) The specific structured product disclaimer, as prescribed by the CBB, is contained in the baseprospectus which is filed with the CBB; and(d) An approval of theissuer's home securities or financial market regulator (which must be a full member of IOSCO) for such structured product(s) being marketed in other jurisdictions must be obtained.January 2014OFS-1.4.4
The
offering document of anysecurities to be offered exclusively outside Bahrain, and marketed through aroadshow , must contain the following prominent statement under the heading "Important Notice", of theprospectus (or such otheroffering documents ) of such offer:"In relation to investors in the Kingdom of Bahrain, securities issued in connection with this prospectus and related offering documents must be in registered form and must only be marketed to existing account holders and accredited investors as defined by the CBB in the Kingdom of Bahrain where such investors make a minimum investment of at least US$ 100,000, or any equivalent amount in other currency or such other amount as the CBB may determine.
This offer does not constitute an offer of securities in the Kingdom of Bahrain in terms of Article (81) of the Central Bank and Financial Institutions Law 2006 (decree Law No. 64 of 2006). This prospectus and related offering documents have not been and will not be registered as a prospectus with the Central Bank of Bahrain (CBB). Accordingly, no securities may be offered, sold or made the subject of an invitation for subscription or purchase nor will this prospectus or any other related document or material be used in connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or indirectly, to persons in the Kingdom of Bahrain, other than as marketing to accredited investors for an offer outside Bahrain.
The CBB has not reviewed, approved or registered the prospectus or related offering documents and it has not in any way considered the merits of the securities to be marketed for investment, whether in or outside the Kingdom of Bahrain. Therefore, the CBB assumes no responsibility for the accuracy and completeness of the statements and information contained in this document and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the content of this document.
No offer of
securities will be made to the public in the Kingdom of Bahrain and thisprospectus must be read by the addressee only and must not be issued, passed to, or made available to the public generally."January 2014OFS-1.4.5
Any
offering document for marketing and/or a foreign private placement that does not include the statement, in Paragraph OFS-1.4.4 may not be circulated or used in the Kingdom of Bahrain.January 2014Filing Requirements
OFS-1.4.6
Where an offer of
securities is not being made in or from the Kingdom of Bahrain, but such offer is to be marketed in Bahrain as part of aroadshow , theissuer and or his advisor or marketing agent is required to provide prior notification to the CBB of suchroadshow and to file a copy of theprospectus with the Capital Markets Supervision Directorate (CMSD).January 2014OFS-1.4.7
The
offering document for anysecurities not to be offered in or from Bahrain but to be marketed in Bahrain as part of aroadshow , must contain the following prominent statement on the cover page of theoffering document :"A copy of this prospectus has been submitted and filed with the Central Bank of Bahrain. Filing of this prospectus with the Central Bank of Bahrain does not imply that any Bahraini legal or regulatory requirements have been complied with. The Central Bank of Bahrain has not in any way considered the merits of the Securities to be offered for investment whether in or outside of the Kingdom of Bahrain.
Neither the Central Bank of Bahrain nor the licensed exchange assumes responsibility for the accuracy and completeness of the statements and information contained in this prospectus and each expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the contents of this prospectus.
The Issuer together with any local agent or adviser accepts responsibility for the information contained in this prospectus. To the best of the knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the information contained in this prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information."
January 2014OFS-1.5 OFS-1.5 General Requirements for the Issuing of Securities
OFS-1.5.1
The following general requirements for issuing of
securities represent the minimum requirements applicable to allissuers and/or all types of offers. The CBB reserves the right to add to, amend or vary such requirements, depending on the nature of theissuer and/or the offering to be made. Specific exemptions may be granted to small and medium enterprises.January 2014OFS-1.5.2
The
issuers of anysecurities in the Kingdom of Bahrain must meet the following general requirements:(a) Be incorporated or in the process of applying to be incorporated, in accordance with the applicable laws, rules and regulations;(b) Have produced or will produce audited financial statements in accordance with the International Financial Reporting Standards (IFRS), Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), or other accounting standards acceptable to the CBB. If the financial statements have not been prepared in accordance with IFRS, AAOIFI or other accounting standards acceptable to the CBB, theissuer must restate the financial statements in accordance with IFRS or AAOIFI, as the case may be;(c) Its annual financial statements must be audited in accordance with the international auditing standards issued by International Auditing Practices Committee of the International Federation of Accountants;(d) Its interim financial statements must be reviewed and be in accordance with OFS-1.5.2(b);(e) Provide to the CBB an appropriate confirmation and evidence and disclose in the offering document that there has been no material adverse change in the financial condition of theissuer (or the guarantor, in the case of a guaranteed issue) since the end of the period last reported on by the external auditor;(f) Appoint an eligible CBB Licensee asreceiving bank andpaying agent that is approved by the CBB;(g) Its appointedcapital market advisory services providers (CMSPs) must meet the requirements of this Module and/or other requirements imposed in this respect by the CBB;(h) May not allocate or allot anysecurities without meeting the CBB's requirements for that type of securities offering with respect to the final allocation orallotment ;(i) Must ensure that they adhere to the utilisation of proceeds statement in theprospectus and obtain the securities holders consent and CBB prior approval for any alteration thereto;(j) When considering the currency of issue, that it may issuesecurities denominated in Bahraini Dinars, currencies of the Gulf Cooperation Council (GCC) or United States Dollars (US$) and other international currencies on approval of the CBB;(k) Should ensure conflicts of interest do not arise during either the issuing ofsecurities or through the offering and relevant appointments or transactions;(l) Must protect and act in the interests ofsecurities holders;(m) Must provide equal treatment to allsecurities subscribers and/or holders for each issue ofsecurities . No discrimination among subscribers and/or holders in any form or by any means may be made by theissuer . Special attention of theissuer in this context shall be drawn particularly to the subscription or offer price of thesecurities ;(n) Must adhere to the issuing timetable contained in its offering documents, or as amended upon the CBB approval;(o) Theissuer and appointed CMSPs must fulfil all obligations in their respective capacities in accordance with the signed written agreements concluded between them in respect of the issue and must provide a written declaration of due diligence in respect of their obligation within theoffering document ;(p) Thefounders , promoters, or the Board of Directors of theissuer must confirm in writing to the CBB that it is responsible for complying with the CBB Law, rules and regulations and any other applicable laws, rules and regulations in accordance with the CBB's standard statement;(q) Thefounders , promoters, or the Board of Directors of theissuer must not establish any restrictions on the rights of thesecurities holders not provided for in law, particularly regarding voting and granting of proxy to any eligible person(s) (no irrevocable proxies or any term of issue subject to a grant of proxy will be permitted);(r) Any special purpose vehicle acting as anissuer and used in the securitisations of assets located in the Kingdom of Bahrain must be incorporated as a company under the laws of the Kingdom of Bahrain;(s) All issues of securities must be in response to the receipt of consideration (cash or in kind). Anissuer may not offer a substitution of one investment for another unless such subsitution is part of an approved corporate event conducted on alicensed exchange ; and(t) The securities issued by theissuer must have a registered International Securities Identification Number (ISIN) issued by a national numbering agent.January 2014OFS-1.5.3
In addition to the requirements of Paragraph OFS-1.5.2, and in order to meet the general requirements the
issuer must:(a) Submit to the CBB the draft or final, duly signed Memorandum and Articles of Association;(b) Submit all the relevant information in due time and form as required under this Module;(c) Submit to the CBB all attachments with its application including the required declarations, as stipulated under this Module;(d) Appoint its relevant advisors for the purposes of its application, as required under this Module and disclose these to the CBB;(e) Confirm that it will comply with all the "fit and proper" provisions contained in the relevant Bahraini Corporate Governance Code and Module HC (Corporate Governance) Volume 6, as applicable;(f) Confirm that it will adhere to its ongoing obligations and the disclosure requirements; and(g) Submit to the CBB at least 2 independent valuation reports in respect of the assets used as underlying assets for asset backedsecurities being issued or offered.January 2014OFS-1.5.4
The
founders of the public shareholding company orlisted company are not entitled to dispose of their shareholding for a period of 1 year, starting from the date of listing on alicensed exchange .January 2014OFS-1.5.5
Unless otherwise permitted by the CBB,
securities issued after the effective date of this Module must be in dematerialised form and theissuer is required to designate the clearing house, or depository facilities in which suchsecurities are deposited.January 2014OFS-1.5.6
All
securities issued under this Module must be in registered form and no bearersecurities may be issued without CBB permission.January 2014OFS-1.5.7
The
issuer or any person acting on its behalf or providing any services to the issue is prohibited to use any part of the proceeds of the issue before theissuer is fully incorporated and the proceeds are placed with the Board of Directors.January 2014OFS-1.5.8
Issuers and market participants are required to adhere to the fees and charges imposed oulined in Chapter OFS-8, or as required by the CBB from time-to-time.January 2014OFS-1.6 OFS-1.6 Eligibility to Issue and Offer Equity Securities
Issuing of Equity Securities to the Public
OFS-1.6.1
Issuers ofequity securities to the public must meet the following additional eligibility criteria in order to obtain approval from the CBB:(a) Theissuer , under formation, must prior to submitting its application to the CBB, submit an application to the Ministry of Industry & Commerce for the purpose of obtaining its no objection for incorporation purposes;(b) Existingissuers intending to list on a main board of alicensed exchange , should have 100 or moreshareholders who are not employees or associated persons. Newissuers must have 100 or moreshareholders after the completion of theinitial public offering or public offering;(c) Theissuer must issue to the above mentionedshareholders free float of at least 10% of the total issued outstandingshares . The CBB reserves its right to amend this amount taking into account the interest of the market;(d)Securities are readily transferable and not subject to any restrictions other than those restrictions stipulated on the Memorandum and Articles of Association or such other applicable laws, rules and regulations;(e) Forequity securities issued at a premium, the issue shall be underwritten by an independentunderwriter through the conclusion of a firm commitment and irrevocable underwriting agreement; and(f) Each type ofsecurities issued shall be equal in respect of rights and obligations, particularly in respect of voting and receipt of dividends and/or profits.January 2014OFS-1.6.2
With respect to Subparagraph OFS-1.6.1(c), the CBB reserves its right to amend such percentage in accordance with the type and size of the issue.
January 2014OFS-1.6.3
With respect to Subparagraph OFS-1.6.1(e), the CBB may exempt any issue from the underwriting requirements where the
offering price is equal to or below the average market price for the last six months, or where it is issued at the flat par value.January 2014OFS-1.6.4
The ownership of
equity securities of theissuer must not be restricted otherwise than in accordance with theissuer's Memorandum and Articles of Association, or the applicable laws, rules and regulations.January 2014OFS-1.6.5
The
founders of theissuer must confirm and submit bank certificates to the CBB that their contribution in theshare capital of theissuer is paid before the CBB grants its approval to issue itssecurities to the public.January 2014OFS-1.6.6
The
issuer's preliminary contract must include the details as specified in this Module.January 2014OFS-1.6.7
Any newly established
issuer must submit to the CBB a duly signed and irrevocable agreement entered into between financial institutions or other third party in respect of procuring partial finance of anissuer's project if such project is required to be financed by the total proceeds of the issue together with such finance.January 2014OFS-1.6.8
For listed or existing
issuers , the issuance and offering of additional and/or newequity securities must obtain the approval of the General Assembly of itsshareholders , in accordance with theissuer's Memorandum and Articles of Association or such other applicable laws, rules and regulations.January 2014CBB's Right of Refusal or Restriction on Issue
OFS-1.6.9
The CBB may reject the registration and issuance of any
securities if it is found that the issuance thereof might cause damage, dilute or be contrary to the interests of the owners or holders of theissuer's securities or public investors in general.January 2014OFS-1.6.10
The CBB may refuse to grant its approval, postpone granting such approval, or fix the timeframe for the
offering period , if the CBB deems that the market condition or circumstances justifies such action.January 2014OFS-1.6.11
The CBB will decide on the application within sixty calendar days from the date of its submission. Any rejection by the CBB will contain reasons for the decision. The applicant whose application has been rejected has the right to be heard by the CBB within thirty
days from the date of notifying it of the rejection of its application. The CBB's decision is final.Amended: April 2014
January 2014OFS-1.6.12
The
founders do not have the right to re-apply for the issuance ofsecurities before addressing the reasons for the rejection or the lapse of six months from the date of the CBB's rejection decision.January 2014OFS-1.7 OFS-1.7 Eligibility to Issue and Offer Debt Securities
OFS-1.7.1
Any
issuer ofdebt securities and the guarantor, in the case of a guaranteed issue, must each be duly incorporated, or otherwise established, under the laws of the place where they are incorporated, or otherwise established, and must be in conformity with those laws and its Memorandum and Articles of Association, or equivalent documents.January 2014OFS-1.7.2
Issuers ofdebt securities must ensure that the issuance ofdebt securities is approved by the General Assembly, or any other equivalent body in accordance with the Memorandum and Articles of Association of theissuer and/or originator.January 2014OFS-1.7.3
Any change, alteration, or modification in the issued
debt securities' rights, obligations, terms and conditions is subject to the approval of thedebt securities holders meeting. Thetrustee is responsible for preparing and presenting at thedebt securities holders' meeting a report through which the holders must be advised whether to accept or reject the proposed changes, alterations or modifications, or arrangements that will be made by theissuer in this respect.January 2014OFS-1.7.4
The
debt securities must be in registered form, having equal par value in each issue.Debt securities of the same issue must confer upon their holders' equal rights towards theissuer and every condition to the contrary must be null and void.January 2014OFS-1.7.5
The
debt securities must be freely transferable.January 2014OFS-1.7.6
A
debt securities holder must have the right to receive an interest or income as per the terms of the security and also to receive the nominal value upon its maturity.January 2014OFS-1.7.7
If the
issuer ofdebt securities is alisted company , any convertibledebt securities issue must first be offered to the existingshareholders unless a whitewash resolution is passed by theshareholders' General Assembly.January 2014OFS-1.7.8
Debt securities to whichoptions ,warrants or similar rights to subscribe or purchaseequity securities ordebt securities are attached, must also comply with the requirements applicable to suchoptions ,warrants or similar rights.January 2014OFS-1.7.9
The
issuer may issue discountdebt securities that may be sold at its redemption value at the time of issuance.January 2014OFS-1.7.10
Public offers of
debt securities must be offered to the market either through a lead manager, or an eligible primary dealer who is required to make the necessary arrangements to re-selldebt securities to the public. The eligible primary dealer must be aCBB licensee under Volumes 1 or 2 and be a member of alicensed exchange .January 2014OFS-1.7.11
The
issuer , the originator and/or the guarantor, in the case of a guaranteed issue, must have produced audited financial statements in accordance with the International Financial Reporting Standards, or other accounting standards acceptable to the CBB covering at least the last 2 financial years preceding the application date.January 2014OFS-1.7.12
The financial statements must be audited to a standard comparable to that required by the International Auditing Practices Committee of the International Federation of Accountants.
January 2014OFS-1.7.13
In the case of a new applicant, if the period since the last financial year of audited financial statements exceeds 15 months at the time of the offering, interim period financial statements, which may be unaudited but reviewed by an external auditor, as compared with the same period in the previous financial year, must also be provided.
OFS-1.7.14
If the
debt securities are guaranteed by tangible assets, properties, or any other assets, theissuer must provide asset valuation reports prepared by at least two independent valuers and submit these to the CBB and be disclosed in theoffering documents , or made available for inspection by potential subscribers.January 2014OFS-1.7.15
The
issuer of public offers ofdebt securities must provide the depository arrangements through which the issueddebt securities can be maintained.January 2014OFS-1.7.16
The
issuer must confirm to the CBB that it will maintain apaying agent at an address in the Kingdom of Bahrain until the date on which nodebt securities are outstanding, unless theissuer performs that function himself.January 2014OFS-1.7.17
If
debt securities are:(a) Redeemable by theissuer , either in whole or in part, by an issue ofshares ;(b) Convertible intoshares , either in whole or in part, by the holder; or(c) Issued in conjunction with separateoptions to subscribe forshares ;then, the terms of the issue of the
securities must provide for all appropriate adjustments to the conversion rights in the event of any alteration to the capital of theissuer , and whether the holders of the debtsecurities and/oroptions have any participating rights in the event of a takeover offer for theissuer .January 2014OFS-1.8 OFS-1.8 Eligibility to Issue Asset-backed Securities
OFS-1.8.1
For the issue of asset-backed
securities , which include mortgaged-backedsecurities (certificates), theissuer must be a single purpose entity (vehicle) (SPV).January 2014OFS-1.8.2
The requirement to be a SPV does not preclude the addition to the pool of further assets during the life of the
securities . Furthermore, otherclasses of debtsecurities may be issued by the SPV, backed by separate pools of similar assets.January 2014OFS-1.8.3
The audited financial statements requirements for previous years' statements do not apply to
issuers of asset-backedsecurities (SPVs), but are required for the issue's originator and/or guarantor, as the case may be.January 2014OFS-1.8.4
Where an issue of asset-backed
securities is backed byequity securities :(a) Thosesecurities must be listed on an exchange;(b) Theequity securities must represent minority interests in and must not confer legal or management control of the companies issuing theequity securities ; and(c) Whereoptions or conversion rights relating toequity securities are used to back an issue, these requirements apply in respect of thesecurities resulting from the exercise of thoseoptions or rights.January 2014OFS-1.8.5
There must be, until the date on which no
debt securities are outstanding, an eligible independenttrustee representing the interests of the holders of the asset-backedsecurities and with the right of access to appropriate, timely information relating to the assets.January 2014OFS-1.8.6
If the
issuer issuesdebt securities guaranteed by mortgages on its property or any other collaterals, the legal procedures for mortgages must be undertaken in favour of the debt-holders, or atrustee representing them before offering thedebt securities for subscription. Theissuer itself must undertake such procedures or they may be undertaken by the party presenting the guarantee, if it is presented by a party other than theissuer . Theissuer must, within a period not exceeding one month from the closing date of subscription, take the necessary measures to enter the loan value, together with all related details in the register in which the mortgage has been entered.January 2014OFS-1.9 OFS-1.9 Eligibility to Issue Shari'a Compliant (Islamic) Securities
OFS-1.9.1
For the issue of Islamic debt
securities or Sukuk, theissuer must be a single purpose entity (vehicle) (SPV).January 2014OFS-1.9.2
The
issuer and/or originator must appoint either:(a) An independent Shari'a advisor or committee who has been approved by the CBB, in case of anissuer who does not have an existing Shari'a advisor or committee; or(b) An Islamic bank or a licensed institution approved by the CBB to carry out Islamic banking to advise on all aspects of the Islamic privatedebt securities .January 2014OFS-1.9.3
The CBB may, where it is of the view that the structure of the offering poses undue risks to the investor, reject the application to issue and offer such securities or require the
issuer to satisfy the CBB that such risks have been addressed.January 2014OFS-1.9.4
The
issuer of Islamicdebt securities must comply with Shari'a principles and the Shari'a pronouncement report.January 2014OFS-1.9.5
The Shari'a advisor appointed in accordance with Rule OFS-1.9.2 must advise the
issuer on all aspects of theIslamic securities, including documentation, structuring, investment, as well as other administrative and operational matters in relation to theIslamic securities , and ensure compliance with applicable Shari'a principles.January 2014OFS-1.9.6
The
issuer is responsible for the compliance of the instrument with Shari'a principles. The Shari'a advisor's role does not release management from their responsibility in ensuring such compliance. Theissuer must not restrict the activities of the Shari'a advisor in any way. In any case where restrictions are imposed these must be disclosed by the Shari'a advisor to the CBB, as well as disclosed in theoffering document .January 2014OFS-1.9.7
For the purposes of Rule OFS-1.9.1, types of
Islamic securities or Sukuk that may be issued include all Islamic Sukuk that are eligible to be issued under the CBB Volume 2 Rulebook, but are not limited to:(a) Ijara contract (similar in structure to a standard lease);(b)Salam contract (payment in advance of goods to be delivered at a date in the future);(c)Murabaha contract (asset financing);(d)Modarabah contracts ;(e)Istisna'a contract ;(f)Bai Bithaman Ajil contracts ;(g) Intifaa; or(h) Any other Islamic contracts approved by a Shari'a Advisory Committee, or considered as an eligible issue under the CBB Volume 2 Rulebook.January 2014OFS-1.9.8
For the purpose of this Module, the Islamic or Shari'a compliance contracts or transactions must have the following meaning:
(a)Ijara Sukuk is issued on stand alone assets identified on the balance sheet. For this purpose, the assets identified can be land which is to be leased, or equipment (e.g. aircraft, ships) to be leased. The rental rates of returns on these Sukuk can be both fixed and floating, depending on the particular originator;(b)Salam contracts are issued when payment is made in cash at the point of contract, but the delivery of the asset purchased is deferred to a pre-determined date;(c)Murabaha contracts are those that cover the sale and purchase transaction for the financing of an asset whereby the cost and profit margin (mark-up) are made known and agreed by all parties involved. The settlement for the purchase can be a deferred lump sum payment or an instalment basis of payments;(d)Modarabah contracts are used to finance a project or business venture whereby the investor (Rabb Al Maal) provides capital and a manager (Mudarib) manages the project or the business. A financial institution may act as the Mudarib for funds it mobilizes for investments in Shari'a compliant products. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio and losses if any are to be borne solely by the provider of the capital (Rabb Al Maal);(e)Istisna'a contracts are used primarily in project finance. Such contracts are not tradablesecurities since the underlying asset does not yet exist. The proceeds of such an issue would typically be used to construct the base infrastructure through multiple Istisna'a agreements;(f)Mixed Ijara contracts are contracts where the underlying assets can comprise of Istisna'a or Murabaha receivables in addition to Ijara; and(g)Mixed Ijara Sukuk allows for a greater variety of funds to be used since previously inaccessible Murabaha and Istisna'a assets can be used in the portfolio.January 2014OFS-1.9.9
The listing and tradability of the various Islamic contracts is subject to the Shari'a rules and principles and Shari'a Pronouncement Report in respect of each contract.
January 2014OFS-1.10 OFS-1.10 Eligibility to Issue Convertible Debt Securities
OFS-1.10.1
All convertible
debt securities which are convertible intoequity securities or outstandingsecurities of theissuer , or a company in the same group as theissuer for which an issuance or offering is to be sought, must comply both with the requirements applicable to thedebt securities for which an issuance is sought, and with the requirements applicable to the underlyingequity securities to which such convertibledebt securities relate. In the event of any conflict or inconsistency between the various requirements, those applicable to suchequity securities prevail.January 2014OFS-1.10.2
Where convertible
debt securities are convertible intoequity securities of a listedissuer , these convertibledebt securities must also be listed on the samelicensed exchange .January 2014OFS-1.10.3
Convertible
debt securities which are convertible into assets, properties, orsecurities other thanequity securities may be listed only if the CBB and thelicensed exchange are satisfied that holders have the necessary information available to form an opinion concerning the value of the other property to which such convertibledebt securities relate. This principle does not apply to an issue of convertibledebt securities by a state or a supranational.January 2014OFS-1.10.4
Any alterations in the terms and conditions of convertible
debt securities after issue must be approved by the debt securities holders and on obtaining such approval by the CBB, except where the alterations take effect automatically under the existing terms and conditions of such convertibledebt securities .January 2014OFS-1.10.5
The
issuer's shareholders must have priority right to subscribe for the convertibledebt securities if they express their desire to do so within a period not exceeding 15days from the date of calling them to exercise such right. Theshareholder may use his priority to subscribe for suchdebt securities in excess of his share in theissuer's capital if the offereddebt securities allow this.Amended: April 2014
January 2014OFS-1.10.6
The
issuer must not distribute bonusequity securities or profits from the reserve or issue new convertibledebt securities , except after taking the necessary measures to safeguard the rights of the holders of the convertibledebt securities who elect to convert them intoequity securities , by granting them bonusshares or profits from the reserve or some of thesedebt securities as if they wereshareholders .January 2014OFS-1.10.7
Any changes to the conversion rights attached to
convertible securities must be brought to the attention of the CBB immediately and is subject to CBB approval.January 2014OFS-1.11 OFS-1.11 Eligibility to Issue Warrants and Other Securities
Warrants
OFS-1.11.1
Where the
issuer directly issueswarrants , he must satisfy the requirements relating to the underlyingsecurities in accordance with this Module.January 2014Structured Warrants
OFS-1.11.2
Structured warrants or such similar instruments must be issued by a third-partyissuer which is:(a) A Volume 1, or Volume 2 licensee authorised by its relevant supervisory directorate of the CBB to conduct such issue (offer); or(b) A foreign financial institution subject to appropriate supervision acceptable to the CBB.January 2014OFS-1.11.3
Structured warrants and other similar instruments may only be issued in relation to:(a)Securities that are listed on a licensed or regulated exchange;(b) Commodities or metals, provided that they are traded on a licensed or regulated exchange and regularly operating open market;(c) Currencies; or(d) Stock indices or basket of listedsecurities .January 2014Placement and Holder Size
OFS-1.11.4
At least 50% of an issue must be placed out to a minimum of 50 persons. This requirement does not apply if there is a designated
market maker for thestructured warrants or other instruments.January 2014OFS-1.11.5
The minimum board lot size, the issue size, issue price and any other details for
structured warrants based on listed or quotedsecurities are subject to thelicensed exchange business rules.January 2014Tenure of Issue
OFS-1.11.6
The tenure of the
structured warrant must not exceed three years from the date of issue, or such longer time as the CBB may allow.January 2014Exercise Settlement
OFS-1.11.7
On exercise,
structured warrants must cash settled unless the CBB has approved physical settlement where the underlyingsecurities are cash or cash equivalent securities. The settlement method must be specified in theoffering document . Theissuer thereafter must not have an option to elect for settlement either inshares or cash upon exercise of thestructured warrants .January 2014OFS-1.11.8
An
issuer must decide on the method for determining the cash settlement price at the time of the launch of an issue, and this must be stipulated in theoffering document and or term sheet. The settlement price must be either:(a) The average of the closing prices of the underlyingsecurities (subject to any adjustment to reflect any capitalisation issue,rights issue , distribution or the like) for the five market days prior to, and including, the market day immediately before the relevant exercise/expiry date;(b) The closing price of the underlyingsecurities on the market day immediately before the exercise/expiry date; and(c) For securities regarded as illiquid, a cash settlement price determination agreed between theissuer and the CBB for that particular security.January 2014Conversion Ratio
OFS-1.11.9
For the exercise of
structured warrants based on individualsecurities , the conversion ratio must avoid using fractions ofsecurities .January 2014Adjustments
OFS-1.11.11
The terms of the issue must provide for adjustment to the exercise price and, where appropriate, the number of
securities which eachstructured warrant carries the right to sell or purchase, in the event of any capitalisation issue,rights issue , distribution or the like relating to the underlyingsecurities. January 2014Designated Market Maker
OFS-1.11.12
If there is a designated
market maker in respect of the issue, the CBB together with thelicensed exchange must be satisfied that the designatedmarket maker's obligations are being fulfilled.January 2014Underlying Securities
OFS-1.11.13
Necessary arrangements must be made for the underlying
securities to be held by atrustee orcustodian to meet the exercise of all obligations of the outstandingwarrants .January 2014OFS-1.11.14
Where the
warrants relate tosecurities issued by a third party, the declaration by theissuer should take the following form:"Subject as set out below, the issuer whose name appears on page [the issuer's Board of Directors and management] accepts responsibility for the information contained in this document. To the best of the knowledge and belief of the issuer (who has taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect such information.
The information contained herein with regard to [name of issuer of underlying securities], its subsidiary undertakings and the [description of underlying securities], consists of extracts from or summaries of information contained in financial and other information released publicly by [name of issuer of underlying securities] and summaries of certain provisions of [jurisdiction of issuer of underlying securities] law. The issuer accepts responsibility for accurately reproducing such extracts or summaries. The issuer accepts no further or other responsibility in respect of such information."
January 2014OFS-1.11.15
In the case of
warrants related to anything other thansecurities , the declaration in Paragraph OFS-1.11.14 should be appropriately modified.January 2014OFS-1.11.16
Where the issue of
warrants is guaranteed, the information requirements which apply to theissuer must also be applied to the guarantor, depending on whether the guarantor is listed or is the guarantor of other listedsecurities .January 2014OFS-1.11.17
The equivalent
offering document must include details of conditions of and procedures for exchange, exercise or cash settlement and details of the situations in which they may be amended, including any provisions for the adjustment of the terms of thewarrants .January 2014OFS-1.12 OFS-1.12 Eligibility for States and Supranationals to Issue Securities
OFS-1.12.1
For issues by states and supranationals, copies of all enabling governmental or legislative laws, authorisations, consents or orders must be submitted to the CBB.
January 2014OFS-1.12.2
The requirements for submission of the following documents do not apply to the
securities issued by states and supranationals:(a) Certificate of incorporation or equivalent document;(b) Memorandum and Articles of Association;(c) Annual financial statements;(d) The resolutions of theissuer at the general meeting authorising the issue of thesecurity ;(e) The resolution(s) of the board of directors; and(f) Notice(s) ofshareholders meeting.January 2014OFS-1.13 OFS-1.13 Eligibility for State Corporations to Issue Securities
OFS-1.13.1
The accountants' report in relation to an issuing of
debt securities issued by a state corporation incorporated or otherwise established in Bahrain is not required. In such case, the latest audited financial statements, which must relate to a financial period ended not more than 15 months before the date the document is issued, must be included in or appended to the issuing andoffering document .January 2014OFS-1.13.2
The issuance of
securities issued by a state corporation incorporated or otherwise established outside Bahrain, where the latest financial period reported on by the external auditor exceeds 15 months before the date of the issuing document, requires reviewed interim financial statements relating to a period ended not more than 9 months before the date of the issuing andoffering document , and appropriate evidence must be given to the CBB that there has been no material adverse change in the financial condition of theissuer or the guarantor, in the case of a guaranteed issue since the end of the period last reported on by the external auditor.January 2014OFS-1.13.3
The requirement of submission of the following documents does not apply to the
securities issued by a state corporation:(a) Certificate of incorporation or equivalent document of theissuer and guarantor, in the case of a guaranteed issue;(b) Certificate entitling theissuer and the guarantor, in the case of guaranteed issue, to commence business; and(c) Notice(s) ofshareholders meeting.January 2014OFS-1.14 OFS-1.14 Eligibility for Overseas Issuers to Issue Securities
OFS-1.14.1
The issuance and offering requirements for local
issuers apply equally tooverseas issuers , subject to the additional requirements, modifications or exceptions below.Amended: April 2014
January 2014OFS-1.14.2
The CBB reserves the right, in its absolute discretion, to refuse any issuing, offering or listing application of
securities of anoverseas issuer if:(a) It believes that it is not in the public interest to approve such application; or(b) Theoverseas issuer's securities , particularlyequity securities , has not obtained the approval of its home market regulator or licensed exchange for offering or listing, as the case may be, and the CBB is not satisfied that the overseasissuer is incorporated or otherwise established in a jurisdiction where the standards ofsecurities holders' protection are at least equivalent to those provided in Bahrain.Amended: April 2014
January 2014OFS-1.14.3
In the case of registered
securities , provision must be made for a depository orsecurities ownership transfer agent, to register holders to be maintained in Bahrain, or such other place as the CBB may accept, and for transfers to be registered locally.January 2014OFS-1.14.4
For purposes of Paragraph OFS-1.14.3, the CBB may consider an alternative proposal for registering transfers for holders in Bahrain, in exceptional circumstances.
January 2014OFS-1.14.5
The following modifications apply:
(a) The references in this Module to "Directors" must be read as references to members of theoverseas issuer's governing body;(b) The issuing andoffering documents must be signed by at least two members of the governing body of theoverseas issuer or guarantor, in the case of a guaranteed issue, or by their agents authorised in writing rather than signed by or on behalf of every director or proposed director; and(c) The declaration to be submitted to the CBB may require adjustment by virtue of the laws to which theoverseas issuer is subject and may be signed by a director's and secretary's agent, authorised in writing, rather than by a director and the secretary.Amended: April 2014
January 2014OFS-1.14.6
The CBB may be prepared to accept modifications to the
offering document and/or listing application as it considers appropriate in a particular case. In particular, in the case of anoverseas issuer whose home market or primary listing is on another regulated exchange recognised by the CBB, particularly for those jurisdictions who are IOSCO members, and signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU), the CBB may accept anoffering document or listing application which incorporates equivalent continuing obligations to those imposed by that other market or exchange.Amended: April 2014
January 2014OFS-1.14.7
Conversely, the CBB may impose additional requirements in certain instances. In particular, if the
overseas issuer's securities has or is to have a primary listing on the exchange, or obtained the approval of thesecurities regulator, the CBB may impose such additional requirements as it considers necessary to ensure that investors have the same protection as that afforded to them in Bahrain.Amended: April 2014
January 2014OFS-1.14.8
Issuers must fulfil their obligations regarding the circulation and contents of annual and interim financial statements and accounts, to ensure simultaneous release of information to other exchanges and to the market in Bahrain.January 2014OFS-1.14.9
The external auditor must be independent, both of the
overseas issuer and of any other company concerned.Amended: April 2014
January 2014OFS-1.14.10
Financial statements in respect of
overseas issuers are required to conform with accounting standards acceptable to the CBB which must meet at a minimum the IFRS, as promulgated from time-to-time by the International Accounting Standards Committee. The relevant standards will normally be those current in relation to the last financial year reported on and, wherever possible, appropriate adjustments must be made to show profits for all periods in accordance with such standards.Amended: April 2014
January 2014OFS-1.14.11
Where the CBB allows reports to be drawn up otherwise than in conformity with accounting standards set by the International Accounting Standards Committee, the CBB may, having regard to the jurisdiction in which the
overseas issuer is incorporated or otherwise established, require the report to contain a statement of the financial effect to the financial statements of the use of accounting standards other than IFRS.Amended: April 2014
January 2014OFS-1.14.12
Where the figures in the report differ from those in the audited annual financial statements, a statement of adjustments must be incorporated in the
offering documents and submitted to the CBB which enables the figures to be reconciled.January 2014OFS-2 OFS-2 Offering of Securities
OFS-2.1 OFS-2.1 Permission Requirements
OFS-2.1.1
Offers in relation to an
overseas issuer may only be made through a person acting as a lead manager or placement agent who is licensed as and eligible to undertake such activity in terms of its relevant CBB Volume.January 2014OFS-2.1.2
The CBB may grant a waiver to an
issuer on eligibility conditions if the interests of the investors, or the capital market in general will not be compromised.January 2014OFS-2.2 OFS-2.2 Methods of Offering
OFS-2.2.1
The following are non-exclusive examples of the types of offering that may take place in the Kingdom of Bahrain with specific eligibility and other approval requirements for each type to be found later in this Chapter:
(a)Initial Public Offering : An offer for subscription to the public by or on behalf of a newly-established company, or an unlistedissuer of its ownsecurities ;(b)Initial Offer for Sale : An offer for sale to the public by or on behalf of existing companies or unlistedissuers or itssecurities holders or part of itssecurities holders, whosesecurities are already in issue or subscribed;(c)Subsequent Public Offer : An offer for subscription to the public by or on behalf of a listedissuer of its ownsecurities other than by arights issue , after obtaining the approval on waiving of the pre-emptive rights of the existingsecurities holders;(d)Rights Issue : Arights issue offer by way of exercising the pre-emptive rights by existing holders ofsecurities which enables those holders to subscribe to thosesecurities in proportion to their existing holding, or otherwise on the basis ofallotment approved by those holders;(e)Private Placement : Private placement is an offer toaccredited investors , as defined in this Module, selected or accepted by theissuer or the appointed lead manager for obtaining subscriptions forsecurities of an issue, or for obtaining subscription for sale ofsecurities by anunderwriter or lead manager;(f)Employee Share Benefit Plan : Offering ofsecurities which is made by theissuer on the exercise ofoptions granted to or for the benefit of management and/or employees, after obtaining the approval ofsecurities holders and the CBB;(g)Capitalisation Issue : A capitalisation issue is anallotment of furthersecurities to existingsecurities holders, credited as fully paid-up out of theissuer's reserves or profits, in proportion to their existing holdings, or otherwise not involving any monetary payments;(h)Consideration Issue : A consideration issue is an issue ofsecurities as consideration, other than cash, in a transaction or in connection with a takeover or merger or the division of anissuer ;(i) Swapping, Exchange or Substitution of Securities:Securities issued through an exchange or a substitution, swapping or conversion ofsecurities into otherclasses ofsecurities ;(j)Initial Listings for Publicly Traded Companies : For non-Bahrainiissuers whosesecurities are issued in other markets, or listed on another regulated exchange and who wish to list on alicensed exchange in Bahrain; or(k)Listing of Closed or Private Companies (including Small and Medium Enterprises SME's); and(l) Closed, private, family companies, or such other non-public companies that offer theirsecurities to the public and list.January 2014OFS-2.3 OFS-2.3 Public Offering
OFS-2.3.1
All public offering applications must meet the eligibility criteria under Section OFS-1.5 and the eligibility criteria related to the type of
security orissuer and follow the requirements outlined in Appendix OFS-1.January 2014Corporate Governance
OFS-2.3.2
Issuers ofsecurities in a public offering must confirm to the CBB before the registration of theoffering document that it is able to comply with the CBB Law, rules and regulations, as well as with all other applicable laws, rules and regulations.January 2014OFS-2.3.3
The
issuer must meet the following requirements in order for apublic offer to be approved by the CBB:(a) Theissuer is a duly incorporated entity under the laws of the Kingdom of Bahrain, or in case of anoverseas issuer , under the laws of its place of incorporation;(b) Theissuer operates in conformity with its Memorandum and Articles of Association or equivalent constitutional documents;(c) Thesecurities are freely transferable and free from any encumbrances;(d) The offeredsecurities are to be listed on alicensed exchange in the Kingdom of Bahrain, and there are adequate assurances between the issuer and thelicensed exchange that they will be admitted to such a platform;(e) The necessary custodial and/or central depository arrangements have been made including the deposit of securities with an entity eligible to provide depository services under Article 94 of the CBB Law;(f) The necessary clearing and settlement arrangements have been made that give effect to Article 108 of the CBB Law;(g) Theissuer has made the appointment of the eligible advisors, as per this Module including the appointment of a listing agent to liaise with thelicensed exchange and the CBB where the CBB deems necessary; and(h) Theissuer meets such other requirement as determined by the CBB from time to time.Amended: October 2017
January 2014OFS-2.3.4
The
issuer must appoint a lead manager for anypublic offer .January 2014OFS-2.3.5
An
issuer in aninitial public offering of equity securities must ensure that the issue is underwritten, unless an exception is made by the CBB, in accordance with Paragraph OFS-2.3.6.Amended: October 2017
January 2014Underwriting
OFS-2.3.6
The CBB may approve an issue without an
underwriter where:(a) More than one institution who are not related parties provide the proposedoffering price ; or(b) The lead manager has established the issue price through abook building mechanism; and(c) The lead manager has signed a declaration of due diligence and has submitted a declaration confirming to theissuer and the CBB that the issue will be fully subscribed, which declaration must be included in theoffering document .January 2014OFS-2.3.7
Where the issue is to be underwritten, full details of the
underwriter and the underwriting arrangement must be disclosed in theprospectus and the full underwriting agreement as signed by the parties must be made available for inspection by the subscribers.January 2014OFS-2.3.8
Where the issue is not to be underwritten, the CBB retains its right to impose full or
partial underwriting based upon pricing of thesecurities to be issued and market conditions.January 2014OFS-2.3.9
Where the issue is underwritten the:
(a)Underwriter must not be a related party; and(b) Lead manager and/orunderwriter must directly or through an authorised market maker, establish a price stabilisation mechanism for thesecurities for a period of at least six months starting from the first day of trading on alicensed exchange . The CBB may require a longer period of price stabilisation where it considers it necessary.January 2014OFS-2.3.10
Details of underwriting agreements must be disclosed in the
offering document and the agreement must be capable of being enforced under any circumstance.January 2014OFS-2.3.11
In respect of
public offers ofdebt securities , where the issue is to be underwritten or sold through primary dealer arrangements, full details of theunderwriter , primary dealer, the underwriting arrangement and/or primary dealer arrangements must be disclosed in theprospectus and the underwriting agreement must made available for inspection by the subscribers.January 2014Book Building
OFS-2.3.12
The
preliminary/red herring prospectus containing all the information except the information regarding the price at which thesecurities are offered, must be filed with the CBB prior to it being used in any manner by theissuer or its advisors.January 2014OFS-2.3.13
The lead manager and/or the
underwriter to the issue must be nominated by theissuer as a book runner and his name must be disclosed in theprospectus .Amended: October 2017
January 2014OFS-2.3.14
The
preliminary/red herring prospectus to be circulated may indicate the price band within which thesecurities are being offered for subscription.January 2014OFS-2.3.15
The book runner, on receipt of the offers must maintain a record of the names and number of
securities ordered and the price at which the investors are willing to subscribe tosecurities under the placement portion.January 2014OFS-2.3.16
On receipt of the information, the book runner and the
issuer must determine the price at which thesecurities are to be offered to the public.January 2014OFS-2.3.17
The book runner and other appointed advisors associated with the
book building process must maintain records of thebook building process and the CBB has the right to inspect and obtain a copy of such records.January 2014OFS-2.3.18
Details of the outcome of the
book building process must be disclosed in theprospectus or offer document and must include information such as the general range of the prices at which the institutional investors are willing to subscribe to under the placement portion, the total number of securities ordered and the total number of institutions involved. The CBB shall have the right to require the disclosure of any other additional information if it deems necessary.Added: October 2017OFS-2.3.19
The
issuer , lead manager and/orunderwriter must consider the outcome of thebook building process and/or any other processes or arrangements employed, when establishing the final offer price at which the securities are to be offered to the public. A statement to the effect must be duly disclosed in theprospectus .Added: October 2017OFS-2.4 OFS-2.4 Private Placement
OFS-2.4.1
Offers made by
private placement pursuant to a Private Placement Memorandum (PPM) are subject to the general eligibility criteria and requirements stipulated under this Module.January 2014OFS-2.4.2
A
private offer must only be made toaccredited investors and must be for a minimum investment of USD 100,000.00. Aprivate offer , excluding those offers made by way of private equity, is limited to a take up by less than 100accredited investors .January 2014OFS-2.4.3
Any subsequent issues or offering of
securities by a publicly listedissuer , for its ownsecurities , must first be offered to its existingshareholders (rights offering) and then to the public. Any listedissuer that would like to make aprivate placement must obtain CBB approval and the approval of theshareholders' General Assembly.January 2014OFS-2.4.4
Issuers must combine all offers ofsecurities that are in substance part of a single offering. The CBB will consider if the offer occurs in the six-month period before or the six-month period after the completion of an offer, for the purpose of the above determination.January 2014OFS-2.4.5
In order for the CBB not to regard the offer as a
public offer , theissuer must exercise reasonable care to ensure that the purchasers ofsecurities are not acquiring them for resale, redistribution to other investors within a period not less than one year.January 2014OFS-2.4.6
The
issuer , lead manager and any appointed advisor to theprivate placement offer must not disseminate or make available any information related to theprivate placement offer to the public prior to the subscription being closed and must not at any time disclose or make available any information that could be regarded as an inducement to deal in thesesecurities .January 2014OFS-2.4.7
Any
private placements marketed or promoted by licensees of the CBB must set fees within the actual cost and must be within reasonable and justifiable levels that do not materially compromise the interests of theissuer or the investor. Theprivate placement fees or any other fees or charges related to the placement and any other related cost must be disclosed clearly in the PPM.January 2014OFS-2.4.8
The level of fees for
issuers of differing sizes of issue is given below as a guidance:Size of Issue Maximum Fee Percentage Up to BD100,000,000 3% BD100,000,001 to BD500,000,000 2% BD500,000,001 and above 1% January 2014OFS-2.5 OFS-2.5 Rights Offering
OFS-2.5.1
Rights offerings of listedequity securities are subject to the eligibility criteria under this Module.January 2014OFS-2.5.2
The CBB may only grant its approval for a
rights issue where the General Assembly of theissuer has issued a resolution approving such offer.January 2014OFS-2.5.3
An
offering period of arights offering must be approved by the CBB and must be close to the public announcement of financial statements so that shareholders and potential subscribers have the most recent financial information of the issuer.January 2014OFS-2.5.4
An application for approval of a
rights issue must include the issue price and principal terms and conditions of the issue.January 2014OFS-2.5.5
If the
rights offering is made at a high share premium or above the market price on alicensed exchange , such issue shall be subject to the underwriting requirement under Subparagraph OFS-1.6.1 (e).January 2014OFS-2.5.6
The content of the
rights offering document must meet the minimum requirements provided in Appendix OFS-1, where relevant.January 2014OFS-2.5.7
To accommodate for the possibility of under subscription by the existing
shareholders ,issuers must preparerights offering documents in line with public offering documents to avoid any delay regarding the approval of a further public offering where therights issues are not fully underwritten or taken up.January 2014OFS-2.5.8
If the
rights issue is not fully subscribed or fully underwritten and thereafter is made to the public, theprospectus requirements of Section OFS-5.1 apply in relation to theoffering document .January 2014OFS-2.5.9
Any announcement made by the
issuer or his advisors prior to receiving the approval of the CBB must clearly state that therights issue is subject to the approval of the CBB.January 2014OFS-2.5.10
The
issuer must disclose the price, terms and the purpose of therights issue , as well as the financial circumstances that call for therights issue .January 2014OFS-2.5.11
The
offering period for arights issue must be at least 15 calendar days.January 2014OFS-2.5.12
A
rights issue which allows holders ofsecurities to participate in proportion or pro rata to the amount of existingshares held, must allow for renunciation, in part or whole, in favour of a third party at the option of the entitledshareholders .January 2014OFS-2.5.13
The CBB will not allow any
rights issue in which the rights cannot be renounced, in part or whole, in favour of a third party at the option of the entitledshareholders , unless theissuer made the necessary arrangements with alicensed exchange to trade the rights, subject to such renunciation.January 2014OFS-2.5.14
Subsequent to a
rights issue , theissuer must submit to the CBB the results of the issue including an allotment report and, if any rights are not taken up or are sold, the details of the sale, including the date and price pershare .January 2014OFS-2.6 OFS-2.6 Employee Stock Option Plan
OFS-2.6.1
Any
employee stock option plan of a listedissuer utilising itsequity securities requires CBB approval.January 2014OFS-2.6.2
The
issuer may reserve up to 10% of its total issuedsecurities, for its directors and employees through anemployee stock option plan .January 2014OFS-2.6.3
The
employee stock option plan must be approved by theshareholders at the General Assembly. Theissuer must provide theshareholders' General Assembly with full details and information about the terms, conditions, eligibility criteria and timeframe and all information included under Rule OFS-2.6.4.January 2014OFS-2.6.4
The
employee stock option plan must contain provisions relating to:(a) The persons to whomsecurities may be issued or sold under the plan ("participants");(b) The total number and/or amount of thesecurities to be issued or purchased on a licensed exchange;(c) Entitlement in terms of number and amount ofsecurities for any one participant;(d) The amount payable on application or acceptance, and the basis for determining the subscription or sale or option price, and the period in or after which payments or calls or loans to provide the same, may be paid or called;(e) The time limit for the plan;(f) The period during which the participants must not dispose of the allottedsecurities , if applicable; and(g) The voting, dividend, transfer and other rights, including those arising from the liquidation of the company attached to thesecurities .January 2014OFS-2.6.5
Any announcement made prior to receiving the approval of the CBB must clearly state that the
employee stock option plan is subject to the approval of the CBB.January 2014OFS-2.6.6
The resolution must approve a specific plan and refer to either the plan itself, or to a summary of its principal terms included in the circular, which must contain all the provisions set out in Rule OFS-2.6.4. Where directors of the
issuer aretrustees of the plan, or have a direct or indirect interest in the plan, the circular must disclose the interest.January 2014OFS-2.6.7
All listed companies'
securities held on behalf of the employees under anemployee stock option plan oremployee share benefit plan , must be held in trust by atrustee subject to the prior written approval of the CBB. The securities account opened and maintained at alicensed central depository for this purpose must be clearly identified as a trust account for theemployee stock option plan oremployee share benefit plan accordingly. Where employees are eligible to trade in the securities of theissuer held on their behalf in anemployee stock option plan , the directors, executive management and any other key persons must not be eligible to hold the position oftrustee of such plan.Amended: October 2017
January 2014Transitional Arrangement
[This Sub-Heading was deleted in July 2018].
Deleted: July 2018OFS-2.6.7A
[This Paragraph was deleted in July 2018].
Deleted: July 2018OFS-2.6.8
Unless the
securities subject to the same plan are identical with othersecurities , they must be separately designated.January 2014OFS-2.6.9
The plan may provide for an adjustment of the subscription or option price, or the number or amount of
securities subject that such variation provides a participant the same portion of the equity capital as that to which he was previously entitled.January 2014OFS-2.6.10
The issue of
securities as consideration for an acquisition will not be regarded as a circumstance requiring adjustment.January 2014OFS-2.6.11
An adjustment other than on a
capitalisation issue must be confirmed in writing by the company's auditor and in its opinion be fair and reasonable.January 2014OFS-2.6.12
The plan must provide, or the circular must state, that the provision relating to the matters contained in Rule OFS-2.6.4 cannot be altered to the advantage of participants, without the
shareholders' prior approval at a General Assembly.January 2014OFS-2.6.13
The plan and any other subsequent renewal or amendments to the terms of the plan are subject to the prior approval of the CBB.
January 2014OFS-2.6.14
The holders or the owners of
securities issued or subsequently issued under anyemployee share benefit plan , whether theissuer or the directors of theissuer aretrustee of the plan or not, are subject to the provisions related to prohibition of abuse ofinside information andinsider trading laws including but not limited to those set out in Module MAM of CBB Rulebook Volume 6.January 2014OFS-3 OFS-3 Capital Market Advisory Services Provider
OFS-3.1 OFS-3.1 Capital Market Advisory Services Provider
OFS-3.1.1
For the purpose of this Module, a
Capital Market Advisory Services Provider (appointed advisor) means any person who provides or involves himself with any activity or services stipulated under Article 80 of the CBB Law.January 2014Definition of Advisors
OFS-3.1.2
For the purpose of this Module, in addition to any other designation by the CBB, a
Capital Market Advisory Services Provider may be classified as follows:(a) Auditors;(aa) Financial Advisors;(b)Custodian ;(c) Independent Reporting Accountant;(d) Independent Valuer;(e) Issue Agent;(f) Lead Manager;(g) Legal Advisor;(h)Paying Agent ;(i)Receiving Bank ;(j) Securities Depositor and ownership transfer agent;(k)Trustee ;(l) Shari'a Advisor;(m) Promoter;(n) Listing Agent;(o)Underwriter ; or(p) Any other person designated as aCapital Market Advisory Service Provider by the CBB from time to time.Amended: October 2017
January 2014OFS-3.2 OFS-3.2 General Eligibility
Incorporation, Licensing and Acceptance
OFS-3.2.1
The appointed advisor must be either incorporated in the Kingdom of Bahrain and licensed by the CBB or authorised to provide this service by the CBB.
January 2014OFS-3.2.2
The Memorandum and Articles of Association and/or the by-laws of the advisor must allow it to provide such service.
January 2014OFS-3.2.3
Where applicable, the appointed advisor must be incorporated in, be a member, associate or registered with the relevant local, and/or international professional body of a jurisdiction which is a signatory to the IOSCO MMoU.
January 2014Ability to Provide the Service
OFS-3.2.4
In addition to incorporation and licensing, the CBB will review the ability of the advisor to provide the service. The CBB will consider the following in such determination:
(a) Historical records and prior performance;(b) Maintenance of systems and controls set-up by the advisor; and(c) Number of suitably experienced and qualified employees.Moreover, advisors' fees and charges should be fixed reasonably in order to ensure that the costs associated with raising capital or initial public offerings are competitive.
Amended: October 2017
January 2014Controlled Functions
OFS-3.2.5
All persons proposed to undertake any of the
controlled functions must be subject to the provisions and requirements related to these functions, particularly in respect of anti-money laundering and financial crime, the compliance function and any person directly involved in the preparation of theprospectus oroffering documents .January 2014OFS-3.2.6
All persons proposed to undertake any
controlled functions and any other persons recruited or employed by thecapital market advisory service provider 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, as the case may be. However the CBB reserves the right to impose a higher level of qualifications as it deems necessary.Amended: April 2016
January 2014OFS-3.2.7
Capital market advisory services providers must maintain and keep records of agreements, contracts, correspondence and other information to demonstrate their compliance with the requirements of this Module. These records must be kept for at least 10 years.January 2014Appointment, Change, Termination
OFS-3.2.8
Any appointment of an advisor must be made in the form of a written agreement, contract and/or official letter issued by the
issuer or lead manager as applicable.January 2014OFS-3.2.9
The acceptance of the appointment by the advisor must be made in the form of an official written confirmation.
January 2014OFS-3.2.10
The name of the appointed advisors must be prominently disclosed in the
offering document and in all advertising materials.January 2014OFS-3.2.11
A person appointed to act as an appointed advisor shall not cease to act as such until another has taken office with CBB approval.
January 2014OFS-3.2.12
An
issuer must notify the CBB in writing immediately of the appointment or dismissal or replacement of an advisor that had been appointed. In the case of a dismissal, the reasons for dismissal must be provided.January 2014Transparency and Disclosure
OFS-3.2.13
Where a
prospectus oroffering document includes a statement purporting to be made by, or based on a statement made by an expert, theprospectus oroffering document must not be issued unless:(a) The expert has, before the approval and registration of theprospectus oroffering document , as the case may be, provided his written consent to the issue thereof; and(b) There appears in theprospectus oroffering document , a statement that the expert has given such consent.January 2014OFS-3.2.14
The appointed advisor must provide a statement regarding its due diligence with regard to its appointed responsibility and this statement must be included in the
prospectus oroffering document .January 2014OFS-3.2.15
The appointed advisor must disclose in the
prospectus and/oroffering documents , whether it has any capital of theissuer under option, or agreed conditionally or unconditionally to be put under option, including:(a) The title and amount ofsecurities covered by theoptions ;(b) The exercise price;(c) The purchase price, if any; and(d) The expiration date of theoptions .January 2014OFS-3.2.16
Where
options have been granted, or agreed to be granted to all the holders ofshares ordebt securities , or of anyclass thereof, or to any appointed advisor, or to employees under theemployees' share benefit plan , a general disclosure of such fact may be made.January 2014OFS-3.2.17
The information provided in Rule OFS-3.2.15 must also be disclosed where there is authorised but unissued capital, or an undertaking to increase the capital in connection with
warrants , convertible obligations or other outstanding equity-linkedsecurities , or subscription rights granted or to be granted to any appointed advisor. Such information must indicate:(a) The amount of outstanding equity-linkedsecurities and of such authorised capital or capital increase and where appropriate, the duration of the authorisation;(b) The categories of advisors having preferential subscription rights for such additional portions of capital;(c) The terms, arrangements and procedures for theshare issue corresponding to such portions; and(d) That no subscription is made by the issuer in contravention of Subparagraph OFS-1.5.2(s).January 2014OFS-3.2.18
In regard to the implementation of the granting of capital in Paragraphs OFS-3.2.15 and OFS-3.2.17:
(a) The General Assembly of thesecurities holders must approve a separate resolution of the rights oroptions through a majority of disinterestedsecurities holders;(b) It must be implemented, exercised and/or allocated separately from the process of the related offering ofsecurities , i.e. either before or after theoffering period ; and(c) Forissuers under formation, the implementation, exercising and or allocation of the requiredsecurities must take place only after the publication of theissuer's incorporation order in the Official Gazette.January 2014Independency and Avoidance of Conflict of Interest
OFS-3.2.19
An appointed advisor must be independent of the
issuer . An appointed advisor will not be considered independent by the CBB if:(a) He owns an interest of 5% or more ofequity securities of theissuer or any other company within theissuer's group;(b) He has a business relationship with, or financial interest in theissuer or any other entity in theissuer's group that would give the appointed advisor, or the appointed advisor's group a material interest in the outcome of the transaction;(c) He provides and has provided in the previous 2 years any service, assurance, or guidance in any event to theissuer , other than the offering or listing in which he is appointed as an appointed advisor, or to another entity in theissuer's group; or(d) A director, partner or employee of the appointed advisor or another entity in the appointed advisor's group has a material interest in theissuer or any other entity in theissuer's group.Amended: July 2018
January 2014OFS-3.2.20
When an appointed advisor undertakes business other than the capital market advisory services, or undertakes two or more of the capital market advisory services, the appointed advisor must ensure that the performance of such business is subject to the avoidance of any conflict of interest.
January 2014Confidentiality and Prohibition of Insider Trading
OFS-3.2.21
Appointed advisors are subject to confidentiality requirements which must be explicitly stated in the respective agreements, contracts and/or letters.
January 2014OFS-3.2.22
All advisors must abide by the rules relating to the Prohibition of Market Abuse and Manipulation contained in Module MAM of Volume 6 CBB Rulebook, as well as the relevant rules of the
licensed exchange regarding the prevention ofinsider trading , in their capacity as a temporary insider.January 2014Reporting and Notification to the CBB
OFS-3.2.23
An appointed advisor is responsible, in addition to the reporting and disclosure requirements stipulated under this Module, for immediate notification to the CBB of any offence involving money laundering, fraud, theft, or other dishonest conduct related to the offer or listing, irrespective of whether such conduct is reported to the CBB by the
issuer and/or the lead manager.January 2014Declaration and Accountability
OFS-3.2.24
An appointed advisor is required to provide the CBB with a declaration confirming his acceptance to the accountability and enforceability of the CBB Law, rules and regulations, and all other applicable laws, rules and regulations, and in particular to the CBB Law Articles 82, 84, 85, 106, 166, 167 and 168.
January 2014CBB Approval
OFS-3.2.25
The CBB shall decide on the eligibility of the appointed advisor(s) on a case by case basis, taking into consideration, the nature and complexity of the offering, as well as, the nature of involvement and commitment of the appointed advisor(s).
January 2014OFS-3.3 OFS-3.3 Role and Responsibilities of the Appointed Advisors
OFS-3.3.1
An appointed advisor is required to fufill the applicable role and responsibilities as laid out in this Section and contained in the agreement signed between the
issuer and advisor.January 2014Role and Responsibilities of the Lead Manager
OFS-3.3.2
All
issuers must engage aCBB licensee to act as a lead manager or to fulfil the obligations of a lead manager as defined in this Section.January 2014OFS-3.3.3
The lead manager is in addition to Paragraph OFS-3.2.24 required by the CBB to act with appropriate care and skill and perform the following:
(a) Prepare and file the application for approval of asecurities offering to the CBB;(b) Report to the CBB on the due diligence undertaken in respect of the issue and theissuer ;(c) Make a declaration that is provided to the CBB and included in theoffering document , that theoffering document does not contain information that is false or misleading, in its opinion does not prejudice the interests of present or future investors and does not omit any material information;(d) Make a declaration that is provided to the CBB and included in theoffering document that theoffering document is in accordance with all the CBB Law, other rules and regulations and this Module;(e) The lead manager's declaration under (d) is only acceptable to the CBB, if it is attached with a duly signed and fully completed offering prospectus checklist prescribed under Appendix OFS-7; and(f) Where the issue is not underwritten, the lead manager must provide the CBB with the method of price determination and price stabilisation for a period of one year or such other period as the CBB may determine.January 2014OFS-3.3.4
For the purposes of Rule OFS-3.3.3, the outstanding underwriting commitments of a lead manager should not exceed reasonable limits including in relation to its capital and capital adequacy requirements.
January 2014OFS-3.3.5
The lead manager is expected to also assist the
issuer with the appointment of other advisors.January 2014OFS-3.3.6
Where the lead manager is also acting as a listing agent or sponsor in relation to a planned listing, the lead manager is also responsible for:
(a) Advising theissuer on its suitability for listing;(b) Ensuring the applicant, as well as the listing documents, meet admission requirements;(c) Preparing the application and listing documents for listing;(d) If thesecurities listing application for obtaining the CBB approval is made separately from the application for the offering ofsecurities , ensuring that in the case of the listing documents the requirements related to the declaration under Subparagraph OFS-3.3.3 (d) and prospectus checklist under Subparagraph OFS-3.3.3 (e) are also applied;(e) Ensuring that theissuer is sufficiently set up to comply with the continuing listing obligations under thelicensed exchange's listing rules including meeting the corporate governance requirements;(f) Ensuring the CBB is informed of all matters which should be brought to its attention; and(g) Notifying the CBB of any amendments to the application or listing documents after submission.January 2014OFS-3.3.7
The lead manager must inform the CBB where:
(a) It is no longer able to satisfy the criteria for approval;(b) Any of the approved executives of the lead manager are convicted of an offence involving fraud, theft or other dishonesty, or are the subject of a bankruptcy proceeding; or(c) It resigns as a lead manager, listing agent or sponsor. In this case, the lead manager must provide written notification to both the CBB and the relevantissuer .January 2014E-Subscription
OFS-3.3.8
In line with Articles 83 and 178 of the CBB Law and the
dematerialisation ofsecurities requirements under Paragraph OFS-1.5.5,issuers and lead managers must put in place appropriate technical infrastructure and other arrangements to encourage subscribers to use e-subscription facilities.Amended: April 2016
January 2014OFS-3.4 OFS-3.4 Role and Responsibilities of Auditor and Independent Reporting Accountant on Financial Projections
OFS-3.4.1
Newly-established
issuers or small and medium enterprises who cannot provide financial statements, or historical records must include projected financial statements in theprospectus oroffering document .January 2014OFS-3.4.2
Other than for newly-established
issuers , financial projections, forecasts, or estimates of future operating results are not required to be included inoffering documents , unless otherwise stated in this Module or by the CBB. However, if theissuer decides to disclose such information, it has to justify its projections adequately. Theissuer should provide an explanation as to how the projections were calculated, taking into account all assumptions and risks.January 2014OFS-3.4.3
Where the projections of financial statements, or forecasted financial information are disclosed in the
prospectus oroffering document , the projections must be reviewed and reported on by an independent reporting accountant or other expert and such report must be set out in theoffering document , in accordance with the International Standards on Assurance Engagement (ISAE), or any other applicable international standards required from time-to-time and the declaration required under Paragraph OFS-3.2.24 must be in line with this standard.January 2014OFS-3.4.4
The
issuer , lead manager and the independent reporting accountant must ensure that sufficient details on the bases and assumptions of the projections are disclosed to enable the investor to assess the reliability of the projections and the effect of any changes to the assumptions used. The bases and assumptions must:(a) Provide useful information to investors to assist them in forming a view as to the reasonableness and reliability of the projections;(b) Draw the investors' attention to, and where possible quantify, those uncertain factors which could materially affect the achievement of the projections;(c) Avoid generalisations and all-embracing assumptions (general asumptions, where applicable, could be made) and those relating to the general accuracy of the projections; and(d) Be clearly stated and reviewed for reasonableness by the directors who are responsible for the projections, bases and assumptions.January 2014OFS-3.4.5
The following requirements are applicable in respect of profit/cash flow projections:
(a) The projections must be realistic and achievable to provide investors with information on theissuer's prospects;(b) The projections must be compiled with utmost care and objectivity; and(c) Where the projections are subject to high probability of variation, theissuer must provide a sensitivity analysis based on any one of the key variables such as sales price, volume of sales, production costs, production capacity, operating expenses and financing costs.January 2014OFS-3.4.6
In addition to the above, owing to the specific nature of profit/cash flow projections, the
issuer must take note of the following:(a) A projection, being a representation of financial information based on a set of assumptions which are uncertain and hypothetical, must be qualified as to its achievability for those reasons;(b) The qualifications of projected financial information must draw attention to the fact that the presentation is based on hypothetical assumptions, and that actual events may differ from those assumed and may materially affect the financial information projected; and(c) Notwithstanding the uncertainties and hypothetical assumptions associated with projections, the projections must be prepared with care, skill and objectivity so as to represent the stated assumptions and not to purport unreasonable hypotheses and assumptions.Amended: July 2018
January 2014Eligibility
OFS-3.4.7
The independent reporting accountant is required to adhere to the independence and other standards applicable to auditors, in addition to the general eligibility under Section OFS-3.2.
January 2014OFS-3.5 OFS-3.5 Role and Responsibilities of Trustees and Custodians
OFS-3.5.1
Borrowing corporations and issuers of
debt securities (hereinafter referred to as borrowing corporations) must appointtrustees to whom the ownership of the trust property must be transferred.January 2014Eligibility
OFS-3.5.2
A Bahrain domiciled
trustee must be established and authorised in accordance with the Bahrain Trust Law of 2006. In the case of overseas domiciledtrustees , they must be registered in their own jurisdiction and be acceptable to the CBB.January 2014Appointment of Trustee
OFS-3.5.3
Every
issuer ofdebt securities must make provision in thosedebt securities , or in a trust deed relating to thosedebt securities, for the appointment of atrustee corporation astrustee for the holders of thedebt securities within a maximum of one month from the allotment date.January 2014Independence
OFS-3.5.4
A
trustee corporation must not be appointed, hold office or act astrustee for the holders ofdebt securities of a borrowing corporation if thattrustee corporation is:(a) Ashareholder who beneficially holdsshares in the borrowing corporation;(b) Beneficially entitled to monies owned by the borrowing corporation to it;(c) A corporation that has entered into a guarantee in respect of the principal debt secured by thosedebt securities or in respect of interest thereon; or(d) A corporation that is related to:(i) Any corporation referred to in Subparagraphs (a), (b) or (c); or(ii) The borrowing corporation.January 2014OFS-3.5.5
The
trustee must be independent of theissuer , or any of theissuer's related party, subsidiaries and/or associates, and must exercise the powers and duties as defined in the Trust Law of 2006 and the trust deed, without interference or guidance from theissuer .January 2014OFS-3.5.6
An
issuer may remove atrustee after obtaining CBB approval if he exceeds the limits or is otherwise in contravention of the trust deed, or if he violates the provisions of the Trust Law of 2006.January 2014Contents of a Trust Deed
OFS-3.5.7
Where a corporation or any other entity makes an offer or invitation in respect of
debt securities , thedebt securities or the relevant trust deed must contain a limitation on the amount that the borrowing corporation may borrow, pursuant to thosedebt securities or that deed and must contain covenants by the borrowing corporation, or if thedebt securities do not or the trust deed does not expressly contain those covenants, they or it are deemed to contain covenants by the borrowing corporation, to the following effect:(a) That the borrowing corporation will use its best endeavours to carry on and conduct its business in a proper and efficient manner;(b) That thetrustee or any auditor or director appointed by thetrustee shall:(i) Be entitled to require the borrowing corporation to make available for its or his inspection the whole of the accounting or other records of the borrowing corporation; and(ii) Give to it or him such information as it or he requires with respect to all matters relating to the accounting or other records of the borrowing corporation; and(c) That the borrowing corporation must, on the application of persons holding at least 10% in nominal value of the issueddebt securities give notice:(i) To each of the holders of thosedebt securities at his address as specified in the register ofdebt securities ;(ii) By an advertisement in at least two local daily newspapers, one each published in the Arabic and English languages addressed to all holders of thosedebt securities ; and(iii) Call a meeting of the holders of thosedebt securities to consider the accounts and balance sheet which were last submitted to thetrustee for the holders of thedebt securities by the borrowing corporation, and to give to thetrustee directions in relation to the exercise of thetrustee's powers. Such meeting is to be held at a time and place specified in the notice and advertisement under the chairmanship of a person nominated by thetrustee , or such other person as appointed on behalf of the holders of thosedebt securities present at the meeting.Amended: July 2018
January 2014OFS-3.5.8
Trust deeds for
convertible securities must not include any provisions for:(a) The extension or shortening of tenure of the convertibles; and(b) Changes to the number ofshares received for the conversion of eachconvertible security , or changes to the pricing mechanism for the conversion of theconvertible security , except where these changes are adjustments pursuant to capitalisation issues,rights issues , or consolidation or sub-division ofshares or capital reduction exercises.January 2014OFS-3.5.9
Any changes in the terms of
convertible securities must be clearly determined and disclosed in the trust deed andoffering document /listing document/circular, or any other documents issued in relation to the proposal.January 2014OFS-3.5.10
Once determined, the terms and conditions of the
convertible securities may not be altered unless approved by the holders of thesecurities and the CBB.January 2014Retirement of Trustees
OFS-3.5.11
A
trustee for the holders ofdebt securities must not cease to be thetrustee until a corporation qualified for appointment astrustee for the holders ofdebt securities has been appointed and has taken office as such. The holders of thesecurities and the CBB must be informed immediately of this event.January 2014OFS-3.5.12
Where provision has been made in the
debt securities or in the relevant trust deed for the appointment of a successor to atrustee for the holders of thedebt securities upon retirement or otherwise, the successor may be appointed in accordance with such provision.January 2014OFS-3.5.13
Where no provision has been made in the
debt securities or in the relevant trust deed for the appointment of a successor to a retiringtrustee , the borrowing corporation may appoint a successor which is qualified for appointment.January 2014OFS-3.5.14
Notwithstanding anything in any
debt securities or trust deed, a borrowing corporation may, with the consent of an existingtrustee for the holders of thedebt securities , appoint as successor to the existingtrustee any corporation which is qualified for such appointment.January 2014OFS-3.5.15
Where the
trustee for the holders of thedebt securities has ceased to exist or to be qualified, or fails or refuses to act or is disqualified, the court may, on the application of the borrowing corporation or the CBB, appoint any corporation qualified to be thetrustee for the holders of the debtsecurities in place of thetrustee which has ceased to exist or to be qualified, which has failed or refused to act astrustee , or which is disqualified.January 2014OFS-3.5.16
Where a successor is appointed to be a
trustee in place of anytrustee , the successor must immediately after the appointment submit to the holders of thesecurities and the CBB notice of such appointment.January 2014Roles and Responsibilities of the Trustees
OFS-3.5.17
A
trustee for the holders ofdebt securities must:(a) Exercise reasonable diligence to ascertain whether or not the assets of the borrowing corporation and of each of its guarantor corporations which are or may be available, whether by way of collateral orsecurity or otherwise, are sufficient or are likely to be or become sufficient to discharge the principal debt as and when it becomes due;(b) Satisfy itself that eachprospectus relating to thedebt securities does not contain any matter which is inconsistent with the terms of thedebt securities or with the relevant trust deed;(c) Ensure that the borrowing corporation complies with the CBB Law, rules and regulations and any other laws, rules and regulations related to thedebt securities as applicable;(d) Exercise reasonable diligence to ascertain whether or not the borrowing corporation and each of its guarantor corporations have committed any breach of the covenants, terms and provisions of thedebt securities or the trust deed;(e) Except where it is satisfied that the breach will not materially prejudice the collateral or thesecurity , if any, for thedebt securities or the interests of the holders of thedebt securities , take all steps and take all such actions as it is empowered to do to cause the borrowing corporation and any of its guarantor corporations to remedy any breach of those covenants, terms and provisions;(f) Where the borrowing corporation or any of its guarantor corporations fails when so required by thetrustee to remedy any breach of the covenants, terms and provisions of thedebt securities or the trust deed, place the matter before a meeting of holders of thedebt securities and submit such proposals for the protection of their interest as thetrustee considers necessary or appropriate and obtain the directions of the holders in relation thereto; and(g) Where the borrowing corporation submits to those holders a compromise or arrangement, give to them a statement explaining the effect of the compromise or arrangement and, if it or he thinks fit, recommend to them an appropriate course of action to be taken by them in relation thereto.January 2014OFS-3.5.18
Where a
trustee for the holders of thedebt securities after due enquiry, at any time is of the opinion that the assets of the borrowing corporation and of any of its guarantor corporations which are or should be available, whether by way of collateral orsecurity or otherwise, are insufficient, or likely to become insufficient, to discharge the principal debt as and when it becomes due, it must apply to the CBB for an order under Paragraph OFS-3.5.19.January 2014OFS-3.5.19
The CBB, on receiving an application under Paragraph OFS-3.5.18 may:
(a) After giving the borrowing corporation an opportunity to make representations in relation to the application, and by order in writing served on the corporation at its registered office in Bahrain, impose such restrictions on the activities of the borrowing corporation, including restrictions on advertising for deposits or loans and on borrowing by the corporation as proposed by thetrustee and/orissuer or the CBB considers necessary for the protection of the interests of the holders of the debtsecurities ; or(b) If the CBB so requires, direct thetrustee to apply to the court for an order; and thetrustee shall act in accordance with the court order.January 2014OFS-3.5.20
Where:
(a) After due enquiry, thetrustee is at any time of the opinion that the assets of the borrowing corporation and of any of its guarantor corporations which are or should be available, whether by way of collateral orsecurity or otherwise, are insufficient or likely to become insufficient to discharge the principal debt as and when it becomes due; or(b) The borrowing corporation has contravened an order made by the CBB under Paragraph OFS-3.5.19.the
trustee may apply to the court for an order.January 2014Powers of the Trustee to Apply to Court
OFS-3.5.21
A
trustee for the holders ofdebt securities may apply to the court:(a) For directions in relation to any matter arising in connection with the performance of the functions of thetrustee ; or(b) To determine any question in relation to the interests of the holders ofdebt securities .January 2014OFS-3.5.22
Prior to making any application to the CBB or to the court, a
trustee must consider the nature and kind of collateral orsecurity given when the offer or invitation in respect of thedebt securities was made to the public, and if nosecurity was given must consider the position of the holders of thedebt securities as unsecured creditors of the borrowing corporation.January 2014OFS-3.5.23
A
trustee may rely upon any certificate or report given or statement made by any legal advisor, auditor or officer of the borrowing corporation or guarantor corporation, if it reasonably believes that such legal advisor, auditor or officer was competent to give or make the certificate, report or statement.January 2014Obligations of the Issuer or Borrowing Corporation
OFS-3.5.24
The directors of the borrowing corporation must:
(a) At the end of a period not exceeding 3 months (being a day after the date of the issue of the relevantprospectus ); and(b) At the end of each succeeding period thereafter, being a period of 3 months or such shorter time as thetrustee may, in any special circumstances allow,prepare a report that relates to that period and complies with the requirements of Paragraph OFS-3.5.25, and within one month after the end of each such period submit a report relating to that period to the
trustee with a copy being submitted to the CBB.January 2014OFS-3.5.25
The report referred to in Paragraph OFS-3.5.24, must be signed by not less than two of the directors on behalf of all of them and must set out in detail any matters adversely affecting the collateral or
security , or the interests of the holders of thedebt securities and, without affecting the generality of Paragraph OFS-3.5.24, state:(a) Whether or not the limitations on the amount that the corporation may borrow have been exceeded;(b) Whether or not the borrowing corporation and each of its guarantor corporations have observed and performed all the covenants and provisions binding upon them respectively by or pursuant to the debtsecurities or any trust deed;(c) Whether or not any event has happened which has caused or could cause the debtsecurities or any provision of the relevant trust deed to become enforceable and, if so, particulars of that event;(d) Whether or not any circumstances affecting the borrowing corporation, originator, group companies or its guarantor corporation(s) or any of them have occurred which materially affect any collateral orsecurity or charge included in or created by the debtsecurities or any trust deed and, if so, particulars of those circumstances;(e) Whether or not there has been any major change in the nature of the business of the borrowing corporation or any of its group companies, originator or any of its guarantor corporation(s) since the debtsecurities were first issued which has not previously been reported upon as required by Section OFS-3.5 and, if so, particulars of that change; and(f) Where the borrowing corporation has deposited money with or lent money to or assumed any liability of a corporation which is related to the borrowing corporation, particulars of:(i) The total amounts so deposited or lent and the extent of any liability so assumed during the period covered by the report; and(ii) The total amounts owing to the borrowing corporation in respect of money so deposited or lent and the extent of any liability so assumed as at the end of the period covered by the report, distinguishing between deposits, loans and assumptions of liabilities which are secured and those which are unsecured, but not including any deposit with or loan to or any liability assumed on behalf of a corporation if that corporation has guaranteed the repayment of thedebt securities of the borrowing corporation, and has secured the guarantee by a charge over its assets in favour of thetrustee for the holders of thedebt securities of the borrowing corporation.January 2014OFS-3.5.26
The
trustee must demand that the borrowing corporation and each of its guarantor corporation(s) which has guaranteed the repayment of the monies raised by the issue ofdebt securities to:(a) Furnish in writing to thetrustee , within 30days after the creation of a charge, with the particulars of any charge created by the corporation or the guarantor corporation, as the case requires; and(b) When the amount to be advanced on the collateral or thesecurity of the charge is indeterminate, furnish thetrustee in writing within 10days after the advance, particulars of the amount or amounts actually advanced.Amended: April 2014
January 2014OFS-3.5.27
Where any such advance referred to in Subparagraph OFS-3.5.26(b) is merged in a current account with bankers or trade creditors, it shall be sufficient for particulars of the net amount outstanding in respect of any such advance to be furnished every 3 months.
January 2014OFS-3.5.28
The
trustees must submit to the CBB a report addressing the requirements stipulated under Paragraph OFS-3.5.17 on a regular basis but not later than each occurrence of the payment of periodic interest or income or when thetrustee deems necessary to keep the CBB informed about the compliance with those requirements.January 2014OFS-3.5.29
The directors of every borrowing corporation and of every guarantor corporation must cause to be made out and submitted to the CBB and
trustee :(a) A profit and loss account for the first 3 months of every financial year of the corporation and a balance sheet as at the end of that period, not less than 3 months after the expiration of the period of 6 months; and(b) A profit and loss account for every financial year of the corporation and a balance sheet as at the end of that period, not later than 3 months after the end of that financial year.January 2014OFS-3.5.30
Where:
(a) The directors of a borrowing corporation do not submit to thetrustee the report as required by Paragraph OFS-3.5.25; or(b) The directors of a borrowing corporation or the directors of a guarantor corporation do not submit with thetrustee the balance sheets and profit and loss accounts as required by Paragraph OFS-3.5.29, within the time prescribed;the
trustee must immediately notify the CBB of this fact.January 2014Obligations of Guarantor
OFS-3.5.31
For the purpose of the preparation of a report that, by this Module, is required to be signed by or on behalf of the directors, or persons approved by the CBB of a borrowing corporation or any of them, that borrowing corporation may, by notice in writing, require any of its guarantor corporations to furnish it with any information relating to that guarantor corporation which is, by this Module, required to be contained in that report.
January 2014OFS-3.5.32
The guarantor corporation must furnish the borrowing corporation with that information required under Paragraph OFS-3.5.31 before the specified date, being a date not earlier than one month after the notice is given.
January 2014OFS-3.6 OFS-3.6 Role and Responsibilities of the Underwriter
Eligibility
OFS-3.6.1
Any person acting as an
underwriter to any offering, must be licensed or otherwise authorised by the CBB to undertake such activity.January 2014OFS-3.6.2
For the purpose of this Module, the definition, role and requirements related to the
underwriter also apply to co-underwriters .January 2014OFS-3.6.3
The CBB may investigate the financial suitability of a proposed
underwriter and may reject the appointment of theunderwriter and/or the application for offering if it is not satisfied as to theunderwriter's ability to meet its commitment under the proposed underwriting agreement and its potential impact in its capital adequacy.January 2014Firm Commitment Underwriting
OFS-3.6.4
Where an
underwriter has been appointed and thesecurities are not fully subscribed during theoffering period , theunderwriter must purchase the balance of thesecurities through afirm commitment underwriting arrangement.January 2014OFS-3.6.5
The
firm commitment underwriting arrangement must be detailed in an underwriting agreement, which must be submitted to the CBB as part of the offering ofsecurities application.January 2014OFS-3.6.6
For the purpose of this Module, the total of all the underwriting undertakings of the
underwriter , the company that controls it, its subsidiary, a subsidiary of the company that controls it and a company affiliated with it, are calculated as one underwriting undertaking.January 2014OFS-3.6.7
The
underwriter may appoint or form an underwriting group for any underwritten issue.January 2014OFS-3.6.8
The
underwriter must comply with the CBB Law, rules and regulations, including Volume 6 of the CBB Rulebook, and theissuer's Memorandum and Articles of Association, particularly in respect of the eligibility of the expected subscribers to acquire theissuer's securities and related disclosure requirements.Amended: October 2017
January 2014OFS-3.6.9
After the approval of the
offering documents (including the underwriting agreement) neither theissuer nor any advisor or person acting on its behalf, nor theunderwriter or any person acting on its behalf, has the right to change any provision or commitments stipulated in the underwriting agreement.January 2014OFS-3.6.10
All commitments, terms and conditions stipulated in the underwriting agreement must be enforced and implemented without any change or alterations, including the relevant timeframes.
January 2014OFS-3.6.11
The CBB may consider amendments to an underwriting agreement where the stability of the financial sector and/or capital market will be adversely affected by the agreement's current provisions. In this regard, the CBB must be provided with a supporting application signed by both the
issuer and theunderwriter , before considering such amendment.January 2014Firm Commitment Underwriting
OFS-3.6.12
A
firm commitment underwriting arrangement is required for all public offerings. However, the CBB may accept other underwriting arrangements other thanfirm commitment underwriting , in the following cases:(a) Offering ofsecurities below the average market price during the last six months; or(b) Offering ofsecurities at the flat par value.January 2014OFS-3.6.13
A
firm commitment underwriting arrangement may also be done through a bought-out deal wherein the underwritten issue is bought entirely by theunderwriter to resell to investors.January 2014OFS-3.6.14
In case of issues which are exempted from
firm commitment underwriting arrangements (non-public offers), the CBB may acceptpartial underwriting commitment arrangements, orbest-efforts underwriting .January 2014Disclosure
OFS-3.6.15
The name of the
underwriter and the terms of the underwriting agreement must be prominently disclosed in theoffering document and in the application for approval.January 2014OFS-3.6.16
A summary of the underwriting agreement or arrangements must be provided in the
prospectus oroffering document , including but not limited to the cost of underwriting and other related fees and charges.January 2014OFS-3.6.17
The
underwriter is required to provide sufficient and adequate information to the CBB and disclose the same in theprospectus oroffering documents as to the method, bases, mechanism, assumptions, and all other related information used to reach theoffering price .January 2014OFS-3.6.18
In cases where the
offering price is determined by theunderwriter jointly with any other advisor or third party, the name and role of such advisor or person must be provided to the CBB and disclosed in theprospectus oroffering document .January 2014OFS-3.6.19
The underwriting agreement must be provided as a document available for inspection to the subscriber.
January 2014OFS-3.6.20
For purposes of Paragraph OFS-3.6.17 and item 25.1(b) under Section 17 of Appendix OFS-1, relating to the pricing of securities and bases or methods for determining the issue or offer price and for prospectus disclosure purposes, the bases used for determining the pricing of securities must be elaborated on and general statements must be avoided.
Added: October 2017OFS-3.6.21
For purposes of Paragraph OFS-3.6.20, factors that are commonly cited in pricing determination which should be elaborated may include, but are not limited to, prevailing market performance and condition (e.g. price earnings ratio, dividend yield, etc.), financial and operating performance (e.g. earnings per share, etc.), consolidated net tangible assets per share and/or net assets per share (or liabilities as to the case may be), earnings potential, assessment of management, market valuation of companies in related businesses, intellectual property and technology, etc. Where appropriate, cross-references should be made to the relevant and specific sections of the prospectus.
Added: October 2017OFS-3.7 OFS-3.7 Role and Responsibilities of the Paying Agent
OFS-3.7.1
The
paying agent must be licensed by the CBB to undertake this activity.January 2014OFS-3.7.2
For an issue of
debt securities , theissuer must appoint and maintain apaying agent , or where appropriate, acentral depository in Bahrain until all outstanding obligations relating to thosesecurities have been met, unless theissuer itself performs these functions.January 2014OFS-3.7.3
The
paying agent must provide facilities for obtaining newdebt securities , in accordance with the terms and conditions of thedebt securities , to replace thosedebt securities which have been damaged, lost, stolen, or destroyed, and for all other purposes provided for in the terms and conditions of thedebt securities , trust deed and/oroffering documents .January 2014OFS-3.7.4
The
paying agent must undertake responsibility for timely disbursement of funds made available by theissuer or thetrustee , as the case may be, to investors in accordance with the terms of thesecurity and the timelines stipulated by the CBB.January 2014OFS-3.7.5
The
paying agent must notify the CBB immediately when theissuer , originator and/or guarantor delays in meeting any required payments, whether in whole or in part.January 2014OFS-3.7.6
The
paying agent or any other party must not issue a new certificate mentioned under Rule OFS-3.7.3, without mandating the certificate holder to publish in a local newspaper and the market that such certificate has been damaged, lost, stolen, or destroyed. A new certificate may only be issued 15 calendar days from the date of the above mentioned publication date.January 2014OFS-3.8 OFS-3.8 Role and Responsibilities of the Shari'a Advisor
OFS-3.8.1
The Shari'a advisor must review the key aspects of the issue of
Islamic securities , including documentation, structuring, investment, as well as any operational matters in relation to theIslamic securities and ensure compliance with applicable Shari'a principles.January 2014OFS-3.8.2
The Shari'a advisor must produce and sign a Shari'a pronouncement report or declaration that the issue is in compliance with the principles of Shari'a and include the report in the offering documentation which is submitted to the CBB.
January 2014OFS-3.8.3
The Shari'a advisor must be of good reputation and character and must possess the necessary qualifications and expertise in relevant Islamic jurisprudence. He must possess a minimum of three years experience in Islamic finance.
January 2014OFS-3.8.4
The Shari'a advisor must be independent of the
issuer . Theissuer must not restrict the activities of the Shari'a advisor in any way. In a case where restrictions are imposed, these must be disclosed by the Shari'a advisor to the CBB.January 2014OFS-3.9 OFS-3.9 Role and Responsibilities of the Legal Advisor
OFS-3.9.1
A legal advisor must be appointed for every offering of
securities and its name must be included in theoffering document and in any advertisement or announcement.January 2014OFS-3.9.2
The lead manager may appoint a legal advisor to assist in carrying out legal due diligence, the results of which must be included in the declaration by the lead manager (See Appendix OFS-8).
January 2014OFS-3.10 OFS-3.10 Role and Responsibilities of the Receiving Bank
OFS-3.10.1
A
receiving bank must be licensed or otherwise authorised by the CBB.January 2014OFS-3.10.2
For any offering made in or from Bahrain (
overseas issuers ), co-receiving banks may be exempted from the requirements under Rule OFS-3.10.1.January 2014OFS-3.10.3
The
issuer , lead manager, and thereceiving bank must designate a separate bank account for each issue ofsecurities . The name(s) of the designated bank(s) must be provided in detail in theoffering document .January 2014OFS-3.10.4
The
receiving bank must notify the CBB immediately upon its appointment and must receive the CBB's approval before entering into an agreement or contract with theissuer or lead manager.January 2014OFS-3.10.5
The
receiving bank must not activate the designated bank account or receive any payment from the subscribers other than during the date, time and working hours stipulated in theprospectus oroffering document . Where there is a change, amendment or alteration to the date, time or working hours, a copy of the CBB's prior approval issued separately to this extent must be received in advance by thereceiving bank before implementing such change or alteration.January 2014OFS-3.10.6
The
receiving bank must not activate the subscription bank account, or accept any subscription form or payment, or continue to accept receiving such forms and payment without ensuring that for each application and payment a final printed copy of theoffering document was made available to the subscriber.January 2014OFS-3.10.7
The
receiving bank is responsible for the accuracy and completeness of all information provided in the subscription form in accordance with the Know Your Client requirements under Module AML or other relevant standard and has the authority to reject any form which is not complete or which contains inaccurate information. Thereceiving bank in cooperation and coordination with theissuer or lead manager is responsible for the avoidance of any duplicate applications for the same beneficiary (subscriber).January 2014OFS-3.10.8
The
receiving bank must adhere to the laws, rules and regulations related to anti-money laundering and financial crime.January 2014OFS-3.10.9
The
receiving bank must not transfer the issue's total proceeds in whole or part to the Board of Directors of theissuer , without receiving the CBB's approval on theallotment and thereceiving bank is required to notify and provide the CBB with a bank certificate or transfer notice upon the transfer of such proceeds.January 2014OFS-3.10.10
The
receiving bank must not charge the subscriber for any additional costs, fees, or charges other than those costs, fees, or charges stipulated in theoffering document . Such costs, fees, or charges must be provided and displayed for the subscribers in a clear and readable place in theoffering document .January 2014OFS-3.10.11
The
receiving bank must be responsible for meeting the refunding and dispatching deadline with respect to the subscription money and shall ensure that all required arrangements are in place before entering into an agreement or contract with theissuer or lead manager.January 2014OFS-3.10.12
Where the refunding and dispatching deadline could not be met due to negligence or without prior approval of the CBB, the
receiving bank , jointly with theissuer and lead manager, is liable to pay to the subscriber interest or penalty on the subscription money equal to BIBOR for any day or part thereof after the deadline.January 2014OFS-3.10.13
Receiving banks should lay down technical infrastructure and other arrangements for promoting the electronic subscription and receipt of moneys (e-subscription) in Bahrain.January 2014OFS-3.11 OFS-3.11 Role and Responsibilities of the Securities Ownership Transfer Agent
OFS-3.11.1
If the issued
securities are not dematerialised, allissuers ofsecurities must appoint asecurities ownership transfer agent to perform the required function of theissuer in respect of the creation, maintenance and update of thesecurities register in terms of this Module.January 2014OFS-3.11.2
The
securities ownership transfer agent must comply with the CBB Law, rules and regulations including those relating to Anti-Money Laundering and Financial Crime and must be subject to an audit according to control and inspection procedures stipulated by the CBB. In addition, the securities ownership transfer agent must provide theissuer with a declaration that the shareholder list is up to date and is accurate.OFS-3.11.3
All
securities ownership transfer agents must provide the CBB on request as well as on a quarterly basis, a summary of the list of securities holders they maintain in the form required by the CBB.OFS-3.11.4
Securities ownership transfer agents shall be responsible for any loss or damage to the securities holder due to any inaccurate information or entries made in the securities holders register.
OFS-3.12 OFS-3.12 Role and Responsibilities of Other Experts or Advisors
OFS-3.12.1
Where an offer of
securities is made in or accompanied by aprospectus oroffering document which includes a statement purporting to be made by, or based on a statement made by an expert, theprospectus oroffering document must not be issued unless:(a) The expert has given and has not before the registration of theprospectus oroffering document , as the case may be, withdrawn his written consent to the issue thereof with the statement included in the form and context in which it is included; and(b) There appears in theprospectus oroffering document , as the case may be, a statement that the expert has given and has not withdrawn his consent.OFS-3.12.2
Every person making the offer must cause a true copy of every written consent referred to under Paragraph OFS-3.12.1 to be deposited within a maximum 7 calendar days after the registration of the
offering document at the registered office of theissuer in Bahrain or, if theissuer has no registered office in Bahrain, at the address in Bahrain specified in theoffering document for that purpose.OFS-3.12.3
The CBB may require a declaration from any appointed expert as per their role and responsibility in the preparation of any
offering document as per Article 85 of the CBB Law.OFS-4 OFS-4 Submission of Offering Application with CBB
OFS-4.1 OFS-4.1 Application Requirements
OFS-4.1.1
An application for the offering of
securities must be made in accordance with Paragraph OFS-4.1.2, accompanied by the required information, documentation and the fee to the CBB for approval at least 30days prior to commencement of the intendedoffering period .Amended: April 2014
January 2014OFS-4.1.2
The application must be submitted under cover of a letter signed by two authorised signatories of the applicant, together with all supporting documentation as outlined in Section OFS-4.2. The authorised signatories are persons authorised as such by the Board of Directors of the
issuer .January 2014OFS-4.1.3
The CBB requires the submitted application and supporting documents to be comprehensive, accurate and complete in all respects. If the CBB has any further concerns, or is dissatisfied with the application it will not be able to grant approval on a timely basis, and the abovementioned timeframe of the CBB approval will start only upon receipt of all information and documentation related to the offer. The CBB will not grant its approval unless and until all such information and documentation required is submitted to the CBB.
January 2014OFS-4.2 OFS-4.2 Information and Documentation Requirements
OFS-4.2.1
Any application under Section OFS-4.1 must include the following minimum information:
(a) A copy of theissuer's Board of Directors proposal in respect of the issue to its General Assembly;(b) A copy of the General Assembly resolution through which the issuing and offering ofsecurities is approved;(c) A copy of the duly signed Board of Directors' responsibility statement, signed by all directors in the standard statement stipulated by this Module (Appendix OFS-9);(d) A copy of the duly signed declaration by the lead manager, based on a due diligence exercise of all relevant conditions, facts and arrangements, as appropriate (Appendix OFS-8);(e) A copy of the duly signed declaration by the legal advisor for the offer, based on a due diligence exercise of all relevant legal conditions, facts and arrangements, as appropriate (Appendix OFS-10);(f) A final ratified Memorandum and Articles of Association, or relevant constitutional documents for existingissuers , or a draft copy thereof forissuers under formation;(g) A draft of theoffering document prepared in line with the CBB requirements as stipulated under this Module;(h) A copy of all arrangements, contracts and/or letters signed with theissuer and or lead manager with all appointed advisors;(i) Duly completed term sheet on the offering, as stipulated by the CBB from time to time in this Module;(j) The expected offering timetable;(k) A bona fide copy of either theissuer's external auditor unqualified report on the annual audited financial statements, or interim period reviewed financial statements prepared by theissuer's external auditor;(l) A copy of the audited financial statements, including the balance sheet, income statement, cash flow statement and change inshareholders' fund, for the period required under this Module for each type of offer, and the interim period reviewed financial statements for the period required under this Module;(m) A copy of the duly signed report prepared by an independent accountant on any estimates, projections of the financial statements, or future operating results of theissuer , if applicable;(n) A copy of at least two independent valuer's reports if the proposed offering ofsecurities is guaranteed, is made up of physical assets or property or backed by any assets, property, or any form of collateral;(o) A copy of all documents available for inspection by the potential subscribers and/or allottees;(p) Information on the legal structure of the company and company registration; and(q) Any other information as required by the CBB.January 2014Lead Manager Declaration
OFS-4.2.2
The declaration by the lead manager (Appendix OFS-8) required under Paragraph OFS-4.2.1 must consider and contain the following:
(a) A confirmation that all compliance requirements, including those specified in the CBB Rulebook Volume 6 are met;(b) A due diligence of the commercial and business prospects based on the analysis of past and current circumstances, both in relation to theissuer and in relation to the external market or industry in which it operates;(c) An analysis of the macroeconomic factors affecting theissuer or the underlyingsecurities being offered;(d) Due consideration for the reasonableness of theissuer's business strategy and related business plan and budgets where appropriate;(e) In the case of asset-backedsecurities ,warrants andIslamic securities , the quality of the underlying assets and anticipated future cash flows and relevant risk factors; and(f) The price stabilisation method, limits and determination of issue price where the issue is not underwritten.January 2014Issue of No Objection by the CBB
OFS-4.2.3
The CBB will notify an applicant of its decision in writing within 15 business days of the receipt of the offering of
securities application, complete in all respects and complying with the provisions of this Module. If permission is granted, it may be conditional or unconditional.January 2014OFS-4.2.4
The CBB may refuse an application on any ground, including but not limited to the following conditions:
(a) The requirements of the CBB Law and Rulebook Volume 6 are not met comprehensively;(b) Theissuer , the lead manager or other appointed advisors do not meet the requirements of this Module;(c) False or misleading information has been provided to the CBB or to another regulator of theissuer or in theoffering documents ;(d) Information otherwise specified by the CBB has not been provided;(e) If the offer is associated with a listing on alicensed exchange , the CBB may consider that admission to listing of thesecurities may be detrimental to the fair, orderly and efficient operation of the Bahrainisecurities market or to the reputation of CBB;(f) Asecurity is already admitted tolisting on another market and theissuer is in breach oflisting rules or other relevant regulations; or(g) The CBB believes it is necessary to refuse permission in order to safeguard the interests of potential investors.January 2014OFS-4.2.5
A notification under Paragraph OFS-4.2.4 will set out:
(a) Grounds for proposed refusal, and(b) The rights of the applicant to appeal the CBB's decision.January 2014OFS-4.2.6
The applicant is allowed to make representation to the CBB within 30 calendar days of the receipt of a notification under Paragraph OFS-4.2.5. The applicant can undertake this through the lead manager to clarify any grounds set out in the notification. The CBB will consider any such representations before issuing a final decision.
January 2014OFS-4.2.7
The CBB will make a decision which is final within 30 calendar days of receiving the representation under Paragraph OFS-4.2.6.
January 2014OFS-4.3 OFS-4.3 Additional Requirements and Exceptions
OFS-4.3.1
In addition to the requirements under Section OFS-4.2, the following specific requirements or exemptions are applicable.
January 2014Public Offering
OFS-4.3.2
For public offerings, the following additional requirements and documentation are required:
(a) A draft of the summaryprospectus to be published in two daily local newspapers, one in Arabic and the other in English, at least 5days before the start of the offering period;(b) If the offer is subject to the listing requirements, theissuer or lead manager must provide information on the listing arrangements and information on the designated listing agent if different from the lead manager;(c) If, in addition to listing on alicensed exchange , the offer will be listed on an exchange outside the Kingdom of Bahrain, a copy of the approval of the relevant regulator within that jurisdiction;(d) If the offer will be made in countries other than the Kingdom of Bahrain, a copy of such other country's regulatory approval for such offer;(e) If thesecurities under the proposed offer are already listed on an exchange, details of the current listing requirements and performance of thesecurities ;(f) If thesecurities under the proposed offer have been placed throughprivate placement prior to the date of submission of application, full details about such placement;(g) Draft or proof print of any application form to subscribe or purchase thesecurities ;(h) A copy of the draft or any temporary document of title proposed to be issued; and(i) For initial public offerings, initial offer for sale ofsecurities and foreign listings, theissuer is required to provide the CBB with a draft of agreements or contracts related to the depositing ofsecurities and registration arrangements.Amended: April 2014
January 2014Rights Offering
OFS-4.3.3
An application to the CBB for a
rights issue by a listedissuer need not contain the following:(a) A copy of the Memorandum and Articles of Association, if such document has already been submitted to the CBB, as amended; nor(b) A separate copy of the previous annual audited financial statements and/or interim period reviewed financial statements, but these must be included in therights issue offering document.January 2014Private Placement
OFS-4.3.4
An application for
private placement of anysecurities must include the following additional information and documents:(a) A confirmation from theissuer and/or lead manager that the offer will not be offered to the public and only offered in line with requirements of Section OFS-2.4;(b) A copy of the subscription form which must include theaccredited investor status confirmation; and(c) A list of the expectedaccredited investors , if available at the time of submission.January 2014Employee Stock Option Plan
OFS-4.3.5
An application for employees stock option plan proposed by a listed
issuer is subject to requirements under Subparagraphs OFS-4.2.1(a) and (b).January 2014Capitalisation Issue
OFS-4.3.6
If the capitalisation issue is made in the form of a
rights issue , then the same requirements stipulated under Section OFS-4.2 as well as Paragraphs OFS-4.3.2 and OFS-4.3.3 will apply.January 2014OFS-4.3.7
If the capitalisation issue is made in the form of a stock dividend for free it is only subject to the requirements under Subparagraphs OFS-4.2.1(a) and (b).
January 2014Consideration Issue
OFS-4.3.8
An application for a consideration issue by a listed
issuer , or listing applicant through which an issue ofsecurities as a consideration other than cash in a transaction, or in connection with a take-over or merger or the division of anissuer is subject to the Take-over, Mergers Acquisitions and Share Repurchases (TMA) Module.January 2014Swapping, Exchange and Substitution of Securities
OFS-4.3.9
An application for the swapping, exchange or substitution of listed
securities must be made as an application for listing, rather than as an offering ofsecurities .January 2014Applications of Listings for Publicly Traded Securities
OFS-4.3.10
An application for the listing of publicly traded
securities must be dealt with either as aninitial public offering , or aninitial offer for sale ofsecurities , as mentioned above.January 2014Issuing of Securities under Privatisation Programmes
OFS-4.3.11
For any state owned entity, or government owned company planning to issue
shares to the public, it must either be made as a public offering, orinitial offer for sale ofsecurities , as the case may be, and is subject to the abovementioned requirements provided for public offering as per Paragraph OFS-4.3.2 unless otherwise exempted by the CBB under Section OFS-1.13.January 2014Debt Securities
OFS-4.3.12
The following additional information and documents must be provided with an application for the offering of
debt securities :(a) A copy of the trust deed or other document securing thedebt securities ;(b) A copy of any collateralising instruments or details of underlying assets;(c) A copy of any intended guarantees provided to holders ofdebt securities ; and(d) A copy of the underlying asset valuation report produced by at least two independent valuers.January 2014Warrants and Other Certificates
OFS-4.3.13
Where appropriate, a copy of the custodial or trusteeship agreement for the underlying
securities must be provided with the application for the offering ofwarrants and other certificates.January 2014Islamic Securities
OFS-4.3.14
The following additional information and documents must be provided with the application for the offering of Shari'a compliant
securities :(a) A copy of Shari'a Pronouncement report that thetransaction is in compliance with the principles of Shari'a;(b) A copy of the trust deed or other document securing the Shari'a compliantsecurities together with anytrustees agreement;(c) A copy of any collateralising instruments and details of underlying assets;(d) A copy of the underlying asset valuation report produced by at least two independent valuers; and(e) Any other documents made available for inspection.January 2014Assets-Backed and Mortgage-Backed Securities
OFS-4.3.15
The following additional information and documents must be provided with an application for the offering of assets-backed and mortgage-backed
securities :(a) A copy of the trust deed or other document securing the assets-backed and mortgage-backedsecurities ; and(b) A copy of the underlying asset valuation report produced by at least two independent valuers.January 2014Offers by Overseas Issuers
OFS-4.3.16
The following additional information, documents (to be provided with the application) are required for an offering of
securities byoverseas issuers :(a) A copy of any necessary approval from the home regulator;(b) A copy of the home market's relevant laws, rules and regulations that show that no restrictions are imposed on the transferability of thesecurities ;(c) Detailed information on listing requirements andsecurities performance on the home or other market(s);(d) Confirmation by theoverseas issuer that it will adhere to the general requirements as well as with the additional requirements and declarations, either in accordance with the type of offer or type ofsecurities , as stipulated in this Module;(e) An appointment of a listing agent where the securities are to be listed on alicensed exchange ; and(f) The issuer to bear the costs of any investigation or inspection by the CBB.January 2014OFS-4.3.17
The CBB may grant exemptions to any
overseas issuer's application, depending upon the type of offer and type ofsecurities on a case-by-case basis.January 2014Other Offering Approved by the CBB
OFS-4.3.18
The CBB may impose additional requirements in respect of the offer of
securities by way of a guaranteed issue.January 2014OFS-4.3.19
The CBB (in conjunction with the
licensed exchange where relevant) may exempt start-up or small and medium size companies from parts of this Module, as it deems appropriate.January 2014OFS-4.4 OFS-4.4 Preliminary/Red Herring Prospectus to be Made Public
OFS-4.4.1
The draft
offering document orred herring prospectus filed with the CBB must be made public for a period of 15days from the date of filing theoffering document with the CBB.Amended: April 2014
January 2014OFS-4.4.2
The lead manager must, while filing the draft
offering document with the CBB:(a) File the draftoffering document with the stock exchanges where thesecurities are proposed to be listed; and(b) Make copies of the draftoffering document available to the public, host the draft and finaloffering documents on the websites of theissuer , lead manager andunderwriters associated with the issue as the case may be, and also ensure that the contents of documents hosted on the websites are the same as that of their printed versions.January 2014OFS-4.4.3
Public investors may provide the CBB with their comments and complaints, and the lead manager must make available to the CBB all comments and complaints received by it.
January 2014No Complaints Certificate
OFS-4.4.4
After a period of 21
days from the date the draftoffering document is made public, the lead manager must file a statement with the CBB giving a list of complaints received, a statement whether it proposes to amend the draftoffering document or not, and highlight those amendments.Amended: April 2014
January 2014OFS-5 OFS-5 Offering Documents
OFS-5.1 OFS-5.1 Prospectus Requirements
OFS-5.1.1
A
prospectus must be drawn up for every offer ofsecurities. Theprospectus must contain the minimum information requirements set out in Sections OFS-5.2 to OFS-5.10 and in this Module and must be submitted to the CBB for approval.January 2014OFS-5.1.2
Issuers ofsecurities , depending on the industry that the issuer is involved in (e.g. engaged in specialised industries (i.e. banking, insurance, mining, telecommunications and oil and gas companies as well as any other specialised industries), are required to provide additional information as directed by the CBB.Amended: October 2017
January 2014Material Information
OFS-5.1.3
The
issuer must disclose any information that would be material to an investor's investment decision.January 2014OFS-5.1.4
In addition to the information prescribed under this Module, a
prospectus must include all such information within the knowledge of those preparing theprospectus so that investors may make an informed assessment.January 2014OFS-5.1.5
It is the responsibility of each
issuer and lead manager to determine the material information:(a) According to the particular nature of its own affairs and the nature and type ofsecurities for which an offering or listing is sought;(b) Necessary to enable a person who invests or seeks to invest insecurities to make an informed assessment of the activities, assets, liabilities, financial position, management and prospects of theissuer , and of its profits and losses and the rights attached to suchsecurities ; and(c) The implicit risk associated with such investment.January 2014OFS-5.1.6
For the purpose of Paragraph OFS-5.1.5, material information consists of both material facts and material changes related to the business and affairs of the
issuer , taking into account qualitative and quantitative facts, developments and events capable of influencing the offering or market price or value of issuedsecurities .January 2014Omission of Information
OFS-5.1.7
If a disclosure requirement is not applicable to an
issuer's sphere of activity or legal form, no information need be provided in response to that requirement, although equivalent information must be given.January 2014OFS-5.1.8
For purposes of Paragraph OFS-5.1.7, the CBB may authorise the omission of information from the
prospectus if it considers that:(a) Such information is of minor importance only and as such, will not influence the assessment of the activities, assets, liabilities, financial position, profits and losses, or implicit risks and prospects of theissuer ;(b) Such information required in theprospectus represents a competitive advantage for theissuer , and its disclosure could affect its financial situation or operating results; or(c) Disclosure of such information would be contrary to the public interest, or be seriously detrimental to theissuer , provided that such an omission would not be likely to mislead the public with regard to facts and circumstances, knowledge of which is essential for the assessment of thesecurities in question.January 2014OFS-5.1.9
To be granted the right to omit information as noted in Paragraph OFS-5.1.8, the
issuer must obtain the CBB's authorisation by explaining in writing to the CBB the reasons for not making information public.January 2014Replacement and Supplementary Document
OFS-5.1.10
A supplementary or replacement
prospectus is aprospectus that has the same wording as the originalprospectus , except for the provision of new or additional information, or the correction of deficiencies in the originalprospectus .January 2014OFS-5.1.11
A supplementary or replacement
prospectus must be submitted to the CBB as soon as practicable if, during the validity period of aprospectus , theissuer becomes aware that theprospectus is deficient or outdated in that:(a) Theprospectus contains a material statement that is false or misleading;(b) There is a material omission from theprospectus ;(c) There has been a significant change affecting information in theprospectus ; or(d) A significant new matter has arisen, and theprospectus content requirements would have required information on that matter to have been included in theprospectus , if the matter had arisen when theprospectus was being prepared.January 2014OFS-5.1.12
The supplementary and/or replacement
prospectus must be approved by the CBB and published in summary form in accordance with Article 81(b) of the CBB Law.January 2014OFS-5.1.13
The supplementary or replacement
prospectus may be used to correct, update or add to the originalprospectus at any time before the date of the CBB approval and/or start of theoffering period .January 2014OFS-5.1.14
All supplementary or replacement
prospectuses must contain the following:(a) A statement that it is a supplementary or replacementprospectus ;(b) An identification of theprospectus it supplements or replaces;(c) An identification of any previous supplementary or replacementprospectus in relation to the same offer;(d) A statement that it is to be read together with theprospectus , as well as any previous supplementary or replacementprospectus ; and(e) A responsibility statement from the board of directors of theissuer .January 2014OFS-5.1.15
All supplementary and/or replacement
prospectuses must clearly indicate the changes and revisions made.January 2014OFS-5.1.16
For purposes of Paragraph OFS-5.1.15, such changes must be made clear in all copies provided to the CBB and the investing public.
January 2014CBB Approval
OFS-5.1.17
Application for approval for any changes to the
prospectus must be accompanied by the following:(a) The supplementary and/or replacementprospectus containing at least the minimum information set out in this Module;(b) A declaration by theissuer and the lead manager that the changes to the supplementary and/or replacementprospectus are free from false or misleading statements, or information biased towards any of its presentshareholders and future investors;(c) A declaration by theissuer and the lead manager that the changes to the supplementary and/or replacementprospectus do not omit any material information; and(d) A declaration by theissuer and the lead manager that the changes to the supplementary and/or replacementprospectus are to the best of their knowledge in accordance with all the applicable laws, rules and regulations.January 2014Announcement
OFS-5.1.18
For public offers, the
issuer must inform the public of the changes and make the supplementary and/or replacementprospectus available to it. In accordance with Article 84 of CBB Law of 2006,issuers ofsecurities must publish a summary of the supplementary and/or replacementprospectus in two daily local newspapers, one in Arabic and the other in English and disclose the material amendments therein.January 2014Equivalent Information
OFS-5.1.19
For Bahraini
issuers who made an offer or listed theirsecurities outside Bahrain, and foroverseas issuers who made an offer or listed theirsecurities in Bahrain, all information of importance toshareholders made public about theissuer in other markets must be made public in Bahrain, whether or not disclosure of such information would otherwise be required by the CBB.January 2014Presentation
OFS-5.1.20
Although the information sections and order of presentation are not mandatory, the CBB recommends that the format of the standards outlined in this Module be followed to enhance comparability. If the same information required by this Module is also required by the body of accounting principles used in preparing financial statements, the information need not be repeated, as long as there is a cross-reference to the location of the information. It is also recommended that a table of contents be provided at the beginning of the document.
January 2014Validity of the Offering Document
OFS-5.1.21
The
prospectus must remain valid for a maximum period of six months from the date of notification of the CBB approval. After this period no person shall offersecurities based on suchprospectus , unless approved by the CBB.January 2014Preliminary or Red Herring Prospectuses
OFS-5.1.22
When a draft
prospectus is submitted to the CBB or to any appointed advisor, the finaloffering price is not required to be disclosed. Theoffering price must however be included in the final printed proofprospectus and before the start of theoffering period is set.January 2014Responsibility for Offering Document
OFS-5.1.23
In accordance with Article 85 of the CBB Law, the person responsible for the preparation of the
prospectus must ensure that it is free of incorrect or misleading information. Furthermore, Article 166 (b) makes it an offence to intentionally include false or misleading information and that the responsible persons may, subject to any greater penalty under the penal code, be punished by imprisonment or a fine not exceeding BD3,000.January 2014OFS-5.1.24
The following persons are responsible for the reliability and accuracy of the
prospectus oroffering documents :(a) Theissuer of thesecurities covered by theprospectus ;(b) The board of directors of theissuer of thesecurities ;(c) The lead manager of thesecurities offered; and(d) Any other appointed advisor or person whose name appears in theprospectus oroffering document each in their respective capacity according to the declaration made by him.January 2014Consent and Declaration
OFS-5.1.25
The
issuer and/or lead manager must obtain confirmation and/or consent letters from the appointed advisors or experts acknowledging their responsibilities and obligations under Article 85 of the CBB Law of 2006.January 2014Registration and Publication
OFS-5.1.26
If the
prospectus is approved by the CBB subject to changes, the final corrected copy must be registered with the CBB within 24 hours prior to the date of commencement of the offering period.January 2014Documents Available for Inspection
OFS-5.1.27
The
prospectus must be attached with all agreements, contracts, arrangements and documents required under this Module, or as referred to in theprospectus as being available for inspection.January 2014Preparation of the Prospectus
OFS-5.1.28
The
issuer , lead manager, or any other appointed advisors or persons involved in the preparation of anyoffering documents must ensure that the content and the statements included in such documents will meet, but not be limited to the following requirements:(a) Theprospectus and all statements included therein must be factual, clear and succinct;(b) Must be balanced and fair;(c) Must contain sufficient quantitative information to allow investors to make informed decisions regarding their participation in the offer;(d) Must avoid any omission of important and favourable facts, or minimising such facts by "burying" them at the end of the related statement or at the end of a section of information, or provided as an appendix to theprospectus , instead of including such facts in the main body of theprospectus ;(e) Must not include a presentation of estimates, projections, forecasts, or forward looking statements or overviews, without sufficient qualification, or without a sufficient factual basis;(f) Must not include any promotional jargon calculated to excite rather than to inform;(g) Must avoid using negative statements phrased so as to create a positive implication like "The company cannot now predict whether the development will have a materially favourable effect on its earnings," (creating the implication that the effect will be favourable even if not materially favourable), or "The company expects that the development will not have a materially favourable effect on earnings in the immediate future," (creating the implication that the development will eventually have a materially favourable effect);(h) Must avoid over-technical language, and where possible, use language comprehensible to laymen; and(i) Must avoid presentation of providing information in the form of diagrams and charts, without first presenting the same information in the form and style of written statements.January 2014OFS-5.1.29
For the purpose of Paragraph OFS-5.1.28, unwarranted promotional information means disclosing information beyond that necessary to inform investors and used only as an attempt to influence potential subscribers.
January 2014OFS-5.1.30
In order to meet the requirements under Paragraphs OFS-5.1.31 and OFS-5.1.32, the contents of the
prospectus and statement therein should either be prepared, reviewed, or edited by the legal advisor or other related appointed advisors, depending on the importance and complexity of the concerned contents or statement.January 2014Use of Prospectus
OFS-5.1.31
No person shall use any
offering document unless:(a) It has been submitted to and approved by the CBB and published; and(b) Where required, a summary of theoffering document has been published in one Arabic and one English language daily newspaper published in Bahrain.January 2014OFS-5.2 OFS-5.2 Contents of the Prospectus
Specific Content for Equity Securities
OFS-5.2.1
An
offering document in respect ofequity securities must contain the minimum content requirements of this Section and be prepared in accordance with Appendix 1.January 2014Front Cover Page
OFS-5.2.2
Front cover page: The cover page of the offering document must contain the following particulars:
(a) Full name and registration number of theissuer ;(b) Type and amount ofsecurities ;(c) Date of theoffering document ;(d) Date of expiry of validity of theprospectus ;(e) Logo and full name of each advisor;(f) Logo and full name of the lead manager and co-managers;(g) Logo and name of theunderwriter , if any;(h) Face or par value of thesecurities ;(i) Offer price;(j) Premium (if applicable);(k) Placement fee or charge (if applicable);(l) Minimum subscription limit (if applicable);(m) Maximum subscription limit (if applicable);(n) Eligible subscribers (general classification by nationality or region); and(o) Standard disclaimer statement, written in capital letters and box framed, as follows:
THE CENTRAL BANK OF BAHRAIN AND [NAME OF THE LICENSED EXCHANGE] ASSUME NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS DOCUMENT AND EXPRESSLY DISCLAIM ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS DOCUMENT. January 2014OFS-5.2.3
If the offer is planned to be issued in any other jurisdiction or is planned to be listed on any other regulated exchange(s) then the name of the
securities regulator of such jurisdiction and/or the name of the other regulated exchange may be added to the above disclaimer statement, if such regulator or regulated exchange has the same or equivalent requirement.January 2014OFS-5.2.4
The CBB will not permit any change, alteration, modification, reduction and/or addition in the above disclaimer statement, other than the cases mentioned under Paragraph OFS-5.2.3.
January 2014Inside Cover Page
OFS-5.2.5
The
prospectus must include on the inside cover page the following standard prominent and legible declaration and responsibility statement within a box frame:THE DIRECTORS OF THE COMPANY, WHOSE NAMES APPEAR HEREIN, ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS DOCUMENT. TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THE DIRECTORS, WHO HAVE TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE, THE INFORMATION CONTAINED IN THIS DOCUMENT IS IN ACCORDANCE WITH THE FACTS AND CONTAINS NO OMISSIONS LIKELY TO AFFECT THE IMPORTANCE AND COMPLETENESS OF THE DOCUMENT. January 2014OFS-5.2.6
The abovementioned standard responsibility statement must be duly signed by the
issuer's board of directors.January 2014OFS-5.2.7
The standard responsibility statement must be produced in the
prospectus and the same must be submitted to the CBB.January 2014OFS-5.2.8
The CBB will not normally accept any board of directors responsibility statement, unless it is duly signed by all directors. In cases where one or more of the directors cannot provide their signature on such statement, the
issuer is required to provide to the CBB and disclose in theprospectus itself the actual reasons and justification.January 2014OFS-5.2.9
In addition to the information required to be included on the front and inside cover pages of the
prospectus , theprospectus must contain, at the minimum, the following information:(a) Important Notice - which may include:(i) Important notice to subscribers;(ii) Due diligence statements;(iii) Forward looking statements; and(iv) General risk statement;(b) Applicants Identification and Anti-Money Laundering requirement;(c) Table of contents;(d) Glossary of the defined terms and abbreviations;(e) Offering timetable;(f) Resolutions and approvals;(g) Summary of the offering;(h) Offering statistics and expected timetable;(i) Information on theissuer , which may include:(i) Background and history;(ii) Principal activities;(iii) Business strategy;(iv) Organisational structure;(v) Corporate governance practices;(vi) Board of Directors(vii) Board of Directors practices;(viii) Senior management team;(ix) Employees;(x) Compensation;(xi) External auditor;(xii) Legal advisor and other advisors;(xiii) Majorshareholders and transactions;(xiv) Related party transactions;(xv) Interests of experts and counsel;(xvi) Material contracts;(xvii) Business overview;(xviii) Key financial information;(xix) Operating and financial review and prospects;(xx) Property, plant and equipment;(xxi) Research and development, patents and licenses;(xxii) Significant assets and liabilities;(xxiii) Liquidity and capital resources;(xxiv) Consolidated financial statements;(xxv) Material changes to financial statements;(xxvi) Restatement of financial statements;(xxvii) Ratios and analysis;(xxviii) Projections of financial statements; and(xix) Subsidiary's separate financial statements;(j) Industry analysis which may include:(i) Economic overview;(ii) Sectoral performance and overview; and(iii) Sub-sectoral performance and overview;(k) Investment considerations, which may include:(i)Equity securities' rights and obligations;(ii) Ranking ofshares ;(iii) Dividend policy;(iv) Listing ofshares ;(v) Description of the offering;(vi) Underwriting arrangements;(vii) Commitments to the offering arrangements;(viii) Contracts or arrangements with the appointed advisor;(ix) Expenses of the issue;(x) Use of proceeds; and(xi) Dilution;(l) Risk factors, which may include:(i) General risks;(ii) Business risks;(iii) Legal and regulatory risks; and(iv) Other specific risks;(m) Disputes, litigations and court orders;(n) Subscription terms and conditions, which may include:(i) Application procedures;(ii) Subscription restrictions;(iii) Subscription period;(iv)Receiving banks ;(v) Mode of payment;(vi) Fund transfer fees and charges;(vii) Rejected applications;(viii)Allotment ;(ix) Over-subscriptionallotment ;(x) Dispatching and refunds; and(xi) Announcements and acknowledgements;(o) Additional information, which may include:(i)Share capital structure; and(ii) Memorandum and Articles of Association;(p) Applicable law;(q) Documents available for inspection; and(r) Appendices.January 2014OFS-5.3 OFS-5.3 Additional and Specific Content for Debt Securities
OFS-5.3.1
An
offering document in respect ofdebt securities must contain the minimum content requirements of this section and be prepared in accordance with Appendix 3.January 2014Front Cover Page
OFS-5.3.2
Front cover page:
The cover page of the
debt securities offering document must contain the following particulars:(a) Full name and registration number of theissuer ;(b) Full name and registration number of the originator;(c) Logo and full name of the guarantor, if any;(d) Type and amount ofdebt securities ;(e) Date of theoffering document ;(f) Date of the expiry of the validity of theprospectus ;(g) Logo and full name of each advisor;(h) Logo and full name of the lead manager, primary dealer, issuing house;(i) Logo and full name of co-managers;(j) Logo and name of theunderwriter , if any;(k) Logo and full name of thetrustee ;(l) Rating ofdebt securities , if any;(m) Face or par value;(n) Offer price;(o) Premium (if applicable);(p) Placement fee or charge (if applicable);(q) Minimum subscription limit (if applicable);(r) Maximum subscription limit (if applicable);(s) Eligible subscribers (general classification by nationality or region); and(t) Standard disclaimer statement, written in capital letters and box framed, as follows:
THE CENTRAL BANK OF BAHRAIN AND [NAME OF LICENSED EXCHANGE] ASSUME NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS DOCUMENT AND EXPRESSLY DISCLAIM ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS DOCUMENT. January 2014Inside Cover Page
OFS-5.3.3
The
offering document must include on the inside cover page the standard prominent and legible declaration and responsibility statement within a box frame:THE DIRECTORS OF THE COMPANY, WHOSE NAMES APPEAR HEREIN, ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS DOCUMENT. TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THE DIRECTORS, WHO HAVE TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE, THE INFORMATION CONTAINED IN THIS DOCUMENT IS IN ACCORDANCE WITH THE FACTS AND CONTAINS NO OMISSIONS LIKELY TO AFFECT THE IMPORTANCE AND COMPLETENESS OF THE DOCUMENT. January 2014OFS-5.3.4
The abovementioned standard responsibility statement must be duly signed by the
issuer's /originator's board of directors.January 2014OFS-5.3.5
The standard responsibility statement must be produced in the
offering document and the same must be submitted to the CBB.January 2014OFS-5.3.6
The CBB will not normally accept any board of directors' responsibility statement unless it is duly signed by all directors. In cases where one or more of the directors cannot provide their signature on such statement, the
issuer is required to provide to the CBB and disclose in theoffering document itself, the actual reasons and justifications.January 2014OFS-5.3.7
In addition to the information required to be included on the front and inside cover pages of the
prospectus or offering documents, theoffering documents ofdebt securities must contain, at the minimum, the following sections of information:(a) Important Notice - which may include:(i) Important notice to subscribers;(ii) Due diligence statements;(iii) Forward looking statements; and(iv) General risk statement;(b) Applicants Identification and Anti-Money Laundering requirement;(c) Table of contents;(d) Glossary of the defined terms and abbreviations;(e) Offering timetable;(f) Resolutions and approvals;(g) Summary of the offering;(h) Offering statistics and expected timetable;(i) Structural overview of the securitisation transaction:(i) Summary of transaction;(ii) Transaction overview diagram;(iii) Cash flow description;(iv) Cash inflow;(v) Monthly instalment;(vi) Cash outflow;(vii) Issuance cost;(viii) Annual expenses;(ix) Delinquencies and defaults;(x) Investment parameters for the investment of temporary liquidity surpluses;(xi) Source of payments;(xii) Order of priority of payments;(xiii) Fees payable;(xiv) Sale of the underlying assets;(xv) Nature of the sale;(xvi) Terms of the sale;(xvii) Underlying assets;(xviii) Purchase consideration;(xix) Cancellation;(xx)Debt securities issuance;(xxi) Partial early redemption;(xxii) Mandatory redemption in full;(xxiii) Formula for optional/mandatory redemption in full;(xxiv)Debt securities redemption table;(xxv) Servicing function;(xxvi) Servicing by the originator;(xxvii) Servicing of thedebt securities by theissuer ; and(xxviii) Utilisation of proceeds;(j) The following minimum information must be provided for:(i) Details of theissuer (for all issues);(ii) Details of the originator (if different from theissuer );(iii) Details of the guarantor (for all guaranteed issues):• Background and history;• Principal activities;• Business strategy;• Organisational structure;• Corporate governance practices;• Board of Directors• Board of Directors practices;• Senior management team;• Employees;• Compensation;• External auditor;• Legal advisor and other advisors;• Majorshareholders and transactions;• Related party transactions;• Interests of experts and counsel;• Material contracts;• Business overview;• Key financial information;• Operating and financial review and prospects;• Significant assets and liabilities;• Property, plant and equipment;• Research and development, patents and licenses;• Liquidity and capital resources;• Consolidated financial statements;• Material changes to financial statements;• Restatement of financial statements;• Ratios and analysis;• Projections of financial statements; and• Subsidiary's separate financial statements;(k) Industry analysis which may include:(i) Economic overview;(ii) Sectoral performance and overview; and(iii) Sub-sectoral performance and overview;(l) Investment considerations, which may include:(i) Limited recourse;(ii) Thedebt securities ;(iii) No prior market for thedebt securities ;(iv) Market value of thedebt securities ;(v) Fluctuation of interest rates;(vi) Inflation risks;(vii) Partial early redemption of thedebt securities ;(viii) Legal investment considerations;(ix) Investment in thedebt securities may not be suitable for all investors;(x) The underlying assets;(xi) Timeliness of collections;(xii) Conditions of the sector/sub-sector/market;(xiii) Obligor's obligations;(xiv) No perfection of theissuer's interests in the underlying assets;(xv) No assurance on conformity with eligibility criteria;(xvi) Reliance on the servicer;(xvii) Rescheduling of payment obligations;(xviii) Replacement of servicer and transaction administrator;(xix) Theissuer ;(xx) Bankruptcy risk;(xxi) Dependence on key personnel;(xxii) No recourse toshareholder ;(xxiii) No operational history;(xxiv) Limitation on enforcement ofsecurity and foreclosure;(xxv) Tax risks;(xxvi) Absence of independent valuation of the underlying assets;(xxvii) General risk associated with emerging markets; and(xxviii) Political, economic and social consideration relating to home market;(m) Risk factors, which may include:(i) Credit risk;(ii) Legal risk;(iii) Interest rate risk;(iv) Operational risk;(v) Currency risk;(vi) Liquidity risk;(vii) Maturity risk;(viii) Other risks;(n) Disputes, litigations and court orders;(o) Subscription terms and conditions, which may include:(i) Type and nominal amount ofdebt securities ;(ii) Ranking ofdebt securities ;(iii) Issue price;(iv) Interest/coupon/profit rate/ income;(v) Minimum subscription required of thedebt securities in order to satisfy the objectives of the issue, offer or invitation (to include procedures for refund if this requirement is not met);(vi) Tenor (nature) of thedebt securities ;(vii) Form and denomination ofdebt securities on issuance;(viii) Underwriting arrangements;(ix) Events of default;(x) Details of anysecurity for thedebt securities ;(xi) Rating assigned todebt securities (together with a description of the rating);(xii) Type of listing that is sought;(xiii) Summary of rights conferred upon the holders ofdebt securities ;(xiv) Governing law — any special legislation under which thedebt securities have been created and the choice of jurisdiction in the event of litigation;(xv) Repayment terms and frequency of interest/profit/income payments;(xvi) Shari'a principle and concept adopted (for Islamicdebt securities );(xvii) Types of underlying assets of the transaction;(xviii) Details of any sinking fund requirement; and(xix) Regulatory approvals required including dates of approval;(p) Announcements and acknowledgements;(q) Additional information, which may include:(i)Share capital structure;(ii) Memorandum and Articles of Association;(r) Applicable law;(s) Documents available for inspection; and(t) Appendices.January 2014OFS-5.4 OFS-5.4 Additional and Specific Content for Convertible Securities
OFS-5.4.1
The
issuer ofconvertible securities must disclose in theoffering document the extent to which theshareholder may subscribe for theconvertible securities .January 2014OFS-5.4.2
For the purpose of this Section,
securities may be converted into other types ofsecurities , or these can be converted into anotherclass of the samesecurities . The conversion ofsecurities may also take place within the samesecurities issuer's company and/or group, or in relation to another company or group.January 2014OFS-5.4.3
In the case of
convertible securities which are exchangeable forsecurities of another company, anissuer must submit to the CBB theannual report and accounts of that other company unless that company is listed or adequate information is otherwise available.January 2014OFS-5.4.4
If the
debt securities are convertible into equity or are issued withwarrants , whether or not detachable, the following detailed information (where applicable) must be made available:(a) Mode of conversion;(b) Number ofwarrants ;(c) Conversion period;(d) Price ofwarrants ;(e) Conversion ratio;(f) Rights attached towarrants ;(g) Conversion price;(h) Warrant exercise period; and(i) Warrant exercise price.January 2014OFS-5.5 OFS-5.5 Additional and Specific Content for Asset-backed Securities
OFS-5.5.1
With regard to asset-backed
securities , the following information must be disclosed in addition to the minimum content requirements set out in section OFS-5.3 and Appendix 4:(a) Under a separate section of theoffering document , a description of the assets used to back the asset-backedsecurities , giving at least the following (where relevant):(i) The legal jurisdiction(s) to which the assets are subject;(ii) The types of assets;(iii) The expiry or maturity date(s) of the assets;(iv) The amount of the assets;(v) Where the assets are secured on or backed by real property or other physical assets, or rely on suchsecurity , the ratio of the amount of the assets to the value or amount of suchsecurity at origination, if available;(vi) For loans and credit agreements, the principal lending criteria and extent to which loans may be included which do not meet these criteria;(vii) An indication of significant representations and warranties given to theissuer relating to the assets;(viii) The method of origination or creation of the assets;(ix) Any rights to substitute the assets and a description of the assets which may be substituted for the original assets;(x) For loans and credit agreements, any rights or obligations to make further advances;(xi) A description of the principal insurance policies, including the names, and where appropriate, the addresses and a brief description of the providers. Any concentration with one insurer should be disclosed if it is material to the transaction;(xii) Where the assets consist of obligations of an obligor's accounts for 10% or more of the assets, so far as theissuer is aware and/or is able to ascertain from information published by the obligor(s), the information required in respect of each obligor will be the same as that which would be required if it were itself theissuer of thesecurities to be listed;(xiii) Where it is already listed on a regulated stock exchange or the obligations are guaranteed by an entity listed on a regulated stock exchange, in this case only the name, address, country of incorporation, nature of business and name of the exchange on which itssecurities are listed need be disclosed in respect of the obligor and the guarantor (if applicable);(xiv) Any relationship between theissuer , guarantor and obligor, if any, must be included. The principal terms and conditions of the obligations must be stated, except where the obligations aredebt securities listed on a regulated stock exchange;(xv) Where the assets consist of obligations of more than 10 obligors, or where an obligor accounts for less than 10% of the assets the general characteristics and descriptions of the obligors must be given; and(xvi) Where the assets consist ofequity securities , the information under section OFS-5.2 should be included in respect of thosesecurities .(b) Investment considerations:(i) An explanation of any matter of significance to investors relating to the issue. Any such explanation should be given appropriate prominence depending on the nature of the matter concerned and its significance to investors; and(ii) Where theissuer proposes to or may issue furtherdebt securities backed by the same assets, a prominent statement to that effect and unless those furtherdebt securities are fungible with or are subordinated to anyclass of existing listeddebt security , a statement that the prior approval of the holders of thatclass will be sought.(c) A description of the method and a statement of the date of the sale, transfer or assignment of the assets or of any rights in the assets to theissuer ;(d) A description of the structure of the transaction;(e) An explanation of the flow of funds stating:(i) How the cash flow from the assets is expected to meet theissuer's obligations to holders of thesecurities ;(ii) Information on any credit enhancements;(iii) An indication of where material potential liquidity shortfalls are expected to occur;(iv) The availability of any liquidity supports as an indication of provisions to cover interest shortfall risks;(v) An indication of any investment parameters for the investment of temporary liquidity surpluses;(vi) How payments are collected in respect of the assets;(vii) The order of priority of payments made by theissuer to the holders of theclass ofdebt securities in question;(viii) Any fees payable by theissuer ;(ix) Details of any other arrangements upon which payments of interest and principal to investors are dependent;(x) Information regarding the accumulation of surpluses in theissuer ; and(xi) Details of any subordinated debt finance.(f) The name, address, description and significant business activities of the originator, or creator of the assets backing the issue;(g) The name, address, description and significant business activities of the administrator or equivalent, (if any), together with a summary of the administrator's responsibilities and a summary of the provisions relating to the termination of the appointment of the administrator and the appointment of an alternative administrator;(h) The names and addresses and brief description of:(i) Any swap counterparties and any providers of other material forms of enhancement; and(ii) The banks with which the main accounts relating to the transaction are held.(i) If applicable, a statement that theissuer does not intend to publishannual reports and accounts and that the trust deed constituting the issue requires theissuer to provide written confirmation to thetrustee (or equivalent), on an annual basis, that no event or default or other matter which is required to be brought to thetrustee's attention has occurred.January 2014OFS-5.5.2
If applicable, all information under Paragraph OFS-5.5.1 must be disclosed in the
offering document in respect of any underlying assets used to secure the issuedsecurities , whether classified as asset-backsecurities or otherwise.January 2014OFS-5.6 OFS-5.6 Additional and Specific Content for Special Purpose Vehicles (SPV)
OFS-5.6.1
In respect of a Special Purpose Vehicle (SPV) created for the purpose of issuing
debt securities , the appointed advisor, orissuer , or other sponsor for the issue, must disclose to the CBB all relevant facts and information relating to the legal, commercial and economic structure associated with the issue.January 2014OFS-5.6.2
The Memorandum and Articles of Association, or copy of such document of the SPV as an
issuer , must be submitted to the CBB along with the offering application and must be made available for inspection to the subscriber.January 2014OFS-5.6.3
SPVs are responsible to meet all ongoing obligations related to the
securities issued.January 2014Additional Issue
OFS-5.6.4
In the case of an
issuer wishing to issue moredebt securities which are:(a) Backed by the same assets;(b) Not freely exchangeable with existingclasses ofdebt securities ; or(c) Not subordinated to existingclasses ofdebt securities ;then the
issuer must inform thedebt security holders of the existingclasses .January 2014OFS-5.7 OFS-5.7 Additional and Specific Content for Islamic Securities
OFS-5.7.1
The application for approval from the CBB for making an offering of
Islamic securities must include the following attachments:(a) A declaration by the Shari'a advisor that the transaction is in compliance with the principles of Shari'a;(b) A declaration by theissuer that the vehicle issuing thesecurities will remain subject to proper Shari'a review, until the maturity date of thesecurity ; and(c) A copy of the trust deed or other document securing or constituting theIslamic securities .January 2014Appointed Shari'a Advisors
OFS-5.7.2
The
offering document must contain the identity of the appointed advisors, including the Shari'a advisor.January 2014Shari'a Advisor's Report
OFS-5.7.3
The offering document must contain a Shari'a advisor's report that, at the minimum, covers the compliance of the
security and its structure with the Shari'a principles.January 2014OFS-5.8 OFS-5.8 Additional and Specific Contents of the Offering Document for Warrants
OFS-5.8.1
The offering document must contain all the information that reasonable investors would require in order to make an informed decision of:
(a) The capacity of theissuer and guarantor (if any) to fulfil the obligations specified under the terms of the issue; and(b) The risks, rights and obligations associated with thewarrants .January 2014OFS-5.8.2
The offering documents for
warrants must contain, at the minimum, the following information:(a) Terms and structure of the issue;(b) Financial information on theissuer and its guarantor (if any);(c) Financial information on the entity whosesecurities are the subject of the issue ofwarrants ;(d) Whether theissuer has authority to issue furtherwarrants ; and(e) If thewarrants are not fully covered by the underlyingsecurities held by atrustee , a declaration that theissuer has appropriate risk management capabilities to manage thewarrants issue.January 2014OFS-5.8.3
In the case of
warrants relating to equity ordebt securities , the offering document must contain at the minimum:(a) The names of the regulated exchange (if any) on whichequity securities are already listed or traded;(b) The name, registered office and, if different, head office of theissuer ;(c) The country of incorporation of theissuer ; and(d) The title of thesecurities including nominal value.January 2014OFS-5.8.4
Additional information to be contained in the offering document, where
warrants offer rights to acquiresecurities :(a) In the case ofwarrants offering rights to acquireequity securities: (i) A statement regarding tax on the income from theshares withheld at source in the country of origin;(ii) A statement whether theissuer assumes responsibility for the withholding of tax at source;(ii) Arrangements for transfer of theshares and (where permitted) any restrictions on their free transferability (for example, provisions requiring transfers to be approved); and(iv) A statement whether theshares are in registered or bearer form.(b) In the case ofwarrants offering rights to acquiredebt securities :(i) A statement regarding tax on the income from thedebt securities withheld at source in the country of origin;(ii) A statement whether theissuer assumes responsibility for the withholding of tax at source;(iii) A statement whether thedebt securities are in registered or bearer form; and(iv) Details of any arrangements for transfer of thesecurities and any restrictions on the free transferability of thedebt securities .January 2014OFS-5.8.5
Where any
security represents 10 percent or more of the total value of thesecurities underlying thewarrant, a table showing the price range of each suchsecurity for each of the last three years must be included.January 2014OFS-5.8.6
In the case of
warrants relating to indices, theoffering document must contain at the minimum:(a) A description of the index, including the name of the publisher of the index, its date of establishment, how it is compiled and a summary of its components;(b) An explanation of the computation of the index;(c) The frequency with which the index is updated and published; and(d) The provisions in the event of modification and discontinuance of the index.January 2014OFS-5.8.7
In the case of
warrants relating to other types ofsecurities , assets or variables, theoffering document must contain at the minimum:(a) A description of thesecurities , assets or variables;(b) A description of the market on which they are traded, including its date of establishment, an indication of daily trading volumes, how price information is published, information as to the standing of the market in its country and the name of the market's regulatory authority; and(c) The frequency with which prices of the relevantsecurities , assets or variables are published.January 2014OFS-5.9 OFS-5.9 Additional and Specific Content for Private Placement Memorandum (PPM)
OFS-5.9.1
An
offering document for a private placement ofsecurities must meet the requirements of the particularsecurity , as laid out in OFS-5.1, OFS-5.2 and OFS-5.3, and Appendix 2 in regard to preparation. In addition to the above, it must meet the specific requirements forprivate placement as outlined in this Section.January 2014Confirmation as Accredited Investor
OFS-5.9.2
The
issuer must obtain a signed confirmation from its investors as to their status asaccredited investors using the "Accredited Investors " Form (Appendix 11).January 2014OFS-5.9.3
The
issuer must submit a copy of the status confirmation contained in Rule OFS-5.9.2 on submission of theoffering document .January 2014Suitability of Investors and Risk Statements
OFS-5.9.4
The
offering document must contain the following statement in respect of suitability of investors:"This offer is a private placement. It is not subject to all of the regulations of the Central Bank of Bahrain that apply to public offerings of
securities . This Memorandum is therefore intended only for "Accredited Investors " as defined in the Glossary to this Memorandum.The
securities offered by way of Private Placement may only be offered in minimum subscriptions of $100,000 (or equivalent in other currencies).The Central Bank of Bahrain assumes no responsibility for the accuracy and completeness of the statements and information contained in this document and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the contents of this document.
The Board of Directors and the management of the
issuer accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Board of Directors and the management, who have taken all reasonable care to ensure that such is the case, the information contained in this document is in accordance with the facts and does not omit anything likely to affect the reliability of such information".January 2014OFS-5.9.5
The
offering document must contain statements covering the risk of investment to the effect that:(a) All prospective investors should make their own investigation into the offer, and consult their own advisors concerning the risks of the investors and the suitability of thesecurities for their individual requirements; and(b) There may be a lack of liquidity and lack of public market for thesecurities on offer.January 2014OFS-5.9.6
Issuers must ensure that all relevant financial and risk information is placed in theoffering document to allow investors to make an informed decision.January 2014Utilisation of Proceeds and Disclosure of Fees
OFS-5.9.7
In line with Subparagraph OFS-1.5.2(i), all funds collected through an
offering document must only be utilised as prescribed in theoffering document , and such condition must be clearly stated in theprospectus under the related section 'Use of Proceeds'. Any usage of funds that is not as stated in theoffering document is prohibited without the consent of the securities holders and the approval of the CBB. All applications to the CBB for approval must include evidence of the consent of the securities holders.January 2014OFS-5.9.8
The PPM must disclose the estimated total amount of the proceeds of the issue, and the proposed timetable for their utilisation. Disclosure must also be made of the total amount of fees payable by the investors, up-front discount or placement commission agreed by the
underwriters or other placement or selling agents and theissuer of sellingshareholders , as well as the percentage such up-front discounts or placement commissions represent of the total amount of the offering, and the amount of up-front discount or placement commission persecurity .January 2014OFS-5.9.9
The document must highlight to the investor the ultimate dilution of proceeds through the disclosure of fees, offering expenses or up-front discounts or placement commissions. There must be a statement of the major categories of expenses incurred in connection with the issuance and distribution of
securities to be offered, and by whom the expenses are payable, if other than by theissuer . If any of thesecurities are to be offered for the account of an existing holder ofsecurities in theissuer , the PPM must indicate the portion of expenses incurred by him.January 2014OFS-5.9.10
Any
private placement ofsecurities offered in the Kingdom of Bahrain should meet the requirements as set out in OFS-2.4.7 and must set fees within reasonable and justifiable levels that do not materially compromise the interests of theissuer or the investor. The above disclosures of fees and utilisation of proceeds must be made prominently and clearly for the attention of investors.January 2014OFS-5.10 OFS-5.10 Additional and Specific Content for Guaranteed Issues
Guarantees
OFS-5.10.1
With regards to the guaranteed issues, the following information must be disclosed in addition to the minimum content requirement set out in Section OFS-5.3:
(a) Nature of guarantee, including description of any arrangement intended to ensure that any obligation material to the issue will be duly serviced, whether in the form of a guarantee, surety, keep well agreement, mono-line insurance policy or other equivalent commitment; and(b) Scope of guarantee:(i) Details regarding the terms and condition and scope of guarantee; and(ii) Details of any guarantors power of veto in relation to changes tosecurity holder's rights.January 2014OFS-5.10.2
Where issuing and offering is sought for
debt securities of anissuer guaranteed or secured by another legal entity other than its holding company, the guarantor will be required to comply with the requirements of this Section to the same extent as if such guarantor were theissuer of the relevantdebt securities. January 2014OFS-5.10.3
An
offering document issued in relation to a guaranteed issue must contain the same information regarding the guarantor as that regarding theissuer , so that, where appropriate the "issuer " should be read as applying equally to the guarantor.January 2014OFS-5.10.4
The relevant guarantee must be issued in conformity with the law of the place where the guarantor is incorporated or otherwise established and in conformity with the guarantor's Memorandum and Articles of Association or equivalent documents, and all authorisations needed for its issue under such law or documents must have been duly given.
January 2014OFS-6 OFS-6 Registration of Prospectus and Offering Documents
OFS-6.1 OFS-6.1 General Requirements
OFS-6.1.1
The
issuer , lead manager, or principal advisor must provide 2 copies to the CBB of the draftprospectus , together with a completed prospectus checklist (Appendix OFS-7). The CBB will not commence its review of a draftprospectus unless theprospectus is complete and attached with all required documents and information, as stipulated under Paragraph OFS-6.1.5.January 2014OFS-6.1.2
Once the CBB has completed its review of the draft
prospectus and notified theissuer accordingly, theissuer is required to make any changes determined by the CBB and to submit the printed proof of theprospectus to the CBB for registration.January 2014Registration
OFS-6.1.3
A copy of the
prospectus submitted for registration must be signed by each director of theissuer .January 2014OFS-6.1.4
If the
prospectus is signed by an agent or alternate director, the printer's proofprospectus and the printedprospectuses must disclose this to be the case under the place where the respective director is meant to have signed theprospectus .January 2014OFS-6.1.5
The printed proof copy of the
prospectus must be accompanied by the following:(a) An application for registration of theprospectus ;(c) A letter of approval from any other relevant regulator or other authority;(d) Original copies of all letters of confirmation, declaration or consent;(e) A certified copy of all material contracts and documents available for inspection disclosed in theprospectus , and in the case of contracts not reduced into writing, a memorandum which gives full particulars of the contracts;(f) A certified copy of underwriting agreements (if applicable);(g) Memorandum and Articles of Association of theissuer , originator and/or guarantor and Certificate of Incorporation or Commercial Registration (or equivalent documents);(h) Original written authority by directors appointing any agents to sign theprospectus on their behalf;(i) Letter of confirmation from theissuer and/or lead manager, that the printed proof copy of theprospectus has incorporated all changes as required by the CBB; and(j) Letter of confirmation from theissuer , lead manager, or other appointed advisors that the final printed copy of theprospectus will be the same as the printed proof of theprospectus registered with the CBB.January 2014OFS-7 OFS-7 Distribution and Subscription
OFS-7.1 OFS-7.1 Prior Request for Announcement and Invitation for Subscription
OFS-7.1.1
No person may make an announcement for invitation for subscription of an offering of
securities , unless he makes sure that the following requirements are met:(a) Theprospectus or offering document has been duly approved and registered with the CBB;(b) All designated advisors have been duly appointed and are ready to undertake their roles and responsibilities;(c) All requirements and arrangements related to the offer are in place or it has made sure that such requirements and arrangements will be in place in due course before the announcement of the offer, or commencement of theoffering period ;(d) The availability of a sufficient number of final printed copies of theprospectus or offering document being not later than the date of the commencement of theoffering period , and free of charge to potential subscribers on request;(e) Confirmation to the CBB that no more changes, amendments or alterations in respect of the information contained in theprospectus or offering document, appointment of the advisors or any information related to theissuer itself, or to the issue will take place after the announcement of the offer or thereafter and a supplementary or replacement prospectus will have to be made as per Paragraph OFS-5.1.11;(f) No press releases, press articles and/or interviews or any other form of dissemination of information related to the issue will take place before the subscription invitation announcement in the local daily newspaper; and(g) Ensure that all permanent and temporary insiders fully adhere to the insiders' trading rules and confirmation to this extent is submitted to the CBB not later than the commencement of theoffering period .January 2014Timetable and Record Date
OFS-7.1.2
No person may make an announcement or invitation for subscription of
securities , without determining the final record date, which must be a future date after the announcement of the offer but before the commencement of theoffering period :(a) In relation to apublic offer , the CBB must be notified at least 10days before the intendedrecord date ;(b) Theoffering document and public announcement must disclose the record date; and(c) Once announced, theissuer must not make any subsequent alterations to therecord date .Amended: April 2014
January 2014Offer Period
OFS-7.1.3
Unless otherwise determined in law or agreed by the CBB, the offer period for subscription of
securities must be open for subscription as follows:(a) Forequity securities , the offer period cannot be less than 10 calendar days after the day of commencement of the offer and must not exceed a maximum period of 6 months;(b) For a secondary listing involving an offer ofshares or in the case of arights issue , 5days from the issue of an announcement stipulating the issue is fully subscribed;(c) For othersecurities the offer period must not be less than 15 calendar days after the day of commencement of the offer. Additionally, it must not exceed a maximum period of 6 months from the date of opening unless extended by the CBB in writing;(d) For any offering ofsecurities , theoffering period must not extend beyond the validity of the date of theprospectus oroffering document , which is a period of 6 months; and(e) Must not allow for the closing of theoffering period to be less than 1 month from the publication of annual audited financial statements, or interim unaudited but reviewed financial statements.Amended: April 2014
January 2014Offer Price
OFS-7.1.4
An
issuer , when stating an offer price must also make reference to and provide a description in theprospectus oroffering document of the bookbuilding, underwriting, price stabilisation or other relevant price factors.January 2014OFS-7.1.5
Where an
issuer is making apublic offer following a rights share offering or a private offer, it may price the offers differently for thepublic offer orprivate placement . In such cases, the differential pricing must also consider the market trends and the justification for the price difference must be outlined in theoffering document . The CBB will determine whether the differential pricing is in the best interests of the investors and the market in general.January 2014Listings
OFS-7.1.6
Where the
securities are to be listed on alicensed exchange , this must be disclosed in the offer and must provide the following information:(a) Location and name of the exchange;(b) Listing agent, if any;(c) Planned listing timeline;(d) The percentage of the total issued and outstanding securities to be made available for public subscription and trading on a licensed exchange;(e) Any market making or price stabilisation arrangements;(f) Any anticipated buy back agreement or related intention of the issuer;(g) Any lock up period of major or other class of securities holders;(h) The necessary clearing, settlement, central depository and securities transfer ownership arrangements; and(i) Any intention or agreement for a secondary (cross) listing.January 2014OFS-7.1.7
Where the
offering document states that the offer will be listed on issue, the CBB may preventallotment from taking place where theissuer has not obtained the authority to list from thelicensed exchange at the time of issue, and order that theissuer refund any monies paid by subscribers in respect of such issue.January 2014OFS-7.1.8
The
issuer , lead manager and/or any other appointed advisor must ensure that the requisite listing agreement is signed within a maximum of 10 calendar days from the closing date of theoffering period , and that the date for commencement of trading on alicensed exchange is within a maximum of 15 calendar days from the closing date of theoffering period . Immediately upon the signing of the listing agreement with thelicensed exchange , the lead manager must notify the CBB confirming the signing of the listing agreement and inform the CBB of the date for the commencement of trading.Added: October 2017OFS-7.1.9
As the listing authority under Article 86 of the CBB Law, the CBB shall retain the right to determine and decide on the final date of listing and/or date of commencement of trading of securities on a licensed exchange.
Added: October 2017OFS-7.2 OFS-7.2 Announcement
OFS-7.2.1
No person may make a
public offer ofsecurities unless a summary of theoffering document has been published in two local daily newspapers, one in Arabic and one in English.January 2014OFS-7.2.2
The summary of the
offering document must be published in at least a 52 cm x 31.5 cm format. For those papers whose pages are smaller than the prescribed size noted in this Paragraph, the publication must take place over 2 pages or more to meet the total size specified and must be clear and legible.January 2014OFS-7.2.3
The
offering document must be made available to the public at least 5 calendar days prior to the commencement of theoffering period and at the same time as publishing the summary of theoffering document .January 2014OFS-7.2.4
The
offering document available to the public must be identical to the printed proof version approved by the CBB.January 2014OFS-7.2.5
The
offering document is available to the public when:(a) An announcement is made in accordance with Rule OFS-7.2.1;(b) It is publicly available in final printed form free of charge at the registered office of theissuer , lead manager andreceiving bank for public offering and, if applicable, at the offices of the principal advisor or other designated advisorplacing or selling thesecurities ; and(c) If available in electronic form, it is available on theissuer's , lead manager's or other principal advisor's website.January 2014OFS-7.2.6
Announcements for a public offering must:
(a) Contain a prominent statement to the effect that the advertisement is not anoffering document and investors should not subscribe for anysecurities , except on the basis of information in theoffering document ;(b) Indicate the date of approval by the CBB of theoffering document ;(c) Indicate how theoffering document may be obtained, including particulars of the internet website where a soft copy of the document can be found if available;(d) Include clear risk warnings, including the potential for loss that is to be prominently presented and not obscured or disguised; and(e) Be consistent with the information contained in theoffering document .January 2014OFS-7.2.7
An
issuer and its affiliated employees and professional advisors are prohibited from stating or disseminating any statements during theoffering period that may lead to:(a) Encouragement of subscription for thesecurities ;(b) Inducement of a particular person to deal in thesecurities ;(c) Sale or purchase of thesecurities ; or(c) Raising, lowering, maintaining or stabilising the market price of thesecurities in conjunction with dissemination or statement of misleading information.January 2014OFS-7.2.8
No announcement, advertisement or promotion of an offer of
securities that would constitute or induce a person to subscribe for suchsecurities may be made without meeting the requirements of Paragraph OFS-5.1.28.January 2014OFS-7.3 OFS-7.3 Stop Order for Offering Document
OFS-7.3.1
The following is a non-exclusive list of examples under which the CBB may issue an order under this Section:
(a) If there exists any statement or matter which, in the opinion of the CBB, is false or misleading;(b) Omission of information that should have been included in theoffering documents in accordance with this Module;(c) There is a change in circumstances of theissuer or conditions;(d) If theoffering period is fixed or extended to be close to the date of the next declaration of theissuer's financial statements for a period not less than 30 calendar days;(e) Receipt of any serious complaint from the subscribers, particularly relating to the availability of the final printedoffering document , or the imposition of additional cost or charges which have not been stipulated in theoffering document ;(f) The raising of new litigation or a court order related to theissuer and/or to the offering itself in or outside Bahrain; or(g) The withdrawal of any declaration or consent that has been given by any appointed advisor.January 2014OFS-7.3.2
The CBB may, by an order in writing, prevent any further use of a
prospectus oroffering document or issue, sale orallotment ofsecurities connected to an offer where theissuer or any person acting on its behalf has committed a violation of the CBB Law, CBB rules or this Module. The CBB may in addition, issue such order where it believes such action is in the best interest of investors or the capital market in general.January 2014OFS-7.4 OFS-7.4 Subscription Results and Allotment
Announcement of Subscription
OFS-7.4.1
Subscription monies received in respect of a
public offer must be held in a separate bank account with an approvedreceiving bank , until the finalallotment of suchsecurities has been approved by the CBB.January 2014OFS-7.4.2
The
issuer , lead manager or other principal advisor must publish the results of the subscription of a public offer in at least two local newspapers, one in Arabic and the other in English, stating all facts related to the outcome of the subscription in at least a 26 cm x 31.5 cm format. The announcement must be published within a maximum period of two calendar days from the closing date of theoffering period and must include the finalallotment basis. The declaredallotment basis must not be subject to any change thereafter.Amended: October 2017
January 2014OFS-7.4.3
The
issuer must allot or allocatesecurities within 6 calendar days of the closing date of the offer in accordance with theallotment basis stipulated in theoffering document or otherwise approved by the CBB upon the subscription results and publication referred to in Paragraph OFS-7.4.2.Amended: October 2017
January 2014Under-subscription
OFS-7.4.4
The
offering document must provide full information about the possibility of an under-subscription event, particularly regarding the treatment of unsubscribedshares for those issues which are not fully underwritten.January 2014OFS-7.4.5
In the event that the
issue is not underwritten noallotment may be made of anysecurities unless the subscription received is, at least equal to the minimum subscription amount set out in theoffering document .January 2014OFS-7.4.6
If a public offering of
equity securities has not been fully subscribed and the offer is underwritten, theunderwriter must purchase the unsubscribedshares and after obtaining the CBB approval, may then re-offer or resell the unsubscribedshares . For the avoidance of doubt, any unsubscribedshares that might be re-offered or re-sold to a related company of theunderwriter such as the company that controls it, its subsidiary, a subsidiary of the company that controls it and a company affiliated with it, shall be subject to the same underwriting commitment of theunderwriter .Amended: October 2017
January 2014OFS-7.4.7
If a rights offering of
equity securities which is underwritten has not been fully subscribed during theoffering period , theunderwriter may either re-offer the unsubscribedshares to the public or purchase the unsubcribedshares .January 2014OFS-7.4.8
If a public offering of
debt securities or other which is underwritten has not been fully subscribed for during theoffering period , theunderwriters must purchase the unsubscribedsecurities and after obtaining the CBB approval, may then resell thesesecurities .January 2014Over-subscription
OFS-7.4.9
If an offer of
securities is over-subscribed after the closing of theoffering period , theissuer must allot theshares in accordance with the pre-determined basis ofallotment which must be described in theoffering document or otherwise approved by the CBB.January 2014OFS-7.4.10
Issuers and lead managers must make sure conditions relating toallotment basis and minimum subscription amounts are in compliance with the Memorandum and Articles of Association, or equivalent constitutional documents of theissuer , as well as in accordance with the applicable laws, rules and regulations.January 2014General Guidance on the Allotment
OFS-7.4.11
The basis of
allotment of anysecurities offered, must be clearly stated in theoffering document .January 2014OFS-7.4.12
While exercising the
allotment ofsecurities theissuer , lead manager, or any appointed advisor must ensure that:(a) For any new public offering ofequity securities , no subscriber is allotted more than 10% of the totalshares offered;(b) All subscribers are treated equally and in accordance with theallotment basis in all aspects, particularly when the rounding up rule is applied;(c) No payment, direct or indirect in the nature of a discount, commission and allowance or otherwise may be made either by theissuer or the promoters in anypublic offer to the parties who received firmallotment ;(d) Noshareholder of theissuer may receive, directly or indirectly, any consideration in the nature of fees, commission, allowance or other benefit, whether in cash or in kind, in a public offering;(e) The totalsecurities allotted must in any case not exceed the totalsecurities offered and approved by the General Assembly and theissuer , lead manager and any other appointed advisor must establish theallotment basis to avoid such possibility;(f)Allotment ofsecurities must avoid allocation of anysecurities fraction, and therefore theissuer must provide provisions related to the possibility of fractions ofsecurities remaining after finalallotment ; and(g) For anyrights issue , the pro-rataallotment basis must be applied, or otherwise the General Assembly ofsecurities holders must have approved such otherallotment basis.January 2014Over-allotments
OFS-7.4.13
The "over-allotment option" may only be exercised if such an option is disclosed and provided for in the
offering document .January 2014OFS-7.4.14
While exercising the over-allotment option, the
issuer , lead manager or any other appointed advisor must fully adhere to general guidelines under Paragraph OFS-7.4.12.January 2014OFS-7.4.15
The CBB may allow the extension of the allotment period up to 6 calendar days to exercise the over-allotment option upon the request of the
issuer , lead manager or any other appointed advisor on application, which contains the reasons and justifications for such extension.Amended: October 2017
January 2014OFS-7.4.16
In the event of the over-allotment option, the
issuer , lead manager or any other appointed advisor is not allowed to exercise any discrimination, whether in cash or in kind among the subscribers or allottees.January 2014Trading of Underwritten Securities Subscribed by the Underwriter
OFS-7.4.17
Where the
underwriter has subscribed for, or purchasedsecurities under an underwriting or sub-underwriting agreement following the under-subscription of the offering ofsecurities , any intention to sell thosesecurities in the ordinary course of trading on alicensed exchange shall, in the interest of maintaining market integrity, not be sold against any price stabilisation fund or the designatedmarket maker as the buying counterparty.Added: October 2017OFS-7.5 OFS-7.5 Refunding and Dispatching
OFS-7.5.1
The
issuer , lead manager or any other appointed advisor must refund the excess subscription money and dispatchsecurities within a maximum of 9 calendar days from the closing date of theoffering period .Amended: January 2018
Amended: October 2017
January 2014OFS-7.5.2
A record for such refunding and dispatching must be maintained for further reference and CBB inspection requirements.
January 2014OFS-7.5.3
If the
issuer fails to meet the refunding and dispatching date under Rule OFS-7.5.1, an interest at one month BIBOR is payable to the subscriber with respect to the subscription amounts received for the period from the required refunding and dispatching date to the actual refunding or dispatching date.January 2014Dematerialised Securities
OFS-7.5.4
As per Paragraph OFS-1.5.5,
securities issued to the public after the effective date of this Module must have an allocated ISIN and be in dematerialised form and theissuer is required to designate the clearing house, or depository facility in which suchsecurities will be deposited.January 2014OFS-7.5.5
For the purposes of Article 178 of the CBB Law and Volume 6, dematerialised
securities shall meansecurities issued and entered in the registry in an electronic format anddematerialisation means the conversion of asecurity certificate from a physical form to an electronic form forsecurities that have already been issued before the effective date of this Module.January 2014OFS-7.5.6
For the purposes of
dematerialisation , each subscriber orshareholder will have to open an account with alicensed clearing house or alicensed central depository , acceptable to the CBB, and then request fordematerialisation of his certificates through the depository.January 2014OFS-7.5.7
The dispatching of the dematerialised
securities must be done in accordance with the CSD Module and SROs business rules.January 2014OFS-7.5.8
The ownership and entitlement of allotted
securities for each subscriber or allottee is established by book entry in the register maintained by thelicensed clearing house and orlicensed central depository , rather than through the issuing of a physical share certificate.January 2014Physical Securities
OFS-7.5.9
Subject to the requirements of the CSD Module, unless the
security is required to be in dematerialised form, the subscriber may request a certificate as evidence of his shareholding, which certificate must contain or be in the following form:(a) The serial number;(b) The par value andclass of thesecurity ;(c) The name of theissuer and the authority under which it was incorporated;(d) The address of the registered office of theissuer ;(e) The name and address of theclearing house ,central depository institution, and/orsecurities ownership transfer agent, if it is different from the registered office of theissuer ;(f) Where a rubber seal is imprinted, original signatures must support it;(g) Where an embossed seal is used, it may, subject to the Articles of Association of theissuer , be supported by facsimile signatures only;(h) Where only the seal is used without supporting signatures, the method or system of control by theissuer on the application of the seal must be approved by the auditor of theissuer , and a copy of such approval forwarded to the CBB;(i) The certificatesecurity must be designed so that the paper quality and watermark forgery and/or alterations are easily detectable;(j) The printing ofsecurities certificates must only be entrusted to recognisedsecurities printers; and(k) The size of the certificate is prescribed by the clearing house and/or central depository, which is used by theissuers .January 2014OFS-7.5.10
[This Paragraph was deleted in October 2017]
Deleted: October 2017
January 2014OFS-8 OFS-8 Fees and Charges
OFS-8.1 OFS-8.1 Introduction
OFS-8.1.1
Offering of securities 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 fees charged vary depending on the nature of the offering and is payable at the time of submission of application.
January 2014OFS-8.2 OFS-8.2 Fees for Offering of Securities
OFS-8.2.1
Subject to any regulation issued by the CBB in respect of fees and charges, for any offering of
securities , certain non-refundable fees are payable to the CBB as set out in Paragraph OFS-8.2.3f.January 2014OFS-8.2.2
An application for approval or reviewing an
offering document related to an offering ofsecurities will not be regarded as complete or submitted until the fee has been paid in full.January 2014OFS-8.2.3
The following table outlines the fees payable to the CBB for the various services provided:
(amount in BD)
No. Type of Approval % of Issue/Offer Value Min Amount Max Amount A Registration of Equity Securities Offering Documents. 1 Public Offering. 0.005% 1000 5000 2 Rights Offering for Listed Issuer. 0.00125% 500 1000 3 Private Placement Memorandum. 0.005% 1000 5000 4 Warrants on Equity. 0.00125% 500 1000 B Registration of Preference Shares, Bonds, Debt Securities and Islamic Sukuk Offering Documents. 1 Applications of securities to be Listed. (Public) 0.005% 1000 5000 2 Applications of securities not to be Listed.(PPM) 0.006% 2000 6000 C Registration of Convertible into Equity Securities Offering Documents. 1 Application of securities to be Listed.(Public) 0.003% 1000 5000 2 Application of securities not to be Listed.(PPM) 0.006% 2000 6000 D Registration of Structured Products Offering Documents. 0.006% 2,000 6,000 E Registration of Options, Commodities, Futures or Derivatives Contracts. Fixed 500 500 F Registration of Replacement and Supplementary Prospectus. Fixed 100 100 G Registration of Pricing Statements (Term Sheets) for Programmes. Fixed 100 100 H Registration of Capital Securities Offering Documents. 0.006% 2,000 6,000 I Filing of Offering Documents in relation to Exempt Offers. Fixed 2,000 6,000 J Examining of an application to approve the increase of the Capital of Listed Companies. Fixed 100 100 Amended: January 2021
January 2014TMA — Take-overs, Mergers and Acquisitions
TMA-A TMA-A Introduction
TMA-A.1 TMA-A.1 Purpose
Executive Summary
TMA-A.1.1
The Module provides an orderly framework within which
takeovers ,mergers or acquisitions andshare repurchases are to be conducted and sets forth special requirements relating to timing and mode ofoffer , announcements, documentaton and disclosure of adequate information to enable shareholders to make an informed decision as to the merits of anoffer relating to atakeover ,merger or acquisition.Amended: October 2019TMA-A.1.2
The
general principles contained in the Module represent the overarching principles relevant totakeovers ,mergers andshare repurchases . In addition to thegeneral principles , each chapter contains a series of rules, some of which are effectively expansions of thegeneral principles and examples of their application and others are rules of procedure designed to govern specific types oftakeovers ,mergers orshare repurchases .Amended: October 2019TMA-A.1.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.4
The CBB may modify or relax the application of a rule if it considers that in the specific circumstances of the case, strict application of a rule would operate in an unnecessarily restrictive or unduly burdensome, or otherwise inappropriate manner.
TMA-A.1.5
The Module also seeks to ensure that the shareholders in the company subject to a takeover are given sufficient information, advice and time to consider and decide on the offer and in some instances an option to relinquish their holdings. The Module seeks to achieve fair treatment by requiring equality of treatment of shareholders of publicly listed companies which are targets in a takeover, merger or acquisition as defined in the Glossary in Part B of the CBB Rulebook Volume 6.
Amended: October 2019TMA-A.1.6
Since the primary purpose of Module TMA is to facilitate fair treatment for all shareholders of publicly listed companies affected by TMA, it is not concerned with the financial or commercial advantages or disadvantages of a
takeover ,merger or acquisition which are matters for the company and its shareholders to decide on.Amended: October 2019Legal Basis
TMA-A.1.7
Article 3 of the Central Bank of Bahrain and Financial Institutions Law (the "CBB Law") states that the objectives of the CBB are to, inter alia, develop the financial sector and enhance confidence therein and protect the interests of depositors and customers of financial institutions, and enhance the Kingdom's credibility as an international financial centre.
TMA-A.1.8
Parts 2 and 4 of the CBB Law empower the CBB to lay down rules for licencees, listed companies and others who undertake capital market and/or securities-related activity in the Kingdom;
TMA-A.1.9
Article 38(a) of the CBB Law empowers the Governor of the CBB to issue Directives to ensure the implementation of the CBB Law, any regulations issued in accordance with that Law and the achievement of the objectives of the CBB.
TMA-A.1.10
These rules are issued by way of a legally-binding Directive.
TMA-A.1.11
Article (3) of Decree No. 64 of 2006 with respect to promulgating the Central Bank of Bahrain and Financial Institutions Law (CBB Law) states that the provisions of the Commercial Companies Law (CCL) issued by Decree No. 21 of 2001 shall apply on all matters that are not stipulated in the CBB Law.
TMA-A.1.11A
This Module should be read in conjunction with Resolution No.(54) of 2023 with respect to issuing a Regulation on the Rules and Procedures for Mergers and Acquisitions of Shares of Companies listed on Stock Exchanges Licensed by the Central Bank of Bahrain (as amended from time to time).
Added: January 2024TMA-A.1.12
Following is also list of relevant Articles of the CBB Law that apply to persons covered by Module TMA:
Circular/ other references Provision Subject CBB Law 2006 Article 99–100 and Article 105 Restrictions of publishing market information and the use and disclosure of insider information. CBB Law 2006 Article 167 Penalty for violating Article 100. CBB Law 2006 Article 106 The offence of market manipulation. CBB Law 2006 Article 168 Penalty for violating Article 106. CBB Law 2006 Article 163 Penalty for concealing documents and information or providing false or misleading information or statements. CBB Law 2006 Article 128 Imposing restrictions on licensees and listed companies. CBB Law 2006 Article 132 Public censure on breaches committed by licensees and listed companies. CBB Law 2006 Article 52 –56 Nature and limits of control, procedures that must be undertaken and the regulations and conditions for granting approval of control CBB Law 2006 Article 162 Penalty for violating Article 52–58. Role of the CBB
TMA-A.1.13
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.14
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.15
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.1.16
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.2 TMA-A.2 Module History
TMA-A.2.1
This Module was first issued in December 2008. It is numbered as version 01. All subsequent changes to this Module are annotated with a sequential version number: UG-3 provides further details on Rulebook maintenance and version control.
TMA-A.2.1A
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes TMA-3.1.4 04/2013 Guidance Paragraph deleted on mandatory offer limit. Module TMA 10/2019 Restructured the whole Module TMA (including moving definitions to the glossary and also the appendices under Part B of the CBB Rulebook Volume 6) TMA-2.2 01/2022 Amended paragraphs in the Section. TMA-2.3 01/2022 Amended paragraphs in the Section. TMA-2.7.7 01/2022 Amended paragraph. TMA-2.7.8 01/2022 Deleted paragraph. TMA-2.8.1 01/2022 Amended paragraph. TMA-2.11.1 01/2022 Amended paragraph. TMA-2.14.1 01/2022 Deleted paragraph. TMA-2.18.1 01/2022 Amended paragraph. TMA-2.18.2 01/2022 Amended paragraph. TMA-2.19 01/2022 Amended paragraphs in the Section. TMA-2.20.6 01/2022 Amended paragraph. TMA-3.4 01/2022 New revised Section. TMA-A.1.11A 01/2024 Added a new Paragraph on Module legal basis. TMA-2.2 01/2024 Amended Section on independent advice and shareholder approval. Superseded Requirements
TMA-A.2.2
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/ other references Provision Subject TMA-A.3 TMA-A.3 [This Section was deleted in October 2019].
TMA-A.3.1
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.5
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.6
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.7
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-A.3.8
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B TMA-B Scope of Application
TMA-B.1 TMA-B.1 Scope
TMA-B.1.1
Module TMA applies to persons ("
relevant persons ") involved in, engaging in or intending to engage in anoffer for,takeover ormerger or acquisition of a controlling interest in a company whose primary listing of its ordinaryequity securities is on alicensed exchange in the Kingdom of Bahrain.Amended: October 2019TMA-B.1.2
The Module applies to
take-overs ,mergers , acquisitions andshare repurchases affecting:(a) Bahrain domiciled publicly listed company whose ordinary votingequity securities are listed on a licensed exchange in Bahrain are the potential targets fortakeovers ,mergers and acquisitions; or(b) Overseas company whose primary listing of its ordinary votingequity securities is on alicensed exchange in Bahrain.Amended: October 2019TMA-B.1.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.5
The TMA Module will not require holders of securities of 30% or more in a listed company at the effective date of this Module to make an
offer under this Module. However, such holders shall comply with the requirments of this Module if they plan to increase their existing holdings by any method as per the requirements of this Module.Amended: October 2019TMA-B.1.6
"While the TMA Module applies to listed companies in which control may change, there are circumstances such as where an unlisted company is a target of a listed company (reverse takeover) in which it is necessary to consider the spirit, General Principles, standards and rules of this Module wherever it is applicable. When there is any doubt as to whether a proposed course of conduct accords with the spirit, General Principles, standards and rules of this Module, parties or their advisers should consult the CBB in advance."
Amended: October 2019
Amended: April 2013TMA-B.1.7
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.8
[This Paragraph was deleted in October 2019].
Deleted: October 2019Exemptions
TMA-B.1.9
Module TMA does not apply to
offers ofequity securities for the following:(a)Offers for non-voting, non-equity capital unless required by this Module;(b) Anexempt share repurchase ;(c) Anoffer document filed with the CBB under Module OFS for the sole purpose of issuing or listing securities that are convertible toequity securities and do not confer, directly or indirectly,a voting right to the holder of such securities;(d) Therelevant person has or had, at any time, financial instruments that are convertible toequity securities and do not confer, directly or indirectly, avoting right ;(e) Therelevant person is not subject to Module TMA under CBB Law;(f) Anexempt fund manager or anexempt principal trader recognized as such by the CBB for the purposes of the Module; and(g) Acquisition of a controlling interest pursuant to an underwriting agreement subject to the timeline of the disposal of such acquisition being approved by the CBB.Amended: October 2019
Amended: April 2013TMA-B.1.10
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.1.11
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.1.12
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
Compliance Responsibility
TMA-B.1.13
Each director of an
offeror and of theofferee company as well as thoseacting in concert and theirprofessional advisers has a responsibility to ensure, so far as he is reasonably able, that the requirements of this Module are complied with in the conduct of transactions which are the subject of the TMA Module.Amended: October 2019TMA-B.1.14
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-B.1.15
The primary responsibility for ensuring compliance with the Module rests with parties involved in a
take-over ,merger , acquisition, orshare repurchase and theirprofessional advisers as follows:(a) Persons or groups of persons who seek to gain or consolidate control of companies that are subject to the Module; and(b) Their brokers and otherprofessional advisers ; or parties who otherwise participate in, act in concert or are connected with, transactions to which the Module applies.Amended: October 2019TMA-B.1.16
[This Paragraph was deleted in October 2019].
Deleted: October 2019Penalty for Non Compliance
TMA-B.1.17
Without prejudice to any greater penalty prescribed under the Penal Code or any other law, including the relevant provisions of the CBB Law, any person who breaches any of the provisions of this module shall be liable to a fine and such other restrictions and prohibitions the CBB may choose to impose under the CBB Law.
Amended: October 2019TMA-B.2 TMA-B.2 [This Section was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2010].
TMA-B.2.1
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.2
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.3
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.4
Associated company: A company shall be deemed to be an associated company of another company if one of them owns or controls 20% or more of the voting rights of the other or if both are associated companies of the same company.
TMA-B.2.5
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.6
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.7
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.8
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.9
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.10
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.11
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.12
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.13
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.14
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.15
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.16
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.17
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.18
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.19
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.20
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.21
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.22
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.23
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.24
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.25
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.26
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.27
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.28
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.29
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.30
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.31
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.32
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.33
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.34
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.35
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.36
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.37
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.38
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-B.2.39
[This Paragraph was moved to the Glossary under Part B of the CBB Rulebook Volume 6 in October 2019].
TMA-1 TMA-1 General Principles
TMA-1.1.1
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-1.1.2
Equal Treatment to all Shareholders: All
relevant persons including anypersons acting in concert in relation to anoffer must treat all holders of each class of securities of anofferee company in a fair and equitable manner demonstrating no bias to a single, group or class of shareholders.Amended: October 2019TMA-1.1.3
Duties of Directors with Personal Interests: Directors of an
offeror and theofferee company must always, in advising their shareholders, act only in their capacity as directors and not have regard to their personal or family shareholdings or to their personal relationships with the companies. They must only consider the shareholders' interests taken as a whole when they are giving advice to shareholders. Directors of theofferee company must give careful consideration before they enter into any commitment with anofferor which would restrict their freedom to advise their shareholders. Such commitments may give rise to conflicts of interest or result in a breach of the directors' fiduciary duties.Amended: October 2019TMA-1.1.4
Minority interests must be protected: Oppression of minority or non-controlling shareholders is not acceptable in any case. Therefore, rights of control must be exercised in good faith in the context of protecting minority shareholders.
Amended: October 2019TMA-1.1.5
Information to All Shareholders: During the course of an
offer , or when anoffer is in contemplation, neither anofferor , nor theofferee company, nor any of their respective advisers may furnish information to some shareholders which is not made available to all shareholders. This principle does not apply to the furnishing of information in confidence by theofferee company to a bona fide potentialofferor or vice versa.Amended: October 2019TMA-1.1.6
Standards of Care in Documents: All
relevant persons including anypersons acting in concert in relation to anoffer must, as with a prospectus act with due skill, care and diligence in relation to all matters connected with anoffer including but not limited to matters relating to standards of research and analysis, public announcements, documentation, information being given to shareholders and the appointment ofadvisers , among others.Amended: October 2019TMA-1.1.7
Announcements: An
offeror must announce anoffer only after careful and responsible consideration. The same applies to making acquisitions which may lead to an obligation to make amandatory offer . In either case theofferor and itsadvisers must be satisfied that it can and will continue to be able to implement theoffer in full.Amended: October 2019TMA-1.1.8
Sufficient Information and Time to Shareholders: Shareholders must be given sufficient information, advice and time to reach an informed decision on an
offer . No relevant information must be withheld. All documents must, as in the case with a prospectus, be prepared with the highest possible degree of care, responsibility and accuracy.Amended: October 2019TMA-1.1.9
Full and Prompt Disclosure and Prevention of a False Market: All
relevant persons including anypersons acting in concert in relation to anoffer must ensure that all information provided inoffer , announcements and related documentation is clear, fair and not misleading, and appropriate to the information needs of the readers. All persons concerned withoffers must make full and prompt disclosure of all relevant information and take every precaution to avoid the creation or continuance of a false market.Relevant persons and theirprofessional adviser (s) involved in anoffer covered by this Module must take care that statements are not made which may mislead shareholders or the market.Amended: October 2019TMA-1.1.10
No Frustration of Bona Fide Offer: At no time after a bona fide
offer has been communicated to the board of theofferee company, or after the board of theofferee company has reason to believe that a bona fideoffer might be imminent, may the board of theofferee company take any action in relation to the affairs of the company, without the approval of shareholders in a general meeting, which could effectively result in any bona fideoffer being frustrated or in the shareholders being denied an opportunity to decide on its merits.Amended: October 2019TMA-1.1.11
Secrecy before Announcements: At any time before the
offer or during theoffer , the management of all relevant persons including any personsacting in concert in relation to anoffer andprofessional adviser (s) must maintain secrecy and confidentiality of theoffer .Amended: October 2019TMA-1.1.12
Limitation On Directors' Actions: The boards of an
offeror and theofferee company and their respective advisers and associates have a duty to act in the best interests of the shareholders of theofferor andofferee company respectively, and these General Principles and the Rules may impinge on the freedom of action of boards and persons involved inoffers . They must, therefore, accept that there are limitations, in connection with transactions which are the subject of the Modules, on the manner in which the pursuit of those interests can be carried out.Each director of an
offeror and of theofferee company has a responsibility to ensure, so far as he is reasonably able, that this Module is complied with in the conduct of transactions which are the subject of this Module.Amended: October 2019TMA-1.1.13
Acquisition or Consolidation of Control: If control of a company changes or is acquired or is consolidated, a
mandatory offer to all other shareholders is required. Where an acquisition is contemplated as a result of which a person may incur such an obligation, he must, before making the acquisition, ensure that he can and will continue to be able to implement such anoffer .Amended: October 2019TMA-1.1.14
Appointment of
Professional Adviser (s): Anofferee board which receives anoffer or is approached with a view to anoffer being made, should in the interest of its shareholders, seek professional advice by aprofessional adviser (s).Amended: October 2019
Amended: April 2013TMA-1.1.15
Co-operation with the CBB: All parties concerned with transactions subject to this Module are required to co-ordinate and co-operate to the fullest extent with the CBB's Capital Markets Supervision Directorate, and to provide all relevant information.
Amended: October 2019TMA-1.1.16
Validity of CBB Approval: Where a transaction requires CBB prior approval, any execution or part thereof must take place within a period of 90 days (including any applicable lock-up period) from the date of the approval, unless otherwise stipulated in writing by the CBB.
Amended: October 2019TMA-1.1.17
Transactions to be concluded on a
licensed exchange : Except with the consent of the CBB, any transaction concluded in terms of this Module shall be executed on the relevantlicensed exchange .Amended: October 2019
Amended: April 2013TMA-2 TMA-2 Rules
TMA-2.1 TMA-2.1 Communication of the Offer
TMA-2.1.1
An
offer must be put forward in the first instance to the board of directors (the "board") of theofferee company in writing.Identity of Offeror
TMA-2.1.2
If the
offer or an approach with a view to anoffer being made is not made by the ultimateofferor or potentialofferor , the identity of that person must be disclosed at the outset to the board of theofferee company. When that person is a company, the identity of its ultimate controlling shareholder(s) and the identity of its ultimate parent company, or, where there is a listed company in the chain between such company and its ultimate parent company, the identity of such listed company must be disclosed.Amended: October 2019Seriousness of Offeror
TMA-2.1.3
The board of the
offeree company when approached is entitled to be satisfied that theofferor is, or will be, in a position to implement theoffer in full. Anofferor , upon receiving a request from the board of theofferee company, must provide reasonable information to verify that theofferor is, or will be, in a position to implement theoffer in full.Confidentiality
TMA-2.1.4
The confidentiality of the
offer before an announcement must be maintained and all persons in possession of confidential information, and particularly price-sensitive information, concerning anoffer or contemplatedoffer must treat that information as secret and may only pass it to another person if it is necessary to do so and if the other person understands the need for secrecy.Amended: October 2019TMA-2.2 TMA-2.2 Independent Advice and Shareholder Approval
Appointment of Advisors by Offeree
TMA-2.2.1
A board which receives an
offer or is approached with a view to anoffer being made, must, in the interests of shareholders, appoint an independentprofessional adviser to advise the board as to whether the financial terms of theoffer is, or is not, fair and reasonable. Such advice, including reasons, must be obtained in writing and made known to shareholders by including it in theofferee board circular along with the recommendation of theofferee company’s board regarding acceptance and voting, where applicable, of theoffer . The board must announce the appointment of theprofessional adviser in the initial announcement of theoffer or possibleoffer , or as soon thereafter as the appointment is made.Amended: January 2024
Amended: January 2022
Amended: October 2019TMA-2.2.1A
For the purposes of Paragraph TMA-2.2.1, the
offeree company’s board, prior to appointment of an independentprofessional adviser , must ensure that the independentprofessional adviser has sufficient experience and a satisfactory work record in corporate finance or in a related field over the period of at least the past 5 years.Added: January 2022TMA-2.2.1B
For the purposes of Paragraph TMA-2.2.1A, a
professional adviser is considered to have the relevant corporate finance experience if it has provided advice for any of the following:a) IPOs;b) Mergers and acquisitions involving listed companies;c) Fund-raising exercise through the capital market by listed companies; and/ord) Restructuring exercises involving listed companies.Added: January 2022TMA-2.2.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.2.3
When it is not possible to give a recommendation or there is a divergence of views amongst board members or between offeree board and the
professional advisor , as to the merits of theoffer or recommendation being made, then it must be stated in theofferee board circular and an explanation given, including the arguments for the recommendation to shareholders with regards to acceptance or rejection of the offer. The views of any directors who are in a minority must also be included in the offeree board circular.Amended: January 2024
Amended: October 2019TMA-2.2.3A
If a director has a conflict of interest, he must not be joined with the rest of the board in the expression of their views on the
offer . The conflict must be disclosed, in the offeree board circular, to the shareholders.Added: January 2024TMA-2.2.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019In-Eligible Professional Adviser(s)
TMA-2.2.5
A person shall not be appointed as an independent
professional adviser if the person is arelated company to theofferor orofferee or who has, or had, a significant connection, financial or otherwise, with either theofferor or theofferee company, or the controlling shareholder(s) of either of them, of a kind likely to create, or to create the perception of, a conflict of interest, or reasonably likely to affect the objectivity of his advice.Amended: October 2019TMA-2.2.5A
For the purposes of Paragraph TMA-2.2.5, a
professional adviser would not generally be considered independent if theprofessional adviser :(a) holds voting rights in theofferor or theofferee at any time during the preceding 12 months from the beginning of theoffer period . While determining the voting rights, shares held under trust arrangement, discretionary managed funds or other form of non-beneficial ownership by the professional adviser in theofferor orofferee company are not to be taken into consideration;(b) provides or has provided any audit and/or review services during the preceding 12 months from the beginning of theoffer period ;(c) has a business relationship with theofferor or theofferee , at any time during the preceding 12 months from the beginning of theoffer period that contributes to more than 10 per cent in revenue or profit of the adviser, based on the latest financial statements;(d) has a representative on the board of theofferor or theofferee ;(e) has a representative from either theofferor or theofferee on its board;(f) is or will be involved in the financing of the offer;(g) is a substantial creditor of either theofferor or theofferee , based on the latest financial statements; or(h) has a financial interest in the outcome of the offer other than as outlined in paragraphs TMA-2.2.5A(a)–(g) above.Added: January 2022TMA-2.2.5B
For the purposes of Paragraph TMA-2.2.5A(g), a
professional adviser would be considered to be a “substantial creditor”, if:(a) the loan (including hire purchase, leasing, corporate bonds and Islamic financing) extended by theprofessional adviser to theofferor or theofferee represents more than 10 per cent of the loan outstanding in theofferor or theofferee ; or(b) the loan (including hire purchase, leasing, corporate bonds and Islamic financing) extended by theprofessional adviser to theofferor or theofferee represents more than 10 per cent of the latest audited shareholders’ funds of theprofessional adviser ; or(c) the professional adviser is a lead banker in a syndicated loan (including Islamic financing) extended to theofferor or theofferee , at any time during the period of 12 months preceding the beginning of the offer period.Added: January 2022TMA-2.2.5C
Paragraph TMA-2.2.1 requires the
professional adviser to have a sufficient degree of independence to ensure that the advice given is proper and objective. Accordingly, in certain circumstances it may not be appropriate for aprofessional adviser who has had a recent advisory relationship with anofferor orofferee to give advice. In such cases, the CBB should be consulted. Also, aprofessional adviser may conduct functions such as corporate finance, lending, stockbroking, fund management and corporate advisory activities on a day-to-day basis quite separately within the same organisation, but it is necessary for theprofessional adviser to satisfy the CBB that it arranges its affairs to ensure that there is total and effective segregation of those operations (Chinese wall), and those operations are conducted without regard for the interests of other parts of the same organisation or of its clients.Amended: January 2024
Added: January 2022TMA-2.2.6
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019Independent Committee
TMA-2.2.6A
If any of the directors of an
offeree company is faced with a conflict of interest, then such directors must notify theofferee company’s board and their interest and they must not vote on the resolution to be adopted in regards of theoffer , and if possible, the offeree company board should establish an independent committee of the board to discharge the board’s responsibilities in relation to theoffer . If it is not possible to form an independent committee, responsibility for representing the interests of independent shareholders must reside primarily with theprofessional adviser . In case of doubt the CBB must be consulted.Added: January 2024TMA-2.2.7
Members of an independent committee of a company’s board of directors (established to discharge the board`s responsibilities in relation to the
offer ) must consist of non-executive directors of the company who have no direct or indirect interest in anyoffer or possibleoffer for consideration by the independent committee other than, in the case of a director of theofferee company, as a shareholder of theofferee company.Amended: January 2024
Amended: October 2019Shareholder Votes to be Conducted by Way of a Poll
TMA-2.2.8
Whenever this Module requires a matter to be approved by shareholders or any class or group thereof in general meeting the vote must be conducted by way of a poll. The results of the poll must be announced.
Amended: October 2019Approval of Delistings by Independent Shareholders
TMA-2.2.9
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019Board of Offeror Company
TMA-2.2.10
Where an
offeror is a listed company, and theoffer being made is a reversetakeover or when the directors of theofferor are faced with a conflict of interest, the board of theofferor must appoint an independent adviser and obtain professional independent advice as to whether the making of theoffer is in the interests of theofferor’s shareholders. The advice must be obtained before announcing an offer or revisedoffer . Theoffer or revisedoffer must also be made subject to the approval of the shareholders of theofferor in a general meeting. The advice must be in writing and sent to the shareholders with the notice of the meeting. If anofferor considers that these requirements should not apply, where for example theoffer is not material to theofferor , it may apply to the CBB for a waiver of these requirements.Amended: January 2024
Amended: October 2019TMA-2.2.10A
For the purposes of TMA-2.2.10, a conflict of interests, amongst others, includes:
a) significant cross shareholdings (10% or more) between an offeror and the offeree company;b) a number of directors common to both companies; orc) a commoncontrolling shareholder in both companies is a director of or has a nominee director in either company.Added: January 2024TMA-2.2.11
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019TMA-2.2.12
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019TMA-2.2.13
[This Paragraph was deleted in January 2024].
Deleted: January 2024
Amended: October 2019TMA-2.3 TMA-2.3 Announcement of Offer or Possible Offer
Announcement to be Made by Offeror
TMA-2.3.1
Except in the case of a
mandatory offer where any of the circumstances occurring in TMA-2.3.10, a brief announcement that a potentialofferor is considering making anoffer must be made after obtaining permission from the CBB.TMA-2.3.2
Before the board of the
offeree company is approached, the responsibility for making an announcement lies with theofferor or potentialofferor . Theofferor or potentialofferor should, therefore, keep a close watch on theofferee company's share price and volume for signs of unusual movement.Amended: October 2019Announcements to be Made by Potential Vendor
TMA-2.3.3
The potential vendor must make an announcement when there are negotiations or discussions between a potential
offeror and the holder, or group of holders, of shares carrying 30% or more of the voting rights of the company and the company is subject to rumour or speculation about a possibleoffer or there is unusual movement in its share price or in the volume of share turnover, and there are reasonable grounds for concluding that it is the potential vendor's actions which have led to the situation.Amended: October 2019Suspension of Trading
TMA-2.3.4
When an announcement is required under this Section, the listed company(ies) being the
offeror or theofferee company, as the case may be, must notify the CBB and thelicensed exchange immediately that an announcement is imminent and if there is any possibility that an uninformed market for shares of theofferor or theofferee company could develop prior to publication of the announcement, serious consideration must be given to requesting a suspension of trading in such shares pending publication of the announcement. A potential offeror must not attempt to prevent the board of theofferee company from making an announcement or requesting thelicensed exchange to grant a temporary suspension of trading at any time the board thinks appropriate. The CBB or thelicensed exchange may, at their discretion and irrespective of whether or not there is a request, suspend trading temporarily on the shares of a listed company being anofferee orofferor .Amended: October 2019Announcements of Certain Purchases
TMA-2.3.5
Acquisitions of
voting rights of the offeree company by anofferor or by any personacting in concert with theofferor may give rise to an obligation to make a cash offer, to increase anoffer or to make amandatory offer . Immediately after any acquisition giving rise to any such obligation, an announcement must be made, stating the number of shares acquired and the price paid, together with the information required (to the extent that it has not previously been announced).Amended: October 2019TMA-2.3.6
CBB should be consulted if an
offeror is wishing to approach a wider group, for example in order to arrange financing for theoffer , whether through equity or debt, or to organize a consortium to make theoffer .TMA-2.3.7
Where the
offeror orofferee does not make an announcement when obliged to do so in terms of this Module, the CBB shall have the right to, without prejudice to any further action imposed by the CBB, instruct theofferor and theofferee to make an announcement in accordance with this Module and theofferor orofferee must comply with the time stipulated in the instruction.Amended: October 2019Publication of an Announcement about an Offer or Possible Offer
TMA-2.3.8
When an
offer or possibleoffer is announced, the announcement must be in accordance with Appendix B in Part B of the CBB Rulebook Volume 6 and be sent to thelicensed exchange and published in two local daily newspapers in Bahrain, one in Arabic, or Arabic and the other in English.Amended: October 2019TMA-2.3.9
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.3.10
An
offeror or potentialofferor must make an announcement under the following conditions:(a) Before an approach has been made to theofferee company, theofferee company is in the subject of rumour or speculation about a possibleoffer .(b) There is unusual movement in the company's share price or in the volume of share turnover, and there are reasonable grounds for concluding that it is the actions of the potentialofferor or personsacting in concert with it through inadequate security, which have led to the situation;(c) When negotiations or discussions are about to be extended to include more than a very restricted number of persons; outside those who need to know in the companies concerned and their immediate advisors; or(d) Immediately upon acquisition of voting rights which gives rise to an obligation to make amandatory offer . The announcement that an obligation has arisen must not be delayed due to information being obtained, additional information can be the subject of a later supplementary announcement.Amended: October 2019Announcement to be Made by Offeree
TMA-2.3.11
Following an approach to the board of the
offeree company which may or may not lead to anoffer , the primary responsibility for making an announcement will normally rest with the board of theofferee company. Theofferee company must, therefore, keep a close watch on its share price and volume.The board of the
offeree company must make an announcement to thelicensed exchange and market and inform its shareholders immediately upon the occurrence of the following conditions:(a) A firm intention to make anoffer has been notified to the board of theofferee company from an authorised source, irrespective of the attitude of the board of theofferee company;(b) When following an approach to theofferee company, whether there is a firm intention to make anoffer or not, theofferee company is the subject of rumour or speculation about a possibleoffer or there is unusual movement in its share price or in the volume of share turnover;(c) When negotiations or discussions about a potentialoffer are about to be extended to include more than a very restricted number of persons;(d) When the board of a company is aware that there are negotiations or discussions between a potentialofferor and the holder, or group of holders of shares carrying 30% or more of the voting rights of a company; or(e) When the board of a company is seeking potentialofferor s, and(i) The company is the subject of rumour or speculation about a possibleoffer , or there is unusual movement in its share price or a significant increase in the volume of share turnover; or(ii) More than a very restricted number of potential purchasers orofferor are about to be approached.Amended: October 2019
Amended: April 2013TMA-2.3.12
When a proposed
offer is conditional on acceptances or undertakings to accept by one or more shareholders, the proposed announcement must include a statement by those shareholders who have accepted or undertaken to accept theoffer , whether such acceptances or undertakings are revocable, and if so, the conditions under which such acceptances or undertakings may be revoked.Amended: October 2019Firm Intention to Make an Offer by Offeror
TMA-2.3.13
An
offeror must announce a firm intention to make anoffer where suchofferor has every reason to believe that it can and will continue to be able to implement theoffer .Amended: October 2019TMA-2.3.14
The announcement of a firm intention to make an
offer must state the following:(a) Terms of theoffer ;(b) Identity of theofferor and, where theofferor is a company, the identity of its ultimate controlling shareholder and the identity of its ultimate parent company, or where there is a listed company in the chain between such company and its ultimate parent company, the identity of such listed company;(c) Details of any existing holding of shares and rights over shares in theofferee company:(i) Which theofferor owns or over which it has control or direction;(ii) Which is owned or controlled or directed by any person acting in concert with theofferor ;(iii) In respect of which theofferor or any personacting in concert with it has received an irrevocable commitment to accept theoffer ; and(iv) In respect of which theofferor or any personacting in concert with it holds convertible securities, warrants or options;(d) Details of any outstanding derivative in respect of securities in theofferee company entered into by theofferor or any personacting in concert with it;(e) All conditions (including normal conditions relating to acceptance, listing and change in capital) to which theoffer is subject;(f) Details of any arrangement (whether by way of option, indemnity or otherwise) in relation to shares of theofferor or theofferee company and which might be material to theoffer . Details of any relevant securities of theofferee company in which theofferor or any personacting in concert with it has an interest or has a right to subscribe. In each case, the nature of the interests or rights concerned needs to be specified;(g) Details of any relevant securities of theofferee company which theofferor or any person acting in concert with it has borrowed or lent, save for any borrowed shares which have been either on-lent or sold;(h) All conditions (including normal conditions relating to acceptances, admission to listing, admission to trading and increase of capital) to which theoffer or the posting of it is subject;(i) Details of any agreements or arrangements to which theofferor is party which relate to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or the consequences of its doing so, including details of any break fees payable as a result; and(j) Details of any arrangement for the payment of an inducement fee or similar arrangement.Amended: October 2019
Amended: April 2013TMA-2.3.15
Where the
offer is for cash, or includes an element of cash, the announcement of firm intention must include a statement by an adviser, or another appropriate third party, that they have carried out necessary assessment to confirm that sufficient resources are available to theofferor to satisfy the full implementation and acceptance of theoffer .Amended: January 2022
Amended: October 2019TMA-2.3.15A
For the purpose of Paragraph TMA-2.3.15, the CBB may require the appointed adviser or third party to provide evidence in support of the confirmation statement referred to in Paragraph TMA-2.3.15 confirming that sufficient resources are available to satisfy the
offeror’s obligation in respect of theoffer .Added: January 2022TMA-2.3.16
Except with the consent of the CBB, if an incorrect or misleading statement is made in an announcement by the potential
offeror , or on behalf of the potentialofferor , or its directors, or officials or advisors, and not immediately withdrawn, then the potentialofferor will be bound by the statement if anoffer for theofferee company is subsequently made.TMA-2.3.17
Except with the consent of the CBB, where the incorrect or misleading statement concerned relates to the price of a possible
offer (or a particular exchange ratio in the case of a proposed securities exchangeoffer ), the potentialofferor will not be allowed subsequently to make anoffer for theofferee company at a lower price (taking the price of any securities concerned at the date of announcement of the firm intention to make theoffer ), unless there has occurred an event which the potentialofferor specified in the statement as an event which would enable it to be set aside.Preconditions
TMA-2.3.18
Any pre-conditions included in an announcement to making a possible
offer must be agreed in advance by the CBB and clearly state whether or not the pre-conditions must be satisfied before anoffer can be made or whether they are waived.Announcement of the Progress of the Offer
TMA-2.3.19
Until a firm intention to make an
offer has been notified a brief announcement by a potentialofferor or theofferee company that talks are taking place or that a potentialofferor is considering making anoffer will normally satisfy the obligations under this Section.If following the announcement of a possible
offer no further announcement has been made in respect of thatoffer or possibleoffer within one month, an announcement must be made setting out the progress of the talks or the consideration of a possibleoffer . This obligation continues, and announcements will be required monthly, until announcement of firm intention to make anoffer or of a decision not to proceed with anoffer . When talks are terminated or a potentialofferor decides not to proceed with anoffer , clear and unambiguous announcement must be made to that effect.Amended: October 2019Statements of Intention Not to Make an Offer
TMA-2.3.20
A person making a statement that he does not intend to make an
offer for a company must make a statement to the market that is very clear and unambiguous.Amended: October 2019TMA-2.3.21
Except with the consent of CBB, unless there has been a material change of circumstances or an event has occurred which the person specified in his statement as an event which would enable it to be set aside, neither the person making the statement, nor any person
acting in concert with him, nor any person who is subsequentlyacting in concert with either of them, may within six months from the date of the statement:(a) Announce anoffer or possibleoffer for theofferee company, including apartial offer ;(b) Acquire any interest in shares of theofferee company if any such person is obliged under TMA-3.1 to make a mandatoryoffer ;(c) Acquire any interest, or procure an irrevocable commitment in respect of, shares of theofferee company if the shares in which such person, together with any personsacting in concert with him, would be interested and the shares in respect of which he, or they, had acquired irrevocable commitments would in aggregate carry 30% or more of the voting rights of theofferee company;(d) Make any statement which raises or confirms the possibility that anoffer might be made for theofferee company; or(e) Proceed with actions to make a possibleoffer , for theofferee company, where knowledge of the possibleoffer might be extended outside the potentialofferor and immediate advisors.Amended: October 2019TMA-2.3.22
Failure to comply with this rule may lead to the period of six months set out to be extended.
TMA-2.3.23
Any person considering issuing a statement of an intention not to make an
offer should consult CBB; particularly when specific reservations are to be included or to be set aside.TMA-2.3.24
Restrictions imposed by TMA-2.3.21 on statements made will apply to any persons
acting in concert with the person making the statement. Unless clear in the statement or at the time of the statement, the restrictions will not apply to the personsacting in concert and that they are continuing to consider making anoffer .Amended: October 2019TMA-2.3.25
When a person is announcing in a statement an intention of not making an
offer , CBB will take into account the manner of any public reporting following the statement. Advisors should advise the directors and officials of companies of the implications of TMA-2.3.21.TMA-2.4 TMA-2.4 No Frustrating Action
TMA-2.4.1
Once a bona-fide
offer has been communicated to the board of anofferee company or the board of anofferee company has reason to believe that a bona-fideoffer may be imminent, no action which could effectively result in anoffer being frustrated, or in the shareholders of theofferee company being denied an opportunity to decide on the merits of anoffer , shall be taken by the board of theofferee company in relation to the affairs of the company without the approval of the shareholders of theofferee company in general meeting. In particular theofferee company's board must not, without such approval, do or agree to do the following:(a) Issue any shares;(b) Create, issue or grant, or permit the creation, issue or grant of, any convertible securities, options or warrants in respect of shares of theofferee company;(c) Other than during the normal course of business, sell, dispose of or acquire assets of a material amount;(d) Enter into contracts, including service contracts, otherwise than in the ordinary course of business; or(e) Cause theofferee company or any subsidiary or associated company to purchase or redeem any shares in theofferee company or provide financial assistance for any such purchase.TMA-2.4.2
For purposes of Paragraph TMA-2.4.1, where the
offeree company is under a prior contractual obligation to take any such action, or where there are other special circumstances, the CBB must be consulted at the earliest opportunity.Amended: October 2019TMA-2.5 TMA-2.5 No Withdrawal of an Offer
TMA-2.5.1
Except with the consent of the CBB, following an announcement of a firm intention to make an
offer , theofferor cannot withdraw theoffer and must continue to implement it unless theoffer is subject to the fulfilment of a specified condition and the condition has not been met.TMA-2.5.2
A change in general economic, industrial or political circumstances will not justify failure to proceed with an announced
offer , unless circumstances of an exceptional and specific nature arise.TMA-2.5.3
If a competitor has posted a higher
offer to the one already made by the firstofferor , the CBB may consent to the withdrawal of the announcedoffer . This should not carry any additional conditions other than those necessary for the implementation of such announcedoffer .TMA-2.5.4
If an
offeror is permitted to withdraw from anoffer , or anoffer is waived because of non-fulfilment of a condition, theofferor will be required to make an announcement giving reasons for the withdrawal.TMA-2.5.5
The CBB may seek to hear views of the
offeree company and its advisors, prior to consenting to a withdrawal of an announcedoffer .TMA 2.6 TMA 2.6 Information to Offeror(s)
TMA-2.6.1
Upon signing a confidentiality agreement to give access to any due diligence material, any information, including particulars of shareholders, given to one
offeror or potentialofferor must be furnished equally and promptly to any other bona fideofferor or potentialofferor .Amended: October 2019TMA-2.6.2
If the
offer or potentialoffer is a management buy-out or similar transaction, the information which this Paragraph requires to be given to a competing or potentialofferor is:(a) The information generated by theofferee company (including the management of theofferee company acting in their capacity as such) which is passed to external providers or potential providers of finance (whether equity or debt) to theofferor or potentialofferor ; and(b) Any other information that is material in the context of making anoffer insofar as the board of theofferee company is aware that the management is in possession of such information.This, however, does not include providing information on the
offeree company's trade and business secrets. The CBB expects the directors of theofferee company who are involved in making theoffer to cooperate with the independent directors of theofferee company and its advisers in the assembly of information.Amended: October 2019
Amended: April 2013TMA-2.6.3
The information related to an
offer should be provided by theofferee company to the ultimateofferor or potentialofferor , the identity of which must be disclosed to the directors of theofferee company.Amended: October 2019Mutual Due Diligence Review
TMA-2.6.4
Where the consideration under an
offer includes exchange of securities, theofferor and theofferee company may, subject to such terms and conditions as may be agreed between theofferor andofferee company under a confidentiality agreement, undertake mutual due diligence (mutual due diligence review) of each other's business.Added: October 2019TMA-2.6.5
Where the CBB is of the opinion that mutual due diligence review as referred to in Paragraph TMA-2.6.4 is in the best interest of the shareholders, it may, at its sole discretion, by notice in writing, order the
offeror and theofferee company to enter into a mutual due diligence review agreement.Added: October 2019TMA 2.7 TMA 2.7 Timing and Content of Documents
Equality of Information to Shareholders
TMA-2.7.1
All
offeree company shareholders must be given sufficient information and advice about anoffer . Information must be made equally available to all shareholders, at the earliest and in the same manner to enable them to reach an informed decision about theoffer .Amended: October 2019TMA-2.7.2
Shareholders must, in accordance with Appendix C in Part B of the CBB Rulebook Volume 6, be given all the facts necessary to make an informed judgment on the merits or demerits of an
offer . Such facts require accurate and fair presentation and must be given to the shareholders early enough to enable them to make a decision in good time. The obligation of theofferor in these respects towards the shareholders of theofferee company is no less than theofferor's obligation towards its own shareholders. In particular, whether or not theoffer consideration is cash, information must be given about theofferor .Amended: October 2019TMA-2.7.3
The
offer document must include a heading stating: "If you are in doubt about any aspect of thisoffer , you should consult a licensed securities dealer or licensed institution in securities, a bank manager, solicitor or attorney, professional accountant, or other professional advisor."TMA-2.7.4
No new material must be released in meetings, interviews or discussions with the media. If any new information is made public as a result of meetings, interviews or discussions with the media, then a circular must be sent to shareholders and where appropriate newspaper space.
Amended: October 2019Subsequent Documents
TMA-2.7.5
Documents subsequently sent to shareholders of the
offeree company must contain details of any material changes in information previously submitted or published by or on behalf of either party during theoffer period . If there have been no such changes this must be stated. In particular, the following matters must be updated:(a) Changes or additions to material contracts;(b) Shareholdings and dealings;(c) Changes to directors' service contracts;(d) Special arrangements;(e) Ultimate owner of securities acquired under theoffer ; and(f) Arrangements in relation to dealings.Amended: October 2019
Amended: April 2013Offer Document Time Limit
TMA-2.7.6
The
offer document must be sent to theofferee company by or on behalf of theofferor within 21 calendar days of the date of the announcement of the terms of theoffer . The CBB's consent is required if theoffer document may not be posted within this period.Amended: October 2019Timing and Contents of Offeree Board Circular
TMA-2.7.7
The
offeree company must send the circular containing the information in Appendix D in Part B of the CBB Rulebook Volume 6, together with any other information it considers to be relevant to enable its shareholders to reach an informed decision on theoffer accompanied by theoffer document to all its shareholders within a maximum period of 21 calendar days from the date of receipt of theoffer document . The CBB’s written approval is required if theofferee board circular may not be sent to the shareholders within the abovementioned period. Theofferee board circular must include the views of theofferee company’s board or its independent committee on theoffer and the written advice of itsprofessional adviser as to whether theoffer is, or is not, fair and reasonable and the reasons thereof.Amended: January 2022
Amended: October 2019TMA-2.7.8
[This Paragraph was deleted in January 2022]
Deleted: January 2022
Amended: October 2019Prospectus Standard
TMA-2.7.9
Each document issued or statement made in relation to an
offer or possibleoffer or during anoffer period must, as is the case with a prospectus, satisfy the highest standards of accuracy and the information given must be adequately and fairly presented. This applies whether theofferor , theofferee company, or any of their advisors or agents issues the document, advertisement, or announcement. Those who issue or make any such document or statement must ensure that it remains accurate and up-to-date throughout theoffer period , and must notify shareholders of any material changes as soon as possible.Amended: October 2019Directors' Responsibility Statement
TMA-2.7.10
All documents must state on the inside cover page that: All directors of the company issuing the document, whose names appear therein, jointly and severally accept full responsibility for the accuracy of information contained in the document. To the best of the knowledge and belief of the directors, who have taken all reasonable care to ensure that such is the case, the information contained in the document is in accordance with the facts and contains no omissions likely to affect the importance and completeness of the document.
Amended: October 2019TMA-2.7.11
If it is proposed that any director be excluded from the Director's Responsibility Statement, the CBB's consent is required. Such consent is given only in exceptional circumstances and in such cases the omission and the reasons for it must be stated in the document to which the Director's Responsibility Statement applies.
Amended: October 2019TMA-2.7.12
The directors of the
offeree company should comment on the statement in theoffer document regarding theofferor's intentions in respect of theofferee company and its employees.Arabic/English Language
TMA-2.7.13
Each document must be written in Arabic and/ or English and shall include or be accompanied by a translation, as the case requires, in Arabic or English.
Amended: October 2019Documents to be on Display
TMA-2.7.14
Except with the consent of the CBB, the following documents must be available for inspection from the time that the
offer document or theofferee board circular is published, until the end of theoffer period . Theoffer document and theofferee board circular must state which documents are available and where, and the place where inspection can be made:(a) Memorandum and articles of association of theofferor or theofferee company or equivalent documents;(b) Audited consolidated accounts of theofferor or theofferee company for the last two financial years for which these have been published in accordance with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) or other accounting standards acceptable to the CBB;(c) All service contracts ofofferee company directors;(d) Any report, letter, valuation or other document any part of which is exhibited or referred to in any document issued by or on behalf of theofferor or theofferee company;(e) Written consents of theprofessional advisers ;(f) All material contracts in relation to theoffer ;(g) Where a profit forecast has been made, the reports of the auditors or consultant accountants and of theprofessional advisers in addition to the letters giving the consent of the auditors or consultant accountants and of theprofessional advisers to the issue of the relevant document with the report in the form and context in which it is included or, if appropriate, to the continued use of the report in a subsequent document;(h) Where an asset valuation has been made, the valuation certificate and associated report containing details of the aggregate valuation, in addition to a letter stating that the valuer has given and not withdrawn his consent to the publication of his name in the relevant document;(i) Any document evidencing an irrevocable commitment or a letter of intent which has been procured by theofferor orofferee company (as appropriate) or any of their respectiveassociates ;(j) Where the CBB has given consent to aggregation of dealings, a full list of all dealings;(k) Documents relating to the financing arrangements for theoffer or a detailed statement from the professional advisor indicating that they have taken all reasonable steps to convince themselves that sufficient resources are available to implement theoffer ;(l) Documents relating to the payment of an inducement fee or similar arrangement;(m) Any agreements or arrangements, or, if not reduced to writing, a memorandum of all the terms of such agreements or arrangements, disclosed in theoffer document ; and(n) Any agreements or arrangements, or, if not reduced to writing, a memorandum of the terms of such agreements or arrangements.Amended: October 2019TMA-2.8 TMA-2.8 The Offeree's Director Responsibilities
TMA-2.8.1
The board of directors of the
offeree company must ensure that proper arrangements are in place to enable it to monitor all aspects relating to the offer to ensure that:(a) The board is provided promptly with copies of all documents and announcements issued by or on behalf of the offeree company which bear on theoffer ; the board receives promptly details of all dealings in relevant securities made by the offeree company or itsassociates and details of any agreements, understandings, guarantees, expenditure (including fees) or other obligations entered into or incurred by or on behalf of the offeree company in the context of theoffer which do not relate to routine administrative matters;(b) Those directors or committee members (appointed in accordance with Paragraph TMA-2.2.7) who undertake daily responsibilities for theoffer are in a position to justify to the board all their actions and proposed courses of action;(c) The opinions of advisers, including professional advisers, are available to the board; and(d) The possible temporary insiders (including members of the board themselves) are identified and that theofferee company (including its employees) comply with the relevant provisions of Insiders as stipulated in the CBB Law and in theofferee’s policy oninsiders .Amended: January 2022
Amended: October 2019
Amended: April 2013TMA-2.8.2
The procedures identified in TMA-2.8.1 must be followed, and board meetings must be held, whenever necessary throughout the offer in order to ensure that all directors remain updated with events and with actions taken.
Amended: October 2019TMA-2.8.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.8.4
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.8.5
Where directors (including their connected persons, related trusts and companies controlled by such directors, connected persons and related trusts) or shareholders or groups of shareholders acting collectively holding effective control, whether represented on the board or not, sell shares to a purchaser, as a result of which the purchaser is required to make an
offer under TMA-3.1 (Mandatory Offer), the vendors must ensure that as a condition of the sale the purchaser undertakes his obligations in accordance with TMA-3.1 .Amended: October 2019Resignation of Directors of Offeree Company
TMA-2.8.6
Once a bona-fide
offer has been communicated to the board of theofferee company or the board of theofferee company has reason to believe that a bona-fideoffer is imminent, except with the consent of the CBB, the directors of anofferee company or any of its subsidiaries must not resign until the first closing date of theoffer , or the date when theoffer becomes or is declared unconditional, whichever is the later. Resignation of directors of theofferee company must be made in accordance with theofferee company's Memorandum and Articles of Association.Amended: October 2019Prompt Registration of Transfers
TMA-2.8.7
The board and officials and registrars of an
offeree company should use their best endeavours to ensure the prompt registration of transfers during anoffer period so that shareholders can freely exercise their voting and other rights.Added: October 2019TMA-2.9 TMA-2.9 Profit Forecast and Other Financial Information
TMA-2.9.1
The directors are responsible for ensuring that the profit forecasts are compiled with the highest standards, presentation and accuracy to shareholders in an
offer . Financial advisors must ensure that the directors are preparing the forecasts with sufficient explanation on how the projection was calculated, taking into account all the assumptions and risk of failure in the projected result. Such project must be examined and reported on by independent reporting accountants, experts, or consultants in accordance with the applicable international standard (International Standard on Assurance Engagement — ISAE).TMA-2.9.2
Profit forecasts provided by the
offeror and/or theofferee must include:(a) A profit forecast for the current financial year. If the forecast year is less than three months of the current financial year, then the period of the forecast will be the current financial year and the next immediate financial year;(b) The assumptions, in addition to the commercial assumptions, on which the forecasts are based must be included in documents sent toofferee shareholders with regards to anoffer ;(c) A statement with the consent of the relevant advisors, including the consultant accountant and professional advisor, that they have given and not withdrawn their consent to the publication of the profit forecast;(d) A statement by the directors that the forecast remains valid for the purpose of theiroffer and that the professional advisors and accountants who reported the forecast agree that their reports continue to apply;(e) The accounting policies and calculations of the forecasts which have been examined and reported on by the auditors, consultant accountants or any other professional advisor of theofferor or theofferee ; and(f) When a profit forecast is made in relation to a period in which trading has already commenced, any previously published profit figures in respect of any expired part of that trading period, together with comparable figures for the same part of the preceding year.Amended: October 2019TMA-2.9.3
When income from land and buildings is a material element in a forecast, that part of the forecast must normally be examined and reported on by an independent valuer. Exceptional items should also be examined and reported on with special care.
Amended: October 2019TMA-2.9.4
Except with the consent of the CBB, any profit forecast which has been made before the commencement of the
offer period must be examined, reproduced and reported on in the document sent to shareholders.Amended: October 2019TMA-2.9.5
Exceptionally, the CBB may accept that, because of the uncertainties involved, it is not possible for a forecast previously made to be reported on in accordance with this Module nor for a revised forecast to be made. In these circumstances, the CBB would insist on shareholders being given a full explanation as to why the requirements of this Module were not capable of being met.
Publication of Reports
TMA-2.9.6
When a profit forecast is made during an
offer period , any documents sent to shareholders must include the forecast reports as required by TMA-2.9.2(e), TMA-2.9.3 and TMA-2.9.4. The reports must include a statement that consent has been given and has not been withdrawn to the circulation to shareholders.Amended: October 2019TMA-2.9.7
If a company's forecast is published first in a press announcement, it must be repeated in full, together with the reports required in TMA-2.9.2(e), TMA-2.9.3 and TMA-2.9.4, in the documents sent to shareholders. The reports must include a statement that consent has been given and has not been withdrawn to the publication.
Amended: October 2019Continuing Validity of Forecast
TMA-2.9.8
When a company includes a forecast in a document, any document subsequently sent out by that company in connection with that
offer must, contain a statement by the directors that the forecast remains valid for the purpose of theoffer and that theprofessional advisers and accountants who reported on the forecast have indicated that they have no objection to their reports continuing to apply.Amended: October 2019Statements Which will be Treated as Profit Forecasts
TMA-2.9.9
When no particular figure is mentioned or even if the word "profit" is not used, certain forms of words may constitute a profit forecast, particularly when considered in context. Examples are "profits will be somewhat higher than last year" and "performance in the second half-year is expected to be similar to our performance and results in the first half-year" (when interim figures have already been published). Whenever a form of words puts a floor under, or a ceiling on, the likely profits of a particular period or contains the data necessary to calculate an approximate figure for future profits, it will be treated by the CBB as a profit forecast which must be reported on. In cases of doubt, the CBB should be consulted in advance.
TMA-2.9.10
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.9.11
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.9.12
[This Paragraph was deleted in October 2019].
Deleted: October 2019When a Forecast Relates to a Period which has Commenced
TMA-2.9.13
[This Paragraph was deleted in October 2019].
Deleted: October 2019Merger Benefits Statements in Securities Exchange Offers
TMA-2.9.14
In a
securities exchange offer , a quantified statement about the expected financial benefits of a proposedtakeover ormerger is deemed to be a profit forecast statement for the purpose of this TMA-2.9. In addition to satisfying the existing standards of information and requirements under the TMA Module, a person issuing such a statement must provide:(a) The basis of the belief (including sources of information) supporting the statement;(b) An analysis and explanation of the constituent elements sufficient to enable shareholders to understand the relative importance of these elements; and(c) A base figure for any comparison drawn.Amended: October 2019
Amended: April 2013TMA-2.10 TMA-2.10 Asset Valuation
TMA-2.10.1
When a valuation of assets is given in connection with an
offer , it must be supported by the opinion of a named independentvaluer who has no connection with other parties to the transaction. Asset valuations by a professionally qualified independent valuer must be provided when asset values are a particularly significant factor in assessing the relevanttakeover ormerger transaction.Amended: October 2019TMA-2.10.2
Valuation of assets documents provided by the
offeror or theofferee must include:(a) The professional qualifications and address of the independent valuer;(b) The basis of valuation;(c) The opinion of the independent valuer supporting the valuation;(d) The effective date at which the assets were valued. If a valuation is not current, the valuer must state that a current valuation would not be materially different and if this statement cannot be made, the valuation must be updated;(e) A statement with the consent of the valuer that he has given and not withdrawn his consent to the use of his valuation report.TMA-2.10.3
Valuation report addressed to shareholders must be made available for inspection together with an associated report containing details of the aggregate valuation. Where CBB is satisfied that such disclosure may be commercially disadvantageous to the company concerned, it will allow the report to be in a summarized form.
Basis of Valuation
TMA-2.10.4
In any valuation of an asset or business the basis of valuation must be clearly stated. Only in exceptional circumstances should it be qualified and in that event the valuer must explain the meaning of the words used. The material assumptions made in a valuation must be stated in the valuation.
Amended: October 2019TMA-2.10.5
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.10.6
In the case of land currently being developed or with immediate development potential, in addition to giving the open market value in the state existing at the date of valuation, the valuation should include:-
(a) The value after the development has been completed;(b) The estimated total cost, including carrying charges, of completing the development and the anticipated dates of completion and of letting or occupation; and(c) A statement whether planning or other regulatory consent has been obtained and, if so, the date thereof and the nature of any conditions attaching to the consent which affect the value.However, the value of the property should also be given as a net of any charges, levy, tax, etc.
Amended: April 2013Opinion and Consent Letters
TMA-2.10.7
Standards of care; A valuation must be made with due care and consideration by the valuer or
professional adviser making the valuation.Amended: October 2019TMA-2.10.8
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.10.9
When the valuer withdraws its written consent, the document must state such fact.
TMA-2.10.10
[This Paragraph was deleted in October 2019].
Deleted: October 2019[This Subsection was deleted in October 2019]
TMA-2.10.11
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.11 TMA-2.11 Issuance of Documents
Filing of Documents for Comments
TMA-2.11.1
All documents must be filed with the CBB for its feedback prior to release or publication and must not be released or published until the CBB has issued its written approval within 10 working days thereon. The final copy of the documents must be filed with the CBB.
Amended: January 2022Publication of Documents
TMA-2.11.2
All announcements in respect of listed companies must be made in accordance with the requirements of the Disclosure Standards. All announcements in respect of unlisted companies must be circulated to their shareholders.
[This Subsection was deleted in October 2019]
TMA-2.11.3
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.12 TMA-2.12 Offers for More than One Class of Equity Shares
TMA-2.12.1
Where a company has more than one class of equity share capital, a comparable
offer must be made for each class whether such capital carries voting rights or not. The comparableoffer or proposal for each class of share capital required must normally be subject to similar conditions. Such a scheme must be considered at separate meetings for each class of the equity share capital, if required by law or the company's Memorandum and Articles of Association.Amended: October 2019TMA-2.13 TMA-2.13 Appropriate Offers for Convertibles
Offeree Companies with Convertible Securities
TMA-2.13.1
Where an
offer is made for equity share capital and theofferee company has convertible securities outstanding, theofferor must make an appropriateoffer or proposal to the holders of the convertible securities to ensure that their interests are safeguarded. Holders ofconvertible securities must be treated equally.Amended: October 2019Professional Independent Advice
TMA-2.13.2
The board of the
offeree company must obtain professional independent advice in writing on theoffer or proposal to the holders of convertible securities and the substance of such advice must be made known to all holders of its securities, together with the board's views on theoffer or proposal.Amended: October 2019Dispatch of Appropriate Offers
TMA-2.13.3
Whenever practicable the
offer or proposal should be dispatched to the holders of convertible securities at the same time that theoffer document is posted to other shareholders, but if this is not practicable the CBB should be consulted and theoffer or proposal should be dispatched as soon as possible thereafter.Amended: October 2019Conditions of Appropriate Offers
TMA-2.13.4
The
offer or proposal required by TMA-2.13.1 must be made conditional on theoffer for equity share capital becoming or being declared unconditional and should not normally be subject to any other conditions. It may, however, be put by way of a scheme to be considered at a meeting of the holders of convertible securities in accordance with the Memorandum and Articles of Association and/oroffer documents in respect of such securities, as the case may be.Amended: October 2019Warrants, Options and Subscription Rights
TMA-2.13.5
The provision of Paragraph TMA-2.13.1 applies also when an
offeree company has warrants, options or subscription rights outstanding in respect of any class of equity share capital (including non-transferable options), with the appropriate amendments.Amended: October 2019TMA-2.14 TMA-2.14 Offer Timetable
Offer to Remain Open for 15 Days
TMA-2.14.1
[This Paragraph was moved to TMA-2.14.2A in October 2019].
Amended: October 2019TMA-2.14.2A
Where a conditional
offer becomes or is declared unconditional, it must remain open for acceptance for not less than 15 calendar days thereafter.Added: October 2019Offering Period
TMA-2.14.2
Where an
offer document and theofferee board circular are distributed on different dates, theoffer must initially be open for acceptance for at least 15 calendar days following the date on the later date in respect of which the document is posted.In any announcement of an extension of an
offer , the next closing date must be stated.Amended: October 2019Final Day Rule
TMA-2.14.3
Except with the consent of the CBB, an
offer (whether revised or not) may not become or be declared unconditional as to acceptances after the official working hours on the 60th day after the day the initialoffer document was posted. The CBB's consent will normally be granted only if a competingoffer has been announced (in which case both or allofferors will normally be bound by the timetable established by the posting of the competingoffer document which is posted later).The consent of the CBB, in such cases, will only be given in very exceptional circumstances.Amended: October 2019Compulsory Acquisition
TMA-2.14.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019Time for Fulfillment of all other Conditions
TMA-2.14.5
Except with the consent of the CBB, all conditions must be fulfilled or the
offer must lapse within 15 calendar days of the first closing date or of the date theoffer becomes or is declared unconditional as to acceptances, whichever is the later.Amended: October 2019TMA-2.15 TMA-2.15 Revised and Alternative Offers
Offer Open for 15 Calendar Days after Revision
TMA-2.15.1
If, in the course of an
offer , theofferor revises its terms, allofferee company shareholders, whether or not they have already accepted theoffer , will be entitled to the revised terms. A revisedoffer must be kept open for at least 15 calendar days following the date on which the revisedoffer document is posted. Therefore, no revisedoffer document may be posted in the 15 calendar days ending on the last day theoffer is able to become unconditional as to acceptances.Amended: October 2019New Conditions for Improved Offers
TMA-2.15.2
An
offeror may introduce new improved conditions to be attached to a revisedoffer , but only to the extent necessary to implement the revisedoffer and subject to the consent of the CBB.Amended: October 2019Reintroduction of Alternative Offers
TMA-2.15.4
Where a firm statement has been made that an alternative
offer will not be extended or reintroduced, neither that alternative, nor any substantially similar alternative, may be extended or reintroduced. Where, however, such a statement has not been made and an alternativeoffer has closed, anofferor will not be precluded from reintroducing that alternative at a later date. Reintroduction constitutes a revision of theoffer and is, therefore, subject to the requirements of, and only permitted as provided in, this Section.Amended: October 2019TMA-2.15.5
CBB must be consulted if a competitive situation continues to exist in the later stages of the
offer period . CBB will normally consider applying a procedure to resolve the situation which is agreed between competingofferors and the board of theofferee company.TMA-2.16 TMA-2.16 Acceptors' Right to Withdraw
TMA-2.16.1
An acceptor will be entitled to withdraw his acceptance after 14 days from the first closing date of the
offer , if theoffer has not become unconditional as to acceptances by that date. Such entitlement to withdraw will be exercisable until theoffer becomes unconditional as to acceptances. However, on the 60th day (or any date beyond which theofferor has stated that itsoffer will not be extended) the final time for the withdrawal must coincide with the final time for the lodgement of acceptances.Amended: October 2019TMA-2.17 TMA-2.17 Statements during Course of Offer
TMA-2.17.1
Information, documents, advertisements or statements issued during an
offer period must not be misleading and must be of the highest standard and accuracy. This is whether the information is issued directly by theofferor ,offeree or by the advisors. All parties and their advisers are responsible for ensuring that any release of information abides with this rule.TMA-2.17.2
Any parties of an
offer or potentialoffer and their advisors must take care not to issue any statements which, while not factually inaccurate, may mislead shareholders and the market and cause uncertainty. Statements regarding anofferor improving hisoffer without committing itself to doing so must not be made.TMA-2.17.3
Documents issued to shareholders or advertisements published in relation to an
offer by, or on behalf of, theofferor or theofferee company, must state where appropriate, that the directors of theofferor and/or theofferee company accept full responsibility for the information contained in the documents and advertisements, to the best of their knowledge, that the information contained in the document or advertisement is in accordance with the facts and that it contains no omissions likely to affect the importance and consistencies of the document.No Extension Statements
TMA-2.17.4
If statements in relation to the duration of an
offer such as "theoffer will not be extended beyond a specified date unless it is unconditional as to acceptances" ("no extension statements") are included in documents sent toofferee company shareholders, or are made by or on behalf of anofferor , its directors, officials or advisers, and not withdrawn immediately if incorrect, only in extremely exceptional circumstances will theofferor be allowed subsequently to extend itsoffer beyond the stated date except where the right to do so has been specifically reserved.Amended: October 2019No Increase Statements
TMA-2.17.5
If statements in relation to the value or type of consideration such as "the
offer will not be further increased" or "ouroffer remains at BHD X per share and it will not be raised" ("no increase statements") are included in documents sent toofferee company shareholders, or are made by or on behalf of anofferor , its directors, officials or advisers, and not withdrawn immediately if incorrect, only in extremely exceptional circumstances will theofferor be allowed subsequently to amend the terms of itsoffer in any way even if the amendment would not result in an increase of the value of theoffer (e.g. the introduction of a lower paper alternative) except where the right to do so has been specifically reserved.Amended: October 2019TMA-2.17.6
An
offeror orofferee company must not make statements about the level of support received from shareholders or other persons, unless they have clearly stated their intentions to theofferor orofferee company, or advisors, as appropriate. CBB will require statements made to be verified, which could include the shareholder confirming their support in writing to theofferor or its advisors, which will then be treated as a letter of intent/consent, as the case may be.Amended: October 2019TMA-2.17.7
Shareholders must not be pressured by any means or by any party involved in an
offer to accept or reject suchoffer through information, documents, advertisements or statements.Amended: October 2019Advertisements
TMA-2.17.8
Any advertisements published in terms of the Module must obtain the prior approval of the CBB. The publication of advertisements in relation to an
offer or potentialoffer is prohibited unless they fall within the following categories:(a) Product advertisements not having an effect on anoffer or potentialoffer , CBB must be consulted if there is any doubt;(b) Corporate image advertisements not having an effect on anoffer or potentialoffer ;(c) Advertisements in relation to non-controversial information about anoffer , such as the value of anoffer or closing dates;(d) Advertisements in relation to preliminary or interim results;(e) Advertisements comprising a tenderoffer ; or(f) [This Subparagraph was deleted in October 2019](g) Advertisements published with the specific prior consent of CBB.Amended: October 2019TMA-2.17.9
Any forms connected with an
offer , including acceptance forms, withdrawal forms, proxy cards must not be published in newspapers or any form of advertisement.Telephone Campaigns
TMA-2.17.10
Campaigns relating to contacting shareholders or persons interested in the
offer by telephone must be conducted only by theprofessional advisor and his staff, who are fully aware of the responsibilities and requirements of this Module. Information passed to such persons must be accurate, already published and not misleading. Persons contacted must not be pressured and must be encouraged to consult their advisors.Amended: October 2019TMA-2.17.11
[This Paragraph was deleted in October 2019]
Deleted: October 2019TMA-2.18 TMA-2.18 Announcement of Result of Offer
Timing and Contents
TMA-2.18.1
An
offeror must publish an announcement on the business day following the day on which theoffer will expire, or becomes or is declared unconditional (whether as to acceptances or in all respects), or is revised or extended.Amended: January 2022
Amended: October 2019TMA-2.18.2
For the purpose of Paragraph TMA-2.18.1, the
offeror must forward such announcement to the CBB and thelicensed exchange andofferee company and publish the announcement on the website of thelicensed exchange before trading hours at thelicensed exchange in Bahrain.Amended: January 2022
Amended: October 2019TMA-2.18.3
The announcement must state the number of shares and rights over shares:
(a) For which acceptances of theoffer have been received;(b) Held, controlled, or directed by theofferor or personsacting in concert with it before theoffer period ; and(c) Acquired or agreed to be acquired during theoffer period by theofferor or any personsacting in concert with it.Amended: October 2019
Amended: April 2013TMA-2.18.4
The announcement must include a prominent statement of the total numbers of shares which the
offeror may count towards the satisfaction of its acceptance condition and must specify the percentages of each class of relevant securities represented by these figures. CBB must be consulted if theofferor wishes to make any other statement about acceptance levels in any announcement made.Amended: October 2019TMA-2.18.5
The
offeror must send copies of the certificate issued by the designatedreceiving bank to the CBB, thelicensed exchange and theofferee company'sprofessional advisor as soon as possible after it is issued.Amended: October 2019TMA-2.18.6
If statements are made during an
offer by anofferor or its advisors, either orally or written, about level of acceptances of theoffer or number or percentages of shareholders who have accepted theoffer , then an immediate announcement must be made.TMA-2.18.7
Companies whose securities are not admitted to listing or trading that are a party to the
offer will normally not be required to make a public announcement, however it will be required to inform all shareholders about the result of theoffer .Amended: October 2019TMA-2.18.8
When the
offeree company has the intention to make an announcement on the level of withdrawals of acceptance of anoffer , CBB must be consulted before any announcement is made.Consequences of Failure to Announce
TMA-2.18.9
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.18.10
If the
offeror is unable to comply with any of the requirements of this Section, within the time limit granted, the CBB shall have the right to request thelicensed exchange to suspend dealings in theofferee company's shares and, where appropriate, in theofferor's shares until the relevant information and documents are provided.Amended: October 2019TMA-2.18.11
If an
offeror has been declared unconditional as to acceptance, but theofferor fails to comply with any of the requirements of this Section by the close of trading at thelicensed exchange in Bahrain on the relevant day, the CBB shall have the right to grant the acceptors the right of withdrawal from theoffer .Amended: October 2019TMA-2.18.12
This right of withdrawal may be terminated not less than 8 days after the relevant date in the case that the
offeror confirms that theoffer is still unconditional as to acceptances and complies with this Section.Amended: October 2019TMA-2.19 TMA-2.19 Settlement of Consideration and Share Transfer
Timing of Acquisition and Payment
TMA-2.19.1
Shares represented by acceptances in any
offer must not be accepted by theofferor until theoffer has become or has been declared unconditional. Such shares must be paid by theofferor in accordance with the terms of payment as stipulated in theoffer document .Amended: October 2019Withdrawn or Lapsed Offers
TMA-2.19.2
If an
offer is withdrawn or lapses, theofferor must, as soon as possible but in any event within 7 calendar days thereof, post the share certificates or transfer documents lodged with acceptance forms to, or make such share certificates or transfer documents available for collection by, thoseofferee company shareholders who accepted theoffer .Amended: October 2019TMA-2.19.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019TMA-2.19.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019TMA-2.19.5
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019Payment of Consideration
TMA-2.19.6
An
offeror must complete payment of consideration whether in the form of cash, in form of securities, or a combination of cash and securities, as the case may be, to all shareholders by crediting the shareholders bank account and/or the shareholders’securities account , as the case may be, who have accepted the offer, within 10 calendar days from the last closing date of theoffer .Amended: January 2022
Added: October 2019TMA-2.19.7
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2019TMA-2.19.8
An
offeror must deposit the unclaimed balances, if any, in an escrow account with a licensed bank within 15 calendar days from the last closing date of theoffer .Added: January 2022TMA-2.19.9
An
offeror , on its own or together with personacting in concert , must not exercise thevoting rights attached to the shares received through acceptances of the take-over offer prior to full settlement of the consideration.Added: January 2022TMA-2.20 TMA-2.20 Restrictions on Dealings before and during the Offer
Restrictions on Dealings Before the Offer
TMA-2.20.1
No dealings of any kind in the securities of the
offeree company (including convertible securities, warrants, options and derivatives in respect of such securities) may be transacted by any person, not being theofferor , who is engaged in theoffer and who has confidential price-sensitive information concerning an actual or contemplatedoffer or revisedoffer between the time when there is reason to suppose that an approach or anoffer or revisedoffer is contemplated and the announcement of the approach, theoffer , the revisedoffer , or of the termination of the discussions where an announcement of theoffer has been made public.Amended: October 2019TMA-2.20.2
Such restrictions do not apply to persons
acting in concert with anofferor in respect of dealings where the securities of such dealings are excluded from theoffer or where there are no-profit arrangements in place.Amended: October 2019TMA-2.20.3
No person who is engaged in the
offer and who has access to the price-sensitive information may deal in securities of theofferor except where the proposedoffer is not price-sensitive in relation to such securities.Amended: October 2019TMA-2.20.4
No person who is engaged in the
offer and who has access to the price-sensitive information may make any recommendations to any other person as to dealing in the relevant securities.Amended: October 2019TMA-2.20.5
CBB must be consulted before acquisitions of interests in
offeree company securities are made by members or potential members of a consortium. If there are existing interests in such securities, it will be necessary to satisfy the CBB that they were acquired before the consortium was formed.Amended: October 2019TMA-2.20.6
A person is considered to have access to confidential price-sensitive information concerning an
offer or contemplatedoffer if the person:(a) Is a director or employee of one of the companies or entities concerned or engaged in theoffer or potential offer including, but not limited to, theofferor , theofferee or any person acting in concert with theofferor orofferee ;(b) An advisor, includingprofessional adviser , to one of the companies or persons concerned or engaged in the offer or potentialoffer ;(c) In a position to have received and has actually received information through a confidential relationship;(d)Connected persons and companies controlled by theofferor and those described in (a), (b) and (c); or(e) Is considered as having or had access to price sensitive information by virtue of the relevant facts and circumstances.Amended: January 2022
Amended: October 2019No-Profit Arrangement
TMA-2.20.7
Arrangements made by a potential
offeror with aperson acting in concert, where securities in theofferee company are acquired by the personacting in concert and theofferor will bear all the risks and receive all the benefits are not prohibited by TMA-2.20.1. Arrangements which have benefits or potential benefits to the person acting in concert, beyond normal expenses and carrying costs, are normally prohibited. In cases of doubt, CBB should be consulted.Amended: October 2019Restrictions on Dealings during an Offer
TMA-2.20.8
The
offeror and personsacting in concert with it must not sell any securities in theofferee company during theoffer period except with the prior consent of the CBB, after 24 hour's advance notice by public announcement of the intention to sell.Amended: October 2019TMA-2.20.9
The CBB will not provide its consent for the sale of securities by an
offeror and personsacting in concert with it where amandatory offer is being made.Amended: October 2019TMA-2.20.10
After an announcement of an intention to sell the securities of the
offeree company has been made, neither theofferor nor personsacting in concert with it can make further purchases and only in exceptional circumstances will the CBB allow theofferor to raise the offer price.Amended: October 2019TMA-2.20.11
Subject to TMA-2.20.8 in respect of the conditions applicable, the sale of any shares in the
offeree company must not be below theoffer price.Amended: October 2019TMA-2.20.12
An
offeror or other persons shall be restricted from dealing or procuring other persons to deal, if theofferor has been supplied by theofferee company with confidential price sensitive information duringoffer discussions.Amended: October 2019TMA-2.20.13
The consent of the CBB is not required for placing or underwriting arrangements made during an
offer in order to achieve the minimum public shareholding to maintain the listing of theofferee company's shares provided that such arrangements are not effective prior to the date when theoffer becomes or is declared unconditional. If anofferor wishes to make such arrangements in order to hold less than 75% (or such percentage as may be relevant in the event that thelicensed exchange has accepted that a percentage other than 20% of theofferee company's shares needs to be in public hands to maintain the listing of theofferee company's shares) of theofferee company's shares, the consent of the CBB is required.Amended: October 2019TMA-2.20.14
Directors and
professional advisers to a company who have interests in securities in that company that is party to anoffer , must not deal in such securities contrary to any advice they have given to shareholder, or which it can be reasonably assumed that they were associated, without giving a 24 hours advance public notice of their intentions with an explanation.Amended: October 2019Restriction on Dealings by Offeror during Non-Cash Offers
TMA-2.20.15
Where the consideration under an
offer includes securities of theofferor or a personacting in concert with it, neither theofferor nor any personacting in concert with it may deal in any such securities during theoffer period .Amended: October 2019Restrictions on Dealings by a Competing Offeror
TMA-2.20.16
Except with the consent of the CBB, where two competing
offers have been made and one of theoffers has lapsed, then neither thatofferor nor any personacting in concert with thatofferor may acquire any interest in shares in theofferee company at a price higher than that made available under its lapsedoffer .Amended: October 2019TMA-2.20.17
Paragraph TMA-2.20.16 shall not apply where each of the competing
offers has either been declared unconditional in all respects or has itself lapsed.Amended: October 2019TMA-2.20.18
For the purpose of Paragraph TMA-2.20.16, the price of the lapsed
offer shall be calculated as at the day theoffer lapsed.Amended: October 2019Dealings After Termination of Discussions
TMA-2.20.19
If following an announcement that
offer discussions are taking place, or that an approach oroffer is being contemplated, discussions are then terminated or theofferor then decides not to proceed with anoffer , an announcement of the position must take place before any dealings in securities of theofferee company take place by any person privy to confidential information.Amended: October 2019Dealings in Offeree Company Securities by Certain Offeree Company Associates
TMA-2.20.20
During the
offer period ,professional advisers or stockbrokers (or any person controlling, controlled by or under the same control as any such adviser or stockbroker) to anofferee company (or any of its parents, subsidiaries or fellow subsidiaries, or their associated companies or companies of which such companies are associated companies) must not, except with the consent of CBB:(a) Purchaseofferee companysecurities or deal in convertible securities, warrants, options or derivatives in respect of suchsecurities for its own account or for its discretionary clients;(b) Make any loan to a person to assist in making any such purchases; or(c) Enter into any indemnity or option arrangement or any arrangement, agreement or understanding, formal or informal, or in any other nature, which may be an inducement for a person to retain, deal or refrain from dealing in relevant securities of theofferee company.TMA-2.20.21
Paragraph TMA-2.20.20 does not apply to fund managers and principal traders that are exempt by CBB who are dealing for any of their investment accounts managed on a discretionary basis.
Amended: October 2019Gathering Irrevocable Commitments
TMA-2.20.22
Any person proposing to contact a private individual or a corporate shareholder with the aim of obtaining an irrevocable commitment should consult CBB in advance.
Amended: October 2019TMA-2.21 TMA-2.21 Disclosure of Dealings During Offer Period
Dealings by Parties and by Associates for Themselves or for Discretionary Clients
TMA-2.21.1
Dealings in relevant securities by an
offeror or theofferee company, and by any associates, for their own account or for the account of discretionary investment clients account during anoffer period must be publicly disclosed.Amended: October 2019TMA-2.21.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.21.3
Except with the consent of the CBB, dealings in relevant securities during an offer period for the account of discretionary investment clients by an associate which is an
exempt fund manager connected with an offeror or the offeree company must be privately disclosed. If, however, theExempt fund manager is anassociate by virtue of sub-paragraph (f) of the definition ofassociate , theexempt fund manager must disclose publicly, in addition to disclosing privately.Amended: October 2019Dealings by Parties and by Associates for Non-Discretionary Clients
TMA-2.21.4
Except with the consent of the CBB, dealings in relevant securities during an offer period by an
offeror or theofferee company, and by any associates, for the account of non-discretionary investment clients (other than anofferor , theofferee company and anyassociates ) must be privately disclosed.Amended: October 2019Discretionary Accounts
TMA-2.21.5
If a person manages investment accounts on a discretionary basis, relevant securities so managed will be treated, for the purpose of this rule, as controlled by that person and not by the person on whose behalf the relevant securities are managed. Except with the consent of the CBB, where more than one discretionary investment management operation is conducted in the same group, relevant securities controlled by all such operations will be treated for the purpose of this rule as those of a single person and must be aggregated.
Amended: October 2019Connected Exempt Principal Traders
TMA-2.21.6
Dealings in relevant securities by an
exempt principal trader connected with anofferor or theofferee company must be aggregated and disclosed to thelicensed exchange before trading hours at thelicensed exchange in Bahrain on the business day following the date of the transactions.In the case of dealings in options or derivatives, full details must be given so that the nature of the dealings can be fully understood.
Amended: October 2019TMA-2.21.7
For the purposes of this Section, the disclosure shall consider the following:
(a) Disclosure shall be made before trading hours at thelicensed exchange in Bahrain on the business day following the date of the transaction. CBB should be consulted on any practical difficulties;(b) In the case of a public disclosure, dealings should be disclosed in writing to allofferor s and theofferee company or their respectiveprofessional advisers while also disclosing to the CBB and also, in respect of dealings in listed securities, to thelicensed exchange ; and(c) The disclosure shall include the following:(i) The total number of securities purchased or sold;(ii) Prices paid or received. In the case of an average price bargain each underlying trade should be disclosed;(iii) Identity of the associate or any other person dealing if different from the owner or controller;(iv) If dealing with an associate, an explanation of how that status arises;(v) If disclosure is made by a 5 percent shareholder or group of shareholders, a statement to that effect;(vi) The resultant total number of relevant securities owner or controlled by the associate and percentage which it represents; and(vii) If relevant, details of any arrangements required in the context of indemnity and other arrangements.Amended: October 2019
Amended: April 2013TMA-2.22 TMA-2.22 When Cash Offer is Required
TMA-2.22.1
Except with the CBB's consent, a cash
offer is required where:-(a) Theofferor and any personacting in concert with it has bought for cash during theoffer period and within 6 months prior to its commencement, an interest in shares of any class underoffer in theofferee company carrying 10% or more of the voting rights of that class; or(b) In the view of the CBB there are circumstances which render such a course necessary.The
offer for each class of shares must be in cash or accompanied by a cash alternative at not less than the highest price paid by theofferor or any personacting in concert with it for shares of the class during theoffer period and within 6 months prior to the commencement.Amended: October 2019
Amended: April 2013TMA-2.23 TMA-2.23 Purchases at Above Offer Price
Highest Price Paid
TMA-2.23.1
[This Paragraph was deleted in October 2019].
Deleted: October 2019TMA-2.23.2
[This Paragraph was moved to Paragraph TMA-2.23.5A in October 2019].
Amended: October 2019Acquisitions Before Announcement of a Firm Intention to Make an Offer
TMA-2.23.3
The
offer to the holders of shares of the same class shall not be on less favourable terms, when anofferor or any personacting in concert with it has acquired an interest in shares in theofferee company:(a) Within the three month period prior to the commencement of theoffer period ; or(b) During the period, if any, between an announcement made by theofferor and the commencement of theoffer period .Amended: October 2019Acquisitions After Announcement of a Firm Intention to Make an Offer
TMA-2.23.4
After an announcement of a firm's intention to make an
offer and before theoffer closes for acceptance, anofferor or any personacting in concert with it acquires any interest in shares at above theoffer price, it shall increase itsoffer to not less than the highest price paid for the interest in shares acquired in such circumstances.Amended: October 2019TMA-2.23.5
Immediately after the acquisition of shares at above the
offer price, theofferor must announce that a revisedoffer will be made in accordance with this Section. This announcement must state the number of shares concerned and the price paid.Amended: October 2019TMA-2.23.5A
Subscription for new securities at a price above the
offer price will be treated as a purchase for the purposes of Paragraph TMA-2.23.4.Added: October 2019Offers Involving a Further Issue of Listed Securities
TMA-2.23.6
If the
offer involves a further issue of securities of a class already listed on alicensed exchange , the current value of theoffer on a given day should normally be established by reference to the weighted average traded price of board lots (excluding special bargains and odd lots) of such securities traded during the immediately preceding trading day. If theoffer involves a combination of cash and securities and further purchases of theofferee company's shares oblige theofferor to increase the value of theoffer , theofferor must endeavour, as far as practicable, to effect such increase while maintaining the same ratio of cash to securities as is represented by theoffer .Amended: October 2019TMA-2.24 TMA-2.24 Provision for Escrow
[This Section was moved to Section TMA-2.19 in October 2019]
TMA-2.24.1
[This Section was moved to Section TMA-2.19 in October 2019]
Amended: October 2019TMA-2.24.2
[This Section was moved to Section TMA-2.19 in October 2019]
Amended: October 2019TMA-2.24.3
[This Section was moved to Section TMA-2.19 in October 2019]
Amended: October 2019TMA-2.25 TMA-2.25 No Special Deals or Arrangements with Selected Shareholders
TMA-2.25.1
Except with the CBB's consent, the
offeror or personsacting in concert with it may not make any arrangements with selected shareholders; and may not deal or enter into arrangements to deal; or make purchases or sales of shares of theofferee company; or enter into arrangements concerning acceptance of anoffer either during anoffer or when one is reasonably in contemplation, if there are favourable conditions attached which are not being extended to all shareholders.Amended: October 2019TMA-2.25.2
An arrangement with special conditions attached includes any arrangement where there is a promise to make good to a vendor of shares any difference between the sale price and the price of any subsequent successful
offer , revisedoffer or successful competingoffer . An irrevocable commitment to accept anoffer combined with an option to put the shares to theofferor should theoffer fail will also be regarded as such an arrangement.Amended: October 2019TMA-2.25.3
Two-tier
offers where shareholders who accept theoffer before a stipulated cutoff date would receive a higher consideration than those who accept theoffer after the cut-off date will be regarded as arrangements with special conditions. A two-tieroffer thatoffers to pay a higheroffer price if a certain level of acceptances is reached will not be regarded as an arrangement with special conditions if the higheroffer price is payable to all accepting shareholders.Amended: October 2019TMA-2.25.4
Paragraph TMA-2.25.1 also covers cases where a shareholder in an
offeree company is to be remunerated for playing a part in promoting anoffer . The CBB will normally consent to such remuneration, provided that the shareholding is not substantial and it can be demonstrated that a person who had performed the same services, but had not at the same time been a shareholder, would be entitled to receive no less remuneration.Amended: October 2019TMA-2.25.5
The CBB should be consulted if the management of the
offeree company is to remain financially interested in the business after theoffer is completed. The methods by which this may be achieved vary but the principle which the CBB is concerned to safeguard is that the risks as well as the rewards associated with an equity shareholding should apply to the management's retained interest.Amended: October 2019TMA-2.26 TMA-2.26 Proxies
TMA-2.26.1
A shareholder must not appoint a person as his proxy to vote in respect of his shares in the
offeree company; or to exercise any other rights; or to take any other action in relation to those shares unless the appointment is under the following conditions:(a) Theoffer is unconditional in all respects;(b) The votes are to be cast as far as possible to satisfy any outstanding condition to the offer, where relevant;(c) The appointment ceases to be valid if the acceptance is withdrawn; and(d) The appointment only applies to shares assented to the offer.Added: October 2019TMA-2.26.2
The terms for the appointment of a proxy must be set out in the
offer document .Added: October 2019TMA-3 TMA-3 Types of Offer
TMA-3.1 TMA-3.1 Mandatory Offer
Conditions for a Mandatory Offer
TMA-3.1.1
A
mandatory offer is required when:(a) Any person acquires, whether by series of transactions over a period of time or not, 30% or more of the voting rights of a company;(b) Two or more persons areacting in concert and they collectively hold less than 30% of the voting rights of a company, and any one or more of them acquires voting rights which increases to 30% or more of the voting rights of the company; or(c) Any person holds not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights acquires additional shares carrying more than 1% of the voting rights in any period of 6 months; or(d) Two or more persons are acting in concert, and they collectively hold not less than 30%, but not more than 50% of the voting rights of a company, and any one or more of them acquires additional voting rights carrying more than 1% of the voting rights in any period of 6 months.Amended: October 2019TMA-3.1.2
The person making the
mandatory offer is required to extend offers to all holders of each class of equity share capital of the company, whether the class carries voting rights or not, and also to the holders of any class of voting non-equity share capital in which such person, or personsacting in concert with him, hold shares. Amended: October 2019TMA-3.1.3
Offers for different classes of equity share capital should be consulted in advance in such cases.Amended: October 2019Creeping Provision
Acquisition and Disposal
TMA-3.1.3A
Any person, or together with persons
acting in concert , holding not less than 30% but not more than 50% of thevoting rights of a company may be permitted to acquire additional shares carrying not more than 1% of suchvoting rights in any period of 6 months without incurring an obligation to make amandatory offer . Within this 1% band, dispositions ofvoting rights may be netted off against acquisitions thereof. If such person, or together with personsacting in concert , intend to acquire such additional shares, the CBB must be consulted in advance.Added: October 2019Effect of Disposal
TMA-3.1.3B
Any person, or together with persons
acting in concert , holding not less than 30% of thevoting rights of a company disposes ofvoting rights in circumstances other than those mentioned in Paragraph TMA-3.1.3A, then the provisions of TMA-3.1 shall apply to the reduced holding. As a result, an obligation to make amandatory offer will arise if:a) the reduced holding is 30% and more and is increased by acquisition of voting shares by more than 1% in any period of 6 months; orb) following a reduction of the holding to less than 30%, it is increased to 30% or more.In this context, disposal of
voting rights may not be netted off against acquisitions thereof.Added: October 2019Holding between 49% and 50%
TMA-3.1.3C
The restriction in Rule TMA-3.1.1 (c) applies to any person, or group of persons
acting in concert , holding 50% or less of thevoting rights. Thus, a person or group of persons holding between 49% and 50% of the voting rights of a company will be restricted from acquiring more than a further 1% of the offeree company'svoting rights for any period of 6 months thereafter.Added: October 2019TMA-3.1.3D
A person or group of persons
acting in concert , holding more than 50% of thevoting rights of a company will normally be free to acquire further shares without incurring any obligation under TMA-3.1 to make amandatory offer subject to Paragraph TMA-3.1.3E.Added: October 2019Acquisition of voting rights by members of a group acting in concert
TMA-3.1.3E
An obligation to make a mandatory offer will normally arise whenever a group of persons
acting in concert collectively hold 30% or more of the voting rights of a company and as a result of an acquisition of the voting rights from another member of the group or from non-members, a single member comes to hold 30% or more of the voting rights of the company or, if holding between 30% and 50%, has acquired more than 1% of the voting rights in any period of 6 months.Added: October 2019Placing and Other Arrangements
TMA 3.1.4
[This Paragraph was deleted in April 2013].
Deleted: April 2013TMA-3.1.5
An agreement between a shareholder and financial institutions and lending institutions, where the shareholder borrows money for the acquisition of shares which gives rise to an obligation under Paragraph TMA-3.1.1 will not normally result in such institution becoming a concert party.
Amended: October 2019TMA-3.1.6
An
offer will not be required under Paragraph TMA-3.1.1 where control of theofferee company is acquired as a result of avoluntary offer made in accordance with Module TMA to all the holders of voting equity share capital and other transferable securities carrying voting rights.Amended: October 2019TMA-3.1.7
If a person acquires shares other than through trading on the
licensed exchange (exempted transaction) which makes the aggregate number of shares carryingvoting rights in which he is interested to 30% or more then the CBB must be consulted.Amended: October 2019TMA-3.1.8
If a person borrows or lends shares he will be treated as holding the
voting rights of such shares save for any borrowed shares which he has either on-lent or sold. CBB must be consulted in such cases before borrowing shares when taken together with shares he or any personacting in concert is interested in and shares already borrowed or lent by him or any personacting in concert would result in amandatory offer .Amended: October 2019Conditions and Consents
TMA-3.1.9
Except with the consent of CBB:
(a) Anofferor shall not include any other condition in amandatory offer other than the condition that theoffer is subject to theofferor having received acceptances which would result in theofferor and all personsacting in concert with theofferor holding in aggregate more than 50% of the voting rights; and(b) No acquisition of anyvoting rights in shares which would give rise to a requirement for amandatory offer may be made, if it is dependent on the passing of a resolution at any meeting of the shareholders of theofferor or upon any other conditions, consents or arrangements.Amended: October 2019
Amended: April 2013TMA-3.1.9A
An offer made under TMA-3.1 should normally be unconditional when the
offeror and personsacting in concert with it hold more than 50% of the voting rights before the offer.Added: October 2019Nature of Consideration
TMA-3.1.10
The consideration to be paid, or provided, for the acquisition of the
voting rights to which themandatory offer relates shall consist solely of cash, securities, or a combination thereof at not less than the highest price paid by theofferor or any personacting in concert with it for shares of that class of theofferee company during theoffer period and within 6 months prior to its commencement.Amended: October 2019TMA-3.1.11
The cash
offer , securities or a combination thereof for the purpose of Paragraph TMA-3.1.10 must remain open after theoffer has become or is declared unconditional for not less than 15 days thereafter.Amended: October 2019TMA-3.1.12
When directors sell shares to an
offeror which result in theofferor having to make amandatory offer , the directors must ensure that theofferor fulfils his obligation under this Module.Amended: October 2019TMA-3.1.13
Such directors must not resign, except with the consent of CBB, from the board of directors until the first closing date of the
takeover offer or the date when thetakeover offer becomes or is declared unconditional as to acceptances, whichever is the later.Amended: October 2019TMA-3.1.14
Until the
offer document has been posted, noofferor , or personsacting in concert , may be appointed to the board of theofferee company or any of its subsidiaries, or exercise or procure the exercise of the votes attaching to any shares in theofferee company.Amended: October 2019Whitewash Resolution/Exemption from Mandatory Offer
TMA-3.1.15
Relevant persons in anoffer subject to themandatory offer requirement may apply to the CBB to waive the obligation under the procedure set out formandatory offers , if themandatory offer is required as a result of:(a) Issuing new securities as consideration for an acquisition, cash injection or subsidiary loan; or(b) Fulfilment of obligations in respect of underwriting the issue of securities; or(c) Any other circumstance with CBB's approval.Amended: October 2019TMA-3.1.16
For purposes of Paragraph TMA-3.1.15, any application for an exemption from a
mandatory offer obligation must be submitted to the CBB before the obligation is triggered.Amended: October 2019TMA-3.1.17
The waiver will be subject to the following conditions:
(a) Obtaining an independent vote at a shareholders meeting of the offeree company (the Whitewash Resolution) to waive their right to receive a general offer from the offeror and partiesacting in concert with the offeror. For this purpose, "independent vote" means a vote by shareholders who are not involved in, or interested in, the transaction in question;(b) The whitewash resolution is separate from other resolutions;(c) Theofferor , partiesacting in concert , and parties not independent from them must abstain from voting on the whitewash resolution;(d) Theofferor , and partiesacting in concert , have not acquired and will not acquire any shares or instruments convertible into options, in respect of shares of theofferee company:(i) During the period between the proposal announcement and the date shareholders approve the whitewash resolution; and(ii) In the 6 months prior to the announcement of the proposal to issue new securities but subsequent to negotiations, discussions or the reaching of understandings or agreements with the directors of the company in relation to such issue;(e) An independentprofessional adviser shall be appointed by theofferee company to provide its independent shareholders with advice on the whitewash resolution;(f) Theofferee company must provide a circular to shareholders giving the particulars, at a minimum, information included in Appendix A under Part B of the CBB Rulebook Volume 6; and(g) Theofferor obtains the CBB's approval in advance.Amended: October 2019
Amended: April 2013TMA-3.1.18
The CBB waiver cannot be transferred or assigned to another person.
TMA-3.1.19
In the case of underwriting or placing of
offeree company securities, the CBB must be furnished with details of all proposed underwriters or placees.Amended: October 2019TMA-3.1.20
An announcement must be made by the
offeree company giving the result of the meeting and the number and percentage ofofferee company shares that theofferor has become entitled to as a result subsequent to the meeting at which the proposals are considered by shareholders.Amended: October 2019TMA-3.1.21
Immediately following the approval of the proposals at the shareholders' meeting, the
offeror will be free to acquire shares in theofferee company, subject to provisions under Module TMA.Amended: October 2019Prompt Registration of Transfers
TMA-3.1.22
[This Paragraph was moved to Paragraph TMA-2.8.7 in October 2019]
Amended: October 2019TMA-3.2 TMA-3.2 Partial Offer
CBB's Consent Required
TMA-3.2.1
CBB's consent is required for any
partial offer . CBB will normally grant consent in the case of anoffer which could not result in theofferor and personsacting in concert with it being interested in shares carrying 30% or more of the voting rights of a company.Amended: October 2019TMA-3.2.2
Consent will not normally be granted in the case of an
offer which could result in theofferor holding not less than 30%, and which must result in a holding of not more than 50% of the voting rights of a company.Amended: October 2019Acquisition Prior to the Offer
TMA-3.2.3
In the case of a
partial offer which could result in theofferor and personsacting in concert with it holding 30% or more, but which must result in their holding less than 100%, of the voting rights of a company, such consent will not normally be granted if theofferor or personsacting in concert with it have acquired, selectively or in significant numbers, voting rights in theofferee company during the 6 months preceding the application for consent or if voting rights have been acquired at any time after thepartial offer was reasonably in contemplation.Amended: October 2019Acquisitions During and After the Offer
TMA-3.2.4
In all
partial offers , theofferor and personsacting in concert with it must not acquire any interest in shares in theofferee company during theoffer period .Amended: October 2019TMA-3.2.5
The
offeror or any personacting in concert with theofferor , or any person who is subsequentlyacting in concert with any of them in the course of thepartial offer , must not acquire any interest in shares during the 12-month period following the end of theoffer period , except with the consent of CBB.Amended: October 2019Offer for between 30% and 50%
TMA-3.2.6
Any
partial offer which could result in theofferor holding 30% or more of the voting rights of a company must normally be conditional, not only on the specified number of acceptances being received, but also on approval of theoffer , signified by means of a separate box on the form of acceptance, being given by shareholders holding over 50% of the voting rights not held by theofferor and personsacting in concert with it. This requirement may be waived if over 50% of the voting rights of theofferee company are held by one independent shareholder who has indicated his approval.Amended: October 2019Control Position Warning
TMA-3.2.7
In the case of a
partial offer which could result in theofferor holding more than 50% of the voting rights of theofferee company, then this must be included in a prominent manner in theoffer document .Amended: October 2019TMA-3.2.8
Where a
partial offer made for a company with more than one class of equity share capital could result in theofferor and personsacting in concert with it being interested in shares carrying 30% or more of the voting rights, a comparableoffer must be made for each class.Amended: October 2019Precise Number of Shares to be Stated
TMA-3.2.9
A
partial offer must be made for a precise number of shares, such number must be stated, and theoffer may not be declared unconditional as to acceptances unless acceptances are received for not less than that number.Amended: October 2019Pro Rata Entitlement
TMA-3.2.10
Partial offers must be made to all shareholders of the class and arrangements must be made for those shareholders who wish to do so to accept in full for the relevant percentage of their holdings. Shares tendered in excess of this percentage must be accepted by theofferor from each shareholder in the same proportion as the number tendered to the extent necessary to enable him to obtain the total number of shares for which he has offered.Amended: October 2019TMA-3.2.11
[This Paragraph was moved to Section TMA-2.26 in October 2019].
TMA-3.2.12
[This Paragraph was moved to Section TMA-2.26 in October 2019].
TMA-3.3 TMA-3.3 Voluntary Offer
TMA-3.3.1
A
voluntary offer is atake-over offer for the voting shares of a company made by a person when he has not incurred an obligation to make amandatory offer for theofferee company under TMA-3.1.1.Amended: October 2019TMA-3.3.2
A
voluntary offer must be conditional upon theofferor receiving acceptances in respect of voting rights which, together with voting rights acquired or agreed to be acquired before or during theoffer , will result in theofferor and personacting in concert with it holding more than 50% of the voting rights.Amended: October 2019TMA-3.3.3
A
voluntary offer must not be made subject to conditions whose fulfilment depends on the subjective interpretation or judgement by theofferor or lies in theofferor's hands.TMA-3.3.4
Normal conditions, such as level of acceptance, approval of shareholders for the issue of new shares and listing, may be attached without reference to the CBB. The CBB should be consulted where other conditions would be attached.
TMA-3.3.5
Where any condition states that the approval of a regulatory authority is required and where such approval is given subject to certain terms and conditions which substantially change the terms and circumstances of the
offer , theofferor may, with the consent of the CBB, be permitted to withdraw itsoffer .Amended: October 2019TMA-3.3.6
Subject to Paragraph TMA-3.1.6, if during an
offer period of a non-mandatory offer, theofferor is obliged under Paragraph TMA-3.1.1 to make amandatory offer , CBB should be consulted in advance. Under such circumstances, theofferor is required to make an announcement.Amended: October 2019TMA-3.3.7
Voluntary offers made must, in respect of each class ofequity securities involved, be in cash or securities or a combination thereof at not less than the highest price paid by theofferor or any personacting in concert with it for voting rights of theofferee company during theoffer period and within 6 months prior to its commencement.Amended: October 2019Pre-Condition in Firm Offer Announcements and Offer Conditions
TMA-3.3.8
An
offer must not normally be subject to conditions or pre-conditions which depend solely on subjective judgements by the directors of theofferor or of theofferee company (as the case may be) or the fulfillment of which is in their hands.Amended: October 2019TMA-3.3.9
The CBB may be prepared to accept an element of subjectivity in certain circumstances especially in cases involving official authorisations or regulatory clearances, the granting of which may be subject to additional material obligations for the
offeror or theofferee company (as the case may be).Amended: October 2019TMA-3.3.10
[This Paragraph was deleted in October 2019].
Acceptability of Pre-Conditions
TMA-3.3.11
Except with the consent of the CBB, an
offer must not be announced subject to a pre-condition unless the pre-condition involves:(a) A material official authorisation; or(b) A regulatory clearance; and(c) Theoffer is publicly recommended by the board of theofferee company; or(d) The CBB is satisfied that it is likely to prove impossible to obtain the authorisation or clearance within the timetable.The CBB must be consulted in advance if a person proposes to include a pre-condition to which the posting of the
offer will be subject.Amended: October 2019
Amended: April 2013TMA-3.3.12
[This Paragraph was deleted in October 2019].
Invoking Conditions and Pre-Conditions
TMA-3.3.13
An
offeror must not invoke any condition or pre-condition so as to cause theoffer not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke the condition or pre-condition are of material significance to theofferor in the context of theoffer . The acceptance condition is not subject to this provision.Amended: October 2019TMA-3.3.14
Following the announcement of a firm intention to make an
offer , anofferor must use all reasonable efforts to ensure the satisfaction of any conditions or pre-conditions to which theoffer is subject.Amended: October 2019Invoking Offeree Protection Conditions
TMA-3.3.15
An
offeree company must not invoke, or cause or permit theofferor to invoke, any condition to anoffer unless the circumstances which give rise to the right to invoke the condition are of material significance to the shareholders in theofferee company in the context of theoffer .Amended: October 2019TMA-3.4 TMA-3.4 Compulsory Acquisitions (Squeeze-Out), Sell-Out and Delisting
Compulsory acquisition (squeeze-out) - Right of offeror to buy-out minority shareholders
TMA-3.4.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019TMA-3.4.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019TMA-3.4.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Amended: October 2019TMA-3.4.4
Where an
offeror orofferor and personsacting in concert :(a) made anoffer for all the shares in anofferee company; and(b) have received acceptances of 90% or more of the offer shares of the offeree company,the
offeror , may within three months beginning immediately after the day on which theoffer receives 90% or more acceptances, acquire the remainingshares of theofferee company, by issuing a notice for compulsory acquisition, in the form or manner specified by the CBB (Appendix E of Part B of Volume 6), to all thedissenting shareholders subject to TMA-3.4.9.Added: January 2022TMA-3.4.5
Where the
offeror orofferee and personsacting in concert , pursuant to anoffer , intends to exercise the compulsory acquisition right, theofferor must state in theoffer document its intention to exercise its power of compulsory acquisition in the event that the conditions under TMA-3.4.4 are satisfied.Added: January 2022TMA-3.4.6
For the purpose of Paragraph TMA-3.4.4(b), the acceptances must not include
shares already held on the date of theoffer by theofferor and personsacting in concert .Added: January 2022TMA-3.4.7
The notice for compulsory acquisition referred to in Paragraph TMA-3.4.4 must be:
(a) issued within 15 calendar days from the date theoffer is declared unconditional in all respects;(b) accompanied by a copy of a declaration by theofferor that the conditions for giving the notice are satisfied; and(c) delivered to thedissenting shareholders in person or by registered post.Added: January 2022TMA-3.4.8
Where the
offeror , despite best efforts, fails to deliver the compulsory acquisition notice, either in person or by registered post todissenting shareholders , and therefore theofferor contemplates alternative methods to serve the notice, including by electronic means, theofferor must consult the CBB prior to initiating any measures to serve the notice by an alternative method.Added: January 2022TMA-3.4.9
Where a notice for compulsory acquisition is issued by an
offeror todissenting shareholders , anddissenting shareholder(s) do not accept the notice for compulsory acquisition, such dissenting shareholder may, within sixty days from the date of the notice for compulsory acquisition, approach a competent court.Added: January 2022TMA-3.4.10
If pursuant to Paragraph TMA-3.4.9, an application to a competent court has been made by a
dissenting shareholder(s) , and where the case is pending (i.e. no ruling is issued on the subject matter), the offeror must pay, allot or transfer to all thedissenting shareholders , the funds or other consideration for the shares to which the notice for compulsory acquisition relates.Added: January 2022TMA-3.4.11
The
offeror must complete the compulsory acquisition settlement process for thedissenting shareholders after the sixty days period (duration during whichdissenting shareholders may approach a competent court) but before the end of the three months period, beginning immediately after the day on which the offer receives 90% or more acceptances.Added: January 2022TMA-3.4.12
The
offeror must acquire the shares to which the notice for compulsory acquisition relates on the same terms as theoffer .Added: January 2022TMA-3.4.13
Where alternative considerations were offered to
shareholders , anofferor must provide thedissenting shareholders the right to select their preferred consideration and specify the time period available to make the selection. While offering alternative considerations to thedissenting shareholders , theofferor must state in theoffer document which of those considerations will apply to the shares ofdissenting shareholders in the event thedissenting shareholders fails to make the selection within the specified time.Added: January 2022Right of Sell-Out by Dissenting Shareholders
TMA-3.4.14
Where an
offeror orofferee and personsacting in concert :(a) made an offer for all theshares in anofferee company; and(b) in pursuance to theoffer having received 90% or higher level of acceptance of the offershares to which theoffer relates,dissenting shareholders may, send a request to theofferor , requiring theofferor to acquire his/hershares within three months beginning immediately after the day on which theoffer receives 90% or more acceptances. Theofferor is bound to acquire thoseshares on the terms of thetake-over offer within three months from the date of receiving the request from thedissenting shareholders .Added: January 2022TMA-3.4.15
For the purposes of calculating 90% or more level of acceptances referred to in Paragraph TMA-3.4.14(b),
shares already held by the offeror and personsacting in concert on the date of the offer must not be taken into consideration.Added: January 2022TMA-3.4.16
An
offeror , upon achieving 90% or higher acceptance level specified in Paragraph TMA-3.4.14(b), must give alldissenting shareholders who have not accepted theoffer , a notice in the manner specified by the CBB (Appendix-F of Part B of Volume 6) regarding the sell-out rights that are exercisable by thedissenting shareholders .Added: January 2022TMA-3.4.17
The sell-out right notice, referred to in Paragraph TMA-3.4.16, must be issued within 15 calendar days from the date the
offer is declared unconditional in all respects.Added: January 2022TMA-3.4.18
The sell-out right notice referred to in Paragraph TMA-3.4.16 must be:
(a) accompanied by a copy of a declaration by theofferor that the conditions for giving the notice are satisfied; and(b) delivered to thedissenting shareholders in person or by registered post.Added: January 2022TMA-3.4.19
Where the
offeror , despite best efforts, fails to deliver the sell-out right notice, either in person or by registered post todissenting shareholders , and therefore theofferor contemplates alternative methods to serve the notice, including by electronic means, theofferor must consult the CBB prior to initiating any measures to serve the sell out right notice by alternative method.Added: January 2022TMA-3.4.20
A sell-out right notice under Paragraph TMA-3.4.16 must specify the period within which the sell-out right is exercisable and that such rights cannot be exercised after the end of that period.
Added: January 2022TMA-3.4.21
The sell-out right conferred on a
dissenting shareholder under Paragraph TMA-3.4.14 is exercisable by a written request addressed to theofferor .Added: January 2022TMA-3.4.22
Sell-out right does not apply if the
offeror has given thedissenting shareholders a notice for compulsory acquisition pursuant to Paragraph TMA-3.4.4.Added: January 2022Acknowledgement of Compulsory Acquisition or Sell-Out Right Notice
TMA-3.4.23
Pursuant to the provisions of compulsory acquisition and sell-out right, where a notice is served to
dissenting shareholders by theofferor , either to exercise the right of compulsory acquisition or to inform about the sell-out right of the dissenting shareholders, theofferor should put in place necessary measures to ensure thatdissenting shareholders who receive the letter duly acknowledge its receipt.Added: January 2022Delisting in Relation to a Takeover Offer
TMA-3.4.24
Upon completion of the acquisition of the remaining
shares pursuant to a compulsory acquisition by theofferor or sell out right exercised bydissenting shareholders , the offeree company must apply to the CBB to delist from thelicensed exchange .Added: January 2022TMA-3.4.25
In cases where the
offeror and personsacting in concert do not receive acceptances of 90% or more of the offer shares of theofferee company, the CBB may approve an application to delist theofferee company after theoffer subject to the following:(a) theofferee company convenes a general meeting to obtainshareholders approval on the delisting of theshares of theofferee company; and(b) the resolution to delist has been approved by at least 75% of the votes attaching to thedisinterested shares that are cast either in person or by proxy at the meeting. Theofferor and any personsacting in concert with theofferor must abstain from voting on the resolution.Added: January 2022TMA-3.5 TMA-3.5 [This Section was deleted in October 2019].
TMA-3.5.1
[This Paragraph was deleted in October 2019].
[This subsection was deleted in October 2019].
TMA-3.5.2
[This Paragraph was deleted in October 2019].
TMA-3.6 TMA-3.6 Restrictions Following an Offer
Delay of 12 Months before a Subsequent Offer
TMA-3.6.1
Except with the consent of the CBB, where an
offer has been announced or posted but has not become or been declared wholly unconditional and has been withdrawn or has lapsed, neither theofferor , nor any person who acted in concert with theofferor in the course of the originaloffer , nor any person who is subsequentlyacting in concert with any of them, may within 12 months from the date on which suchoffer is withdrawn or lapses either:(a) Announce anoffer or possibleoffer for theofferee company (including apartial offer which could result in theofferor and personsacting in concert with it being interested in shares carrying 30% or more of the voting rights of theofferee company);(b) Acquire any interest in shares of theofferee company if theofferor or any such person would thereby become obliged to make anoffer as per Section TMA-3.1;(c) Acquire any interest in, or procure an irrevocable commitment in respect of, shares of theofferee company if the shares in which such person, together with any personsacting in concert with him, would be interested and the shares in respect of which he, or they, had acquired irrevocable commitments would in aggregate carry 30% or more of the voting rights of theofferee company;(d) Make any statement which raises or confirms the possibility that anoffer might be made for theofferee company; or(e) Take any steps in connection with a possibleoffer for theofferee company where knowledge of the possibleoffer might be extended outside those who need to know in theofferor and its immediate advisers.Amended: October 2019Restrictions on a Partial Offer
TMA-3.6.2
The restrictions in Paragraph TMA-3.6.1 will also apply following a
partial offer :(a) Which could result in theofferor and personsacting in concert with it being interested in shares carrying not less than 30% but not holding shares carrying more than 50% of the voting rights of theofferee company whether or not theoffer has become or been declared wholly unconditional. When such anoffer has become or been declared wholly unconditional, the period of 12 months runs from that date; and(b) For more than 50% of the voting rights of theofferee company which has not become or been declared wholly unconditional.Amended: October 2019TMA-3.6.3
The restrictions in Paragraph TMA-3.6.1 will not normally apply following a
partial offer which could only result in theofferor and personsacting in concert with it being interested in shares carrying less than 30% of the voting rights of theofferee company.Amended: October 2019Delay of 6 Months
TMA-3.6.4
Except with the consent of the CBB, if a person, together with any person
acting in concert with him, holds shares carrying more than 50% of the voting rights of a company, neither that person nor any personacting in concert with him may, within 6 months of the closure of any previousoffer made by him to the shareholders of that company which became or was declared wholly unconditional, make a secondoffer to any shareholder in that company, or acquire any interest in shares in that company, on more favourable terms than those made available under the previousoffer . For this purpose the value of asecurities exchange offer shall be calculated as at the date theoffer closed. In addition, special deals with favourable conditions attached may not be entered into during this 6-month period.Amended: October 2019Restrictions on Dealings by a Competing Offeror
TMA-3.6.5
Except with the consent of the CBB, where an
offer has been one of two or more competingoffers and has lapsed, neither thatofferor , nor any personacting in concert with thatofferor , may acquire any interest in shares in theofferee company on more favourable terms than those made available under its lapsedoffer until each of the competingoffers has either been declared unconditional in all respects or has itself lapsed. For these purposes, the value of the lapsedoffer shall be calculated as at the day theoffer lapsed.Amended: October 2019TMA-4 TMA-4 Share Repurchases
TMA-4.1 TMA-4.1 Share Repurchases
Increase in Shareholding Deemed to be Acquisitions
TMA-4.1.1
If as a result of a
share repurchase a shareholder's proportionate interest in the voting rights of the repurchasing company increases, such increase will be treated as an acquisition of voting rights for purposes of this Module.Amended: October 2019TMA-4.1.2
As a result, a shareholder, or group of shareholders
acting in concert , could obtain or consolidate control of a repurchasing company and thereby become obliged to make amandatory offer . If so the CBB should be consulted at the earliest opportunity.Amended: October 2019TMA-4.1.3
In the case of a
share repurchase by general offer the CBB will treat an application for a waiver from the requirement to make amandatory offer as if it were an application for a whitewash waiver. The CBB will normally grant such a waiver if:(a) The TMA Module implications of theshare repurchase are disclosed in the repurchasing company'soffer document ;(b) Theshare repurchase is approved in accordance with applicable shareholder approval requirements by those shareholders who could not become obliged to make amandatory offer as a result of theshare repurchase ; and(c) For the purpose of this Section, dealings in relevant securities includeshare repurchases of the relevant securities of a repurchasing company.Amended: October 2019
Amended: April 2013Shareholders' Approval
TMA-4.1.4
During the course of an
offer , or even before the date of theoffer if the board of theofferee company has reason to believe that a bona fideoffer might be imminent, no redemption or purchase by theofferee company of its own securities may, except in pursuance of a contract entered into earlier, be effected without the approval of the shareholders at a general meeting. The notice convening the meeting must include information about theoffer or anticipatedoffer . Where an obligation or other special circumstance exists without a formal contract, the CBB must be consulted and its consent to proceed without a shareholders' meeting obtained.Amended: October 2019Disclosure
TMA-4.1.5
Dealings in relevant securities include the purchase of, or taking or exercising an option over, any of its own relevant securities by the offeree company. Shares repurchased by the offeree company are not considered outstanding for the purposes of voting, dividend or earnings per share calculations. Shares repurchased shall not be shown in the financial statements of the offeree company as a direct deduction from the outstanding shares or paid up share capital but must be represented as a deduction from other reserves and retained earnings. Therefore, listed companies shall not be entitled to repurchase its own shares unless it has sufficient distributable reserves or retained earnings. The total amount of securities of the relevant class remaining in issue following the redemption or purchase must also be disclosed.
Amended: October 2019Disclosure in the Offeree Board Circular
TMA-4.1.6
The
offeree board circular must state the amount of relevant securities of theofferee company which theofferee company has purchased during the period commencing 6 months prior to theoffer period and ending with the latest practicable date prior to the posting of the document, and the details of any such redemptions and purchases, including dates and prices.Amended: October 2019Redemption or Purchase of Securities by the Offeror Company
TMA-4.1.7
The
offer document must state (in the case of asecurities exchange offer only) the amount of relevant securities of theofferor which the offeror has purchased during the period commencing 6 months prior to theoffer period and the details of any such purchases, including dates and prices.Amended: October 2019Repurchase Limit
TMA-4.1.8
A company listed on a
licensed exchange may repurchase its own shares, after obtaining shareholder approval up to a maximum of 10% of its issued and paid-up share capital. The CBB's prior approval must be sought before the company can repurchase its own shares.Amended: October 2019TMA-4.1.9
The shares repurchase can be used by the company for the purpose of:
(a) Employee Stock Option Plan;(b) Capital reorganisation schemes;(c) Reselling such shares in order to support its share price and liquidity on alicensed exchange ; or(d) For any other purpose with CBB approval.Amended: October 2019
Amended: April 2013TMA-4.1.10
If the shares repurchased are not utilized for the purpose outlined in Paragraph TMA-4.1.9 for a period of 12 months without the consent of the CBB, such shares shall be considered redeemed and must be resold within the specified period.
Amended: October 2019Appendices Appendices
Appendix TMA-A Information to be Included Supporting a Whitewash Resolution
(a) Details of the proposed issue of new securities or convertibles;(b) The dilution effect of issuing the new shares, or upon the exercise or conversion of th convertibles to be issued, to existing holders of voting rights;(c) The number and percentage of voting rights in the offeree company and the number of instruments convertible into, rights to subscribe for and option in respect of shares in the offeree company (other than the convertibles to be issued) held by the offeror and its concert parties as at the latest practicable date;(d) The number and percentage of voting rights to be issued to the offeror, or to be acquired by the offeror upon the exercise or conversion of the convertibles to be issued;(e) Where the proposal could result in the offeror holding shares carrying over 49% of the voting rights of the offeree company, there must be reference to this fact and to the fact that the offeror will be free to acquire further shares without incurring any obligation under TMA-3.1 to make a mandatory offer;(f) That shareholders, by voting for the whitewash resolution, are waiving their rights to a mandatory offer from the offeror at the highest price paid by the offeror and persons acting in concert with it for the shares of the offeree company in the past 6 months prior to the commencement;(g) That shareholders voting for the whitewash resolution could be foregoing the opportunity to receive a mandatory offer from another person who may be discouraged from making a mandatory offer due to the potential dilution effect of the convertibles;Appendix TMA-B Information Contents of the Public Announcement of Offer
The
public announcement made by an offeror or offeree shall contain the following particulars:(a) The issued and paid up share capital of the offeree company, the number of fully paid up and partly paid up shares;(b) The total number and percentage of shares proposed to be acquired by the offeror(c) The minimum offer price for each fully paid-up or partly paid up share;(d) Mode of payment of consideration;(e) The identity of the offeror(s) and in case the offeror is a company or companies, the identity of the management and, or the persons having control over such company(ies) and the group, if any, to which the company(ies) belong;(f) The existing holding, if any, of the offeror in the shares of the offeree, including holdings of persons acting in concert with him;(g) The existing shareholding, if any, of the merchant banker in the offeree;(h) Salient features of the agreement, such as:(i) The date;(ii) The name of the seller;(iii) The price at which the shares are being acquired;(iv) The manner of payment of the consideration; and(v) The number and percentage of shares in respect of which the offeror has entered into the agreement to acquire the shares; or(vi) The consideration, monetary or otherwise, for the acquisition of control over the offeree company, as the case maybe;(i) The highest and the average price paid by the offeror or persons acting in concert with him for acquisition, if any, of shares of the offeree company made by him during the twelve month period prior to the date of public announcement;(j) Object and purpose of the acquisition of the shares and future plans, if any, of the offeror for the target company, including disclosures whether the offeror proposes to dispose of or otherwise encumber any assets of the offeree in the succeeding two years, except in the ordinary course of business of the offeree;(k) Where the future plans are set out, the public announcement shall also set out how the offeror propose to implement such future plans. The offeror shall not sell, dispose of or otherwise encumber any substantial asset of the offeree except with the prior approval of the shareholders.(l) The date by which individual letters of offer would be posted to each of the shareholders;(m) The date of opening and closure of the offer and the manner in which and the date by which the acceptance or rejection of the offer would be communicated to the shareholders;(n) The date by which the payment of consideration would be made for the shares in respect of which the offer has been accepted;(o) Disclosure to the effect that firm arrangement for financial resources required to implement the offer is already in place, including details regarding the sources of the funds whether domestic, i.e. from banks, financial institutions, or otherwise;(p) Regulatory and statutory approvals, if any, required to be obtained for the purpose of acquiring the shares under the Commercial Company Law 2001 and/or any other applicable laws;(q) Whether the offer is subject to a minimum level of acceptance from the shareholders; and(r) Such other information as is essential for the shareholders to make an informed decision in regard to the offer.Amended: April 2013Appendix TMA-C Appendix TMA-C Offer Document for Takeovers, Mergers and Acquisitions
Offer and Offeror
The following details of the offeror must be included in the offer document:
(a) Name and address of the offeror and any financial advisor or other person making the offer on behalf of the offeror, and the principal members of the offeror's concert group;(b) The place of incorporation, a description of their capital structures, group structures, business and assets accompanied by a structural chart depicting the structure of the company.(c) If the offeror or persons acting in concert is a company, then the identity of the ultimate controlling shareholders, and the names of the directors and the directors of their ultimate parent companies, or where there is a listed company in the chain between such companies and their ultimate parent companies, the directors of such listed company;(d) A statement as to whether or not any securities acquired in pursuance of the offer will be transferred to any other persons, including the names of the persons of any such arrangement. Additionally, the terms and conditions of such arrangement;(e) CBB may at its discretion waive the above stated requirement (d); and(f) Offeror's intentions for the future of the companyDetails regarding the offeror's intentions for the future of the company must be included in the offer document:
(a) Continuation of the business of the offeree company;(b) Strategic plans for the offeree company, and its repercussions on employment;(c) Any major changes to be introduced in the business, including redeployment of the fixed assets of the offeree company;(d) Long term commercial justification for the proposed offer; and(e) Continued employment of the employees and management of the offeree company and of its subsidiaries.Amended: April 2013Shareholdings and Dealings
The following details of the offeror's shareholding in the offeree company and other material information must be included in the offer document:
(a) The shareholdings of the offeror in the offeree company;(b) In the case of securities exchange offers the shareholdings in the offeror and in the offeree company:(i) In which directors of the offeror are interested; and(ii) Which any persons acting in concert with the offeror own or control and the names of such persons;(c) By any persons who, prior to the posting of the offer document, have committed themselves to accept or reject the offer and the names of such persons;(d) Owned or controlled by a person with whom the offeror or any person acting in concert with the offeror has any arrangements involving rights over shares, and any agreement or understanding, formal or informal, relating to relevant securities which may be an inducement to deal or refrain from dealing; and(e) Dealings in offeror's shareholding during 6 months prior to offer period including prices, dates and volume.All conditions of the offer must be stated, including:
(a) The price and other considerations to be paid for the securities.(b) Whether the offer is conditional upon acceptances being received in respect of a minimum number and the last day on which the offer can become unconditional to acceptances. This must include particulars of all documents required, and procedures to be followed for acceptances of an offer; and(c) A statement by the offeror regarding the intentions of availing of any powers of compulsory acquisition.Amended: April 2013Market Prices of Offeree Company
The closing price of the securities of the offeree company which are listed on the licensed Exchange, and are subject of the offer must be included in the offer document, as they stand:
(a) On the latest practicable date prior to publication of the offer document;(b) On the last business day prior to the date of the initial announcement, if any;(c) On the last business day prior to the date of the announcement of a firm intention to make an offer; and(d) At the end of each of the calendar months during the period commencing 6 months prior to the commencement of the offer period and ending on the latest practicable date prior to the posting of the offer document.If any of the securities of the offeree company which are subject of the offer are not listed, any information available as to the number and price of transactions which have taken place during the period stated above should be stated along with the source.
The highest and lowest closing market prices with the relevant dates during the period commencing 6 months prior the commencement of the offer period and ending on the latest practicable date prior to the posting of the offer document must be included in the offer document.
Comparisons issued by the offeror between the value of the offer and previous prices of the offeree company's securities, then a comparison between the current value of the offer and the price of the offeree company's securities on the last business day prior to the commencement of the offer period must be included.
Information should also be provided for securities of the offeror if the consideration for the offer involves such securities.
Amended: April 2013Offeror's Business
Except with the consent of CBB, the following must be included in the offer document for all types of offers:
(a) The nature of the offeror's business, its principal activities and its financial and trading prospects;(b) Details of the last 3 financial years for which the information has been published, turnover, net profit or loss before and after taxation, the charge for tax (where applicable), extraordinary items, minority interests, the amount absorbed by dividends and earnings and dividends per share;(c) A statement of the assets and liabilities shown in the last published audited accounts;(d) If provided in the last published audited accounts, a cash flow statement and any other primary statement shown;(e) All material changes in the financial or trading position or outlook of the offeror, following the last published audited accounts or a statement that there are no material changes;(f) Significant accounting polices together with any points from the notes to the relevant published accounts which are of major relevance to an appreciation of the figures;(g) If, due to a change in an accounting policy, figures are not comparable to a material extent, this should be disclosed and the approximate amount of the resultant variation should be stated;(h) Except for cash offer seeking to privatize the offeree company, all offer documents must contain a description of how the offer is to be financed and the source of the finance. The principal lenders or arrangers of such finance must be named; and(i) If any arrangements are made where the offeror intends that the payment of interest on repayment of or security for any liability will depend to an extent on the business of the offeree company, then a description of the arrangements must be included.Amended: April 2013Financial Information
Where the offer includes an element of cash or any other asset except new securities to be issued by the offeror company, then an independent financial advisor must include a confirmation that sufficient resources are available to satisfy full implementation of the offer.
When an offer involves issuance of unlisted securities, the value of such securities estimated by an advisor, including the assumptions and method used to arrive at that value must be stated.
The offer document must contain a statement to the effect that settlement of the consideration to which any shareholder is entitled under the offer will be implemented in full in accordance with the terms of the offer.
Arrangements
If any arrangement involving rights over shares, any indemnity arrangement, and any agreement or understanding, formal or informal, relating to relevant securities which may be an inducement to deal or refrain from dealing exist between the offeror or any person acting in concert should be stated, otherwise it should be stated that no such arrangements have been made.
The following regarding any arrangements or agreements made between the offeror and another party should be included in the offer document:
(a) Details of compensation arrangements to be given to any directors of the offeree company in connection with the offer; and(b) A statement to whether any agreement, arrangement or understanding, including any compensation agreement exists; including its details, in connection with the offer, between the offeror or any person acting in concert with it and the directors or shareholders of the offeree company.Amended: April 2013Offering of Securities
The offeror company should include the following in the offer document when the offeror is offering its securities in exchange for the securities of the offeree company:
(a) The nature of its business and its financial and trading prospects;(b) The date and country of its incorporation;(c) The address of its head office;(d) The authorized and issued share capital and the rights of the shareholders in respect of capital, dividends and voting;(e) A precise description of the rights of the holders of the securities, including as to ranking for dividends and capital;(f) Details of shares issued and shares repurchased starting the end of the last financial year of the offeror;(g) Details of options, warrants and conversion rights affecting shares in the offeror;(h) Details of any reorganisation of capital during the 2 financial years previous to the commencement of the offer period;(i) Details of any bank overdrafts or loans, or other similar transactions, mortgages, charges, guarantees or other material contingent liabilities of the offeror and any of its subsidiaries, or, if there are no such liabilities, a statement to that effect. Details should be not more than 3 months preceding the latest practicable date prior to the posting of the document;(j) Details of any material litigation to which the offeror is, or may become, a party;(k) Details of every material contract entered into 2 years prior to the commencement of the offer period;(l) When and how the documents of title to the securities will be issued;(m) The effect of the offer on the directors of the offeror. If there will be no effect, this must be stated; and(n) The effect of full acceptance of the offer upon the offeror's assets, liabilities, profits and business which may be significant for a proper appraisal of the offer. This does not require a profit forecast to be made.Amended: April 2013Appendix TMA-D Appendix TMA-D Offeree Board Circular
The offeree board circular must include the following regarding the view of the board:
(a) The names of the directors of the offeree company;(b) The recommendation of the directors as to whether they accept or reject the offer, or a statement that the directors are unable to make a recommendation, in addition to their reasons for giving the recommendation or for making no recommendation; and(c) A copy of the written advice of the offeree company's financial advisors.Amended: April 2013Shareholdings and Dealings
The document of the offeree company advising its shareholders on an offer (whether recommending acceptance or rejection of the offer) must state:
(a) The shareholdings of the offeree company in the offeror;(b) The shareholdings in the offeree company and in the offeror in which directors of the offeree company are interested;(c) The shareholdings in the offeree company and in the offeror (in the case of a securities exchange offer only):(i) Owned or controlled by the independent professional adviser to the offeree company; or(ii) By funds whose investments are managed by the adviser on a discretionary basis; and(d) Whether the directors of the offeree company intend, in respect of their own beneficial shareholdings, to accept or reject the offer.If in any of the above categories there are no shareholdings, then this fact should be stated. Where the persons mentioned above have dealt for value in shares during the six months prior to the offer period, the same should be disclosed (whether there is an existing holding or not).
The above disclosure details must include dates and prices of the transaction.
Amended: April 2013Share Capital of Offeree Company
The following information about the offeree should be disclosed:
(a) The authorised and issued capital, and the rights of the shareholders in respect of capital, dividends and voting;(b) The number of shares issued since the end of the last financial year; and(c) Details of options, warrants and conversion rights affecting shares in the offeree company.Amended: April 2013Financial Information
The offeree circular must include the following information about the offeree company:-
(a) The financial information of the last 3 financial years for which the information has been published, turnover, net profit or loss before and after taxation, the charge for tax, extraordinary items, exceptional items, minority interests, the amount absorbed by dividends, and earnings and dividends per share;(b) A statement of the assets and liabilities shown in the last published audited accounts;(c) A cash flow statement if provided in the last published audited accounts;(d) Any other primary statement shown in the last published audited accounts;(e) All material changes in the financial or trading position or outlook of the offeree company subsequent to the last published audited accounts or a statement that there are no known material changes;(f) Details relating to items referred to (a) above in respect of any interim statement or preliminary announcement made since the last published audited accounts;(g) Significant accounting policies together with any points from the notes to the relevant published accounts which are of major relevance to an appreciation of the information contained above (a) to (f);(h) Details of any qualification contained in the auditors' report in respect of each of the last 3 financial years or a statement that there is no such qualification; and(i) Where, because of a change in accounting policy, figures are not comparable to a material extent, this should be disclosed and the approximate amount of the resultant variation should be stated.Amended: April 2013Director's Service Agreements
The offeree board circular must contain particulars of all service contracts of any director:
(a) Which, have been entered into or amended within 6 months before the commencement of the offer period;(b) Which are continuous contracts with a notice period of 12 months or more; or(c) Which are fixed term contracts with more than 12 months to run irrespective of the notice period.The particulars must be given of the earlier contracts, if any, which have been replaced or amended as well as the current contracts. If no disclosures are required to be made under this paragraph, this should be stated.
MAM — Prohibition of Market Abuse and Manipulation
MAM-A MAM-A Introduction
MAM-A.1 MAM-A.1 Purpose
Executive Summary
MAM-A.1.1
The CBB believes that in order to achieve the basic objectives of securities regulation of ensuring investor protection and fairness, efficiency and transparency of the market, it is essential to ensure that prices of securities are determined by the collective judgment of uninterrupted market forces of supply and demand.
November 2010MAM-A.1.2
Market manipulation, misleading behaviour or conduct, insider trading and fraudulent or deceptive behaviour or conduct may distort the price discovery system and distort prices and thereby unfairly disadvantage the investors. While the CBB Law criminalizes the offence of market manipulation, the CBB seeks to maintain investor confidence on the integrity and fairness of the Kingdom's capital market by clearly laying down the various types of prohibited market behaviour or conduct to facilitate the understanding of the market participants in this regard.
November 2010MAM-A.1.3
The CBB's approach is to provide a strong and facilitative regulatory framework along with an effective enforcement of regulatory requirements. While the CBB favours an open and pragmatic approach to supervision within the boundaries set by the law and the CBB's regulations, and avoids a legalistic and confrontational style of supervision, it ensures effective enforcement of regulatory requirements.
November 2010MAM-A.1.4
The CBB seeks to clearly lay down the rules that will be applied transparently and consistently to ensure that the bona fide investors and market participants are not inconvenienced in their normal course of business, by enabling them to take all reasonable precautions and exercise due diligence to avoid their engagement in prohibited market behaviour or conduct. This is intended to drive the development and strategic positioning of the Kingdom's capital market and lay a strong foundation for further growth.
November 2010Legal Basis
MAM-A.1.5
Article 3(4) of the Central Bank of Bahrain and Financial Institutions (CBB) Law requires the CBB to protect the interests of depositors and the customers of financial institutions, and enhance the Kingdom's credibility as an international financial centre. Article 4(10) mandates the CBB to safeguard the legitimate interests of licensees' customers against the risks associated with the financial services industry.
November 2010MAM-A.1.6
Article (38) (a) mandates the Governor of the CBB to issue necessary directives to ensure the implementation of the CBB Law and regulations and the achievement of the objectives of the CBB. Article (38) (b) provides the CBB with the power to issue necessary directives to ensure the implementation of CBB Laws and regulations that aim to formulate the understanding and implementation of the CBB Law.
November 2010MAM-A.1.7
Chapter 1 of Part 5 of the CBB Law (Articles 97 to 105) defines insiders, inside information and market information, prohibits abuse of inside information, and provides defences. Particularly, Article 99 provides the CBB with the power to issue regulations concerning the necessary procedures and controls of publishing market information, and Article 105 states that a person shall not be guilty of inside dealing if he proves that the dealing was completed in accordance with CBB's price policies.
November 2010MAM-A.1.8
Chapter 2 of Part 5 of the CBB Law (Articles 106 and 107) deals with violation of market dealings:
Article 106 states that: "In the application of this law a person is guilty of market manipulation if he:
(1) Is engaged, or encourages others to engage, in any conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of any securities.(2) Is engaged, or encourages others, to engage in any conduct that may give an unrealistic picture of the market regarding the volume and prices of any securities."Article 107 states that: "A person shall not be guilty of market manipulation if he proves that his reasons for engaging in the alleged conduct were legitimate and that he had acted in conformity with the accepted market practices in the market concerned, or that he had acted in conformity with any price stablization rules made by the Central Bank, or if he believed on reasonable grounds that his conduct did not violate Article 106 of this Law and that he had taken all reasonable precautions and exercised all due diligence to avoid behaving in any way against the said Article."
November 2010MAM-A.1.9
Part 11 of the CBB Law (Articles 160 — 172) provides for penalties for various contraventions and violations of the provisions of the CBB Law:
Article 167 specifically provides penalty for the offences of abuse of inside information and states that: "Without prejudice to any greater penalty prescribed in the Penal Code or under any law, a person who contravenes Article (100) of this Law, while he is fully aware, shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars (10,000), or either penalty".
Article 168 specifically provides penalty for the offence of market manipulation and states that: "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a person who contravenes Article (106) of this Law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty".
November 2010MAM-A.1.10
This Module contains the CBB's Directive relating to the prohibition of market abuse and market manipulation and is issued under the powers available to the CBB under Article 38 of the CBB Law, read with the abovementioned provisions of the CBB Law. The Directive under this Module is applicable to all market participants and relevant persons, including but not limited to issuers of securities or any person acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, investment firms, business trusts, listed companies, any person acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts and any other person who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether such person is a market participant or not. These rules are issued by way of a legally-binding Directive.
November 2010MAM-A.2 MAM-A.2 Module History
Evolution of Module
MAM-A.2.1
This Module was first issued in January 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.
November 2010MAM-A.2.2
The CBB's Disclosure Standards issued vide Circular No. ODG/407/03 dated 3rd December 2003 and available at www.cbb.gov.bh, inter-alia, contain ongoing obligations of issuers, including immediate announcement of material information, rules governing transactions of directors and senior management and guidelines for trading by directors and senior management and their related parties. The principles contained in the CBB's Disclosure Standards will become part of Module DIS (Disclosure) on its issuance.
November 2010MAM-A.2.3
The BSE's Guidelines on Issuers' Key Person Dealing Policies and available at www.bahrainstock.com, contains rules for the prohibition of abuse of inside information and guidelines and procedures for monitoring, supervising and handling of insiders' issues, as well as insiders' duty to declare and restrict their dealings.
November 2010MAM-A.2.3A
The most recent changes made to this Module are detailed in the table below:
Module Ref. Change Date Description of Changes MAM-2.14.1 04/2021 Changed guidance to Rule. MAM-2.14.2 04/2021 Added Paragraph number and changed from guidance to Rule. MAM-2.14.3 04/2021 Changed guidance to Rule. MAM-3.10.1 07/2021 Amended references in Paragraph. Superseded Requirements
MAM-A.2.4
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/ other references Provision Subject November 2010MAM-A.3 MAM-A.3 Interaction with Other Modules
MAM-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.
November 2010MAM-A.4 MAM-A.4 Division of Responsibilities
MAM-A.4.1
While dealing with cases relating to market abuse and manipulation, a clear division of responsibilities between CBB as the securities regulator and the
licensed exchanges or thelicensed market operators orlicensed clearing houses ordepositories as a self regulatory organisation (SRO) is required:(a) To maximise the regulatory effectiveness;(b) To permit flexibility to thelicensed exchanges or thelicensed market operators in their functioning(c) To achieve greater efficiency and transparancy in the enforcement of the laws, rules and regulations;(d) To minimise the regulatory cost; and(e) To maintain market integrity and investor confidence.November 2010MAM-A.4.2
As a regulator, the CBB's role is as follows:
(a) Regulatory supervision, including the licensing, supervision, inspection, investigation and enforcement and regulatory oversight on the licensed exchanges, licensed market operators, licensed clearing houses and depositories and other SROs.(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 internal regulations of thelicensed exchanges or thelicensed market operators ,licensed clearing houses ordepositories , whereby any change in the rules, by-laws and regulations of the SROs would need prior approval of the CBB.November 2010MAM-A.4.3
The
licensed exchange or thelicensed market operator orclearing house ordepository established as an SRO must comply with the requirements laid down under the CBB Law, rules and regulations, this Module and the other applicable laws and regulations.November 2010MAM-A.4.4
As an SRO, the main objective of the exchange or the operator or the clearing house or depository should include steps to:
(a) Promote fairness and investor protection;(b) Promote fair access to market facilities and information;(c) Promote the provision of timely and accessible relevant market data;(d) Promote the efficient regulation of its members;(e) Develop rules that are designed to set standards of behaviour for its members and to promote investor protection;(f) Take disciplinary actions for contraventions by markets and listed companies through an SRO's Disciplinary Action Committee(s);(g) Identify unlawful transactions and take preventative actions;(h) Maintain fairness of price discovery mechanism and ensure prices are determined by the genuine forces of demand and supply;(i) Monitor the trading and market on a continuous basis;(j) Report any suspected transactions or suspected market behaviour or suspected cases of market abuse or market manipulation.November 2010Role of Other CBB Licensees
MAM-A.4.5
All capital market service providers and listed companies in general, and members of the SROs in particular, must have the necessary infrastructure and systems to identify and report any irregular transactions or suspected cases of market abuse or market manipulation which they come across in the normal course of business to the CBB in the format given in paragraph MAM-A.4.6
November 2010Market Abuse Reporting Format
MAM-A.4.6
Persons subject to the obligations to report irregular transactions to the CMSD shall report in the following standard format:
Description of the transaction(s)
Details of the securities, including the code of the security (ISIN Number); the market(s) concerned; the original order's entry date/time, price and size; the times and sizes of the transaction(s); the type and characteristics of the order, etc.Reasons for Suspicion
Reasons for suspecting that the transaction(s) might constitute insider dealing/market abuse/ market manipulationIdentities of persons carrying out transaction(s)
Names, addresses, telephone number, location, account number, client Identification code used by the firm, etc.Identities of any other persons known to be involved in the transaction(s)
Names, addresses, telephone number, location, relation to person carrying out the transaction, position held, role played, etc.Capacity in which the person performing the transaction(s) acts
e.g. broker, underwriter, agent, investment/fund manager, auditor, insider.Any information which may be of significance (along with a list of any accompanying documents/evidence) Details of the person making notification
Name of person, name of firm, position held within firm, contact details, etc.Signed ........... (person making report)
Dated ........... (date of report)November 2010MAM-A.4.8
Where the information specified to be reported is not available at the time of reporting, the report shall include at least the reasons why the reporting persons suspect that the transactions might constitute insider dealing or market manipulation. All remaining information shall be provided to the CMSD as soon as it becomes available.
Persons making suspicious transactions reports therefore, do not need to have all the required information before contacting the CMSD. If the case is one which (the persons subject to the reporting obligation consider) needs to be brought to the attention of the CMSD urgently, then the person(s) concerned shall make the first contact quickly. This can be done by telephone if appropriate, giving the basic details and reasons for suspicion, followed by written confirmation. The other information can be supplied subsequently.
November 2010MAM-B MAM-B Scope of Application
MAM-B.1 MAM-B.1 Scope
MAM-B.1.1
This Module shall apply to:
(a) Any behaviour or conduct occurring within Bahrain; or any transaction or expected transaction done by or on behalf of any person(s) within Bahrain in relation to securities offered, issued or listed in Bahrain or elsewhere;(b) Any behaviour or conduct occurring outside Bahrain or any transaction or expected transaction done by or on behalf of any person(s) outside Bahrain in relation to securities offered, listed or issued in Bahrain;(c) Any behaviour or conduct occurring within Bahrain; or any transaction or expected transaction done by or on behalf of any person(s) within Bahrain in relation to:(i) Futures contracts, whether traded on a futures market in Bahrain or elsewhere; or(ii) Leveraged foreign exchange trading contracts, whether in Bahrain or elsewhere; and(d) Any behaviour or conduct occurring outside Bahrain; or any transaction or expected transaction done by or on behalf of any person(s) outside Bahrain in relation to:(i) Futures contracts traded on a futures market in Bahrain;(ii) Leveraged foreign exchange trading contracts in Bahrain; or(iii) Leveraged foreign exchange trading contracts that are accessible from Bahrain.November 2010MAM-B.1.2
This Module is applicable to all market participants and relevant persons, including but not limited to issuers of securities or any person acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, investment firms, business trusts, collective investment undertakings, listed companies, any person acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts and any other person who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether such person is a market particpant or not.
November 2010MAM-B.2 MAM-B.2 Definitions
For the purpose of this Module, the following definitions shall apply:
November 2010MAM-B.2.1
"A Person Associated with another Person":
(1) Any reference in this Module to a person associated with another person shall be construed as a reference to:(a) Where the other person is a company:(i) A director or secretary of the company;(ii) A related company; or(iii) A director or secretary of such related company;(b) Where the matter to which the reference relates is the extent of a power to exercise, or to control the exercise of, the voting power attached to voting shares in a company, a person with whom the other person has, or proposes to enter into, an agreement, arrangement, understanding or undertaking, whether formal or informal, or express or implied:(i) By reason of which either of those persons may exercise, directly or indirectly, control the exercise of, or substantially influence the exercise of, any voting power attached to a share in the company;(ii) With a view to controlling or influencing the composition of the board of directors, or the conduct of affairs, of the company; or(iii) Under which either of those persons may acquire from the other of them shares in the company or may be required to dispose of such shares in accordance with the directions of the other of them;except that in relation to a matter relating to shares in a company, a person may be an associate of the company and the company may be an associate of a person;(c) A person with whom the other person is acting, or proposes to act, in concert in relation to the matter to which the reference relates;(d) Where the matter to which the reference relates is a matter, other than the extent of a power to exercise, or to control the exercise of, the voting power attached to voting shares in a company:(i) Subject to paragraph (2) a person who is a director of a company of which the other person is a director; or(ii) A trustee of a trust in relation to which the other person benefits or is capable of benefiting otherwise than by reason of transactions entered into in the ordinary course of business in connection with the lending of money;(e) A person with whom the other person is, according to any subsidiary legislation made under this Module, to be regarded as associated in respect of the matter to which the reference relates;(f) A person with whom the other person is, or proposes to become, associated, whether formally or informally, in any other way in respect of the matter to which the reference relates; or(g) Where the other person has entered into, or proposed to enter into a transaction or has done, or proposes to do so, any other act or thing, with a view to becoming associated with a person as referred to in sub-paragraph (a), (b), (c), (d), (e) or (f), that last-mentioned person.(2) Where, in any proceedings under this Module, it is alleged that a person referred to in paragraph (1) (d) (i) was associated with another person at a particular time, the first-mentioned person shall not be considered to be so associated in relation to a matter to which the proceedings relate unless the person alleging the association proves that the first-mentioned person at that time knew or ought reasonably to have known the material particulars of that matter.(3) A person shall not be considered to be associated with another person by virtue of paragraph (1) (b), (c), (e) or (f) by reason only of one or more of the following:(a) That one of those persons furnishes advice to, or acts on behalf of, the other person in the proper performance of the functions attaching to his professional capacity or to his business relationship with the other person;(b) That one of those persons, a customer, gives specific instructions to the other, whose ordinary business includes dealing in securities, trading in futures contracts or leveraged foreign exchange trading, to acquire shares on the customer's behalf in the ordinary course of that business;(c) That one of those persons has sent, or proposes to send, to the other a take-over offer, or has made or proposes to make, offers under a take-over announcement, within the meaning of the Take-overs, Mergers, Acquisitions and Share Repurchases (TMA) Module in relation to shares held by the other;(d) That one of those persons has appointed the other, otherwise than for valuable consideration given by the other or by an associate of the other, to vote as a proxy or representative at a meeting of members, or of a class of members of a company.November 2010MAM-B.2.2
"Beneficial Owner" the term "beneficial owner" of securities for the purposes of this Module refers to any person who, even if not the recorded owner of the securities, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities, or to receive the economic benefit of ownership of the securities. A person is also considered to be the "beneficial owner" of securities if that person has the right to acquire such securities within a certain period of time, either by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through issuers in which they have a "controlling interest", which means the direct or indirect power to direct the management and policies of the issuer, or any other entity in question.
November 2010MAM-B.2.3
"Capital Market Service provider" means any person licensed or authorised or involved in providing any activity specified under Article 80 of the CBB Law.
November 2010MAM-B.2.4
"Connected Persons" in relation to an individual means:
(a) The individual's spouse and his/her son, adopted son, stepson, daughter, adopted daughter, step-daughter, father, step-father, mother, step-mother, brother, step-brother, sister or step-sister, under his/her guardianship or control; or(b) A firm or company in which the individual or any of the persons mentioned in sub-paragraph (a) has control of not less than 10% of the voting power in the firm or company, whether such control is exercised individually or jointly; Connected persons in relation to a firm or company means another firm or company in which the first-mentioned firm or company has control of not less than 10% of the voting power in that other firm or company.November 2010MAM-B.2.5
"CMSD" means the Capital Markets Supervision Directorate of the Central Bank of Bahrain.
November 2010MAM-B.2.6
"Dealing in Securities" includes (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 an any agreement for or with a view to acquiring, disposing of, subscribing for, or underwriting securities.
November 2010MAM-B.2.7
"Director and Senior Management" includes any member of senior management, regardless of title, including:
(a) The issuer's directors;(b) Senior management, including the General Manager, Chief Executive Officers, Presidents, Heads of Finance, Heads of Business Departments;(c) Partners with unlimited liability, in the case of a limited partnership with share capital;(d) Nominees to serve in any of the aforementioned positions; and(e) Founders, if the issuer has been established for fewer than two years.November 2010MAM-B.2.8
(a) "Fraud" includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, and shall also include:(i) A knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment;(ii) A suggestion as to a fact which is not true by one who does not believe it to be true;(iii) An active concealment of a fact by a person having knowledge or belief of the fact;(iv) A promise made without any intention of performing it;(v) A representation made in a reckless and careless manner whether it be true or false;(vi) Any such act or omission as any other law specifically declares to be fraudulent;(vii) Deceptive behaviour by a person depriving another of informed consent or full participation;(viii) A false statement made without reasonable ground for believing it to be true;(ix) The act of an issuer of securities giving out misinformation that affects the market price of the security, resulting in investors being effectively misled even though they did not rely on the statement itself or anything derived from it other than the market price;and "fraudulent" shall be construed accordingly.Nothing contained in this paragraph shall apply to any general comments made in good faith in regard to:
(a) The economic policy of the government;(b) The economic situation of the country;(c) Trends in the securities market; or(d) Any other matter of a like nature.November 2010MAM-B.2.9
"Insider" means any person who has obtained inside information;
(a) By virtue of his employment or profession;(b) Being an officer or shareholder of the issuer of the securities; or(c) Through illegal means.A person may be an insider if he is already aware that such information is classified as inside information even though none of the above applies to him.
All persons who have access or come into possession of material inside information before its public release are considered insiders. Such persons include controlling shareholders, "directors and senior management", officers and employees, and frequently should also include any officials of the CBB and the Exchange who have access to such information, outside attorneys, accountants, auditors, underwriters, investment bankers, public relations advisers, advertising agencies, consultants and other independent contractors. The husbands, wives, immediate families and those under the control of insiders may also be regarded as insiders. Where acquisition or other negotiations are concerned, the above relationships apply to other parties to the negotiations as well. Further, for purposes of this Module, insiders include "tippees" who come into possession of material inside information.
November 2010MAM-B.2.10
"Inside Information" means information that;
(a) Is precise in nature relating directly or indirectly to one or more of the securities or the issuer thereof;(b) Has not been made public;(c) If made public, is likely to have a significant impact on the price of those securities or their derivatives;(d) Is, directly or indirectly, related to derivatives of commodities which the traders expect to be disclosed according to the market regulations.November 2010MAM-B.2.11
"Insider Trading" refers not only to the purchase or sale of an issuer's equity and debt securities, but also to the purchase or sale of puts, calls or other options with respect to such securities. Such trading is deemed to be done by an insider whenever he has any beneficial interest, direct or indirect, in such securities or options, regardless of whether they are actually held in his name. Included in the concept of "insider trading" is "tipping", or revealing inside information to outside individuals, to enable such individuals to trade in the issuer's securities on the basis of undisclosed information.
November 2010MAM-B.2.12
"Information" includes:
(a) Matters of supposition and other matters that are insufficiently definite to warrant being made known to the public;(b) Matters relating to the intentions, or the likely intentions, of a person;(c) Matters relating to negotiations or proposals with respect to:(i) Commercial dealings;(ii) Dealing in securities; or(iii) Trading in futures contracts;(d) Information relating to the financial performance of a company or an issuer, or otherwise;(e) Information that a person proposes to enter into, or had previously entered into one or more transactions or agreements in relation to securities or has prepared or proposes to issue a statement relating to such securities; and(f) Matters relating to the future.November 2010MAM-B.2.13
"Information Disclosed Widely Enough" for the purposes of this Module, information is disclosed widely enough if:
(a) It consists of readily observable matter;(b) Without limiting the generality of paragraph (a):(i) It has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information; and(ii) Since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed; or(c) It consists of deductions, conclusions or inferences made or drawn from either or both of the following:(i) Information referred to in paragraph (a);(ii) Information made known as referred to in paragraph (b) (i);(d) It is disclosed in the manner and within the timeframe stipulated by the CBB rules and regulations.November 2010MAM-B.2.14
"Market Information" means any published information about trading or non-trading in certain types of securities, their number, prices, range of price for trading or the identity of those involved or who may be involved, in any capacity, such as trading.
November 2010MAM-B.2.15
"Materiality" information is material if its omission or mis-statement could influence the economic decisions of the users taken on the basis of the financial statements. For the purpose of this Module, a reasonable person would be taken to expect information to have a material effect on the price or value of securities if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether or not to subscribe for, buy or sell the first-mentioned securities.
November 2010MAM-B.2.16
"Manipulation" includes any deliberate/reckless act or attempt or act, expression, omission or concealment or influence to interfere with the free and fair functioning of the market or to introduce misinformation or misleading appearance in the market, or to impede judgement of investors and market participants.
November 2010MAM-B.2.17
"Permanent Insider" means members of the Board of Directors of a company, its senior management, the Issuer itself, and such other persons as decided by the Issuer's Board to have access to inside information relating to the Issuer from time-to-time
November 2010MAM-B.2.18
"Profit" includes the avoidance of any loss.
November 2010MAM-B.2.19
"Purchase" in relation to securities, includes, in the case of an option contract under which a party acquires an option or right from another party, acquiring the option or right under the contract, or taking an assignment of the option or right, whether or not on another's behalf.
November 2010MAM-B.2.20
"Related Company" means where a company:
(a) Is the holding company of another company;(b) Is a subsidiary of another company; or(c) Is a subsidiary of the holding company of another company,that first-mentioned company and that other company shall for the purposes of this Module be deemed to be related to each other.
November 2010MAM-B.2.21
"Rumour" includes an unverified statement or account or explanation of events, circulating from person to person, whose veracity or authenticity or trueness is not immediately verifiable.
November 2010MAM-B.2.22
"Securities" means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:
(a)Shares in companies and othersecurities equivalent to shares in companies or other entities, and depositary receipts in respect of shares;(b)Bonds or other forms of debt, including depositary receipts in respect of suchsecurities ;(c)Warrants ;(d)Units, rights or interests (however described) of theparticipants in a collective investment scheme;(e)Options, futures and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);(f)Options, futures and any other derivative contract relating to commodities that can be physically settled;(g) Units to Real Estate Investment Trusts (REITs);(h) Index tracking products including Islamic indices;(i) Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such instrument on an exchange; and(j) Islamicsecurities , being those financial instruments that are Shari'a compliant.November 2010MAM-B.2.23
"Sell" in relation to securities, includes, in the case of an option contract under which a party acquires an option or right from another party:
(a) Grant or assign the option or right; or(b) Take, or cause to be taken, such action as releases the option or right, whether or not on another's behalf.November 2010MAM-B.2.24
"Trading and Procuring Trading in Securities" for the purposes of this Module, trading in securities that is ordinarily permitted on the securities market or future market shall be taken to be permitted on that securities market or futures market, even though trading in any such securities on that securities market or futures market is suspended.
For the purposes of this Module, but without limiting the meaning that the expression "procure" has apart from this paragraph, if a person incites, induces, or encourages an act or omission by another person, the first-mentioned person is taken to procure the act or omission by the other person.
November 2010MAM-B.2.25
"Temporary Insider" means any person who is an insider, but not a permanent insider.
November 2010MAM-B.2.26
"Person" means unless the context requires otherwise, a natural or legal person.
November 2010MAM-1 MAM-1 Accepted Market Practices
MAM-1.1 MAM-1.1 Accepted Market Practices
MAM-1.1.1
Accepted market practices are those practices that are reasonably expected on one or more financial markets and are accepted by the CBB.
November 2010MAM-1.1.2
Accepted market practices in no way constitute safe harbours similar to those provided by section MAM-4.1 (which deals with price stabilization).
November 2010MAM-1.2 MAM-1.2 Criteria for Assessment of a Market Practice
MAM-1.2.1
When assessing whether a market practice is acceptable, the CBB will take at least the following criteria into account:
(a) The level of transparency of the relevant market practice to the whole market;(b) The disclosure requirement of the relevant market practice by the market participants;(c) The need to safeguard the operation of market forces and the interplay of supply and demand, or safeguard the interest of the securities holders;(d) The degree to which the relevant market practice has an impact on market liquidity and efficiency;(e) The degree to which the relevant practice takes into account the trading mechanism of the relevant market and enables market participants to react properly and in a timely manner to the new market situation created by that practice;(f) The risk inherent in the relevant practice for the integrity of directly or indirectly, related markets, whether regulated or not, in the relevant securities within Bahrain;(g) The outcome of any inspection or investigation of the relevant market practice by the CBB, by any other authority or market operator with which the CBB cooperates, by any other authority or market undertaking acting on behalf or on the authority of the CBB, or by the courts acting on a referral from the CBB, in particular whether the relevant market practice breached rules or regulations designed to prevent market abuse, or codes of conduct, be it on the market in question or on directly or indirectly related markets within Bahrain;(h) The structural characteristics of the relevant market including whether it is regulated or not, the types of financial instruments traded and the type of market participants, including the extent of non-professional investor participation in the relevant marketHaving regard to (c) above, the CBB takes account in its assessment of how the relevant practice will affect market conditions, with particular reference to daily weighted average prices or daily closing prices.
November 2010MAM-1.2.2
The CBB periodically reviews accepted market practices, in particular taking into account significant changes to the relevant market environment, such as changes to trading rules or to market infrastructure.
November 2010MAM-1.2.3
Where an organization representing companies making public offers of securities, investment service providers, investors or market operators seeks the CBB's acceptance of a market practice, the CBB shall consult the other organizations concerned before deciding whether to accept or reject such practice.
November 2010MAM-1.2.4
The CBB will also consult other competent authorities in respect of existing practices, notably on markets that are comparable in terms of structures, volumes or types of transaction.
November 2010MAM-1.2.5
Where inspections or investigations of specific cases have already started, the consultation procedure referred to above may be delayed until the end of such inspections or investigations and possible related sanctions.
November 2010MAM-1.2.6
A market practice that was accepted following the consultation procedure shall not cease to be accepted without using the same procedure. Where appropriate, a CBB instruction shall specify the arrangements for implementing the market practice accepting procedure.
November 2010MAM-1.3 MAM-1.3 Market Abuse
MAM-1.3.1
For the purposes of this Module, market abuse is behaviour or conduct (whether by one person alone or by two or more persons jointly or in concert):
(a) Which occurs in relation to securities traded on a market to which this Module applies;(b) Which satisfies any one or more of the conditions set out in paragraph MAM-1.3.2; and(c) Which is likely to be regarded by a regular user of that market who is aware of the behaviour or conduct as a failure on the part of the person or persons concerned to observe the standard of behaviour or conduct reasonably expected of a person in his or their position in relation to the market.November 2010MAM-1.3.2
The conditions referred to in paragraph MAM-1.3.1 (b) are that:
(a) The behaviour or conduct is based on information which is not generally available to those using the market but which, if available to a regular user of the market, would or would be likely to be regarded by him as relevant when deciding the terms on which dealings or transactions in securities of the kind in question should be effected;(b) The behaviour or conduct is likely to give a regular user of the market a false or misleading impression as to the supply of, or demand for, or as to the price or value of, securities of the kind in question;(c) A regular user of the market would, or would be likely to, regard the behaviour or conduct as behaviour or conduct which would, or would be likely to, distort the market in securities of the kind in question.November 2010MAM-1.3.3
For the purposes of this Module, the behaviour or conduct which is to be regarded as occurring in relation to securities, includes behaviour or conduct which:
(a) Occurs in relation to anything which is the subject matter, or whose price or value is expressed by reference to the price or value of those securities; or(b) Occurs in relation to securities whose subject matter is those securities.November 2010MAM-1.3.4
Information which can be obtained by research or analysis conducted by, or on behalf of users of a market, is to be regarded for the purposes of this Module as being generally available to them.
November 2010MAM-1.3.5
Behaviour or conduct does not amount to market abuse if it conforms with a rule which includes a provision to the effect that behaviour or conduct conforming with the rule does not amount to market abuse.
November 2010MAM-1.3.6
Any reference in this Module to a person engaged in market abuse is a reference to a person engaged in market abuse whether alone or with one or more other persons.
November 2010MAM-1.3.7
In this Module; "behaviour or conduct" includes action or inaction; "regular user" in relation to a particular market means a reasonable person who regularly deals on that market in securities of the kind in question.
November 2010MAM-1.3.8
The types of behaviour or conduct that amount to market abuse include:
(a) Abuse of information:(i) Insider dealing;(ii) Improper disclosure;(iii) Misuse of information.(b) Market manipulation:(iv) Manipulating transactions;(v) Manipulating devices;(vi) Dissemination;(vii) Misleading behaviour and distortion.November 2010MAM-2 MAM-2 Prohibited Conduct in Possession of Inside Information
MAM-2.1 MAM-2.1 Prohibited Conduct with respect to Possession of Inside Information
MAM-2.1.1
Pursuant to Article 100 of the CBB Law a person who is in possession of inside information, as an insider shall not use such information to:
1) Deal in any securities to which that information relates;2) Encourage any person to deal in any securities to which that information relates;3) Disclose inside information to any other person, otherwise than in the proper performance of the functions of his employment, office or profession;4) Violate the rules governing the publishing of market information.November 2010MAM-2.2 MAM-2.2 Prohibited Conduct of Permanent Insiders
MAM-2.2.1
Without prejudice to rule MAM-2.1, where:
(a) A person who is a Permanent Insider to a company possesses information concerning that company that is not disclosed widely enough; and(b) The Permanent Insider knows or ought reasonably to know that:(i) The information is not disclosed widely enough; and(ii) If it were disclosed widely enough, it might have a material effect on the price or value of those securities of that company;rules MAM-2.2.2, MAM-2.2.3 AND MAM-2.2.4 shall apply.
November 2010MAM-2.2.2
The Permanent Insider must not (whether as principal or agent):
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities referred to in rule MAM-2.2.1; or(b) Procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities referred to in rule MAM-2.2.1.November 2010MAM-2.2.3
Where trading in the securities referred to in rule MAM-2.2.1 is permitted on the securities market of a licensed exchange, the Permanent Insider must not, directly or indirectly, communicate the information, or cause the information to be communicated to another person if the Permanent Insider knows, or ought reasonably to know, that the other person would or would be likely to:
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities; or(b) Procure a third person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.November 2010MAM-2.2.4
In any proceedings for a contravention of rules MAM-2.2.2 and MAM-2.2.3 against a Permanent Insider to a company referred to in rules MAM-2.2.1, MAM-2.2.2 and MAM-2.2.3, where the prosecution or plaintiff proves that the Permanent Insider was at the material time:
(a) In possession of information concerning the company to which he was connected; and(b) The information was not disclosed widely enough;
it shall be presumed, until the contrary is proved that the permanent insider knew at the material time that:(i) The information was not disclosed widely enough; and(ii) If the information were disclosed widely enough, it might have a material effect on the price or value of securities of that company.November 2010MAM-2.3 MAM-2.3 Prohibited Conduct by Other Persons in Possession of Inside Information
MAM-2.3.1
Without prejudice to section MAM-2.1, where:
(a) A person who is not a Permanent Insider (referred to in this section as the insider) possesses information that is not disclosed widely enough; and(b) The insider knows that:(i) The information is not disclosed widely enough; and(ii) If it were disclosed widely enough, it might have a material effect on the price or value of those securities;rules MAM-2.3.2 and MAM-2.3.3 shall apply.
November 2010MAM-2.3.2
The insider must not (whether as principal or agent):
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell any such securities; or(b) Procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.November 2010MAM-2.3.3
Where trading in the securities referred to in rule MAM-2.3.1 is permitted on the securities market of a licensed exchange, the insider must not, directly or indirectly, communicate the information or cause the information to be communicated to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to:
(a) Subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell any such securities; or(b) Procure a third person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.November 2010MAM-2.4 MAM-2.4 Not Necessary to Prove Intention to Use
MAM-2.4.1
Without prejudice to the criminal law proceedings, for the avoidance of doubt, in any proceedings against a person for a contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3 it is not necessary for the prosecution or plaintiff to prove that the accused person or defendant intended to use the information referred to in rules MAM-2.2.1 (a) or MAM-2.3.1 (a) in contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3 as the case may be.
November 2010MAM-2.4.2
Without prejudice to the criminal law proceedings, in any proceedings against a person for a contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3, it is not necessary for the prosecution or plaintiff to prove the absence of facts or circumstances which if they existed would, by virtue of rules MAM-2.5 to MAM-2.15 or any other CBB regulations, preclude the act from constituting a contravention of sections MAM-2.1, MAM-2.2 or MAM-2.3 as the case may be.
November 2010MAM-2.5 MAM-2.5 Exception for Redemption of Units in a Collective Investment Scheme
MAM-2.5.1
Sections MAM-2.2 or MAM-2.3 shall not apply in respect of the redemption of units in a collective investment scheme by a trustee or manager under a trust deed relating to that collective investment scheme in accordance with a buy-back covenant contained or deemed to be contained in the trust deed at a price that is required by the trust deed to be calculated, so far as is reasonably practicable, by reference to the underlying value of the assets less:
(a) Any liabilities of that collective investment scheme to which the units relates; and(b) Any reasonable charge for purchasing the units.November 2010MAM-2.5.2
The exception provided under rule MAM-2.5.1 will not be applicable to fund managers or trustees who are identified as insiders for the selling of underlying securities of a collective investment scheme for the purpose of redemption of units.
November 2010MAM-2.6 MAM-2.6 Exception for Underwriters
MAM-2.6.1
Sections MAM-2.2 and MAM-2.3 shall not apply in respect of:
(a) Subscribing for, or purchasing securities under an underwriting agreement or a sub-underwriting agreement;(b) Entering into an agreement referred to in paragraph (a); or(c) Selling securities subscribed for or purchased under an agreement referred to in paragraph (a).November 2010MAM-2.6.2
Sections MAM-2.2 and MAM-2.3 shall not apply in respect of the communication of information in relation to securities:
(a) To a person solely for the purpose of procuring the person to enter into an underwriting agreement in relation to any such securities; or(b) By a person who may be required under an underwriting agreement to subscribe for, or purchase any such securities if the communication is made to another person solely for the purpose of procuring the other person to do either or both of the following:(i) Enter into a sub-underwriting agreement in relation to any such securities;(ii) Subscribe for, or purchase any such securities.November 2010MAM-2.7 MAM-2.7 Attribution of Knowledge within Companies
MAM-2.7.1
For the purposes of this Module:
(a) A company is taken to possess any information which an officer of the company possesses and which came into his possession in the course of the performance of duties as such an officer; and(b) If an officer of a company knows or ought reasonably to know any matter or thing because he is an officer of the company, it is to be presumed, until the contrary is proved, that the company knows or ought reasonably to know that matter or thing.November 2010MAM-2.7.2
A company does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement at any time merely because of information in the possession of an officer of the company if:
(a) The decision to enter into the transaction or agreement was taken on its behalf by a person other than that officer;(b) It had in operation at that time arrangements that could reasonably be expected to ensure that the information was not communicated to the person who made the decision and that no advice with respect to the transaction or agreement was given to that person by a person in possession of the information; and(c) The information was not communicated and no such advice was given.November 2010MAM-2.8 MAM-2.8 Attribution of Knowledge with Partnerships and Limited Liability Partnership
MAM-2.8.1
For the purposes of this Module:
(a) A partner of a partnership or a limited liability partnership (as the case may be) is taken to possess any information:(i) Which another partner of the partnership or limited liability partnership (as the case may be) possesses and which came into such other partner's possession in his capacity as a partner of the partnership or limited liability partnership (as the case may be); or(ii) Which an employee of the partnership or a manager of a limited liability partnership (as the case may be) possesses and which came into the possession of such an employee or manager in the course of the performance of his duties as such an employee or manager; and(b) If a partner or employee of a partnership or a partner, manager or employee of a limited liability partnership (as the case may be) knows or ought reasonably to know any matter or thing in his capacity as such a partner, manager, or employee, it is to be presumed that every partner of the partnership or limited liability partnership (as the case may be) knows or ought reasonably to know that matter or thing.November 2010MAM-2.8.2
The partners of a partnership or limited liability partnership (as the case may be) do not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement at any time merely because one or more (but not all) of the partners, or a manager or managers, or an employee or employees, of the partnership or limited liability partnership (as the case may be) are in actual possession of information if:
(a) The decision to enter into the transaction or agreement was taken on behalf of the partnership or limited liability partnership by any one or more of the following persons:(i) A partner who is taken to have possessed the information merely because another partner, or a manager or employee of the partnership or limited liability partnership, was in possession of the information;(ii) An employee of the partnership or limited liability partnership or a manager of the limited liability partnership who was not in possession of the information;(b) The partnership or limited liability partnership had in operation at that time arrangements that could reasonably be expected to ensure that the information was not communicated to the person or persons who made the decision and that no advice with respect to the transaction or agreement was given to that person or any of those persons by a person in possession of the information; and(c) The information was not so communicated and no such advice was so given.November 2010MAM-2.8.3
A partner of a partnership or limited liability partnership (as the case may be) does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement otherwise than on behalf of the partnership or limited liability partnership merely because he is taken to possess information that is in the possession of another partner, a manager, or an employee of the partnership.
November 2010MAM-2.9 MAM-2.9 Exception for Knowledge of Person's Own Intentions Or Activities
MAM-2.9.1
An individual does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement in relation to securities merely because he is aware that he proposes to enter into, or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10 MAM-2.10 Exception for Companies and its Officers, etc.
MAM-2.10.1
A company does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement in relation to securities merely because it is aware that it proposes to enter into or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10.2
Subject to rule MAM-2.10.3, a company does not contravene section MAM-2.3 by entering into a transaction or agreement in relation to securities merely because an officer of the company is aware that the company proposes to enter into, or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10.3
Rule MAM-2.10.2 shall not apply unless the officer of the company mentioned in that rule became aware of the matters referred to in that rule in the course of the performance of duties as such an officer.
November 2010MAM-2.10.4
Subject to rule MAM-2.10.5, a person does not contravene sections MAM-2.2 or MAM-2.3 by entering into a transaction or agreement on behalf of a company in relation to securities merely because he is aware that the company proposes to enter into, or has previously entered into, one or more transactions or agreements in relation to those securities.
November 2010MAM-2.10.5
Rule MAM-2.10.4 shall not apply unless the person became aware of the matters referred to in that rule in the course of the performance of duties as an officer of the company or in the course of acting as an agent of the company.
November 2010MAM-2.11 MAM-2.11 Unsolicited Transactions by the Holder of a CBB License
MAM-2.11.1
The holder of a CBB license who acts as a broker to deal in securities or trade in futures contracts, or a representative of such a holder does not contravene sections MAM-2.2 or MAM-2.3 by subscribing for, purchasing or selling, or entering into an agreement to subscribe for, purchase or sell, securities that are traded on the stock market or futures market if:
(a) The licensed person entered into the transaction or agreement concerned on behalf of another person (referred to in this section as the principal) under a specific instruction by the principal to enter into that transaction or agreement which was not solicited by the licensed person;(b) The licensed person has not given an advice to the principal in relation to the transaction or agreement or otherwise sought to procure the principal's instructions to enter into the transaction or agreement; and(c) The principal is not an associate of the licensed person.November 2010MAM-2.12 MAM-2.12 Parity of Information
MAM-2.12.1
In any proceedings against a person for a contravention of sections MAM-2.2 or MAM-2.3 because the person entered into, or procured another person to enter into, a transaction or agreement at a time when certain information was in the first-mentioned person's possession, it is a defence if the court is satisfied that:
(a) The information came into the first-mentioned person's possession solely as a result of the information having been disclosed widely enough; or(b) The other party to the transaction or agreement knew, or ought reasonably to have known of the information before entering into the transaction or agreement.November 2010MAM-2.12.2
In any action against a person for a contravention of sections MAM-2.2 or MAM-2.3 because the person communicated information, or caused information to be communicated, to another person, it is a defence if the court is satisfied that:
(a) The information came into the first-mentioned person's possession solely as a result of the information having been disclosed widely enough; or(b) The other person knew, or ought reasonably to have known, of the information before the information was communicated.November 2010MAM-2.13 MAM-2.13 Defences
MAM-2.13.1
In line with Article 101 of the CBB Law: "The mere trading by any person with inside information in securities, or encouraging others to trade therein, shall not be considered as a violation to this chapter if,
(1) He did not, at the time, expect that he will make a profit due to the inside information;(2) He reasonably believed at the time of dealing that the information had been disclosed widely enough that none of those taking part in the dealing would be prejudiced by not being aware of the said information;(3) He would have acted as he did even if such information was not available to him."This defence will be available only in cases where the person has reasonable or sufficient grounds to believe that the information had been "Information disclosed widely enough" as referred to in this Module.
November 2010MAM-2.13.2
In line with Article 102 of the CBB Law: "A person with inside information shall not be violating this chapter if he proves that he did not expect, at the time of disclosure, any person to trade in such securities based on such information, or that he did expect such trading but never thought that such person would make profits because the disclosed information was an inside information."
This defence will be available only for cases where the disclosure of information is made in the proper performance of the functions, office or profession.
November 2010MAM-2.13.3
In line with Article 103 of the CBB Law: "A person shall not be violating this chapter by virtue of dealing in securities or encouraging another person to deal, if he proves that he had acted in good faith in the course of his business as a licensed mediator or his employment with a mediator."
This defence will be available only in cases where the person has acted in his capacity as an investment firm licensee or an underwriter and the transactions are covered by the exceptions provided under sections MAM-2.6 or MAM-2.11.
November 2010MAM-2.13.4
In line with Article 104 of the CBB Law: "An individual is not guilty of inside dealing by virtue of dealing in securities or encouraging another person to deal if he proves that:
(1) The information, which he had as an insider, was market information;(2) It was reasonable that any person in their position would have acted similarly despite having such information as an insider at the time. In determining the appropriateness of such action, a special consideration shall be given to the content of the information, the circumstances in which it was first acquired and in what capacity did he act at the time of dealing."This defence will be available only if the individual proves that there was parity of information available as per section MAM-2.12.
November 2010MAM-2.13.5
In line with Article 105 of the CBB Law: "A person shall not be guilty of inside dealing by virtue of dealing in securities or encouraging another person to deal if he proves that:
(1) The securities were, at the time of dealing, under consideration or negotiation, or that the dealing took place during the course of a series of such negotiations;(2) The dealing was intended to facilitate the negotiation of securities or execute a series of negotiations of such securities;(3) The dealing was completed in accordance with the Central Bank's price policies."The first two defences mentioned in this rule will be available only for exceptions specified in section MAM-2.9 or MAM-2.10. The third defence mentioned in this rule will be available only for price stabilization transactions undertaken by a market maker who should also be a Category 1 Investment Firm Licensee.
November 2010MAM-2.14 MAM-2.14 Restrictions on Insider's Trading
Trading by Permanent Insiders
MAM-2.14.1
Permanent Insiders must schedule their trading of securities issued by the company in such a manner that their trading will not undermine confidence in the securities market.
Amended: April 2021
November 2010Trading After Publication of Financial Statements
Following the publication of financial statements by a company, Permanent Insiders of that company must refrain from trading and wait until the commencement of the following day's trading session, or after 24 hours, whichever is less, after the publication of the financial statements have been released in the local newspapers.
November 2010MAM-2.14.2
Following the publication of financial statements by a company, Permanent Insiders of that company must refrain from trading and wait until the commencement of the following day's trading session, or after 24 hours, whichever is less, after the publication of the financial statements have been released in the local newspapers.
Amended: April 2021
November 2010Scope of the Restriction on Trading
MAM-2.14.3
The restrictions on trading must be applied to the listed company's Permanent Insiders. A Permanent Insider must also be responsible for compliance with the restriction on trading when the management of the securities of the Permanent Insider has been assigned to another party.
Amended: April 2021
November 2010MAM-2.14.4
The restriction on trading shall not be applied in cases where:
(a) Buying securities by subscribing or obtaining them directly from the company or its group in a public issue;(b) Receiving securities in consideration of redemption, merger, demerger, or as compensation in accordance with a public tender offer, or in another comparable manner;(c ) Receiving shares as dividends (bonus shares), or another form of payout from retained earnings;(d) Receiving securities as compensation for work or other performance or service;(e) Receiving securities as inheritance under a will, as a present, or as a result of partition of an estate, or by means of similar acquisition.November 2010MAM-2.15 MAM-2.15 Obligations of Insiders, Listed Companies and Brokerage Firms
Creation of Register
MAM-2.15.1
Permanent Insiders shall provide to the listed company their basic personal data and information for the purpose of creating a register of such details. The register must be maintained at its headquarters in Bahrain and be made available for investigation and inspection to the CBB at all times. The register shall be maintained and kept by the listed company for a minimum period of 5 years.
November 2010Changes in Declared Information
MAM-2.15.2
Any changes in personal data and information or change in beneficial ownership or holdings of securities shall be notified to the listed company by the end of the next business day following the date the change took place.
November 2010Obligations of Listed Companies
MAM-2.15.3
Listed companies shall organize regular supervision (at least annually) of the Permanent Insiders to verify the information declared to the company and the trading of the Permanent Insiders.
November 2010MAM-2.15.4
Listed companies shall, where necessary, case-by-case, verify the trading of securities of a Permanent Insider more diligently, for example if a Permanent Insider deals with a large volume of securities or is trading frequently.
November 2010MAM-2.15.5
Any violations of this Module or the requirement of a licensed exchange shall be reported immediately to the CBB.
November 2010Annual Verification
MAM-2.15.6
The register data shall be verified at least once a year before the Annual General Meeting by the internal auditor of the company. The result of such verification shall be forwarded to the CBB not more than 10 days after the date of the company's AGM.
November 2010Written Guidelines and Instructions
MAM-2.15.7
All listed companies must have their own written guidelines on Permanent Insiders in line with the Module and the requirements of the listed exchange. The company may define other instructions or restrictions, as it deems fit according to its situation.
November 2010MAM-2.15.8
The listed company's written guidelines on Permanent Insiders should be submitted to the licensed exchange for approval before being officially implemented. The company shall make its approved guidelines available to its Permanent Insiders, and to ordinary shareholders or any other interested parties.
November 2010MAM-2.15.9
Each listed company shall appoint an officer of the company to maintain and manage the register and requirements imposed by this Module and the licensed exchange.
November 2010Obligations of Capital Markets Service Providers
MAM-2.15.10
Capital Markets Service Providers shall lay down internal guidelines on the prevention of abuse of Inside Information, and compliance with this Module, and the requirements of a licensed exchange in respect of their staff, directors, proprietors and partners dealing in securities of any company listed or to be listed.
November 2010MAM-2.15.11
Capital Markets Service Providers are prohibited from entering any order by any Permanent Insider, if there is any suspicion that this Module or the requirements of a licensed exchange may be violated.
November 2010Obligations of Licensed Exchanges
MAM-2.15.12
The licensed exchanges shall have appropriate systems and procedures to prevent the abuse of inside information and to ensure prompt disclosure by listed companies of price sensitive information, in order to limit the possibility of abuse of inside information.
November 2010MAM-2.15.13
Licensed exchanges shall have appropriate functions and systems to monitor trading and the market on a continuous basis and detect the possible cases of contravention of this Module, including abuse of inside information.
November 2010MAM-2.15.14
Licensed exchanges shall report the detected suspected transactions, or suspected market behaviour or conduct, or suspected cases of market abuse to the CBB's Capital Markets Supervision (CMS) Directorate for further investigation.
November 2010MAM-3 MAM-3 Prohibited Market Conduct
MAM-3.1 MAM-3.1 Prohibited Market Conduct
MAM-3.1.1
Article 106 of the CBB Law states that a person is guilty of market manipulation if he engages or encourages to engage in any conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of any securities or that may give an unrealistic picture of the market regarding the volume and/or prices of any securities. In application of this Article 106 of the CBB Law, the CBB will consider that a person is guilty of market manipulation if he engages or encourages to engage in any act of commission or omission of the prohibited market behaviour or conduct listed in rule MAM-3.1.2.
November 2010MAM-3.1.2
No person shall directly or indirectly:
(a) Engage or encourage others to engage in any behaviour or conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of any securities.(b) Engage or encourage others to engage in any behaviour or conduct that may give an unrealistic picture of the market regarding the volume and/or prices of any securities.(c) Create or do anything that is intended or likely to create a false or misleading appearance:(i) Of active trading in any securities on a securities market;(ii) With respect to the market for, or the price of, such securities; or(iii) By engaging or encouraging others to engage in any act of conducting or attempting to conduct a manoeuver with the intention to impede normal functioning of a market.(d) Maintain, inflate, depress, stabilize, or cause fluctuations in the market price of any securities, or the trading volume of any securities by means of a purchase or sale of any securities that do not involve a change in the beneficial ownership of those securities, or by any fictitious transaction or device.(e) Engage or encourage others to engage in any fraudulent or misleading or manipulative practice, such as to:(i) Employ any device, scheme or artifice to defraud;(ii) buy, sell, intermediate or otherwise deal in securities in a fraudulent manner;(iii) Obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;(iv) Engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser; or(v) Induce, fraudulently, other persons to deal in securities, or trade in futures contracts.(f)Use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a licensed exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the CBB Law or the rules and regulations made thereunder, including the rules and regulations of licensed exchanges.(g)Manipulate or publish or cause to publish or report or cause to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities.(h) Indulge in price manipulation or any act or omission amounting to manipulation of the price or volume of a security.(i) Make a statement, promise, forecast or any other action, or disseminate information that is false or misleading and has or is likely to have an impact on the price or volume of securities.(j) Employ manipulative or deceptive devices or practices.(k) Disseminate information about illegal transactions.(i) Fail, intentionally or recklessly, to notify the licensed exchange or the CBB of such information as is required to be disclosed as per the CBB Law, rules and regulations, Modules on listing requirements, Disclosure Standards and AML/CFT of CBB's Rulebook Volume 6.(m) Indulge in manipulative or fraudulent or unfair trade practices in securities.(n) Advance or agree to advance any money to any person thereby inducing any other person to offer to buy any security in any issue only with the intention of manipulating or securing the minimum subscription to such issue.(o) Enter into a transaction in securities without the intention of performing it, or without the intention of change of ownership of such security.(p) Sell, deal or pledge stolen or counterfeit securities, whether in physical or dematerialized form.(q) Provide clients with such information relating to a security that cannot be verified by the clients before their dealing in such security.(r) Encourage clients to deal in securities solely with the object of enhancing his brokerage or commission.(s) Indulge in buying or selling securities in advance of a substantial client order, or whereby a futures or option position is taken about an impending transaction in the same or related futures or options contract.(t) Plant false or misleading news or rumours, or deceitful information which may induce sale or purchase of securities.November 2010MAM-3.2 MAM-3.2 False Trading and Market Rigging Transactions
MAM-3.2.1
Without prejudice to the provisions of the rule MAM-3.1.2 above, a person who:
(a) Effects, takes part in, is concerned in or carries out directly or indirectly, any transaction of purchase or sale of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities;(b) Makes or causes to be made an offer to sell any securities at a specified price where he has made or caused to be made or proposes to make or to cause to be made, or knows that a person associated with him has made or caused to be made or proposes to make or to cause to be made, an offer to purchase the same number, or substantially the same number of securities at a price that is substantially the same as the first-mentioned price; or(c) Makes or causes to be made an offer to purchase any securities at a specified price where he has made or caused to be made or proposes to make or to cause to be made, or knows that a person associated with him has made or caused to be made or proposes to make or to cause to be made, an offer to sell the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price,shall be deemed to have created a false or misleading appearance of active trading in securities on a securities market.
November 2010MAM-3.2.2
In any proceedings against a person for a contravention of rule MAM-3.1.2 (c) and (d) because of an act referred to in rule MAM-3.2.1, it is a defence if the defendant establishes that the purpose or purposes for which he did the act was not, or did not include, the purpose of creating a false or misleading appearance of active trading in securities on a securities market.
November 2010MAM-3.2.3
For the purposes of rule MAM-3.1.2 (c) and (d) and rule MAM-3.2.1, a purchase or sale of securities does not involve a change in the beneficial ownership if a person who had an interest in the securities before the purchase or sale, or a person associated with the first-mentioned person in relation to those securities, has an interest in the securities after the purchase or sale.
November 2010MAM-3.2.4
In any proceedings against a person for a contravention of rule MAM-3.2.1 in relation to a purchase or sale of securities that did not involve a change in the beneficial ownership of those securities, it is a defence if the defendant establishes that the purpose or purposes for which he purchased or sold the securities was not, or did not include, the purpose of creating a false or misleading appearance with respect to the market for, or the price of, securities.
November 2010MAM-3.2.5
The reference in rule MAM-3.2.1 to a transaction of purchase or sale of securities includes:
(a) A reference to the making of an offer to purchase or sell securities; and(b) A reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to purchase or sell securities.November 2010MAM-3.3 MAM-3.3 Fraudulent Dealings
Fraudulently Inducing Persons to Deal in Securities
MAM-3.3.1
Without prejudice to the provisions of rule MAM-3.1.2 (e), no person shall:
(a) By making or publishing, by any means, any statement, promise or forecast that he knows or ought reasonably to have known to be misleading, false or deceptive;(b) By any dishonest concealment of material facts;(c) By the reckless making or publishing of any statement, promise or forecast that is misleading, false or deceptive; or(d) By recording or storing in, or by means of, any mechanical, electronic or other device information that he knows to be false or misleading in a material particular;induce or attempt to induce another person to deal in securities.
November 2010MAM-3.3.2
In any proceeding against a person for a contravention of rule MAM-3.3.1 constituted by recording or storing information as mentioned in rule MAM-3.3.1 (d), it is a defence if it is established that, at the time when the defendant so recorded or stored the information, he had no reasonable grounds for expecting that the information would be available to another person.
November 2010MAM-3.3.3
In any proceedings against a person for a contravention of rule MAM-3.3.1, the opinion of any registered or public accountant as to the financial position of any company at any time or during any period in respect of which he has made an audit or examination of the affairs of the company according to recognised audit practice shall be admissible, for any party to the proceedings, as evidence of the financial position of the company at any time or during that period, notwithstanding that the opinion is based in whole or in part on book-entries, documents or vouchers or on written or verbal statements by other persons.
November 2010Employment of Manipulative and Deceptive Devices or Practices
MAM-3.3.4
Without prejudice to the provisions of rule MAM-3.1.2 (e), no person shall, directly or indirectly, in connection with the subscription, purchase or sale of any securities:
(a) Employ any device, practice, scheme or artifice to defraud;(b) Engage in any act or course of business which operates as a fraud or deception, or is likely to operate as a fraud or deception, upon any person;(c) Make any statement he knows to be false in a material particular; or(d) Omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.November 2010MAM-3.4 MAM-3.4 Dissemination of Information about Illegal Transactions
MAM-3.4.1
Without prejudice to the provisions of section MAM-3.1, no person shall circulate or disseminate, or authorise or be concerned in the circulation or dissemination of, any statement or information to the effect that the price of any securities will, or is likely, to rise or fall or be maintained by reason of a transaction entered into, or to be entered into, or other act or thing done or to be done in relation to such securities which to his knowledge, was entered into or done in contravention of section MAM-3.1, or if entered into or done would be in contravention of section MAM-3.1, if:
(a) The person, or a person associated with the person, has entered into or purports to enter into any such transaction or has done or purports to do any such act or thing; or(b) The person, or a person associated with the person, has received, or expects to receive, directly or indirectly, any consideration or benefit for circulating or disseminating, or authorising or being concerned in the circulation or dissemination, the statement or information.November 2010MAM-3.5 MAM-3.5 False or Misleading Statements
MAM-3.5.1
Without prejudice to the provisions of rule MAM-3.1.2 (e) and (f), no person shall make a statement, or disseminate information, that is false or misleading in a material particular and is likely:
(a) To induce other persons to subscribe for securities;(b) To induce the sale or purchase of securities by other persons; or(c) To have the effect of raising, lowering, maintaining or fixing the market price of securities;if, when he makes the statement or disseminates the information:
(a) He does not care whether the statement or information is true or false; or(b) He knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.November 2010MAM-3.6 MAM-3.6 Price Manipulation
MAM-3.6.1
Without prejudice to the provisions of rule MAM-3.1.2, no person shall effect, take part in, be concerned in or carry out, directly or indirectly, two or more transactions in securities, being transactions that have, or are likely to have, the effect of raising, lowering, maintaining or fixing the price of securities on a securities market, with intent to induce other persons to subscribe for, purchase or sell securities of the company or of a related company.
November 2010MAM-3.6.2
A reference to rule MAM-3.6.1 (a) or (b) to transactions in securities includes:
(a) A reference to the making of an offer to purchase or sell such securities; and(b) A reference to the making of an invitation, however expressed, that directly or indirectly invites a person to offer to purchase or sell such securities.November 2010MAM-3.7 MAM-3.7 Continuous Disclosure
MAM-3.7.1
This rule shall apply to:
(a) An entity the securities of which are listed for quotation on a licensed exchange;(b) A trustee of a business trust, where the securities of the business trust are listed for quotation on a securities exchange; or(c) A responsible person of a Collective Investment undertaking or business trust, where the units of the Collective Investment scheme are listed for quotation on a securities exchange.if the entity, trustee or responsible person is required by the licensed exchange under the listing rules or any other requirement of the licensed exchange to notify the licensed exchange of information on specified events or matters as they occur or arise for the purpose of the licensed exchange making that information available to a securities market operated by the licensed exchange.
November 2010MAM-3.7.2
The persons specified in rule MAM-3.7.1 shall not intentionally, recklessly or negligently fail to notify the licensed exchange of such information, as is required to be disclosed by the licensed exchange under the listing rules or any other requirement of the licensed exchange.
November 2010MAM-3.7.3
A contravention of rule MAM-3.7.2 shall not be an offence unless the failure to notify is intentional or reckless.
November 2010MAM-3.8 MAM-3.8 Fraudulent and Manipulative Practices in Offering Or Issuing Securities
MAM-3.8.1
Without prejudice to section MAM-3.1, no person shall either directly or indirectly:
(a) Obtain or participate in a subscription for any offering or issue of securities or use the proceeds thereof, in a fraudulent or manipulative manner, or in contravention of the CBB Law, the Offering Module or other applicable laws, rules and regulations; or(b) Induce or compel any person to surrender any rights attached to a security, including voting rights or the ability to appoint a proxy, either as a pre-condition for subscription of such security or otherwise;(c) Manipulate or fraudulently secure a minimum subscription of any offering or issue of securities, either by accepting a subscription in contravention of the Anti-Money Laundering (AML) and Combating Financial Crime (CFC) Laws and regulations, or by accepting incomplete subscription forms or otherwise.(d) Make a reference to the CBB's or any other authority's approval for the purpose of marketing of or obtaining subscription for any offering or issue of securities, or give a misleading appearance that such an approval or no-objection relates to financial soundness of any project or merits of any offering or issue of securities.November 2010MAM-3.9 MAM-3.9 Prohibited Conduct — Futures Contract and Leveraged Foreign Exchange Trading
False Trading — Futures Contracts and Leveraged Foreign Exchange Trading
MAM-3.9.1
Without prejudice to section MAM-3.1, no person shall create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any futures contract on a futures market or in connection with leveraged foreign exchange trading, or a false or misleading appearance with respect to the market for, or the prices of futures contracts on a futures market or foreign exchange, in connection with leveraged foreign exchange trading.
November 2010Bucketing
MAM-3.9.2
Without prejudice to section MAM-3.1 no person shall:
(a) Knowingly execute, or hold himself out as having executed, an order for the purchase or sale of a futures contract on a futures market, without having effected a bona fide purchase or sale of the futures contract in accordance with the business rules, practices and procedures of the licensed exchange;(b) Knowingly execute, or hold himself out as having executed, an order to make a purchase or sale of foreign exchange in connection with leveraged foreign exchange trading, without having effected a bona fide purchase or sale in accordance with the order.November 2010Manipulation of Price of Futures Contract and Cornering
MAM-3.9.3
Without prejudice to section MAM-3.1 no person shall, directly or indirectly:
(a) Manipulate or attempt to manipulate the price of a futures contract that may be dealt in on a futures market, or of any commodity which is the subject of such futures contract; or(b) Corner, or attempt to corner, any commodity which is the subject of a futures contract.November 2010Fraudulently Inducing Persons to Trade in Futures Contracts
MAM-3.9.4
Without prejudice to section MAM-3.1 no person shall:
(a) By making or publishing any statement, promise or forecast that he knows or ought reasonably to have known to be false, misleading or deceptive;(b) By any dishonest concealment of material facts;(c) By the reckless making or publishing of any statement, promise or forecast that is false, misleading or deceptive; or(d) By recording or storing in, or by means of hard copy or any mechanical, electronic or other device information that he knows to be false or misleading in a material particular;induce or attempt to induce another person to trade in a futures contract or engage in leveraged foreign exchange trading.
November 2010MAM-3.9.5
In any proceedings against a person for a contravention of rule MAM-3.9.4, constituted by recording or storing information as mentioned in rule MAM-3.9.4 (d), it is a defence if it is established that, at the time when the defendant so recorded or stored the information, he had no reasonable grounds for expecting that the information would be available to another person.
November 2010Employment of Fraudulent or Deceptive Devices and Practices
MAM-3.9.6
Without prejudice to section MAM-3.1 no person shall directly or indirectly, in connection with any transaction involving trading in a futures contract or leveraged foreign exchange trading:
(a) Employ any device, scheme or artifice to defraud;(b) Engage in any act, practice or course of business which operates as a fraud or deception, or is likely to operate as a fraud or deception, upon any person;(c) Make any false statement of a material fact; or(d) Omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.November 2010Dissemination of Information about Illegal Transactions
MAM-3.9.7
Without prejudice to section MAM-3.1 no person shall circulate, disseminate, or authorise or be concerned in the circulation of dissemination of, any statement or information to the effect that the price of a class of futures contracts or foreign exchange in connection with leveraged foreign exchange trading will, or is likely to, rise or fall or be maintained because of the market operations of one or more persons which, to his knowledge, are conducted in contravention of section MAM-3.1 if:
(a) The person, or a person associated with the person, has conducted such market operations; or(b) The person, or a person associated with the person, has received, or expects to receive, directly or indirectly, any consideration or benefit for circulating or disseminating or authorising or being concerned in the circulation or dissemination, the statement or information.November 2010MAM-3.10 MAM-3.10 Methods of Market Abuse and Manipulation
MAM-3.10.1
A person who engages or encourages others to engage in market manipulation by his acts of commission or omission will be liable for penalties under the CBB Law, irrespective of the methods used for market manipulation. Methods of market abuse and market manipulation may include but not be limited to the methods mentioned in rules MAM-3.10.2 to MAM-3.10.38.
(a) Abuse of information:Amended: July 2021
November 2010Insider Dealing
MAM-3.10.2
Frontrunning: Frontrunning (or trading ahead) occurs when a broker times the purchase or sale of shares of a security for his own account so as to benefit from the price movement that follows execution of large customer orders. Frontrunning involves a trader taking a position in a security to profit from advance non-public knowledge of an imminent order that may affect the market price of that security.
November 2010MAM-3.10.3
Tailgating: When a broker or adviser buys or sells a security for an informed client(s) and then immediately makes the same transaction in his or her own account.
November 2010MAM-3.10.4
Spreading False Information to Purchase at Bargain Prices: An unlawful practice occurring mainly on the internet. A small group of informed people attempt to push down a stock by spreading false information and rumours. If they are successful, they can purchase the stock at bargain prices.
November 2010Improper Disclosure
MAM-3.10.5
Concealing Ownership: This is a transaction or a series of transactions which is designed to conceal the ownership of a security via the breach of disclosure requirements through the holding of the instrument in the name of a colluding party (or parties). The disclosures are misleading in respect of the true underlying holding of the instrument. (This practice does not cover cases where there are legitimate reasons for securities to be held in the name of a party other than the beneficial owner; e.g. nominee holdings. Nor do all failures to make a required disclosure necessarily constitute market manipulation.)
November 2010MAM-3.10.6
Touting: The practice refers to any person who is paid directly or indirectly, to recommend the sale of any security, without disclosing this fact and the amount of compensation to be received. Once someone is paid to recommend a security, this information should be provided to the market. Touting is also an unlawful practice in the securities market, since it does not follow the principle of full disclosure to the market and gives an unfair advantage to some investors over others.
November 2010Misuse of Information
MAM-3.10.7
Pump and Dump: This practice involves taking a long position in a security and then undertaking further buying activity and/or disseminating misleading positive information about the security with a view to increasing the price of the security. Other market participants are mislead by the resulting effect on price and are attracted into purchasing the security. The manipulator then sells out at the inflated price. Pump and dump is a scheme that attempts to boost the price of a stock through brokers recommendations, internet forums, or cold calling based on false, misleading or greatly exaggerated statements, and the perpetrators of this scheme, who already have an established position in the company's stock, sell their positions after the hype has led to a higher share price.
November 2010MAM-3.10.8
Trash and Cash: Trash and cash (or "slur and slurp") is the opposite of pump and dump. A party will take a short position in a security; undertake further selling activity and/or spread misleading negative information about the security with the purpose of driving down its price. The manipulator then closes their position after the price has fallen.
November 2010MAM-3.10.9
Influencing Market Price without Controlling the Available Supply or Demand: An individual may not control the supply of a security or the asset underlying a derivative contract, but may use various other means to manipulate the price, such as disseminating false information about the relevant company or taking advantage of a congested market. False information about the company or the derivative or cash market, which influences the price of the company's shares or of the asset underlying a derivative contract may be disseminated in publicly filed financial statements, press releases, or through some other medium.
November 2010MAM-3.10.10
Boiler Room Sales: Boiler rooms use banks of telephones to make cold calls to as many potential investors as possible using high-pressure selling techniques to persuade investors to purchase "house stocks"- stocks that the firm buys or sells as a market maker or has in its inventory. Boiler room operators typically sell worthless shares or thinly traded stocks of "microcap" or "small cap" companies.
November 2010MAM-3.10.11
Cybersmear: Cybersmear is a practice in which individuals post malicious messages about businesses in online forums, to manipulate the stock or to hurt a company they have a grievance against.
November 2010MAM-3.10.12
Scalping: Scalping is the fraudulent trading practice that occurs when a person buys shares of thinly-traded, small-cap companies, recommending the companies to the general public, and then selling the majority of his shares when the increased demand generated by his favourable recommendations drove up the stock price.
November 2010MAM-3.10.13
False Market: A market where prices are manipulated and impacted by erroneous information, preventing the efficient negotiation of prices. These types of markets will often be marred by volatile swings because the true value of the market is clouded by the misinformation.
November 2010MAM-3.10.14
Short and Distort (Bear Raid): An unlawful practice employed by unethical investors who short-sell a stock and then spread unsubstantiated rumours and other kinds of unverified bad news in an attempt to drive down the equity's price and realize a profit.
November 2010MAM-3.10.15
Long and Distort: An unlawful practice employed by unethical investors who buy a stock and then spread unsubstantiated rumours and other kinds of unverified good news in an attempt to drive up the equity's price and realize a profit.
November 2010MAM-3.10.16
Stock Basher: An individual, either acting alone or on behalf of someone else, who attempts to devalue a stock by spreading false or exaggerated claims against a public company. After the stock's price has dropped, the basher, or the basher's employer, will then purchase the stock at a lower price than that he or she believes it is intrinsically worth.
(b) Market Manipulation:November 2010Manipulating Transactions
MAM-3.10.17
Painting the Tape: This practice involves engaging in a transaction or series of transactions which are shown on a public display facility to give the impression of activity or price movement in a security. This may include an unlawful practice in which traders buy and sell a specific security among themselves, creating the illusion of high trading volume and significant investor interest, which can attract unsuspecting investors who might then buy the stock and enable the traders to profit. Or, an unlawful action by a group of market manipulators buying and/or selling a security among themselves to create artificial trading activity, which, when reported on the ticker tape, lures in unsuspecting investors as they perceive an unusual volume.
November 2010MAM-3.10.18
Wash Sales: This is the practice of entering into arrangements for the sale or purchase of a security where there is no change in beneficial interests or market risk, or where the transfer of beneficial interest or market risk is only between parties who are acting in concert or collusion. (Repo transactions and stock lending/borrowing or other transactions involving transfer of securities as collateral do not constitute wash trades.) Wash sales include an unlawful transaction a trader makes by simultaneously buying and selling a security through two different brokers, thereby creating the illusion of activity. The trader sometimes would use a relative to conclude such manipulative transactions.
November 2010MAM-3.10.19
Improper Matched Orders: Transactions where both buy and sell orders are usually entered at the same time, with the exact same price and quantity by different but colluding parties.
November 2010MAM-3.10.20
Marking the Close: Marking the close (or ramping) involves deliberately buying or selling securities or derivatives contracts at the close of the market in an effort to alter the closing price of the security or derivatives contract. This practice may take place on any individual trading day but is particularly associated with dates such as future/option expiry dates or quarterly/annual portfolio or index reference/valuation points.
November 2010MAM-3.10.21
Cornering the Market: Securing such control of the bid or demand-side of both the derivative and the underlying asset that leads to a dominant position. This position can be exploited to manipulate the price of the derivative and/or the asset. With regards to derivatives, in a corner, a market participant or group of participants accumulates a controlling position in an asset in the cash, derivative and other markets. The market participant or group of participants then requires those holding short positions to settle their obligations under the terms of their contracts, either by making delivery or by purchasing the asset from the manipulator or by offsetting in the derivatives market opposite the manipulator at prices distorted by the manipulators.
In the context of a futures contract and leveraged foreign trading corners or attempts to corner, any commodity which is the subject of a futures contract.
November 2010MAM-3.10.22
Abusive Squeeze: This involves a party or parties with a significant influence over the supply of, or demand for, or delivery mechanisms for a security and/or the underlying product of a derivative contract exploiting a dominant position in order materially to distort the price at which others have to deliver, take delivery or defer delivery of the security/product in order to satisfy their obligations.
November 2010MAM-3.10.23
Capping and Pegging: This practice involves activity on both the stock market and the derivatives market. A trader writes an option, which obliges the trader to sell to (in the case of a call option) or buy from (in the case of a put option) the option holder a specified number of shares covered by the option in order to affect the share price in a direction that will make the option unprofitable to exercise.
November 2010MAM-3.10.24
Manipulative Naked Short Sales: A short sale is generally the sale of a stock the seller does not own. In a "naked" short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard settlement period. As a result, the seller fails to deliver securities to the buyer when delivery is due. Selling stock short and failing to deliver shares at the time of settlement with the purpose of driving down the security's price is a manipulative activity.
November 2010MAM-3.10.25
Pooling and Churning: "Pooling and Churning" can involve wash sales or pre-arranged trades executed in order to give an impression of active trading, and therefore investor interest in the stock.
November 2010MAM-3.10.26
Interpositioning: Interpositioning involves a 2-step process that allows the brokerage firm to generate a profit for the brokerage firm from the spread between two opposite trades. Interpositioning can take various forms. In one form, the broker purchases stock for the brokerage firm's proprietary account from the customer sell order; and then fills the customer buy order by selling from the brokerage firm's proprietary account at a higher price — thus locking in a riskless profit for the brokerage firm's proprietary account. A second form of interpositioning involves the broker selling stock into the customer buy order, and then filling the customer sell order by buying for the brokerage firm's proprietary account at a lower price — again, locking in a riskless profit for the brokerage firm's proprietary account. In both forms of interpositioning, the broker participates on both sides of the trade, thereby capturing the spread between the purchase and sale prices, disadvantaging at least one of the parties to the transaction.
November 2010MAM-3.10.27
Late Trading: This involves purchasing mutual fund shares at the closing price after the market closes. This is an investment technique involving short-term "in and out" trading of mutual fund shares, which has a detrimental effect on the long-term shareholders. The technique is designed to exploit market inefficiencies when the "net asset value" of the mutual fund shares; which is set at the market close, does not reflect the current market value of the stocks held by the mutual fund. When a "market timer" buys mutual fund shares at the stale NAV, it realizes a profit when it sells those shares the next trading day or thereafter. That profit dilutes the value of shares held by long term investors. Late Trading (or market timing) includes: (a) frequent buying and selling of shares of the same mutual fund; or (b) buying or selling mutual fund shares in order to exploit inefficiencies in mutual fund pricing. Market timing, while not illegal per se, can harm other mutual fund shareholders because it can dilute the value of their shares, if the market timer is exploiting pricing inefficiencies, or disrupt the management of the mutual funds' investment portfolio and can cause the targeted mutual fund to incur costs borne by other shareholders to accommodate frequent buying and selling of shares by the market timer.
November 2010MAM-3.10.28
Holding the Market: The practice of placing active or pending orders for a security into a market where the price is dropping rapidly in an attempt to "hold" the price of the security steady, or create a floor in the security. This practice is unlawful except when a broker or other party is mandated to keep the price of a security steady as part of Price Stabilization or a buy-back programme. This is only done in rare cases where there is not enough market depth to hold the price.
November 2010MAM-3.10.29
Ghosting: An unlawful practice whereby two or more market makers or brokers collectively attempt to influence and change the price of a stock. Ghosting is used to affect stock prices so the manipulators can profit from the price movement.
November 2010MAM-3.10.30
Freeriding: An unlawful practice in which an underwriting syndicate member withholds part of a new securities issue and later sells it at a higher price. This practice involves the unlawful activity of buying a stock and selling it before paying for the purchase.
November 2010MAM-3.10.31
Bucketing: A brokerage that makes trades on a client's behalf and promises a certain price and/or confirms execution of an order to a client without actually executing it. The brokerage however, waits until a different price arises and then makes the trade, keeping the difference as profit in an attempt to make a short-term profit.
November 2010MAM-3.10.32
Portfolio Pumping. The unlawful act of bidding up the value of a fund's holdings right before the end of a quarter, when the fund's performance is measured. This is done by placing a large number of orders on existing holdings, which drives up the value of the securities within the Portfolio.
November 2010Manipulating Devices
MAM-3.10.33
Advancing the Bid: Increasing the bid for a security to increase its price artificially, creating the impression of strength or the illusion that stock activity was causing the increase.
November 2010MAM-3.10.34
Placing Orders without Intention to Execute: This involves the entering of orders, especially into electronic trading systems, which are higher/lower than the previous bid/offer. The intention is not to execute the order but to give a misleading impression that there is demand for or supply of the security at that price. The orders are then withdrawn from the market before they are executed. (A variant on this type of market manipulation is to place a small order to move the bid/offer price of the security and being prepared for that order to be executed if it cannot be withdrawn in time.) These manipulative orders are entered in the pre-open sessions and also during the normal trading sessions.
November 2010MAM-3.10.35
Excessive Bid-ask Spreads: This conduct is carried out by intermediaries which have market power, such as specialists or market makers acting in cooperation, in such a way intentionally to move the bid-ask spread to and/or to maintain it at artificial levels and far from fair values, by abusing their market power, i.e. the absence of other competitors.
November 2010Misleading Behaviour and Distortion
MAM-3.10.36
Short and Extort: This practice occurs when short sellers state, for example posting messages on message boards, they would stop shorting the stock if they were given money or free shares.
November 2010MAM-3.10.37
Spoofing: Spoofing (or small lot bailing) is a fraudulent trading practice that occurs when a person uses a displayed limit order to manipulate prices, entering quotes followed by virtually simultaneous cancellations, obtaining an improper trading advantage. The order is placed with the intention of briefly triggering a market movement from which the participant or others may benefit by trading the opposite side of the original manipulative order.
November 2010MAM-3.10.38
Overtrading: An unethical practice employed by some brokers to increase their commissions by excessively trading in a client's account. It is also referred to as "churn and burn", "twisting" and "churning".
November 2010MAM-3.11 MAM-3.11 Motives and Parties Involved in Market Manipulation
MAM-3.11.1
Any manipulative behaviour or conduct prohibited under this Module will attract a penalty specified in Article 106 of the CBB Law and other enforcement actions by the CBB, irrespective of the objective of such manipulative market behaviour or conduct.
However, the CBB would investigate into the intentions behind the market behaviour or conduct and the objectives of the market behaviour or conduct of the various parties while dealing with suspected market behaviour or conduct cases.
(a) Some examples of such motives include:(i) Influencing the price or value of a security or a derivative contract, so that the manipulator can:• Buy at a lower price;• Sell at a higher price;• Influence takeover bids, or other large transactions; or• combat competitive transactions;(ii) Influencing the price of a derivative contract or the underlying asset;(iii) Influencing the subscription price in public or non-public offerings;(iv) Influencing the price/conversion ratio in connection with the merger of companies;(v) Influencing the price of a security in connection with take-over offers;(vi) Influencing someone to subscribe for, purchase, or sell assets or rights to assets, or to abstain from doing so;(vii) Influencing the accounts/balance sheet of institutional investors;(viii) Influencing the limit for triggering forced sale by creditors; and(ix) Influencing the impression of financial advice or placements.(b) Any person who violates, or aides or abets any violation of the provisions of this Module will be liable for penalty and other enforcement actions under the CBB Law, irrespective of the status or position of the person involved. Those in a position to effect a manipulation include:(i) Issuers of securities;(ii) Participants in the securities market, derivatives market or underlying cash market, including investors and institutions;(iii) Market intermediaries;(iv) Financial analysts;(v) Any other person;(vi) Any combination of the above acting in cooperation with one another; and(vii) Any person aiding or abetting the person(s) involved in prohibited behaviour or conduct.November 2010MAM-3.12 MAM-3.12 Error Trades
MAM-3.12.1
Every licensed exchange and market operator should have policies and systems for error trades which should be transparent and applied consistently and fairly, so that the brokerage firms and their representatives are made accountable for providing correct information with regards to the investor's and transaction details at the time of entering the orders into the trading systems of the licensed exchanges or market operators.
November 2010MAM-3.12.2
All transaction information after execution in the Automated Trading System of licensed exchanges must not be changed except when there is a misallocation of the Investor Account. Such change can only be made subject to the prior approval of the licensed exchange and any change after the settlement period can be made only after obtaining the CBB's Capital Markets Supervision Directorate's written approval.
November 2010MAM-3.12.3
A repeated pattern of error trades could be indicative of possible manipulation or other abuse market activity and the licensed exchanges should have adequate systems in place to detect such activities and report to the CBB.
November 2010MAM-3.12.4
If there is an error trade which is caused by mistake or lapse on the part of a brokerage firm, the cost for correcting such error trade shall be borne by the respective brokerage firm.
November 2010MAM-3.13 MAM-3.13 Defences
MAM-3.13.1
A person shall not be guilty of violation of section MAM-3.1 if he proves that his reasons for engaging in the alleged behaviour or conduct were legitimate and that he had acted in conformity with the accepted market practices in the market concerned, or that he had acted in conformity with any price stabilization rules or market making rules made/approved by the Central Bank, or if he believed on reasonable grounds that his behaviour or conduct did not violate Article 106 of the CBB Law, and that he had taken all reasonable precautions and exercised all due diligence to avoid behaving in any way against the said Article.
November 2010MAM-4 MAM-4 Exemption for Price Stabilization
MAM-4.1 MAM-4.1 Exemption for Price Stabilization
MAM-4.1.1
Price stabilization action taken by a designated market maker who is also a Category 1 Investment Firm Licensee acting as or on behalf of the Price Stabilization Manager in Bahrain in respect of an initial public offering, shall not be considered as market manipulation or abuse of inside information, if and only if, the conditions mentioned in section MAM-4.2 are satisfied.
November 2010MAM-4.1.2
For the purposes of sections MAM-4.1 and MAM-4.2, unless the context otherwise requires:
(a) ''Closing Date" in relation to an offer, means the date specified in the offer document as the last date for the submission of applications for subscription or purchase of the securities being offered.(b) "Dealer' means a Category 1 Investment Firm Licensee acting on behalf of a Price Stabilization Manager.(c) "Issuer" in relation to an offer, means the person who issues the securities being offered or, where the securities have been issued, the person making the offer.(d) "Offer" means an offer to the public for subscription or purchase of securities in conjunction with the listing of such securities on a licensed exchange, or on both a securities exchange and an overseas securities exchange, as the case may be, where the securities are not previously listed on any licensed exchange or overseas securities exchange.(e) "Offer Price" in relation to an offer, means the price of the securities being offered, or where the securities are offered in more than one tranche at different prices, the highest price offered, after deducting any concession, commission, brokerage, transaction fee or levy.(f) "Over-Allotment" in relation to an offer, means the allotment or sale of a number of the relevant securities in excess of the number of the securities available for subscription or purchase under the offer.(g) "Relevant Securities" in relation to an offer, means the securities which are, or when issued will be, uniform in all respects with the securities being offered under the offer and includes the securities being offered under the offer.(h) 'Stabilizing Action" in relation to an offer, means the action taken in Bahrain or elsewhere by a stabilizing manager, or by a Category 1 Licensee on behalf of the stabilizing manager:(i) Where the securities being offered under the offer are debentures, to buy or to offer or agree to buy, any relevant securities; or(ii) In any other case, to buy or offer or agree to buy any relevant securities on the securities market;In order to stabilize or maintain the market price of such securities in Bahrain or elsewhere.(i) "Stabilizing Manager" in relation to an offer, means a person:(i) Who is appointed in writing by the issuer of an offer to take stabilizing action in respect of the offer; and(ii) Whose appointment under paragraph (i) is notified to the licensed exchange on which the relevant securities are or are intended to be listed before the closing date of the offer.November 2010MAM-4.2 MAM-4.2 Conditions for Exemption for Stabilizing Action
MAM-4.2.1
In order to be eligible for exemption under rule MAM-4.1.1, the stabilizing action taken must be in respect of an offer of securities where:
(a) The relevant securities are or are intended to be listed on a licensed exchange or on both a licensed exchange and an overseas securities exchange, as the case may be;(b) The price stabilization scheme, the total value of securities and the maximum number of securities that the price stabilization manager can buy or sell are approved by the CBB at the time of permitting the issue or listing of relevant securities;(c) The offer document states:(i) That stabilizing action may be taken in respect of the relevant securities;(ii) The maximum period during which stabilizing action may be taken;(iii) The total nominal value or number, as the case may be, of the securities which are the subject of an over-allotment option, if applicable; and(iv) The total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action, which shall not exceed the value or number approved by the CBB, as the case may be;(d) A public announcement has been made, through the licensed exchange on which the relevant securities are or are intended to be listed, on the business day of that licensed exchange immediately following the closing date of the offer, stating:(i) That such securities may be subject to stabilizing action;(ii) The maximum period during which stabilizing action may be taken;(iii) The total nominal value or number, as the case may be, of the securities which are the subject of an over-allotment option, if applicable; and(iv) The total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action, which shall not exceed the value or number approved by the CBB, as the case may be; and(e) The offer is on cash terms and is to be, is or has been, made at a specified price payable in any currency acceptable to the CBB.November 2010MAM-4.2.2
The stabilizing manager shall:
(a) Take stabilizing action only after he is reasonably satisfied that the price of the relevant securities is not false or misleading; and(b) Shall continue with the stabilizing action only after he is reasonably satisfied that the price of the relevant securities has not become false or misleading other than by reason of any stabilizing action.November 2010MAM-4.2.3
No stabilizing action shall be taken before the following date:
(a) Where the relevant securities are debt securities, the date on which the earliest public announcement of the offer which states the offer price is made through the licensed exchange on which the relevant securities are or are intended to be listed;(b) In any other case;(i) The date of commencement of trading in the securities being offered on the licensed exchange or the overseas securities exchange, as the case may be; or(ii) Where the relevant securities are offered on both the licensed exchange and the overseas exchange, the earlier of the dates of commencement of trading in the securities on these exchanges.November 2010MAM-4.2.4
No stabilizing action shall be taken:
(a) Where the relevant securities are debt securities, after the earlier of the following dates:(i) The date of expiry of the period of 30 calendar days from the date of commencement of trading in the securities being offered on the licensed exchange or the overseas securities exchange, or the date of expiry of the period of 60 calendar days from the date on which the earliest public announcement of the offer which states the offer price is made through the licensed exchange on which the relevant securities are or are intended to be listed, whichever is the earlier;(ii) The date on which the stabilizing manager has bought, whether on the securities exchange, the overseas securities exchange or both, the total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action as stated in the offer document under rule MAM-4.2.1 (c).(b) In any other case, after the earlier of the following dates:(i) The date of expiry of the period of 30 calendar days from the date of commencement of trading in the securities being offered on the securities exchange or the overseas securities exchange;(ii) The date that the stabilizing manager has bought, whether on the securities exchange, the overseas securities exchange or both, the total nominal value or number, as the case may be, of the relevant securities that the stabilizing manager may buy to undertake stabilizing action as stated in the offer document under rule MAM-4.2.1 (c).November 2010MAM-4.2.5
No stabilizing action may be taken in respect of an offer of securities (other than debt securities) at a price higher than the offer price, or the price determined on the basis indicated in the offering document at the time of obtaining the CBB's permission for the issue or listing.
November 2010MAM-4.2.6
Subject to rule MAM-4.2.7 the stabilizing manager shall not effect or cause to be effected, directly or indirectly, any sell order of the relevant securities prior to the date of commencement of each stabilizing action or during the period in which stabilizing action is permitted under this Module.
November 2010MAM-4.2.7
Nothing in rule MAM-4.2.6 shall prohibit:
(a) The stabilizing manager; or(b) An associate of the stabilizing manager, in the associate's capacity as a dealer;from executing any sell order of the relevant securities for a person who is not an associate of the issuer of the offer of securities.
November 2010MAM-4.2.8
The stabilizing manager shall:
(a) Keep a register in such form as the securities exchange on which the relevant securities are listed may require; and(b) Record in the register the particulars of each transaction to buy the relevant securities entered into in connection with the stabilizing action, including the price, quantity and name of the dealer, before the end of the day on which the transaction is entered into.November 2010MAM-4.2.9
Where the register referred to in rule MAM-4.2.8 is kept in Bahrain, it shall be made available by the stabilizing manager for inspection by the CBB, or the licensed exchange on which the relevant securities are listed, within such time as may be stipulated by the CBB or that licensed exchange, as the case may be.
November 2010MAM-4.2.10
Where the register referred to in rule MAM-4.2.8 is kept outside Bahrain:
(a) It shall be capable of being brought into Bahrain and made available by the stabilizing manager for inspection by the CBB, or the licensed exchange on which the relevant securities are listed, within such time as may be stipulated by the CBB or that licensed exchange, as the case may be;(b) If it is not capable of being brought into Bahrain, a copy of the register certified to be a true copy by the stabilizing manager shall be brought into Bahrain and made available by the stabilizing manager for inspection by the CBB or the licensed exchange on which the relevant securities are listed, within such time as may be stipulated by the CBB or that licensed exchange, as the case may be.November 2010MAM-4.2.11
The stabilizing manager shall:
(a) Before the closing date of the offer of securities, inform the licensed exchange on which the relevant securities are or are intended to be listed of the name of any dealer, whether in Bahrain or elsewhere, appointed by the stabilizing manager to take the stabilizing action; and(b) Inform that licensed exchange of any subsequent change of dealer immediately upon such change.November 2010MAM-4.2.12
Where, pursuant to any stabilizing action, a transaction to buy any relevant securities (other than debt securities) has been effected, the stabilizing manager shall make a public announcement through the licensed exchange on which the relevant securities are listed of the number of the securities bought by the stabilizing manager and the price range, no later than 12 noon on the first full trading day of that licensed exchange immediately following the day on which the transaction was effected, whether in Bahrain or elsewhere.
November 2010MAM-4.2.13
The stabilizing manager shall make a public announcement through the licensed exchange on which the relevant securities are listed of the cessation of any stabilizing action, whether in Bahrain or elsewhere, no later than the start of the trading day of that licensed exchange immediately following the day of cessation of the stabilizing action.
November 2010MAM-4.2.14
No stabilizing action in respect of an offer shall be taken after the public announcement of the cessation referred to in rule MAM-4.2.13.
November 2010MAM-5 MAM-5 Penalty for Contravention
MAM-5.1 MAM-5.1 Penalty for Contravention
MAM-5.1.1
Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any person who contravenes any of the provisions of this Module shall be liable for penalties and enforcement actions stipulated under various provisions of the CBB Law including, but not limited to, criminal sanctions, fines, imprisonment, suspension of license, public censure, freezing of accounts, cease and desist order and specific directives.
November 2010MAM-5.1.2
The CBB's investigation and enforcement proceedings and procedures, as set out in the Market Surveillance, Investigation and Enforcement (MIE) Module will be applicable for contraventions of this Module.
November 2010MIE — Market Surveillance, Investigation & Enforcement
MIE-A MIE-A Introduction
MIE-A.1 MIE-A.1 Purpose
Executive Summary
MIE-A.1.1
The Central Bank of Bahrain’s (CBB) statutory regulatory objectives include maintaining and promoting the fairness, efficiency, competitiveness, transparency and orderliness of the
securities markets in the Kingdom of Bahrain. The CBB believes that investor confidence in the fairness of markets enhances liquidity and efficiency of the markets and for this purpose, it is essential that the laws and standards governing the markets are rigorously and credibly enforced. In this respect, the CBB is making continuous efforts to ensure that the rules are strongly and fairly enforced, with proscribed behaviour clearly and unambiguously defined.Amended: July 2021The CBB's Enforcement Responsibilities
MIE-A.1.2
The CBB's key enforcement-related aims are to protect investors and maintain market integrity and confidence. The CBB's regulatory framework needs to address stray cases of non-compliance to ensure that such contraventions of relevant laws, rules and regulations:
• do not cause potential loss to the investing public;• do not disrupt the financial sector in general and the capital market in particular;• do not adversely impact the Kingdom's credibility as an international financial centre;• do not encourage non-compliance or contravention of rules; and• do not unfairly disadvantage the market participants who comply with all laws, rules and regulations.MIE-A.1.3
The Market Surveillance, Investigation and Enforcement Module (MIE Module) sets out the CBB's regulatory framework governing the mechanisms and proceedings relating to detection and
investigation of breaches of laws, rules and regulations and the appropriate enforcement actions. The process of enforcing the laws and regulations generally involves three main steps:• Market Surveillance: identifying that a potential breach of the relevant laws or regulations has taken place and identification of those responsible for the potential breach;• Investigation: once there is a suspected case of a breach of relevant laws or standards, the CBB may conductinvestigations or enquiries to find out what has happened, and whether there is any evidence of a breach; and• Enforcement: taking necessary steps to protect the public interest and if appropriate, to punish those responsible for the breach.The CBB's Approach to Enforcement
MIE-A.1.4
The CBB's approach is to provide a strong and facilitative regulatory framework along with an effective enforcement of regulatory requirements. While the CBB favours an open and pragmatic approach to supervision within the boundaries set by the law and the CBB's regulations, it ensures effective enforcement of regulatory requirements.
MIE-A.1.5
The CBB seeks to clearly lay down the rules that will be applied transparently and consistently to ensure that the bona fide investors and market participants are not inconvenienced in their normal course of business, by enabling them to take all reasonable precautions and exercise due diligence to avoid their engagement in prohibited market conducts.
MIE-A.1.6
The CBB is guided by the following principles of regulation and enforcement:
• Firmness — firm and appropriate action against those who harm investors or damage market integrity, regardless of their position or status.• Fairness — treat everyone fairly. The requirements of procedural fairness and natural justice are important in CBB's decision-making processes.• Consistency — try to ensure that consistency is maintained in decisions or actions whilst having regard to the specific circumstances of each case.• Proportionality — try to ensure that decisions or actions are proportionate, or balanced. For example, take tough action against serious misconduct but more lenient action against less serious conduct.MIE-A.1.7
The CBB's enforcement actions are aimed at achieving the following:
• Prevention — it is better to stop improper conduct before it happens. To achieve this, the CBB encourages market participants to foster a culture of compliance. The investing public can also help by learning how to look after their own rights and interests.• Remedying what has happened — if a breach has already occurred, the CBB will take appropriate steps in terms of applicable laws, rules and regulations to remedy it and look at each situation in light of its particular circumstances and consider what might be appropriate courses of action. It is important to note that, although the CBB is required to act in the public interest, the CBB cannot seek compensation for those who have suffered loss as a result of a breach, or directly assist them in their attempts to seek compensation through the courts.• Punishing wrongdoers and deterring others — in general, punishment is usually appropriate for those who engage in wrongdoing. Punishment serves a number of purposes. Firstly, it is an effective tool to deter wrongdoers from engaging in further wrongdoing. Punishment may also deter others from engaging in wrongdoing. Thus, it has a deterrent effect that minimises misconduct. To maximise the deterrent effect, the CBB generally publicises its enforcement sanctions wherever appropriate. Note that the CBB cannot represent or bind other authorities or regulators that may have an interest in the matter.• Effectiveness of action — the CBB must set priorities and make the best use of the limited resources available. Therefore, the costs and benefits of any action that the CBB proposes to take must be considered.• Cooperation with other regulators — the CBB cooperates with other domestic and overseas regulators in situations where it may be more appropriate for a regulatory body other than the CBB to take action.• A balancing act — each of the CBB's enforcement actions involves a careful balancing of a number of complex issues. These issues will also vary from case-to-case. In balancing them and making a decision, the CBB will always endeavour to act firmly, fairly and impartially, keeping in mind at all times the CBB's principles of regulations and aims described under paragraphs MIE-A.1.6 and MIE-A.1.7.Legal Basis
MIE-A.1.8
Article 38 (a) of Chapter 8 of Part 1 of the CBB Law mandates the Governor of the CBB to issue necessary directives to ensure the implementation of the CBB Law and regulations and the achievement of the objectives of the CBB. Article 38 (b) provides the CBB with the power to issue necessary directives to ensure the implementation of CBB laws and regulations that aim to formulate the understanding and implementation of the CBB Law and regulations.
Amended: July 2021MIE-A.1.9
Article 96 of Chapter 2 of Part 4 of the CBB Law states that: "Subject to the rules and laws of evidence and electronic transactions, any computer data, electronic files, recorded telephone calls, telex and facsimile correspondence may be used as evidence in disputes relating to
securities ".Amended: July 2021MIE-A.1.10
Chapter 1 of Part 5 of the CBB Law (Articles 97-105) defines insiders, inside information and market information, prohibits abuse of inside information, and provides defences. Particularly, Article 99 provides the CBB with the power to issue regulations concerning the necessary procedures and controls of publishing market information. Article 100 states that: "A
person who is in possession of inside information, as an insider shall not use such information to:(1) Deal in anysecurities to which that information relates.(2) Encourage anyperson to deal in anysecurities to which that information relates.(3) Disclose inside information to any otherperson , otherwise than in the proper performance of the functions of his employment, office or profession.(4) Violate the rules governing the publishing of market information."Amended: July 2021MIE-A.1.11
Chapter 2 of Part 5 of the CBB Law (Articles 106 and 107) deals with Violation of Market Dealings. Article 106 states that: "In the application of this law a
person is guilty of market manipulation if he:(1) Is engaged, or encourages others to engage, in any conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of anysecurities .(2) Is engaged, or encourages others, to engage in any conduct that may give an unrealistic picture of the market regarding the volume and prices of anysecurities ."Amended: July 2021MIE-A.1.12
Chapter 1 of Part 7 of the CBB Law (Articles 111-115) provides the CBB with the power to obtain information and reports, conduct
inspections and to participate in judicialinvestigations with the Ministry of Justice and Islamic Affairs.Amended: July 2021MIE-A.1.13
Part 8 of the CBB Law (Articles 116-120) provides for restrictions on disclosure of confidential information.
MIE-A.1.14
Part 9 of the CBB Law (Articles 121-132) provides for the appointment of
investigators , obtaining information, documents and explanations in possession of a third party, entering and inspecting specific premises to obtain relevant information, documents and explanations, retaining the information, penalties and administrative proceedings, and assistance ininvestigations by overseas authorities.MIE-A.1.15
Part 11 of the CBB Law (Articles 160-172) provides for penalties for various contraventions and violations of the provisions of the CBB Law.
MIE-A.1.16
Article 167 of Part 11 of the CBB Law specifically provides penalty for the offence of abuse of inside information and states that "Without prejudice to any greater penalty prescribed in the Penal Code or under any law, a
person who contravenes Article 100 of this Law, while he is fully aware, shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars (10,000), or either penalty".Amended: July 2021MIE-A.1.17
Article 168 of Part 11 of the CBB Law specifically provides penalty for the offence of market manipulation and states that: "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a
person who contravenes Article 106 of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty".Amended: July 2021MIE-A.1.18
Article 175 of Part 12 of the CBB Law provides that neither the CBB nor any of its employees shall be responsible for any procedure, action or forbearance that resulted in inflicting damages to others if such procedure, action or forbearance was performed in good faith in the course of execution of the duties and responsibilities of the CBB and within its authorities as specified in the Law and the regulations and by-laws issued in implementing it.
Amended: July 2021MIE-A.2 MIE-A.2 Module History
Evolution of Module
MIE-A.2.1
This Module was first issued in October 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.
MIE-A.2.2
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-A.2.3
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-A.2.4
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-A.2.5
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Superseded Requirements
MIE-A.2.6
This Module supersedes the following provisions contained in circulars or other regulatory instruments:
Circular/ other references Provision Subject MIE-A.3 MIE-A.3 Interaction with Other Modules
MIE-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.
MIE-A.4 MIE-A.4 Division of Responsibilities
MIE-A.4.1
While dealing with cases relating to contravention of the CBB Law, rules and regulations, or other applicable laws, rules and regulations, a clear division of responsibilities between the CBB as the
securities regulator and thelicensed exchanges or thelicensed market operators as a self-regulatory organization (SRO) is required:(a) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations;(b) To maximise the regulatory effectiveness;(c) To permit flexibility to thelicensed exchanges or thelicensed market operators in their functioning;(d) To minimise the regulatory cost; and(e) To maintain market integrity and investor confidence.Amended: July 2021MIE-A.4.2
As a regulator, CBB's role is as follows:
(a) Regulatory supervision, including the licensing,inspection ,investigation and enforcement and regulatory oversight on thelicensed exchanges ,licensed market operators ,licensed clearing houses anddepositories and otherSROs and other capital market service providers ;(b) Maintaining and promoting fairness, efficiency and transparency within the capitalmarket ;(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 business rules of thelicensed exchanges or thelicensed market operators ,licensed clearing houses ordepositories , whereby any change in the rules, by-laws and regulations of theSROs would need prior approval of the CBB; and(e) Ensuring that thelicensed exchanges andlicensed market operators ,licensed clearing houses anddepositories , members ofSROs and othercapital market service providers have appropriate systems and procedures for detection of unlawful transactions and contraventions of the CBB Law, rules and regulations and report the same to the CBB at the earliest stage possible.Amended: July 2021MIE-A.4.3
The
licensed exchange or thelicensed market operator orlicensed clearing house orcentral depository established as anSRO must comply with the requirements laid down under the CBB Law, rules and regulations, this Module and the other applicable laws and regulations.MIE-A.4.4
As an
SRO , the main objective of the exchange or the operator or the clearing house would be to:(a) Actively perform market surveillance as a front-line regulator;(b) Promote fairness and investor protection;(c) Promote fair access tomarket facilities and information;(d) Promote the provision of timely and accessiblemarket information;(e) Promote the efficient regulation of its members;(f) Maintain fairness of price discovery mechanism and ensure prices are determined by the genuine forces of supply and demand;(g) Monitor the trading and market on a continuous basis;(h) Report any irregular transactions or irregular market behaviour or suspected cases of market abuse or market manipulation, or any contravention of the CBB Law, rules and regulations;(i) Identify irregular transactions and take appropriate enforcement actions;(j) Take disciplinary action for contraventions by market participants and listed companies through anSRO 's Disciplinary Action Committee(s).MIE-A.4.5
Apart from the obligations of the
licensed exchanges and market operators under the Markets & Exchanges (MAE) Module, and the obligations of thelicensed clearing houses anddepositories under the Clearing, Settlement and Central Depository (CSD) Module, theseSROs shall:(a) Provide such assistance to the CBB in the manner required by the CBB for the purposes of the CBB's market surveillance,investigation and enforcement functions;(b) Provide such reports as the CBB may require for the purposes of this Module;(c) Conductinspections orinvestigations as the CBB may require theSRO to do and submit its Inspection and Investigation Report, along with the facts, documents and evidence supporting the outcome of suchinspection orinvestigation ;(d) Implement the decisions or measures or actions decided by the CBB, both at the market level and at the level of the individual security or issuer, or member or market participant level in the manner required by the CBB;(e) Promptly implement such enforcement actions determined by the CBB against the members and issuers, through theSROs Disciplinary Action Committees.Role of Other Capital Market Service Providers
MIE-A.4.6
All
capital market service providers in general, and members of theSROs in particular, must have the necessary infrastructure and systems to identify and report any irregular transactions or suspected cases of market abuse or market manipulation, or suspected cases of contravention of the CBB Law, rules and regulations, or any other relevant laws, rules and regulations, which they come across in the normal course of business, to the CBB in the format given in paragraph MIE-A.4.7. This reporting shall be done immediately on becoming aware of such incidences or contraventions, or suspected cases.Reporting of Irregular Transactions
MIE-A.4.7
Persons subject to the obligations to report irregular transactions to the Capital Markets Supervision Directorate (CMSD ) shall report in the following standard format:Description of the transaction(s)
Details of the securities, including the code of the security (ISIN Number); the market(s) concerned; the original order's entry date/time, price and size; the times and sizes of the transaction(s); the type and characteristics of the order, etc.Reasons for Suspicion
Reasons for suspecting that the transaction(s) might constitute insider dealing/market abuse/ market manipulationIdentities of persons carrying out transaction(s)
Names, addresses, telephone number, location, account number, client identification code used by the firm, etc.Identities of any other persons known to be involved in the transaction(s)
Names, addresses, telephone number, location, relation to person carrying out transaction, position held, role played, etc.Capacity in which the person performing the transaction(s) acts
e.g. broker, underwriter, agent, investment/fund manager, auditor, insider.The ownership of securities before and after the execution of the transaction (of the concerned parties carrying out the transactions). Any information which may be of significance (along with a list of any accompanying documents/evidence) Details of the person making notification
Name of person, name of firm, position held within firm, contact details, etc.Signed ........... (person making report)
Dated ........... (date of report)Amended: July 2021MIE-A.4.8
Where the information specified to be reported is not available at the time of reporting, the report shall include at least the reasons why the reporting
persons suspect that the transactions might constitute contravention of the CBB Law, rules and regulations. All remaining information shall be provided to theCMSD as soon as it becomes available.Persons making reports therefore, do not need to have all the required information before reporting to theCMSD . If the case is one which (thepersons subject to the reporting obligation consider) needs to be brought to the attention of theCMSD urgently, then theperson (s) concerned shall make the first contact quickly. This can be done by telephone if appropriate, giving the basic details and reasons for suspicion, followed by written confirmation. The other information may be supplied subsequently.Records of Telephone Conversations and Electronic Communications
MIE-A.4.9
In addition to meeting the book-keeping and record-keeping requirements as per the applicable laws, rules and regulations, all
capital market service providers must maintain records of telephone conversations and electronic communications, including facsimile, email and other instant messaging devices relating to their activities in thesecurities market and particularly 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 thecapital market service provider , or anotherperson in thecapital market service provider group, and which are part of thecapital market service provider's trading activities, or the trading activities of anotherperson in thecapital market service provider group;(e) Executing orders that result from decisions by thecapital market service provider to deal on behalf of its client;(f) Placing orders with other entities for execution that result from decisions by thecapital market service provider to deal on behalf of its client;that are required to be maintained by the
capital market service provider as per the CBB rules, regulations and directives.Amended: July 2021MIE-A.4.10
All
capital market service providers must take reasonable steps to retain and protect the records referred to in rule MIE-A.4.9:(a) Apart from complying with various requirements relating to record keeping, as per CBB Law, rules and regulations and other applicable laws, rules and regulations, the recordings of telephone conversations and electronic communications, including facsimile, email and other instant messaging devices relating to their activities in the securities market must be retained for a period of at least twelve months from the date the record was created;(b) [This subparagraph was deleted in July 2021];(c) In a medium that allows the storage of the information in a way accessible for future reference by the CBB, and so that the following conditions are met:(i) The CBB must be able to access the records readily and take copies;(ii) It must be possible for any corrections or other amendments, and the contents of the records prior to such corrections and amendments to be easily ascertained;(iii) It must not be possible for the records to be otherwise manipulated or altered.Amended: July 2021MIE-B MIE-B Scope of Application
MIE-B.1 MIE-B.1 Scope of Application
Scope
MIE-B.1.1
This Module shall apply to:
(a) Any conduct or behaviour occurring within Bahrain; or any transaction or expected transaction done by or on behalf of anyperson (s) within Bahrain in relation tosecurities offered, issued or listed in Bahrain or elsewhere;(b) Any conduct or behaviour occurring outside Bahrain or any transaction or expected transaction done by or on behalf of anyperson (s) outside Bahrain in relation tosecurities offered, listed or issued in Bahrain;(c) Any conduct or behaviour occurring within Bahrain; or any transaction or expected transaction done by or on behalf of anyperson (s) within Bahrain in relation to:(i) Futures contracts, whether traded on a futures market in Bahrain or elsewhere; or(ii) Leveraged foreign exchange trading contracts, whether in Bahrain or elsewhere; and(d) Any conduct or behaviour occurring outside Bahrain; or any transaction or expected transaction done by or on behalf of anyperson (s) outside Bahrain in relation to:(i) Futures contracts traded on a futures market in Bahrain;(ii) Leveraged foreign exchange trading contracts in Bahrain; or(iii) Leveraged foreign exchange trading contracts that are accessible from Bahrain.MIE-B.1.2
This Module contains the CBB's Directive relating to Market Surveillance, Investigation and Enforcement and is issued under the powers available to the CBB under Article 38 of the CBB Law, read with the abovementioned provisions of the CBB Law. The Directive under this Module is applicable to all market participants and relevant
persons , including but not limited to issuers ofsecurities or anyperson acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories,crypto-asset licensees , investment firms, collective investment undertakings, business trusts, listed companies, anyperson acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts, credit rating agencies and any otherperson who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether suchperson is a market participant or not. These rules are issued by way of a legally-binding Directive.Amended: July 2021MIE-B.2 [This Section has been deleted in July 2021].
MIE-1 MIE-1 Market Surveillance
MIE-1.1 MIE-1.1 Market Surveillance
Market Surveillance
MIE-1.1.1
The CBB's surveillance function is focused on identifying potential breaches of the relevant laws, rules and regulations and those responsible for the potential breaches. The surveillance function includes the following:
a) Policy formulation for introducing surveillance systems that bring integrity, safety and stability to thesecurities market in the Kingdom of Bahrain;b) Gather and analyze information for the purpose of spotting abnormal situations in the market;c) Detect potential contraventions of relevant laws, rules and regulations and identify those responsible for such contraventions;d) Prepare initial analysis report;e) Take interim enforcement actions, if warranted;f) Pursue preventative action, if required, and avoid market disruptions at the earliest possible time.g) [This Subparagraph has been deleted in July 2021].Amended: July 2021MIE-1.1.2
The Market Surveillance, Department of the Capital Markets Supervision Directorate within the CBB is responsible for the market surveillance function relating to the
securities market in the Kingdom of Bahrain.Amended: July 2021MIE-1.1.3
The CBB may apply, adopt, determine and implement various measures, mechanisms and requirements, as may be required from time-to-time.
MIE-1.1.4
Licensed exchanges and market operators, licensed clearing houses and depositories, members of
SROs and othercapital market service providers must have appropriate systems and procedures for the detection of potential cases of unlawful transactions and contraventions of the CBB Law, rules and regulations and report to the CBB at the earliest stage possible.Amended: July 2021MIE-1.2 MIE-1.2 Information Gathering
MIE-1.2.1
The CBB may exercise its powers under Part 7 and Part 9 of the CBB Law for obtaining information, data, documents and explanations from:
(a)Self-Regulatory Organizations (SRO s), including licensed exchanges, licensed clearing houses and depositories, and related parties;(b) Members ofSROs and related parties;(c) Listed companies and issuers ofsecurities ;(d) Any otherperson who is in the possession of information or documents relevant for the purpose of conducting specific preliminaryinvestigations by the CBB.Amended: July 2021Type of Information
MIE-1.2.2
For the purpose of this Module, information includes:
(a) Any books, records or registers required to be maintained by acapital market service provider (including members of SROs, listed companies and issuers of securities) and related parties under the CBB Law, rules and regulations and any other law, rules and regulations;(b) Information, books, records or documents known to or in the possession of acapital market service provider (including members of SROs, listed companies and issuers of securities) and related party;(c) [This Subparagraph has been deleted in July 2021];(d) [This Subparagraph has been deleted in July 2021](e) Information, books, records or documents maintained by or known to or in the possession of any other relevantperson .Amended: July 2021MIE-1.2.3
In this Module, a reference to disclosing information includes, in relation to information that is contained in a document, a reference to producing the document.
Acquisition and Disposal of Securities or Futures Contract
MIE-1.2.5
Without prejudice to the generality of rule MIE-1.2.4:
(a) The CBB may, where it considers it necessary for the protection of investors, require acapital market service provider to disclose to the CBB in relation to any acquisition or disposal ofsecurities or futures contracts:(i) The name of theperson from or through whom or on whose behalf thesecurities or futures contracts were acquired; or(ii) The name of theperson to or through whom or on whose behalf thesecurities or futures contracts were disposed of;and the nature of the instructions given to the licensee or licensed exchange, or licensed clearing house and depository in respect of the acquisition or disposal.(b) The CBB may require aperson who has acquired, held or disposed ofsecurities or futures contracts to disclose to the CBB whether he acquired, held or disposed of thosesecurities or futures contracts, as the case may be, as custodian or trustee for, or on behalf of, anotherperson (whether or not as a nominee), and if so:(i) The name of that otherperson ; and(ii) The nature of any instructions given to the first-mentionedperson in respect of the acquisition, holding or disposal.(c) The CBB may require a licensed exchange to disclose to the CBB in relation to an acquisition or disposal ofsecurities , or futures contracts on the licensed exchange, the names of the members of that licensed exchange who acted in the acquisition or disposal.(d) The CBB may require a licensed clearing house and/or depository for asecurities market or futures market to disclose to the CBB in relation to any dealing insecurities on thatsecurities market, or trading in futures contracts on that futures market, the names of the members of the licensed clearing house and/or depository who were concerned in any act or omission in relation to the dealing or trading.Amended: July 2021Exercise of Certain Powers in Relation to Securities
MIE-1.2.6.1
Where the CBB considers that:
(i) It may be necessary to prohibit under the Markets & Exchanges (MAE) Module dealing insecurities of, or made available by, a company or an issuer ofsecurities ;(ii) Aperson may have contravened any of the provisions of the Prohibition of Market Abuse and Manipulation (MAM) Module in relation tosecurities of, or made available by, a company; or(iii) Aperson may have contravened any of the provisions of the Disclosure Standards or Take-overs, Mergers, & Acquisitions (TMA) Module in relation tosecurities in a company;The CBB may require an officer of a company, or an issuer of
securities , to disclose to the CBB any information of which he is aware and which may have affected any dealing that has taken place, or which may affect any dealing that may take place, insecurities of or made available by, the company or the issuer ofsecurities .Amended: July 2021MIE-1.2.6.2
Where the CBB believes on reasonable grounds that a
person is capable of giving information concerning any of the following matters:(i) Any dealing insecurities of, or made available by, a company or an issuer ofsecurities ;(ii) Any advice given or any report or analysis issued or published concerning suchsecurities , by anycapital market service provider to deal insecurities , or a representative of such a holder;(iii) The financial position of any business carried on by aperson who is or has been (either alone or together with anotherperson or otherpersons ) the holder of acapital market service provider to deal insecurities and who has dealt or given advice or issued or published a report or an analysis concerning suchsecurities ;(iv) The financial position of any business carried on by a nominee controlled by aperson referred to in paragraph (iii) or jointly controlled by two or morepersons at least one of whom is aperson referred to in that paragraph; or(v) An audit of, or any report of an auditor concerning any book of thecapital market service provider to deal insecurities , being a book relating to dealings in suchsecurities .the CBB may require the
person to disclose to the CBB the information that theperson has about the matter.Amended: July 2021Exercise of Certain Powers in Relation to Futures Contracts
MIE-1.2.7
(a) Where the CBB considers that:(i) It may be necessary to give a direction or take any action in relation to any trading in futures contracts under the Markets & Exchanges (MAE) Module;(ii) Aperson may have contravened any of the provisions of the Prohibition of Market Abuse & Manipulation (MAM) Module in relation to futures contracts.(b) Where the CBB believes on reasonable grounds that aperson is capable of giving information concerning the following matters:(i) Any trading in futures contracts;(ii) Any advice given publicly or privately, or any report or analysis issued or published concerning such futures contracts by thecapital market service provider to trade in futures contracts, or a representative of such a holder;(iii) The financial position of any business carried on by aperson who is or has been (either alone or together with anyperson or otherpersons ) thecapital market service provider to trade in futures contracts and has traded in or given advice or issued or published a report or an analysis concerning such futures contracts;(iv) The financial position of any business carried on by a nominee controlled by aperson referred to in paragraph (iii) or jointly controlled by two or morepersons , at least one of whom is aperson referred to in that paragraph; or(v) An audit of, or any report of an auditor concerning any book of thecapital market service provider to trade in futures contracts, being a book relating to trading, clearing or settlement in such futures contracts.the CBB may require theperson to disclose to the CBB the information that theperson has about that matter.Amended: July 2021Self-Incrimination
MIE-1.2.8
(a) Aperson is not excused from disclosing information to the CBB under a requirement made of him under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, on the grounds that the disclosure of the information might tend to incriminate him.(b) Where aperson claims before making a statement disclosing information that he is required to disclose by a requirement made of him under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, that the statement might tend to incriminate him, that statement shall not be used by the CBB to support any CBB disciplinary measures against him.Savings for Advocates and Solicitors
MIE-1.2.9
(a) Nothing in Section 1.2 shall compel the disclosure by an advocate and solicitor of information containing a privileged communication made by or to him in that capacity.(b) An advocate and solicitor who refuses to disclose the information referred to in paragraph (a) shall nevertheless be obliged to give the name and address (if he knows them) of theperson to whom, or by or on behalf of whom, that privileged communication was made.Immunities Under CBB Law
MIE-1.2.10
(a) The CBB shall not bring any civil or criminal proceedings, other than proceedings for an offence under rule MIE-1.2.11 against anyperson for disclosing any information to the CBB, if he had done so in good faith in compliance with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, 1.2.6A or MIE-1.2.7.(b) Anyperson who complies with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7 shall not be treated by the CBB as being in breach of any restriction upon the disclosure of information or thing imposed by any prescribed written law, or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.Offences
MIE-1.2.11
(a) Aperson who, without reasonable excuse, refuses or fails to comply with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6 or MIE-1.2.7, may be guilty of an offence of concealing information, or providing false information, or obstructing a currentinvestigation , or aninvestigation likely to be conducted by the CBB in accordance with Part 9 of the CBB Law, punishable under Articles 163 and 170 of the CBB Law.(b) Aperson who, in purported compliance with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6 or MIE-1.2.7, discloses information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.(c) It may be a defence to prosecution for an offence under paragraph (b) if the defendant proves that he believed on reasonable grounds that the information or statement was not misleading.Amended: July 2021Copies of or Extracts from Documents to be Admitted as Evidence
MIE-1.2.12
(a) The CBB shall treat copies of or extracts from a document produced under this Module that are provided to be a true copy of the document, or the relevant part of the document, as if they were the original document, or the relevant part of the original document.(b) For the purposes of paragraph (a), evidence that a copy of or extract from a document is a true copy of the document or of a part of the document may be given by aperson who has compared the copy or extract with the document or the relevant part of the document and may be given orally or by an affidavit sworn, or by a declaration made before aperson authorised to take an affidavit or statutory declarations.MIE-1.3 MIE-1.3 Information from Self-Regulatory Organizations (SROs)
MIE-1.3.1
Without prejudice to the generality of rule MIE-1.2.4 and apart from using reports, notifications, communications, information, records, data and documents and explanations already provided to the CBB by the licensed exchanges, licensed market operators and licensed clearing houses, and central depositories, the CBB may also use methods of obtaining information mentioned in paragraph MIE-1.3.2, in addition to the usual methods of obtaining information from licensees.
MIE-1.3.2
The methods of obtaining information referred to in paragraph MIE-1.3.1, which may be used by the CBB, may include but not be limited to:
(a) Online connectivity
The CBB may require the licensed exchanges, licensed market operators, licensed clearing houses and central depositories to establish and maintain online connectivity with the CBB for the purpose of receiving on a continuous basis, as well as on a periodical basis (including real-time, intra-day, daily, weekly, monthly, quarterly and/or annually), such market transaction information, market referential information and any other data or information. For this purpose, the CBB may require a direct online connectivity to the trading system, clearing and settlement facilities and depository facilities. The CBB may collect, validate, transform, consolidate and load such information and other information received from various sources for the purpose of market surveillance, research and regulatory analysis into the CBB's systems and records.(b) Periodic and Emergency Meetings
The CBB may conduct periodic meetings and emergency meetings with the licensed exchanges, market operators, licensed clearing houses and central depositories. The CBB may obtain information, reports, documents and data during or pursuant to such periodical or emergency meetings, and use the same for to satisfy the supervisory objectives of the CBB.(c) Periodic and Event Based Reports (Electronic Form or Physical Form)
The CBB may stipulate periodic and event-based reports in addition to other reporting requirements applicable to licensed exchanges, market operators, licensed clearing houses and central depositories under the MAE Module and CSD Module respectively; and other rules and regulations. The CBB requires these reports either in electronic form or in physical form.(d) Inspection
The CBB may conduct aninspection under the MAE Module or CSD Module, either an overallinspection or a special purposeinspection of a licensed exchange or market operator, or licensed clearing house or central depository, and use the information, data, reports, records and documents obtained through suchinspection for the purpose of the CBB's market surveillance, investigation and enforcement functions.(e) Information Provided to Public Investors
The CBB may also use the information made available by licensed exchanges, market operators, licensed clearing houses or central depositories to the public investors.(f) Referrals from SROs
If a licensed exchange, market operator, licensed clearing house or central depository (SRO ) discovers any conduct in violation or contravention of the CBB Law, rules and regulations, business rules of suchSRO , or any other applicable laws, rules and regulations, the concernedSRO shall, apart from taking action based on its own findings andinvestigations on the matter, refer the potential contraventions to the CBB. Such referrals shall contain or be followed by a detailedinvestigation report on the matter and the evidence obtained by theSRO .(g) Investigation Report
The CBB may require a licensed exchange, market operator, licensed clearing house or central depository to conduct aninvestigation on any matter considered appropriate by the CBB for the purpose of the CBB's market surveillance, investigation and enforcement functions, and to submit a detailedinvestigation report on the matter required by the CBB to be investigated, along with the evidence collected during theinvestigation , for the findings and conclusions of suchinvestigation .(h) Formal Request for Information
As part of the CBB’s ongoing supervision, the CBB may, by direction, specifically request information or temporary or ad-hoc reporting from a licensee under Article 111 of the CBB Law, or frompersons related to any licensee under Article 113 of the CBB Law, and the recipients of such request are bound to provide the information requested within the time specified by the CBB.Amended: July 2021MIE-1.4 MIE-1.4 Information from Members of SROs and Other Capital Market Service Providers
MIE-1.4.1
Without prejudice to the generality of rule MIE-1.2.4 and apart from using reports, notifications, communications, information, records, data, documents and explanations already provided to the CBB by the
capital market service providers the CBB may also use the methods of obtaining information mentioned in paragraph MIE-1.4.2, in addition to the other ongoing obligations and reporting obligations of the respectivecapital market service provider for the purpose of the CBB's market surveillance, investigation and enforcement function.Amended: July 2021MIE-1.4.2
The methods of obtaining information referred to in paragraph MIE-1.4.1 which may be used by the CBB may include, but not be limited to:
(a) Formal Request for Information
As part of the CBB's ongoing supervision, the CBB may, by direction, specifically request information or temporary or ad-hoc reporting from a licensee under Article 111 of the CBB Law, or frompersons related to any licensee under Article 113 of the CBB Law, and the recipients of such request are bound to provide the information requested within the time specified by the CBB.(b) Meetings
Apart from the normal meetings, periodical prudential meetings, or any other special purpose meeting, the CBB may convene a meeting with a CBB licensee for the purpose of obtaining specific information.(c) Periodic Reports and Event-Based Reports (in Electronic Form or Physical Form)
The CBB may use the periodic reports and event-based reports submitted by acapital market service provider to the CBB or to anSRO (including a licensed exchange or market operator and a licensed clearing house or central depository). For example, the CBB may use a Suspicious Transaction Report made by acapital market service provider under the Anti-Money Laundering and Combating Financial Crime Module (AML Module), or the Prohibition of Market Abuse and Manipulation Module (MAM Module) for the purpose of obtaining information. The CBB may require these reports either in electronic form or physical form.(d) Inspection
The CBB may conduct aninspection and use the information obtained through suchinspection .(e) Additional Responsibilities to Auditors
As per Article 63 of the CBB Law, the CBB may request from the external auditors of acapital market service provider to increase the scope of audit and provide additional information to the CBB and the information and reports provided by the external auditors can be used by the CBB.(f) Notifications, Registrations, Filings and other Communications
The CBB may use any information contained in any of the notifications, registrations, filings and other communications received from the CBB licensees and related parties for the purpose of the market surveillance, investigation and enforcement functions.(g) Record of Telephone Conversations and Electronic Communications
The CBB may also use the records of telephone conversations and electronic communications that are required to be maintained by acapital market service provider or for the purposes of the CBB’s market surveillance, investigation and enforcement functions.Amended: July 2021MIE-1.5 MIE-1.5 Information from Listed Companies and Issuers of Securities
MIE-1.5.1
As per Article 112 of the CBB Law, the CBB may require any listed company or issuer of
securities , or anyperson acting on their behalf, to provide such information as the CBB deems necessary for discharging its duties and responsibilities under this Law.MIE-1.5.2
Without prejudice to the generality of paragraph MIE-1.5.1, the CBB may, in addition to using reports, notifications, announcements, annual reports, reports, communications, records, data and explanations received from any listed company or issuer of
securities , also use methods mentioned in paragraph MIE-1.5.3 for obtaining information in addition to the usual methods of obtaining information from listed companies and issuers ofsecurities .MIE-1.5.3
The methods of obtaining information referred to in paragraph MIE-1.5.2 which may be used by the CBB to obtain information from listed companies and issuers of
securities include, but are not limited to:(a)Formal Request for Information
The CBB may require any listed company or issuer ofsecurities to provide such information as the CBB deems necessary within the time specified by the CBB.(b)Inspection
The CBB may conduct aninspection and use the information obtained through suchinspection in discharging its supervisory responsibilities. (c)Additional Responsibilities to Auditors
As per Article 63 of the CBB Law, the CBB may request from the external auditors of a listed company or issuer ofsecurities to increase the scope of audit and provide additional information to the CBB, and the information and reports provided by the external auditors can be used by the CBB.(d)Notifications, Registrations, Filings and other Communications
The CBB may also use any information contained in any of the notifications, registrations, filings and other communications received from listed companies and issuers ofsecurities and related parties for the purpose of discharging its supervisory duties.(e)Meetings
The CBB may convene a meeting with any issuer or listed company for the purpose of discussing matters relating to the market surveillance, investigation and enforcement functions of the CBB.(f)Periodic Reports
The CBB may use the periodic and other reports submitted by the listed companies and issuers for the purpose of the CBB's market surveillance, investigation and enforcement functions.Amended: July 2021MIE-1.6 MIE-1.6 Referrals from Other Domestic Authorities
MIE-1.6.1
The CBB may use information contained in referrals received from other domestic authorities, including but not limited to the Ministry of Industry, Commerce & Tourism (MOICT) and the Financial Intelligence Directorate within the Ministry of Interior (MOI) based on the discovery made by them regarding potential cases of contravention of the CBB Law, rules and regulations and other applicable laws, rules and regulations.
Amended: July 2021MIE-1.7 MIE-1.7 Referrals from Overseas Authorities
MIE-1.7.1
The CBB may receive referrals from overseas authorities, either pursuant to the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU), or other multilateral/bilateral arrangements, or otherwise, leading to potential cases of contravention of the CBB Law, rules and regulations, or any other applicable laws, rules and regulations.
Amended: July 2021MIE-1.8 MIE-1.8 Complaints from the Public and Information from Other Sources
MIE-1.8.1
Complaints from the public and customers of the CBB licensees are received by the CBB in the complaint forms available on the CBB's official website and such complaints which relate to potential cases of contravention of the CBB Law, rules and regulations, or
SROs ' business rules are also used by the CBB for the purposes of the CBB’s market surveillance, investigation and enforcement functions.The CBB’s surveillance, investigation and enforcement functions also uses information disseminated through the media, including newspapers, television, newsletters, internet, research reports and other media.
Amended: July 2021MIE-1.9 MIE-1.9 Reports from Experts
MIE-1.9.1
Article 121 of the CBB Law enables the CBB to appoint qualified
investigators (including professional firms) and Article 63 of the CBB Law enables the CBB to request additional duties from external auditors.The CBB may at its discretion, require a CBB licensee or a listed company or an issuer of
securities , or any other relevantperson to provide a report by an expert in order to support the CBB's market surveillance,investigation and enforcement functions. The costs associated with such appointment of an expert shall be borne bypersons required to appoint an expert.MIE-1.9.2
The factors the CBB will consider when deciding whether to use an expert include:
(a) If the CBB's objectives for making further enquiries are predominantly for the purposes of fact finding; i.e. gathering historic information or evidence for determining whether enforcement action may be appropriate, the CBB's information gathering andinvestigation powers under Part 7 of the CBB Law are likely to be more effective and more appropriate than appointing an expert.(b) If the CBB's objectives include obtaining expert analysis or recommendations (or both) for say, the purposes of seeking remedial action, it may be appropriate to appoint an expert instead of or in conjunction with the CBB's other available powers.MIE-1.9.3
The CBB shall normally make clear both to the
persons referred to in rule MIE-1.9.1and to the expert, the nature of the concerns that led the CBB to decide to appoint an expert, and the possible uses of the results of the report. A report the CBB commissions for purely diagnostic purposes may identify issues which could lead to the appointment of aninvestigator and/or enforcement action.MIE-1.9.4
The CBB shall:
a) Requirepersons referred to in rule MIE-1.9.1 to appoint experts only for specific purposes, rather than for general enquiry;b) Not use the procedure as a matter of routine in relation to particularpersons ;c) Use the procedure only after having considered the alternatives;d) Normally use the procedure because of the added value to be gained from use of an expert, because of their particular expertise or knowledge, not because of CBB's resource constraints;e) Take into account cost implications, including whether the likely cost of an expert's report is proportionate and will provide enough benefit, having regard to the issue in question and the resources of thepersons referred to in rule MIE-1.9.1;f) Take into account the expected benefit to thepersons referred to in rule MIE-1.9.1; andg) Use the procedure in a focused, proportionate way and ensure that reports are scoped accordingly.This policy does not preclude the use of the same procedure for generically similar purposes in different cases, for example, to review systems and controls of
persons referred to in rule MIE-1.9.1 or to obtain verification of information provided to the CBB.Who the CBB will Nominate or Approve when Using Experts
MIE-1.9.5
When considering whether to nominate or approve an expert to make a report, the CBB will have regard to such factors as whether the proposed
person appears to have:(a) The skills necessary to make a report on the matter concerned;(b) The ability to complete the report within the time required;(c) Relevant specialised knowledge on the matter to be reported on;(d) Any professional difficulty or potential conflict of interest in reviewing the matters to be reported on, including but not limited to questions reflecting on the quality or reliability of work previously carried out by the expert;(e) Independence, bearing in mind the closeness of any existing professional or commercial relationship, to give an objective opinion on such matters as:(i) Matters already reported on by the expert (e.g. on the firm's financial statements or in relation to a firm's systems and controls);(ii) Matters that are likely to be contentious and may result in disciplinary or other enforcement actions against thepersons referred to in rule MIE-1.9.1, its management, shareholders or major shareholders; or(iii) Matters that the expert has been involved in, in another capacity.MIE-1.9.6
In appropriate circumstances it may be cost effective for the CBB to nominate or approve the appointment of an expert who has already acted for, or advised the
persons referred to in rule MIE-1.9.1. For example, the CBB may nominate or approve the appointment of a firm's auditor to prepare a report, taking into account where relevant, the considerations set out in paragraph MIE-1.9.2.MIE-1.10 MIE-1.10 Detection of Potential Cases of Contraventions
MIE-1.10.1
The
CMSD captures all the relevant information, reports, data and documents received from various sources and stores them in its records and systems for the purpose of regulatory analyses and identifies potential cases of contravention of the CBB Law, rules and regulations, and other applicable laws, rules and regulations. On-line and off-line alerts are generated based on the information available and analysis made of potential cases of contraventions and such alerts are further examined by the Market Surveillance Department at theCMSD , to evaluate the potential evidences indicating suspicions of contraventions.Amended: July 2021MIE-1.11 MIE-1.11 Determination of Preliminary Investigation
MIE-1.11.1
If the analysis of the known facts and potential evidence indicates contraventions the
CMSD shall consider whether a sufficient, credible source of facts and evidence suggests contravention of the CBB Law, rules and regulations and/or an enforcement action is warranted. Some of the factors that could be considered include, but are not limited to:(a) The laws, rules or regulations that could potentially be considered as having been contravened or violated;(b) The severity and/or seriousness of such contravention or violation;(c) The potential magnitude of such contravention or violation;(d) The potential losses involved or harm to an investor or investors;(e) Whether the affected group is particularly vulnerable or at risk;(f) Whether the conduct is ongoing;(g) Whether the conduct can be investigated efficiently;(h) WhetherSROs or other authorities might be better suited to investigate the conduct.Amended: July 2021MIE-1.11.2
After conducting an analysis referred to in paragraph MIE-1.11.1, the Director of the
CMSD shall be consulted regarding any further analysis that should be undertaken, before determining whether a preliminaryinvestigation of the potential cases of contravention shall be undertaken. Approval of the Director of theCMSD shall be sought for opening a preliminaryinvestigation .Amended: July 2021MIE-1.12 MIE-1.12 Preliminary Investigation
Information from Third Parties During Preliminary Investigation
MIE-1.12.1
As per Article 123 of the CBB Law, the CBB may require any
person who is in possession of information or documents relevant to aninvestigation conducted by the CBB, to promptly present such information and documents to the CBB.MIE-1.12.2
Pursuant to a preliminary
investigation referred to in section MIE-1.11, theCMSD , or any official of the CBB authorised in this regard, may take copies or extracts from such documents referred to in rule MIE-1.12.1 and also require theperson producing such a document, or any other relevantperson to provide an explanation, including written explanations, of the contents of the document.MIE-1.12.3
If a
person required under rule MIE-1.12.1 to produce the document required fails to produce such a document, but he has information about the whereabouts of such a document, then he must indicate to theCMSD , or any official of the CBB authorised in this regard, where the document is located and who is in possession of the document.Access to Premises, Information and Documents
MIE-1.12.4
As per Articles 114 and 124 of the CBB Law, the
CMSD , or any other CBB staff who are authorised to undertake a preliminaryinvestigation referred to in section MIE-1.11, may enter and inspect the premises, offices, or locations of anycapital market service provider to obtain any information or necessary documents or data.Amended: July 2021MIE-1.12.5
If necessary, the
CMSD or the authorised CBB staff may retain any documents obtained by virtue of the provisions of the previous paragraph for a period not exceeding six months. However, if the procedures of a trial of anyperson commenced in connection with committing a crime within the period of the specified six months and the procedures of the said trial continued beyond this period, and the mentioned documents prove to be of relevance to such procedures, then theCMSD or the authorised CBB staff may retain such documents up to the end of the said trial procedures, or to any other date determined by the Competent Court.MIE-1.12.6
As per Article 123 of the CBB Law, it shall be the duty of every
person who is in possession of information or documents relevant to a preliminaryinvestigation conducted by the CBB to:(a) Allow the staff of theCMSD or the authorised CBB staff to have access to the premises, offices and locations occupied by suchpersons at all reasonable times for the purpose of preliminaryinvestigation .(b) Extend the staff of theCMSD or the authorised CBB staff facilities for examining any books, accounts and other documents in the custody or control (whether kept manually or in a computer, or in any other form) of suchperson , required for the purposes of the preliminaryinvestigation .(c) Provide to such staff of theCMSD or the authorised CBB staff copies of any books, records, documents, information, data and explanation which in the opinion of the staff of theCMSD are relevant to the preliminaryinvestigation .MIE-1.12.7
If the staff of the
CMSD or the authorised CBB staff fail to enter and inspect the premises, offices, or locations of anySRO , or member of anSRO or any othercapital market service provider , to obtain any information, or documents, or data, then theCMSD shall seek approval for formalinvestigation , and theCMSD investigator appointed to conduct the formalinvestigation may seek a court order, as per Article 124 of the CBB Law, to carry out the following:(a) Entering and inspecting specific premises and obtaining relevant information, data, or documents.(b) Copying or taking extracts of any relevant document, information or data.(c) Compelling anyperson employed by anySRO , or member of anSRO or any othercapital market service provider , to give an explanation, or to specify the whereabouts of any documents, information, or data.Compelling force may be used, where necessary.
Amended: July 2021MIE-1.12.8
The
CMSD should evaluate the facts and evidence gathered during the preliminaryinvestigation to determine whether it is appropriate to:(a) Open a formalinvestigation considering the factors mentioned in section MIE-2.2.4; or(b) Close the preliminaryinvestigation without any recommendation for enforcement actions; or(c) Initiate appropriate enforcement actions, without opening up a formalinvestigation , based on the findings of the preliminaryinvestigation , and facts and evidence of the case.Amended: July 2021MIE-1.12.9
In respect of cases where it is determined to open a formal
investigation and if it is considered appropriate to initiate appropriate interim enforcement measures swiftly, before further damage is done and remedial actions are taken as early as possible, theCMSD shall evaluate and initiate appropriate interim enforcement measures that are required to be taken, pending the outcome of the formalinvestigations on the case.MIE-1.12.10
After determining the outcome of the preliminary
investigation and recommended course of interim or final enforcement measures, theCMSD staff authorised to conduct the preliminaryinvestigation shall submit the preliminaryinvestigation report containing the findings of the preliminaryinvestigation , facts and evidence of the case along with the recommended course of action, based on the outcome of the preliminaryinvestigation mentioned in rule MIE-1.12.7.Amended: July 2021MIE-1.12.11
The
CMSD shall decide on the course of action of the preliminaryinvestigation mentioned in rule MIE-1.12.7 and also, if required, decide on the interim or final enforcement actions and seek the approval of H.E. the Governor for the same.MIE-1.12.12
The procedure and proceedings of the enforcement actions shall be governed by chapter MIE-3 of this Module.
MIE-1.13 MIE-1.13 Preventive Surveillance Actions
MIE-1.13.1
The CBB seeks to proactively prevent contraventions or unfair practices or improper conduct and protect the interests of the public investors and
securities market at the earliest possible time and the CBB may take preventive surveillance measures. Such preventive surveillance measures may include but not be limited to:(a)Interim Enforcement Actions
Interim enforcement actions can be taken based on the information, facts and evidence available to theCMSD and such action can be initiated at the earliest possible time as part of the market surveillance function. Details of such interim enforcement actions are given in chapter MIE-3 of this Module.(b)Directives Under Article 38
The CBB may issue directives to anycapital market service provider , or any market participant, or any other relevantperson as a preventive surveillance measure. Such directives under Article 38 of the CBB Law may be issued where the CBB believes that it is necessary or expedient in the interest of the public investors orsecurities market, or for the protection of investors, to take such action as it considers necessary, and such preventive surveillance measures can be imposed either market-wide or be made available to individualsecurities or issuers or anSRO , or any member of anSRO or any othercapital market service provider , or market participants or any relevantpersons .(c)Imposition of Trading Limits, Margins and Trading Restrictions
TheCMSD may, as a pro-active surveillance measure in emergency situations, impose limits or restrictions or measures. Such measures may include but not be limited to trading limits, position limits, additional margins, trading restrictions, suspending trading of anysecurities , freezing of accounts, suspending clearing/settlement of any transaction(s), or off-setting the suspected transactions, or any other prudential limits for the purposes of protecting the interests of investors and thesecurities market.Amended: July 2021MIE-2 MIE-2 Formal Investigation
MIE-2.1 MIE-2.1 Scope of Investigation
MIE-2.1.1
Notwithstanding anything in this Module, or any other rules and regulations of the CBB, the Governor of the CBB may, if he thinks fit and it is in the public interest to do so, order an
investigation as per Article 121 of the CBB Law.(a) The CBB may conduct suchinvestigation as it considers necessary or expedient for any of the following purposes:(i) to exercise any of its powers or to perform any of its functions and duties under the CBB Law;(ii) to ensure compliance with the CBB Law, rules, regulations, directives, or any written direction issued under the CBB Law;(iii) to investigate an alleged or suspected contravention of any provision of the CBB Law, rules, regulations, or directives, or any written direction issued under the CBB Law;(iv) to investigate whether the transactions insecurities are being dealt with in a manner detrimental to the investors or thesecurities market in violation of the CBB Law, rules and regulations; or(v) to investigate whether anycapital market service provider , or anyperson associated with thesecurities market, or any otherperson has violated any of the provisions of the CBB Law, or the rules, regulations or directives issued thereunder.(b) A requirement imposed by the CBB in the exercise of its powers under Parts 7 or 9 of the CBB Law shall be deemed to have effect notwithstanding any obligations as to secrecy or other restrictions upon the disclosure of information imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.(c) Anyperson who complies with a requirement imposed by the CBB in the exercise of its powers under Parts 7 or 9 of the CBB Law shall not be treated by the CBB as being in breach of any restriction upon the disclosure of information, or thing imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.(e) In this Module, "requirement by the CBB" includes a requirement imposed by theCMSD or aninvestigator appointed by the CBB to conduct a formalinvestigation .Amended: July 2021MIE-2.1.2
When necessary, the
CMSD may appoint one or more qualifiedinvestigators to conduct aninvestigation with respect to the following, in accordance with Chapter 1 of Part 9 (Articles 121-124) of the CBB Law:(a) Nature or position of the business of thecapital market service provider ;(b) A particular aspect of the businesses of thecapital market service provider ;(c) The ownership or control of thecapital market service provider ;(d) Whether thecapital market service provider is practicing the very business licensed thereto, and assessing to what extent thecapital market service provider is abiding, in providing the said business, by the provisions of the law and the terms and conditions of the licence.(e) Whether thecapital market service provider is carrying out unlicensed business;(f) Whether the listed companies are abiding by the procedures and principles of listing referred to in paragraph (c) of Article 86 of the CBB Law.The
investigator may conduct aninvestigation , where necessary, on the business of any member of a group or company to which thecapital market service provider underinvestigation is a party. Thecapital market service provider underinvestigation must be notified in writing of the decision to investigate its business.Amended: July 2021MIE-2.1.3
In exercise of powers available to the CBB under Article 38 of the CBB Law, the CBB implements the scope referred to in rule MIE-2.1.2 above for the purpose of achieving the objectives of the CBB stated in Article 3 of the CBB Law, and discharging duties and responsibilities mandated to the CBB vide Article 4 of the CBB Law, the matters referred to in rule MIE-2.1.2 (a)-(f) shall include the following:
(i)Investigation of matters considered expedient for the purpose of ensuring compliance with the CBB Law, or any rules or regulations issued thereunder.(ii) Alleged or suspected contravention of any provision of the CBB Law or rules and regulations made thereunder, or any directive issued by the CBB.(iii) Whether the transactions insecurities are being dealt with in a manner detrimental to the investors or thesecurities market in violation of the CBB Law, rules and regulations; or(iv) Whether acapital market service provider , or anyperson associated with thesecurities market, or any otherperson has violated any of the provisions of the CBB Law, or the rules, regulations or directives issued thereunder or business rules ofSROs .Amended: July 2021Self-Incrimination and Savings for Advocates and Solicitors
MIE-2.1.4
(a) Aperson is not excused from disclosing information to the CBB or, as the case may be, aninvestigator appointed by the CBB to conduct a formal investigation, under a requirement made of him in any provision of this Module, on the grounds that the disclosure of the information might tend to incriminate him.(b) Where aperson claims, before making a statement disclosing information that he is required to under any provision of this Module to the CBB or, as the case may be, aninvestigator appointed by the CBB to conduct a formalinvestigation , that the statement might tend to incriminate him, that statement shall not be used by the CBB to support any CBB disciplinary measures against him.(c) Nothing in this Module shall:(i) Compel an advocate and solicitor to disclose or produce a privileged communication, or a document or other material containing a privileged communication, made by or to him in that capacity; or(ii) Authorise the taking of any such document or other material which is in his possession.(d) An advocate and solicitor who refuses to disclose the information to produce the document or other material referred to in paragraph (c) shall nevertheless be obliged to give the name and address (if he knows them) of theperson to whom, or by or on behalf of whom, that privileged communication was made.Amended: July 2021MIE-2.2 MIE-2.2 Ordering a Formal Investigation
Appointment of Investigator
MIE-2.2.1
(a) TheCMSD may, at any time by order in writing, direct any official of theCMSD specified in the order to conduct a formalinvestigation into the affairs of anySRO , or member of anSRO , or listed company or issuer ofsecurities , or any othercapital market service provider orpersons associated with thesecurities market or any otherperson , and to report thereon to the CBB, as per Article 121 of the CBB Law.(b) TheCMSD may also appoint, with the approval of the Governor, any professional firm to conduct such formalinvestigation referred to in paragraph (a) of this rule.Amended: July 2021MIE-2.2.2
Before it proceeds with an
investigation , theCMSD will satisfy itself that there are grounds to investigate under the statutory provisions that give the CBB powers to appointinvestigators . If the statutory test is met, it will decide whether to carry out aninvestigation after considering all the relevant circumstances. To assist its consideration of cases, theCMSD will apply a set of assessment criteria stated in paragraph MIE-2.2.4. Not all of the criteria will be relevant to every case and there may be other considerations which are not mentioned in the list, but which are relevant to a particular case. TheCMSD's assessment will include considering whether using alternative procedures is more appropriate, taking into account the overall circumstances of theperson concerned and the wider context. Another consideration will be whether the CBB is under a general duty to take action on behalf of, or otherwise to provide assistance to another domestic or overseas authority.MIE-2.2.3
Formal
investigation can be ordered in three ways. Firstly, it can be when a preliminaryinvestigation opened under section MIE-1.11 can be converted into a formalinvestigation based on the findings, facts and evidence gathered during the preliminaryinvestigation . Secondly, prior to completion of the preliminaryinvestigation , it may be determined that it would be appropriate to order a formalinvestigation on the case. Thirdly, a formalinvestigation can also be ordered without any history of a preliminaryinvestigation on the matter.Factors Considered while Deciding on a Formal Investigation
MIE-2.2.4
Without prejudice to the generality of the powers of the CBB to order formal
investigations , the factors that may be considered by the CBB, while deciding to order a formalinvestigation , include but are not limited to:(a) Whether the subject matter is a CBB priority in the context of the CBB's objectives and responsibilities, as per Articles 3 and 4 of the CBB Law.(b) Whether an action would address a problematic industry practice.(c) Whether the conduct undermines the fairness or integrity of the Kingdom'ssecurities market.(d) Whether an action would provide an opportunity for the CBB to address violative conduct targeted to a specific market participant, or group ofpersons that might not otherwise be familiar with the CBB, or the protections afforded by thesecurities laws.(e) Whether an action would present a good opportunity to coordinate with other regulators or authorities in the Kingdom and overseas authorities.(f) Whether the conduct can be addressed by other regulators or authorities.(g) Whether an action would alert the investing public of a new type ofsecurities fraud or misconduct.(h) The magnitude of the potential violations involved in theinvestigation , considering:(i) The severity and seriousness of the conduct;(ii) The length of time the conduct continued, or whether it is ongoing;(iii) The number of violations;(iv) Whether recidivists were involved;(v) Whether violations were repeated;(vi) The amount of harm or potential harm to victims;(vii) The amount of ill-gotten gains to the violators;(viii) Whether victims were specifically targeted based on personal or affinity group characteristics;(ix) forcapital market service providers , whether the conduct involved officers, directors, or senior management;(x) Whether gatekeepers (such as accountants or attorneys) orsecurities industry professionals are involved.(i) The resources required to investigate the potential violations, considering:(i) The complexity of the potential violations;(ii) The approximate staff man days required over the course of theinvestigation ;(iii) The duration of the relevant conduct;(iv) The number of potential violators;(v) The number and location of potential witnesses;(vi) The volume of evidence that the staff must collect and review, such as trading records, corporate documents and email correspondence;(vii) The level of analysis required for complex data and evidence, such as auditor workpapers, bluesheets, or financial data;(viii) The number and location of witnesses and the scheduling of the examination ofpersons ;(ix) Travel requirements.(j) Whether there is an urgent need to file an enforcement action, such as aninvestigation into ongoing fraud or conduct that poses a threat of imminent harm toinvestigators .Amended: July 2021Investigation of Certain Cases
MIE-2.2.5
The combination of the priority given to certain types of misconduct over others and the CBB's risk-based approach to enforcement means that certain cases will be subject to enforcement action and others will not, even where they may be similar in nature or impact. The CBB's choice as to the use of the enforcement tool is therefore a question of how the CBB uses its resources effectively and efficiently and how it ensures that it is an effective regulator.
Amended: July 2021MIE-2.2.6
Where unauthorised business poses a significant risk to the investor protection objective or to the CBB's other regulatory objectives, unauthorised activity will be a matter of serious concern for the CBB. The CBB deals with cases of suspected unauthorised activity in a number of ways and it will not use its
investigation powers and/or take enforcement action in every single instance.MIE-2.2.7
The CBB's primary aim in using its
investigation and enforcement powers in the context of suspected unauthorised activities is to protect the interests of investors. The CBB's priority will be to confirm whether or not a regulated activity has been carried on in the Kingdom of Bahrain by someone without licensed authorisation or exemption, and if so, the extent of that activity and whether other related contraventions have occurred. It will seek to assess the risk to investors' assets and interests arising from the activity as soon as possible.MIE-2.2.8
The CBB often takes a different approach to that described above where
capital market service providers no longer meet the licensing conditions. The CBB views the licensing conditions as being fundamental requirements for licensing and authorisation and it will generally take action in all such cases which come to its attention and which cannot be resolved through the use of supervisory tools. The CBB does not generally appointinvestigators in such cases. Instead,capital market service providers may first be given an opportunity to correct the failure. If the CBB licensee does not take the necessary remedial action, the CBB will consider whether its license to carry out regulated businesses should be varied and/or cancelled. However, there may be cases where the CBB considers that a formalinvestigation into a licensing condition concern is appropriate.Amended: July 2021MIE-2.2.9
When the CBB has information regarding possible contravention of the Issuing and Offering of Securities Module, or listing rules, or the Disclosure Standards (DIS) Module, or any violation or contravention relating to the primary market, the CBB will use its investigative powers and/or take enforcement action, as deemed fit.
Cases where Other Authorities or SROs have an Interest
MIE-2.2.10
Action before or following an
investigation may include, for example, referring some issues or information to other authorities or SROs for consideration, including where another authority or SRO appears to be better placed to take action. For example, when considering whether to use its powers to conduct formalinvestigations into market misconduct, the CBB will take into account whether another regulatory authority or anSRO is in a position to investigate and deal with the matters of concern (as far as a licensed exchange or market operator or licensed clearing house and depository is concerned, the CBB will consider the extent to which the licensed exchange or market operator, or licensed clearing house and depository has adequate and appropriate powers to investigate and deal with a matter itself). Equally, in some cases the CBB may investigate and/or take action in parallel with another domestic or international authority or SRO.Amended: July 2021Sources of Cases
MIE-2.2.11
The CBB may be alerted to possible contraventions or breaches by complaints from the public or CBB licensees, or listed companies or issuers of
securities by referrals from other authorities, or through its own enquiries and supervisory activities. CBB licensees or listed companies, or issuers ofsecurities may also bring their own contraventions to the CBB's attention, as they are obliged to do so under the CBB Law, rules and regulations.Assisting Overseas Regulators
MIE-2.2.12
Providing assistance upon request by an overseas authority will be governed by Article 122 of the CBB Law and the Cooperation and Exchange of Information with Overseas Authorities (ICO) Module.
MIE-2.3 MIE-2.3 Investigation Proceedings
Request for Information and Documents
MIE-2.3.1
(a) As per Article 123 of the CBB Law:"(i) Anyperson who is in possession of information or documents relevant to aninvestigation conducted by the Central Bank or its duly appointedinvestigator , should promptly present such information or documents upon request by the Central Bank or its duly appointedinvestigator .(ii) If the Central Bank or its duly appointedinvestigator receives a document according to the requirement imposed under this Chapter, it may:• Take copies or extracts from such document.• Require theperson producing the document, or any other relevantperson , to provide an explanation of the contents of the document.(iii) If theperson fails to produce the document required, but he has information about the whereabouts of such document, then he should, upon the request of the Central Bank or its appointedinvestigator , indicate where the document is located."(b) Examination of Persons
As per Article 124 of the CBB Law:"(i) If the Central Bank or its authorisedperson , for any reason, fails to enter and inspect the premises, offices, or locations of the licensee to obtain any information or necessary documents and data, or if the powers conferred to the Central Bank are not sufficient for it to practice its supervision tasks over the business of the licensee, then the Central Bank may seek a court order upon a petition to enable the authorisedinvestigators to carry out the following:• Entering and inspecting specific premises and obtaining relevant information, data or documents.• Copying or taking extracts of any relevant document information or data.• Compelling anyperson employed by the licensee to give explanation respecting, or to specify the whereabouts of, any documents, information or data.Compelling force may be used, where necessary.(ii) If necessary the Central Bank may retain any documents obtained by virtue of the provisions of the previous paragraph for a period not exceeding six months. However, if the procedures of a trial of anyperson commenced in connection with committing a crime within the period of the specified six months and the procedures of the said trial continued beyond this period, and the mentioned documents prove to be of relevance to such procedures, then the Central Bank may retain such documents up to the end of the said trial procedures, or to any other date determined by the Competent Court."Requirement to Appear for Examination
MIE-2.3.2
(a) Pursuant to Articles 123 and 124 of the CBB Law and for the purpose of aninvestigation under this Module, theCMSD or its duly appointedinvestigator may, in writing, require aperson :(i) To give theCMSD or its duly appointedinvestigator all reasonable assistance in connection with theinvestigation ; and(ii) To appear before an officer of theCMSD or its duly appointedinvestigator for examination under oath and to answer questions under oath.(b) A requirement in writing imposed under paragraph (a) shall state the general nature of the matter referred to in paragraph (a).Proceedings at Examination
MIE-2.3.3
The provisions of section MIE-2.3 shall apply where, pursuant to a requirement made under rule MIE-2.3.2 for the purposes of an
investigation under this Module, aperson (referred to in this Module as the examinee) appears before anotherperson (referred to in this Module as theinvestigator ) for examination.Requirements Made of Examinee
MIE-2.3.4
(a) Pursuant to the powers provided under Article 123(b) of the CBB Law, theinvestigator may examine the examinee on oath or affirmation and may, for that purpose, administer an oath or affirmation to the examinee.(b) The oath or affirmation to be taken or made by the examinee for the purposes of the examination is an oath or affirmation that the statements that the examinee will make are true.(c) Theinvestigator may require the examinee to answer a question that is put to the examinee at the examination and is relevant to a matter that theCMSD is investigating, or is to investigate, under this Module.Examination to Take Place in Private
MIE-2.3.5
(a) The examination shall take place in private and theinvestigator may give directions as to who may be present during the examination or part thereof.(b) Aperson shall not be present at the examination unless he is:(i) Theinvestigator or the examinee;(ii) Aperson approved by theCMSD to be present; or(iii) Entitled to be present by virtue of a direction under rule MIE-2.3.5(a).Record of Examination
MIE-2.3.6
(a) Theinvestigator may, and shall if the examinee so requests, cause a record to be made of statements made at the examination.(b) If a record made under rule MIE-2.3.6 (a) is in writing, or is reduced to writing:(i) Theinvestigator may require the examinee to read the record, or to have it read to him, and may require him to sign it; and(ii) Theinvestigator shall, if requested in writing by the examinee to give to the examinee a copy of the written record, comply with the request without charge but subject to such conditions as theinvestigator may impose.Giving Copies of Record to Other Persons
MIE-2.3.7
(a) The CBB may give a copy of a written record of the examination, or such a copy together with a copy of any related record, or document, or book, to an advocate and solicitor acting on behalf of aperson who is carrying on, or is contemplating in good faith, a proceeding in respect of a matter to which the examination relates.(b) If the CBB gives a copy to aperson under rule MIE-2.3.7 (a), theperson , or any otherperson who has possession, custody or control of the copy, or a copy of it, shall not except in connection with preparing, beginning or carrying on, or in the course of any proceedings:(i) Use the copy or a copy of it; or(ii) Publish or communicate to aperson , the copy, a copy of it, or any part of the copy's contents.(c) The CBB may, subject to such conditions or restrictions as it may impose, give to aperson a copy of a written record of the examination, or such a copy together with a copy of any related record, or document, or book.Amended: July 2021Copies Given Subject to Conditions
MIE-2.3.8
If a copy of a written record, or document, or book is given to a
person under rules MIE-2.3.6 (b) or MIE-2.3.7 (c), subject to conditions or restrictions imposed by the CBB, theperson and any otherperson who has possession, custody or control of the copy or a copy of it, shall comply with the conditions.Record to Accompany Report
MIE-2.3.9
(a) If, in the CBB's opinion a statement made at an examination is relevant to any otherinvestigation conducted under this Module;(b) If a record of the statement was made under rule MIE-2.3.6; and(c) A report about the otherinvestigation is prepared under this Module, a copy of the record shall accompany the report relating to such otherinvestigation submitted to the CBB.Offences
MIE-2.3.10
(a) Aperson who refuses or fails to comply with the rules MIE-2.3.2 or MIE-2.3.4 (c) may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.(b) Aperson who:(i) Refuses or fails to take an oath or make an affirmation when required to do so by aninvestigator examining him under this Module;(ii) Refuses or fails to comply with a requirement of aninvestigator under rule MIE-2.3.6 (b) (i); or(c) Aperson who, in purported compliance with the provisions of this Module, or in the course of examination of theperson, furnishes information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.(d) It may be a defence to prosecution for an offence under paragraph (c) if the defendant proves that he believed on reasonable grounds that the information or statement was true and was not misleading.(e) Aperson who obstructs or hinders the CBB or anotherperson in the exercise of any power under this Module or the CBB Law, may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.Amended: July 2021Powers to Obtain Information
MIE-2.3.11
Power of Authority to order Production of Records, or Documents or Books
Without prejudice to rule MIE-2.3.1 and for the purpose of an
investigation under this Module, the CBB may in writing, require anyperson at a specified time and place to provide information or produce records, or documents, or books relating to any matter underinvestigation , and suchperson shall comply with that requirement.MIE-2.3.12
Application for Warrant to Seize Records, or Documents, or Books Not Produced
(a) Where the CBB has reasonable grounds to suspect that there is, on any particular premises, any record, or document, or book the production of which has been required under rule MIE-2.3.11, and:(i) Which has not been produced in compliance with that requirement; or(ii) Which the CBB has reasonable grounds to believe will not be produced in compliance with that requirement,the CBB may apply to a court for the issue of a warrant authorising the CBB to search the premises for such record, or document, or book, with or without compelling force:(iii) To enter and search the premises and to break open and search anything, whether a fixture or not, in the premises; and(iv) To take possession of or secure against interference, any record, or document, or book that appears to be a record, or document, or book, the production of which was so required.(b) The powers conferred under paragraph (a) are in addition and not in derogation of any other powers conferred by any other written law or rule of law.(c) In this Module, "premises" includes any structure, building, aircraft, vehicle or vessel.MIE-2.3.13
Powers Where Records, or Documents, or Books are Produced or Seized
(a) This rule shall apply where:(i) Records, or documents, or books are produced to the CBB under a requirement made under rule MIE-2.3.11;(ii) Under a warrant issued under rule MIE-2.3.12, the CBB or aperson named therein:• Takes possession of records, or documents, or books; or• Secures records, or documents, or books against interference; or(iii) Under a previous application of rule MIE-2.3.13 (f) of this section, records, or documents, or books are delivered into the possession of the CBB or aperson authorised by it.(b) If paragraph (a) (i) applies, the CBB may take possession of any of the records, or documents, or books.(c) The CBB or, where applicable, aperson referred to in paragraph (a) (ii) may:• Examine, and may make copies of or take extracts from, any of the records, or documents, or books;• Use or permit the use of any of the records, or documents, or books for the purposes of any proceedings; and• Retain possession of any of the records, or documents, or books for so long as is necessary.(i) For the purposes of exercising a power conferred by this rule (other than paragraph (e));(ii) For a decision to be made about whether or not any proceedings to which the records, or documents, or books concerned would be relevant should be instituted; or(iii) For such proceedings to be instituted and carried on.(d) Noperson shall be entitled as against the CBB or, where applicable, aperson referred to in paragraph (a) (ii) to claim a lien on any of the records, or documents, or books, but such a lien is not otherwise prejudiced.(e) While the records, or documents, or books are in the possession of the CBB or where applicable, theperson referred to in paragraph (a) (ii) the CBB orperson :(i) Shall permit anotherperson to inspect at all reasonable times such of the records, or documents, or books (if any) as the second-mentionedperson would be entitled to inspect if they were not in possession of the CBB or the first-mentionedperson; and(ii) May permit any otherperson to inspect any of the records, or documents, or books.(f) Unless paragraph (a) (ii) applies, aperson referred to in paragraph (a) (ii) may deliver any of the records, or documents, or books into the possession of the CBB or of aperson authorised by the CBB to receive them.(g) Where paragraphs (a) (i) or (ii) applies, the CBB, aperson referred to in paragraph (a) (ii), or aperson into whose possession the records, or documents, or books are delivered under paragraph (f) may require:(i) If paragraph (a) (i) applies, aperson who so produced any of the records, or documents, or books; or(ii) In any other case, aperson who was a party to the compilation of any of the records, or documents, or books, to explain to the best of his knowledge and belief any matter about the compilation of any of the records, or documents, or books, or to which any of the records, or documents, or books relate.MIE-2.3.14
Powers where Records, or Documents, or Books are not Produced
Where a
person fails to comply with a requirement imposed by the CBB under rule MIE-2.3.11 to produce any record, or document, or book, the CBB may require theperson to state to the best of his knowledge and belief:(a) The place where such record, or document, or book may be found; and(b) Theperson who last had possession, custody or control of such record, or document, or book and the place where thatperson may be found.MIE-2.3.15
Copies of or Extracts from Records, or Documents, or Books to be Admitted in Evidence
(a) Subject to this rule, a copy of or extract from a record, or document, or book referred to in this rule that is proved to be a true copy of the record, or document, or book, or of the relevant part of the record, or document, or book is admissible in evidence as if it were the original record, or document, or book or the relevant part of the original record, or document, or book.(b) For the purposes of paragraph (a), evidence that a copy of or extract from a record, or document, or book is a true copy of the record, or document, or book, or of a part of the record, or document, or book, may be given by aperson who has compared the copy or extract with the record, or document, or book, or the relevant part of the original record, or document, or book and may be given orally or by an affidavit sworn, or by a declaration made before aperson authorised to take affidavits or statutory declarations.MIE-2.3.16
Offences
(a) Aperson who refuses or fails to comply with any requirement imposed under rules MIE-2.3.11, MIE-2.3.13 (g), or MIE-2.3.14 may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(b) Aperson who in purported compliance with a requirement under this rule, furnishes information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(c) It may be a defence to the prosecution for an offence under paragraph (b) if the defendant proves that he believed on reasonable grounds that the information or statement was true and not misleading.(d) Anyperson who conceals, destroys, mutilates or alters any record, or document, or book relating to a matter that the CBB is investigating or about to investigate under this Module, or who, where such a record, or document, or book is within the territory of the Kingdom of Bahrain, takes or sends the record, or document, or book out of Bahrain, may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(e) Aperson who, obstructs or hinders the CBB in the exercise of any power under this rule, or obstructs or hinders aperson who is executing a warrant issued under rule MIE-2.3.12, may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.(f) The occupier or theperson in charge of the premises that aperson enters under a warrant issued under rule MIE-2.3.12 who fails to provide to thatperson all reasonable facilities and assistance for the effective exercise of his powers under the warrant may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.Information and Records from Telecommunications Operators
MIE-2.3.17
Access to Records of Telecommunication Companies and Internet Service Providers
As per Article 123 of the CBB Law, if it appears to the
CMSD or its duly appointedinvestigator that the records, information, documents and data recorded in electronic format or otherwise is available, or likely to be available with the telecommunications service providers or internet service providers, and these are relevant to aninvestigation conducted by theCMSD , then theCMSD or its duly appointedinvestigator may request the Telecommunications Regulatory Authority of the Kingdom of Bahrain to use its powers under the telecommunication laws, rules and regulations to obtain such records or information, or documents or data. Such records, information, documents or data should be provided by such telecommunications service providers or internet service providers, who should promptly present such records, information, documents and data for the purpose of theCMSD's investigation .MIE-2.4 MIE-2.4 Investigation Report
MIE-2.4.1
The
investigator appointed by the CBB to conduct aninvestigation shall, on completion of the investigation, after taking into account all relevant findings, conclusions, facts and evidence, submit a report to the CBB, provided that theinvestigator shall submit an interim report pending completion ofinvestigations if he considers necessary in the interest of investors and thesecurities market, or as directed by the CBB.MIE-2.4.2
The investigation report shall be submitted to the
CMSD .MIE-2.4.3
The
CMSD may, after considering theinvestigation report and the facts and evidence of the case and if satisfied that there is contravention of the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, decide to initiate appropriate enforcement actions. This is without prejudice to the powers of the CBB to take interim and other enforcement actions before conducting formalinvestigations , or before receipt of a finalinvestigation report.MIE-2.4.4
Apart from initiating appropriate enforcement actions referred to in paragraph MIE-2.4.3, the
CMSD may make referrals to SROs or other regulators and authorities in the Kingdom of Bahrain, as well as to the overseas regulators and authorities, particularly in respect of contraventions which can be addressed by such other domestic or overseas regulators/authorities.Amended: July 2021MIE-2.5 MIE-2.5 Judicial Investigation
MIE-2.5.1
Article 115 of the CBB Law states that: "The officers of the Central Bank who are appointed by a resolution issued by the Minister of Justice and Islamic Affairs in agreement with the Governor, shall have the capacity of Judicial Investigation Officers with respect to criminal offences that fall under their jurisdiction and relevant to the duties assigned to them. The verbal process of such crimes prepared by the said officials should be referred to the public prosecution pursuant to a resolution to be issued by the Governor or any
person he may authorise".MIE-2.5.2
The CBB may suggest that the Minister of Justice and Islamic Affairs appoint any of the officers of the
CMSD as Judicial Investigation Officers with respect to criminal offences relating to thesecurities market or the offences covered by the scope of this Module. Judicial investigation undertaken by the officials of theCMSD , either jointly with the officers of the Ministry of Justice and Islamic Affairs, or otherwise, shall submit aninvestigation report to theCMSD , giving details of contraventions and offences of the CBB Law, rules and regulations, along with all relevant information and evidence.Amended: July 2021MIE-2.5.3
The
CMSD may, after considering theinvestigation report submitted to theCMSD officers who conducting the judicialinvestigation , and if satisfied that there is a contravention of the CBB Law, rules and regulations, decide to initiate appropriate enforcement actions.MIE-3 MIE-3 Enforcement
MIE-3.1 MIE-3.1 Enforcement
The CBB's General Approach to Enforcement
MIE-3.1.1
This section sets out the CBB's approach to enforcement, and the measures used by the CBB to address failures and contraventions by various market participants, including
capital market service providers , investors or any otherpersons involved in the non-compliance or contravention. The purpose of such measures is to encourage high standards of compliance by all those involved in the capital market, thus reducing risk to the Kingdom's financial sector in general, and the capital market in particular.Amended: July 2021MIE-3.1.2
Since most of the CBB's enforcement powers are derived from the CBB Law, this Module contains a large number of references to the Law. Users of the Module should therefore refer to the Law as well as to the Module where necessary. In the event of a dispute on interpretation between the Law and the description of an enforcement power in this Module, the provisions of the Law prevail.
MIE-3.1.3
The CBB's effective and proportionate use of its enforcement powers plays an important role in the pursuit of its regulatory objectives of protecting investors, maintaining confidence in the financial system, promoting public awareness and reducing risks and financial crime. For example, using enforcement helps to contribute to the protection of investors and to deter future contraventions of the CBB Law and other application requirements and market abuse. It can also be a particularly effective way, through publication of enforcement outcomes, of raising awareness of regulatory standards.
MIE-3.1.4
There are a number of principles underlying the CBB's approach to the exercise of its enforcement powers:
(a) The effectiveness of the regulatory regime depends to a significant extent on maintaining an open and cooperative relationship between the CBB and those it regulates.(b) The CBB will seek to exercise its enforcement powers in a manner that is transparent, proportionate, responsive to the issue and consistent with its publicly stated policies.(c) The CBB will seek to ensure fair treatment when exercising its enforcement powers.(d) The CBB will aim to enhance the market discipline of theperson who is the subject of its action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance, and where appropriate, to remedy the harm caused by the non-compliance.(e) The CBB will seek to exercise its enforcement powers in a non-discriminatory manner with an effort to treat similarly situatedpersons and entities in a similar manner.MIE-3.1.5
Where a
person has failed to comply with the requirements of the CBB Law, rules and regulations, or other relevant laws, rules and regulations, it may be appropriate to deal with this without the need for formal disciplinary or other enforcement action. The proactive supervision and monitoring of the capital market and an open and cooperative relationship between market participants and their regulators, will in some cases where a contravention has taken place, lead the CBB to decide against taking formal disciplinary action. However, in those cases, the CBB will expect the market participant or relevantperson to act promptly in taking the necessary remedial action agreed with its regulators orSROs , to deal with the CBB's concerns. If the market participant or relevantperson does not do this, the CBB may take disciplinary or other enforcement action in respect of the original contravention.MIE-3.1.6
The CBB favours an open, pragmatic and collaborative relationship with market participants, within the boundaries set by the CBB Law and Rulebook. Whilst the CBB wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective and timely enforcement of its requirements.
MIE-3.1.7
The CBB's approach is not to prescribe in detail the exact regulatory response for each and every contravention, as there may be several types of contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.
MIE-3.1.8
In deciding any given regulatory and enforcement response, the CBB will nonetheless consistently assess the individual circumstance of each contravention against the CBB Law and this Module. The CBB's overall approach is to take into account:
(a) The seriousness of the contravention concerned (including the risks posed to the capital market);(b) The compliance track record of theperson concerned (including the extent to which the contravention reflects systemic weaknesses, reckless conduct, or wilful violation); and(c) The measures that are most likely to achieve the desired result of remedying the contravention and preventing future contraventions.MIE-3.1.9
Such an approach reduces the risk of inappropriate enforcement actions, by allowing regulatory measures to be tailored to individual circumstances. By taking into account a
person's compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the CBB also aims to achieve an overall consistency in its regulatory actions.MIE-3.1.10
Underlying the CBB's approach in paragraph MIE-3.1.8 is the fundamental principle of proportionality. The enforcement measures contained in this Module are of varying severity, and will be used accordingly in keeping with the CBB's assessment of the contravention. Thus, the CBB will reserve its most serious enforcement measures — such as initiating prosecution for imposing criminal sanctions, cancellation of license or withdrawal of "fit and proper" status — for the most serious contraventions.
MIE-3.1.11
Where a significant element of judgement is required to assess compliance with a requirement, the CBB will usually discuss the matter with the person concerned, before using one of this Module's enforcement mechanisms. Conversely, where there are clear-cut contraventions of CBB requirements, then the CBB will usually move immediately to one or more of the enforcement mechanisms outlined in this Module. In most such cases, though, the CBB also expects to continue an active dialogue with the person concerned, aimed at remedying the contravention.
MIE-3.1.12
Except in the limited circumstances outlined below, the CBB will usually only apply an enforcement measure after the person concerned has been given a suitable opportunity to be heard and/or make representations.
Prohibition on Insurance
MIE-3.1.12A
To help the CBB achieve the purpose of this Module,
licensees and listed companies must not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the fines provided for in this Module.Added: July 2021Publicity
MIE-3.1.12B
The CBB will not as a matter of general policy publicise individual cases when it uses enforcement measures. However, in such cases the CBB may inform the licensee’s or listed company’s external auditor and – in the case of overseas operations – relevant overseas regulators.
Added: July 2021MIE-3.1.12C
In exceptional circumstances, as allowed by Article 132 of the CBB Law, the CBB may decide to publicise individual cases when the measures set out in MIE are used, where there is a strong case that doing so would help achieve the CBB’s supervisory objectives. In such instances, the CBB will usually allow the licensee, listed company or individual concerned the opportunity to make representations to the CBB before a public statement is issued.
Added: July 2021MIE-3.1.12D
With respect to the financial penalties provided Chapter MIE-4, licensees and listed companies are required to disclose in their annual report the amount of any such penalties paid to the CBB, together with a factual description of the reason(s) given by the CBB for the penalty.
Added: July 2021MIE-3.1.12E
Without prejudice to the above policy, the CBB may from time to time publish aggregate information on its use of measures set out in MIE, without identifying the licensees, listed companies or individuals concerned, unless their identities have previously been disclosed as provided for in Paragraphs MIE-3.1.12C or MIE-3.1.12D.
Added: July 2021MIE-3.1.12F
By their nature, penalties relating to placing licensees under administration and/or amending or cancelling of a license, are public acts, once applied. The CBB will in these instances generally issue a public statement explaining the circumstances of the case.
Added: July 2021Senior Management Responsibility
MIE-3.1.13
The CBB is committed to ensuring that senior managers of CBB licensees, listed companies, issuers of
securities and otherpersons fulfil their responsibilities. The CBB expects senior management to take responsibility for ensuring their organizations identify risks, develop appropriate systems and controls to manage those risks and ensure that the systems and controls are effective in practice. Where senior managers are themselves responsible for misconduct, the CBB will where appropriate, bring cases against individuals as well as organizations. The CBB believes that deterrence will most effectively be achieved by bringing home to such individuals the consequences of their actions.MIE-3.1.14
The CBB recognises that cases against individuals are very different in their nature from cases against corporate entities and the CBB is mindful that an individual will generally face greater risks from enforcement action in terms of financial implications, reputation and livelihood than would a corporate entity. However, taking action against individuals sends an important message about the CBB's regulatory objectives and priorities and the CBB considers that such cases have important deterrent values. The CBB is therefore committed to pursuing appropriate cases robustly, and will dedicate sufficient resources to them to achieve effective outcomes.
Cooperation
MIE-3.1.15
An important consideration before an enforcement
investigation and/or enforcement action is taken forward is the nature of acapital market service provider's , or otherperson's overall relationship with the CBB and whether, against that background, the use of enforcement procedures is likely to further the CBB's aims and objectives. So, for any similar set of facts, using enforcement procedures will be less likely if acapital market service provider , or any otherperson has built up over time a strong track record of taking its senior management responsibilities seriously and been open and communicative with the CBB.In addition, a
person 's conduct in response to the specific issue which has given rise to the question of whether enforcement procedures should be used will also be relevant. In this respect, relevant matters may include whether theperson has self-reported, helped the CBB establish the facts and/or taken remedial action such as addressing any systems and controls issues and compensating any consumers who have lost out. Such matters will not, however, necessarily mean that enforcement procedures will not be used. The CBB has to consider each case on its merits and in the wider regulatory context, and any such steps cannot automatically lead to an enforcement sanction. However, they may in any event be factors which will mitigate the penalty.Amended: July 2021MIE-3.1.16
In those cases where enforcement action is not taken and/or a formal
investigation is not commenced, the CBB will expect thecapital market service provider or otherperson to act promptly to take the necessary remedial action agreed with its regulators to deal with the CBB's concerns. In cases of failure to take prompt remedial action, the CBB may take disciplinary or other enforcement action in respect of the original contravention.Amended: July 2021Late Reporting or Non-submission of Reports to the CBB
MIE-3.1.17
The CBB attaches considerable importance to the timely submission of reports by
capital market service providers . This is because the information contained in such reports is essential to the CBB's assessment of whether a market participant is complying with the requirements and standards of the regulatory system. So in the majority of cases involving non-submission of reports or repeated failure to submit complete reports in time, the CBB considers that it will be appropriate to initiate enforcement actions.Amended: July 2021MIE-3.2 MIE-3.2 Interim Measures and Actions
MIE-3.2.1
In order to pursue the CBB's objectives and perform the duties specified by Articles 3 and 4 of the Law, the CBB needs to initiate appropriate enforcement measures swiftly before further damage is done and take remedial actions as early as possible, in order to protect the interest of the investors and the capital market.
MIE-3.2.2
The CBB's enforcement measures are intended to achieve compliance and therefore may, in certain cases, have to be applied in a timely and prompt manner without waiting for the
investigation to be completed. In such cases, pending the receipt of a finalinvestigation report, theCMSD will resort to interim enforcement actions in order to restrain future violation and also act as a remedial, so that the past unlawful conduct may be reversed at the earliest.MIE-3.2.3
Interim enforcement actions may be taken, based on the information/documents/reports available with the
CMSD , analysis and findings of theCMSD , interim findings of theinvestigation initiated by theCMSD , and reports from licensed exchanges and the Clearing, Settlement and Central Depository System and the clearing house, or any other appropriate source of documents or information or reports.Amended: July 2021MIE-3.2.4
In cases where the
CMSD takes interim measures, usually theCMSD will provide a post-decisional opportunity of a hearing to thepersons affected by such interim actions within a reasonable period of time, as expeditiously as possible. TheCMSD may, after taking into account the submissions made by thepersons concerned both during the hearing and in writing, modify or reconfirm or cancel or reverse the enforcement action, as may be deemed fit by theCBB Enforcement Decision Review Committee (EDRC).Amended: July 2021MIE-3.2.5
Interim enforcement actions shall be decided by the
CMSD , based on the available information, facts and evidence, including the preliminaryinvestigation report or interiminvestigation report, or any other information, data, report, facts or evidence available to theCMSD . Interim enforcement actions can also be decided by theEnforcement Decisions Review Committee on a reference made to it by theCMSD .Amended: July 2021MIE-3.2.6
Interim enforcement actions shall be applicable without prejudice to any further
investigation and enforcement actions that may be decided by theCMSD or theEnforcement Decisions Review Committee .Amended: July 2021Procedure
MIE-3.2.7
Based on the facts and evidence available, the
CMSD may at its discretion, decide on an interim enforcement action.MIE-3.2.8
In the course of the CMSD’s case examination or during the course of carrying out an
investigation , if it appears to the official of theCMSD conducting the examination orinvestigation , or the appointedinvestigator that an interim enforcement action is warranted, he shall submit the facts and evidence of the case to theCMSD , along with the proposal for interim enforcement action.Amended: July 2021MIE-3.2.9
If the
CMSD , during the course of its normal supervisory functions, finds that interim enforcement action is warranted, theCMSD shall evaluate the information, documents, data and evidence available, and initiate interim enforcement action, as may be deemed fit.MIE-3.2.10
The
CMSD shall issue the order to all the parties against whom interim enforcement action is taken and other relevant parties involved in the implementation of the order, includingcapital market service providers , investors or any other relevant parties.Amended: July 2021MIE-3.2.11
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.12
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.13
[This Paragraph has been deleted in July 2021]
Deleted: July 2021MIE-3.2.14
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.15
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.16
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.2.17
Interim enforcement actions shall be applicable without prejudice to any further enforcement actions that may be decided by the
CMSD orEDRC , and to any furtherinvestigation and enforcement proceedings and actions.Amended: July 2021MIE-3.3 MIE-3.3 Final Enforcement Actions
MIE-3.3.1
When there is clear-cut evidence to confirm contraventions of the CBB Law, CBB Rulebook or other related laws, rules and regulations, the CBB may implement one or more appropriate enforcement measures.
MIE-3.3.2
The CBB may implement one or more appropriate enforcement measures, where the CBB has evidence in the form of findings of the
CMSD investigation done by theinvestigators appointed by the CBB under Articles 121 or 115 of the CBB Law, along with the information, documents, statements of explanation and other evidence obtained duringinvestigation and also in the form of findings of theCMSD and when there is clear-cut evidence available, even without a formalinvestigation .Amended: July 2021MIE-3.3.3
If considered appropriate, the CBB may also rely on the documents and information obtained through other means such as information, reports, documents, statements of explanation obtained from the
SROs , members ofSROs , listed companies, issuers ofsecurities , any othercapital market service providers and other third parties, as per Articles 111, 112 and 113 of the CBB Law,inspection conducted under Article 114 of the CBB Law, and references received from other regulatory authorities with complete evidence etc., to initiate final enforcement actions.Amended: July 2021MIE-3.3.4
However, the CBB will usually apply a final enforcement action only after the concerned
person has been given notice of the charges of contravention and an opportunity to make his submissions in writing and/or during a personal hearing.MIE-3.4 MIE-3.4 Enforcement Proceedings
Enforcement Decisions Review Committee (EDRC)
MIE-3.4.1
For the purpose of taking enforcement decisions that are of material significance, the CBB has set up the
Enforcement Decisions Review Committee .The
EDRC shall be as constituted by a Directive of the Governor.Amended: July 2021MIE-3.4.2
The
EDRC exercises enforcement powers on behalf of the CBB and is separate from the CBB's executive management structure.Amended: July 2021MIE-3.4.3
The
EDRC may take the assistance of theCMSD staff, but they shall be separate from the staff who were involved in conducting theinvestigations and making recommendations to theEDRC . TheEDRC may also decide to take the assistance ofSROs and outside experts, if warranted.Amended: July 2021Scope of Work of the EDC
MIE-3.4.4
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.5
[This Paragraph has been deleted in July 2021].
Deleted: July 2021The Operation of the EDC
EDC Meetings and Composition of Panels
MIE-3.4.6
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.7
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Conflicts of Interest
MIE-3.4.8
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.9
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.10
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: General
MIE-3.4.11
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.12
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.13
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.14
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: Warning Notices
MIE-3.4.15
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.16
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.17
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: Representations
MIE-3.4.18
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.19
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.20
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.21
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.22
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.23
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.24
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Procedure: Enforcement orders
MIE-3.4.25
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Default Procedures
MIE-3.4.26
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.27
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.28
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.29
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.30
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.31
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.32
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.33
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Court Proceedings
MIE-3.4.34
[This Paragraph has been deleted in July 2021].
Deleted: July 2021Review Proceedings
MIE-3.4.35
Where an
enforcement order is issued by theEDRC , a party may appeal such decision to the Appeals Committee of the CBB.Amended: July 2021MIE-3.4.36
The Appeals Committee shall be as constituted by a Directive of the Governor.
Amended: July 2021MIE-3.4.37
[This Paragraph has been deleted in July 2021].
Deleted: July 2021MIE-3.4.38
The scope of the Appeals Committee shall include but not be limited to determining:
(a) Whether theEDRC followed the correct procedures of theEDRC ;(b) Whether the penalty imposed by theEDRC is justified.(c) Evaluating any appeals to enforcement measures submitted, in conjunction with supporting evidence and documentation received from the relevant CBB Directorate and utilize experts internal or external to the CBB.(d) Issuing recommendations following an evaluation of the appeal and within 30 days of its referral to the Appeals Committee.Amended: July 2021MIE-3.5 MIE-3.5 Settlement
Introduction
MIE-3.5.1
(a) Aperson subject to enforcement action may agree to a financial penalty or other outcome, rather than contest formal action by the CBB.(b) The fact that he does so will not usually obviate the need for anenforcement order recording the CBB's decision to take that action. Where, however, theperson subject to enforcement action agrees not to contest the content of a proposedenforcement order , the decision to issue that order will be taken by theEDRC on matters which are before theEDRC , or by theCMSD on matters which have not been referred to or being considered by theEDRC .Amended: July 2021Procedure: General
MIE-3.5.2
A
person who is or may be subject to enforcement action may wish to discuss the proposed action with theCMSD through settlement discussions. TheCMSD shall refer the matter to theEDRC if the matter is subject to proceedings before theEDRC and decide on its own on other matters.Amended: July 2021MIE-3.5.3
Settlement discussions may take place at any time during the enforcement process if both parties agree. This might be before the giving of a
warning notice , before anenforcement order , or even after referral of the matter to the Court. But theCMSD would not normally agree to detailed settlement discussions until it has a sufficient understanding of the nature and gravity of the suspected misconduct or issue to make a reasonable assessment of the appropriate outcome. Settlement after anenforcement order is not encouraged.MIE-3.5.3A
The CBB reserves the right not to enter into settlement discussions where its examination of the nature of the contravention and/or the contravening party discourages this or where the matter was previously rejected under the settlement proceedings.
Added: July 2021MIE-3.5.3B
Entering into settlement discussions shall not prohibit the initiation of any proceedings, in so far as may be deemed necessary by the CBB for the purpose of issuance of interim measures to protect the interests of investors and to maintain the integrity of the securities markets.
Added: July 2021MIE-3.5.4
The
CBB and theperson concerned may agree that neither theCBB nor theperson concerned would seek to rely against the other on any admissions or statements made in the course of their settlement discussions, if the matter is considered subsequently by the Court.Amended: July 2021Procedure: Participation of Decision-Makers in Discussions
MIE-3.5.5
(a) TheEDRC may, but need not, participate in the discussions exploring possible settlement.(b) If theEDRC has not been involved in the discussions, but an agreement has been reached, they may ask to meet the relevantCMSD staff or theperson concerned, in order to assist in the consideration of the proposed settlement.Amended: July 2021MIE-3.5.6
The terms of any proposed settlement:
(a) Will be put in writing and be agreed byCMSD staff and theperson concerned;(b) May refer to a draft of the proposedwarning notices (if any) setting out the facts of the matter and theCMSD's conclusions;(c) May, depending upon the stage in the enforcement process at which agreement is reached, include an agreement by theperson concerned to:(i) waive and not exercise any rights under the CBB Law or otherwise to take note of, or access to material relied upon by theCMSD any secondary material which might undermine theCMSD decision to give thewarning notice ;(ii) waive and not exercise any rights under the CBB Law or otherwise to make representations to theCBB in respect of awarning notice ;(iii) not object to the giving of anenforcement order before the expiry of the 30 day period after the giving of awarning notice ;(iv) not dispute with theCMSD the facts and matters set out in awarning notice , orenforcement order , and to waive and not exercise any right under the CBB Law to refer the matter to the Court.(d) Will include that the person subject to the enforcement action accepts that it contravened relevant requirements and admits relevant facts regarding those contraventions in the settlement.(e) Will vary depending on the circumstances of the matter and the CBB settles only if the agreed terms of the settlement result in an acceptable policy and regulatory outcomes.Amended: July 2021MIE-3.5.7
The
EDRC may:(a) Accept the proposed settlement by deciding to give anenforcement order based on the terms of the settlement; or(b) Decline the proposed settlement; or(c) Recommend other terms.Amended: July 2021MIE-3.5.8
(a) In a matter where the CMSD is engaged in settlement discussions and theEDRC subsequently declines the proposed settlement, they may inviteCMSD staff and theperson concerned to enter into further discussions to try to achieve an outcome theEDRC would be prepared to endorse.(b) However, if the matter for settlement has been submitted to theEDRC for consideration, it will be for theEDRC to decide:(i) Whether to extend the period for representations in response to awarning notice ; or(ii) If representations have been made in response to awarning notice , whether to proceed to give anenforcement order .Amended: July 2021MIE-3.5.9
The CBB and other parties may agree to mediation as a way of facilitating settlement in appropriate cases.
Amended: July 2021MIE-3.6 MIE-3.6 Enforcement Measures and Actions
MIE-3.6.1
As it is neither practical nor effective to prescribe in detail the exact enforcement measures for each and every type of potential non-compliance or violation, the CBB will consistently apply the principles stated in paragraph MIE-3.1.4 to assess the individual circumstance of each contravention and decide on the appropriate type or types of enforcement actions that may be resorted to in respect of each case.
MIE-3.6.2
The type of enforcement actions, both interim and final, that can be applied on different categories of
persons involved could include but not be limited to the enforcement actions and measures specified in paragraphs MIE-3.6.3 to MIE-3.6.9.Members of SROs and other Capital Market Service Providers
MIE-3.6.3
Enforcement actions in respect of the members of
SROs and othercapital market service providers will mainly be governed by the CBB Law and the relevant volume of the CBB Rulebook and enforcement actions thereunder include:1) Formal warnings;2) [This Subparagraph was deleted in July 2021].3) Financial penalties as per Article 129 of the CBB Law;4) Placing a licensee under administration as per Article 136 of the CBB Law;5) Cancellation or amendment of license as per Article 48 of the CBB Law;In addition to the above, the CBB may also resort to the following enforcement actions under the CBB Law:
(a)i. Cease and Desist Order
An order prohibiting members ofSROs or othercapital market service providers from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the finalinvestigation and/or enforcement proceedings as a permanent injunction.ii. Freezing Accounts
An order restricting asecurities orsecurities cash account of a member of anSRO or othercapital market service provider with the licensed exchanges, clearing houses, central depositories, banks, brokerage firms, etc. This measure generally will be used as an interim measure.iii. This Subparagraph was deleted in July 2021].iv. Private Warnings
In certain cases despite concerns about aperson 's conduct or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make theperson aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where theperson has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to lead to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.(b) Amendment or Revocation of License Under Article 48
The CBB may amend or revoke a license of a member of anSRO or othercapital market service provider , for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.(c) Imposing Restrictions under Article 128
The CBB may impose administrative restrictions upon members ofSROs or othercapital market service providers , in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.(d) Imposing Financial Penalties under Article 129 of the CBB Law
The CBB may impose financial penalties as an enforcement action for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.(e) Appointing an Observer Member on the Board of the Licensee under Article 130
If imposing administrative restrictions prove to be futile, then the CBB may appoint an observer member on the Board of Directors of the member of anSRO or othercapital market service provider , for a specified period.(f) Suspension of a Licensee under Article 131
The CBB may suspend a member of anSRO or othercapital market service provider , who contravenes the provisions of the CBB Law, rules and regulations and terms and conditions of a license for a period not exceeding 12 months.(g) Public Censure under Article 132
The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.(h) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of offences which result in the violation of Articles 81 or 85 of the CBB Law, if members ofSROs or othercapital market service providers , are involved in such violations.(i) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.(j) Criminal Sanction under Article 168
Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."(k) Criminal Sanction under Article 169
Article 169 of the CBB Law states that "Without prejudice to any greater penalty stated under the Penal Code or any other law, a punishment by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, shall be imposed upon any official or employee of the licensee who acts or permitted an action in violation of Article (134) of this Decree, if he knows or should have known that the licensee is insolvent".(l) Criminal Sanction under Article 170
Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law: (1) Aperson shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Anyperson participates in such an offence shall be liable to the same penalty of the principal offender. (2) Aperson shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed any investigation carried out by the Central Bank or aninvestigator appointed by the Central Bank."(m) Criminal Sanction under Article 171
Article 171 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8), shall be liable to imprisonment and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty." This criminal sanction is applicable to members ofSROs or othercapital market service providers who violate Part 8 of the CBB Law.(n) Criminal Sanction under Article 172
Article 172 of the CBB Law states that "Any legalperson shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legalperson or anyperson who acts in such capacity."(o) Criminal Sanction under Article 163
Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or anyperson appointed by the Central Bank to conduct aninvestigation orinspection on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."(p) [This Subparagraph was deleted in July 2021].Amended: July 2021Disciplinary Action through Licensed Exchanges and Licensed Clearing Houses/Central Depositories (SROs)
MIE-3.6.4
SROs are required to establish a Disciplinary Committee for the purpose of deciding violations by the members or listed companies, or issuers ofSRO's business rules. A Disciplinary Committee shall decide on cases relating to any violation of laws, rules and regulations which regulate the licensed exchanges. Enforcement measures that can be imposed on members ofSROs and listed companies/issuers through the Disciplinary Committee of licensed exchanges may include:i. Warning;ii. Confiscation of all or part of the member's deposits with the licensed exchange;iii. Suspension of trading or clearing rights;iv. Suspension of membership rights;v. Cancellation of membership;vi. Financial penalties, fines and charges.The
CMSD may advise licensed exchanges, licensed clearing houses and central depositories within their scope of their respective powers, to take appropriate enforcement actions. These actions can be in addition to other enforcement actions which are taken by the CBB itself.Listed Companies
MIE-3.6.5
Listed companies are required to meet their obligations as per the CBB Law, rules and regulations and these obligations include the dissemination of information, filing of returns, notifications and periodic reports. For example, listed companies are required to monitor insiders' transactions and report to the
CMSD regarding any suspected case of abuse of inside information and file reports regarding insiders' transactions. If a listed company or an issuer fails to comply with or contravenes the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, the CBB may initiate appropriate enforcement actions. Such enforcement actions may include, but not be limited to:(a)i. Formal warning:
An order issuing a formal warning may be issued to a listed company in order to clearly set out the CBB's concerns to a listed company to ensure that the matter is viewed by the recipient with appropriate seriousness.ii. Cease and Desist Order:
An order prohibiting a listed company from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the finalinvestigation and/or enforcement proceedings as a permanent injunction.iii. [This Subparagraph was deleted in July 2021].iv. Private Warnings
In certain cases despite concerns about aperson 's behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make theperson aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where theperson has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to head to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.(b) Restraining offering of securities using powers under Article 81:
The CBB may direct a listed company or any other prospective issuer not to access the market for an offer or issue ofsecurities in the Kingdom for a certain period or until certain conditions are satisfied.(c) Cancellation of listing and suspension of trading:
Article 87 (a) of the CBB Law states that: "The Central Bank may decide to cancel the listing of anysecurities that contravene the requirements of the Listing Rules, or to suspend the trading of any listedsecurities facing exceptional circumstances that the Central Bank considers as sufficient grounds for the suspension of thesecurities .
The cancellation of listing or the suspension of trading shall be decided by the Governor."(d) Imposing restrictions under Article 128
The CBB may impose administrative restrictions upon listed companies in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.(e) Public censure under Article 132
The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.(f) Criminal sanction under Article 163
Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or anyperson appointed by the Central Bank to conduct aninvestigation orinspection on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."(g) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of violation of Articles 81 or 85 of the CBB Law.(h) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.(i) Criminal Sanction under Article 168
Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."(j) Criminal Sanction under Article 170
Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law:(1) Aperson shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Anyperson participates in such an offence shall be liable to the same penalty of the principal offender.(2) Aperson shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed anyinvestigation carried out by the Central Bank or aninvestigator appointed by the Central Bank."(k) Criminal Sanction under Article 172
Article 172 of the CBB Law states that "Any legalperson shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legalperson or anyperson who acts in such capacity."(l) Imposing Financial Penalties under Article 129 of the CBB Law
The CBB may impose financial penalties as an enforcement action for contravention of the CBB Law, rules and regulations.Amended: July 2021Licensed Exchanges, Clearing Houses and Central Depositories
MIE-3.6.6
As an
SRO , the licensed exchanges, clearing houses and depositories are required to:a) Actively perform market surveillance as a front-line regulator;b) Take disciplinary action for contraventions by members and listed companies/issuers through theSRO's Disciplinary Action Committee;c) Identify potential cases of unlawful transactions and take preventative actions;d) Report suspected cases of market abuse and manipulation to the CBB;e) Implement enforcement actions determined by the CBB.When an
SRO contravenes the provisions of the CBB Law, rules and regulations, as CBB licensees, the enforcement action applicable to all othercapital market service providers of the CBB will also be applicable to the licensed exchanges, clearing houses and central depositories. In addition to these enforcement actions, theseSROs will be subject to other enforcement actions stated in the Markets & Exchanges Module and the Clearing, Settlement & Central Depository Module. Such enforcement measures include:a) Cancellation or amendment of license;b) [This Subparagraph has been deleted in July 2021];c) Removal of officers from his office or employment;d) Financial penalties as per Article 129 of the CBB Law.Amended: July 2021Users of Capital Market Service Providers and Persons other than Licensees and Listed Companies
MIE-3.6.7
Users of
capital market service providers and other persons who are neither licensees nor listed companies must also not engage in conduct that would cause harm to capital markets or that would contravene the CBB Law, its regulations, resolutions or directives, or any other applicable laws relating to capital markets.(a) [This Subparagraph has been deleted in July 2021].(b) [This Subparagraph has been deleted in July 2021].(c) [This Subparagraph has been deleted in July 2021].Where the CBB discovers, suspects or identifies such conduct, it may take the following actions or measures:i. Warning:
A warning may be sent to relevantpersons clearly setting out the CBB's concerns and requesting them to stop or cease the particular conduct.
In certain cases, despite concerns about the behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to take formal action. This is consistent with the CBB’s risk-based approach. The purpose of the warning is to make the relevant persons aware of the issue and to permit the taking of full and immediate remedial action.ii. [This Subparagraph has been deleted in July 2021].iii. Restricting Accounts/Activities:
Instructing licensed exchanges, clearing houses, central depositories, brokerage firms, etc. to restrict the accounts of relevantpersons who fail to comply with the laws, regulations and rules relating to capital markets or to restrict such persons from conducting transactions or engaging in activities that are relevant to the accounts.iv. [This Subparagraph has been deleted in July 2021].v. [This Subparagraph has been deleted in July 2021].iv. [This Subparagraph has been deleted in July 2021].In addition to the above, the CBB may initiate proceedings as follows:(b) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of offences which result in the violation of Articles 81 or 85 of the CBB Law relating to issuing securities and preparing prospectuses.(c) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of insider trading offences which result in the violation of Article 100 of the CBB Law.(d) Criminal Sanction under Article 168
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences that result in a violation of Article 106 of the CBB Law.(e) Criminal Sanction under Article 170
The CBB may initiate proceedings for imposing criminal sanctions in respect of any forging, concealing or destroying of any document relating to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of the CBB Law.(f) Criminal Sanction under Article 171
The CBB may initiate proceedings in relation to Article 171 of the CBB Law concerning anyperson who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8) of the CBB Law.(g) Criminal Sanction under Article 172
The CBB may initiate proceedings in relation to Article 172 of the CBB Law concerning any legalperson , where any of the crimes stated in the CBB Law were committed in its name or for its account or by means of any of its methods and which resulted from the action or gross negligence or approval or under the cover of any member of the board of directors or management or any other official of that legalperson or anyperson who acts in such capacity.(h) [This Subparagraph has been deleted in July 2021].(i) [This Subparagraph has been deleted in July 2021].Amended: July 2021Restriction of Capital Market Service Providers, Auditors and Other Experts
MIE-3.6.8
The CBB may in respect of auditors of CBB licensees, listed companies, issuers of
securities or any other market participant, restrict the duties of such auditors and other experts, where the auditors and other experts failed to perform their duties specified under the CBB Law, rules and regulations. Any decision of the CBB in this regard may apply for a specified period or indefinite period until the CBB is satisfied that theperson will in future comply with the duties and responsibilities in question.MIE-3.6.9
The CBB may also restrict the activities that may be undertaken by
capital market service providers , lead managers, share registrars, underwriters and other professionals involved in capital market activities.MIE-4 MIE-4: Financial Penalties
MIE-4.1 MIE-4.1 CBB Policy
MIE-4.1.1
Under Chapter 2 "Procedures to be taken before penalties or administrative proceedings are applied" and Chapter 3 "Penalties and administrative proceedings" of Part 9 of the CBB Law, the CBB may impose financial penalties on licensees or listed companies or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law and its amendments (in particular Article 129). The CBB shall use judgement and will take into account relevant facts in determining the need to impose financial penalties. Financial penalties are thus normally preceded by the issuance of a written formal notice and/or Direction.
Added: July 2021MIE-4.1.2
The level of financial penalty applied is determined by the nature of the contravention and the amount of additional supervisory attention and resources taken up by licensees or listed companies or persons, referred to in paragraph (b) of Article (68 bis 1) of the CBB Law, the licensees behaviour and by limits set in the CBB Law. The CBB will apply the methodology set out in Appendix A to determine the size of the penalty. The CBB intends that the impact of a penalty should derive more from its signaling effect than from the actual amount of money involved.
Added: July 2021MIE-4.1.3
In accordance with Article 129 of the CBB Law, the maximum financial penalty levied for failing to comply with CBB Law, Regulations, Directives and other requirements is BD 100,000 per violation. The CBB may opt to limit the amount of the financial penalty and use other enforcement measures as outlined in this Module, such as imposing restrictions on a licensee or listed company or limiting the scope of operations.
Added: July 2021MIE-4.1.4
As indicated in Paragraph MIE-3.1.12D, the CBB requires disclosure by licensees and listed companies in their annual report of any financial penalties served on them, together with a factual description of the reasons given by the CBB for applying the penalty. In addition, the CBB may publicise the issuance of a financial penalty notice, where there is a strong case that doing so would help achieve the CBB's supervisory objectives, as mentioned in Article 132 of the pre-mentioned Law.
Added: July 2021MIE-4.1.5
Examples of the types of compliance failings that may lead to the serving of a financial penalty notice are outlined in Part 11 of the CBB Law and may include (but are not limited to):
(a) Failures to address persistent delays and/or significant inaccuracies in regulatory reporting to the CBB;(b) Repeated failures to respond to formal requests for information from the CBB, within the deadlines set;(c) The submission of information to the CBB known to be false or misleading; and(d) Major failures in maintaining adequate systems and controls in accordance with the CBB's requirements, subjecting investors to significant risk of financial loss.Added: July 2021MIE-4.1.6
In assessing whether to serve a financial written penalty notice, the CBB takes into account the following criteria:
(a) the seriousness of the contravention, in relation to the requirement(s) concerned;(b) the duration and/or frequency of the contravention, and the extent to which it reflects more widespread weaknesses in controls and/or management; the extent to which the contravention was deliberate or reckless;(c) the licensee's or listed company's past compliance record and conduct following the contravention; and(d) the scope of any other action taken by the CBB or other regulators against the licensee or listed company in response to the compliance failures in question.Additional criteria are set out in Appendix A.
Added: July 2021MIE-4.1.7
The imposition of a financial penalty does not preclude the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).
Added: July 2021MIE-4.1.8
A written notice of a financial penalty must be issued before imposing any financial penalty. The written notice must contain the following information:
(a) The violations committed by the licensee or listed company with respect to CBB Law; or the prudential Rulebook; or any Directions, warnings or formal requests for information; or violations of the terms and conditions of the license issued to the licensee;(b) Evidence or proof to support the above;(c) The level of financial penalty to be imposed; and(d) The grace period to be allowed to the licensee or listed company for challenging the intended penalty (which will not be less than 30 days).Added: July 2021MIE-4.1.9
The licensee or listed company may either pay the penalty or object within the above period. The CBB will consider any objection and make a formal resolution within 30 days of receiving the objection. Thereafter, the formal resolution and any accompanying penalties are final and must be paid within 30 days.
Added: July 2021MIE-4.2 MIE-4.2 Module AML (Anti-Money Laundering and Combating of Financial Crime)
MIE-4.2.1
Any financial penalties applied by the CBB as regards the implementation of its requirements set out under Module AML, are without prejudice to the criminal sanctions available to the Bahraini courts under the Decree – Law No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money. As with other financial penalties, the imposition of a financial penalty with regards to breaches of the requirements in Module AML does not prevent the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).
Added: July 2021MIE-4.3 MIE-4.3 Financial Penalties for Date Sensitive Requirements
MIE-4.3.1
Volume 6 (Capital Markets) Modules contain specific requirements where licensees and listed companies must comply with, by a precise date. As per MIE-3.1.17, the CBB attaches considerable importance to the timely submission of reports, and late reporting or non-submission of reports will prompt the CBB to consider initiating enforcement actions. In cases where a specific due date and licensees and listed companies are involved, the CBB will impose financial penalties which are based on a per diem basis.
Added: July 2021MIE-4.3.2
This Section applies to date sensitive requirements for:
(a) Reporting requirements included in Volume 6 Modules;(b) Public disclosure requirements included in Volume 6 Modules and any related regulations pursuant thereto;(c) The report of the external auditor required as per Paragraph AML-3.3.1B (d);(d) Annual licensing fees required as per Volume 6 Modules, and(e) Conduct of Shareholders' Meetings requirements included in Section HC-7.4.Added: July 2021MIE-4.3.3
For listed companies, financial penalties related to late filing or other date sensitive requirements are calculated as per the following per diem basis:
(a) Where the listed company’s total consolidated assets are less than or equal to BD 50 million, the financial penalty for late filing is BD 100 per day;(b) Where the listed company’s total consolidated assets are greater than BD 50 million but less than BD 250 million, the financial penalty for late filing is BD 200 per day;(c) Where the listed company’s total consolidated assets are greater than BD 250 million but less than or equal to BD 5 billion, the financial penalty is BD 400 per day;(d) Where the listed company’s total consolidated assets are greater than BD 5 billion, the financial penalty is BD 800 per day; and(e) For a newly listed company who is yet to provide audited financial statements, the financial penalty is BD 100 per day.Added: July 2021MIE-4.3.4
For
SROs and members ofSROs , the financial penalties related to late filing or other date sensitive requirements are calculated as per the following per diem basis:(a) ForSROs under Module MAE and Module CSD, the financial penalty for late filing is BD 100 per day;(b) For members ofSROs under Module MIR, the financial penalty for late filing is BD 50 per day.Added: July 2021MIE-4.3.5
For licensed crypto-asset service providers, the financial penalties related to late filing or other date sensitive requirements are outlined in Paragraph CRA-14.6.13 of the Crypto-Asset Module (CRA).
Added: July 2021MIE-4.3.6
The various deadlines for submission of reports and annual fees referred to in Volume 6 Modules are defined:
(a) In terms of a specified number of days or months following a given date, such as the last date of a calendar quarter;(b) A specified number of days or months after the occurrence of a specific event; or(c) A specific date.Added: July 2021MIE-4.3.7
In imposing financial penalties for date sensitive requirements, the following criteria apply:
(a) Where the due date falls on a weekend or a holiday as designated by the CBB, the first business day following the weekend or holiday will be considered as being the due date;(b) Where a due date is not complied with by the end of the day on which it is due, holidays and weekend days are included in the number of days the item is considered late;(c) For returns and other filings, the date received is the date recorded by the CBB's systems in case of returns filed electronically;(d) In the case of returns filed in hard copy, the CBB stamp is the date received;(e) All returns are to be sent to the respective Supervision Directorate and the annual fees to the Accounts Directorate, on or before the due date, to be considered filed on time;(f) A day ends at midnight in the case of returns that must be filed electronically, or at the close of CBB business day, in the case returns are filed in hard copy; and(g) An incomplete return, where completeness is determined in relation to the requirements of the relevant instructions and Volume 6 Modules, is considered 'not filed' until the CBB receives all necessary elements of the return.Added: July 2021MIE-4.3.8
The CBB does not require any particular method of delivery for returns and filings that are filed in hard copy. The use of the Bahrain postal services, private courier services or other methods of delivery is entirely at the discretion and risk of the licensee and listed company. For the payment of annual fees, licensees and listed companies must follow the requirements under Volume 6 Modules.
Added: July 2021MIE-4.3.9
A decision to impose a financial penalty for date sensitive requirements is unrelated to whether the CBB issues a reminder; it is the licensee's and listed company’s responsibility to file and disclose on time as per the requirements of Volume 6 (Capital Markets) Rulebook.
Added: July 2021MIE-4.4 MIE-4.4 Financial Penalties for Non-compliance with Blocking/Unblocking Requirements
MIE-4.4.1
The financial penalty for late execution of blocking/unblocking orders issued by the Court/Public Prosecution is BD 10 per day per customer account/claim. Such financial penalties will be charged to the
licensee through billing on a weekly basis.Added: July 2021MIE-4.5 MIE-4.5 Procedures for Financial Penalties
MIE-4.5.1
A written financial penalty notice will be addressed to the Chief Executive Officer or General Manager of the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law concerned. This written notification will describe the contravention concerned, the CBB's evidence supporting a financial penalty, and the factors justifying the level of penalty proposed. Only a Director or more senior member of the CBB's management may sign the notification.
Added: July 2021MIE-4.5.2
The licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law has 30 days from the notification's date of issuance to submit any objections it wishes to make to the CBB, in writing and addressed to the issuer of the original notification. If the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law decides not to submit objections, it has 30 calendar days from the notification's date of issuance in which to pay the penalty.
Added: July 2021MIE-4.5.3
Should the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law make representations challenging the proposed penalty, the CBB has 30 days from the issuance of those representations in which to re-examine the facts of the case and its conclusions. If the CBB confirms application of a penalty, payment is required within 30 calendar days of a final notice being issued.
Added: July 2021MIE-4.5.4
Failure to pay penalties within the required deadlines will be considered a breach of the CBB's regulatory requirements, and will also result in other measures being considered, as described elsewhere in this Module.
Added: July 2021MIE-4.5.5
In instances where a licensee or listed company anticipates that it will be unable to meet any date sensitive requirements prescribed by the Rulebook, it must provide a written notification to the CBB at least one week prior to the prescribed due date outlining the date sensitive requirements which it will be unable to comply with, along with a well justified reason for the non-compliance.
Added: July 2021MIE-4.6 MIE-4.6 Remedying a Compliance Failure
MIE-4.6.1
Payment of a financial penalty does not by itself absolve a licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law from remedying the compliance failure concerned. The CBB will expect the licensee or listed company or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law to address the contravention within a reasonable timescale, to be agreed on a case-by-case basis. Failure to do so will result in other measures being considered.
Added: July 2021Appendices
Appendix A - Methodology of Calculating Financial Penalties
I. Introduction
This appendix sets out the Central Bank of Bahrain's Capital Market Supervision Directorate’s approach in assessing and calculating/determining financial penalties.
The purpose of the financial penalties is to encourage a high standard of conduct and compliance by CBB licensees and listed companies, thereby reducing risk to investors and the rest of the financial sector.
The imposition of a financial penalty does not preclude the CBB from also using other enforcement measures to remedy the same violation.
II. The Scope of Application
In assessing whether to serve a financial penalty upon a licensee or listed company, the CBB shall consider the following additional criteria:
(a) The assessment of gain/benefit made or cost avoided and/or the level of risks posed to investors, financial position of the licensee or listed company, shareholders, stability of the financial sector and/or the reputation of the Kingdom.(b) If the licensee or listed company made any gain/benefit or avoided any costs by violating the CBB rules then the gain/benefit and/or the cost avoided will be used as a benchmark for calculating the fine amount subject to BD 100,000 cap for each violation. In addition, the customers impacted must be compensated in full. The scope of this section does not cover penalties for non-compliance with date sensitive requirements of Section MIE-4.3.(c) Fit and proper reassessment tests would take place for the approved persons deemed to be responsible for serious or repeated violations at the discretion and judgment of the CBB. The relevant approved person/(s) will be identified based on a review of relevant information including but not limited to the licensee’s records before the final decision is made.(d) Each incident of breaching a rule (CBB Law, regulations, resolutions, and Rulebook directives) will be considered a stand-alone violation.(e) If the CBB discovers that one or more breaches had been committed by the licensee or listed company in the past and had gone un-detected, then the CBB has the right, at the point of detection, to impose penalties for each of these past breaches.(f) If the gain/benefit made and/or cost avoided cannot be quantified, then the table below will be used to determine the penalty amount based on the seriousness of violations as determined by the CBB.(g) The factors used to determine the seriousness of the violation include, but are not limited to, the level of risks posed to the licensee's or listed company’s customers, financial position of the licensee or listed company, shareholders, stability of the financial sector and/or the reputation of the Kingdom. The CBB may consider other factors or circumstances as well.Table 1: Risk Rating of Violation and Related Penalty
Risk Rating Fine Amount (BD) 1 Low 1,000 to 10,000 2 Moderate 10,001 to 50,000 3 Serious 50,001 to 100,000 III. Internal Assessment by the CMSD
In deciding which level of risk is most appropriate (which will then determine the penalty amount in relation to the violation), various factors will undergo comprehensive assessment including but not limited to the following:
1) Impact of the violation;2) Nature of the violation;3) Factors showing whether the violation was deliberate; and4) Mitigating and aggravating factors.1. Impact of the violation
Factors relating to assessment of the impact of a violation include:
(a) The level of benefit gained or loss avoided, or intended to be gained or avoided, by the licensee or listed company as a result of the violation, either directly or indirectly;(b) The loss or risk of loss, as a whole, caused to customers, investors or other market users in general;(c) The loss or risk of loss caused to individual customers, investors or other market users;(d) Whether the violation had an effect on particularly vulnerable people, whether intentionally or otherwise;(e) The inconvenience or distress caused to investors; and(f) Whether the violation had an adverse effect on the financial sector and, if so, how serious that effect was. This may include its impact on the confidence in or damage caused to the financial sector. A violation is generally more serious when it causes or may cause extensive financial damage, or when it is likely to be particularly detrimental to investor or customer confidence.2. Nature of the violation
Factors relating to assessment of the nature of the violation include:
(a) Whether the violation revealed serious or systemic weaknesses in the licensee's or listed company’s procedures or in the management systems or internal controls relating to all or part of the licensee's or listed company’s business;(b) Whether the licensee's or listed company’s senior management was aware of the violation;(c) The nature and extent of any financial crime facilitated, occasioned or otherwise attributable to the violation;(d) The scope for any potential financial crime to be facilitated, occasioned or otherwise occurred as a result of the violation;(e) Whether the licensee or listed company failed to conduct its business with integrity; and(f) Whether the licensee or listed company, in committing the violation, took any steps to comply with CBB Law, regulations, resolutions, Rulebook directives, and the adequacy of such steps.3. Factors showing whether the violation was deliberate
Factors relating to assessment of whether the violation was deliberate include:
(a) The violation was intentional, in that the licensee's approved person(s), intended or foresaw that the likely or actual consequences of their actions or inaction would result in a violation and they failed to adequately mitigate that risk;(b) The licensee's approved person(s) knew that their actions were not in accordance with the licensee's internal policies and procedures;(c) The licensee's approved person(s) sought to conceal their misconduct;(d) The licensee's approved person(s) committed the violation in such a way as to avoid or reduce the risk that the violation would be discovered;(e) The licensee's approved person(s) were influenced to commit the violation by the belief that it would be difficult to detect;(f) The violation was repeated; and(g) In the context of a contravention of any rule or requirement imposed by or under CBB law, regulations, resolutions, Rulebook directives, the licensee or listed company obtained reasonable professional advice before the contravention occurred and failed to follow that advice. Obtaining professional advice does not remove a person's responsibility for compliance with applicable rules and requirements.4. Mitigating and aggravating factors
Mitigation and aggravating factors include:
(a) the conduct of the licensee or listed company in bringing (or failing to bring) quickly, effectively and completely the violation to the CBB's attention;(b) the degree of cooperation the licensee or listed company showed during the investigation of the violation. Correspondingly, if the licensee or listed company takes a passive stance towards the matter or avoids investigating the matter properly with the CBB, it is likely to increase the penalty payment and/or imposing other enforcement measures.(c) where the licensee's approved person(s) were aware of the violation or of the potential for a violation, whether they took any steps to stop the violation, and when these steps were taken;(d) any remedial steps taken by the licensee or listed company prior to the discovering of such violation by the CBB; for example, identifying whether customers or investors or other market users suffered loss and compensating them where they have; correcting any misleading statement or impression; taking disciplinary action against staff involved (if appropriate); and taking steps to ensure that similar problems do not arise in the future;(e) whether the licensee or listed company had previously been told about the CBB's concerns in relation to the issue, either by means of a written formal warning/notice and/or Direction;(f) whether the licensee or listed company had previously undertaken not to perform a particular act or engage in a particular behavior;(g) the previous disciplinary record and general compliance history of the licensee or listed company;(h) action taken against the licensee or listed company by other domestic or international regulatory authorities that is relevant to the violation in question.Added: July 2021AML — Anti-Money Laundering & Combating Financial Crime
AML-A AML-A Introduction
AML-A.1 AML-A.1 Purpose
Executive Summary
AML-A.1.1
This Module is a comprehensive framework of rules and guidance aimed at combating money laundering and terrorist financing and applies to all
Capital Market Licensees . In so doing, it helps implement the FATF Recommendations on combating money laundering and financing of terrorism and proliferation, issued by the Financial Action Task Force (FATF), that are relevant toCapital Market Licensees . It also helps implement IOSCO guidance in this area. The Module also contains measures relating to the combating of fraud in the capital market.Amended: January 2022
Amended: July 2016
October 2010AML-A.1.2
The Module requires
Capital Market Licensees to have effective anti-money laundering ('AML') policies and procedures, in addition to measures for combating the financing of terrorism ('CFT'). The Module contains detailed requirements relating to customer due diligence, reporting and the role and duties of the Money Laundering Reporting Officer (MLRO). Furthermore, examples of suspicious activity are provided, to assistCapital Market Licensees monitor transactions and fulfil their reporting obligations under Bahrain Law and this Module.Amended: January 2022
October 2010Legal Basis
AML-A.1.3
This Module contains the Central Bank of Bahrain ('CBB') Directive (as amended from time to time) regarding the combating money laundering and terrorism financing and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all
Capital Market Licensees .Amended: January 2022
Amended: July 2011
October 2010AML-A.1.4
For an explanation of the CBB's rule-making powers and different regulatory instruments, see section UG-1.1.
October 2010AML-A.2 AML-A.2 Module History
Evolution of Module
AML-A.2.1
This Module was first issued in October 2010. Any material changes that have subsequently been 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.
October 2010AML-A.2.2
Prior to the introduction of this Module, the CBB had issued various regulatory instruments containing requirements covering different aspects of financial crime. The CBB issued Ministerial Order No. 1 of 2004 with Respect to Directives Relating to the Prevention & Prohibition of Money Laundering at the Bahrain Stock Exchange (BSE) and this Order was applicable to the BSE, issuers of
Securities , brokerage firms and offices, registration offices, issue underwriters, establishments accredited with receiving money relating to the subscription ofSecurities , custodians ofSecurities , banks accredited for clearance of transactions carried out at the BSE, dealers inSecurities , and all other entities concerned with dealing inSecurities .October 2010AML-A.2.3
A list of recent changes made to this Module is detailed in the table below:
Module Ref. Change Date Description of Changes AML-A.1.3 07/2011 Clarified legal basis. AML-7.1 07/2011 Clarified the Rules dealing with substantial shareholdings. AML-4.2.3 10/2014 Updated method of submitting STRs. AML-4.4 10/2014 Updated relevant authorities information. AML 07/2016 Updated to reflect February 2012 update to FATF Recommendations. AML-4.2.3 07/2016 Updated instructions for STR. AML-1.2.9A 01/2017 Added guidance paragraph on CR printing AML-9.2.1AA 04/2017 Added Paragraph on Implementing and complying with the United Nations Security Council resolutions requirement. AML-1.1.2A 10/2017 Added new paragraph on the verification of identity and source of funds. AML-1.1.2B 10/2017 Added new paragraph on the verification of identity and source of funds. AML-1.2.7 10/2017 Amended paragraph. AML-1.2.8A 10/2017 Added new paragraph on legal entities or legal arrangements CDD. AML-2.2.10 – AML-2.2.11 10/2017 Amended paragraphs on On-going CSS and Transaction Monitoring. AML-3.1.4A 10/2017 Added paragraph on combining the MLRO or DMLRO position with any other position within the licensee. AML-B.2.4 01/2018 Amended paragraph. AML-1.8.1 01/2018 Amended paragraph. AML-1.10.1 01/2018 Deleted sub-paragraph (a). AML-4.2.6 01/2018 Amended paragraph. AML-9.1.4 01/2018 Amended paragraph. AML-9.2.2 01/2018 Deleted paragraph. AML-1.1.2 07/2018 Deleted Sub-paragraph (a). AML-1.10.2 07/2018 Amended Paragraph deleting cross reference. AML-1.10.3 07/2018 Deleted Paragraph. AML-1.10.9 07/2018 Deleted Paragraph. AML-1.10.1 01/2019 Amended references. AML-3.3.2 01/2019 Amended references. AML-3.3.4 — AML-3.3.5 01/2019 Amended references. AML-1.2.9A 10/2019 Amended reference. AML-1.9.2 10/2019 Amended authority name. AML-3.1.8 10/2019 Amended authority name. AML-3.2.1 10/2019 Amended authority name. AML-4.2.3 10/2019 Amended authority name. AML-4.4.2 10/2019 Amended authority name. AML-7.1.2 10/2019 Deleted Paragraph. AML-9.2.1AA 10/2019 Added a new Paragraph on Terrorist Financing. AML-B.1.1 01/2020 Added “ crypto-asset licensees”. AML-B.1.3 01/2020 Deleted Paragraph. AML-B.3 01/2020 Deleted Section. AML-C 01/2020 Added new Chapter “Risk Based Approach”. AML-1 01/2020 Rename the Chapter to “Customer Due Diligence”. AML-1.1.1 01/2020 Amended Paragraph on procedures approval. AML-1.1.2 01/2020 Added sub-paragraph (i). AML-1.1.14 – AML-1.1.16 01/2020 Added new paragraphs on “Suspicious Wallet Addresses”. AML-1.2.1 01/2020 Added sub-paragraph (n). AML-1.2.5 01/2020 Added new sub-paragraph (f). AML-1.3.4 01/2020 Added new paragraph. AML-1.4.7 01/2020 Added new paragraph. AML-1.5.4 01/2020 Deleted paragraph. AML-1.9 01/2020 Rename the section to “Shell financial Institutions”. AML-1.9.1 01/2020 Amended paragraph. AML-1.11 01/2020 Added new section “Enhanced Due Diligence for Correspondent Accounts” AML-2.2.1 01/2020 Amended Paragraph. AML-2A 01/2020 Added new chapter. AML-3.1.5 01/2020 Amended Paragraph. AML-3.1.5A 01/2020 Added Paragraph. AML-3.1.7 01/2020 Amended sub-Paragraph (a). AML-3.3.2 01/2020 Amended Paragraph. AML-3.3.5 01/2020 Amended Paragraph on report submission date. AML-3.3.2A – AML-3.3.2E 01/2020 Added Paragraphs. AML-6.1.1A – AML-6.1.1C 01/2020 Added Paragraphs. AML-8.1.1 01/2020 Deleted Paragraph. AML-8.1.1A 01/2020 Added Paragraph. AML-11.1.2 01/2020 Added Paragraph. AML-2.1.3 & AML-2.1.4 04/2020 Added new Paragraphs on KPIs compliance with AML/CFT requirements. AML-5.1.6A 01/2021 Added a new Paragraph on requirements to hire new employees. AML-A.1.3 01/2022 Amended Paragraph to replace financial crime with money laundering and terrorism financing. AML-C 01/2022 New revised risk-based approach (RBA). AML-1.1 01/2022 Amended Section to introduce additional rules for non-resident customers, amendments to customers onboarded prior to full completion of customer due diligence, digital onboarding etc. AML-1.2 01/2022 Amended Section to include E-KYC and electronic documents law requirements. AML-1.3.2 01/2022 Amended Paragraph on enhanced due diligence requirements for customers identified as having higher risk profile. AML-1.4 01/2022 Amended Section to introduce detailed requirements for digital onboarding and related requirements. AML-1.5.2 01/2022 Amended Paragraph on onboarding non-Bahraini PEPs using digital ID applications. AML-1.10.8A 01/2022 Added a new Paragraph on not applying simplified CDD in situations where the licensee has identified high ML/TF/PF risks. AML-2.2.5 01/2022 Amended Paragraph. AML-3.3.1B 01/2022 Amended Paragraph. AML-3.3.2 01/2022 Amended Paragraph. AML-3.3.5 01/2022 Amended Paragraph. AML-3.3.6 01/2022 Deleted Paragraph. AML-5.1.6A 01/2022 Deleted Paragraph. AML-9.2.5 01/2022 Amended reference to Paragraph. AML 01/2022 Changed Licensee name to Capital Market Licensees across Module. AML-C.2.9 01/2023 Minor amendment to Paragraph. AML-9.2.4(c) 01/2023 Added a new Sub-paragraph on reporting any frozen assets or actions taken. AML-1.1.17 10/2023 Amended Sub-Paragraph on the enhanced diligence for the non-resident accounts. AML-1.1.23 10/2023 Deleted Paragraph. AML-1.1.24 10/2023 Added a new Paragraph on CDD and Customer onboarding requirements. AML-1.4.14 10/2023 Deleted Paragraph. AML-1.12 10/2023 Added a new Section on reliance on third parties for customer due diligence. AML-1.2.1 01/2024 Amended Paragraph on customer due diligence. Superseded Requirements
AML-A.2.4
This Module supersedes the following provisions contained in Circulars or other regulatory instruments:
Circular/other references Provision Subject Resolution No. 1 of 2004 All In respect of the Directives Relating to the Prevention and Prohibition of Money Laundering at the Bahrain Stock Exchange October 2010AML-A.3 AML-A.3 Interaction with Other Modules
AML-A.3.1
All
Capital Market Licensees must comply with all the other relevant Modules in Volume 6 in addition to other applicable laws, rules and regulations.Amended: January 2022
October 2010AML-B AML-B Scope of Application
AML-B.1 AML-B.1 Scope of Application
AML-B.1.1
This Module contains the CBB's Directive relating to Anti-Money Laundering and Combating of Financial Crime and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive under this Module is applicable to all
Capital Market Licensees and relevantPersons , including but not limited to issuers ofSecurities or anyPerson acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, investment firms, collective investment undertakings, business trusts, listed companies,crypto-asset licensees , anyPerson acting for or on behalf of listed companies,Persons accredited with receiving money relating to the subscription ofSecurities , custodian ofSecurities , settlement banks, dealers inSecurities , share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts, credit rating agencies and any otherPerson concerned with dealing inSecurities , irrespective of whether suchPerson is aCapital Market Licensees or not. These rules are issued by way of a legally-binding Directive.Amended: January 2022
Amended: January 2020
Added: October 2010AML-B.1.2
Capital Market Licensees that are subsidiaries of an overseas based group may apply additional AML/CFT policies and procedures, provided they satisfy the minimum requirements contained in this Module.Amended: January 2022
Added: October 2010AML-B.1.3
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.1.4
The requirements of this Module are in addition to and supplement Decree Law No. (4) of 2001 with respect to the Prevention and Prohibition of the Laundering of Money; this Law was subsequently updated, with the issuance of Decree Law No. 54 of 2006 with respect to amending certain provisions of Decree No. 4 of 2001 (collectively, 'the AML Law'). The AML Law imposes obligations generally in relation to the prevention of money laundering and the combating of the financing of terrorism, to all
Persons resident in Bahrain (including financial services firms such asCapital Market Licensees ). AllCapital Market Licensees are therefore under the statutory obligations of that Law, in addition to the more specific requirements contained in this Module. Nothing in this Module is intended to restrict the application of the AML Law (a copy of which is contained in Part B of Volume 6 Capital Markets), under 'Supplementary Information'. Also included in Part B is a copy of Decree Law No. 58 of 2006 with respect to the protection of society from terrorism activities ('the anti-terrorism law').Amended: January 2022
Added: October 2010AML-B.2 AML-B.2 Overseas Subsidiaries and Branches
AML-B.2.1
Capital Market Licensees must apply the requirements in this Module to all their branches and subsidiaries operating both in the Kingdom of Bahrain and in foreign jurisdictions. Where local standards differ, the higher standard must be followed.Capital Market Licensees must pay particular attention to procedures in branches or subsidiaries in countries that do not or insufficiently apply theFATF Recommendations and do not have adequate AML/CFT procedures, systems and controls (see also Section AML-9.1).Amended: January 2022
Amended: July 2016
Added: October 2010AML-B.2.2
Where another jurisdiction's laws or regulations prevent a
Capital Market Licensee (or any of its foreign branches or subsidiaries) from applying the same standards contained in this Module or higher, theCapital Market Licensee must immediately inform the CBB in writing.Amended: January 2022
Added: October 2010AML-B.2.3
In such instances, the CBB will review alternatives with the
Capital Market Licensees . Should the CBB and theCapital Market Licensees be unable to reach agreement on the satisfactory implementation of this Module in a foreign subsidiary or branch, theCapital Market Licensees may be required by the CBB to cease the operations of the subsidiary or branch in the foreign jurisdiction in question.Amended: January 2022
Added: October 2010AML-B.2.4
Financial groups must implement groupwide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes, which must also be applicable, and appropriate to, all branches and subsidiaries of the financial group. These must include:
(a) The development of internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees;(b) An ongoing employee training programme;(c) An independent audit function to test the system;(d) Policies and procedures for sharing information required for the purposes of CDD and money laundering and terrorist financing risk management;(e) The provision at group-level compliance, audit, and/or AML/CFT functions of customer, account and transaction information from branches and subsidiaries when necessary for AML/CFT purposes; and(f) Adequate safeguards on the confidentiality and use of information exchanged.Amended: January 2018
Added: July 2016AML-B.3 AML-B.3 Definitions [This Section was deleted in January 2020]
Deleted: January 2020
Added: October 2010AML-B.3.1
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.2
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.3
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.4
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.5
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Amended: July 2016
Added: October 2010AML-B.3.6
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Amended: July 2016
Added: October 2010AML-B.3.7
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.8
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.9
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-B.3.10
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-C AML-C Risk Based Approach
AML-C.1 AML-C.1 Risk Based Approach
AML-C.1.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.6
Capital Market Licensees must perform enhanced measures where higher ML/TF/PF risks are identified to effectively manage and mitigate those higher risks.Added: January 2022AML-C.1.7
Capital Market Licensees must maintain and regularly review and update the documented risk assessment. The risk management and mitigation measures implemented by aCapital Market Licensee must be commensurate with the identified ML/TF/PF risks.Added: January 2022AML-C.1.8
Capital Market Licensees must allocate adequate financial, human and technical resources and expertise to effectively implement and take appropriate preventive measures to mitigate ML/TF/PF risks.Added: January 2022AML-C.2 AML-C.2 Risk Assessment
AML-C.2.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.4
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.5
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.6
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.2.7
Capital Market Licensees must ensure that it takes measures to identify, assess, monitor, manage and mitigate ML/TF/PF risks to which it is exposed and that the measures taken are commensurate with the nature, scale and complexities of its activities. The risk assessment must enable thelicensee to understand how, and to what extent, it is vulnerable to ML/TF/PF.Added: January 2022AML-C.2.8
In the context of the risk assessment, “proliferation financing risk” refers to the potential breach, non-implementation or evasion of the targeted financial sanctions obligations referred to in FATF Recommendation 7.
Added: January 2022AML-C.2.9
The risk assessment must be properly documented, regularly updated and communicated to the
capital market licensees senior management.Licensees must have in place policies, controls and procedures, which are approved by senior management, to enable them to manage and mitigate the risks that have been identified. In conducting its risk assessments, thecapital market licensees must consider quantitative and qualitative information obtained from the relevant internal and external sources to identify, manage and mitigate these risks. This must include consideration of the risk and threat assessments using, national risk assessments, sectorial risk assessments, crime statistics, typologies, risk indicators, red flags, guidance and advisories issued by inter-governmental organisations, national competent authorities and the FATF, and AML/CFT/CPF mutual evaluation and follow-up reports by the FATF or associated assessment bodies.Amended: January 2023
Added: January 2022AML-C.2.10
Capital Market Licensees must assess country/geographic risk, customer/investor risk, product/ service/ transactions risk and distribution channel risk taking into consideration the appropriate factors in identifying and assessing the ML/TF/PF risks, including the following:a) The nature, scale, diversity and complexity of its business, products and target markets;b) Products, services and transactions that inherently provide more anonymity, ability to pool underlying customers/funds, cash-based, face-to-face, non face-to-face, domestic or cross-border;c) The volume and size of its transactions, nature of activity and the profile of its customers;d) The proportion of customers identified as high risk;e) Its target markets and the jurisdictions it is exposed to, either through its own activities or the activities of customers, especially jurisdictions with relatively higher levels of corruption or organised crime, and/or deficient AML/CFT/CPF controls and listed by FATF;f) The complexity of the transaction chain (e.g. complex layers of intermediaries and sub intermediaries or distribution channels that may anonymise or obscure the chain of transactions) and types of distributors or intermediaries;g) The distribution channels, including the extent to which theCapital market licensee deals directly with the customer and the extent to which it relies (or is allowed to rely) on third parties to conduct CDD and the use of technology; andh) Internal audit, external audit or regulatory inspection findings.Added: January 2022Country/Geographic risk
AML-C.2.11
Country/geographic area risk, in conjunction with other risk factors, provides useful information as to potential ML/TF/PF risks. Factors that may be considered as indicators of higher risk include:
(a) Countries identified by credible sources, such as mutual evaluation or detailed assessment reports or published follow-up reports, as not having adequate AML/CFT/CPF systems;(b) Countries or geographic areas identified by credible sources as providing funding or support for terrorist activities, or that have designated terrorist organisations operating within their country;(c) Countries identified by credible sources as having significant levels of corruption or organized crime or other criminal activity, including source or transit countries for illegal drugs, human trafficking and smuggling and illegal gambling;(d) Countries subject to sanctions, embargoes or similar measures issued by international organisations such as the United Nations Organisation; and(e) Countries identified by credible sources as having weak governance, law enforcement, and regulatory regimes, including countries identified by the FATF statements as having weak AML/CFT/CPF regimes, and for which financial institutions should give special attention to business relationships and transactions.Added: January 2022Customer/Investor risk
AML-C.2.12
Categories of customers which may indicate a higher risk include:
(a) The business relationship is conducted in unusual circumstances (e.g. significant unexplained geographic distance between the financial institution and the customer).(b) Non-resident customers;(c) Legal persons or arrangements that are personal asset-holding vehicles;(d) Companies that have nominee shareholders or shares in bearer form;(e) Businesses that are cash-intensive;(f) The ownership structure of the company appears unusual or excessively complex given the nature of the company’s business;(g) Customer is sanctioned by the relevant national competent authority for non-compliance with the applicable AML/CFT/CPF regime and is not engaging in remediation to improve its compliance;(h) Customer is a PEP or customer’s family members, or close associates are PEPs (including where a beneficial owner of a customer is a PEP);(i) Customer resides in or whose primary source of income originates from high-risk jurisdictions;(j) Customer resides in countries considered to be uncooperative in providing beneficial ownership information; customer has been mentioned in negative news reports from credible media, particularly those related to predicate offences for AML/CFT/CPF or to financial crimes;(k) Customer’s transactions indicate a potential connection with criminal involvement, typologies or red flags provided in reports produced by the FATF or national competent authorities;(l) Customer is engaged in, or derives wealth or revenues from, a high-risk cash-intensive business;(m) The number of STRs and their potential concentration on particular client groups;(n) Customers who have sanction exposure; and(o) Customer has a non-transparent ownership structure.Added: January 2022Product/Service/Transactions risk
AML-C.2.13
An overall risk assessment should include determining the potential risks presented by product, service, transaction or the delivery channel of the
Capital market licensees . ACapital market licensees should assess, using an RBA, the extent to which the offering of its product, service, transaction or the delivery channel presents potential vulnerabilities to placement, layering or integration of criminal proceeds into the financial system.Added: January 2022AML-C.2.14
Determining the risks of product, service, transaction or the delivery channel offered to customers may include a consideration of their attributes, as well as any associated risk mitigation measures. Products and services that may indicate a higher risk include:
(a) Private banking;(b) Anonymous transactions (which may include cash);(c) Non-face-to-face business relationships or transactions;(d) Payment received from unknown or un-associated third parties;(e) Products or services that may inherently favour anonymity or obscure information about underlying customer transactions;(f) The geographical reach of the product or service offered, such as those emanating from higher risk jurisdictions;(g) Products with unusual complexity or structure and with no obvious economic purpose;(h) Products or services that permit the unrestricted or anonymous transfer of value (by payment or change of asset ownership) to an unrelated third party, particularly those residing in a higher risk jurisdiction; and(i) Use of new technologies or payment methods not used in the normal course of business by theconventional bank licensee .Added: January 2022Distribution channel risk
AML-C.2.15
A customer may request transactions that pose an inherently higher risk to the
conventional bank licensee . Factors that may be considered as indicators of higher risk include:(a) A request is made to transfer funds to a higher risk jurisdiction/country/region without a reasonable business purpose provided; and(b) A transaction is requested to be executed, where thelicensee is made aware that the transaction will be cleared/settled through an unregulated entity.Added: January 2022AML-C.2.16
Capital market licensees should analyse the specific risk factors, which arise from the use of intermediaries and their services. Intermediaries’ involvement may vary with respect to the activity they undertake and their relationship with theCapital market licensees .Capital market licensees should understand who the intermediary is and perform a risk assessment on the intermediary prior to establishing a business relationship.Licensees and intermediaries should establish clearly their respective responsibilities for compliance with applicable regulation.Added: January 2022AML-C.3 AML-C.3 [This Section was deleted in January 2022].
AML-C.3.1
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.3.2
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.3.3
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2020AML-C.1.5
Capital Market Licensees must implement Risk Based Approach (RBA) in establishing an AML/CFT/CPF program and conduct ML/TF/PF risk assessments prior to and during the establishment of a business relationship and, on an ongoing basis, throughout the course of its relationship with the customer. Thelicensee must establish and implement policies, procedures, tools and systems commensurate with the size, nature and complexity of its business operations to support its RBA.Added: January 2022AML-1 AML-1 Customer Due Diligence Requirements
AML-1.1 AML-1.1 General Requirements
Verification of Identity and Source of Funds
AML-1.1.1
Capital Market Licensees must establish effective systematic internal procedures for establishing and verifying the identity of their customers and the source of their funds. Such procedures must be set out in writing and approved by theCapital Market Licensees senior management and must be strictly adhered to.Amended: January 2022
Amended: January 2020
Amended: July 2016
Added: October 2010AML-1.1.2
Capital Market Licensees must implement the customer due diligence measures outlined in Chapter AML-1 when:(a) [This Sub-paragraph was deleted in July 2018];(b) Establishing business relations with a new or existing customer;(c) A change to the signatory or beneficiary of an existing account or business relationship is made;(d) Customer documentation standards change substantially;(e) TheCapital Market Licensees has doubts about the veracity or adequacy of previously obtained customer due diligence information;(f) A significant transaction takes place (as per rule AML-2.2.3);(g) There is a material change in the way that an account is operated or in the manner in which the business relationship is conducted;(h) There is a suspicion ofMoney Laundering or terrorist financing; or(i) Carrying outaccepted crypto-assets transfers and/or wire transfers irrespective of value and/or amount.Amended: January 2022
Amended: January 2020
Amended: July 2018
Added: October 2010AML-1.1.2A
Capital Market Licensees must understand, and as appropriate, obtain information on the purpose and intended nature of the business relationship.Amended: January 2022
Added: October 2017AML-1.1.2B
Capital Market Licensees must conduct ongoing due diligence on the business relationship, including:(a) Scrutinizing transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution's knowledge of the customer, their business and risk profile, including, where necessary, the source of funds; and(b) Ensuring that documents, data or information collected under the CDD process is kept up-to-date and relevant, by undertaking reviews of existing records, particularly for higher risk categories of customers.Amended: January 2022
Added: October 2017AML-1.1.2C
A
capital market licensee must also review and update the customers’ risk profile based on their level of ML/TF/PF risk upon onboarding and regularly throughout the life of the relationship. The risk management and mitigation measures implemented by acapital market licensee must be commensurate with the risk profile of the customer or type of customer.Added: January 2022AML-1.1.3
For the purposes of this Module, 'customer' includes counterparties such as financial markets counterparties, except where
Capital Market Licensees are acting as principals where simplified due diligence measures may apply. These simplified measures are set out in section AML-1.10.Amended: January 2022
October 2010AML-1.1.4
The CBB's specific minimum standards to be followed with respect to verifying customer identity and source of funds are contained in section AML-1.2. Enhanced requirements apply under certain high-risk situations: these requirements are contained in sections AML-1.3 to AML-1.7 inclusive. Additional requirements apply where a
Capital Market Licensee is relying on a professional intermediary to perform certain parts of the customer due diligence process: these are detailed in section AML-1.8. Simplified customer due diligence measures may apply in defined circumstances: these are set out in section AML-1.10.Amended: January 2022
October 2010Verification of Third Parties
AML-1.1.5
Capital Market Licensees must obtain a signed statement, in hard copy or through digital means from all new customers confirming whether or not the customer is acting on his own behalf or not. This undertaking must be obtained prior to conducting any transactions with the customer concerned.Amended: January 2022
Added: October 2010AML-1.1.6
Where a customer is acting on behalf of a third party, the
Capital Market Licensees must also obtain a signed statement from the third party, confirming they have given authority to the customer to act on their behalf. Where the third party is a legal person, theCapital Market Licensees must have sight of the original Board resolution (or other applicable document) authorising the customer to act on the third party's behalf and retain a certified copy.Amended: January 2022
Added: October 2010AML-1.1.7
Capital Market Licensees must establish and verify the identity of the customer and (where applicable) the party/parties on whose behalf the customer is acting, including the Beneficial Owner of the funds. Verification must take place in accordance with the requirements specified in this Chapter.Amended: January 2022
Added: October 2010AML-1.1.8
Where capital market services are provided to a minor or other person lacking full legal capacity, the normal identification procedures as set out in this Chapter must be followed. In the case of minors,
Capital Market Licensees must additionally verify the identity of the parent(s) or legal guardian(s). Where a third party on behalf of a person lacking full legal capacity wishes to open business relations, theCapital Market Licensee must establish the identity of that third party, as well as the person conducting the business.Amended: January 2022
Added: October 2010Anonymous and Nominee Accounts
AML-1.1.9
Capital Market Licensees must not establish or keep anonymous accounts or accounts in fictitious names. WhereCapital Market Licensees maintain a nominee account, which is controlled by or held for the benefit of another person, the identity of that person must be disclosed to theCapital Market Licensees and verified by it in accordance with the requirements specified in this Chapter.Amended: January 2022
Added: October 2010Timing of Verification
AML-1.1.10
Capital Market Licensees must not commence a business relationship or undertake a transaction with a customer before completion of the relevant customer due diligence (‘CDD’) measures specified in Chapter AML-1.Capital Market Licensees must also adopt risk management procedures with respect to the conditions under which a customer may utilise the business relationship prior to verification. However, verification may be completed after receipt of funds in the case of non face-to-face business, or the subsequent submission of CDD documents by the customer after undertaking initial customer due diligence provided that no disbursement of funds takes place until after the requirements of this Chapter have been fully met.Amended: January 2022
Added: October 2010Incomplete Customer Due Diligence
AML-1.1.11
Where a
Capital Market Licensee is unable to comply with the requirements specified in Chapter AML-1, it must consider whether to terminate the relationship or not proceed with the transaction. If it proceeds with the transaction (to avoid tipping off the customer), it should additionally consider whether it should file a Suspicious Transaction Report.Amended: January 2022
Added: October 2010AML-1.1.12
See also Chapter AML-4, which covers the filing of Suspicious Transaction Reports.
October 2010AML-1.1.13
The CBB will monitor the application of these requirements to
Capital Market Licensees existing customer base.Amended: January 2022
Added: October 2010Suspicious Wallet Addresses
AML-1.1.14
A
crypto-asset licensee must establish and implement policies for identification of wallet addresses that are suspected of ML/TF (suspicious wallet addresses).Added: January 2020AML-1.1.15
A
crypto-asset licensee must not establish or continue business relationship with or transact with suspicious wallet addresses referred to in Paragraph-1.1.14.Added: January 2020AML-1.1.16
Where a
crypto-asset licensee identifies or becomes aware of a suspicious wallet address, it must immediately file a Suspicious Transaction Report (STR) and also notify the CBB.Added: January 2020Non-Resident Accounts
AML-1.1.17
Capital Market Licensees that establish a business relationship or transact or deal with non-resident customers must have documented criteria for acceptance of business with such persons. For non-resident customers, assessed as high risk,licensees must ensure the following:(a) Ensure there is a viable economic reason for the business relationship;(b) Perform enhanced due diligence where required in accordance with Paragraph AML-1.1.24;(c) Obtain and document the country of residence for tax purposes where relevant;(d) Obtain evidence of banking relationships in the country of residence;(e) Obtain the reasons for dealing with licensee in Bahrain;(f) Obtain an indicative transaction volume and/or value of incoming funds; and(g) Test that the persons are contactable without unreasonable delays.Amended: October 2023
Added: January 2022AML-1.1.18
Capital Market Licensees must not accept non-residents customers from high risk jurisdictions subject to a call for action by FATF.Added: January 2022AML-1.1.19
Capital Market Licensees must take adequate precautions and risk mitigation measures before onboarding non-resident customers from high risk jurisdictions. Thelicensees must establish detailed assessments and criteria that take into consideration FATF mutual evaluations, FATF guidance, the country national risk assessments (NRAs) and other available guidance on onboarding and retaining non-resident customers from the following high-risk jurisdictions:(a) Jurisdictions under increased monitoring by FATF;(b) Countries upon which United Nations sanctions have been imposed except those referred to in Paragraph AML-1.1.18; and(c) Countries that are the subject of any other sanctions.Added: January 2022AML-1.1.20
Capital Market Licensees must establish systems and measures that are proportional to the risk relevant to each jurisdiction and this must be documented. Such a document must show the risks, mitigation measures for each jurisdiction and for each non-resident customer.Added: January 2022AML-1.1.21
Capital Market Licensees must establish a comprehensive documented policy and procedures describing also the tools, methodology and systems that support the licensee’s processes for:(a) The application of RBA;(b) Customer due diligence;(c) Ongoing transaction monitoring; and(d) Reporting in relation to their transactions or dealings with non-resident customers.Added: January 2022AML-1.1.22
Capital Market Licensees must ensure that only the official/government documents are accepted for the purpose of information in Subparagraphs AML-1.2.1 (a) to (f) in the case of non-resident customers.Added: January 2022AML-1.1.23
[This Paragraph has been deleted in October 2023].
Deleted: October 2023
Added: January 2022AML-1.1.24
Capital Market Licensees must follow the below CDD and customer onboarding requirements:Enhanced Due Diligence Digital Onboarding Bahrainis and GCC nationals (wherever they reside) and expatriates resident in Bahrain No Yes Others Yes Yes Added: October 2023AML-1.2 AML-1.2 Face-to-Face Business
Natural Persons
AML-1.2.1
If the customer is a natural
Person ,Capital Market Licensees must identify the person’s identity and obtain the following information before providing capital market services, as described in paragraph AML-1.1.2:(a) Full legal name and any other names used;(b) Full permanent address (i.e. the residential address of the customer; a post office box is insufficient);(c) Date of birth;(d) Nationality;(e) Passport number (if the customer is a passport holder);(f) Current CPR or Iqama number (for residents of Bahrain or GCC states) or government issued national identification proof;(g) Telephone/fax number and email address (where applicable);(h) Occupation or public position held (where applicable);(i) Employer's name and address (if self-employed, the nature of the self-employment);(j) Type of account, and nature and volume of anticipated business dealings with theCapital Market Licensees ;(k) Signature of the customer(s);(l) Source of funds;(m) Source ofSecurities ;(n) Reason for opening the account; and(o) Place of birth.Amended: January 2024
Amended: January 2022
Amended: January 2020
Added: October 2010AML-1.2.1A
Capital Market Licensees obtaining the information and customer signature electronically using digital applications must comply with the applicable laws governing the onboarding/business relationship including but not limited to the Electronic Transactions Law (Law No. 54 of 2018) for the purposes of obtaining signatures as required in Subparagraph AML-1.2.1 (k) above.Added: January 2022AML-1.2.2
See the Guidance Notes (filed under Supplementary Information in Part B of Volume 6) for further information on source of funds (rule AML-1.2.1 (l)) and CDD requirements for Bahrain residents (rule AML-1.2.1 (c) & (f)).
October 2010AML-1.2.3
Capital market licensees must verify the information in Paragraph AML-1.2.1 (a) to (f), by the following methods below; at least one of the copies of the identification documents mentioned in (a) and (b) below must include a clear photograph of the customer:(a) Confirmation of the date of birth and legal name, by use of the national E-KYC application and if this is not practical, obtaining a copy of a current valid official original identification document (e.g. birth certificate, passport, national identity card, CPR or Iqama);(b) Confirmation of the permanent residential address by use of the national E-KYC application and if this is not practical, obtaining a copy of a recent utility bill, bank statement or similar statement from another licensee or financial institution, or some form of official correspondence or official documentation card, such as national identity card or CPR, from a public/governmental authority, or a tenancy agreement or record of home visit by an official of the licensee; and(c) Where appropriate, direct contact with the customer by phone, letter or email to confirm relevant information, such as residential address information.Amended: January 2022
Added: October 2010AML-1.2.4
Any document copied or obtained for the purpose of identification verification in a face-to-face customer due diligence process must be an original. An authorised official of the
Capital Market Licensees must certify the copy, by writing on it the words 'original sighted', together with the date and his name and signature. Equivalent measures must be taken for electronic copies.Amended: January 2022
Added: October 2010AML-1.2.5
Identity documents which are not obtained by an authorised official of the
Capital Market Licensees in original form (e.g. due to a customer sending a copy by post following an initial meeting) must instead be certified (as per rule AML-1.2.4) by one of the following from a GCC or FATF member state:(a) A lawyer;(b) A notary;(c) A chartered/certified accountant;(d) An official of a government ministry;(e) An official of an embassy or consulate;(f) An official of another licensed financial institution or of an associate company of the licensee.Amended: January 2022
Amended: January 2020
Added: October 2010AML-1.2.6
The individual making the certification under rule AML-1.2.5 must give clear contact details (e.g. by attaching a business card or company stamp). The
Capital Market Licensee must verify the identity of thePerson providing the certification through checking membership of a professional organisation (for lawyers or accountants), or through checking against databases/websites, or by direct phone or email contact.Amended: January 2022
Added: October 2010Legal Entities or Legal Arrangements (such as trusts)
AML-1.2.7
If the customer is a legal entity or a legal arrangement such as a company or trust, the
Capital Market Licensee must obtain and record the following information from original identification documents, databases, or websites, in hard copy or electronic form, identify the customer and to take reasonable measures to verify its identity;(a) The entity's full name and other trading names used;(b) Registration number (or equivalent);(c) Legal form and status and proof of existence;(d) Registered address and trading address (including a branch where applicable);(e) Objectives and type of business activity;(f) Date and place of incorporation or establishment;(g) Telephone, fax number and email address;(h) Regulatory body or listing body (for regulated activities such as financial services and listed companies);(hh) The names of the relevant persons having a senior management position in the legal entity or legal arrangement;(i) Name of external auditor (where applicable);(j) Type of account, and nature and volume of anticipated business dealings with theCapital Market Licensee ;(k) Source of funds; and(l) Legal representative, such as Trustees or trusts.Amended: January 2022
Amended: October 2017
Added: October 2010AML-1.2.8
The information provided under rule AML-1.2.7 must be verified by obtaining certified copies of the following documents, as applicable (depending on the legal form of the entity):
(a) Certificate of incorporation and/or certificate of commercial registration or trust deed;(b) Partnership agreement;(c) Board resolution seeking the capital market services (only necessary in the case of private or unlisted companies);(d) Identification documentation of the authorised signatories of the account (certification not necessary for companies listed in a GCC/FATF state);(e) Copy of the latest financial report and accounts, audited where possible (audited copies do not need to be certified);(f) List ofPersons authorised to do business on behalf of the company and in the case of the opening of an account, a Board resolution (or other applicable document) authorising the namedPersons to operate the account (resolution only necessary for private or unlisted companies); and(g) Memorandum and Articles of Association.Amended: July 2016
Amended: April 2016
October 2010AML-1.2.8A
For customers that are legal persons,
Capital Market Licensees must identify and take reasonable measures to verify the identity ofbeneficial owners through the following information:(a) The identity of the natural person(s) who ultimately have a controlling ownership interest in a legal person, and(b) To the extent that there is doubt under (a) as to whether the person(s) with the controlling ownership interest is thebeneficial owner (s), or where no natural person exerts control of the legal person or arrangement through other means; and(c) Where no natural person is identified under (a) or (b) above, the identity of the relevant natural person who holds the position of senior managing official.Amended: January 2022
Added: October 2017AML-1.2.9
Documents obtained to satisfy the requirements in rule AML-1.2.8 above must be certified in the manner specified in rules AML-1.2.4 to AML-1.2.6.
October 2010AML-1.2.9A
For the purpose of Subparagraph AML-1.2.8(a), the requirement to obtain a certified copy of the commercial registration, may be satisfied by obtaining a commercial registration abstract printed directly from the Ministry of Industry, Commerce and Tourism's website, through "SIJILAT Commercial Registration Portal".
Amended: October 2019
Added: January 2017AML-1.2.10
The documentary requirements in rule AML-1.2.8 above do not apply in the case of listed companies from countries which are members of FATF/GCC: see section AML-1.8 below. Also, the documents listed in rule AML-1.2.8 above are not exhaustive: for customers from overseas jurisdictions, documents of an equivalent nature may be produced as satisfactory evidence of a customer's identity.
October 2010AML-1.2.11
Capital Market Licensees must also obtain and document the following due diligence information. These due diligence requirements must be incorporated in theCapital Market Licensees new business procedures:(a) Enquire as to the structure of the legal entity or trust sufficient to determine and verify the identity of the ultimate beneficial owner of the funds orSecurities , the ultimate provider of funds orSecurities (if different), and the ultimate controller of the funds orSecurities (if different);(b) Ascertain whether the legal entity has been or is in the process of being wound up, dissolved, struck off or terminated;(c) Obtain the names, country of residence and nationality of Directors or partners (only necessary for private or unlisted companies);(d) Require, through new customer documentation or other transparent means, updates on significant changes to corporate ownership and/or legal structure;(e) Obtain and verify the identity of shareholders holding 20% or more of the issued capital (where applicable). The requirement to verify the identity of these shareholders does not apply in the case of FATF/GCC listed companies;(f) In the case of trusts or similar arrangements, establish the identity of the settlor(s), trustee(s), and beneficiaries (including making such reasonable enquiries as to ascertain the identity of any other potential beneficiary, in addition to the named beneficiaries of the trust); and(g) Where aCapital Market Licensee has reasonable grounds for questioning the authenticity of the information supplied by a customer, conduct additional due diligence to confirm the above information.Amended: January 2022
Added: October 2010AML-1.2.12
For the purposes of rule AML-1.2.11, acceptable means of undertaking such due diligence might include taking bank references; visiting or contacting the company by telephone; undertaking a company search or other commercial enquiries; accessing public and private databases (such as stock exchange lists, if they are listed); making enquiries through a business information service or credit bureau; confirming a company's status with an appropriate legal or accounting firm; or undertaking other enquiries that are commercially reasonable.
October 2010AML-1.2.13
In cases where a
Capital Market Licensee is providing investment management services to a regulated mutual fund, and is not responsible for receiving investors' funds (being paid into the fund), it may limit its CDD to confirming that the administrator of the fund is subject to FATF-equivalent customer due diligence measures (see section AML-1.7 for applicable measures). Where there are reasonable grounds for believing that investors' funds being paid into the fund are not being adequately verified by the administrator, then theCapital Market Licensee should consider terminating its relationship with the fund.Amended: January 2022
Added: October 2010AML-1.3 AML-1.3 Enhanced Customer Due Diligence: General Requirements
AML-1.3.1
Enhanced customer due diligence must be performed on those customers identified as having a higher risk profile, and additional inquiries made or information obtained in respect of those customers.
October 2010AML-1.3.2
Capital Market licensees should examine, as far as reasonably possible, the background and purpose of all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic or lawful purpose. Where the risks of money laundering or terrorist financing are higher,capital Market licensees should conduct enhanced CDD measures, consistent with the risks identified. In particular, they should increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear unusual or suspicious. The additional inquiries or information referred to in Paragraph AML-1.3.1 include:(a) Obtaining additional information on the customer (e.g. occupation, volume of assets, information available through public databases, internet, etc.), and updating more regularly the identification data of customer and beneficial owner;(b) Obtaining additional information on the intended nature of the business relationship;(c) Obtaining information on the source of funds or source of wealth of the customer;(d) Obtaining information on the reasons for intended or performed transactions;(e) Obtaining the approval of senior management to commence or continue the business relationship;(f) Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination;(g) Taking specific measures to identify the source of the first payment in this account and applying RBA to ensure that there is a plausible explanation in any case where the first payment was not received from the same customer’s account;(h) Obtaining evidence of a person's permanent address through the use of a credit reference agency search, or through independent governmental database or by home visit;(i) Obtaining a personal reference (e.g. by an existing customer of theCapital Market Licensee );(j) Obtaining another licensed entity’s reference and contact with the concernedlicensee regarding the customer;(k) Obtaining documentation outlining the customer’s source of wealth;(l) Obtaining additional documentation outlining the customer’s source of income; and(m) Obtaining additional independent verification of employment or public position held.Amended: January 2022
Added: October 2010AML-1.3.3
In addition to the general rule contained in rule AML-1.3.1 above, special care is required in the circumstances specified in sections AML-1.4 to AML-1.8 inclusive.
October 2010AML-1.3.4
Additional enhanced due diligence measures for non-resident account holders may include the following:
(a) References provided by a regulated bank from a FATF country;(b) Certified copies of bank statements for a recent 3-month period; or(c) References provided by a known customer of the bank licensee.Added: January 2020AML-1.4 AML-1.4 Enhanced Customer Due Diligence: Non Face-to-Face Business and New Technologies
AML-1.4.1
Capital Market Licensees must establish specific procedures for verifying customer identity where no face-to-face contact takes place.Amended: January 2022
Added: October 2010AML-1.4.2
Where no face-to-face contact takes place,
Capital Market Licensees must take additional measures (to those specified in section AML-1.2), in order to mitigate the potentially higher risk associated with such business. In particular,Capital Market Licensees must take measures:(a) To ensure that the customer is thePerson they claim to be; and(b) To ensure that the address provided is genuinely the customer's.Amended: January 2022
Added: October 2010AML-1.4.3
There are a number of checks that can provide a
Capital Market Licensees with a reasonable degree of assurance as to the authenticity of the applicant. They include:(a) Telephone contact with the applicant on an independently verified home or business number;(b) With the customer's consent, contacting an employer to confirm employment via phone through a listed number or in writing;(c) Salary details appearing on recent bank statements.(d) Independent verification of employment (e.g.: through the use of a national E-KYC application, or public position held;(e) Carrying out additional searches (e.g. internet searches using independent and open sources) to better inform the customer risk profile;(f) Carrying out additional searches focused on financial crime risk indicator (i.e. negative news);(g) Evaluating the information provided with regard to the destination of fund and the reasons for the transaction;(h) Seeking and verifying additional information from the customer about the purpose and intended nature of the transaction or the business relationship; and(i) Increasing the frequency and intensity of transaction monitoring.Amended: January 2022
Added: October 2010AML-1.4.4
Capital market services provided using digital channels or internet pose greater challenges for customer identification and AML/CFT purposes.
Capital Market Licensees must identify and assess the money laundering or terrorist financing risks relevant to any new technology or channel and establish procedures to prevent the misuse of technological developments inMoney Laundering or terrorist financing schemes. The risk assessments must be consistent with the requirements in Section AML-C.2.Capital Market Licensees which provide screen based trading or online services to their customers must set-up programmes or systems to highlight unusual transactions to enable theCapital Market Licensees to report all such transactions.Amended: January 2022
Added: October 2010New Products, Practices and Technologies
AML-1.4.5
Capital Market Licensees must identify and assess the money laundering or terrorist financing risks that may arise in relation to:(a) The development of new products and new business practices, including new delivery mechanisms; and(b) The use of new or developing technologies for both new and pre-existing products.Amended: January 2022
Added: April 2016AML-1.4.6
For purposes of Paragraph AML-1.4.5, such a risk assessment must take place prior to the launch of the new products, business practices or the use of new or developing technologies.
Capital Market Licensees must take appropriate measures to manage and mitigate those risks.Amended: January 2022
Added: April 2016AML-1.4.7
Capital Market Licensees , while complying with the requirements of Paragraphs AML-1.4.5 and AML-1.4.6, must pay special attention to new products, new business practices, new delivery mechanisms and new or developing technologies that favor anonymity.Amended: January 2022
Added: January 2020Enhanced Monitoring
AML-1.4.8
Customers on boarded digitally must be subject to enhanced on-going account monitoring measures.
Added: January 2022AML-1.4.9
The CBB may require a
licensee to share the details of the enhanced monitoring and the on-going monitoring process for non face-to-face customer relationships.Added: January 2022Licensee’s digital ID applications
AML-1.4.10
Capital Market Licensees may use its digital ID applications that use secure audio-visual real time (live video conferencing/live photo selfies) communication means to identify the natural person.Added: January 2022AML-1.4.11
Capital Market Licensees must maintain a document available upon request for the use of its digital ID applications that includes all the following information:(a) A description of the nature of products and services for which the proprietary digital ID application is planned to be used with specific references to the rules in this Module for which it will be used;(b) A description of the systems and IT infrastructure that are planned to be used;(c) A description of the technology and applications that have the features for facial recognition or biometric recognition to authenticate independently and match the face and the customer identification information available with the licensee. The process and the features used in conjunction with video conferencing include, among others, face recognition, three-dimensional face matching techniques etc;(d) “Liveness” checks created in the course of the identification process;(e) A description of the governance arrangements related to this activity including the availability of specially trained personnel with sufficient level of seniority; and(f) Record keeping arrangements for electronic records to be maintained and the relative audit.Added: January 2022AML-1.4.12
Capital Market Licensees that intends to use its digital ID application to identify the customer and verify identity information must meet the following additional requirements:(a) The digital ID application must make use of secure audio visual real time (live video conferencing/ live photo selfies) technology to (i) identify the customer, (ii) verify his/her identity, and also (iii) ensure the data and documents provided are authentic;(b) The picture/sound quality must be adequate to facilitate unambiguous identification;(c) The digital ID application must include or be combined with capability to read and decrypt the information stored in the identification document’s machine readable zone (MRZ) for authenticity checks from independent and reliable sources;(d) Where the MRZ reader is with an outsourced provider, thelicensee must ensure that such party is authorized to carry out such services and the information is current and up to date and readily available such that thelicensee can check that the decrypted information matches the other information in the identification document;(e) The digital ID application has the features for allowing facial recognition or biometric recognition that can authenticate and match the face and the customer identification documents independently;(f) The digital ID solution has been tested by an independent expert covering the governance and control processes to ensure the integrity of the solution and underlying methodologies, technology and processes and risk mitigation. The report of the expert’s findings must be retained and available upon request;(g) The digital ID application must enable an ongoing process of retrieving and updating the digital files, identity attributes, or data fields which are subject to documented access rights and authorities for updating and changes; and(h) The digital ID application must have the geo-location features which must be used by thelicensee to ensure that it is able to identify any suspicious locations and to make additional inquiries if the location from which a customer is completing the onboarding process does not match the location of the customer based on the information and documentation submitted.Added: January 2022AML-1.4.13
Capital Market Licensees using its digital ID application must establish and implement an approved policy which lays down the governance, control mechanisms, systems and procedures for the CDD which include:(a) A description of the nature of products and services for which customer due diligence may be conducted through video conferencing or equivalent electronic means;(b) A description of the systems, controls and IT infrastructure planned to be used;(c) Governance mechanism related to this activity;(d) Specially trained personnel with sufficient level of seniority; and(e) Record keeping arrangements for electronic records to be maintained and the relative audit trail.Added: January 2022AML-1.4.14
[This Paragraph has been deleted in October 2023]
Deleted: October 2023
Added: January 2022AML-1.4.15
Capital Market Licensees must ensure that the information referred to in Paragraph AML-1.2.1 is collected in adherence to privacy laws and other applicable laws of the country of residence of the customer.Added: January 2022AML-1.4.16
Capital Market Licensees must ensure that the information referred to in Subparagraphs AML-1.2.1 (a) to (f) is obtained prior to commencing the digital verification such that:(a) Thelicensee can perform its due diligence prior to the digital interaction/communication and can raise targeted questions at such interaction/communication session; and(b) Thelicensee can verify the authenticity, validity and accuracy of such information through digital means (See Paragraph AML-1.4.18 below) or by use of the methods mentioned in Paragraph AML-1.2.3 and /or AML-1.4.3 as appropriate.Added: January 2022AML-1.4.17
Capital Market Licensees must also obtain the customer’s explicit consent to record the session and capture images as may be needed.Added: January 2022AML-1.4.18
Capital Market Licensees must verify the information in Paragraph AML-1.2.1 (a) to (f) by the following methods below:(a) Confirmation of the date of birth and legal name by digital reading and authenticating current valid passport or other official original identification using machine readable zone (MRZ) or other technology which has been approved under paragraph FC-1.4.10, unless the information was verified using national E-KYC application;(b) Performing real time video calls with the applicant to identify the person and match the person’s face and /other features through facial recognition or bio-metric means with the office documentation, (e.g. passport, CPR);(c) Matching the official identification document, (e.g. passport, CPR) and related information provided with the document captured/displayed on the live video call; and(d) Confirmation of the permanent residential address by, unless the information was verified using national E-KYC application capturing live, the recent utility bill, bank statement or similar statement from anotherlicensee or financial institution, or some form of official correspondence or official documentation card, such as national identity card or CPR, from a public/governmental authority, or a tenancy agreement or record of home visit by an official of thelicensee .Added: January 2022AML-1.4.19
For the purposes of Paragraph AML-1.4.18, actions taken for obtaining and verifying customer identity could include:
(a) Collection: Present and collect identity attributes and evidence, either in person and/or online (e.g., by filling out an online form, sending a selfie photo, uploading photos of documents such as passport or driver’s license, etc.);(b) Certification: Digital or physical inspection to ensure the document is authentic and its data or information is accurate (for example, checking physical security features, expiration dates, and verifying attributes via other services);(c) De-duplication: Establish that the identity attributes and evidence relate to a unique person in the ID system (e.g., via duplicate record searches, biometric recognition and/or deduplication algorithms);(d) Verification: Link the individual to the identity evidence provided (e.g., using biometric solutions like facial recognition and liveness detection); and(e) Enrolment in identity account and binding: Create the identity account and issue and link one or more authenticators with the identity account (e.g., passwords, one-time code (OTC) generator on a smartphone, etc.). This process enables authentication.Added: January 2022AML-1.4.20
Not all elements of a digital ID system are necessarily digital. Some elements of identity proofing and enrolment can be either digital or physical (documentary), or a combination, but binding and authentication must be digital.
Added: January 2022AML-1.4.21
Sufficient controls must be put in place to safeguard the data relating to customer information collected through the video conference and due regard must be paid to the requirements of the Personal Data Protection Law (PDPL). Additionally, controls must be put in place to minimize the increased impersonation fraud risk in such non face-to-face relationship where there is a chance that customer may not be who he claims he is.
Added: January 2022Overseas branches
AML-1.4.22
Where
Capital Market Licensees intend to use a digital ID application in a foreign jurisdiction in which it operates, it must ensure that the digital ID application meets with the requirements under Paragraph AML-B.2.1.Added: January 2022AML-1.5 AML-1.5 Enhanced Customer Due Diligence: Politically Exposed Persons ('PEPs')
AML-1.5.1
Capital Market Licensees must have appropriate risk management systems to determine whether a customer or beneficial owner is aPolitically Exposed Person ('PEP') , both at the time of establishing business relations and thereafter on a periodic basis.Capital Market Licensees must utilise publicly available databases and information to establish whether a customer is aPEP .Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.5.2
Capital Market Licensees must establish a client acceptance policy with regard toPEPs , taking into account the reputational and other risks involved. Senior management approval must be obtained before aPEP is accepted as a customer.Capital Market Licensees must not accept a non-Bahraini PEP as a customer based on customer due diligence undertaken using digital ID applications.Amended: January 2022
Added: October 2010AML-1.5.3
Where an existing customer is a
PEP , or subsequently becomes aPEP , enhanced monitoring and customer due diligence measures must include:(a) Analysis of complex financial structures, including trusts, foundations or international business corporations;(b) A written record in the customer file to establish that reasonable measures have been taken to establish both the source of wealth and the source of funds;(c) Development of a profile of anticipated customer activity, to be used in on-going monitoring;(d) Approval of senior management for allowing the customer relationship to continue; and(e) On-going account monitoring of thePEP's account by senior management (such as the MLRO).October 2010AML-1.5.3A
In cases of higher risk business relationships with such persons, mentioned in Paragraph AML-1.5.1,
Capital Market Licensees must apply, at a minimum, the measures referred to in (b), (d) and (e) of Paragraph AML-1.5.3.Amended: January 2022
Added: July 2016AML-1.5.3B
The requirements for all types of
PEP must also apply to family or close associates of suchPEPs .Added: July 2016AML-1.5.3C
For the purpose of Paragraph AML-1.5.3B, 'family' means spouse, father, mother, sons, daughters, sisters and brothers. 'Associates' are persons associated with a
PEP whether such association is due to the person being an employee or partner of thePEP or of a firm represented or owned by thePEP , or family links or otherwise.Added: July 2016AML-1.5.4
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Amended: July 2016
October 2010AML-1.6 AML-1.6 Enhanced Due Diligence: Charities, Clubs and Other Societies
AML-1.6.1
Capital market services must not be provided to charitable funds and religious, sporting, social, cooperative and professional and other societies, until an original certificate authenticated by the relevant Ministry confirming the identities of those purporting to act on their behalf (and authorising them to obtain the said service) has been obtained. For clubs and societies registered with the General Organisation for Youth and Sports (GOYS),
Capital Market Licensees must contact GOYS to clarify whether the account may be opened in accordance with the rules of GOYS.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.6.2
Capital Market Licensees are reminded that clubs and societies registered with GOYS may only have one account with banks in Bahrain.Amended: January 2022
Added: October 2010AML-1.6.3
Charities should be subject to enhanced transaction monitoring by
Capital Market Licensees .Capital Market Licensees should develop a profile of anticipated account activity (in terms of payee countries and recipient organizations in particular).Amended: January 2022
Added: October 2010AML-1.6.4
Capital Market Licensees must provide a monthly report of all payments and transfers of BD3,000 (or equivalent in foreign currencies) and above, from accounts held by charities registered in Bahrain. The report must be submitted to the CBB's Compliance Unit (see section AML-4.4 for contact address), giving details of the amount transferred, account name, number and beneficiary name account and bank details.Capital Market Licensees must ensure that such transfers are in accordance with the spending plans of the charity (in terms of amount, recipient and country).Amended: January 2022
Added: October 2010AML-1.6.5
Article 20 of Decree Law No. 21 of 1989 (issuing the Law of Social and Cultural Societies and Clubs and Private Organisations Operating in the Area of Youth and Sport and Private Institutions) provides that
Capital Market Licensees may not accept or process any incoming or outgoing wire transfers from or to any foreign country on behalf of charity and non-profit organisations licensed by the Ministry of Social Development, until an official letter by the Ministry authorising the receipt or remittance of the funds has been obtained by the concernedCapital Market Licensees .Amended: January 2022
Added: October 2010AML-1.6.6
The receipt of a Ministry letter mentioned in rule AML-1.6.5 above does not exempt the concerned
Capital Market Licensees from conducting normal CDD measures as outlined in other parts of this Module.Amended: January 2022
Added: October 2010AML-1.7 AML-1.7 Enhanced Due Diligence: 'Pooled Funds'
AML-1.7.1
Where
Capital Market Licensees receive pooled funds managed by professional intermediaries (such as investment and pension fund managers, stockbrokers and lawyers or authorized money transferors), they must apply CDD measures contained in section AML-1.8 to the professional intermediary. In addition,Capital Market Licensees must verify the identity of the beneficial owners of the funds where required as shown in rules AML-1.7.2 and AML-1.7.3 below.Amended: January 2022
Added: October 2010AML-1.7.2
Where funds pooled in an account are not co-mingled (i.e. where there are 'sub-accounts' attributable to each beneficiary), all beneficial owners must be identified by the
Capital Market Licensees and their identity verified in accordance with the requirements in section AML-1.2.Amended: January 2022
Added: October 2010AML-1.7.3
For accounts held by intermediaries, where such funds are co-mingled, the
Capital Market Licensees must make a reasonable effort (in the context of the nature and amount of the funds received) to look beyond the intermediary and determine the identity of the beneficial owners or underlying clients, particularly where funds are banked and then transferred onward to other financial institutions (e.g. in the case of accounts held on behalf of authorized money transferors). Where, however, the intermediary is subject to equivalent regulatory andMoney Laundering regulation and procedures (and, in particular, is subject to the same due diligence standards in respect of its client base) the CBB will not insist upon all beneficial owners being identified, provided the bank has undertaken reasonable measures to determine that the intermediary has engaged in a sound customer due diligence process, consistent with the requirements in section AML-1.8.Amended: January 2022
Added: October 2010AML-1.7.4
For accounts held by intermediaries from foreign jurisdictions, the intermediary must be subject to requirements to combat
Money Laundering and terrorist financing consistent with the FATF Recommendations and the intermediary must be supervised for compliance with those requirements. TheCapital Market Licensees must obtain documentary evidence to support the case for not carrying out customer due diligence measures beyond identifying the intermediary. TheCapital Market Licensees must satisfy itself that the intermediary has identified the underlying beneficiaries and has the systems and controls to allocate the assets in the pooled accounts to the relevant beneficiaries.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.7.5
Where the intermediary is not empowered to provide the required information on beneficial owners (e.g. lawyers bound by professional confidentiality rules) or where the intermediary is not subject to the same due diligence standards referred to above, a
Capital Market Licensees must not permit the intermediary to open an account or allow the account to continue to operate, unless specific permission has been obtained in writing from the CBB.Amended: January 2022
Added: October 2010AML-1.8 AML-1.8 Introduced Business from Professional Intermediaries
AML-1.8.1
A
Capital Market Licensees must only accept customers introduced to it by otherCapital Market Licensees , financial institutions or intermediaries, if it has satisfied itself that the introducer concerned is subject to FATF-equivalent measures and customer due diligence measures. WhereCapital Market Licensees delegate part of the customer due diligence measures to an introducer, the responsibility for meeting the requirements of Chapters 1 and 2 remains with theCapital Market Licensee , not the introducer.Amended: January 2022
Amended: January 2018
Added: October 2010AML-1.8.2
Capital Market Licensees may only accept introduced business if all of the following conditions are satisfied:(a) The customer due diligence measures applied by the introducer are consistent with those required by the FATF Recommendations;(b) A formal agreement is in place defining the respective roles of theCapital Market Licensees and the introducer in relation to customer due diligence measures. The agreement must specify that the customer due diligence measures of the introducer will comply with the FATF Recommendations;(c) The introducer is able to provide all relevant data pertaining to the identity of the customer and beneficial owner of the funds and, where applicable, the party/parties on whose behalf the customer is acting; also, the introducer has confirmed that theCapital Market Licensee will be allowed to verify the customer due diligence measures undertaken by the introducer at any stage; and(d) Written confirmation is provided by the introducer confirming that all customer due diligence measures required by the FATF Recommendations have been followed and the customer's identity established and verified. In addition, the confirmation must state that any identification documents or other customer due diligence material can be accessed by theCapital Market Licensee and that these documents will be kept for at least five years after the business relationship has ended.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.8.3
The
Capital Market Licensees must perform periodic reviews ensuring that any introducer on which it relies is in compliance with the FATF Recommendations. Where the introducer is resident in another jurisdiction, theCapital Market Licensees must also perform periodic reviews to verify whether the jurisdiction is in compliance with the FATF Recommendations.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.8.4
Should the
Capital Market Licensees not be satisfied that the introducer is in compliance with the requirements of the FATF Recommendations, theCapital Market Licensees must not accept further introductions or discontinue the business relationship with the introducer.Amended: January 2022
Amended: July 2016
Added: October 2010AML-1.9 AML-1.9 Shell Financial Institutions
Accounts with Shell Financial Institutions
AML-1.9.1
Capital Market Licensees must not establish business relations withshell financial institutions which have no physical presence or 'mind and management' in the jurisdiction in which they are licensed and which are unaffiliated with a regulated financial group.Capital Market Licensees must not knowingly establish relations with otherCapital Market Licensees or financial institutions that have relations withshell financial institutions .Amended: January 2022
Amended: January 2020
Amended: July 2016
Added: October 2010AML-1.9.2
Capital Market Licensees must make a Suspicious Transaction Report to the Financial Intelligence Directorate, Ministry of Interior and the Compliance Directorate of the CBB if they are approached by ashell financial institutions or an institution they suspect of being ashell financial institutions .Amended: January 2022
Amended: January 2020
Amended: October 2019
Added: October 2010AML-1.10 AML-1.10 Simplified Customer Due Diligence
AML-1.10.1
Capital Market Licensees may apply simplified customer due diligence measures, as described in paragraphs AML-1.10.2 to AML-1.10.8, if:(a) [This Subparagraph was deleted in January 2018];(b) The transaction concerns the sale of aSecurity listed on a licensed exchange, issued as a result of an initial public offering after January 2006, and the customer already holds an investor number and an allotment letter. Furthermore, the licensed exchange should have advised the broker (by circular) that all necessary customer due diligence information and copies of all original identification documents will be made available upon request without delay;(c) The customer is a company listed on a GCC or FATF member state stock exchange with equivalent disclosure standards to those of a licensed exchange;(d) The customer is a financial institution whose entire operations are subject to AML/CFT requirements consistent with the FATF Recommendations and it is supervised by a financial services supervisor in a FATF or GCC member state for compliance with those requirements;(e) The customer is a financial institution which is a subsidiary of a financial institution located in a FATF or GCC member state, and the AML/CFT requirements applied to its parent also apply to the subsidiary;(f) The customer is the Central Bank of Bahrain ('CBB'), a licensed exchange, or a licensee of the CBB; or(g) The customer is a Ministry of a GCC or FATF member state government, a company in which a GCC government is a majority shareholder, or a company established by decree in the GCC.Amended: January 2022
Amended: January 2019
Amended: January 2018
Amended: July 2016
Added: October 2010AML-1.10.2
For customers falling under category (b) in rule AML-1.10.1, the customer's name and contact information must be recorded. However, the verification, certification and due diligence requirements (contained in rules AML-1.2.3, AML-1.2.5, AML-1.2.6, AML-1.2.8, AML-1.2.9 and AML-1.2.11), may be dispensed with.
Amended: July 2018
October 2010AML-1.10.3
[This Paragraph was deleted in July 2018].
Deleted: July 2018
October 2010AML-1.10.4
For customers falling under categories (c) to (g) in rule AML-1.10.1, the information required under rule AML-1.2.7 (for legal entities) must be obtained. However, the verification, certification and due diligence requirements (contained in rules AML-1.2.3, AML-1.2.5, AML-1.2.6, AML-1.2.8, AML-1.2.9 and AML-1.2.11), may be dispensed with.
October 2010AML-1.10.5
Capital Market Licensees wishing to apply simplified due diligence measures as allowed for under categories (c) to (g) of rule AML-1.10.1 must retain documentary evidence supporting their categorization of the customer.Amended: January 2022
Added: October 2010AML-1.10.6
Examples of such documentary evidence may include a printout from a regulator's website, confirming the licensed status of an institution, and internal papers attesting to a review of the AML/CFT measures applied in a jurisdiction.
October 2010AML-1.10.7
Capital Market Licensees may use authenticated SWIFT messages as a basis for confirmation of the identity of a financial institution under rule AML-1.10.1 (d) and (e) where it is dealing as principal. For customers coming under rule AML-1.10.1 (d) and (e),Capital Market Licensees must also obtain and retain a written statement from the parent institution of the subsidiary concerned, confirming that the subsidiary is subject to the same AML/CFT measures as its parent.Amended: January 2022
Added: October 2010AML-1.10.8
Simplified customer due diligence measures must not be applied where a
Capital Market Licensee knows, suspects, or has reason to suspect, that the applicant is engaged inMoney Laundering or terrorism financing or that the transaction is carried out on behalf of anotherPerson engaged inMoney Laundering or terrorism financing.Amended: January 2022
Added: October 2010AML-1.10.8A
Simplified customer due diligence measures must not be applied in situations where the licensee has identified high ML/TF/PF risks.
Added: January 2022AML-1.10.9
[This Paragraph was deleted in July 2018].
Deleted: July 2018
October 2010AML-1.11 AML-1.11 Enhanced Due Diligence for Correspondent Accounts
AML-1.11.1
This Section, AML1.11, applies to a
Capital Market Licensee when it providescorrespondent account services or characteristic similar tocorrespondent account services .Amended: January 2022
Added: January 2020AML-1.11.2
When providing
correspondent account services ,Capital Market Licensee , must gather sufficient information (e.g. through a questionnaire) about theirrespondent financial institution to understand the nature of the respondent's business. Factors to consider to provide assurance that satisfactory measures are in place at therespondent financial institution includes:(a) Information about therespondent financial institution’s ownership structure and management;(b) Major business activities of therespondent financial institution and its location (i.e. whether it is located in a FATF compliant jurisdiction) as well as the location of its parent (where applicable);(c) Where the customers of therespondent financial institution are located;(d) Therespondent financial institution AML/CFT controls;(e) The purpose for which the account will be opened;(f) Confirmation that the respondent financial institution has verified the identity of any third party entities that will have direct access to the account without reference to the respondent financial institution (payable through account);(g) The extent to which the respondent financial institution performs on-going due diligence on customers with direct access to the account (payable through account), and the condition of regulation and supervision in the respondent financial institution’s country (e.g. from published FATF reports).Capital Market Licensees must take into account the country where the respondent financial institution is located and whether that country abides by the FATF Recommendations when establishing correspondent relationships with foreign entities.Capital Market Licensees must obtain where possible copies of the relevant laws and regulations concerning AML/CFT and satisfy themselves that the respondent financial institution have effective customer due diligence measures consistent with the FATF Recommendations;(h) Confirmation that the respondent financial institution is able to provide relevant customer identification data on request to theCapital Market Licensees ; and(i) Whether the respondent financial institution has been subject to a money laundering or terrorist financing investigation.Amended: January 2022
Added: January 2020AML-1.11.3
Capital Market Licensees must implement the following additional measures, prior to opening a correspondent account:(a) Complete a signed statement that outlines the respective responsibilities of each institution in relation to money laundering detection and monitoring responsibilities; and(b) Ensure that the correspondent relationship has the approval of senior management.Amended: January 2022
Added: January 2020AML-1.11.4
Where the
correspondent account services involve apayable through account ,Capital Market Licensees must be satisfied that:(a) Therespondent financial institution has performed appropriate measures at least equivalent to those specified in Sections AML-1.1 to AML-1.8 (Customer Due Diligence) on the third party having direct access to the payable-through account; and(b) Therespondent financial institution is able to perform ongoing monitoring of its business relations with that third party and is willing and able to provide CDD information to theCapital Market Licensees upon request.Amended: January 2022
Added: January 2020AML-1.11.5
Capital Market Licensees must document the basis for their satisfaction that the requirements in Paragraphs AML-1.11.2, AML-1.11.3 and AML-1.11.4 are met.Amended: January 2022
Added: January 2020AML-1.11.6
Capital Market Licensees must not enter into or continue correspondent account services relationship with another financial institution that does not have adequate controls against money laundering or terrorism financing activities, is not effectively supervised by the relevant authorities or is ashell financial institution .Capital Market Licensees must pay particular attention when entering into or continuing relationships with respondents located in jurisdictions that have poor KYC standards or have been identified by the FATF as being ‘non-cooperative’ in the fight against money laundering/terrorist financing.Amended: January 2022
Added: January 2020AML-1.11.7
Capital Market Licensees must also take appropriate measures when establishing acorrespondent account services relationship, to satisfy themselves that theirrespondent financial institutions do not permit their accounts to be used byshell financial institutions .Amended: January 2022
Added: January 2020AML-1.11.8
In the case of
correspondent account services relationships, theCapital Market Licensee generally does not have direct relationships with the customers of therespondent financial institution . Therefore, there is no expectation or requirement for theCapital Market Licensee to apply CDD on arespondent financial institution’s customer, which is, instead the responsibility of therespondent financial institution . Nonetheless, it is consistent with the risk-based approach for theCapital Market Licensee to have some general sense of therespondent financial institution’s customer base as part of ascertaining the risks associated with therespondent financial institution itself.Amended: January 2022
Added: January 2020AML-1.12 Reliance on Third Parties for Consumer Due Diligence
AML-1.12.1
Licensees are permitted to rely on third parties to perform elements of CDD measures and recordkeeping requirements stipulated in Chapter AML-1 related to customer and beneficial owner identity, verification of their identity and information on the purpose and intended nature of the business relationship with thelicensee , subject to complying with the below:(a)Licensees remain ultimately responsible for CDD measures;(b)Licensees immediately obtain the relevant CDD information from the third party upon onboarding clients;(c) There is an agreement with the third party for the arrangement with clear contractual terms on the obligations of the third party;(d) The third party without delay makes available the relevant documentation relating to the CDD requirements upon request;(e)Licensees ensure that the third party is a financial institution that is regulated and supervised for, and has measures in place for compliance with, CDD and recordkeeping requirements in line with FATF Recommendations 10 and 11; and(f) For third parties based abroad,licensees must consider the information available on the level of country risk.Added: October 2023AML-1.12.2
Where a
licensee relies on a third-party that is part of the same financial group, thelicensee can consider that:(a) The requirements under Subparagraphs AML-1.12.1 (d) and (e) are complied with through its group programme, provided the group satisfies the following conditions:(i) The group applies CDD and record keeping requirements consistent with FATF Recommendations 10, 11 and 12 and has in place internal controls in accordance with FATF Recommendation 18; and(ii) The implementation of CDD, record keeping and AML/CFT measures are supervised at a group level by a financial services regulatory authority for compliance with AML/CFT requirements consistent with standards set by the FATF.(b) The requirement under Subparagraph AML-1.12.1 (f) is complied with if the country risk is adequately mitigated by the group’s AML/CFT policies.Added: October 2023AML-1.12.3
This Section does not apply to outsourcing or agency arrangements in which the outsourced entity applies the CDD measures on behalf of the delegating
licensee , in accordance with its procedures.Added: October 2023AML-2 AML-2 AML/CFT Systems and Controls
AML-2.1 AML-2.1 General Requirements
AML-2.1.1
Capital Market Licensees must implement programmes against money laundering and terrorist financing which establish and maintain appropriate systems and controls for compliance with the requirements of this Module and which limit their vulnerability to financial crime. These systems and controls must be documented and approved and reviewed annually by the Board of theCapital Market Licensees . The documentation, and the Board's review and approval, must be made available upon request to the CBB.Amended: January 2022
Amended: July 2016
Added: October 2010AML-2.1.2
The above systems and controls, and associated documented policies and procedures should cover standards for customer acceptance, on-going monitoring of high-risk accounts, staff training and adequate screening procedures to ensure high standards when hiring employees.
October 2010AML-2.1.3
Capital Market Service Providers must incorporate Key Performance Indicators (KPIs) to ensure compliance with AML/CFT requirements by all staff. The performance against the KPIs must be adequately reflected in their annual performance evaluation and in their remuneration (See also Paragraph HC-10.5.3).Added: April 2020AML-2.1.4
In implementing the policies, procedures and monitoring tools for ensuring compliance with Paragraph AML-2.1.3,
Capital Market Service Providers should consider the following:(a) The business policies and practices should be designed to reduce incentives for staff to expose theCapital Market Service Providers to AML/CFT compliance risk;(b) The performance measures of departments/divisions/units and personnel should include measures to address AML/CFT compliance obligations;(c) AML/CFT compliance breaches and deficiencies should be attributed to the relevant departments/divisions/units and personnel within the organisation as appropriate;(d) Remuneration and bonuses should be adjusted for AML/CFT compliance breaches and deficiencies; and(e) Both quantitative measures and human judgement should play a role in determining any adjustments to the remuneration and bonuses resulting from the above.Added: April 2020AML-2.2 AML-2.2 On-going Customer Due Diligence and Transaction Monitoring
Risk Based Monitoring
AML-2.2.1
Capital Market Licensees must develop risk-based monitoring systems appropriate to the complexity of their business, their number of clients and types of transactions. These systems must be configured to identify significant or abnormal transactions or patterns of activity. Such systems must include limits on the number, types or size of transactions undertaken outside expected norms; and must include limits for cash and non-cash transactions including transactions inaccepted crypto-assets .Amended: January 2022
Amended: January 2020
Added: October 2010AML-2.2.2
Capital Market Licensees risk-based monitoring systems should therefore be configured to help identify:(a) Transactions which do not appear to have a clear purpose or which make no obvious economic sense;(b) Significant or large transactions not consistent with the normal or expected behaviour of a customer; and(c) Unusual patterns of activity (relative to other customers of the same profile or of similar types of transactions, for instance because of differences in terms of volumes, transaction type, or flows to or from certain countries), or activity outside the expected or regular pattern of a customer's account activity.Amended: January 2022
Added: October 2010Automated Transaction Monitoring
AML-2.2.3
Capital Market Licensees must consider the need to include automated transaction monitoring as part of their risk-based monitoring systems to spot abnormal or unusual flow of funds. In the absence of automated transaction monitoring systems, all transactions above BD6,000 must be viewed as 'significant' and be captured in a daily transactions report for monitoring by the MLRO or a relevant delegated official, and records retained by theCapital Market Licensees for five years after the date of the transaction.Amended: January 2022
Added: October 2010AML-2.2.4
The CBB would expect larger
Capital Market Licensees to include automated transaction monitoring as part of their risk-based monitoring systems. See also Chapters AML-3 and AML-6, regarding the responsibilities of the MLRO and record-keeping requirements. Where theCapital Market Licensee is not receiving funds — for instance where it is simply acting as agent on behalf of a principal, and the customer is directly remitting funds to the principal — then theCapital Market Licensee may agree with the principal that the latter should be responsible for the daily monitoring of such transactions.Amended: January 2022
Added: October 2010Unusual Transactions or Customer Behaviour
AML-2.2.5
Where a
Capital Market Licensee's risk-based monitoring systems identify significant or abnormal transactions (as defined in paragraph AML-2.2.2 and rule AML-2.2.3), it must verify the source of funds for those transactions, particularly where the transactions are above the transactions threshold of BD6,000. Furthermore,Capital Market Licensees must examine the background and purpose to those transactions and document their findings. In the case of one-off transactions where there is no ongoing account relationship, theCapital Market Licensees must file a Suspicious Transaction Report (STR) if it is unable to verify the source of funds to its satisfaction (see Chapter AML-4).Amended: January 2022
Added: October 2010AML-2.2.6
The investigations required under rule AML-2.2.5 must be carried out by the MLRO (or relevant delegated official). The documents relating to these findings must be maintained for five years from the date when the transaction was completed (see also rule AML-6.1.1 (b)).
October 2010AML-2.2.7
Capital Market Licensees must consider instances where there is a significant, unexpected or unexplained change in customer activity.Amended: January 2022
Added: October 2010AML-2.2.8
When an existing customer closes one account and opens another, the
Capital Market Licensees must review its customer identity information and update its records accordingly. Where the information available falls short of the requirements contained in Chapter AML-1, the missing or out-of-date information must be obtained and re-verified with the customer.Amended: January 2022
Added: October 2010AML-2.2.9
Once identification procedures have been satisfactorily completed and, as long as records concerning the customer are maintained in line with Chapters AML-1 and AML-6, no further evidence of identity is needed when transactions are subsequently undertaken within the expected level and type of activity for that customer, provided reasonably regular contact has been maintained between the parties and no doubts have arisen as to the customer's identity.
October 2010Ongoing Monitoring
AML-2.2.10
Capital Market Licensees must take reasonable steps to:(a) Scrutinize transactions undertaken throughout the course of that relationship to ensure that transactions being conducted are consistent with thecapital market licensee 's knowledge of the customer, their business risk and risk profile; and(b) Ensure that they receive and maintain up-to-date and relevant copies of the identification documents specified in Chapter AML-1, by undertaking reviews of existing records, particularly for higher risk categories of customers.Capital Market Licensees must require all customers to provide up-to-date identification documents in their standard terms and conditions of business.Amended: January 2022
Amended: October 2017
Added: October 2010AML-2.2.11
Capital Market Licensees must review and update their customer due diligence information at least every three years, particularly for higher risk categories of customers. If, upon performing such a review, copies of identification documents are more than 12 months out-of-date, theCapital Market Licensees must take steps to obtain updated copies as soon as possible.Amended: January 2022
Amended: October 2017
Added: October 2010AML-2.2.12
Capital Market Licensees must in addition to rules AML-2.2.10 and AML-2.2.11, maintain information and documents in respect to client transactions such as date of execution, value of transaction, type ofSecurities and identity of the counterparty.Amended: January 2022
Added: October 2010AML-2A AML-2A: Money Transfers and Accepted Crypto-asset Transfers
AML-2A.1 AML-2A.1 Applicability and CBB’s Approach to Transfer of Accepted Crypto-assets
AML-2A.1.1
The requirements of this Section, AML-2A.1, applies to
Capital Market Licensees (includingCrypto-asset licensees as well as third party service providers) if they act as anordering financial institution ,intermediary financial institution orbeneficiary financial institution .Amended: January 2022
Added: January 2020AML-2A.1.2
A third party service provider that provides
accepted crypto-asset transfers and/or electronic transfer of funds (wire transfer) on behalf of aCapital Market Licensee , irrespective of whether the third-party service provider is licensed by the CBB or not, must comply with the requirements of Paragraph AML-2A.1. ACapital Market Licensee is ultimately responsible for the functioning and activities of the third-party service provider and must ensure that the third party service provider meets all regulatory obligations as specified in this Section.Amended: January 2022
Added: January 2020CBB’s Approach to Transfer of Accepted Crypto-assets
AML-2A.1.3
As with financial payment methods,
accepted crypto-assets can be used to quickly move (transfer) funds globally and to facilitate a range of financial activities. Similar to mobile or internet based payment services and mechanism,accepted crypto-assets can be used to transfer funds in a wide geographical area with a large number of counterparties.Added: January 2020AML-2A.1.4
The CBB considers transactions involving transfer of
accepted crypto-assets as functionally analogous to wire transfer. Therefore,Capital Market Licensees (includingcrypto-asset licensees ), whenever their transaction, whether in fiat currency oraccepted crypto-assets , involves (i) a traditional wire transfer, or (ii) anaccepted crypto-asset transfer, must comply with the requirements of Paragraph AML-2A.2 unless stated otherwise.Amended: January 2022
Added: January 2020AML-2A.2 AML-2A.2 Transfer of Accepted Crypto-assets and Wire Transfer
Accepted Crypto-asset Transfer to be Considered as Cross Border Transfer
AML-2A.2.1
Capital Market Licensees (includingcrypto-asset licensees ) must consider all transfers ofaccepted crypto-assets as cross-border transfer rather than domestic transfer.Amended: January 2022
Added: January 2020Outward Transfers
AML-2A.2.2
Capital Market Licensees must include all requiredoriginator information and requiredbeneficiary information details with the accompanying transfer ofaccepted crypto-assets and/or wire transfer of funds they make on behalf of their customers.Amended: January 2022
Added: January 2020AML-2A.2.3
For purposes of this Section,
originator information refers to the information listed in Subparagraphs AML-2A.2.7 (a) to (c) and beneficiary information refers to the information listed in Subparagraphs AML-2A.2.7 (d) and (e).Added: January 2020Inward Transfers
AML-2A.2.4
Capital Market Licensees must:(a) Maintain records (in accordance with Chapter AML-6 of this Module) of alloriginators information received with an inward transfer; and(b) Carefully scrutinize inward transfers which do not containoriginator information (i.e. full name, address and account number or a unique customer identification number).Capital Market Licensees must presume that such transfers are ‘suspicious transactions’ and pass them to the MLRO for review for determination as to possible filing of STR, unless (i) theordering financial institution is able to promptly (i.e. within two business days) advise thelicensee in writing of the originator information upon thelicensee’s request (Refer to Paragraph AML-2A.2.5); or (ii) theordering financial institution and the licensee are acting on their own behalf (as principal).Amended: January 2022
Added: January 2020AML-2A.2.5
The period of 2 business days provided to
ordering financial institution by theCapital Market Licensees under Paragraph AML-2A.2.4(b)(i) to furnish theoriginator information is only applicable while undertaking fund transfer (traditional wire transfer) and must not be used in case of transfer ofaccepted crypto-assets .Amended: January 2022
Added: January 2020AML-2A.2.6
While undertaking accepted crypto-asset transfer, a
Capital Market Licensees must ensure that theordering financial institution transmits theoriginator andbeneficiary information immediately (Refer to Paragraph AML-2A.2.9).Amended: January 2022
Added: January 2020Accepted Crypto-asset Transfer and Cross Border Wire Transfer
AML-2A.2.7
Information accompanying all
accepted crypto-asset transfer as well as wire transfer must always contain:(a) The name of theoriginator ;(b) The originator account number (e.g. IBAN or crypto-asset wallet) where such an account is used to process the transaction;(c) The originator’s address, or national identity number, or customer identification number, or date and place of birth;(d) The name of thebeneficiary ; and(e) The beneficiary account number (e.g. IBAN or crypto-asset wallet) where such an account is used to process the transaction.Added: January 2020AML-2A.2.8
Where a
Capital Market Licensees undertakes a transfer ofaccepted crypto-asset , it is not necessary for the information referred to in Paragraph AML-2A.2.7 to be attached directly to theaccepted crypto-asset transfers itself. The information can be submitted either directly or indirectly.Amended: January 2022
Added: January 2020AML-2A.2.9
A
Capital Market Licensee while undertaking transfer ofaccepted crypto-asset must ensure that the requiredoriginator andbeneficiary information is transmitted immediately and securely.Amended: January 2022
Added: January 2020AML-2A.2.10
For the purposes of Paragraph AML-2A.2.9, “Securely” means that the provider of the information must protect it from unauthorized disclosure as well as ensure that the integrity and availability of the required information is maintained so as to facilitate recordkeeping and the use of such information by
financial institution . The term “immediately” means that the provider of the information must submit the required information simultaneously or concurrently with the transfer itself of theaccepted crypto-asset .Added: January 2020AML-2A.2.11
The CBB recognises that unlike traditional fiat currency wire transfer, not every
accepted crypto-asset transfer involves (or is bookended by) two institutions (crypto-asset entities or financial institution). In instances in which anaccepted crypto-asset transfer involves only one financial institution on either end of the transfer (e.g. when anordering financial institution sendsaccepted crypto-assets on behalf of its customers, theoriginator , to abeneficiary that is not a customer of abeneficiary financial institution but rather an individual user who receives theaccepted crypto-asset transfer using his/her own distributed ledger technology (DLT) software, such as an unhosted wallet), the financial institution must still ensure adherence to Paragraph AML-2A.2.7 for their customer. The CBB does not expect that financial institutions, when originating anaccepted crypto-asset transfer, would submit the required information to individual users who are not financial institutions. However, financial institutions receiving anaccepted crypto-asset transfer from an entity that is not a financial institution (e.g. from an individual accepted crypto-asset user using his/her own DLT software, such as an unhosted wallet), must obtain the required originator information from their customer.Added: January 2020Domestic Wire Transfer
AML-2A.2.12
Information accompanying domestic wire transfers must also include
originator information as indicated for cross-border wire transfers, unless this information can be made available to thebeneficiary financial institution and the CBB by other means. In this latter case, theordering financial institution need only include the account number or a unique transaction reference number, provided that this number or identifier will permit the transaction to be traced back to theoriginator or thebeneficiary .Added: January 2020AML-2A.2.13
For purposes of Paragraph AML-2A.2.12, the information should be made available by the
ordering financial institution within three business days of receiving the request either from thebeneficiary financial institution or from the CBB.Added: January 2020AML-2A.2.14
It is not necessary for the recipient institution to pass the originator information on to the
beneficiary . The obligation is discharged simply by notifying thebeneficiary financial institution of the originator information at the time the transfer is made.Added: January 2020Responsibilities of Ordering, Intermediary and Beneficiary Financial Institutions
Ordering Financial Institution
AML-2A.2.15
The
ordering financial institution must ensure that wire transfers as well asaccepted crypto-asset transfers contain required and accurate originator information, and requiredbeneficiary information.Added: January 2020AML-2A.2.16
The
ordering financial institution must maintain alloriginator andbeneficiary information collected in accordance with Paragraph AML-6.1.1.Added: January 2020AML-2A.2.17
The
ordering financial institution must not execute the wire transfer oraccepted crypto-asset transfer if it does not comply with the requirements of Paragraphs AML-2A.2.15 and AML-2A.2.16.Added: January 2020Intermediary Financial Institutions
AML-2A.2.18
For cross-border wire transfers and
accepted crypto-asset transfers, financial institutions processing an intermediary element of such chains of wire transfers and/oraccepted crypto-asset transfers must ensure that alloriginator andbeneficiary information that accompanies a wire transfer andaccepted crypto-asset transfer is retained with it.Added: January 2020AML-2A.2.19
Where technical limitations prevent the required
originator orbeneficiary information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, a record must be kept, for at least five years, by the receiving intermediary institution of all the information received from theordering financial institution or anotherintermediary financial institution .Added: January 2020AML-2A.2.20
An
intermediary financial institution must take reasonable measures to identify cross-border wire transfers andaccepted crypto-asset transfer that lack requiredoriginator information or requiredbeneficiary information.Added: January 2020AML-2A.2.21
An
intermediary financial institution must have effective risk-based policies and procedures for determining:(a) When to execute, reject, or suspend a traditional wire transfer lacking requiredoriginator or requiredbeneficiary information; and(b) The appropriate follow-up action.Added: January 2020Beneficiary Financial Institution
AML-2A.2.22
A
beneficiary financial institution must take reasonable measures to identify cross-border wire transfers as well asaccepted crypto-asset transfer that lack requiredoriginator or requiredbeneficiary information. Such measures may include post-event monitoring or real-time monitoring where feasible.Added: January 2020AML-2A.2.23
For wire transfers as well as
accepted crypto-asset transfer, abeneficiary financial institution must verify the identity of thebeneficiary , if the identity has not been previously verified, and maintain this information in accordance with Paragraph AML-6.1.1.Added: January 2020AML-2A.2.24
A
beneficiary financial institution must have effective risk-based policies and procedures for determining:(a) When to execute, reject, or suspend a traditional wire transfer lacking requiredoriginator or requiredbeneficiary information; and(b) The appropriate follow-up action.Added: January 2020AML-3 AML-3 Money Laundering Reporting Officer (MLRO)
AML-3.1 AML-3.1 Appointment of MLRO
AML-3.1.1
Capital Market Licensees must appoint a Money Laundering Reporting Officer ("MLRO"). The position of the MLRO is a controlled function and the MLRO is an approvedPerson .Amended: January 2022
Added: October 2010AML-3.1.2
For details of CBB's requirements regarding controlled functions and approved
Persons , see the relevant licensing Module, such as MAE, CSD, or MIR Module. Amongst other things, approvedPersons require CBB approval before being appointed, which is granted only if they are assessed as 'fit and proper' for the function in question. A completed Form 3 must accompany any request for CBB approval.October 2010AML-3.1.3
The position of the MLRO must not be combined with functions that create potential conflicts of interest, such as an internal auditor or business line head. The position of the MLRO may not be outsourced.
October 2010AML-3.1.4
Subject to rule AML-3.1.3, however, the position of the MLRO may otherwise be combined with other functions in the
Capital Market Licensees , such as that of Compliance Officer, in cases where the volume and geographical spread of the business is limited and, therefore, the demands of the function are not likely to require a full time resource. Rule AML-3.1.7 requires that the MLRO is a Director or employee of theCapital Market Licensees , so the function may not be outsourced to a third-party employee.Amended: January 2022
Added: October 2010AML-3.1.4A
For purposes of Paragraphs AML-3.1.3 and AML-3.1.4 above,
Capital Market Licensees must clearly state in the Application for Approved Person Status — Form 3 — when combining the MLRO or DMLRO position with any other position within theCapital Market Licensees .Added: January 2022AML-3.1.5
Unless exempted by the CBB, a
Capital Market Licensees must appoint deputy MLRO to act for the MLRO in his/her absence. The deputy MLRO must be resident in Bahrain unless otherwise agreed with the CBB.Amended: January 2022
Added: October 2010AML-3.1.5A
Where a
Capital Market Licensees seeks an exemption from appointment of Deputy MLRO, from the CBB, it must provide in writing, to the satisfaction of the CBB, the nature, scale and complexity of their business and the alternative arrangements that theCapital Market Licensees shall implement when the MLRO is not available to carry out thecontrolled function .Added: January 2022AML-3.1.6
Capital Market Licensees should note that although the MLRO may delegate some of his functions, either to other employees of theCapital Market Licensees or even (in the case of larger groups) to individuals performing similar functions for other group entities, the responsibility for compliance with the requirements of this Module remains with theCapital Market Licensees and the designated MLRO. The deputy MLRO should be able to support the MLRO discharge his responsibilities and to deputise for him in his absence.Amended: January 2022
Added: October 2010AML-3.1.7
So that he can carry out his functions effectively,
Capital Market Licensees must ensure that their MLRO:(a) Is a Director or a member of senior management of theCapital Market Licensees ;(b) Has a sufficient level of seniority within theCapital Market Licensees , has the authority to act without interference from business line management and has direct access to the Board and senior management (where necessary);(c) Has sufficient resources, including sufficient time and (if necessary) support staff, and has designated a replacement to carry out the function should the MLRO be unable to perform his duties;(d) Has unrestricted access to all transactional information relating to any financial services provided by theCapital Market Licensees to that customer, or any transactions conducted by theCapital Market Licensees on behalf of a customer;(e) Is provided with timely information needed to identify, analyze and effectively monitor customer accounts;(f) Has access to all customer due diligence information obtained by theCapital Market Licensees ; and(g) Is resident in Bahrain.Amended: January 2022
Added: October 2010AML-3.1.8
In addition,
Capital Market Licensees must ensure that their MLRO is able to:(a) Monitor the day-to-day operation of its policies and procedures relevant to this Module; and(b) Respond promptly to any reasonable request for information made by the Financial Intelligence Directorate, or the CBB.Amended: January 2022
Amended: October 2019
Added: October 2010AML-3.1.9
If the position of the MLRO falls vacant, the
Capital Market 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, theCapital Market Licensees must make immediate interim arrangements (including the appointment of an acting MLRO) to ensure continuity in the MLRO function's performance. These interim arrangements must be approved by the CBB. Any action taken by the Deputy MLRO will be regarded as having the same authority as if it had been done by the MLRO.Amended: January 2022
Added: October 2010AML-3.2 AML-3.2 Responsibilities of the MLRO
AML-3.2.1
The MLRO is responsible for:
(a) Establishing and maintaining theCapital Market Licensee 's AML/CFT policies and procedures;(b) Ensuring that theCapital Market Licensees complies with the AML Law, any other applicable AML/CFT legislation and this Module;(c) Ensuring day-to-day compliance with theCapital Market Licensee 's own internal AML/CFT policies and procedures;(d) Acting as theCapital Market Licensee 's main point of contact in respect of handling internal Suspicious Transaction Reports from theCapital Market Licensee 's staff (refer to section AML-4.1) and as the main contact for the Financial Intelligence Directorate, the CBB and other concerned bodies regarding AML/CFT;(e) Making external Suspicious Transaction Reports to the Financial Intelligence Directorate and the Compliance Directorate (refer to section AML-4.2);(f) Taking reasonable steps to establish and maintain adequate arrangements for staff awareness and training on AML/CFT matters (whether internal or external), as per Chapter AML-5;(g) Producing annual reports on the effectiveness of theCapital Market Licensee 's AML/CFT controls, for consideration by senior management, as per rule AML-3.3.3 and following-up on the status of any anomaly identified or remedial measure required by the CBB;(h) On-going monitoring of what may, in his opinion, constitute high-risk customer accounts; and(i) Ensuring that theCapital Market Licensee maintains all necessary CDD, transactions, STR and staff training records for the required periods (refer to section AML-6.1).Amended: January 2022
Amended: October 2019
Amended: July 2016
Added: October 2010AML-3.3 AML-3.3 Compliance Monitoring
Annual Compliance Review
AML-3.3.1
Capital Market Licensees must take appropriate steps to identify and assess their money laundering and terrorist financing risks (for customers, countries or geographic areas; and products, services, transactions or delivery channels). They must document those assessments in order to be able to demonstrate their basis, keep these assessments up to date, and have appropriate mechanisms to provide risk assessment information to the CBB. The nature and extent of any assessment of money laundering and terrorist financing risks must be appropriate to the nature and size of the business.Amended: January 2022
Added: July 2016AML-3.3.1A
Capital Market Licensees should always understand their money laundering and terrorist financing risks, but the CBB may determine that individual documented risk assessments are not required, if the specific risks inherent to the sector are clearly identified and understood.Amended: January 2022
Added: July 2016AML-3.3.1B
A
Capital Market Licensee must review the effectiveness of its AML/CFT procedures, systems and controls at least once each calendar year. The review must cover theCapital Market Licensees and its branches and subsidiaries both inside and outside the Kingdom of Bahrain. ACapital Market Licensee must monitor the implementation of those controls and enhance them if necessary. The scope of the review must include:(a) A report, containing the number of internal reports made in accordance with section AML-4.1, a breakdown of all the results of those internal reports and their outcomes for each segment of theCapital Market Licensee 's business, and an analysis of whether controls or training need to be enhanced;(b) A report, indicating the number of external reports made in accordance with section AML-4.2 and, where aCapital Market Licensee has made an internal report but not made an external report, noting why no external report was made;(c) A sample test of compliance with this Module's customer due diligence requirements; and(d) A report as to the quality of theCapital Market Licensee 's anti-money laundering procedures, systems and controls and compliance with the rules of alicensed exchange andlicensed clearing house orcentral depository , AML Law and this Module.Amended: January 2022
Amended: July 2016
Added: October 2010AML-3.3.2
The reports listed under rule AML-3.3.1B (a) and (b) must be made by the MLRO. The sample testing and report required under rule AML-3.3.1B (c) and (d) must be made by the
Capital Market Licensee 's external auditorsor a consultancy firm approved by the CBB.Amended: January 2022
Amended: January 2020
Amended: January 2019
Added: October 2010AML-3.3.2A
In order for a consultancy firm to be approved by the CBB for the purposes of Paragraph AML-3.3.2, such firm should provide the CBB’s Compliance Directorate with:
(a) A sample AML/CFT report prepared for a financial institution;(b) A list of other AML/CFT related work undertaken by the firm;(c) A list of other audit/review assignments undertaken, specifying the nature of the work done, date and name of the licensee; and(d) An outline of any assignment conducted for or in cooperation with an international audit firm.Added: January 2020AML-3.3.2B
The firm should indicate which personnel (by name) will work on the report (including, where appropriate, which individual will be the team leader) and demonstrate that all such persons have appropriate qualifications in one of the following areas:
(a) Audit;(b) Accounting;(c) Law; or(d) Banking/Finance.Added: January 2020AML-3.3.2C
Capital Market Licensees must ensure that the personnel conducting the review are qualified, skilled and have adequate experience to conduct such a review. At least two persons working on the report (one of whom should be the team leader) must have:(a) A minimum of 5 years professional experience dealing with AML/CFT issues; and(b) Formal AML/CFT training.Amended: January 2022
Added: January 2020AML-3.3.2D
Submission of a curriculum vitae for all personnel to be engaged on the report is encouraged for the purposes of evidencing the above requirements.
Added: January 2020AML-3.3.2E
Upon receipt of the above required information, the CBB Compliance Directorate will assess the firm and communicate to it whether it meets the criteria required to be approved by the CBB for this purpose. The CBB may also request any other information it considers necessary in order to conduct the assessment.
Added: January 2020AML-3.3.3
The reports listed under rule AML-3.3.1B must be submitted to the
Capital Market Licensee 's Board for it to review and commission any required remedial measures and copied to theCapital Market Licensee 'ssenior management .Amended: January 2022
Amended: July 2016
Added: October 2010AML-3.3.4
The purpose of the annual compliance review is to assist a
Capital Market Licensee 's Board and senior management to assess, amongst other things, whether internal and external reports are being made (as required under Chapter AML-4), and whether the overall number of such reports (which may otherwise appear satisfactory) does not conceal inadequate reporting in a particular segment of theCapital Market Licensee 's business (or, where relevant, in particular branches or subsidiaries).Capital Market Licensees should use their judgement as to how the reports listed under rule AML-3.3.1B (a) and (b) should be broken down in order to achieve this aim (e.g. by branches, departments, product lines, etc).Amended: January 2022
Amended: January 2019
Added: October 2010AML-3.3.5
Capital Market Licensees must instruct their external auditor to produce the report referred to in rule AML-3.3.1B (c) and (d). The report must be submitted to the CBB by the 30th of June of the following year. The findings of this review must be received and acted upon by theCapital Market Licensee .Amended: January 2022
Amended: January 2020
Amended: January 2019
Added: October 2010AML-3.3.6
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: October 2010AML-4 AML-4 Suspicious Transaction Reporting
AML-4.1 AML-4.1 Internal Reporting
AML-4.1.1
Capital Market Licensees must implement procedures to ensure that staff who handle customer business (or are managerially responsible for such staff) make a report promptly to the MLRO if they know or suspect that a customer (or aPerson on whose behalf a customer may be acting) is engaged inMoney Laundering or terrorism financing, or if the transaction or the customer's conduct otherwise appears unusual or suspicious. These procedures must include arrangements for disciplining any member of staff who fails, without reasonable excuse, to make such a report.Amended: January 2022
Added: October 2010AML-4.1.2
Where
Capital Market Licensees internal processes provide for staff to consult with their line managers before sending a report to the MLRO, such processes must not be used to prevent reports reaching the MLRO, where staff have stated that they have knowledge or suspicion that a transaction may involveMoney Laundering or terrorist financing.Amended: January 2022
Added: October 2010AML-4.2 AML-4.2 External Reporting
AML-4.2.1
Capital Market Licensees must take reasonable steps to ensure that all reports made under section AML-4.1 are considered by the MLRO (or his duly authorised delegate). Having considered the report and any other relevant information, if the MLRO (or his duly authorised delegate), still suspects that aPerson has been engaged inMoney Laundering or terrorism financing, or the activity concerned is otherwise still regarded as suspicious, he must report the fact promptly to theRelevant Authorities . Where no report is made, the MLRO must document the reasons why.Amended: January 2022
Added: October 2010AML-4.2.2
To take reasonable steps, as required under rule AML-4.2.1,
Capital Market Licensees must:(a) Require the MLRO to consider reports made under Section AML-4.1 in the light of all relevant information accessible to or reasonably obtainable by the MLRO;(b) Permit the MLRO to have access to any information, including Know Your Customer information, in theCapital Market Licensee 's possession which could be relevant; and(c) Ensure that where the MLRO, or his duly authorised delegate, suspects that aPerson has been engaged inMoney Laundering or terrorist financing, a report is made by the MLRO which is not subject to the consent or approval of any otherPerson .Amended: January 2022
Added: October 2010AML-4.2.3
Reports to the
Relevant Authorities made under rule AML-4.2.1 must be sent to the Financial Intelligence Directorate at the Ministry of the Interior, and the CBB's Compliance Directorate using the Suspicious Transaction Reporting Online System (Online STR system). STRs in paper format will not be accepted.Amended: October 2019
Amended: July 2016
Amended: October 2014
October 2010AML-4.2.4
Capital Market Licensees must report all suspicious transactions or attempted transactions. This reporting requirement applies regardless of whether the transaction involves tax matters.Amended: January 2022
Added: October 2010AML-4.2.5
Capital Market Licensees must retain all relevant details of STRs submitted to theRelevant Authorities , for at least five years.Amended: January 2022
Amended: July 2016
Added: October 2010AML-4.2.6
In accordance with the AML Law,
Capital Market Licensees , their Directors, officers and employees:(a) Must not warn or inform ('tipping off') their customers, the beneficial owner or other subjects of the STR when information relating to them is being reported to theRelevant Authorities ; and(b) In cases whereCapital Market Licensees form a suspicion that transactions relate to money laundering or terrorist financing, they must take into account the risk of tipping-off when performing the CDD process. If theCapital Market Licensee reasonably believes that performing the CDD process will tip-off the customer or potential customer, it may choose not to pursue that process, and must file an STR.Amended: January 2022
Amended: January 2018
Amended: July 2016
Added: October 2010AML-4.3 AML-4.3 Reporting to the SRO
AML-4.3.1
The MLRO, whenever he becomes aware or believes, or has reason to believe that a client is involved in a
Money Laundering offence, shall in addition to the reporting in section AML-4.2, inform the SRO on which the transaction is taking place, or where theSecurities or cash is being held, in which case the SRO must, unless instructed otherwise by aRelevant Authority , stop the execution of the suspicious transaction and anySecurity deposited with the SRO or otherCapital Market Licensee .Amended: January 2022
Added: October 2010AML-4.4 AML-4.4 Contacting the Relevant Authorities
AML-4.4.1
Reports made by the MLRO or his duly authorised delegate under Section AML-4.2 must be sent electronically using the Suspicious Transaction Reporting Online System (Online STR system).
Amended: October 2014
October 2010AML-4.4.2
The
relevant authorities are:
Financial Intelligence Directorate (FID)
Ministry of Interior
P.O. Box 26698
Manama, Kingdom of Bahrain
Telephone: + 973 17 749397
Fax: + 973 17 715502
E-mail: bahrainfid@moipolice.bhDirector of Compliance Directorate
Central Bank of Bahrain
P.O. Box 27
Manama, Kingdom of Bahrain
Telephone: 17 547107
Fax: 17 535673
E-mail: Compliance@cbb.gov.bhAmended: October 2019
Added: October 2014AML-5 AML-5 Staff Training and Recruitment
AML-5.1 AML-5.1 General Requirements
AML-5.1.1
Capital Market Licensees must take reasonable steps to provide periodic training and information to ensure that staff who handle customer transactions, or are managerially responsible for such transactions, are made aware of:(a) Their responsibilities under the AML Law, this Module, and any other relevant AML/CFT laws and regulations;(b) The identity and responsibilities of the MLRO and his deputy;(c) The potential consequences, both individual and corporate, of any breach of the AML Law, this Module and any other relevant AML/CFT laws or regulations;(d) TheCapital Market Licensee 's current AML/CFT policies and procedures;(e)Money Laundering and terrorist financing typologies and trends;(f) The type of customer activity or transaction that may justify an internal report in accordance with section AML-4.1;(g) TheCapital Market Licensee 's procedures for making an internal report as per section AML-4.1; and(h) Customer due diligence measures with respect to establishing business relations with customers.Amended: January 2022
Added: October 2010AML-5.1.2
The information referred to in rule AML-5.1.1 must be brought to the attention of relevant new employees of
Capital Market Licensees and must remain available for reference by staff during their period of employment.Amended: January 2022
Added: October 2010AML-5.1.3
Relevant new employees must be given AML/CFT training within three months of joining a
Capital Market Licensee .Amended: January 2022
Added: October 2010AML-5.1.4
Capital Market Licensees must ensure that their AML/CFT training for relevant staff remains up-to-date and is appropriate given theCapital Market Licensee 's activities and customer base.Amended: January 2022
Added: October 2010AML-5.1.5
The CBB would normally expect AML/CFT training to be provided to relevant staff at least once a year.
October 2010AML-5.1.6
Capital Market Licensees must develop adequate screening procedures to ensure high standards when hiring employees. These procedures must include controls to prevent criminals or their associates from being employed byCapital Market Licensees .Amended: January 2022
Amended: July 2016
Added: October 2010AML-5.1.6A
[This Paragraph was deleted in January 2022].
Deleted: January 2022
Added: January 2021AML-6 AML-6 Record Keeping
AML-6.1 AML-6.1 General Requirements
CDD and Transaction Records
AML-6.1.1
Capital Market Licensees must comply with the record-keeping requirements contained in the AML Law and in the CBB Law.Capital Market Licensees must therefore retain adequate records (including accounting and identification records), for the following minimum periods:(a) For customers, in relation to evidence of identity and business relationship records (such as application forms, account files and business correspondence, including the results of any analysis undertaken (e.g. enquiries to establish the background and purpose of complex, unusual large transactions)), for at least five years after the customer relationship has ceased; and(b) For transactions, in relation to documents enabling a reconstitution of the transaction concerned, for at least five years after the transaction was completed.Amended: January 2022
Amended: July 2016
Added: October 2010AML-6.1.1A
For the purposes of Subparagraph AML-6.1.1(b),
crypto-asset licensees must maintain all records of transactions in such form or manner that individual transactions can be reconstructed swiftly and the records can associate the transactions to a natural person.Added: January 2020AML-6.1.1B
Crypto-asset licensees must maintain information obtained through enhanced customer due diligence (refer CRA-7.1.3 of Module CRA), including information relating to the identification of the relevant customers, the public keys (or equivalent identifiers), addresses or accounts involved (or equivalent identifiers), the nature and date of transaction and the amount transferred.Added: January 2020AML-6.1.1C
Crypto-asset licensees relying solely on the public information available on the blockchain or other type of distributed ledger underlying theaccepted crypto-asset for record keeping in not sufficient for compliance with AML-6.1.1 and AML-6.1.1A. The information available on the blockchain or other type of distributed ledger may enable to trace transactions back to a wallet, though may not readily link the wallet address to the name of the customer and the beneficial owner.Crypto-asset licensees must ensure that additional information necessary to associate the wallet address to a natural person is maintained.Added: January 2020Compliance Records
AML-6.1.2
Capital Market Licensees must retain copies of the reports produced for their annual compliance review, as specified in rule AML-3.3.1, for at least five years.Capital Market Licensees must also maintain for five years reports made to, or by, the MLRO made in accordance with sections AML-4.1 and AML-4.2, and records showing how these reports were dealt with and what action, if any, was taken as a consequence of those reports.Amended: January 2022
Added: October 2010AML-6.1.3
When required to deliver the original copy of a record concerning any transaction, or a document pertaining thereto before the expiry of the prescribed period, the
Capital Market Licensees shall observe the following:(a) They shall maintain a complete copy of the delivered record or documents until the end of the period prescribed for maintaining the original records or documents.(b) They shall maintain a record of the delivered documents.Amended: January 2022
Added: October 2010Training Records
AML-6.1.4
Capital Market Licensees must maintain for at least five years, records showing the dates when AML/CFT training was given, the nature of the training, and the names of the staff that received the training.Amended: January 2022
Added: October 2010Access
AML-6.1.5
All records required to be kept under this section must be made available for prompt and swift access by the
Relevant Authorities or other authorisedPersons .October 2010AML-7 AML-7 General Requirements in Relation to Securities
AML-7.1 AML-7.1 General Requirements in Respect of Substantial Shareholding
AML-7.1.1
Any
Person whose ownership alone or his ownership together with that of his minor children, or any other accounts under his disposal, or the ownership of any of his associate or affiliate companies amounts to 5% or more of any listedSecurity of a joint stock company, must notify the licensed exchange forthwith, which must in turn notify the CBB of this fact and the CBB may declare the name of thePerson who owns such stake.Amended: July 2011
October 2010AML-7.1.2
[This Paragraph was deleted in October 2019].
Deleted: October 2019
Amended: July 2011
October 2010AML-7.1.3
All persons must obtain CBB prior written approval to execute any order that will bring their ownership alone or their ownership together with their minor children, or the accounts standing under their disposal to 10% or more in any listed
security . Any further increase of 1% or more shall also be subject to CBB prior written approval.Amended: July 2011
October 2010AML-7.1.4
Without prejudice to any greater penalty prescribed under the Prevention and Prohibition of the Money Laundering Law or any other law, a breach of the provisions of section AML-7.1 shall result in the cancellation of the transaction, and the
Person in breach must bear all costs arising in this connection.Amended: July 2011
October 2010AML-7.2 AML-7.2 Requirements for Listing
AML-7.2.1
No local or foreign company shall be listed on a Licensed Exchange, unless their documents of incorporation are complete and satisfy all legal requirements applicable in the Kingdom, or in their countries of incorporation to the extent that these are comparable to this Module, as the case may be.
October 2010AML-7.3 AML-7.3 Requirements for Offering
AML-7.3.1
No
Security shall be offered for public subscription in the Kingdom unless the issuing company is duly incorporated under the laws of the Kingdom, or the laws of its country of incorporation, as the case may be, satisfying all terms and conditions governing the public offering ofSecurities in the Kingdom, and abiding by the conditions and requirements stipulated under the Commercial Companies Law and the Disclosure Standards in force in the Kingdom.No
Security issued to the bearer shall be offered, listed, traded or deposited on a Licensed Exchange.October 2010AML-7.4 AML-7.4 Requirements for Deposit
AML-7.4.1
A
Security shall not be accepted in the Central Depository System unless its authenticity is approved by the concerned shares registrar and the client shall provide the Central Depository System with any amendment or change which may occur in such particulars.October 2010AML-8 AML-8 Acceptance of Cash
AML-8.1 AML-8.1 Acceptance of Cash
AML-8.1.1
[This Paragraph was deleted in January 2020].
Deleted: January 2020
Added: October 2010AML-8.1.1A
A
Capital Market Licensee , whether at the commencement of or during a business relationship, must not accept cash from a customer, whether for investment purpose or as payment for services provided by theCapital Market Licensee except for payment of one time or non-recurring fees (symbolic fees) with a value not exceeding Two Hundred Bahraini Dinars for the services provided by theCapital Market Licensee such as account opening fees, fees for providing statements, fees for printing documents and certificates of various types and such other services.Amended: January 2022
Added: January 2020AML-9 AML-9 NCCT Measures and Terrorist Financing
AML-9.1 AML-9.1 Special Measures for Non-Cooperative Countries or Territories ('NCCTs')
AML-9.1.1
Capital Market Licensees must give special attention to any dealings they may have with entities orPersons domiciled in countries or territories which are:(a) Identified by the FATF as being 'non-cooperative'; or(b) Notified toCapital Market Licensees from time-to-time by the CBB.Amended: January 2022
Added: October 2010AML-9.1.2
Whenever transactions with such parties have no apparent economic or visible lawful purpose, their background and purpose must be re-examined and the findings documented. If suspicions remain about the transaction, these must be reported to the
Relevant Authorities in accordance with section AML-4.2.October 2010AML-9.1.3
Capital Market Licensees must apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries where such measures are called for by the FATF. The type of enhanced due diligence measures applied must be effective and proportionate to the risks.Amended: January 2022
Added: July 2016AML-9.1.4
With regard to jurisdictions identified as NCCTs or those which in the opinion of the CBB, do not have adequate AML/CFT systems, the CBB reserves the right to:
(a) Refuse the establishment of subsidiaries or branches or representative offices of financial institutions from such jurisdictions;(b) Limit business relationships or financial transactions with such jurisdictions or persons in those jurisdictions;(c) Prohibit financial institutions from relying on third parties located in such jurisdictions to conduct elements of the CDD process;(d) Require financial institutions to review and amend, or if necessary terminate, correspondent relationships with financial institutions in such jurisdictions;(e) Require increased supervisory examination and/or external audit requirements for branches and subsidiaries of financial institutions based in such jurisdictions; or(f) Require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in such jurisdictions.Amended: January 2018
Added: July 2016AML-9.2 AML-9.2 Terrorist Financing
AML-9.2.1AA
Capital Market Licensees must implement and comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing.Capital Market Licensees must freeze, without delay, the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity either (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267(1999) and its successor resolutions as well as Resolution 2178(2014) or (ii) designated as pursuant to Resolution 1373(2001).Amended: January 2022
Amended: October 2019
Added: April 2017AML-9.2.1
Capital Market Licensees must comply in full with the provisions of the UN Security Council Anti-Terrorism Resolution No. 1373 of 2001 ('UNSCR 1373').Amended: January 2022
Added: October 2010AML-9.2.2
[This Paragraph was deleted in January 2018].
Deleted: January 2018
October 2010AML-9.2.3
A copy of UNSCR 1373 is included in Part B of Volume 6 (Capital Markets), under 'Supplementary Information' on the CBB Website.
October 2010AML-9.2.4
Capital Market Licensees must report to the CBB details of:(a) Funds or other financial assets or economic resources held with them which may be the subject of Article 1, Paragraphs (c) and (d) of UNSCR 1373;(b) All claims, whether actual or contingent, which theCapital Market Licensee has onPersons and entities which may be the subject of Article 1, Paragraphs (c) and (d) of UNSCR 1373; and(c) All assets frozen or actions taken in compliance with the prohibition requirements of the relevant UNSCRs, including attempted transactions.Amended: January 2023
Amended: January 2022
Added: October 2010AML-9.2.5
For the purposes of rule AML-9.2.4, 'funds or other financial resources' includes (but is not limited to) shares in any undertaking owned or controlled by the
Persons and entities referred to in Article 1, Paragraphs (c) and (d) of UNSCR 1373, and any associated dividends received by theCapital Market Licensees .Amended: January 2022
Added: October 2010AML-9.2.6
All reports or notifications under this section must be made to the CBB's Compliance Directorate.
October 2010AML-9.2.7
See section AML-4.3 for the Compliance Directorate's contact details.
October 2010AML-9.3 AML-9.3 Designated Persons and Entities
AML-9.3.1
Without prejudice to the general duty of all
Capital Market Licensees to exercise the utmost care when dealing withPersons or entities who might come under Article 1, Paragraphs (c) and (d) of UNSCR 1373,Capital Market Licensees must not deal with anyPersons or entities designated by the CBB as potentially linked to terrorist activity.Amended: January 2022
Added: October 2010AML-9.3.2
The CBB from time-to-time issues to
Capital Market Licensees lists of designatedPersons and entities believed linked to terrorism.Capital Market Licensees are required to verify that they have no dealings with these designatedPersons and entities, and report back their findings to the CBB. Names designated by the CBB includePersons and entities designated by the United Nations, under UN Security Council Resolution 1267 ('UNSCR 1267').Amended: January 2022
Added: October 2010AML-9.3.3
Capital Market Licensees must report to theRelevant Authorities , using the procedures contained in section AML-4.2, details of any accounts or other dealings with designatedPersons and entities, and comply with any subsequent directions issued by theRelevant Authorities .Amended: January 2022
Added: October 2010AML-10 AML-10 Enforcement Measures
AML-10.1 AML-10.1 Regulatory Penalties
AML-10.1.1
Without prejudice to any other penalty imposed by the CBB Law, the AML Law No. 4 or the Penal Code of the Kingdom of Bahrain, failure by a
Capital Market Licensees to comply with this Module or any direction given hereunder shall result in the levying by the CBB, without need of a court order and at the CBB's discretion, of a fine of up to BD20,000.Amended: January 2022
Added: October 2010AML-10.1.2
Module MIE provides further information on the CBB's general approach to enforcement and the criteria taken into account prior to imposing such fines (see section MIE-3.1). Other enforcement measures may also be applied by the CBB in response to a failure by a
Capital Market Licensees to comply with this Module; these other measures are also set out in Module MIE.Amended: January 2022
Added: October 2010AML-10.1.3
The CBB will endeavour to assist
Capital Market Licensees to interpret and apply the requirements of this Module.Capital Market Licensees may seek clarification on any issue by contacting the Compliance Directorate (see section AML-4.3 for contact details).Amended: January 2022
Added: October 2010AML-10.1.4
Without prejudice to the CBB's general powers under the law, the CBB may amend, clarify or issue further directions on any provision of this Module from time-to-time, by notice to its
Capital Market Licensees .Amended: January 2022
Added: October 2010AML-11 AML-11 AML/CFT Guidance and Best Practice
AML-11.1 AML-11.1 Guidance Provided by International Bodies
FATF Recommendations
AML-11.1.1
The Recommendations (see www.fatf-gafi.org) together with their associated interpretative notes and best practices papers issued by the Financial Action Task Force (FATF), provide the basic framework for combating
Money Laundering activities and the financing of terrorism.Amended: July 2016
October 2010AML-11.1.2
The
Relevant Authorities in Bahrain believe that the principles established by these Recommendations should be followed byCapital Market Licensees in all material respects, as representing best practice and prudence in this area.Amended: January 2022
Amended: July 2016
Added: October 2010Other Website References Relevant to AML/CFT
AML-11.1.3
The following lists a selection of other websites relevant to AML/CFT:
(a) The Middle East North Africa Financial Action Task Force: www.menafatf.org;(b) The Egmont Group: www.egmontgroup.org;(c) The United Nations: www.un.org/terrorism;(d) The UN Counter-Terrorism Committee: www.un.org/Docs/sc/committees/1373/;(e) The UN list of designated individuals: www.un.org/Docs/sc/committees/1267/1267ListEng.htm;(f) The Wolfsberg Group: www.wolfsberg-principles.com; and(g) The Association of Certified Anti-Money Laundering Specialists: www.acams.org.October 2010AML-12 AML-12 Fraud
AML-12.1 AML-12.1 General Requirements for the Detection and Prevention of Fraud
AML-12.1.1
Capital Market Licensees must ensure that they allocate appropriate resources and have in place systems and controls to deter, detect, and record instances of fraud or attempted fraud.Amended: January 2022
Added: October 2010AML-12.1.2
Fraud may arise from internal sources originating from changes or weaknesses to processes, products and internal systems and controls. Fraud can also arise from external sources, for instance through false invoicing or advance fee frauds. Further guidance — and occasional investor alerts — can be found on the CBB's website (www.cbb.gov.bh).
October 2010AML-12.1.3
Any actual or attempted fraud incident (however small) must be reported to the appropriate authorities (including the CBB) and followed up. Monitoring systems must be designed to measure fraud patterns that might reveal a series of related fraud incidents.
October 2010AML-12.1.4
Capital Market Licensees must ensure that aPerson of sufficient seniority is given overall responsibility for the prevention, detection and remedying of fraud within the organisation.Amended: January 2022
Added: October 2010AML-12.1.5
Capital Market Licensees must ensure the effective segregation of functions and responsibilities between different individuals and departments, such that the possibility of financial crime is reduced and that no single individual is able to initiate, process and control a transaction.Amended: January 2022
Added: October 2010AML-12.1.6
Capital Market Licensees must provide regular training to their management and staff, to make them aware of potential fraud risks.Amended: January 2022
Added: October 2010TC — Training and Competency
TC-A Introduction TC-A Introduction
TC-A.1 TC-A.1 Purpose
Executive Summary
TC-A.1.1
Module TC provides Rules and Guidance to
capital market licensees to ensure satisfactory levels of competence, in terms of an individual’s knowledge, skills, experience and professional qualifications.Capital market licensees are required to demonstrate thatapproved persons including individuals undertakingcontrolled functions are sufficiently competent, and are able to undertake their respective roles and responsibilities.Capital market licensees must maintain the competence to provide regulated services. Individuals occupying controlled functions as outlined in respective Modules of Volume 6, must, therefore, meet minimum levels of training and experience related to their functions.Added: January 2022TC-A.1.2
Capital market licensees andapproved persons should observe high standards of integrity and fair dealing, and be honest and straightforward in their dealings withclients .Capital market licensees should maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.Added: January 2022TC-A.1.3
The CBB’s Licensing Conditions require a
capital market licensee’s staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of thecapital market licensee in a sound and prudent manner. This condition requires thatcapital market licensees must ensure their employees meet any training and competency requirements specified by the CBB. Theapproved persons requirements, specified in Module MAE, Module CSD, Module MIR and Module CRA, sets forth the ‘fit and proper’ requirements in relation to competence, experience and expertise required byapproved persons ; this Chapter specifies various factors that the CBB takes into account when reaching such decision regarding approval of such persons to act asapproved persons by CBB.Added: January 2022Legal Basis
TC-A.1.4
This Module contains the CBB’s Directive (as amended from time to time) relating to training and competency and is issued under the powers available to the CBB under Articles 38 and 65(b) of the Central Bank of Bahrain and Financial Institutions Law 2006 (‘CBB Law’). The Directive in this Module is applicable to all
capital market licensees .Added: January 2022TC-A.1.5
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.
Added: January 2022TC-A.2 TC-A.2 Module History
Evolution of the Module
TC-A.2.1
This Module was first issued in August 2021. 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.
Added: January 2022TC-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes TC-B Scope of Application TC-B Scope of Application
TC-B.1 TC-B.1 Scope
TC-B.1.1
This Module applies to all
capital market licensees in the Kingdom of Bahrain. It covers the training and competency requirements forapproved persons (See Chapter TC-1).Added: January 2022TC-B.1.2
In the case of an overseas licensee or entity undertaking regulated business activities within the framework of CBB Rulebook Volume-6, the applicability of this Module is restricted to its Bahrain operations.
Added: January 2022TC-B.1.3
Persons authorised by the CBB as
approved persons prior to the issuance of Module TC need not reapply for authorisation.Added: January 2022TC-B.1.4
The requirements of this Module apply to
approved persons in connection with thecapital market licensee’s regulated services, or under a contract of service.Added: January 2022TC-B.1.5
In the case of outsourcing arrangements, the
capital market licensee should refer to the competency requirements, outlined in Appendix TC-1 forapproved persons , for assessing the suitability of the outsourcing provider.Added: January 2022TC-B.1.6
Capital market licensees must satisfy the CBB that individuals undertaking acontrolled function position for it or on its behalf are suitable and competent to carry out the tasks assigned to that position.Added: January 2022TC-B.1.7
In implementing this Module,
capital market licensees must ensure that individuals appointed/recruited to performcontrolled functions :(a) Hold suitable qualifications and experience appropriate to the nature of the business;(b) Remain competent for the work they do; and(c) Are appropriately supervised.Added: January 2022TC-1 Requirements for Controlled Functions TC-1 Requirements for Controlled Functions
TC-1.1 TC-1.1 Controlled Functions
TC-1.1.1
Individuals occupying
controlled functions in acapital market licensee must be qualified and suitably experienced for their specific roles and responsibilities. The approved persons are:(a) Board Member/Director;(b) Chief Executive or General Manager and their Deputies;(c) Chief Financial Officer and/or Head of Finance;(d) Chief Risk Officer/ Head of Risk Management;(e) Compliance Officer;(f) Chief Information Officer/Chief Technology Officer or Head of Information Technology;(g) Heads of Other Functions (as specified in respective Modules);(h) Money Laundering Reporting Officer (MLRO);(i) Registered Representative; and(j) Chief Information Security Officer (CISO).Added: January 2022TC-1.1.2
Paragraph TC-1.1.1 specifies the
controlled functions that are common to all categories ofcapital market licensees under Volume 6.Controlled functions specific to each category ofcapital market licensee is specified in MAE, CSD, MIR, and CRA Modules. It is the responsibility of thecapital market licensee to refer to the respective Module to ascertain whether a particular position is considered acontrolled function or not.Added: January 2022TC-1.1.3
A
capital market licensee must take reasonable steps to ensure that individuals holdingcontrolled functions are sufficiently knowledgeable about their respective fields of work to be able to guide and supervise operations that fall under their responsibilities. Competence must be assessed on the basis of experience and relevant qualifications described in Appendix TC-1 as a minimum. However, the CBB reserves the right to impose a higher level of competence as it deems necessary.Added: January 2022TC-1.1.4
The CBB may, at its sole discretion, grant exemption to an individual from the requirements relevant to experience and/or qualifications stipulated in Appendix TC-1, on the basis of an application made to it, provided that the
licensee is able to demonstrate, to the satisfaction of the CBB, that the individual under consideration possesses qualification and/or experience comparable to those prescribed in Appendix TC-1. The CBB shall review and consider all relevant facts and circumstances in granting the exemption.Added: January 2022TC-1.1.5
While granting the exemption referred to in Paragraph TC-1.1.4, the CBB may impose other conditions as deemed appropriate. Conditional exemptions so granted are specific to the facts and circumstances set forth in the application and in the context of the individual’s engagement with the
capital market licensee , and therefore, non-transferable. The individual may be required to meet the qualification and experience requirements if there are changes to his/her role.Added: January 2022Board Member/Director
TC-1.1.6
Board members/Directors collectively are responsible for the business performance and strategy of the
capital market licensee , as outlined in more details in Section HC-10.1Added: January 2022TC-1.1.7
When taken as a whole, the board of directors of a
capital market licensee must be able to demonstrate that it has the necessary skills and expertise, as outlined in Paragraph HC-10.1.Added: January 2022Chief Executive or General Manager and their Deputies
TC-1.1.8
The
chief executive officer orgeneral manager and their deputies (as appropriate) are responsible for the executive management and performance of thelicensee within the framework or delegated authorities set by the Board. This is outlined in more details in Paragraph HC-10.6.Added: January 2022Chief Financial Officer/Head of Finance
TC-1.1.9
The Chief Financial Officer/Head of Finance is responsible for directing the
capital market licensee’s finance function, including ensuring that the relevant accounting treatment is applied to all of the activities of thecapital market licensee in a timely manner.Added: January 2022Chief Risk Officer/ Head of Risk Management
TC-1.1.10
The Chief Risk Officer/ Head of Risk Management is responsible for the management and control of all risk exposures arising from the activities of the
capital market licensee .Added: January 2022Compliance Officer
TC-1.1.11
An employee of appropriate standing must be designated by the
capital market licensee for the position of compliance officer. The duties of the compliance officer, who must have Bahraini residency, include:(a) Having responsibility for oversight of thecapital market licensee’s compliance with the requirements of the CBB and other applicable laws and regulations;(b) Raising awareness and providing training for thecapital market licensee’s staff on compliance issues; and(c) Reporting to thecapital market licensee’s Board in respect of that responsibility.Added: January 2022Chief Information Officer/Chief Technology Officer or Head of Information Technology
TC-1.1.12
The Chief Information Officer/Chief Technology Officer/ or Head of Information Technology is responsible for establishing and implementing the overall information technology strategy, overseeing the day-to-day information technology operations, and managing the information technology risks of the financial institution.
Added: January 2022Heads of Other Functions
TC-1.1.13
Heads of other functions are responsible for tracking specific functional performance goals in addition to identifying, managing and reporting critical organisational issues upstream. Certain functions require dealing directly withclients while others do not. Both categories of functions, however, require specific qualifications and experience to meet the objectives as well as compliance requirements of thecapital market licensee .Added: January 2022TC-1.1.14
For purposes of Paragraph TC-1.1.13,
capital market licensees should contact the CBB if they require further clarification on whether a specific position falls under the definition of “Heads of other Functions”.Added: January 2022Money Laundering Reporting Officer (MLRO)
Registered Representative
TC-1.1.16
The registered representative is responsible for solicitation or handling of accounts or orders for the purchase or sale of securities, or other similar instruments for the accounts of customers of his employer.
Added: January 2022Chief Information Security Officer
TC-1.1.17
The Chief Information Security Officer (“CISO”) is responsible and accountable for the effective management of cyber security risks. A CISO is responsible for overseeing and implementing the
capital market licensees cyber security program and enforce its cyber security policy.Added: January 2022TC-1.2 TC-1.2 Continuous Professional Development Training (“CPD”)
CPD
TC-1.2.1
All individuals holding
controlled functions in acapital market licensee must undergo a minimum of 15 hours ofCPD per annum.Added: January 2022TC-1.2.2
Where a
capital market licensee , based on the nature, scale and complexity of its business, determines that anapproved person , by not undergoing the CPD programme for the specificcontrolled function , on an annual basis, shall not impair the functioning of thecapital market licensee , it should approach the CBB with the rationale and request for an exemption from the CPD requirement stipulated in Paragraph TC-1.2.1. The CBB may consider exempting theapproved person undertaking the specificcontrolled function from the CPD requirement altogether or may recommend that theapproved person undergoes the CPD programme at such other frequency (biennial, triennial etc.) as deemed necessary.Added: January 2022TC-1.2.3
The
capital market licensee must ensure that an individual appointed as anapproved person is supervised and undergoes appropriate review and assessment of his/her performance.Added: January 2022TC-1.2.4
The level of supervision should be proportionate to the level of competence demonstrated by the
approved person . Supervision shall include, as appropriate:(a) Reviewing and assessing work on a regular basis; and(b) Coaching and assessing performance against the competencies necessary for the role.Added: January 2022TC-1.2.5
Supervisors of
approved persons should have technical knowledge and relevant skills, e.g. coaching and assessment skills.Added: January 2022TC-2 General Requirements TC-2 General Requirements
TC-2.1 TC-2.1 Recruitment and Assessing Competency
Recruitment and Appointment
TC-2.1.1
If a
capital market licensee recruits or promotes an individual to undertake acontrolled function , it must satisfy itself, where appropriate, of such individual’s relevant qualifications and experience.Added: January 2022TC-2.1.2
For purposes of Paragraph TC-2.1.1,
capital market licensees must file Form 3 (Approved Persons) with the CBB and obtain the express written approval of the CBB for that person to occupy the desired position. In its application, thecapital market licensee must demonstrate to the CBB that full consideration has been given to the qualifications and core competencies forcontrolled functions as per Appendix TC-1 (See Article 65(b) of the CBB Law).Added: January 2022TC-2.1.3
While assessing the competency for the position of Board of Director, a
capital market licensee should give due weightage to relevant experience and expertise of the applicant. The applicant should demonstrate clear understanding of the licensee’s business and his/her ability to exercise strategic oversight over the business operations. In case where an applicant does not fulfil the educational qualification and minimum experience requirement stipulated in Appendix TC-1 (Board member/Director), thecapital market licensee may still consider the applicant for appointment provided the applicant demonstrates:(a) clear understanding of the licensee’s business operations;(b) ability to provide objective views to the Board on issues of strategy, business performance, risk management, financial control and other matters which has a bearing on the licensee’s performance;(c) leadership ability or has previously operated in a leadership position.Added: January 2022TC-2.1.4
For the purposes of Paragraph TC-2.1.3 above, where an applicant does not fulfil the educational and minimum experience requirements, the CBB may, at its sole discretion, waive some or all the educational and minimum experience requirements, should it determine that the applicant (board member) demonstrates qualitative attributes which fulfils the core competency requirements as stipulated in Appendix TC-1 and his/her appointment shall contribute effectively to the decision making and governance process of the
licensee .Added: January 2022TC-2.1.5
Capital market licensees should refer to their respective Module (MAE, CSD, MIR and CRA) providing detailed requirements on the appointment of individuals occupyingcontrolled functions (approved persons).Added: January 2022TC-2.1.6
A
capital market licensee proposing to recruit an individual has to satisfy itself of his/her relevant qualifications and experience. Thecapital market licensee should:(a) Take into account the knowledge and skills required for the role, in addition to the nature and the level of complexity of thecontrolled function ; and(b) Take reasonable steps to obtain sufficient information about the individual’s background, experience, training and qualifications.Added: January 2022Assessing Competency
TC-2.1.7
Capital market licensees must not allow an individual to undertake or supervise acontrolled function unless that individual has been assessed by thecapital market licensee as competent in accordance with this Section.Added: January 2022TC-2.1.8
In determining an individual’s competency,
capital market licensees may assess if the person is fit and proper in accordance with the requirements stipulated for authorisation ofapproved persons in MAE, CSD, MIR and CRA Modules.Added: January 2022TC-2.1.9
Capital market licensees must assess individuals as competent when they have demonstrated the ability to apply the knowledge and skills required to perform a specificcontrolled function .Added: January 2022TC-2.1.10
The assessment of competence shall depend on the nature and the level of complexity of the
controlled function . Such assessment of competence of new personnel may take into account the fact that an individual has been previously assessed as competent in a similarcontrolled function .Added: January 2022TC-2.1.11
If a
capital market licensee assesses an individual as competent in accordance with TC-2.1.9 to perform a specificcontrolled function , it does not necessarily mean that the individual is competent to undertake othercontrolled functions .Added: January 2022TC-2.1.12
A
capital market licensee should use methods of assessment that are appropriate to thecontrolled function and to the individual’s role.Added: January 2022TC-2.2 TC-2.2 Training and Maintaining Competence
TC-2.2.1
A
capital market licensee must annually determine the training needs of individuals undertakingcontrolled functions . It must develop a training plan to address these needs and ensure that training is planned, appropriately structured and evaluated.Added: January 2022TC-2.2.2
The assessment and training plan described in Paragraph TC-2.2.1 should be aimed at ensuring that the relevant
approved person maintains competence in thecontrolled function . An individual can develop skills and gain experience in a variety of ways. These could include on-the-job learning, individual study, and other methods. In almost every situation, and for most individuals, it is likely that competence will be developed most effectively by a mixture of training methods.Added: January 2022TC-2.2.3
The training plan of
capital market licensees must include a programme for continuous professional development training (“CPD”) for theircontrolled function .Added: January 2022TC-2.2.4
Approved persons may choose to fulfil their CPD requirements by attending courses, workshops, conferences and seminars at local or foreign training institutions.
Added: January 2022TC-2.2.5
The annual training required under Paragraph TC-2.2.1 must also include the quarterly updates, if any, to the CBB Volume 6 (Capital Markets) Rulebook, in areas relevant to each
controlled function .Added: January 2022TC-2.2.6
Capital market licensees should maintain appropriate training records for each individual.Licensees should note how the relevant training relates to and supports the individual’s role. Training records may be reviewed during supervisory visits to assess thecapital market licensee’s systems and to review how thelicensee ensures that its staff are competent and remain competent for their roles.Added: January 2022Maintaining Competence
TC-2.2.7
A
capital market licensee must make appropriate arrangements to ensure thatapproved persons maintain competence.Added: January 2022TC-2.2.8
A
capital market licensee should ensure that maintaining competence for anapproved person takes into account:(a) Application of technical knowledge;(b) Application and development of skills; and(c) Appropriate knowledge of relevant market changes and changes to products, legislation and regulation.Added: January 2022TC-2.2.9
A capital market licensee may utilise the CPD schemes of relevant professional bodies to demonstrate compliance with TC-2.2.1. See Appendix TC-2 for a list of CBB-recognised professional bodies. The list of professional bodies set out in Appendix TC-2 is not exhaustive. Capital market licensees may conduct CPD training through other professional bodies provided such other professional bodies are of good repute, have an established track record in training related to regulated activities, the trainers are professionally qualified, and the training program is interactive (self-study without assessment or evaluation is not acceptable). In-house training, seminars, conferences, further qualifications, product presentations, computer-based training and one-to-one tuition may also be considered to demonstrate compliance with TC-2.2.1.
Added: January 2022TC-2.3 TC-2.3 Transitional Period
TC-2.3.1
The requirements of Module TC for
capital market licensees are effective from the date of issuance of this Module.Added: January 2022TC-2.3.2
New applications for
approved persons are subject to the requirements of this Module (See Paragraph TC-B.1.3).Added: January 2022TC-2.3.3
Approved persons occupyingcontrolled functions at the time this Module is issued will be grandfathered and not subject to the requirements of this Module, with the exception of CPD requirements in Paragraph TC-1.2.1. However, should theapproved person move to anothercontrolled function , Paragraph TC-2.3.4 will apply.Added: January 2022TC-2.3.4
In instances, where an
approved person in onecapital market licensee moves to anothercapital market licensee and occupies the same position, the CBB will exercise its discretion on whether to grandfather such approved person from the required qualifications and competencies outlined in Appendix TC-1 into the newcapital market licensee . The grandfathering criteria used by the CBB will include a comparison of the scope and size of both positions. This will also apply in instances where an approved person in onecapital market licensee moves from one department to another within the samecapital market licensee .Added: January 2022TC-2.4 TC-2.4 Record Keeping
TC-2.4.1
A
capital market licensee must make and retain updated digital and/or manual records of:(a) The annual training plan for eachcontrolled function ;(b) Materials used to conduct in-house training courses;(c) List of participants attending such in-house training courses;(d) Results of evaluations conducted at the end of such training courses.(e) The criteria applied in assessing competence;(f) How and when the competence decision was arrived at; and(g) Record of CPD hours undertaken by eachapproved person .Added: January 2022TC-2.4.2
For purposes of Paragraph TC-2.4.1, the record keeping requirements apply to both current employees as well as to employees following termination of their services or employment with the
capital market licensee , for a minimum period of five years.Added: January 2022TC-2.4.3
A
capital market licensee must maintain records of its recruitment and appointment procedures forapproved persons for a minimum period of five years following termination of their services or employment with thecapital market licensee . Such procedures should be designed to adequately take into account proof of the candidates’ knowledge and skills and their previous activities and training.Added: January 2022TC-2.4.4
For purposes of Paragraph TC-2.4.3, the recruitment record keeping procedure should include, but is not limited to, the following:
(a) Results of the initial screening;(b) Results of any employment tests;(c) Results and details of any interviews conducted;(d) Background and references checks; and(e) Details of any professional qualifications.Added: January 2022Appendices
Appendix TC-1 Qualifications and Core Competencies of Controlled Functions
Role Core Competencies How can competence be demonstrated? Board Member/Director Board members should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Sufficient experience to demonstrate sound business decision-making;(c) Good understanding of the industry; and(d) Good understanding of the industry’s regulatory environment.Competence could be demonstrated by: (a) An academic degree from a university at bachelor level or higher and/or a relevant professional qualification.; and(b) A minimum experience of 5 years in business and/or government/quasi government of which at least 3 years at a senior management levelOR(c) A minimum experience of 7 years in businessChief Executive or General Manager and their Deputies The Chief Executive or General Manager and their Deputies should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of the licensee’s business and the wider industry;(c) Good understanding of the industry’s regulatory environment;(d) Relevant experience and qualifications associated with such executive responsibilities; and(e) The necessary technical, professional and leadership capabilities which qualify him for this position.Competence could be demonstrated by: (a) A minimum experience of 5 years at senior management level in the financial industry and/or capital market industry; and(b) An academic degree from a university at bachelors level or higher preferably MBA, Masters in finance/accounting/economics/management or in any other subject related to financial services industry and/or capital market industry in addition to professional qualification(s) related to financial services industry and/or capital market industry.Chief Financial Officer/ Head of Finance The Chief Financial Officer/ Head of Finance should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Good understanding of business and the wider industry;(c) Strong understanding of the industry’s regulatory environment;(d) The relevant experience and qualifications to fulfil his responsibilities; and(e) Strong knowledge and understanding of international accounting standards and how they are applied in a business context, including IFRS.The Chief Financial Officer/ Head of Finance should have: (a) A minimum of 5 years of practical experience in a finance function; and(b) An academic degree from a university at bachelor level related to banking/finance/accounting/economics or higher in addition to professional qualification(s) related to banking/finance/accounting/economics and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) Affiliate, The Association of Chartered Certified Accountants (ACCA);(ii) Certified Public Accountant (CPA), The Association of International Certified Professional Accountants (AICPA);(iii) AAOIFI’s Certified Islamic Professional Accountant (CIPA);(iv) Associate Chartered Accountant (ACA), Institute of Chartered Accountants in England and Wales (ICAEW); and/or(v) Chartered Financial Analyst (CFA).Heads of other Functions Heads of other Functions should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Strong understanding of the licensee’s business and the broader industry;(c) Good understanding of the industry’s regulatory environment; and(d) The relevant experience and qualifications to fulfil their responsibilities.Competence could be demonstrated by: (a) A minimum of 5 years of practical experience in a comparable function within the financial services and/or capital market industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) and other relevant certification(s) specific to this role. Such certifications may, depending on the function being fulfilled, include but are not limited to:(i) Chartered Financial Analyst (CFA);(ii) Certificate in Securities and Financial Derivatives;(iii) Certificate in Investment Management;(iv) Professional Certification in Accounting;(v) Equivalent certificates or qualifications from the BIBF or other institutions; and/or(vi) Securities Markets Regulation CertificationCompliance Officer A Compliance Officer should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) An appropriate level of experience and standing to demonstrate suitable independence from other functions within the capital market Licensee;(c) Good understanding of the industry; and(d) Strong understanding of the industry’s applicable regulatory requirements.Competence could be demonstrated by: (a) A minimum of 2 years of relevant experience in compliance in the financial services and capital markets industry, financial institution or financial market regulator;(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to accounting or finance and other relevant certification(s) specific to this role. Such professional qualifications may include but are not limited to:(i) International Diploma in Governance, Risk and Compliance, International Compliance Association (ICA); and(ii) International Advanced Certificate in Compliance and Financial Crime offered by the International Compliance Association; and/or(iii) Any other relevant professional certification deemed suitable by the CBB.Money Laundering Reporting Officer (MLRO) The MLRO should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) Understand the business of the licensee and how the Anti Money Laundering framework applies to it;(c) Demonstrate independence from the staff of the licensee who deal directly with customer; and(d) A thorough knowledge of the financial industry and be familiar with relevant FATF and applicable domestic regulatory requirements.Competency could be demonstrated by: (a) An MLRO should have a minimum experience of 2 years in anti-money laundering or anti-money laundering related role in the financial services industry.(b) The MLRO should have:(i) A degree from a university at bachelor level or higher or a relevant professional qualification; and(ii) Relevant certification(s) specific to this role. Such certifications may include but are not limited to:1) Certified Anti-Money Laundering Specialist Examination, Association of Certified Anti-Money Laundering (ACAMS);2) Diploma in Anti-Money Laundering, International Compliance Association (ICA);3) International Diploma in Financial Crime Prevention, International Compliance Association (ICA); and/or4) International Advanced Certificate in Compliance and Financial Crime, International Compliance Association (ICA).Registered Representative The Registered Representative should have thorough understanding of: (a) Regulatory framework and applicable rules and regulations;(b) Ethical framework, duties towards customers and employer, disclosure of conflict of interest, preservation of confidential information, best trade execution practice and separation of customer and proprietary trading.(c) Understanding of exchange trading and clearing process including order types and limits, margin requirements, execution strategies and trading cost.Competency could be demonstrated by: (a) A Registered Representative should have a minimum experience of 2 years in financial markets. Relevant experience in capital markets is preferred; and(b) A degree from a university at bachelor level or higher or a relevant professional qualification in accounting, finance, banking, or management. Such certification may include but are not limited to:(i) General Securities Representatives Qualification (Series -7) by Bahrain Institute of Banking and Finance; or(ii) Securities Market Regulation Certification Program (Series-79) by Bahrain Institute of Banking and Finance; or(iii) Trading and Financial Market Analysis by Bahrain Institute of Banking and Finance; or(iv) Certificate in Securities; or(v) Certificate in Securities and Financial Derivatives; or(vi) Certificate in investment management; or(vii) Chartered Financial Analyst (CFA); or(viii) Any other equivalent certification acceptable to the CBBChief Risk Officer/Head of Risk Management The Head of Risk Management should have: (a) A clear understanding of the role and responsibilities associated with this position;(b) An appropriate level of experience and standing to demonstrate suitable independence from other functions within the licensee;(c) Good understanding of the licensee’s business and the wider industry;(d) Good understanding of the industry’s regulatory environment; and(e) The relevant experience and qualifications to fulfill his responsibilities.Competency could be demonstrated by: (a) A minimum of 5 years of practical experience in a financial institution of which at least 2 years in a risk management position within the financial market industry; and(b) An academic degree from a university at bachelor level or higher in addition to professional qualification(s) related to risk management, accounting, finance or other relevant certification(s) specific to this role. Such certifications may include but are not limited to:(i) Associate in Risk Management (ARM), The Institutes;(ii) International Diploma in Risk Management, Institute of Risk Management qualifications (IRM);(iii) Financial Risk Manager (FRM), Global Association of Risk Professionals (GARP); and/or(iv) Professional Risk Manager (PRM), Professional Risk Managers’ International Association (PRIMA).(v) Any other equivalent certification acceptable to the CBBThe Chief Information Officer/Chief Technology Officer/ or Head of Information Technology The Chief Information Officer/Chief Technology Officer/ or Head of Information Technology should have: (a) A clear understanding of the management information system used by the licensee;(b) Ability to:(i) effectively manage, monitor and control all aspects of the information system operations;(ii) Ability to critically assess information system related issues and be able to come up with appropriate solutions to tackle the problem.
Strong technical and architectural skills along with knowledge of system analysis and design.Competency could be demonstrated by: (a) A minimum experience of 5 years in the field of information technology.;(b) An academic degree from a university at bachelor level or higher in information technology;, and(c) Relevant professional qualification/certification information technology specific to this role.Chief Information Security Office (CISO) The Chief Information Security Officer should have: (a) A clear understanding of the responsibility and accountability for effectively managing cyber-security threats;(b) Ability to implement and oversee a cyber-security program and enforce a cyber security policy; and(c) The relevant experience and qualification to fulfill his responsibilites.Competency could be demonstrated by: (a) A minimum experience of 5 years in the field of information technology and cyber security.;(b) An academic degree from a university at bachelor level or higher or relevant professional qualification in information technology, information security, cyber security or related field and(c) Relevant certification related to cyber/information security, data privacy or other relevant certification(s) specific to this role.Added: January 2022Appendix TC-2 Appendix TC-2 Professional Bodies and Qualifications
Relevant Professional Bodies
(a) Any accredited university(b) Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)(c) American Institute of Certified Public Accountants (AICPA), USA(d) Association Cambiste Internationale (ACI), France(e) Association of Certified Anti-Money Laundering Specialists (ACAMS), USA(f) Association of Chartered Certified Accountants (ACCA), UK(g) Bahrain Institute of Banking and Finance (BIBF), Bahrain(h) Chartered Financial Analyst (CFA) Institute , USA(i) Chartered Alternative Investment Analyst Association (CAIA)(j) Chartered Institute for Securities & Investment (CISI)(k) Institute of Chartered Accountants in England and Wales (ICAEW), UK(l) Institute of Internal Auditors (IIA);(m) Institute of Risk Management qualifications (IRM)(n) Insurance Institute of India (I.I.I), India(o) International Compliance Association (ICA), UK(p) Life Office Management Association (LOMA), USA(q) Society of Actuaries, USA(r) The Chartered Insurance Institute (CII), UK(s) The Institute and Faculty of Actuaries, UK(t) The Institutes, USAAdded: January 2022