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  • MAE-5 MAE-5 Matters Requiring Approval of CBB

    • MAE-5.1 MAE-5.1 Control of Substantial Shareholding in Licensed Exchanges

      • MAE-5.1.1

        No person shall enter into any agreement to acquire shares in a licensed exchange by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of the licensed exchange without first obtaining the approval of the CBB to enter into the agreement.

      • MAE-5.1.2

        In Paragraph MAE-5.1.1 "substantial shareholder" means a person who alone or together with his associates:

        (a) Holds not less than 5% of the shares in the licensed exchange; or
        (b) Is in a position to control not less than 5% of the votes in the licensed exchange.

      • MAE-5.1.3

        In this Section:

        (a) A person holds a share if:
        (i) He is deemed to have an interest in that share in terms of the Commercial Companies Law (CCL); or
        (ii) He otherwise has a legal or a beneficial interest in that share, except such interest as is to be disregarded in the terms of the CCL;
        (b) A reference to the control of a percentage of the votes in a licensed exchange shall be construed as a reference to the control, whether direct or indirect, of that percentage of the total number of votes that might be cast in a general meeting of the licensed exchange; and
        (c) An associate of another person means in respect of individuals, a direct family member and in the case of a company, means the company is bound to follow the directives of the substantial shareholder, or the company in which the substantial shareholder has 20% of the votes of that company.
        Amended: April 2016
        Amended: April 2013

      • MAE-5.1.4

        The CBB may grant its approval referred to in Paragraphs MAE-5.1.1 or MAE-5.1.2 subject to such conditions or restrictions as the CBB may deem fit.

        Amended: April 2016

    • MAE-5.2 MAE-5.2 Application and Criteria for Approval to Acquire Substantial Shareholding

      • MAE-5.2.1

        Any person applying for approval under MAE-5.1.1 shall submit to the CBB a written application that sets out:

        (a) The name of the applicant;
        (b) In the case where the applicant is a company:
        (i) Its place of incorporation;
        (ii) Its substantial shareholders;
        (iii) Its directors and chief executive officer; and
        (iv) Its principal business.
        (c) In the case where the applicant is a natural person:
        (i) His nationality;
        (ii) His principal occupation; and
        (iii) His directorships;
        (d) All the companies in which the applicant has a substantial shareholding;
        (e) The percentage of shareholding and voting power that the applicant has in the licensed exchange;
        (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed exchange;
        (g) The reasons for making the application;
        (h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;
        (i) Whether the applicant will seek representation on the board of directors of the licensed exchange; and
        (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper person for the purposes of Paragraph MAE-5.2.3 (a).
        Amended: April 2013

      • MAE-5.2.2

        The CBB may require the applicant to furnish it with such information or documents as the CBB considers necessary in relation to the application and the applicant shall furnish such additional information or documents as required by the CBB.

      • MAE-5.2.3

        The CBB may approve an application made under Paragraph MAE-5.2.1 of this Module if the CBB is satisfied that:

        (a) The applicant is a fit and proper person to be a substantial shareholder;
        (b) Having regard to the applicant's likely influence, the licensed exchange will or will continue to conduct its business prudently and in compliance with the provisions of this Module; and
        (c) It would not be contrary to the interests of the public to do so.
        Amended: April 2016

      • MAE-5.2.4

        The CBB may, for the purposes of securing compliance with Paragraphs MAE-5.1.1 or MAE-5.2.2, or any condition or restriction imposed under Paragraph MAE-5.2.5, by notice in writing direct the transfer or disposal of all or any of the shares of a licensed exchange in which a substantial shareholder of the licensed exchange has an interest.

      • MAE-5.2.5

        Until a person to whom a direction has been issued under Paragraph MAE-5.2.4 transfers or disposes of the shares which are subject to the direction and notwithstanding anything to the contrary, the Memorandum or Articles of Association or other constituent document or documents of the licensed exchange:

        (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
        (b) The licensed exchange shall not offer or issue any shares (whether by way of rights, bonus, share dividend or otherwise) in respect of the shares which are the subject of the direction; and
        (c) Except in liquidation of the licensed exchange, the licensed exchange shall not make any payment (whether by way of cash dividend, dividend in kind or otherwise) in respect of the shares which are the subject of the direction.

      • MAE-5.2.6

        Any issue of shares by a licensed exchange in contravention of Paragraph MAE-5.2.5 (b) shall be deemed to be null and void, and a person to whom a direction has been issued under Paragraph MAE-5.2.4 shall immediately return those shares to the licensed exchange, upon which the licensed exchange shall return to the person any payment received from him in respect of those shares.

      • MAE-5.2.7

        Any payment made by a licensed exchange in contravention of Paragraph MAE-5.2.5 (c) shall be deemed to be null and void, and a person to whom a direction has been issued under Paragraph MAE-5.2.4 shall immediately return the payment he has received to the licensed exchange.

      • MAE-5.2.8

        The CBB may exempt:

        (a) Any person or class of persons; or
        (b) Any class or description of shares or interests in shares;

        from the requirement under paragraph MAE-5.2.1 or MAE-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB.

    • MAE-5.3 MAE-5.3 Authorisation of Approved Persons

      • Prior Approval Requirements and Process

        Contents:

        •    MAE-5.3.1
        •    MAE-5.3.2
        •    MAE-5.3.3
        •    MAE-5.3.4
        •    MAE-5.3.5
        •    MAE-5.3.6
        •    MAE-5.3.7

        • MAE-5.3.1

          Licensees must obtain the CBB's prior written approval for any person wishing to undertake a controlled function in a licensee. The approval from the CBB must be obtained prior to their appointment.

          Amended: April 2016
          Amended: April 2013

        • MAE-5.3.2

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

          (a) Board members;
          (b) Chief Executive or General Manager;
          (c) Head of function;
          (d) Compliance Officer; and
          (e) Money Laundering Reporting Officer (MLRO).
          Amended: April 2016
          Amended: April 2013

        • MAE-5.3.2A

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

          (a) Head of listing;
          (b) Head of trading;
          (c) Head of market control;
          (d) Head of member affairs;
          (e) Head of risk management; and
          (g) Head of other functions.
          Added: April 2016

        • MAE-5.3.2B

          Whether a person is head of function will depend on the nature, scale and complexity of the function and is not determined by the presence or absence of the word in their job title.

          Added: April 2016

        • MAE-5.3.2C

          Licensees must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. The segregation of responsibilities must ensure avoidance of any conflict of interest and maintain a Chinese Wall such critical controlled functions.

          Added: April 2016

        • MAE-5.3.3

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

          Amended: April 2013

        • MAE-5.3.4

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

          Amended: April 2016
          Amended: April 2013

        • MAE-5.3.5

          In accordance with Subparagraph MAE-5.3.2(d), every licensed exchange must appoint a compliance officer. The compliance officer is responsible for discharging the obligations of the licensee.

          Amended: April 2013

        • MAE-5.3.6

          In accordance with Paragraph MAE-5.3.5:

          (a) The Compliance Officer should be competent and knowledgeable regarding the CBB Law, rules and regulations, as well as the various applicable Volume 6 Modules;
          (b) The Compliance Officer shall: ;
          (i) Monitor the transactions undertaken by the member, its representatives, or participants;
          (ii) Identify disorderly transactions or conduct that may involve market abuse or disruption;
          (iii) Identify and monitor transactions undertaken by insiders dealing through or with the member;
          (iv) Identify any breach of CBB Law, rules and regulations; and
          (v) Identify any breach of the rules of the SRO.
          Added: April 2013

        • MAE-5.3.7

          The Compliance Officer shall on the identification of any breach referred to in Paragraph MAE-5.3.6(b), report such breach to the CBB without delay for the investigation and prosecution of market abuse and shall provide full assistance to the latter in investigating and prosecuting market abuse occurring on or through the licensed exchange.

          Amended: April 2013

        • MAE-5.3.7A

          The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in the Form 3, including previous experience, is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms MAE Forms of the CBB Rulebook.

          Added: April 2016

        • MAE-5.3.7B

          When the request for approved person status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake a controlled function is in relation to an existing licensee, the Form 3 must be marked for the attention of the Director, Capital Markets Supervision. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

          Amended: April 2018
          Added: April 2016

        • MAE-5.3.7C

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

          (a) Submitted to the CBB with a covering letter signed by an authorised representative of the licensee, seeking approval for the proposed controlled function;
          (b) Submitted in original form;
          (c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
          (d) Signed by an authorised representative of the licensee and all pages stamped on with the licensee's seal.
          Added: April 2016

        • MAE-5.3.7D

          For existing licensees applying for the appointment of a Board Director or the Chief Executive/General Manager, the authorised representative should be the Chairman of the Board or a Director signing on behalf of the Board. For all other controlled functions, the authorised representative should be the Chief Executive/General Manager.

          Added: April 2016

      • Fit and Proper Requirements

        • MAE-5.3.8

          Licensees seeking an approved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled function in question.

          Amended: April 2016
          Added: April 2013

        • MAE-5.3.8A

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

          (a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;
          (b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;
          (c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;
          (d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;
          (e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;
          (f) Must have personal integrity, good conduct and reputation;
          (g) Has appropriate professional and other qualifications for the controlled function in question, including qualifications such as the Securities Market Regulation Certification Programme (Series 7), the General Securities Representative Qualification (Series 79), and/or any other relevant examinations and qualifications recognised by the CBB that are appropriate to capital market functions, as the case may be. However the CBB reserves the right to impose a higher level of qualifications as it deems necessary; and
          (h) Has sufficient experience to perform the duties of the controlled function.
          Added: April 2016

        • MAE-5.3.8B

          In assessing the conditions prescribed in Rule MAE-5.3.8A, the CBB will take into account the criteria contained in Paragraph MAE-5.3.8C. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled function but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled function in one licensee may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger licensee.

          Added: April 2016

        • MAE-5.3.8C

          In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

          (a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
          (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
          (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
          (d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;
          (e) The contravention of any financial services legislation;
          (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
          (g) Dismissal or a request to resign from any office or employment;
          (h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
          (i) The extent to which the person has been truthful and open with supervisors; and
          (j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.
          Added: April 2016

        • MAE-5.3.8D

          With respect to Paragraph MAE-5.3.8C, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

          Added: April 2016

        • MAE-5.3.9

          Approved persons undertaking a controlled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking a controlled function and shall be subject, among all accepted market conducts, to the insider trading rules.

          Added: April 2013

        • MAE-5.3.10

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

          (a) A person has breached any fiduciary obligations to the licensed exchange or terms of employment;
          (b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensed exchange; and
          (c) A person has failed to declare a personal interest that has a material impact in terms of the person's relationship with the licensed exchange in general, and interest in holding any listed securities or futures contracts in particular.
          Added: April 2013

        • MAE-5.3.11

          [This Paragraph was deleted in April 2016.]

          Deleted: April 2016
          Added: April 2013

        • MAE-5.3.12

          [This Paragraph was deleted in April 2016.]

          Deleted: April 2016
          Added: April 2013

        • MAE-5.3.13

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

          Amended: April 2016
          Added: April 2013

      • Assessment of Application

        Contents:

        •    MAE-5.3.14
        •    MAE-5.3.15

        • MAE-5.3.14

          The CBB shall review and assess the application for approved person status to ensure that it satisfies all the conditions required in Paragraph MAE-5.3.8A and the criteria outlined in Paragraph MAE-5.3.8C.

          Amended: April 2016
          Added: April 2013

        • MAE-5.3.14A

          For purposes of Paragraph MAE-5.3.14, licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.

          Added: April 2016

        • MAE-5.3.15

          The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph MAE-5.3.8A and the criteria outlined in Paragraph MAE-5.3.8C. A notice of such refusal is issued by registered mail to the licensee concerned, setting out the basis for the decision.

          Amended: April 2016
          Added: April 2013

      • Appeal Process

        • MAE-5.3.16

          Licensees or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved person status. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from submitting the appeal.

          Amended: April 2016
          Added: April 2013

        • MAE-5.3.17

          Where notification of the CBB's decision to grant a person approved person status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, licensees or the nominated approved persons may appeal to the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from the date of submitting the appeal.

          Amended: April 2016
          Amended: April 2013

      • Notification Requirements and Process

        Contents:

        •    MAE-5.3.18
        •    MAE-5.3.19
        •    MAE-5.3.20

        • MAE-5.3.18

          A licensed exchange must immediately notify the CBB when an approved person ceases to hold a controlled function together with an explanation as to the reasons why. In such cases, their approved person status is automatically withdrawn by the CBB.

          Amended: April 2013

        • MAE-5.3.18A

          Licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved person.

          Added: April 2016

        • MAE-5.3.19

          The licensed exchange shall provide for the composition and duties of the board of directors or any committee of a licensed exchange after obtaining CBB approval.

          Amended: April 2013

        • MAE-5.3.20

          In this section "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a member of a licensed exchange.

          Amended: April 2013

      • Amendment of Authorisation

        • MAE-5.3.21

          A licensed exchange must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

          Added: April 2013

        • MAE-5.3.22

          In such instances, a new application should be completed and submitted to the CBB. Note that a person may be considered 'fit and proper' for one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another licensed exchange, the first licensee should notify the CBB of that person's departure, and the new licensee should submit a request for approval under this Section.

          Added: April 2013

      • Cancellation of Authorisation and Power of CBB to Remove Approved Person

        • MAE-5.3.23

          Where the CBB is satisfied that an approved person:

          (a) Has wilfully contravened or wilfully caused that licensed exchange to contravene the CBB Law, rules and regulations;
          (b) Has without reasonable excuse, failed to ensure compliance by the licensed exchange, or a person associated with that licensee with the CBB Law rules and regulations;
          (c) Has failed to discharge the duties or functions of his office or employment;
          (d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;
          (e) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;

          the CBB may if it thinks it is necessary in the interests of or for the protection of investors, by notice in writing direct that a licensee remove the approved person from his office or employment, and that licensee shall comply with such notice.

          Added: April 2013

        • MAE-5.3.24

          Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an approved person has failed to discharge the duties or functions of his office or employment for the purposes of paragraph MAE-5.3.23 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing, after consultation with the licensed exchange and/or licensed clearing house, as the case may be.

          Added: April 2013

        • MAE-5.3.25

          Subject to Paragraph MAE-5.3.26, the CBB shall not direct a licensee to remove an approved person from his office or employment without giving the approved person an opportunity to be heard.

          Added: April 2013

        • MAE-5.3.26

          The CBB may direct a licensee to remove an approved person from his office or employment under Paragraph MAE-5.3.23 on any of the following grounds, without giving the approved person an opportunity to be heard:

          (a) The approved person is an undischarged bankrupt whether in Bahrain or elsewhere;
          (b) The approved person has been convicted whether in Bahrain or elsewhere, of an offence:
          (i) Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and
          (ii) Punishable with imprisonment for a term of 3 months or more.
          Added: April 2013

      • Criteria to Determine Failure to Discharge Duties or Functions by Approved Persons

        • MAE-5.3.27

          The CBB may, in determining whether approved persons have taken reasonable steps to discharge their duties, have regard to whether or not the approved person:

          (a) Ensured the proper functioning of the licensed exchange;
          (b) Ensured the compliance of the licensed exchange with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides its regulated activities;
          (c) Set out and ensured compliance with written policies on all operational areas of the licensed exchange, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed exchange in general;
          (d) Identified, monitored and addressed the risks associated with the business of the licensed exchange;
          (e) Ensured that the regulated activities of the licensed exchange were subject to adequate internal audit;
          (f) Oversaw the financial undertakings or exposure of thelicensed exchange to risks of any nature by setting out proper delegation limits and risk management controls; and
          (g) Ensured:
          (i) That the licensed exchange maintained written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and provided relevant procedures; and
          (ii) That every report, return or statement submitted by the licensed exchange to the CBB was complete and accurate.
          Added: April 2013

    • MAE-5.4 MAE-5.4 Business Transfer

      • MAE-5.4.1

        A licensed exchange or licensed market operator shall not transfer all or any part of its business to others without the prior written approval from the CBB.

        Amended: April 2016

      • MAE-5.4.2

        A licensed exchange or licensed market operator who desires to transfer all or any part of its business referred to in Paragraph MAE-5.4.1 shall make an application to the CBB in Form 8.

      • MAE-5.4.3

        A Transfer of Business application shall be published by the CBB in the Official Gazette and also in 2 daily newspapers, one in Arabic and one in English in Bahrain. The publication should include a call to the concerned parties to submit any objections to the CBB within 3 months from the date of publication.

      • MAE-5.4.4

        The CBB shall consider the objections referred to in the preceding Paragraph before taking any action on the application for transfer.

      • MAE-5.4.5

        The CBB shall determine the procedure of processing applications for business transfer.

        Amended: July 2016

      • MAE-5.4.6

        The following shall apply in order to approve a business transfer:

        (a) The business, subject of transfer, shall not be prohibited by the CBB;
        (b) The Transfer of Business shall not cause damages to the interests of the licensed exchange or licensed market operator's users;
        (c) The transferee must be licensed to carry out the business in the place to which it is to be transferred;
        (d) The transferee company should fulfil all the eligibility criteria laid down in this module to operate as a licensed exchange; and
        (e) The CBB must be satisfied that the Transfer of Business is appropriate under relevant regulations issued in this respect.

      • MAE-5.4.7

        The CBB shall give its approval to a Transfer of Business if the application satisfies the requirements set in Paragraph MAE-5.4.6. Such approval may be given subject to any conditions deemed appropriate by the CBB.

        Amended: July 2016

      • MAE-5.4.8

        The decision of the CBB on a Transfer of Business shall be published in the Official Gazette as well as in 2 daily newspapers, one in Arabic and one in English in Bahrain. The decision shall be effective from the date set therein.

      • MAE-5.4.9

        An applicant whose application has been turned down or who faces restrictions regarding the transfer of his business may appeal to a competent court within 30 days from the date of publishing of such decision on the Official Gazette.