CSD-1.2 CSD-1.2 Licensing Process and Timeline
A person may apply to the CBB to be:(a) A
licensed clearing house(including the function of central depository); and(b) A licensed central depository.Amended: July 2016
Unless otherwise approved, a person licensed as a
clearing houseor central depository, or either a licensed clearing houseor licensed central depositoryis required to be registered as a joint stock company in Bahrain in accordance with the Commercial Companies Law (CCL) 2001.
An application for a license to operate as a
clearing houseor central depositoryunder Article 39 of the CBB Law shall be made in Form 1 and shall be lodged with the CBB, together with the following:(a) Form 3 (Application for Approved Person Status) and Form 4 (Information on Shareholders and Subsidiaries);(b) Any relevant annexe and information specified in those forms;(c) A non-refundable prescribed application fee of BD100;(d) A business plan setting forth the internal controlling and risk management procedures of the enterprise; furthermore, the business plan must contain a budgeted accounting plan for the first three business years;(e) The memorandum and articles of association of the company or any of its constituent documents;(f) Three-year operational plans including the organisational structure, communication facilities and training programmes;(g) Draft business rules in respect of its operations as a licensed clearing house or central depository; and(h) The details of the proposed authorised and paid-up capital.Amended: April 2013
The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.
Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner.
The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.
The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.
The CBB may grant an 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.Amended: April 2016
An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Industry and Commerce unless it receives the final approval from the CBB.Added: April 2016
At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with rule CSD-1.2.3.
The CBB may call for further information if it is of the opinion that the information provided is incomplete or needs to be substantiated.
Where a clearing house applies to be licensed as a clearing house including the function of a
central depository, the licensed clearing houseshall apply for a single license as a clearing house and central depository, but must comply with the requirements of both a clearing house and central depository.
clearing houseor central depositoryshall confirm that, for the duration of the license, it shall satisfy all conditions and restrictions that may be imposed on it.
General Criteria Applicable to a Clearing House and Central Depository
The applicant must also demonstrate to the satisfaction of the CBB that it has:(a) The financial resources, and the management and human resources with appropriate experience, necessary for the operation of a
clearing houseor central depository;(b) Made arrangements for the proper supervision of all transactions effected through the clearing houseor central depository,so as to ensure compliance with the clearing houseor central depositoryrules;(c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the recordsof transactions effected through the clearing houseor central depository;(d) IT infrastructure and necessary systems to perform its function and comply with its obligations, including business continuity and disaster recovery systems;(e) Procedures in place for compliance with obligations in respect of Anti-Money Laundering and the Combating of Financial Crime;(f) Rules and procedures in place for the disciplining of its members and depository participants;(g) The ability to avoid and manage any conflicts of interest;(h) The ability to maintain confidentiality as required in this Module.
Criteria for Granting License of a Clearing House
The CBB may license a
personas a clearing houseif:(a) The CBB is satisfied that the establishment of a clearing houseto be operated by a personwill;(i) Contribute towards developing the financial sector and enhance confidence therein; and(ii) Protect the interests of investors;(b) The CBB is satisfied that the person, having applied to be a licensed clearing houseunder this Module, is able/will be able to comply with the obligations or requirements imposed on the clearing house;and(c) If the CBB shall be satisfied that the rules of the applicant make satisfactory provision for:(i) The size and structure, or proposed size and structure, of the clearing facility;(ii) The nature of the services provided, or to be provided, by the clearing facility;(iii) The nature of the transactions cleared, or to be cleared, by the clearing facility;(iv) The clearing and settlement of transactions and for the management of trade and settlement risk;(v) The market where the transactions cleared through the clearing facility are traded or are to be traded;(vi) The nature of the investors or members, or proposed investors or members, who may use or have an interest in the clearing facility;(vii) Whether the personoperating the clearing facility is otherwise regulated by the CBB Law or any other law;(viii) Whether the clearing facility has the ability to perform its function as a central counterparty;(ix) Whether the clearing facility takes on counterparty risks, through novation or otherwise, in the clearing or settlementof transactions;(x) The parties who may be affected in the event that the clearing facility runs into difficulties;(xi) The interests of the public;(xii) The ability to meet international standards and related protocols including IOSCO;(xiii) The ability to meet the International Securities Identification Number (ISIN) Standards and other international standards and protocols; and(xix) Any other circumstances that the CBB may deem relevant.
This Paragraph has been left blank.Added: April 2013
Criteria for Granting License of a Central Depository
The CBB may license a
personas a central depositoryif:(a) The CBB is satisfied that the establishment of a central depositoryto be operated by a personwill;(i) Contribute towards developing the financial sector and enhance confidence therein; and(ii) Protect the interests of investors; and(b) The CBB is satisfied that the person, having applied to be a licensed central depositoryunder this Module, is able/will be able to comply with the obligations or requirements imposed on the central depository.(c) The CBB shall be satisfied that the rules of the applicant make satisfactory provision:(i) With respect to the conditions under which securities may be deposited with, held by, withdrawn from, or transferred within, the central depository;(ii) For the holding of securities deposited with the central depository or its nominee company;(iii) For the processing of dealings in deposited securities;(iv) For facilitating the settlement of deposited securities;(v) For the protection of the interests of depositors and the protection and control of information on deposited securities and dealings therein;(vi) For the monitoring of compliance with, and for the enforcement of, the rules of the central depository;(vii)With respect to the maintenance of a policy or policies of insurance, and the establishment and maintenance of compensation funds, for the purpose of settling claims by depositors against the central depository, its nominee companies and depository participants; and(viii) Adequate regulation and supervision of its depository participants.
Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.