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  • 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 other persons 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 2021

        • MIE-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 the person 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 situated persons 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 relevant person to act promptly in taking the necessary remedial action agreed with its regulators or SROs, to deal with the CBB's concerns. If the market participant or relevant person 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 the person 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 2021

      • Publicity

        • 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 2021

        • MIE-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 2021

        • MIE-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 2021

        • MIE-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 2021

        • MIE-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 2021

      • Senior Management Responsibility

        • MIE-3.1.13

          The CBB is committed to ensuring that senior managers of CBB licensees, listed companies, issuers of securities and other persons 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 a capital market service provider's, or other person'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 a capital market service provider, or any other person 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 the person 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 2021

        • MIE-3.1.16

          In those cases where enforcement action is not taken and/or a formal investigation is not commenced, the CBB will expect the capital market service provider or other person 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 2021

      • Late 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 2021

    • MIE-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 final investigation report, the CMSD 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 the CMSD, interim findings of the investigation initiated by the CMSD, 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 2021

      • MIE-3.2.4

        In cases where the CMSD takes interim measures, usually the CMSD will provide a post-decisional opportunity of a hearing to the persons affected by such interim actions within a reasonable period of time, as expeditiously as possible. The CMSD may, after taking into account the submissions made by the persons concerned both during the hearing and in writing, modify or reconfirm or cancel or reverse the enforcement action, as may be deemed fit by the CBB Enforcement Decision Review Committee (EDRC).

        Amended: July 2021

      • MIE-3.2.5

        Interim enforcement actions shall be decided by the CMSD, based on the available information, facts and evidence, including the preliminary investigation report or interim investigation report, or any other information, data, report, facts or evidence available to the CMSD. Interim enforcement actions can also be decided by the Enforcement Decisions Review Committee on a reference made to it by the CMSD.

        Amended: July 2021

      • MIE-3.2.6

        Interim enforcement actions shall be applicable without prejudice to any further investigation and enforcement actions that may be decided by the CMSD or the Enforcement Decisions Review Committee.

        Amended: July 2021

      • Procedure

        • 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 the CMSD conducting the examination or investigation, or the appointed investigator that an interim enforcement action is warranted, he shall submit the facts and evidence of the case to the CMSD, along with the proposal for interim enforcement action.

          Amended: July 2021

        • MIE-3.2.9

          If the CMSD, during the course of its normal supervisory functions, finds that interim enforcement action is warranted, the CMSD 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, including capital market service providers, investors or any other relevant parties.

          Amended: July 2021

        • MIE-3.2.11

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.2.12

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.2.13

          [This Paragraph has been deleted in July 2021]

          Deleted: July 2021

        • MIE-3.2.14

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.2.15

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.2.16

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.2.17

          Interim enforcement actions shall be applicable without prejudice to any further enforcement actions that may be decided by the CMSD or EDRC, and to any further investigation and enforcement proceedings and actions.

          Amended: July 2021

    • MIE-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 the investigators 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 during investigation and also in the form of findings of the CMSD and when there is clear-cut evidence available, even without a formal investigation.

        Amended: July 2021

      • MIE-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 of SROs, listed companies, issuers of securities, any other capital 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 2021

      • MIE-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 2021

        • MIE-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 2021

        • MIE-3.4.3

          The EDRC may take the assistance of the CMSD staff, but they shall be separate from the staff who were involved in conducting the investigations and making recommendations to the EDRC. The EDRC may also decide to take the assistance of SROs and outside experts, if warranted.

          Amended: July 2021

      • Scope of Work of the EDC

        • MIE-3.4.4

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.5

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • The Operation of the EDC

        • EDC Meetings and Composition of Panels

          • MIE-3.4.6

            [This Paragraph has been deleted in July 2021].

            Deleted: July 2021

          • MIE-3.4.7

            [This Paragraph has been deleted in July 2021].

            Deleted: July 2021

      • Conflicts of Interest

        • MIE-3.4.8

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.9

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.10

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • Procedure: General

        • MIE-3.4.11

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.12

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.13

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.14

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • Procedure: Warning Notices

        • MIE-3.4.15

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.16

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.17

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • Procedure: Representations

        • MIE-3.4.18

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.19

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.20

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.21

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.22

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.23

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.24

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • Procedure: Enforcement orders

        • MIE-3.4.25

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • Default Procedures

        • MIE-3.4.26

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.27

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.28

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.29

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.30

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.31

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.32

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.33

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • Court Proceedings

        • MIE-3.4.34

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

      • Review Proceedings

        • MIE-3.4.35

          Where an enforcement order is issued by the EDRC, a party may appeal such decision to the Appeals Committee of the CBB.

          Amended: July 2021

        • MIE-3.4.36

          The Appeals Committee shall be as constituted by a Directive of the Governor.

          Amended: July 2021

        • MIE-3.4.37

          [This Paragraph has been deleted in July 2021].

          Deleted: July 2021

        • MIE-3.4.38

          The scope of the Appeals Committee shall include but not be limited to determining:

          (a) Whether the EDRC followed the correct procedures of the EDRC;
          (b) Whether the penalty imposed by the EDRC 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 2021

    • MIE-3.5 MIE-3.5 Settlement

      • Introduction

        • MIE-3.5.1

          (a) A person 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 an enforcement order recording the CBB's decision to take that action. Where, however, the person subject to enforcement action agrees not to contest the content of a proposed enforcement order, the decision to issue that order will be taken by the EDRC on matters which are before the EDRC, or by the CMSD on matters which have not been referred to or being considered by the EDRC.
          Amended: July 2021

      • Procedure: General

        • MIE-3.5.2

          A person who is or may be subject to enforcement action may wish to discuss the proposed action with the CMSD through settlement discussions. The CMSD shall refer the matter to the EDRC if the matter is subject to proceedings before the EDRC and decide on its own on other matters.

          Amended: July 2021

        • MIE-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 an enforcement order, or even after referral of the matter to the Court. But the CMSD 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 an enforcement 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 2021

        • MIE-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 2021

        • MIE-3.5.4

          The CBB and the person concerned may agree that neither the CBB nor the person 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 2021

      • Procedure: Participation of Decision-Makers in Discussions

        • MIE-3.5.5

          (a) The EDRC may, but need not, participate in the discussions exploring possible settlement.
          (b) If the EDRC has not been involved in the discussions, but an agreement has been reached, they may ask to meet the relevant CMSD staff or the person concerned, in order to assist in the consideration of the proposed settlement.
          Amended: July 2021

        • MIE-3.5.6

          The terms of any proposed settlement:

          (a) Will be put in writing and be agreed by CMSD staff and the person concerned;
          (b) May refer to a draft of the proposed warning notices (if any) setting out the facts of the matter and the CMSD's conclusions;
          (c) May, depending upon the stage in the enforcement process at which agreement is reached, include an agreement by the person 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 the CMSD any secondary material which might undermine the CMSD decision to give the warning notice;
          (ii) waive and not exercise any rights under the CBB Law or otherwise to make representations to the CBB in respect of a warning notice;
          (iii) not object to the giving of an enforcement order before the expiry of the 30 day period after the giving of a warning notice;
          (iv) not dispute with the CMSD the facts and matters set out in a warning notice, or enforcement 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 2021

        • MIE-3.5.7

          The EDRC may:

          (a) Accept the proposed settlement by deciding to give an enforcement order based on the terms of the settlement; or
          (b) Decline the proposed settlement; or
          (c) Recommend other terms.
          Amended: July 2021

        • MIE-3.5.8

          (a) In a matter where the CMSD is engaged in settlement discussions and the EDRC subsequently declines the proposed settlement, they may invite CMSD staff and the person concerned to enter into further discussions to try to achieve an outcome the EDRC would be prepared to endorse.
          (b) However, if the matter for settlement has been submitted to the EDRC for consideration, it will be for the EDRC to decide:
          (i) Whether to extend the period for representations in response to a warning notice; or
          (ii) If representations have been made in response to a warning notice, whether to proceed to give an enforcement order.
          Amended: July 2021

        • MIE-3.5.9

          The CBB and other parties may agree to mediation as a way of facilitating settlement in appropriate cases.

          Amended: July 2021

    • MIE-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 other capital 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;
          6) Taking enforcement action(s) directly against Approved Persons under Article 65 of the CBB Law;
          7) Criminal sanctions under Articles 163, 169, 170 and 171 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 of SROs or other capital 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 final investigation and/or enforcement proceedings as a permanent injunction.
          ii. Freezing Accounts

          An order restricting a securities or securities cash account of a member of an SRO or other capital 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 a person'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 the person 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 the person 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 an SRO or other capital 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 of SROs or other capital 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 an SRO or other capital market service provider, for a specified period.
          (f) Suspension of a Licensee under Article 131

          The CBB may suspend a member of an SRO or other capital 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 of SROs or other capital 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, 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."
          (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) A person 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 current investigation or an investigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Any person participates in such an offence shall be liable to the same penalty of the principal offender. (2) A person 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 an investigator 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, a person 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 of SROs or other capital 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 legal person 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 legal person or any person 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 any person appointed by the Central Bank to conduct an investigation or inspection 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 2021

      • Disciplinary 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 of SRO'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 of SROs 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 final investigation 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 a person'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 the person 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 the person 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 of securities 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 any securities that contravene the requirements of the Listing Rules, or to suspend the trading of any listed securities facing exceptional circumstances that the Central Bank considers as sufficient grounds for the suspension of the securities.

          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 any person appointed by the Central Bank to conduct an investigation or inspection 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, 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."
          (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) A person 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 current investigation or an investigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Any person participates in such an offence shall be liable to the same penalty of the principal offender.
          (2) A person 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 an investigator appointed by the Central Bank."
          (k) Criminal Sanction under Article 172

          Article 172 of the CBB Law states that "Any legal person 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 legal person or any person 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 2021

      • Licensed 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 the SRO'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 other capital 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, these SROs 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 2021

      • Users 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 relevant persons 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 relevant persons 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 current investigation or an investigation 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 any person 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 legal person, 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 legal person or any person 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 2021

      • Restriction 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 the person 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.