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 othercapital market service providers will mainly be governed by the CBB Law and the relevant volume of the CBB Rulebook and enforcement actions thereunder include:1) Formal warnings;2) [This Subparagraph was deleted in July 2021].3) Financial penalties as per Article 129 of the CBB Law;4) Placing a licensee under administration as per Article 136 of the CBB Law;5) Cancellation or amendment of license as per Article 48 of the CBB Law;In addition to the above, the CBB may also resort to the following enforcement actions under the CBB Law:
(a)i. Cease and Desist Order
An order prohibiting members ofSROs or othercapital market service providers from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the finalinvestigation and/or enforcement proceedings as a permanent injunction.ii. Freezing Accounts
An order restricting asecurities orsecurities cash account of a member of anSRO or othercapital market service provider with the licensed exchanges, clearing houses, central depositories, banks, brokerage firms, etc. This measure generally will be used as an interim measure.iii. This Subparagraph was deleted in July 2021].iv. Private Warnings
In certain cases despite concerns about aperson 's conduct or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make theperson aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where theperson has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to lead to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.(b) Amendment or Revocation of License Under Article 48
The CBB may amend or revoke a license of a member of anSRO or othercapital market service provider , for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.(c) Imposing Restrictions under Article 128
The CBB may impose administrative restrictions upon members ofSROs or othercapital market service providers , in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.(d) Imposing Financial Penalties under Article 129 of the CBB Law
The CBB may impose financial penalties as an enforcement action for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.(e) Appointing an Observer Member on the Board of the Licensee under Article 130
If imposing administrative restrictions prove to be futile, then the CBB may appoint an observer member on the Board of Directors of the member of anSRO or othercapital market service provider , for a specified period.(f) Suspension of a Licensee under Article 131
The CBB may suspend a member of anSRO or othercapital market service provider , who contravenes the provisions of the CBB Law, rules and regulations and terms and conditions of a license for a period not exceeding 12 months.(g) Public Censure under Article 132
The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.(h) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of offences which result in the violation of Articles 81 or 85 of the CBB Law, if members ofSROs or othercapital market service providers , are involved in such violations.(i) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.(j) Criminal Sanction under Article 168
Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."(k) Criminal Sanction under Article 169
Article 169 of the CBB Law states that "Without prejudice to any greater penalty stated under the Penal Code or any other law, a punishment by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, shall be imposed upon any official or employee of the licensee who acts or permitted an action in violation of Article (134) of this Decree, if he knows or should have known that the licensee is insolvent".(l) Criminal Sanction under Article 170
Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law: (1) Aperson shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Anyperson participates in such an offence shall be liable to the same penalty of the principal offender. (2) Aperson shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed any investigation carried out by the Central Bank or aninvestigator appointed by the Central Bank."(m) Criminal Sanction under Article 171
Article 171 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8), shall be liable to imprisonment and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty." This criminal sanction is applicable to members ofSROs or othercapital market service providers who violate Part 8 of the CBB Law.(n) Criminal Sanction under Article 172
Article 172 of the CBB Law states that "Any legalperson shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legalperson or anyperson who acts in such capacity."(o) Criminal Sanction under Article 163
Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or anyperson appointed by the Central Bank to conduct aninvestigation orinspection on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."(p) [This Subparagraph was deleted in July 2021].Amended: July 2021Disciplinary Action through Licensed Exchanges and Licensed Clearing Houses/Central Depositories (SROs)
MIE-3.6.4
SROs are required to establish a Disciplinary Committee for the purpose of deciding violations by the members or listed companies, or issuers ofSRO's business rules. A Disciplinary Committee shall decide on cases relating to any violation of laws, rules and regulations which regulate the licensed exchanges. Enforcement measures that can be imposed on members ofSROs and listed companies/issuers through the Disciplinary Committee of licensed exchanges may include:i. Warning;ii. Confiscation of all or part of the member's deposits with the licensed exchange;iii. Suspension of trading or clearing rights;iv. Suspension of membership rights;v. Cancellation of membership;vi. Financial penalties, fines and charges.The
CMSD may advise licensed exchanges, licensed clearing houses and central depositories within their scope of their respective powers, to take appropriate enforcement actions. These actions can be in addition to other enforcement actions which are taken by the CBB itself.Listed Companies
MIE-3.6.5
Listed companies are required to meet their obligations as per the CBB Law, rules and regulations and these obligations include the dissemination of information, filing of returns, notifications and periodic reports. For example, listed companies are required to monitor insiders' transactions and report to the
CMSD regarding any suspected case of abuse of inside information and file reports regarding insiders' transactions. If a listed company or an issuer fails to comply with or contravenes the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, the CBB may initiate appropriate enforcement actions. Such enforcement actions may include, but not be limited to:(a)i. Formal warning:
An order issuing a formal warning may be issued to a listed company in order to clearly set out the CBB's concerns to a listed company to ensure that the matter is viewed by the recipient with appropriate seriousness.ii. Cease and Desist Order:
An order prohibiting a listed company from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the finalinvestigation and/or enforcement proceedings as a permanent injunction.iii. [This Subparagraph was deleted in July 2021].iv. Private Warnings
In certain cases despite concerns about aperson 's behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make theperson aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where theperson has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to head to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.(b) Restraining offering of securities using powers under Article 81:
The CBB may direct a listed company or any other prospective issuer not to access the market for an offer or issue ofsecurities in the Kingdom for a certain period or until certain conditions are satisfied.(c) Cancellation of listing and suspension of trading:
Article 87 (a) of the CBB Law states that: "The Central Bank may decide to cancel the listing of anysecurities that contravene the requirements of the Listing Rules, or to suspend the trading of any listedsecurities facing exceptional circumstances that the Central Bank considers as sufficient grounds for the suspension of thesecurities .
The cancellation of listing or the suspension of trading shall be decided by the Governor."(d) Imposing restrictions under Article 128
The CBB may impose administrative restrictions upon listed companies in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.(e) Public censure under Article 132
The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.(f) Criminal sanction under Article 163
Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or anyperson appointed by the Central Bank to conduct aninvestigation orinspection on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."(g) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of violation of Articles 81 or 85 of the CBB Law.(h) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.(i) Criminal Sanction under Article 168
Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, aperson who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."(j) Criminal Sanction under Article 170
Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law:(1) Aperson shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Anyperson participates in such an offence shall be liable to the same penalty of the principal offender.(2) Aperson shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed anyinvestigation carried out by the Central Bank or aninvestigator appointed by the Central Bank."(k) Criminal Sanction under Article 172
Article 172 of the CBB Law states that "Any legalperson shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legalperson or anyperson who acts in such capacity."(l) Imposing Financial Penalties under Article 129 of the CBB Law
The CBB may impose financial penalties as an enforcement action for contravention of the CBB Law, rules and regulations.Amended: July 2021Licensed Exchanges, Clearing Houses and Central Depositories
MIE-3.6.6
As an
SRO , the licensed exchanges, clearing houses and depositories are required to:a) Actively perform market surveillance as a front-line regulator;b) Take disciplinary action for contraventions by members and listed companies/issuers through theSRO's Disciplinary Action Committee;c) Identify potential cases of unlawful transactions and take preventative actions;d) Report suspected cases of market abuse and manipulation to the CBB;e) Implement enforcement actions determined by the CBB.When an
SRO contravenes the provisions of the CBB Law, rules and regulations, as CBB licensees, the enforcement action applicable to all othercapital market service providers of the CBB will also be applicable to the licensed exchanges, clearing houses and central depositories. In addition to these enforcement actions, theseSROs will be subject to other enforcement actions stated in the Markets & Exchanges Module and the Clearing, Settlement & Central Depository Module. Such enforcement measures include:a) Cancellation or amendment of license;b) [This Subparagraph has been deleted in July 2021];c) Removal of officers from his office or employment;d) Financial penalties as per Article 129 of the CBB Law.Amended: July 2021Users of Capital Market Service Providers and Persons other than Licensees and Listed Companies
MIE-3.6.7
Users of
capital market service providers and other persons who are neither licensees nor listed companies must also not engage in conduct that would cause harm to capital markets or that would contravene the CBB Law, its regulations, resolutions or directives, or any other applicable laws relating to capital markets.(a) [This Subparagraph has been deleted in July 2021].(b) [This Subparagraph has been deleted in July 2021].(c) [This Subparagraph has been deleted in July 2021].Where the CBB discovers, suspects or identifies such conduct, it may take the following actions or measures:i. Warning:
A warning may be sent to relevantpersons clearly setting out the CBB's concerns and requesting them to stop or cease the particular conduct.
In certain cases, despite concerns about the behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to take formal action. This is consistent with the CBB’s risk-based approach. The purpose of the warning is to make the relevant persons aware of the issue and to permit the taking of full and immediate remedial action.ii. [This Subparagraph has been deleted in July 2021].iii. Restricting Accounts/Activities:
Instructing licensed exchanges, clearing houses, central depositories, brokerage firms, etc. to restrict the accounts of relevantpersons who fail to comply with the laws, regulations and rules relating to capital markets or to restrict such persons from conducting transactions or engaging in activities that are relevant to the accounts.iv. [This Subparagraph has been deleted in July 2021].v. [This Subparagraph has been deleted in July 2021].iv. [This Subparagraph has been deleted in July 2021].In addition to the above, the CBB may initiate proceedings as follows:(b) Criminal Sanction under Article 166
The CBB may initiate proceedings for imposing criminal sanctions in respect of offences which result in the violation of Articles 81 or 85 of the CBB Law relating to issuing securities and preparing prospectuses.(c) Criminal Sanction under Article 167
The CBB may initiate proceedings for imposing criminal sanctions in respect of insider trading offences which result in the violation of Article 100 of the CBB Law.(d) Criminal Sanction under Article 168
The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences that result in a violation of Article 106 of the CBB Law.(e) Criminal Sanction under Article 170
The CBB may initiate proceedings for imposing criminal sanctions in respect of any forging, concealing or destroying of any document relating to a currentinvestigation or aninvestigation likely to be conducted in accordance with Chapter (1) of Part 9 of the CBB Law.(f) Criminal Sanction under Article 171
The CBB may initiate proceedings in relation to Article 171 of the CBB Law concerning anyperson who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8) of the CBB Law.(g) Criminal Sanction under Article 172
The CBB may initiate proceedings in relation to Article 172 of the CBB Law concerning any legalperson , where any of the crimes stated in the CBB Law were committed in its name or for its account or by means of any of its methods and which resulted from the action or gross negligence or approval or under the cover of any member of the board of directors or management or any other official of that legalperson or anyperson who acts in such capacity.(h) [This Subparagraph has been deleted in July 2021].(i) [This Subparagraph has been deleted in July 2021].Amended: July 2021Restriction of Capital Market Service Providers, Auditors and Other Experts
MIE-3.6.8
The CBB may in respect of auditors of CBB licensees, listed companies, issuers of
securities or any other market participant, restrict the duties of such auditors and other experts, where the auditors and other experts failed to perform their duties specified under the CBB Law, rules and regulations. Any decision of the CBB in this regard may apply for a specified period or indefinite period until the CBB is satisfied that theperson will in future comply with the duties and responsibilities in question.MIE-3.6.9
The CBB may also restrict the activities that may be undertaken by
capital market service providers , lead managers, share registrars, underwriters and other professionals involved in capital market activities.