Part A
Collective Investment Undertakings
CIU — Collective Investment Undertakings
CIU-A CIU-A Introduction
CIU-A.1 CIU-A.1 Purpose
Executive Summary
CIU-A.1.1
Module CIU (Collective Investment Undertakings) sets out the Central Bank of Bahrain's regulatory framework governing
collective investment undertakings ('CIUs') . The Module sets out requirements relevant to allCIUs that are domiciled in the Kingdom of Bahrain ('Bahrain domiciled CIUs '). It also prescribes requirements relating toCIUs that are domiciled in an overseas jurisdiction ('overseas domiciled CIUs ') and offered to investors in the Kingdom of Bahrain.CIU-A.1.2
In summary,
CIUs are defined in Section CIU-B.3 as undertakings the sole object of which is the collective investment of capital raised from the public and which operates on the basis of risk-spreading; and theholdings of which are re-purchased or redeemed out of those undertakings' assets. The definition ofCIUs further specifies the various legal forms that aCIU may take.CIU-A.1.3
The definition of
CIUs includesclosed-ended funds as well asopen-ended funds , and includes funds formed under statute (as investment companies), as well as contract law and trust law (respectively, as common funds and as unit trusts).CIU-A.1.4
Module CIU distinguishes between
CIUs that are classed asretail CIUs , which may be offered to all types of investors, andexpert CIUs , which may only be offered toexpert investors (as defined in this Module).Retail CIUs are subject to more restrictive investment rules, aimed at protecting the general retail investor.CIU-A.1.5
Module CIU also defines a category of
exempt CIU .CIUs that fall under this category are mostly exempt from the requirements contained in this Module; however, they may only be offered to a very restricted investor base ('accredited investors ').CIU-A.1.6
Bahrain domiciled retail CIUs andBahrain domiciled expert CIUs must be authorised by the CBB prior to being offered to investors (whether resident in the Kingdom of Bahrain or outside).Bahrain domiciled exempt CIUs need only register with the CBB before being offered to investors.CIU-A.1.7
Overseas domiciled retail CIUs andoverseas domiciled expert CIUs also require CBB authorisation before being offered to investors in the Kingdom of Bahrain. However, thoseCIUs domiciled in a recognised jurisdiction are only required to register with the CBB, rather than seek authorisation, on the basis that they have already been adequately vetted in their home jurisdiction.Overseas domiciled exempt CIUs are only required to register with the CBB, regardless of their home jurisdiction.CIU-A.1.8
Module CIU replaces previous circulars and other regulatory instruments relating to
CIUs , issued over a number of years (see Rule CIU-A.2.3). It updates these previous requirements, which were effectively geared towards the retail investor, and provides for a greater range ofCIUs to be offered, through its provisions regardingexpert CIUs andexempt CIUs .Legal Basis
CIU-A.1.9
Module CIU constitutes the CBB's Directive relating to
CIUs , and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). Module CIU is applicable to allCBB licensees that arerelevant persons , as defined in Section CIU-B.2.CIU-A.1.10
The contents of this Module are also included in Regulations, to be issued by the CBB, by virtue of which they are applicable to all those who are
relevant persons but are notCBB licensees .CIU-A.1.11
Thus, persons that are not
CBB licensees (because they are not undertaking regulated services within Bahrain), yet are stillrelevant persons (because their activities relate to aCIU falling within the scope of this Module), are also subject to the requirements of this Module, with respect to theCIU(s) concerned.CIU-A.1.12
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
CIU-A.2 CIU-A.2 Module History
Evolution of Module
CIU-A.2.1
This Module was first issued with an April 2007 date, as part of the initial release of the contents of Volume 6 (Capital Markets); it was given an effective date of 1 June 2007, with a one-year transition for existing
CIUs (see Chapter CIU-7). Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made. Chapter UG-3 provides further details on Rulebook maintenance and version control.CIU-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes CIU-B.5 July 2007 Amendment of definition of expert and accredited investors who are individuals, to focus on financial assets held (the same as for companies etc). CIU-2.1 July 2007 Amendment of Paragraph CIU-2.1.4 to reflect above. CIU-3.1 July 2007 Addition to Rule CIU-3.1.1 to restrict promotion by Bahrain domiciled exempt CIUs . Amendment of Paragraph CIU-3.1.4 to reflect changes to CIU-B.5 above.CIU-4.2 July 2007 Corrections in Paragraphs CIU-4.2.7 and CIU-4.2.10; amendment of Paragraph CIU-4.2.5 to reflect changes to CIU-B.5 above. CIU-5.2 July 2007 Amendment of Sub-paragraph CIU-5.1.2(b). CIU-7.1 July 2007 Expansion of Rule CIU-7.1.3 regarding first reporting date. Superseded requirements
CIU-A.2.3
This Module supersedes the following circulars or other regulatory instruments:
Circular/ other references Provision Subject Regulation with respect to the General supervision, Operation and Marketing of Collective Investment CIUs. BMA Circular No. OG/356/92 dated 18th November, 1992. Collective Investment Undertakings. Principles of Supervision, Operations and Marketing with respect to Collective Investment CIUs .BMA Circular No. OG/318/95 dated 4th November, 1995. Collective Investment Undertakings. Collective investment CIUs (Amendment to item I.B of the regulation).BMA Circular No. OG/121/99 dated 19th April, 1999. Collective Investment Undertakings. Guidelines on Advertising and Public Announcements for Collective Investment CIUs .BMA Circular No. BC/23/99 dated 27th October, 1999. Collective Investment Undertakings. Quarterly information Returns for Collective Investment CIUs. BMA Circular No. BC/13/2001 dated 9th December, 2001. Collective Investment Undertakings. Information to be Contained in the CIU Particulars Document. BMA Circular No. BC/05/2002 dated 1st June, 2002. Collective Investment Undertakings. CIU-B CIU-B Scope of Application
CIU-B.1 CIU-B.1 Application
CIU-B.1.1
Module CIU applies to all
relevant persons , with respect tocollective investment undertakings ('CIUs') that are:(i) Domiciled in the Kingdom of Bahrain (irrespective of the jurisdiction in which they are offered); and(ii) Domiciled in an overseas jurisdiction, and offered to investors resident in Bahrain.CIU-B.1.2
The terms
relevant persons ,collective investment undertakings ,Bahrain domiciled CIUs andoverseas domiciled CIUs are as defined in Sections CIU-B.2, CIU-B.3 and CIU-B.4 respectively.CIU-B.1.3
No person may establish a
Bahrain domiciled CIU , unless theCIU is either authorised or registered, as required under this Module.CIU-B.1.4
No person may offer
CIU holdings to investors resident in the Kingdom of Bahrain, unless theCIU concerned is either authorised or registered, as required under this Module.CIU-B.1.5
For the purposes of this Module, 'offering'
CIU holdings means, by way of business, soliciting investors to purchaseholdings , by whatever means. (These may include, but are not limited to, advertising in print or other media, or use of the telephone, face-to-face contact, e-mail or internet.) Such activity would be viewed as offeringholdings to investors resident in Bahrain, where it could reasonably be viewed as addressed to Bahrain residents (e.g. advertising in Bahrain print media, or addressing communications to Bahrain residents).CIU-B.1.6
For the purposes of this Module,
holdings mean the unit of measurement of the beneficial interest ofparticipants in aCIU , by whatever name it is called (including 'units' and, in the case of investment trusts or companies, shares). Eachholding (which may be in fractions of aholding ) represents a right to the assets of theCIU .CIU-B.2 CIU-B.2 Relevant Persons
CIU-B.2.1
A
relevant person , for the purpose of Module CIU, is any person:(a) Acting as theoperator ,manager ,administrator , orcustodian of aCIU subject to this Module; or(b) OfferingCIU holdings to investors resident within the Kingdom of Bahrain.CIU-B.2.2
CIUs subject to this Module are those defined in Rule CIU-B.1.1, namely,CIUs that are:(i) Domiciled in the Kingdom of Bahrain (irrespective of the jurisdiction in which they are offered); and(ii) Domiciled in an overseas jurisdiction, and offered to investors resident in Bahrain.CIU-B.2.3
Note that
relevant persons undertaking in Bahrain the activity of anoperator ,manager ,administrator orcustodian , are also required to hold an appropriate CBB license, in addition to complying with the requirements contained in this Module. These licensing requirements can be found in CBB Rulebook Volumes 1, 2 and 4 (which deal, respectively, withconventional bank licensees ,Islamic bank licensees , andinvestment firm licensees ).CIU-B.2.4
Conversely,
relevant persons undertaking outside Bahrain the activity of anoperator ,manager ,administrator orcustodian are not required to hold a CBB license, in addition to complying with the requirements contained in this Module. However, to be authorised,Bahrain domiciled retail CIUs andBahrain domiciled expert CIUs must satisfy the administration and custody requirements prescribed in this Module (see Section CIU-1.4).CIU-B.2.5
The activity of offering
CIU holdings to investors resident in Bahrain is a regulated activity (that of dealing infinancial instruments ). As such, it requires the appropriate CBB license to be held (see CBB Rulebook Volumes 1, 2 and 4). It is therefore not possible to offerCIU holdings to investors resident in Bahrain, on a 'cross-border' basis from outside Bahrain. Where an overseasoperator of aCIU wishes to offer anoverseas domiciled CIU to investors resident in Bahrain, they must themselves hold the appropriate CBB license or appoint an appropriateCBB licensee as their distributor — see also Rule CIU-4.1.5.CIU-B.3 CIU-B.3 Collective Investment Undertakings ('CIUs')
CIU-B.3.1
Collective investment undertakings ('CIUs') are undertakings:(i) The sole object of which is the collective investment of capital raised from the public infinancial instruments or other assets and which operates on the basis of risk-spreading; and(ii) Theholdings of which are re-purchased or redeemed, directly or indirectly, out of those undertakings' assets.CIU-B.3.2
In the case of
CIUs whoseholdings are listed and traded on a stock exchange (such as aclosed-ended fund ), actions taken by theCIU to align the stock exchange value of itsholdings and its net asset value is taken as equivalent to the repurchase or redemption specified in Rule CIU-B.3.1(ii). The definition thus recognises bothopen-ended funds andclosed-ended funds : unit trusts, investment trusts, mutual funds, SICAV and collective investment schemes are all examples ofCIUs . As further specified in Section CIU-B.4,CIUs may be constituted under contract law (as common funds managed by management companies); trust law (as unit trusts); or under statute (as investment companies).CIU-B.3.3
Closed-ended funds areCIUs with a limited number ofholdings . Where the fund vehicle is a company,holdings can take the form of shares. Newholdings are rarely issued after the fund is launched and are not normally redeemable until the fund liquidates. Typically an investor can acquire or dispose ofholdings in aclosed-ended fund by buying or selling them on a secondary market, from a market intermediary or other investor, rather than by dealing with theCIU itself.CIU-B.3.4
The following arrangements do not fall within the definition given in Rule CIU-B.3.1 above:
(a) A contract of insurance, insurance linked investment products or investments managed as part of a takaful contract of insurance;(b) Unrestricted or restricted investment accounts offered byIslamic bank licensees ;(c) Unilateral arrangements to hold or manage assets on a discretionary basis;(d) Arrangements entirely between bodies corporate who are members of the same group, or entirely between family members;(e) Pension, annuity and other employee benefit products, organised and managed for the benefit of employees or for another corporate body, which are governed by separate laws of the Kingdom of Bahrain (e.g. GOSI);(f) Structured products;(g) Cash savings schemes; and(h) Special Purpose Vehicles used to issue debt securities.CIU-B.3.5
Where a person is in any doubt as to whether a particular product or structure falls within the definition of a
CIU given in Rule CIU-B.3.1 above, they must refer the matter to the CBB.CIU-B.3.6
Where a
CIU is structured as a series of separate offerings, such as an umbrella fund with a series of sub-funds, whereby each is a separate offering and financially independent of others established within the same legal vehicle, each sub-fund shall be treated as a separateCIU .CIU-B.3.7
The consequence of Rule CIU-B.3.5 above is that each sub-fund, or separate offering, requires a separate authorisation or registration (as the case may be), and the
operator of theCIU in question — together with the directors or trustees of theCIU (as appropriate) — are required to ensure that each sub-fund or separate offering complies with the applicable rules prescribed in this Module.CIU-B.4 CIU-B.4 Bahrain and Overseas Domiciled CIUs
CIU-B.4.1
Bahrain domiciled CIUs are undertakings where the legal form of theCIU is established under the laws of the Kingdom of Bahrain.CIU-B.4.2
Bahrain domiciled CIUs may be constituted either as:(a) Common funds, established under the law of contract;(b) Trusts, established under trust law; or(c) Investment companies, established under company law.CIU-B.4.3
Bahrain domiciled retail CIUs andBahrain domiciled expert CIUs must be authorised by the CBB prior to being established.Bahrain domiciled exempt CIUs are required only to register with the CBB (see Section CIU-3.2). Definitions ofretail CIUs ,expert CIUs andexempt CIUs are provided in Section CIU-B.5.CIU-B.4.4
Overseas domiciled CIUs are undertakings that fall outside the definition provided in Rule CIU-B.4.1.CIU-B.4.5
Overseas domiciled CIUs are only impacted by the requirements contained in this Module, if they are offered to investors resident in the Kingdom of Bahrain (see Section CIU-B.1).CIU-B.4.6
Overseas domiciled CIUs must be authorised by the CBB prior to being offered to investors resident in the Kingdom of Bahrain, unless they are domiciled in arecognised jurisdiction , in which case they are only require to register with the CBB (see Section CIU-B.6).Overseas domiciled exempt CIUs , regardless of the jurisdiction in which they are domiciled, are required only to register with the CBB (see Section CIU-B.6).CIU-B.5 CIU-B.5 Categories of CIUs
Retail CIUs
CIU-B.5.1
Retail CIUs areCIUs that may be offered to all types of investors.CIU-B.5.2
The requirements in this Module are framed such that
retail CIUs are subject to relatively detailed requirements, including restrictions on the types offinancial instruments or other assets that may be held in theCIU , in order to limit risks to the general investor.Expert CIUs
CIU-B.5.3
Expert CIUs areCIUs that may be offered only toexpert investors , and impose a minimum initial investment of USD 10,000 (or equivalent in foreign currency).CIU-B.5.4
Expert CIUs are subject to less restrictive requirements thanretail CIUs : specifically,expert CIUs have greater investment flexibility, notably in terms of asset classes and risk concentration limits. They therefore potentially offer higher risks and are therefore only suitable forexpert investors , who are better able to assess those risks than less sophisticated investors.CIU-B.5.5
The minimum initial investment requirement specified in Rule CIU-B.5.3 means that the first payment made by an investor into the
CIU must be at least USD 10,000 (or its equivalent in foreign currency). Subsequent investments may be for smaller amounts.CIU-B.5.6
Expert investors are:(a) Individuals holding financial assets (either singly or jointly with their spouse) of USD 100,000 or more;(b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 100,000; or(c) Governments, supranational organisations, central banks or other national monetary authorities, local authorities and state organisations.Amended: July 2007Exempt CIUs
CIU-B.5.7
Exempt CIUs are largely unregulatedCIUs that may be offered only toaccredited investors , and impose a minimum initial investment of USD 100,000 (or equivalent in foreign currency).CIU-B.5.8
Exempt CIUs are only regulated to the extent that they must register with the CBB prior to being offered to investors; may only be offered toaccredited investors ; and are subject only to high-level disclosure and reporting requirements. They are not subject to any restrictions on their investment policies, as a result of which they may exhibit high risk characteristics, such as high levels of leverage and the taking of large speculative positions. Because of this,exempt CIUs may only be offered to a highly restricted investor base (i.e. those defined asaccredited investors ).CIU-B.5.9
The minimum initial investment requirement specificed in Rule CIU-B.5.7 means that the first payment made by an investor into the
CIU must be at least USD 100,000 (or its equivalent in foreign currency). Subsequent investments may be for smaller amounts.CIU-B.5.10
Accredited investors are:(a) Individuals holding financial assets (either singly or jointly with their spouse) of USD 1,000,000 or more;(b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 1,000,000; or(c) Governments, supranational organisations, central banks or other national monetary authorities, and state organisations whose main activity is to invest infinancial instruments (such as state pension funds).Amended: July 2007CIU-B.5.11
Note that the definition of
accredited investors , compared to that ofexpert investors , not only imposes higher liquid asset thresholds, but also prevents local authorities, as well as state organisations whose main activity is not related to investing infinancial instruments , from investing inexempt funds . Investors that satisfy the definition ofaccredited investor also satisfy the definition ofexpert investor .CIU-B.6 CIU-B.6 Recognised Jurisdictions
CIU-B.6.1
Overseas domiciled retail CIUs andoverseas domiciled expert CIUs included in the CBB's list of recognized jurisdictions (as defined in Rule CIU-B.6.3) are required only to register with the CBB, rather than be authorised, prior to their being offered to investors resident in the Kingdom of Bahrain.CIU-B.6.2
Overseas domiciled CIUs that are not included in the CBB's list ofrecognised jurisdictions are required to seek authorisation from the CBB prior to their being offered within the Kingdom of Bahrain.Exempt CIUs , regardless of their jurisdiction of domicile, are required only to be registered with CBB, prior to their being offered within the Kingdom of Bahrain.CIU-B.6.3
Recognised jurisdictions for the purposes of this Module are:Jurisdiction Fund Type Australia A retail fund established and registered under the Managed Investment CIU provisions of the Corporations Act (Chapter 5 C) 2001 where the Australian Securities and Investments Commission ('ASIC') has approved the constitution of the CIU. Bermuda An "investment fund" authorized by the Bermuda Monetary Authority as defined under section 3 of the Investment Funds Act 2006 Canada A mutual fund which has been authorised by any of the 13 respective Canadian provincial regulatory authorities in accordance with National Instrument 81-101 and National Instrument 81-102 issued by the Canadian Securities Administrators (CSA). Cayman Islands A mutual fund that is licensed by the Cayman Islands Monetary Authority under the Mutual Funds Law (2003 Revision) and the Mutual Funds (Amendment) Regulations 2006. European Economic Area (see list below) A UCITS compliant fund or CIU, authorised by the relevant EEA State's regulator as a UCITS fund or CIU. Other GCC countries (see list below) Any fund incorporated in another GCC member state, authorised and supervised by the central bank or other appropriate regulatory authority, to a standard equivalent to those in this Module. Guernsey Any authorised CIU (within the meaning of the Collective Investment CIUs (Class A) Rules 2002, as amended by the Collective Investment CIUs (Class A) Rules 2000 (Amendment) Rules 2003), managed in and authorised under the law of Guernsey. Ireland The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above): non-UCIT funds licensed by the Financial Regulator under the Investment Funds, Companies and Miscellaneous Provisions Act 2005. Isle of Man Any CIU which is an authorised CIU within the meaning of the Financial Supervision Act 1988 (an Act of Tynwald) (as last amended by the Corporate Service Providers Act 2000), where the CIU is managed in and authorised under the law of the Isle of Man. Jersey Any CIU which is a recognised fund within the meaning of the Collective Investment Funds (Recognised Funds) (Rules) (Jersey) Order 2003, managed in and authorised under the law of Jersey. Luxembourg The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above): (a) Undertaking for Collective Investments (UCIs) as registered under Part II of the Law of 1988 Relating to Undertakings for Collective Investment; and (b) Funds registered under the Law Of 13th February, 2007 Relating To Specialised Investment Funds. New Zealand A unit trust authorised under the Unit Trusts Act 1960 and in accordance with the interpretation of section 2 of that act. Singapore A collective investment CIU authorised by the Monetary Authority of Singapore under section 286 of the Securities and Futures Act, and whose units may be offered to the general public. South Africa A collective investment CIU which is registered with the Financial Services Board under the Collective Investment CIUs Control Act (Act 45 of 2002) of 2002 ("CISCA"). Switzerland A securities fund which corresponds to a UCITs fund in accordance with the Swiss Investment Fund Act and where the manager is licensed by the Swiss Federal Banking Commission. United Kingdom The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above): (a) Unit trust CIUs authorised under section 243 of the Financial Services and Markets Act 2000 (FSMA), authorised open ended investment companies incorporated by virtue of regulations made under section 262 of FSMA in respect of which an authorisation order is in force; and(b) Authorised Qualified Investor CIUs whether in the form of a unit trust or an investment company with variable capital.United States of America A collective investment CIU registered under the Investment Company Act of 1940, which has also registered the offering of its securities under the Securities Act of 1933 and where the registration statement has become effective in accordance with the Securities and Exchange Commission's Regulations and the Operator is registered with the SEC. EEA Member States are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom GCC Member States (besides Bahrain) are Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. CIU-1 CIU-1 Bahrain Domiciled Retail CIUs
CIU-1.1 CIU-1.1 Authorisation
Authorisation Requirement
CIU-1.1.1
Bahrain domiciled retail CIUs must be authorised by the CBB prior to being offered to investors.CIU-1.1.2
An application for authorisation may only be made by one of the following:
(a) Theoperator of theCIU ; or(b) The directors or trustees of theCIU (as appropriate).CIU-1.1.3
An applicant may appoint a representative — such as the
CIU's proposedadministrator /custodian , or a law firm or professional consultancy — to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the authorisation process, when seeking clarification of any issues.CIU-1.1.4
An application for authorisation under Rule CIU-1.1.1 involving an overseas
operator will only be considered if:(a) The overseasoperator is duly authorised to operate similarCIUs in its home jurisdiction and is supervised by an overseas financial services authority acceptable to the CBB; and(b) The overseasoperator has identified an appropriate institution licensed by the CBB, with which it would enter into service agreements in order to satisfy the administration and custody requirements contained in Rule CIU-1.4.9.Authorisation Process
CIU-1.1.5
An application for authorisation under Rule CIU-1.1.1 must be made using a Form CIU(A) (Application for Authorisation of a CIU), submitted under a formal cover letter signed by two authorised signatories of the applicant, together with all supporting documentation requested.
CIU-1.1.6
The application for authorisation must identify an individual, for approval by CBB as an
approved person , in their capacity as the person responsible for theCIU . This person must be:(a) An officer of aCBB licensee ;(b) Resident in Bahrain; and(c) An individual capable of being contacted by the CBB by post, telephone, fax and/or e-mail.CIU-1.1.7
The CBB will acknowledge applications made under Rule CIU-1.1.5 within 7 calendar days of receipt and provide formal feedback on the application within 21 calendar days of receipt. This feedback will confirm whether the application is complete, or whether further information is required.
CIU-1.1.8
Should the application be deemed complete, then a final decision on the application will be issued within 30 calendar days of its receipt by the CBB. Should further information be required, then the applicant has 90 calendar days from the date of the CBB's feedback in which to complete the application, failing which the application will be cancelled by the CBB and a new one will need to be submitted. If all outstanding information is submitted and the CBB confirms the application to be complete, then the CBB will take a final decision within 30 calendar days of the CBB's confirmation that the application is complete.
Granting or Refusal of Authorisation
CIU-1.1.9
To be granted authorisation, an applicant must demonstrate compliance with the applicable requirements of this Module. Should an authorisation application be granted, the CBB will notify the applicant in writing of the fact. The authorisation may be subject to additional conditions being met.
CIU-1.1.10
The CBB may refuse to grant authorisation if in its opinion:
(a) The requirements of this Module are not met;(b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potential investors.CIU-1.1.11
Where the CBB proposes to refuse an application for authorisation, it must give the applicant written notice to that effect. Applicants have 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.
Fees Payable to CBB
CIU-1.1.12
Each application for authorisation made under Rule CIU-1.1.1 must be accompanied by a BD 100 processing fee. This fee is non-refundable.
CIU-1.1.13
Each
Bahrain domiciled retail CIU authorised by CBB is subject to an annual fee of BD 2,000. In the case of umbrella funds, each sub-fund is also charged BD 2,000 a year.CIU-1.1.14
Where the fee specified in Rule CIU-1.1.13 is paid, it exempts those
Bahrain domiciled retail CIU wishing to list on the Bahrain Stock Exchange ('BSE') from having to pay the listing fee normally levied by the BSE.Revocation of Authorisation
CIU-1.1.15
The CBB may revoke authorisation of a
Bahrain domiciled retail CIU if theCIU is not in operation within 6 months of the date of its authorisation.CIU-1.1.16
The CBB will normally only exempt a
CIU from the above 6 months rule if exceptional unforeseen circumstances have intervened and delaying the start of theCIU's operations would not prejudice the interests of potential investors (for instance, due to a sudden downturn in markets).CIU-1.1.17
The CBB may also revoke authorisation of a
Bahrain domiciled retail CIU if in its opinion:(a) Any of the applicable requirements contained in Module CIU are not met;(b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potential investors or theCIU's participants .CIU-1.1.18
Where the CBB proposes to cancel a
CIU's authorisation, it shall give theCIU concerned a written notice of its intention to do so and the reasons for such action. TheCIU has 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.CBB Powers
CIU-1.1.19
Part 9 of the CBB Law provides the CBB with various investigative and administrative powers to help discharge its regulatory and supervisory functions. These include the right to appoint investigators (Article 121), to assist overseas authorities (Article 122), to demand information (Article 123), and to compel access to premises or information (Article 124).
CIU-1.1.20
The CBB aims to achieve an open, constructive and cooperative relationship with those persons it regulates, but will resort to more formal enforcement powers where cooperation is not forthcoming.
CIU-1.2 CIU-1.2 The Instrument Constituting the CIU
CIU-1.2.1
Every
Bahrain domiciled retail CIU must have an instrument constituting theCIU , containing the information listed in Appendix A.CIU-1.2.2
The
operator of aBahrain domiciled retail CIU together with the directors of theCIU concerned (or trustees in the case of a trust arrangement) must ensure that the instrument constituting theCIU :(a) Does not contain information that is untrue, misleading, or unfairly prejudicial to the interests of theCIU participants ;(b) Does not contain any provisions that conflict with either CBB requirements or other laws and regulations, that may apply to the CIUoperator ,manager and otherrelevant persons to the CIU; and(c) Is not unfairly prejudicial to the interests of theCIU participants , either generally or to a particular class ofCIU participant .CIU-1.2.3
The
operator of aBahrain domiciled retail CIU together with the directors of theCIU concerned (or trustees in the case of a trust arrangement) must maintain the instrument constituting theCIU and make any necessary revisions in accordance with applicable legislation as and when required.CIU-1.2.4
Once authorised, prior approval must be obtained from the CBB for any subsequent material changes to the instrument. An updated copy of the instrument must be made available to the CBB within 30 calendar days of the revision being agreed.
CIU-1.2.5
The
operator of aBahrain domiciled retail CIU must make available for inspection, free of charge by any member of the public in an office in Bahrain, the following documents:(a) The instrument constituting theCIU ;(b) Theprospectus (both simplified and full);(c) All annual and half yearly reports issued to date by theCIU ; and(d) Copies of all CBB approvals, where required.CIU-1.3 CIU-1.3 Holdings
Rights
CIU-1.3.1
If a
Bahrain domiciled retail CIU has different classes ofholdings , the instrument constituting theCIU must clearly set out the different features of each class ofholding , including their respective rights; the allocation of expenses and fees; and how the proportion of the value of the assets of theCIU and the proportion of income available for allocation attributable to each such class is to be calculated.CIU-1.3.2
For the purposes of this Module, the interest of the
CIU participants in aBahrain domiciled retail CIU (by whatever name these interests are called), are deemed to consist ofholdings (including fractions of a holding), eachholding representing one undivided share of the entitlement in theCIU's assets.CIU-1.3.3
The instrument constituting the
CIU may provide for different classes ofholdings to be issued in an authorisedCIU and, in the case of umbrellaCIUs , may provide that different classes ofholdings may be issued for each sub-CIU .Issue, Purchase and Redemption
CIU-1.3.4
Holdings may not be created or issued unless the equivalent of the net issue price is paid into the assets of theBahrain domiciled retail CIU within the usual time limits. This shall not preclude the distribution of bonusholdings .CIU-1.3.5
CIU participants shall, in accordance with theCIU documents, either be:(a) Issued with registered certificates evidencing title toholdings , in a form and substance satisfactory to the CBB; or(b) Provided with written confirmation of entry in a register for suchholdings which shall be kept current and up-to-date at all times and shall contain full details of the names and addresses of theCIU participants , the number ofholdings held by them, and the date of acquisition of suchholdings .CIU-1.3.6
Holdings in aCIU (except for those inclosed-end funds ), must be redeemed, repurchased, reimbursed or repaid (as may be appropriate) at the request of theCIU participants and in accordance with theBahrain domiciled retail CIU's documents.CIU-1.3.7
Holdings may only be created, issued or sold, and redeemed, repurchased, reimbursed or repaid (as may be appropriate), in accordance with theprospectus constituting theBahrain domiciled retail CIU and at a price arrived at by dividing the net asset value of theCIU by the number ofholdings outstanding, after taking into account any charges as agreed in advance with the CBB.CIU-1.3.8
The
prospectus constituting theBahrain domiciled retail CIU must clearly state the frequency and basis for calculation of the issue price, repurchase price and other appropriate prices of theholdings in theCIU .CIU-1.4 CIU-1.4 Governance of the CIU
Governing Body Requirements
CIU-1.4.1
The governing body of a
Bahrain domiciled retail CIU (i.e. its directors or trustees, as appropriate) must comprise of persons with appropriate experience.CIU-1.4.2
Bahrain domiciled retail CIUs are in addition required to comply with any legal requirements imposed by virtue of the legal form used to create theCIU .CIU-1.4.3
The governing body of a
Bahrain domiciled retail CIU (i.e. its directors or trustees, as appropriate) must meet at least once every financial year (or more frequently if required by law), to review the performance and operations of theCIU .CIU-1.4.4
If the
CIU participants have a right to call for a general meeting ofCIU participants , the instrument constituting theCIU must describe how the meeting may be convened.CIU-1.4.5
If a general meeting of
CIU participants is called, theBahrain domiciled retail CIU must ensure that:(a) EachCIU participant is given at least 14 calendar days written notice of the meeting;(b) The notice specifies the place, day and time of the meeting; and(c) The terms and resolutions to be proposed, as well as a copy of the notice, are sent to theCIU's administrator /custodian and to the CBB.Governance Framework
CIU-1.4.6
Bahrain domiciled retail CIUs must maintain an adequate framework for the governance and operation of theCIU . This framework must seek to ensure that theCIU is governed effectively and in the interests of theCIU's participants .CIU-1.4.7
The main aim of the framework should be to ensure that when faced with a conflict, the
CIU respects all applicable rules and its contractual obligations from an objective perspective, withouth favouringCIU insiders (includingrelevant persons ) at the expense of the interests of theCIU's participants .CIU-1.4.8
The
CIU's directors (or trustees in the case of a trust) may not delegate their oversight responsibilities, although execution of operational functions may be outsourced to other entities.Relevant Persons
CIU-1.4.9
Bahrain domiciled retail CIUs must delegate the administration and safe-keeping of their assets to anadministrator /custodian (with the two functions either undertaken by a single institution or two separate institutions). These functions must be undertaken by one or moreCBB licensees acceptable to the CBB for the role. Theadministrator /custodian must:(a) Be independent of theCIU's operator ;(b) Act solely in the interests of theCIU's participants ;(c) Have sufficient financial and other resources in order to undertake properly its function asadministrator /custodian of theCIU ; and(d) Accept liability to theCIU and itsparticipants , for any loss suffered by them as a result of its unjustifiable failure to perform its obligations adequately.CIU-1.4.10
In applying Rule CIU-1.4.9 above, the CBB will allow 'hub and spoke' arrangements, whereby actual operations of the
administrator /custodian are undertaken outside of Bahrain, providing a suitably licensed office is maintained in Bahrain, through which the CBB can access theCIU's records, and providing the overseas operations are undertaken in reputable jurisdictions by regulated entities that belong to the same group as the Bahrainadministrator /custodian . Also, Rule CIU-1.4.9 does not prevent thecustodian from appointing sub-custodians, providing thecustodian retains ultimate responsibility for theCIU's assets, and providing suitable outsourcing arrangements have been put in place (equivalent to the standards applied by the CBB — see for instance Chapter OM-2 in Volume 1 of the CBB Rulebook.CIU-1.4.11
The
operator andmanager (if different) of aBahrain domiciled retail CIU must be acceptable to the CBB.CIU-1.4.12
In applying Rule CIU-1.4.11 above, the CBB will take into account an institution's financial soundness, relevant experience with respect to
CIUs , and regulatory track record. See also Chapter CIU-5.CIU-1.5 CIU-1.5 Prospectus Requirements
Prospectus
CIU-1.5.1
Every
Bahrain domiciled retail CIU authorised under Section CIU-1.1 must publish aprospectus containing (at a minimum) the information set out in Appendix B.CIU-1.5.2
The
CIU's directors (or trustees in the case of a trust) must declare that theprospectus :a) Does not contain information that is untrue, misleading, or is unfairly prejudicial to the interests of theCIU participants generally or to theparticipants of other classes of instruments issued by theCIU ; andb) Does not contain any provision that conflicts with any rule in this Rulebook, or other legal or regulatory requirements that apply to theCIU or otherrelevant persons connected to theCIU .CIU-1.5.3
The instrument constituting the
Bahrain domiciled retail CIU (i.e. theCIU's rules or instruments of incorporation — see also Section CIU-1.2) must form an integral part of theprospectus and must be annexed to it. Alternatively, theprospectus must specify where the instrument constituting theBahrain domiciled retail CIU may be obtained.CIU-1.5.4
The
CIU must keep theprospectus up-to-date, such that the information it contains is materially current.CIU-1.5.5
Once authorised, prior approval must be obtained from the CBB for any subsequent material changes to the
prospectus . An updated copy of theprospectus must be made available to CBB within 30 calendar days of the revision being agreed, andCIU participants must be notified of the changes at least 14 calendar days before they take effect.CIU-1.5.6
For the purposes of above, material revisions include changes in the
CIU's manager ,administrator orcustodian ; a change to the investment strategy; or a change in fees.CIU-1.5.7
The
CIU must provide a copy of its most recentprospectus free of charge to a potential investor.CIU-1.5.8
The
CIU must upon request provide explanations and such other information supplementary to theprospectus as may reasonably be required by a potential investor.Simplified Prospectus
CIU-1.5.9
Where a
simplified prospectus is published by aBahrain domiciled retail CIU , it must include (as a minimum) the information specified in Appendix C. It must also include a statement specifying that more detailed information on theCIU is contained in theprospectus , a copy of which must be made available free of charge to potential investors upon request.CIU-1.5.10
A
simplified prospectus must contain a summary of the key features of theCIU , including its investment policy and fee structure. It must not be misleading.CIU-1.5.11
A
simplified prospectus must be kept up to date, such that the information it contains is materially current and accurately represents theprospectus .CIU-1.5.12
There is no requirement for a
simplified prospectus to be approved by the CBB, nor for any subsequent material changes to be approved or notified. However, thesimplified prospectus must accurately reflect theprospectus , which is subject to approval and notification requirements (see Rule CIU-1.5.4 above).CIU-1.6 CIU-1.6 Investments
Risk Management
CIU-1.6.1
Bahrain domiciled retail CIUs must operate on the principle of risk spreading and must maintain and implement investment and risk management policies aimed at the prudent control of risks.CIU-1.6.2
The
prospectus must summarise the policies and limits which theBahrain domiciled retail CIU will apply, including (but not limited to):(a) The type of assets which theCIU may invest in;(b) The aggregate limits for each asset class;(c) Permitted individual exposures under each asset class; and(d) A description of remedial measures to be taken in the event of limit exceptions.CIU-1.6.3
If the investment and risk management policies specified in Rule CIU-1.6.2 are breached, the
Bahrain domiciled retail CIU must take all necessary steps to remedy the situation immediately, taking into account the interests of theCIU's participants .Investment Limits
CIU-1.6.4
Subject to Rule CIU-1.6.6,
Bahrain domiciled retail CIUs may only invest in the assets specified and in accordance with the limits prescribed in Appendix D.CIU-1.6.5
In the case of an umbrella fund (as defined in Rule CIU-B.3.5), the limits referred to in Rule CIU-1.6.4 are applicable to each sub-fund.
CIU-1.6.6
The limits prescribed in Appendix D do not apply until the expiry of a period of six months after the date of initial offering of the
CIU .CIU-1.6.7
Where the limits specified in Appendix D are breached, the
Bahrain domiciled retail CIU must report the fact as soon as it becomes aware of the situation to the CBB.CIU-1.6.8
The CBB may authorise a
CIU to widen its investment policy to allow investments in financial assets other than those specified in Appendix D, if it is satisfied that such assets are sufficiently liquid and the interests of theCIU participants are not prejudiced. The CBB may similarly also authorise limits beyond those specified in Appendix D, if it is satisfied that such relief is in the interests of theCIU participants . Where such approvals are given, the fact must be notified toCIU participants as an amendment to theprospectus (andsimplified prospectus where applicable).CIU-1.6.9
If the name or particulars of a
Bahrain domiciled retail CIU indicates a specific objective, asset class, geographic region or market, theCIU must invest at least 60% of its assets in investments that reflect the specific objective, asset class, region or market. The remaining balance of theCIU's assets may only be held in cash or cash equivalents.Derivative Transactions
CIU-1.6.10
Subject to the conditions below, a
Bahrain domiciled retail CIU may enter into permitted financial derivative transactions provided that:(a) The underlying positions continue to satisfy Rule CIU-1.6.4 (and the limits specified in Appendix D);(b) The transactions are consistent with the stated investment objectives;(c) The counterparties are licensed financial institutions or recognised exchanges or clearing houses;(d) The instrument constituting theCIU and itsprospectus clearly specify the use and rationale of such transactions (i.e. for hedging purposes or for achieving investment goals), as well as a clear description of the associated risks, including that of volatility in net asset values;(e) The derivative positions and balances are capable of independent and reliable daily valuations and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the initiative of theCIU ;(f) The transactions are subject to sound and documented risk management policies and practices; and(g) The arrangement is consistent with good market practice.Significant Influence
CIU-1.6.11
Bahrain domiciled retail CIUs may not acquire securities issued by arelevant person , without prior written CBB approval.CIU-1.6.12
Exemption from Rule CIU-1.6.11 will normally only be given by CBB in cases where a
Bahrain domiciled retail CIU is pursuing a market index strategy, such that it is obliged to invest in arelevant person's securities in order to replicate a market index.Other Restrictions
CIU-1.6.13
Bahrain domiciled retail CIUs may not:(a) Assume, guarantee, endorse or otherwise become directly or contingently liable for the obligations or indebtedness of any person, except in accordance with itsprospectus or instrument constituting theCIU ;(b) Acquire any asset which involves the assumption of any liability which is unlimited;(c) Invest in any security (of any class) in a company or other undertaking, if any director or officer of theCIU (or of anyrelevant person and its affiliates) individually owns more than ½ % of the total nominal amount of all the issued securities of that class, or collectively the directors or officers of theCIU (or of anyrelevant person and its affiliates) own more than 5% of those securities. This prohibition shall also apply where the ownership of the directors or officers specified above is in the parent, subsidiary or other associated undertaking of the company in which theCIU is to make the investment; and(d) Invest in otherCIUs of the sameoperator .CIU-1.7 CIU-1.7 Borrowing, Lending and Short Selling
Borrowing
CIU-1.7.1
A
Bahrain domiciled retail CIU may only borrow subject to the following conditions:(a) The borrowing is temporary and not persistent;(b) The borrowing is to be repayable out of the assets of theCIU ;(c) The assets of theCIU are not hypothecated or mortgaged or otherwise encumbered, except for the purposes of stock lending;(d) The borrowing does not at any time exceed 20% of theCIU's assets; and(e) The circumstances and applicable conditions for such borrowings are disclosed in itsprospectus .CIU-1.7.2
The CBB expects any borrowing to be exceptional and to assist with liquidity management, rather than to leverage returns. With regards to Rule CIU-1.7.1(a), the CBB will take into account both the duration of any period of borrowing and the number of occasions on which resort is had to borrowing in any given period. Thus, occasional, short-term borrowings might be viewed as permissible, whilst longer-term frequent borrowings, such that the
CIU was commonly or permanently indebted, would generally not. In the case of investment companies, longer-term borrowings may be allowed where required to make possible the acquisition of immovable assets essential to the direct pursuit of its business.Lending
CIU-1.7.3
A
Bahrain domiciled retail CIU may not lend its assets, except as otherwise provided for in Rule CIU-1.7.5 (in relation to stock lending) or for the purposes of meeting margin requirements where theCIU is using financial derivatives.CIU-1.7.4
For the purpose of Rule CIU-1.7.3, the placing of money on short-term deposit (i.e. for a term of less than one year) or in a current account is not considered lending.
CIU-1.7.5
A
Bahrain domiciled retail CIU may only enter into stock lending arrangements (including repurchase arrangements) in respect of any securities held by it, provided that:(a) The counterparty is a licensed financial institution;(b) The arrangement is consistent with good market practice;(c) Acceptable collateral with a value equal to the securities lent is obtained to secure the obligation;(d) The aggregate value of stocks lent does not at any time exceed 20% of the net asset value of theCIU's assets; and(e) The circumstances and applicable conditions for such borrowings are disclosed in itsprospectus .Short Selling
CIU-1.7.6
A
Bahrain domiciled retail CIU may not undertake uncovered sales of its assets ('short selling').CIU-1.8 CIU-1.8 Fees and Dividends
Fees
CIU-1.8.1
All costs and charges payable from the assets of a
Bahrain domiciled retail CIU must be clearly stated in itsprospectus . This must detail the estimated or actual amount of costs and charges payable; their nature and the basis for their calculation; together with maximum amounts payable expressed as percentages of theCIU's assets, on a per annum basis. The level of fees for investment management or advisory functions including administration, custody, transfer agency and registrar fees must also be disclosed.CIU-1.8.2
Where a performance fee is charged by way of deduction from the assets of a
Bahrain domiciled retail CIU , the following must be stated:(a) The frequency with which the performance fee is charged to theCIU ; and(b) The basis upon which the performance fee is calculated.CIU-1.8.3
If a performance fee is levied, the fee may only be payable:
(a) No more frequently than annually; and(b) If the net asset value perholding exceeds the net asset value perholding on which the performance fee was last calculated and paid.CIU-1.8.4
Costs and charges which have not been disclosed in a
Bahrain domiciled retail CIU's prospectus may not be paid from theCIU's assets.Dividends
CIU-1.8.5
All dividends on
holdings must be approved in writing by the CBB prior to being announced or distributed toparticipants of aBahrain domiciled retail CIU .CIU-1.9 CIU-1.9 Valuation and Record-keeping
Valuation
CIU-1.9.1
The
administrator appointed by aBahrain domiciled retail CIU (under Rule CIU-1.4.9 above) must ensure an independent, fair and regular valuation of all theCIU's assets, by appropriately qualified persons.CIU-1.9.2
The valuation principles to be applied must be laid down in the
CIU's rules or instruments of incorporation (as appropriate), and details of these provided in theCIU's prospectus .CIU-1.9.3
The detailed methods and frequency of the valuation of assets must be documented in a valuation policy drawn up by the
administrator and agreed with the CBB.CIU-1.9.4
The CBB would expect the valuation policy to reflect 'good practice' industry standards. Amongst other things, the CBB would expect wherever possible that valuations be based on multiple and independent price sources. Where unavoidable, valuations based on trader, broker or pricing model input should be sufficiently tested and controlled, and declared, such that conflicts of interest are minimised. Procedures should be developed to identify stale prices or illiquid assets. Valuations should normally be undertaken at least weekly, in the case of exchange traded
financial instruments , and at least monthly in all other cases.Record Keeping
CIU-1.9.5
Bahrain domiciled retail CIUs must make and retain for 5 years such records that enable:(a) TheCIU and itsrelevant persons , as appropriate, to comply with the rules in this Module; and(b) TheCIU to demonstrate at any time that such compliance has been achieved.CIU-1.9.6
The obligation under Rule CIU-1.9.5 is additional to any record-keeping requirements that may apply as a result of applicable laws (such as the commercial companies law), and any regulatory requirements that may apply to
relevant persons that are licensed institutions (such as the CBB's record-keeping requirements applicable toCBB licensees ).CIU-1.9.7
Bahrain domiciled retail CIUs must arrange for a register ofholdings in theCIU to be maintained, containing the names ofCIU participants and theirholdings , as well as the sale, issue, repurchase, redemption and cancellation ofholdings . The register must be kept up to date.CIU-1.9.8
Rule CIU-1.9.7 may normally be satisfied by an independent registrar being appointed to maintain such a register on behalf of the
Bahrain domiciled retail CIU .CIU-1.9.9
Bahrain domiciled retail CIUs must arrange for theCIU's operator or any other institution offering itsholdings to investors to comply with applicable anti-money laundering and combating the financing of terrorism ('AML/CFT') requirements. It is the responsibility of theBahrain domiciled retail CIU to ensure that copies of required AML/CFT identification documentation are retained as part of the register specified in Rule CIU-1.9.7. Alternatively, they may be kept by the institution(s) offering theCIU's holdings , provided the documentation may be accessed by theBahrain domiciled retail CIU and the CBB on request.CIU-1.10 CIU-1.10 Reporting and Auditors
Publication Requirements
CIU-1.10.1
Bahrain domiciled retail CIUs must publish semi annual and annual financial statements in respect of each financial year. These statements must be prepared in accordance with International Financial Reporting Standards.CIU-1.10.2
Publication on the
CIU's oroperator's website would satisfy the requirement in Rule CIU-1.10.1 that the report be published.CIU-1.10.3
The annual financial statement must be published and distributed to
CIU participants within 4 months of the end of theCIU's financial year. The semi annual financial statement must be published and distributed toCIU participants within 2 months of the period end. Both the annual and semi-annual reports must contain at least the minimum information specified in Appendix E.CIU-1.10.4
The annual financial statement must be subject to independent audit by a qualified auditor located in Bahrain and acceptable to the CBB. The semi-annual financial statement must be subject to an independent review by the same qualified auditor.
CIU-1.10.5
Bahrain domiciled retail CIUs must publish the issue, sale, repurchase or redemption price of itsholdings each time it issues, sells, repurchases or redeems itsholdings , and at least twice a month.CIU-1.10.6
Publication on the
CIU's oroperator's website, or in a local newspaper, would satisfy the publication requirement in Rule CIU-1.10.5.Reporting to the CBB
CIU-1.10.7
Bahrain domiciled retail CIUs must file the annual and semi annual reports required under Rule CIU-1.10.1 with the CBB within the time periods specified in Rule CIU-1.10.3.CIU-1.10.8
Bahrain domiciled retail CIUs must file with the CBB Form CIU (QS), the CIU Quarterly Statistical Return, within the deadline specified on the return.CIU-1.10.9
Bahrain domiciled retail CIUs must notify the CBB of any AGMs or EGMs they intend to hold, with at least 14 calendar days' notice. The CBB may attend such meetings at its discretion.CIU-1.10.10
Bahrain domiciled retail CIUs must provide the CBB, upon request, any additional information relevant to theCIU's financial reports and accounts.CIU-1.10.11
Bahrain domiciled retail CIUs must, in their terms of engagement with their external auditor,administrator /custodian , provide for them to report to the CBB in writing without delay, if they become aware of any of the following:(a) The information provided to theCIU's participants or the CBB does not truly reflect the financial situation of theCIU ;(b) There has been a material breach of the requirements of this Module, theCIU documents, or any directions issued by the CBB;(c) There exist circumstances that may materially affect the ability of theCIU to fulfill its obligations to theCIU participants ;(d) There are material defects in the financial systems, controls or accounting records of theCIU ;(e) There are material inaccuracies in any reporting provided to the CBB; or(f) In the case of the external auditor, they are likely to qualify any opinion they are to provide in relation to the financial statements of theCIU .Auditors
CIU-1.10.12
Bahrain domiciled retail CIUs must appoint an external auditor resident in Bahrain, and acceptable to the CBB.CIU-1.11 CIU-1.11 Advertising
CIU-1.11.1
Advertisements in respect of
Bahrain domiciled retail CIUs must be:(a) Fair and not misleading;(b) Clear and self-explanatory (describing the nature or type ofCIU to which the advertisement relates);(c) State any assumptions on which claims in advertisements are based;(d) Include risk warnings, including the potential for loss, that are prominently presented and not obscured or disguised;(e) Not describeCIUs as "guaranteed" unless there is a legally enforceable capital guarantee; and(f) Not include any comparisons which may be misleading considering the circumstances of theCIU .CIU-1.11.2
Where an advertisement contains any forecast or projection, it must make clear the basis upon which that forecast or projection is made.
CIU-1.11.3
The advertisements must include a statement informing the client that more detailed information on the
CIU is contained in theprospectus , a copy of which must be made available free of charge.CIU-1.12 CIU-1.12 Mergers and Transfers, Suspension and Winding-Up
Mergers and Transfers
CIU-1.12.1
A
Bahrain domiciled retail CIU must seek prior written approval from the CBB in order to merge with, or else transfer its assets to anotherCIU . TheBahrain domiciled retail CIU concerned must set out in writing the reasons for the proposed merger or transfer, the alternatives available toCIU participants (including redemption and if possible a right to redeem or switch without charge into another authorisedCIU ), the estimated costs of the merger or transfer, and information on who is expected to bear these.CIU-1.12.2
In all cases, a merger or transfer of a
Bahrain domiciled retail CIU must be in accordance with the instrument constituting theCIU and all applicable laws.Suspension
CIU-1.12.3
A
Bahrain domiciled retail CIU may only suspend the issue and cancel the sale and redemption of itsholdings with the prior written approval of the CBB. Such approval will only be given in exceptional circumstances and when in the interest of theCIU's participants .CIU-1.12.4
Resumption of dealing in
holdings may only take place with the prior written approval of the CBB. Once dealing is restarted, theCIU must confirm this to the CBB.CIU-1.12.5
The circumstances in which dealing in
holdings may be suspended must be specified in theCIU's prospectus .Winding-Up
CIU-1.12.6
A
Bahrain domiciled retail CIU may only initiate winding-up procedures with the prior written approval of the CBB, and subject to the terms of the instrument constituting theCIU and any applicable laws.CIU-1.12.7
CBB approval in response to a request to wind-up a
retail CIU will normally be given in the following circumstances:(a) The purpose of the CIU cannot be accomplished;(b) The constitutional documents of the CIU provide for a termination;(c) The NAV of the CIU has fallen below US$ 5 million (or some other threshold agreed by CBB); or(d) A resolution of a duly convened meeting of theCIU participants has been passed to wind-up the CIU.CIU-1.12.8
A
CIU may also be wound up under a directive of the CBB or other competent authority, such as a court that has issued an order to liquidate theCIU . See also Rules CIU-1.1.17 and CIU-1.1.18 regarding the revocation of authorisation by the CBB.CIU-1.12.9
Bahrain domiciled CIUs must give at least one months' written notice toCIU participants of their intention to wind-up theCIU , together with an explanation for wishing to do so, and the options available toCIU participants (such options to include, if possible, a right to switch without charge into anotherCIU ). A copy of this notice must be provided to the CBB at the time it is issued toCIU participants .CIU-1.12.10
Winding-up of a
Bahrain domiciled retail CIU must comply with all applicable laws and directions issued by the CBB. In all cases, the CBB requires independent verification by auditors that theCIU's assets have been distributed toCIU participants in accordance with the instrument constituting theCIU , or switched into anotherCIU .CIU-1.12.11
Once the
CIU's assets have been distributed to theCIU's participants , or switched into anotherCIU , theBahrain domiciled retail CIU must confirm the fact to the CBB and request that it be taken off the register of authorisedCIUs .CIU-2 CIU-2 Bahrain Domiciled Expert CIUs
CIU-2.1 CIU-2.1 Rule Variations
Restrictions
CIU-2.1.1
Bahrain domiciled expert CIUs may only be offered toexpert investors (as defined in Rule CIU-B.5.6), when offered within the Kingdom of Bahrain.CIU-2.1.2
Bahrain domiciled expert CIUs , if offered to non-resident investors, are also required to comply with any applicable local laws and regulations in the jurisdiction concerned. These may be more or less restrictive than the restriction contained in Rule CIU-2.1.1.CIU-2.1.3
A
Bahrain domiciled expert CIU must be able to demonstrate that each of itsparticipants falls within the definition of anexpert investor . They should also be able to demonstrate that the additional risks potentially represented by anexpert CIU have been clearly communicated and understood by theirparticipants .CIU-2.1.4
To help demonstrate compliance with Rule CIU-2.1.3,
Bahrain domiciled expert CIUs should be able to provide a written confirmation from eachparticipant , stating that they satisfy the definition of anexpert investor and confirming they understand the higher risks involved in anexpert CIU . The CBB also expects supporting documentation to be kept, demonstrating that the minimum financial asset threshold specified in Rule CIU-B.5.6 has been satisfied, such as a copy of a bank or broker's statement. Where the investor’s initial investment matches or exceeds the financial asset threshold, this may by itself be taken as evidence that the client meets the minimum financial asset threshold.Amended: July 2007Exemptions
CIU-2.1.5
Bahrain domiciled expert CIUs must comply with all the requirements contained in Chapter CIU-1, subject to the exemptions specified below in Rule CIU-2.1.6. References toBahrain domiciled retail CIU(s) in Chapter CIU-1 should be read as also applying toBahrain domiciled expert CIUs .CIU-2.1.6
Expert CIUs may avail themselves of the following exemptions:(a) They may utilize higher aggregate and individual exposure limits, as specified in Appendix D;(b) They may invest in a wider range of asset classes, as specified in Appendix D;(c) They may borrow up to 30% of theCIU's assets, instead of the 20% limit applied toBahrain domiciled retail CIUs (see Rule CIU-1.7.1); and(d) They may enter into stock lending arrangements of up to 30% of theCIU's net asset value, instead of the 20% limit applied toBahrain domiciled retail CIUs .CIU-2.1.7
Bahrain domiciled expert CIUs are, in short, subject to mostly the same requirements applicable toBahrain domiciled retail CIUs . In return to being limited toexpert investors , however, they are subject to fewer investment restrictions and can utilize more liberal borrowing and stock-lending limits. The looser investment restrictions allow them, amongst other things, to invest in additional asset classes (such as real estate and commodities, unlisted securities, and to offer funds of hedge funds).CIU-3 CIU-3 Bahrain Domiciled Exempt CIUs
CIU-3.1 CIU-3.1 Exemption Conditions
Promotion
CIU-3.1.1
Bahrain domiciled exempt CIUs may only be offered toaccredited investors (as defined in Rule CIU-B.5.10), when offered within the Kingdom of Bahrain. They may not be promoted through mass communication channels (such as the press, radio or television).Amended: July 2007CIU-3.1.2
Bahrain domiciled exempt CIUs , if offered to non-resident investors, are required to comply with any applicable local laws and regulations in the jurisdiction concerned. These may be more or less restrictive than the restriction contained in Rule CIU-3.1.1.CIU-3.1.3
A
Bahrain domiciled exempt CIU must be able to demonstrate that each of itsparticipants falls within the definition of anaccredited investor . They should also be able to demonstrate that the additional risks potentially represented by aBahrain domiciled exempt CIU have been clearly communicated and understood by theirparticipants .CIU-3.1.4
To help demonstrate compliance with Rule CIU-3.1.3,
Bahrain domiciled exempt CIUs should be able to provide a written confirmation from eachparticipant , stating that they satisfy the definition of anaccredited investor and confirming they understand the higher risks involved in anexempt CIU . The CBB also expects supporting documentation to be kept, demonstrating that the minimum financial asset threshold specified in Rule CIU-B.5.10 has been satisfied, such as a copy of a bank or broker’s statement. Where the investor’s initial investment matches or exceeds the financial asset threshold, this may by itself be taken as evidence that the client meets the minimum financial asset threshold.Amended: July 2007Disclosures
CIU-3.1.5
Bahrain domiciled exempt CIUs must not quote the CBB as the regulator of theCIU in any document or material, and must clearly display a statement to the fact that theCIU is considered anexempt CIU for the purposes of the CBB'sCIU regulations.CIU-3.1.6
Bahrain domiciled exempt CIUs must disclose all relevant features of theCIU in theirprospectus (including but not limited to their investment strategy; extent of any leverage; key risks; and expenses, fees and charges).Relevant Persons
CIU-3.1.7
Bahrain domiciled exempt CIUs must delegate the administration and safe-keeping of their assets to anadministrator /custodian (with the two functions either undertaken by a single institution or two separate institutions). These functions must be undertaken by one or more licensed institutions acceptable to the CBB for the role. Theadministrator /custodian must:(a) Be independent of theCIU's operator ;(b) Act solely in the interests of theCIU's participants ;(c) Have sufficient financial and other resources in order to undertake properly its function asadministrator /custodian of theCIU ; and(d) Accept liability to theCIU and itsparticipants , for any loss suffered by them as a result of its unjustifiable failure to perform its obligations adequately.CIU-3.1.8
The CBB would normally expect the
administrator /custodian required under Rule CIU-3.1.7 to be aCBB licensee (although 'hub and spoke' arrangements are allowed — see Paragraph CIU-1.4.10). However, with respect toBahrain domiciled exempt CIUs , the CBB may additionally consider allowing non-CBB licensees to be used, on a case-by-case basis, where there is a strong rationale for doing so (e.g. prime broking arangements for hedge funds).Auditors
CIU-3.1.9
Bahrain domiciled exempt CIUs must appoint an auditor resident in Bahrain, and acceptable to the CBB.Record-Keeping
CIU-3.1.10
Bahrain domiciled exempt CIUs must make and retain for 5 years such records that enable:(a) TheCIU and itsrelevant persons , as appropriate, to comply with the rules in Chapter CIU-3; and(b) TheCIU to demonstrate at any time that such compliance has been achieved.CIU-3.1.11
The obligation under Rule CIU-3.1.10 is additional to any record-keeping requirements that may apply as a result of applicable laws (such as the commercial companies laws), and any regulatory requirements that may apply to
relevant persons that are licensed institutions (such as the CBB's record-keeping requirements applicable toCBB licensees ).CIU-3.1.12
Bahrain domiciled exempt CIUs and theirrelevant persons are reminded that they must also comply with all applicable AML/CFT laws and regulations.Relevant persons that areCBB licensees are required to comply with the relevant CBB Rulebook Volume in this respect.CIU-3.2 CIU-3.2 Registration Requirements
Registration Requirement
CIU-3.2.1
Bahrain domiciled exempt CIUs must be registered with the CBB prior to their being offered to investors.CIU-3.2.2
Bahrain domiciled exempt CIUs are not subject to the CBB's authorisation or on-going supervisory requirements. The registration requirement is to allow the CBB to monitor developments in the financial services sector.CIU-3.2.3
An application for registration may only be made by one of the following:
(a) Theoperator of theCIU ; or(b) The directors or trustees of theCIU (as appropriate).CIU-3.2.4
An applicant may appoint a representative — such as the
CIU's proposedadministrator /custodian , or a law firm or professional consultancy — to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the registration process, when seeking clarification of any issues.CIU-3.2.5
An application for registration under Rule CIU-3.2.1 involving an overseas
operator will only be considered if the overseasoperator has a suitable track record in operatingCIUs .Registration Process
CIU-3.2.6
An application for registration under Rule CIU-3.2.1 must be made using a Form CIU (R) (Application for Registration of a CIU), submitted under a formal cover letter signed by two authorised signatories of the applicant.
CIU-3.2.7
The application must identify an individual who should be capable of being contacted by the CBB by post, telephone, fax and/or e-mail.
CIU-3.2.8
The CBB's review of registration applications is mainly limited to satisfying itself that the exemption conditions specified in Section CIU-3.1 are likely to be complied with. CBB does not review the proposed structure or operations in detail, although it reserves the right to seek appropriate confirmations or additional information from the applicant. The CBB takes a decision on an application for registration made under Rule CIU-3.2.1 within 15 calendar days of the application being received and assessed by the CBB as complete.
Granting or refusal of registration
CIU-3.2.9
To be registered, an applicant must demonstrate that it will comply with the exemption conditions specified in Section CIU-3.1. Should the application for registration be accepted, the CBB will notify the applicant in writing of the fact. The registration may be subject to additional conditions being met.
CIU-3.2.10
The CBB may refuse to register a
Bahrain domiciled exempt CIU , if in its opinion:(a) The exemption requirements in Section CIU-3.1 are unlikely to be met;(b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potential investors.CIU-3.2.11
Where the CBB proposes to refuse an application for registration, it must give the applicant written notice to that effect. Applicants have 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.
Fees Payable to CBB
CIU-3.2.12
Each application for registration made under Rule CIU-3.2.1 must be accompanied by a BD 100 processing fee. This fee is non-refundable.
CIU-3.2.13
Each
Bahrain domiciled exempt CIU registered by CBB is subject to an annual fee of BD 2,000. In the case of umbrella funds, each sub-fund is also charged BD 2,000 a year.CIU-3.2.14
Where the fee specified in Rule CIU-3.2.13 is paid, it exempts those
Bahrain domiciled exempt CIUs wishing to list on the Bahrain Stock Exchange ('BSE') from having to pay the listing fee normally levied by the BSE.CIU-3.3 CIU-3.3 Reporting Requirements
Notifications to the CBB
CIU-3.3.1
Bahrain domiciled exempt CIUs must file with the CBB Form CIU (QS), the CIU Quarterly Statistical Return, within the deadline specified on the return.CIU-3.3.2
All annual and interim reports produced by a
Bahrain domiciled exempt CIU must be filed with CBB (within four months of the period end for annual reports and two months of the period end for interim reports).CIU-3.3.3
Bahrain domiciled exempt CIUs must notify the CBB in a timely manner of any intention to merge, transfer, wind up or suspend dealings in theCIU .CIU-3.4 CIU-3.4 De-registration
CIU-3.4.1
Bahrain domiciled exempt CIUs must give at least one months' written notice toCIU participants of their intention to de-register theCIU , together with an explanation for wishing to do so, and the options available toCIU participants (such options to include, if possible, a right to switch without charge into anotherCIU ). A copy of this notice must be provided to the CBB at the time it is issued toCIU participants .CIU-3.4.2
Once the
CIU's assets have been distributed to theCIU's participants , or switched to anotherCIU , theBahrain domiciled exempt CIU must confirm the fact to the CBB and request that it be taken off the CBB register ofexempt CIUs .CIU-3.4.3
In the meantime, the
Bahrain domiciled exempt CIU should keep the CBB informed about their timetable and progress made in either transferringCIU participants into anotherCIU , or returning moneys due to them.CIU-3.4.4
CBB may cancel the registration of a
CIU if in its opinion:(a) Any of the applicable requirements contained in Module CIU are not met;(b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potential investors or theCIU's participants .CIU-3.4.5
Where the CBB proposes to cancel a
CIU's registration, it shall give theCIU concerned a written notice of its intention to do so and the reasons for such action. TheCIU has 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.CIU-4 CIU-4 Overseas Domiciled CIUs
CIU-4.1 CIU-4.1 Registration and Authorisation
Registration Requirements
CIU-4.1.1
Overseas domiciled CIUs that fall under the categories listed in the table appearing in Rule CIU-B.6.3, must be registered with the CBB before they are offered to investors in Bahrain.CIU-4.1.2
Overseas domiciled CIUs that do not appear under the categories listed in the table appearing in Rule CIU-B.6.3, but which satisfy the exemption conditions specified in Section CIU-3.1, must also be registered with the CBB before they are offered to investors in Bahrain.CIU-4.1.3
All other
overseas domiciled CIUs , i.e. those that satisfy neither the conditions specified in Rules CIU-4.1.1 and CIU-4.1.2, are required to be authorised by the CBB prior to being offered to investors in Bahrain: see Rules CIU-4.1.20 below.Registration Process
CIU-4.1.4
An application for registration under either Rules CIU-4.1.1 or CIU-4.1.2 must be made using a Form CIU (R) (Application for Registration of a CIU), submitted under a formal cover letter signed by two authorised signatories of the applicant. The application may only be made by the
CBB licensee that is proposing to offer theCIU to investors in Bahrain.CIU-4.1.5
Only
CBB licensees that are licensed either asconventional bank licensees (Volume 1 of the CBB Rulebook),Islamic bank licensees (Volume 2) orinvestment firm licensees (Volume 4), may offeroverseas domiciled CIUs in Bahrain.CIU-4.1.6
The application must identify an individual who should be capable of being contacted by the CBB by post, telephone, fax and/or e-mail.
CIU-4.1.7
The CBB's review of registration applications is mainly limited to satisfying itself that the applicant satisfies the conditions specified in Rules CIU-4.1.1 and CIU-4.1.2, and which category of scheme it falls under (i.e.
retail CIU ,expert CIU orexempt CIU ): this may require seeking confirmation of theCIU's regulatory status from its home regulator, and reviewing theCIU's documentation (such as promotional material and its prospectus). The CBB does not however review the proposed structure or operations in detail, although it reserves the right to seek appropriate confirmations or additional information from the applicant.Granting or refusal of registration
CIU-4.1.9
To be registered, an applicant must demonstrate that it will comply with the conditions specified in Rules CIU-4.1.1 or CIU-4.1.2 (as appropriate). Should the application for registration be accepted, the CBB will notify the applicant in writing of the fact. The registration may be subject to additional conditions being met.
CIU-4.1.10
The CBB may refuse to register an
overseas domiciled CIU , if in its opinion:(b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potential investors.CIU-4.1.11
Where the CBB proposes to refuse an application for registration, it must give the applicant written notice to that effect. Applicants have 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.
Fees Payable to CBB (registered overseas domiciled CIUs)
De-registration
CIU-4.1.13
The
CBB licensee responsible for distributing anoverseas domiciled CIU must must seek prior written approval from the CBB if they wish to de-register the fund. They must provide an explanation for wishing to de-register, and the options available toparticipants in the event of de-registration (such options to include, if possible, a right to switch without charge into anotherCIU ).CIU-4.1.14
The CBB will normally respond to such requests within 15 calendar days of the request being made.
CIU-4.1.15
Once approval has been granted under Rule CIU-4.1.13, the
CBB licensee concerned must give at least one month's written notice toparticipants . The notice must provide an explanation and explain theparticipants' options (as specified in Rule CIU-4.1.13). A copy of this notice must be provided to the CBB at the time it is issued toparticipants .CIU-4.1.16
Once the
CIU's participants have been repaid, or transferred to anotherCIU , theCBB licensee must notify the CBB of the fact and request that theCIU concerned be taken off the CBB register ofoverseas domiciled CIUs .CIU-4.1.17
In all cases, the
CBB licensee should keep the CBB informed about their timetable and progress made in either transferringCIU participants into anotherCIU , or returning moneys due to them.CIU-4.1.18
The CBB may cancel the registration of an
overseas domiciled CIU if in its opinion:(a) Any of the applicable requirements contained in Module CIU are not met;(b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or(c) The CBB believes it necessary in order to safeguard the interests of potential investors or theCIU's participants .CIU-4.1.19
Where the CBB proposes to cancel a CIU registration pursuant to Paragraph CIU-4.1.18, it shall give the CIU
operator or its appointed representative a written notice of its intention to do so and the reasons for such action, together with a description of the process for appealing such a decision.Authorisation — Requirement, Process and Revocation
Authorisation — Requirement, Process and Revocation
CIU-4.1.21
The authorisation process for
overseas domiciled CIUs falling under Rule CIU-4.1.20 is the same as that specified forBahrain domiciled CIUs , in Rules CIU-1.1.5 to CIU-1.1.11. The same requirements and processes are also applicable with respect to the revocation of an authorisation (Rules CIU-1.1.15 to CIU-1.1.18).Fees Payable to CBB (authorised overseas domiciled CIUs)
CIU-4.1.22
No processing or annual authorisation fees are payable by
overseas domiciled CIUs subject to Rule CIU-4.1.20.CIU-4.2 CIU-4.2 Requirements
Promotion and Advertising of Overseas Domiciled CIUs
CIU-4.2.1
The
CBB licensee responsible for distributing anoverseas domiciled retail CIU oroverseas domiciled expert CIU must ensure that theCIU's prospectus (andsimplified prospectus where applicable) are kept up-to-date. A most recent copy of theprospectus (andsimplified prospectus where applicable) must be made available to the CBB within 30 calendar days of any revision.CIU-4.2.2
The
CBB licensee responsible for distributing anoverseas domiciled retail CIU oroverseas domiciled expert CIU must always make available a copy of the CIU's most recentprospectus (andsimplified prospectus where applicable) free of charge to any person on request.CIU-4.2.3
The
CBB licensee responsible for distributing anoverseas domiciled retail CIU oroverseas domiciled expert CIU must provide explanations and such other information supplementary to theprospectus as may be reasonably required by a potential investor.CIU-4.2.4
The
CBB licensee responsible for distributing anoverseas domiciled expert CIU andoverseas domiciled exempt CIU must be able to demonstrate that each of itsparticipants falls within the definition of anexpert investor oraccredited investor (as appropriate). They should also be able to demonstrate that the additional risks potentially represented by anexpert CIU orexempt CIU have been clearly communicated and understood by theirparticipants .CIU-4.2.5
To demonstrate compliance with Rule CIU-4.2.4, the CBB would expect to see a written confirmation from each
participant , stating that they satisfy the definition of anexpert investor oraccredited investor (as appropriate) and confirming they understand the higher risks involved in anexpert CIU orexempt CIU . The CBB also expects supporting documentation to be kept, demonstrating that the minimum financial assets threshold specified in Rules CIU-B.5.6 and CIU-B.5.10 (as appropriate) has been satisfied, such as copies of bank or broker statements. Where the investor’s initial investment matches or exceeds the threshold, this may by itself be taken as evidence that the client meets the minimum financial asset threshold.Amended: July 2007CIU-4.2.6
Overseas domiciled CIUs may not be offered directly to investors in Bahrain, by non-resident persons. OnlyCBB licensees that are licensed either asconventional bank licensees (Volume 1 of the CBB Rulebook),Islamic bank licensees (Volume 2) orinvestment firm licensees (Volume 4), may offeroverseas domiciled CIUs to investors in Bahrain.CIU-4.2.7
Advertisements in respect of
overseas domiciled retail CIUs andoverseas domiciled expert exempt CIUs must comply with the requirements applicable to their Bahrain domiciled equivalents, as specified in Section CIU-1.11.Overseas domiciled exempt CIUs must comply with the restrictions on promotions applied toBahrain domiciled exempt CIUs (see Rule CIU-3.1.1).Amended: July 2007Reporting to CIU Participants
CIU-4.2.8
Overseas domiciled retail CIUs andoverseas domiciled expert CIUs must publish and distribute to their Bahrain residentparticipants at least two reports in respect of each financial year. Annual reports and accounts prepared in accordance with local accounting standards must be published and distributed to Bahrain residentparticipants within the time scales specified by their home jurisdiction.CIU-4.2.9
Overseas domiciled retail CIUs andoverseas domiciled expert CIUs must distribute to their Bahrain resident participants any other reports (such as valuation reports), where these are specified in theCIU's prospectus .CBB Reporting
CIU-4.2.10
The
CBB licensee responsible for distributing anoverseas domiciled retail expert CIU andoverseas domiciled expert CIU must file copies of the reports required under Rule CIU-4.2.8 with the CBB, within the same time periods.Amended: July 2007CIU-4.2.11
The
CBB licensee responsible for distributing anoverseas domiciled exempt CIU must file with the CBB all annual and interim reports produced by theCIU (within the time scales specified in Rule CIU-4.2.8).CIU-4.2.12
The
CBB licensee responsible for distributing anoverseas domiciled CIU must notify the CBB in a timely manner of any intention to merge, transfer, wind up or suspend dealings in theCIU .CIU-4.2.13
The
CBB licensee responsible for distributing anoverseas domiciled CIU must file with the CBB Form CIU (QS), the CIU Quarterly Statistical Return, within the deadline specified on the return.CIU-5 CIU-5 Relevant Persons
CIU-5.1 CIU-5.1 General Requirements
CIU-5.1.1
Relevant persons must maintain proper standards of market conduct, in relation to their role with respect to aCIU , in addition to any applicable legal and regulatory requirements (such as those imposed on them by virtue of their license, in the case ofCBB licensees ).CIU-5.1.2
To demonstrate compliance with Rule CIU-5.1.1,
relevant persons are thus expected, in relation to their role with respect to aCIU , to:(a) Observe high standards of integrity and fair dealing, including being honest and straightforward in their dealings with clients;(b) Take all reasonable steps to identify, and prevent or manage, potential or actual conflicts of interest that could harm the interests of a client (such steps to include, wherever appropriate, declaring such conflicts). This includes a prohibition onadministrators andcustodians beingparticipants in aCIU in respect of which they are arelevant person — unless, in the case ofoverseas domiciled CIUs , the applicable regulations of their jurisdiction of domicile permit such investments;(c) Act with due skill, care and diligence;(d) Act impartially and refrain from any action which may be to the advantage of oneCIU and/or itsparticipants , at the expense of anotherCIU and/or itsparticipants ;(e) Observe in full any obligations of confidentiality, including with respect to client information. This requirement does not over-ride lawful disclosures;(f) Observe proper standards of market conduct, and avoid action that would generally be viewed as improper;(g) Take reasonable care to safeguard the assets of clients for which they are responsible, and ensure that those assets are kept separate from their own assets and are separately identifiable from the assets of otherCIUs with which they are involved;(h) Pay due regard to the legitimate interests and information needs of the clients and communicate with them in a fair and transparent manner;(i) Act in an open and co-operative manner with CBB and other regulatory/supervisory bodies under whose authority they come under. They should take reasonable care to ensure that their activities comply with all applicable laws and regulations;(j) Maintain adequate human, financial and other resources sufficient to run theCIU in an orderly manner;(k) Keep accurate accounts and records for eachCIU for which it holds assets;(l) Take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations. Their systems and controls, as far as is reasonably practical, should also be sufficient to manage the level of risk inherent in their business; and(m) Ensure that when outsourcing functions, such outsourcing is properly controlled and that ultimate responsibility for the proper discharge of those functions is retained by therelevant person concerned.Amended: July 2007CIU-5.1.3
Rules CIU-1.4.9 and CIU-1.4.11 state that
relevant persons must be acceptable to the CBB, in order for aretail CIU orexpert CIU to be authorised. Compliance with Rule CIU-5.1.1 is an essential element of this assessment.CIU-5.2 CIU-5.2 Requirements for Operators
CIU-5.2.1
Operators ofCIUs authorised or registered under this Module must:(a) Ensure compliance of theCIU with the requirements of this Module, the instrument constituting the CIU, and of itsprospectus ;(b) Take all reasonable steps to rectify any failure to comply with the obligations specified in (a) above, and to notify the CBB of such a breach as soon as it becomes aware of the fact; and(c) Not withdraw asoperator of theCIU except upon the appointment of a newoperator and subject to the prior approval of the CBB.CIU-5.2.2
Operators ofBahrain domiciled retail CIUs andBahrain domiciled expert CIUs who have introduced seed capital into aCIU authorised or registered under this Module must not seek redemption or buy back the seed capital without the prior written approval of the CBB.CIU-5.2.3
Operators ofBahrain domiciled retail CIUs andBahrain domiciled expert CIUs are liable for any loss suffered byparticipants , because of of their unjustifiable failure to perform their obligations adequately, as required under theCIU documents or this Module. This liability shall not in any way be diminished by any provision in any document, save to the extent that any release or indemnity from liability relates to a prior event and/or where clients holding not less than 75% in value of the units in issue at that date have agreed to such a release or indemnity.CIU-6 CIU-6 Shari'a Compliant CIUs
CIU-6.1 CIU-6.1 Additional Requirements
Application
CIU-6.1.1
This Chapter applies to all
retail CIUs andexpert CIUs that hold themselves out to be managed in accordance with Shari'a compliant principles.CIU-6.1.2
The rules included in this Chapter are additional to other applicable rules contained in other Chapters of this Module. In applying Rule CIU-6.1.1 to
overseas domiciled retail CIUs andoverseas domiciled expert CIUs , the CBB may accept other specific arrangements as having equivalent effect.Constitution
Shari'a Advisers
CIU-6.1.4
The
operator ofCIUs defined in Rule CIU-6.1.1 must appoint two or more Shari'a Advisers and ensure that:(a) Appointments, dismissals or other changes in respect of members of the Shari'a Advisers are approved by the governing body of theCIU (i.e. its directors or trustees, as appropriate);(b) The Shari'a Advisers are independent of the CIU and itsoperator — amongst other things, no Shari'a Adviser should be a director, trustee or controller of theCIU or itsoperator ;(c) The Shari'a Advisers selected are suitably qualified and experienced for their role; and(d) The Shari'a Advisers are given sufficient resources and access to information and personnel in order to undertake effectively their role as Shari'a Advisers to theCIU .Shari'a Compliance
CIU-6.1.5
CIUs defined in Rule CIU-6.1.1 must comply with all applicable standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).Compliance Monitoring and Reporting
CIU-6.1.6
The
operator ofCIUs defined in Rule CIU-6.1.1 must ensure that the operations and investments of theCIU are subject to compliance reporting and monitoring by its Shari'a Advisers, in accordance with applicable AAOIFI standards.CIU-6.1.7
The annual report to
CIU participants must contain a report and opinion from theCIU's Shari'a Advisers:(a) Explaining the work undertaken by the Shari'a Advisers to verify compliance by theCIU with the Shari'a; and(b) Giving an opinion on the extent of theCIU's compliance with the Shari'a.CIU-6.1.8
CIUs defined in Rule CIU-6.1.1 must report without delay to the CBB changes to their Shari'a Advisers, together with an explanation for the change. All such changes must be reflected in an update to theCIU's prospectus (andsimplified prospectus where applicable).CIU-7 CIU-7 Transition Arrangements
CIU-7.1 CIU-7.1 Implementation by Existing CIUs
CIU-7.1.1
CIUs approved by the CBB prior to the date of commencement of this Module (1 June 2007) are not required to submit a new application for authorisation or registration.CIU-7.1.2
Rather, the CBB will confirm with the
CIUs concerned which category they fall under according to the new framework contained in this Module (i.e. aretail CIU ,expert CIU orexempt CIU ; and, in the case ofoverseas domiciled CIUs , whether they qualify as arecognised jurisdiction ). The CBB will then update its published list ofCIUs accordingly.CIU-7.1.3
CIUs approved by the CBB prior to the date of commencement of this Module must ensure compliance with the requirements of this Module within the 12 months following the date of commencement of this Module (i.e. by June 2008). In addition, they must submit the Form CIU(QS) starting with the quarter-period ending 30 June 2007: i.e., the first such Form must be filed by 21 July 2007.Amended: July 2007CIU-7.1.4
With respect to
overseas domiciled CIUs , which comprise the bulk ofCIUs approved by the CBB prior to the commencement date of this Module, the impact of Rule CIU-7.1.3 is that thoseCBB licensees responsible for distributingoverseas domiciled CIUs must ensure compliance with applicable requirements contained in Section CIU-4.2. These requirements mostly apply tooverseas domiciled retail CIUs andoverseas domiciled expert CIUs , and are relatively limited in scope.CIU-7.1.5
For
CIUs authorised or registered after 1 June 2007, the requirements of this Module have immediate effect.CIU-8 CIU-8 Appendices
Appendix A — Instrument constituting the CIU
The instrument constituting the
CIU must contain the following minimum information:(a) Name and legal form of theCIU (i.e. company, trust or other contractual structure);(b) Name ofoperator ;(c) The governing law;(d) Objective of the investment vehicle;(e) Classes ofholdings and, if any rights of any class ofholdings differ, a statement describing those differences in relation to the differing classes;(f) Rules regarding the organizational and operational framework of theCIU , including provisions on the manner in which meetings are to be conducted, and interests ofparticipants protected;(g) The date on which the annual accounting period ends; and(h) A statement of terms and circumstances in which theCIU may be wound up, merged with otherCIUs , suspended or otherwise terminated.Appendix B — Prospectus
The
prospectus of theCIU must contain the following minimum information:(a) Constitution of theCIU :(i) Name(ii) Registered address(iii) Nature of corporate form(iv) If it is a company, particulars of its capital structure(v) Date of creation(vi) Place of creation(vii) Indication of duration if limited(b) Governing law of theCIU :(c) Details of any tax levied on the income and capital of theCIU , including tax deducted on distributions toparticipants (if applicable)(d) Investment objectives and restrictions:(i) Details of investment objectives and policy;(ii) A summary of the different asset classes that may be held, and the extent to which derivatives, borrowings and stock lending may be undertaken;(iii) A summary of the risk management policy, processes and limits structure to be applied; and(iv) An assessment of the risks that theCIU may incur, and its overall risk profile.(e)Operator and principals:(i) Names and registered addresses of the following parties (where applicable) and any additional information as stated:a. The Directors or trustees (as appropriate) of theCIU , including a summary of their professional experience and other positions held;b. Theoperator ,manager ,administrator andcustodian , plusi. Nature of their corporate form;ii. If a subsidiary, the name of their ultimate holding company and the country or territory where the holding company is incorporated;iii. The address of their registered offices;iv. A description of their principal business activity;v. The nature of any licenses held, and their lead regulators; andvi. A summary of any material provisions, if applicable.c. The investment advisor (if applicable)i. Their functionii. Whether or not it is the holder of a licenseiii. If it is body corporate in a group of which theoperator oradministrator is a memberiv. If the advisor's principal activity is not providing services as an investment advisor, what the principal activity isv. Main terms of any agreement or arrangement between the advisor and theoperator d. The Kingdom of Bahrain representativee. The Kingdom of Bahrain distribution company, if different from d.f. The auditorsg. The registrar(f) Characteristics ofholdings :(i) Minimum investment and subsequent investment requirements (if any).(ii) A description of the different types ofholdings , including their currency of denomination, their nominal value and any applicable requirements for minimum level ofholdings .(iii) In relation to each available class ofholding , the entitlement of the holder to participate in the assets of theCIU and its income.(iv) The voting rights that are exercisable at meetings ofparticipants by theparticipants and, if different rights attach to different classes ofholdings , what those rights are.(v) Form of certification.(g) Valuation:(i) How frequently and at what time of day in a specified country or territory the assets of theCIU will be valued for the purpose of determining prices at which units in theCIU may be sold or repurchased.(ii) The method of valuation of assets and liabilities of theCIU and the method of pricing and determination of investment returns of theCIU .(iii) The circumstances under which the method of valuation and pricing may change for aCIU .(h) Seed Capital:(i) The amount of any seed capital invested in theCIU (if any), who by, and the investor's proposed intention regarding retaining the seed capital in theCIU or redeeming it. Also, a statement must be included that any redemption of seed capital is subject to the CBB's prior approval.(i) Application and redemption procedures:(i) Names of any Bahraini daily newspapers in which prices will be published, and details of other sources where prices may be published (e.g. website), as applicable.(ii) Procedure for subscribing/redeemingholdings .(iii) The maximum interval between the request for redemption and the dispatch of the redemption proceeds(iv) A summary of the circumstances under which dealings inholdings may be deferred or suspended.(v) A statement that no money will be paid to any financial intermediary in the Kingdom of Bahrain who is not licensed or registered.(j) Distribution policy:(i) The distribution policy and the approximate dates on which dividends (if any) will be paid (if applicable).(k) Fees and charges:(i) The level of all fees and charges payable by aparticipant , including all charges levied on subscription, redemption and conversion.(ii) The level of all fees and charges payable by theCIU , including management fees, administration fees,custodian fees and start up expenses.(iii) The notice period for fee increases.(l) Reports and accounts:(i) The date of theCIU's financial year.(ii) Particulars of what reports will be sent toparticipants and when.(iii) When annual and half yearly reports will be published.(m) Warnings:(i) The following statement should be predominantly displayed in the offering document as follows:"Important — if you are in any doubt about the contents of this prospectus, you should seek independent professional financial advice. Remember that all investments carry varying levels of risk and that the value of your investment may go down as well as up. Investments in this collective investment undertaking are not considered deposits and are therefore not covered by the Kingdom of Bahrain's deposit protection scheme. The fact that this collective investment undertaking has been authorised by the Central Bank of Bahrain, does not mean that the CBB takes responsibility for the performance of these investments, nor for the correctness of any statements or representations made by the operator of this collective investment undertaking."
(n) General information:(i) A list of the documents constituting theCIU and an address in the Kingdom of Bahrain where they can be inspected free of charge.(ii) The date of publication of the offering document.(iii) A statement that the directors or trustees (as appropriate) of theCIU , together with theCIU's operator , accept responsibility for the information contained in the offering document as being accurate at the date of publication.(iv) A statement thatparticipants will be notified, at least 14 calendar days before the changes take effect, in the following circumstances:a. Any changes in the investment policy;b. Any changes in theoperator ,manager ,administrator orcustodian of theCIU ;c. The merger, division or termination of theCIU ; andd. Any major issues that may affect theparticipants of theCIU .(vi) Details of the documentation to be provided byparticipants in order to satisfy applicable AML/CFT requirements.(o) Termination ofCIU :(i) A summary of circumstances in which theCIU can be terminated.Appendix C — Simplified Prospectus
The
simplified prospectus must contain at the very least the following information:(a) The nature of theCIU , including a brief description of the legal status of theCIU , the date it was established and how long it will continue;(b) TheCIU objectives, investment strategy or management style or policy;(c) The significant benefits to which a client in theCIU will or may become entitled, including details about the circumstances and times at which these benefits will or may be provided, and the way these benefits will or may be provided;(d) The significant risks associated with investing in theCIU ;(e) The costs, fees and other charges or expenses associated with an investment in or redemption of theCIU , including a brief description of how they are determined and whether they are payable directors by clients or theCIU ;(f) Key details about the pricing of theCIU interest and how current pricing information may be obtained;(g) The date of issue and expiry (if applicable) of thesimplified prospectus ;(h) How a client can ask for a fullprospectus or other detailed information about theCIU with an explanation that such information can be obtained free of charge;(i) Key details about theCIU operator (including contact information),manager ,administrator ,custodian , and auditor including their domicile, their key obligations to investors and their relationship to theCIU operator ;(j) In summary form, selected financial information of theCIU — including historic;(k) Performance of theCIU over various time periods, compared to established and consistent benchmarks;(l) In summary form, the key operating rules of theCIU , including the key client rights, such as ability to purchaseholdings , redemption right or cooling off rights; and(m) The statement:"Important — if you are in any doubt about the contents of this simplified prospectus, you should refer to the full prospectus, or else seek independent professional financial advice. Remember that all investments carry varying levels of risk and that the value of your investment may go down as well as up. Investments in this collective investment undertaking are not considered deposits and are therefore not covered by the Kingdom of Bahrain's deposit protection scheme. The fact that this collective investment undertaking has been authorized by the Central Bank of Bahrain, does not mean that the CBB takes responsibility for the performance of these investments, nor for the correctness of any statements or representations made by the
operator of this collective investment undertaking."Appendix D — Admissible Assets and Limits (Retail CIU)
Admissible assets Descriptions and Limits Cash and cash equivalents (including bank deposits and certificates of deposit — i.e. assets that may be realised in cash immediately). • Not more than 20% of total value of theCIU's assets may be placed with a single party (or group of connected counterparties).Transferable securities including equity and debt securities. • Not more than 10% of the total assets of theCIU may be placed with a single party. (Where a stock represents more than 10% of a market index, and theCIU's investment objective is to replicate that market index, then theCIU can hold up to the market weight of the stock in the index.)• Not more than 20% of the total assets of theCIU may be placed with a single group of connected parties.• Securities not regularly traded on a recognised exchange are limited to 10% of the total assets of theCIU .Government and public sector securities issued by GCC andOECD countries.• Not more than 20% of total value of theCIU's assets may be with a single party.Authorised and regulated funds of the open ended type. •Retail CIUs with a 'fund of funds' investment strategy may invest up to 100% of their assets in authorised/regulatedopen-ended funds , providing the investment objectives of these funds is consistent with the investment objective of theCIU , and providing its exposure to any single fund (or group of connected funds) does not exceed 10% of its assets.• OtherCIUs may only invest in authorized/regulatedopen ended funds , consistent with their investment objectives, up to 20% of the total value of theCIU's assets. TheCIU's exposure to any single fund (or group of connected funds) must not exceed 10% of its assets.REITs listed on a recognised exchange• Not more than 20% of total assets of theCIU may be invested in this asset class. Single exposure limit is 10% of theCIU's total assets.Physical commodities and commodity based investments traded on a recognised market. • Not more than 20% of total assets of theCIU may be invested in this asset class. Single exposure limit is 10% of theCIU's total assetsApproved financial derivatives and positions are (i) exchange traded options — long positions; (ii) long positions in forwards and futures; and (iii) sold positions in exchange traded options, forwards and financial futures if matching long positions exist or for hedging purposes. Underlying assets of the derivatives are: • Any of the above, subject to limits specified above.• With respect to interest rate or foreign exchange derivatives, the value of the underlying assets must be restricted to 20% of the total assets of theCIU .Cash and cash equivalents (including bank deposits and certificates of deposit — i.e. assets that may be realised in cash immediately). • Not more than 20% of total value of theCIU's assets may be placed with a single party (or group of connected counterparties).Transferable securities including equity and debt securities • Not more than 10% of the total assets of theCIU may be placed with a single party. (Where a stock represents more than 10% of a market index, and theCIU's investment objective is to replicate that market index, then theCIU can hold up to the market weight of the stock in the index.)• Not more than 20% of the total assets of theCIU may be placed with a single group of connected parties.• Securities not regularly traded on a recognised exchange are limited to 20% of the total assets of theCIU .Government and public sector securities issued by GCC andOECD countries.• Not more than 20% of total value of theCIU's assets may be with a single party.Collective Investment Undertakings • Expert funds with a 'fund of funds' investment strategy may invest up to 100% of their assets in otherCIU (whether regulated or not), providing the investment objectives of these funds is consistent with the investment objective of the expert fund, and providing their exposure to any single fund (or group of connected funds) does not exceed 10% of their assets.• Expert funds without a 'fund of funds' strategy may only invest in otherCIUs , consistent with their investment objectives, up to 20% of the total value of their assetsREITs and real estate holdings• Allowed up to 100% of theCIU's assets. Single exposure limit is 10% of theCIU's total assets.Physical commodities and commodity based investments traded on a recognised market. • Allowed up to 100% of theCIU's assets. Single exposure limit is 10% of theCIU's total assets.Approved financial derivatives and positions are: (i) exchange traded options — long positions; (ii) long positions in forwards and futures; and (iii) sold positions in exchange traded options, forwards and financial futures if matching long positions exist or for hedging purposes Underlying assets of the derivatives are: • Any of the above, subject to limits specified above.• With respect to interest rate or foreign exchange derivatives, the value of the underlying assets must be restricted to 20% of the total assets of theCIU .Appendix E — Contents of Financial Reports
• Annual reports must contain all the information required in this Appendix as well as a report issued by theadministrator .• Half-year reports must contain at the very least the Statement of Assets and Liabilities and the Investment Portfolio Statement.• All reports must contain the comparative figures for the previous period except for the Investment Portfolio Statement.• All reports must be prepared in accordance with International Financial Reporting Standards.Statement of Assets and Liabilities:
The following must be separately disclosed
(a) Total value of investments(b) Bank balances(c) Dividends and other receivables(d) Amounts receivable on subscription(e) Bank loans and overdrafts or other forms of borrowings(f) Amounts payable on redemption(g) Distributions payable(h) Total value of all assets(i) Total value of all liabilities(j) Net asset value(k) Number ofholdings in issue(l) Net asset value perholding Revenue Statement:
(a) Total investment income net of withholding tax, broken down by category(b) Total other income, broken down by category(c) Equalisation on issue and cancellation ofholdings (d) An itemized list of various costs debited to theCIU including:a. Fees paid to theoperator b. Remuneration of theadministrator ,custodian andmanager (as appropriate)c. Fees paid to the investment advisor (if any)d. Other amounts paid to any connectedpersons of theCIU e. Director's fee and remunerationf. Safe custody and bank chargesg. Auditor's remunerationh. Interest on borrowingsi. Legal and other professional expensej. Other(e) Amounts transferred to and from the capital account(f) Net income to be carried forward for distributionDistribution Statement:
(a) Amount brought forward at the beginning of the period(b) Net income for the period(c) Interim distribution perholding and date of distribution(d) Final distribution perholding and date of distribution(e) Undistributed income carried forwardStatement of Movements in Capital Account:
(a) Value of theCIU as at the beginning of the period(b) Number ofholdings issued and the amounts received upon such issuance(c) Number ofholdings redeemed and the amount paid on redemption(d) Any items resulting in an increase/decrease in value of theCIU including:a. Surplus/loss on sale of investmentsb. Exchange gain/lossc. Unrealised appreciation/diminution in value of investmentsd. Net income for the period less distribution(e) Value of theCIU as at the end of the periodNotes to the accounts:
The following matters should be set out in the notes to the accounts:
(a) Principal accounting, investment and risk management policies(b) Transactions with connected persons(c) Details of any soft commission arrangements relating to dealings in the assets of theCIU (d) Borrowings are secured or unsecured and the duration of the borrowings(e) Contingent liabilities and commitments(f) If the free negotiability of any asset is restricted by statutory or contractual requirements, this must be statedContents of the Auditor's Report
The report of the Auditor should state:
(a) Whether, in the auditor's opinion, the accounts prepared for that period have been properly prepared in accordance with the relevant provisions of the rules in this Module;(b) Whether in the auditor's opinion, a true and fair view is given of the financial position of theCIU at the period-end, and of its financial performance and its cash flows for the period then ended, in accordance with International Financial Reporting Standards;(c) Whether, in the auditor's opinion, proper books and records have been kept by theCIU and the accounts prepared are in agreement with theCIU's books and records; and(d) Whether, in the auditor's opinion, theCIU has complied with all applicable laws and regulations.(e) If an auditor of aCIU :a. has reason to believe that the information provided to itsparticipants or to the CBB does not truly describe the financial situation of theCIU , orb. has reason to believe that there has been some breach of theCIU documents, applicable laws and regulations or the CBB's directions, orc. has reason to believe that there exist circumstances which are likely to affect materially the ability of theCIU to fulfill its obligations to itsparticipants or to meet any of its financial obligations under theCIU documents, applicable laws and regulations, or the CBB's directions, ord. has reason to believe that there are material defects in the financial systems, controls or accounting records of theCIU , or has reason to believe that there are material inaccuracies in, or omissions from, any returns of a financial nature made by theCIU and/or, as may be appropriate, any one or more of therelevant persons , to the CBB, ore. proposes to qualify any certificate which he is to provide in relation to the financial statements or returns of theCIU under Bahrain law and these ruleshe shall report the matter to the CBB in writing, with a copy to theCIU and itsrelevant persons , as appropriate, without delay.(f) The auditor of aCIU shall, if requested by the CBB, furnish to it, with a copy to theCIU and/or (as may be appropriate) therelevant persons , a report stating whether in his opinion and to the best of his knowledge theCIU has complied with theCIU documents, applicable laws and regulations, and/or any relevant directions of the CBB. The auditor may be requested by the CBB to supply it with information available to him as a result of his audit of theCIU .Investment Portfolio
(a) Number or quantity of each investment together with the description and market value(b) The total investment stated at cost(c) The value of each investment as a percentage of the net asset value(d) Statement of movements in portfolio investments since the end of the preceding accounting periodPerformance Table
(a) A comparative table covering the last 3 financial years and including, for each financial year, at the end of the financial year :a. The total net asset value; andb. The net asset value perholding .(b) A performance record over the last 10 financial years; or of theCIU has not been in existence during the whole of that period, over the whole period in which it has been in existence, showing the highest issue price and the lowest redemption price of itsholdings during each of those years.MAE — Markets and Exchanges
MAE-B.2 MAE-B.2 Definitions [Version up to 30 June 2016]
MAE-B.2.1 [Version up to 30 June 2016]
"Business Rules" in relation to a
licensed exchange , a futures exchange or alicensed market operator , means the rules, regulations, by-laws or such similar body of statements, by whatever name called, that govern the activities and conduct of:(a) Thelicensed exchange orlicensed market operator or;(b)Members of the respectivelicensed exchange orlicensed market operator ; and(c) Otherpersons in relation to it.MAE-B.2.2 [Version up to 30 June 2016]
This Paragraph has been left blank.
Added: April 2013MAE-B.2.3 [Version up to 30 June 2016]
"Licensed Exchange" means an exchange licensed in respect of the operation of its
market in and from the Kingdom of Bahrain.MAE-B.2.4 [Version up to 30 June 2016]
"Licensed Market Operator" means an
overseas exchange that is licensed by the CBB to operate amarket in the Kingdom of Bahrain.MAE-B.2.5 [Version up to 30 June 2016]
"Listing Rules" in relation to a
licensed exchange or alicensed market operator that establishes or operates or proposes to establish or operate a licensedmarket means rules governing or relating to:(a) The admission to the official list of thelicensed exchange orlicensed market operator of thesecurities of corporations, governments, bodies unincorporated or otherpersons for the purpose of the quotation on thesecurities market of thelicensed exchange ofsecurities issued, or made available by such corporations, governments, bodies unincorporated or otherpersons , or the removal from that official list and for other purposes; or(b) The activities or conduct of corporations governments, bodies unincorporated and otherpersons who are admitted to that list.MAE-B.2.6 [Version up to 30 June 2016]
"Market" means a place at which, or a facility (whether electronic or otherwise) by means of which, offers or invitations to sell, purchase or exchange
securities or futures contracts (including options and derivatives) regularly made on a centralised basis, being offers or invitations that are intended or may reasonably be expected to result, whether directly or indirectly, in the acceptance or making, respectively, of offers to sell, purchase or exchangesecurities orfutures contracts (whether through that place or facility or otherwise).Amended: April 2016MAE-B.2.7 [Version up to 30 June 2016]
An
"exempt exchange" or " exempt market operator" for the purpose of this module means an exchange or amarket operator who has been exempted from the requirement of licensing by the CBB.MAE-B.2.8 [Version up to 30 June 2016]
"Member" in relation to alicensed exchange or alicensed market operator , means aperson who holds membership of any class or description in thelicensed exchange orlicensed market operator , whether or not he holds any share in the share capital of thelicensed exchange ,licensed market operator or designatedclearing house , as the case may be and who has been approved by thelicensed exchange or thelicensed market operator to effect transactions on the floor of the Exchange or under any facility thereofMAE-B.2.9 [Version up to 30 June 2016]
"Overseas Exchange" means an exchange licensed or recognized by a financial services authority in a jurisdiction outside of the Kingdom of Bahrain to operate a licensed
market in that jurisdictionMAE-B.2.10 [Version up to 30 June 2016]
"Participant" means a
person who may participate in one or more of the services provided by alicensed exchange or alicensed market operator in its capacity as alicensed exchange orlicensed market operator respectively.MAE-B.2.11 [Version up to 30 June 2016]
"Person", for the purpose of this Module, shall mean a natural
person , corporation, limited liability company, joint stock company, partnership, association, trust, fund or any organized group ofpersons whether incorporated or not.MAE-B.2.12 [Version up to 30 June 2016]
"Position" in relation to a
securities or futures contract, means asecurities or futures contract which is outstanding and which has not been liquidated:(a) By an off-setting transaction;(b) By delivery of thesecurities or the commodity (or any other asset class) underlying the futures contract;(c) Through settlement of thesecurities or futures contract in accordance with thebusiness rules or practices of asecurities or futuresmarket , as the case may be; or(d) By substituting the futures contract for a cash commodity.MAE-B.2.13 [Version up to 30 June 2016]
"Quote" in relation to
securities and asecurities market of alicensed exchange or of alicensed market operator , means to display or provide, on thesecurities market of thelicensed exchange orlicensed market operator , information concerning the particular prices or particular consideration at which offers or invitations to sell, purchase or exchange issued or prescribedsecurities are made on thatsecurities market , being offers or invitations that are intended or may reasonably be expected to result, directly or indirectly, in the making or acceptance of offers to sell, purchase or exchange issued or prescribedsecurities. MAE-B.2.14 [Version up to 30 June 2016]
"Securities" means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:
(a)Shares in companies and othersecurities equivalent to shares in companies or other entities, and depositary receipts in respect of shares;(b)Bonds or other forms of debt, including depositary receipts in respect of suchsecurities ;(c)Warrants ;(d)Units, rights or interests (however described) of theparticipants in a collective investment scheme;(e)Options, futures and any other derivative contracts relating to commodities that must be settled in cash or may be settlted in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);(f)Options, futures and any other derivative contract relating to commodities that can be physically settled;(g) Units toReal Estate Investment Trusts (REITs) ;(h) Index tracking products including Islamic indices;(i) Any other financial instrument approved as afinancial instrument by the CBB for the purpose of trading such instrument on an exchange; and(j) Islamicsecurities , being thosefinancial instruments that are Shari'a compliant.Amended: April 2016MAE-B.2.15 [Version up to 30 June 2016]
"Transaction Information" means information relating to:
(a) Offers or invitations to purchase, sell, or exchangesecurities orfutures contracts ;(b) Executed transactions insecurities orfutures contracts ; and(c) Transactions cleared or settled by a designatedclearing house .Amended: April 2016MAE-B.2.16 [Version up to 30 June 2016]
"User" in relation to a
licensed exchange or a designatedclearing house , means aperson who is:(a) Amember of alicensed exchange or designatedclearing house ; or(b) A customer of amember of alicensed exchange or designatedclearing house .MAE-B.2.17 [Version up to 30 June 2016]
"User Information" means
transaction information that is referable to:(a) A nameduser of alicensed exchange or designatedclearing house ; or(b) A group ofusers , from which the name of auser can be directly inferred of alicensed exchange or designatedclearing house .MAE-5 MAE-5 Matters Requiring Approval of CBB
MAE-5.3 MAE-5.3 Approval of Chairman, Chief Executive Officer, Director [Version from 1 October 2008 to 31 March 2016]
MAE-5.3.1 [Version from 1 October 2008 to 31 March 2016]
No
licensed exchange shall appoint aperson as its chairman, chief executive officer or director unless thelicensed exchange has obtained the approval of the CBB.MAE-5.3.2 [Version from 1 October 2008 to 31 March 2016]
The CBB may, by notice in writing, require a
licensed exchange to obtain the approval of the CBB for the appointment of anyperson to any key management position or committee of thelicensed exchange and thelicensed exchange shall comply with the notice.MAE-5.3.3 [Version from 1 October 2008 to 31 March 2016]
An application for approval under Paragraph MAE-5.3.1 or MAE-5.3.2 shall be made in such form and manner as the CBB may prescribe and the CBB may require the
licensed exchange to furnish it with such information or documents as the CBB considers necessary in relation to the application referred to in Paragraph MAE-5.3.1 and thelicensed exchange shall furnish such information or documents as required by the CBB.MAE-5.3.4 [Version from 1 October 2008 to 31 March 2016]
The CBB may have regard to the following matters in determining whether to approve or refuse to approve the appointment of a
person under Paragraph MAE-5.3.1 or MAE-5.3.2:(a) Whether theperson is fit and proper to be so appointed;(b) Whether the appointment of theperson would be consistent with any applicable law relating to the qualifications for the position or the requirements for the composition of the board of directors or any committee of thelicensed exchange ; and(c) Whether it would be contrary to the interests of the public to approve the appointment of theperson .MAE-5.3.5 [Version from 1 October 2008 to 31 March 2016]
Subject to Paragraph MAE-5.3.6, the CBB shall not refuse an application for approval under this section without giving the
licensed exchange an opportunity to be heard.MAE-5.3.6 [Version from 1 October 2008 to 31 March 2016]
The CBB may refuse an application for approval on any of the following rounds without giving the
licensed exchange an opportunity to be heard:(a) Theperson is an undischarged bankrupt, whether in Bahrain or elsewhere;(b) Theperson has been convicted, whether in Bahrain or elsewhere, of an offence:1. Involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and2. Punishable with imprisonment for a term of 3 months or more.MAE-5.3.7 [Version from 1 October 2008 to 31 March 2016]
Where the CBB refuses an application for approval under this section, the CBB need not give the
person who was proposed to be appointed an opportunity to be heard.MAE-5.3.8 [Version from 1 October 2008 to 31 March 2016]
A
licensed exchange shall as soon as practicable, give written notice to the CBB of the resignation or removal of its chairman, chief executive officer, director orperson referred to in the notice issued by the CBB under Paragraph MAE-5.3.2.MAE-5.3.9 [Version from 1 October 2008 to 31 March 2016]
The
licensed exchange shall provide for the composition and duties of the board of directors or any committee of alicensed exchange after obtaining CBB approval.MAE-5.3.10 [Version from 1 October 2008 to 31 March 2016]
In this section "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a
member of alicensed exchange .CSD CSD — Clearing, Settlement and Depository
CSD-B.2 CSD-B.2 Definitions [Version up to 30 June 2016]
CSD-B.2.1 [Version up to 30 June 2016]
For the purpose of this Module, unless the context otherwise requires, a list of relevant terms are defined in this section.
CSD-B.2.2 [Version up to 30 June 2016]
"Annual report" means:
(a) In relation to a corporation operating alicensed clearing house orcentral depository , the annual audited financial statements, plus all accompanying notes, auditors' reports, commentaries and disclosures required by IFRS, including the required non-financial, employment and corporate governance disclosures of thelicensed clearing house orcentral depository ; or(b) In relation to any otherperson operating alicensed clearing house orcentral depository , the profit and loss accounts and balance-sheet of theperson in respect of thelicensed clearing house orcentral depository .CSD-B.2.3 [Version up to 30 June 2016]
"Beneficial owner" the term "beneficial owner" of securities refers to any person who, even if not the recorded owner of the securities, has or participates in the underlying benefits of ownership. These benefits include the power to direct the voting or the dispostion of the securities, or to receive the economic benefit of ownership of the securities. A person is also considered to be the "beneficial owner" of securities if that person has the right to acquire such securities within a certain period of time, either by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through issuers in which they have a "controlling interest", which means the direct or indirect power to direct the management and policies of the issuer, or any other entity in question.
CSD-B.2.4 [Version up to 30 June 2016]
"Business rules" are those rules issued by a licensed clearing house or central depository in their capacities as self-regulatory organisations (SROs) to regulate the functions of a licensed clearing house and central depository and the admission, regulation and supervision of their members or participants.
CSD-B.2.5 [Version up to 30 June 2016]
"Central depository" means a central securities depository being any person who is eligible and licensed by the CBB to provide custody services, maintain a central securities register and accounts of central depository participants and evidence and transfer of ownership.
CSD-B.2.6 [Version up to 30 June 2016]
"Clearing member" means a person who is a member of a licensed exchange and a licensed clearing house and a Category 1 Investment Firm Licensee in terms of CBB Rulebook Volume 4 who can execute transactions and clear and settle transactions in a licensed clearing house.
CSD-B.2.7 [Version up to 30 June 2016]
"Clearing house" means any
person who is eligible and licensed by the CBB and acts as the central counterparty in makingpayments ordeliveries or both in connection with transactions insecurities, or who provides facilities for comparison of data in respect of thesettlement ofsecurities transactions, to reduce the number ofsettlements ofsecurities transactions, or for allocation ofsecurities settlement responsibilities.CSD-B.2.8 [Version up to 30 June 2016]
"Custodian" means a person who is licensed to undertake depository participant or clearing member services as a licensed Category 1 Investment Firm in terms of CBB Rulebook Volume 4, including undertaking the business of safeguarding securities and assets on behalf of his clients in terms of this Module.
CSD-B.2.9 [Version up to 30 June 2016]
"Days" unless specifically referred to as business days, means calendar days.
CSD-B.2.10 [Version up to 30 June 2016]
"Dealing" in relation to any deposited security, means the deposit, purchase or sale of
securities , including the charging or pledging of the deposited security by a securities holder and the evidence of ownership.CSD-B.2.11 [Version up to 30 June 2016]
"Default proceedings" means proceedings or other action taken by a
licensed clearing house or acentral depository under itsdefault rules .CSD-B.2.12 [Version up to 30 June 2016]
"Default rules" in relation to a
licensed clearing house orcentral depository , means thebusiness rules of thelicensed clearing house orcentral depository which provide for the taking of proceedings or other action if aclearing member , orparticipant has failed, or appears to be unable or to be likely to become unable, to meet his obligations for all unsettled or open derivativesmarket contracts to which he is a party.CSD-B.2.13 [Version up to 30 June 2016]
"Defaulter" means a clearing member or
participant who is the subject of anydefault proceedings .CSD-B.2.14 [Version up to 30 June 2016]
"Delivery" means the final transfer of a
security by the seller to the buyer.CSD-B.2.15 [Version up to 30 June 2016]
"Dematerialisation" means a process by which evidence of ownership of securities is issued in electronic form or book entries, either at the time of original issue of securities or by subsequent conversion of evidence of ownership in the form of physical certificates into electronic form.
Amended: April 2016CSD-B.2.16 [Version up to 30 June 2016]
"Depository participant" means a member of a
licensed central depository who intermediates between the licensed central depository and the beneficial owner of securities as an agent of the depository.Amended: April 2016CSD-B.2.17 [Version up to 30 June 2016]
"Immobilisation" means a process by which physical securities are held in a licensed central depository for the account of the beneficial owners of such securities and such immobilized securities can either be transferred by electronic or book entries on the records of a licensed central depository.
Amended: April 2016CSD-B.2.18 [Version up to 30 June 2016]
"Issuer" means any
person making an issue ofsecurities .CSD-B.2.19 [Version up to 30 June 2016]
"Market charge" means a security interest, whether fixed or floating, granted in favour of a licensed clearing house or central depository:
(a) Over property held by or deposited with thelicensed clearing house orlicensed central depository ; and(b) To secure liabilities arising directly in connection with thelicensed clearing house orlicensed central depository , ensuring the performance of a market contract.Amended: April 2016CSD-B.2.20 [Version up to 30 June 2016]
"Market collateral" means
property held by, or deposited with, alicensed clearing house orlicensed central depository for the purpose of securing liabilities arising directly in connection with thelicensed clearing house orlicensed central depository , ensuring the performance ofmarket contracts .Amended: April 2016CSD-B.2.21 [Version up to 30 June 2016]
"Market contract or contracts" means:
(a) A contract subject to thebusiness rules of alicensed clearing house orlicensed central depository that is entered into between thelicensed clearing house and a member pursuant to a novation (however described), whether before or afterdefault proceedings have commenced, which is in accordance with thosebusiness rules and for the purposes of the clearing orsettlement of transactions using the clearing facility of thelicensed clearing house ; or(b) A transaction which is being cleared or settled using the clearing facility of alicensed clearing house and in accordance with thebusiness rules of thelicensed clearing house , whether or not a novation referred to in paragraph (a) is to take place.Amended: April 2016CSD-B.2.22 [Version up to 30 June 2016]
"Payment" means the final transfer of funds from the buyer to the seller.
CSD-B.2.23 [Version up to 30 June 2016]
"Position" in relation to a futures contract, means a futures contract which is outstanding and which has not been liquidated:
(a) By an off-setting transaction;(b) Bydelivery of the commodity underlying the futures contract;(c) Throughsettlement of the futures contract in accordance with thebusiness rules or practices of a futures market, as the case may be; or(d) By substituting the futures contract for a cash commodity.CSD-B.2.24 [Version up to 30 June 2016]
"Property" in relation to a
market charge ormarket collateral , means:(a) Money, letters of credit, banker's drafts, certified cheques, guarantees or other similar instruments;(b) Securities listed and deposited with the central depository;(c) Futures contracts and any similar financial contract; or(d) Other assets of value acceptable to alicensed clearing house orlicensed central depository .Amended: April 2016CSD-B.2.25 [Version up to 30 June 2016]
"Record" includes the
records maintained in the form of books or stored in a computer or in such other form as may be determined and approved by the CBB.CSD-B.2.26 [Version up to 30 June 2016]
"Registered owner" means a
person who is listed in theissuer's register as the owner ofsecurities .CSD-B.2.27 [Version up to 30 June 2016]
"Relevant office holder" means:
(a) Aperson acting in relation to a company as its liquidator, its provisional liquidator, its receiver, its receiver and manager, its judicial manager, or an equivalentperson ; or(b) Aperson acting in relation to an individual as his trustee in bankruptcy, the interim receiver of hisproperty or an equivalentperson .CSD-B.2.28 [Version up to 30 June 2016]
"RTGS" means Real Time Gross Settlement System introduced, operated and maintained by the CBB for facilitating on-line real-time settlement of payments in the Kingdom of Bahrain between members admitted to the RTGS system, either on gross basis, or through the Multilateral Net Settlement Batches (MNSB) received from the members and for matters connected therewith, or incidental hereto.
CSD-B.2.29 [Version up to 30 June 2016]
"Securities" means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:
(a)Shares in companies and othersecurities equivalent to shares in companies or other entities, and depositary receipts in respect of shares;(b)Bonds or other forms of debt, including depositary receipts in respect of suchsecurities ;(c)Warrants ;(d)Units, rights or interests (however described) of theparticipants in a collective investment scheme;(e)Options, futures and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);(f)Options, futures and any other derivative contract relating to commodities that can be physically settled;(g) Units toReal Estate Investment Trusts (REITs) ;(h) Index tracking products including Islamic indices;(i) Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such instrument on an exchange; and(j) Islamicsecurities , being those financial instruments that are Shari'a compliant.Amended: April 2016CSD-B.2.30 [Version up to 30 June 2016]
"Securities account" means an account maintained by the
licensed central depository on behalf of the participants and their clients for use in one or more of its services.Amended: April 2016CSD-B.2.31 [Version up to 30 June 2016]
"Settlement bank" means an RTGS member entity licensed by the CBB and appointed by a
licensed clearing house (including the clearing house itself) to settlepayment obligations arising from the transactions of theparticipants of thelicensed clearing house that are cleared or settled by thelicensed clearing house .CSD-B.2.32 [Version up to 30 June 2016]
"Settlement", in relation to a securities trade, means the final transfer of the
securities from the seller to the buyer and the final transfer of funds from the buyer to the seller. When bothdelivery andpayment have occurred, thesettlement process is complete.CSD-B.2.33 [Version up to 30 June 2016]
Settlement , in relation to amarket contract , includes partialsettlement :(a) Where a charge is granted partly for the purpose specified in the definition of "market charge " and partly for any other purpose or purposes, the charge shall be treated as amarket charge under this Module insofar as it has effect for that specified purpose;(b) Where collateral is granted partly for the purpose specified in the definition of "market collateral " and partly for any other purpose or purposes, the collateral shall be treated asmarket collateral under this Module insofar as it has been provided for that specified purpose; and(c) References in this Part tosettlement , in relation to amarket contract , are references to the discharge of the rights and liabilities of the parties to themarket contract , whether by performance, compromise or otherwise.CSD-B.2.34 [Version up to 30 June 2016]
"Settlement Guarantee Fund" means a fund maintained by a licensed clearing house through contributions from its members for providing a cushion against any residual risk to enable the licensed clearing house to eliminate counterparty risk and guarantee timely settlement of transactions.
CSD-B.2.35 [Version up to 30 June 2016]
"Trading Member" means a person including a clearing member, where such member has been accepted in terms of the rules of the licensed clearing house, who is a member of a licensed exchange and who can execute transactions on a licensed exchange or licensed market operator.
Amended: April 2016CSD-5.3 CSD-5.3 Approval of Chairman, Chief Executive Officer, Director and Key Persons
CSD-5.3.1
No
licensed clearing house orcentral depository shall appoint aperson as its chairman, chief executive officer or director, unless thelicensed clearing house orcentral depository has obtained the approval of the CBB.CSD-5.3.2
The CBB may, by notice in writing, require a
licensed clearing house orcentral depository to obtain the approval of the CBB for the appointment of anyperson to any key managementposition or committee of thelicensed clearing house orcentral depository, and thelicensed clearing house orcentral depository shall comply with the notice.CSD-5.3.3
An application for approval under rule CSD-5.3.1 or paragraph CSD-5.3.2 shall be made in such form and manner as the CBB may prescribe; and the CBB may require the
licensed clearing house orcentral depository to furnish it with such information or documents as the CBB considers necessary in relation to the application referred to in rule CSD-5.3.1, and thelicensed clearing house orcentral depository shall furnish such information or documents as required by the CBB.CSD-5.3.4
The CBB may have regard to the following matters in determining whether to approve or refuse to approve the appointment of a
person under rule CSD-5.3.1 or paragraph CSD-5.3.2 of this Module:(a) Whether theperson is fit and proper to be so appointed;(b) Whether the appointment of theperson would be consistent with any applicable written law relating to the qualifications for theposition or the requirements for the composition of the board of directors, or any committee of thelicensed clearing house orcentral depository ; and(c) Whether it would be contrary to the interests of the public to approve the appointment of theperson .CSD-5.3.5
Subject to paragraph CSD-5.3.6, the CBB shall not refuse an application for approval under this section without giving the
licensed clearing house orcentral depository an opportunity to be heard.CSD-5.3.6
The CBB may refuse an application for approval on any of the following grounds without giving the
licensed clearing house orcentral depository an opportunity to be heard:(a) Theperson is an undischarged bankrupt, whether in Bahrain or elsewhere; or(b) Theperson 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; or(ii) Punishable with imprisonment for a term of 3 months or more.CSD-5.3.7
Where the CBB refuses an application for approval under this section, the CBB need not give the
person who was proposed to be appointed an opportunity to be heard.CSD-5.3.8
A
licensed clearing house orcentral depository shall, as soon as practicable, give written notice to the CBB of the resignation or removal of its chairman, chief executive officer, director orperson referred to in the notice issued by the CBB under paragraph CSD-5.3.2.CSD-5.3.9
The CBB may impose regulations relating to the composition and duties of the board of directors or any committee of a
licensed clearing house orcentral depository .CSD-5.3.10
In this section, "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a member or depository participant of a
licensed clearing house orcentral depository .CSD-5.3.11
The CBB may exempt any
licensed clearing house orcentral depository, or a class oflicensed clearing houses orcentral depositories from complying with rules CSD-5.3.1 or CSD-5.3.8, subject to such conditions or restrictions as may be imposed by the CBB.CSD-5.3.12
Where any appointment made in terms of section CSD-5.3 requires the approval of the CBB and the appointment is made without the approval of the CBB, such appointment shall be treated as null and void.
MIR — MIR — Market Intermediaries and Representatives License
MIR-B.2 MIR-B.2 Definitions [Version up to 30 June 2016]
MIR-B.2.1 [Version up to 30 June 2016]
"Business Rules" in relation to a
licensed exchange , a futures exchange or alicensed market operator , means the rules, regulations, by-laws or such similar body of statements, by whatever name called, that governs the activities and conduct of:(a) Thelicensed exchange orlicensed market operator ; or(b)Members of the respectivelicensed exchange orlicensed market operator ; and(c) Otherpersons in relation to it.Adopted January 2010MIR-B.2.2 [Version up to 30 June 2016]
"Broker" means
person who acts as an intermediary between the buyer and seller, usually charging a commission. Abroker who specializes in stocks, debtsecurities , commodities or options acts as agent and must be licensed by the CBB and registered with thelicensed exchange as a member.Adopted January 2010MIR-B.2.3 [Version up to 30 June 2016]
"Chief Executive" or "General Manager" means a
person who is responsible for the conduct of the licensee (regardless of actual title). TheChief Executive orGeneral Manager must be resident in Bahrain. Thisperson is responsible, alone or jointly, for the conduct of the whole of the firm, or, in the case of an Overseas Investment Firm Licensee, for all of the activities of the branch.Adopted January 2010MIR-B.2.4 [Version up to 30 June 2016]
"Client" means a
person with or for whom a licensedmember conducts or intends to conductregulated activities .Amended: April 2013
Adopted January 2010MIR-B.2.5 [Version up to 30 June 2016]
"Client Information" means
transaction information relating to:(a) A namedclient of a licensedmember ; or(b) A group ofclients , from which the name of aclient can be directly inferred from a licensedmember .Amended: April 2013
Adopted January 2010MIR-B.2.6 [Version up to 30 June 2016]
"Dealer" means a
person acting as a principal in asecurities transaction. Principals trade for their own account and risk. When buying from abroker acting as adealer , the customer receivessecurities from the member's inventory; the confirmation must disclose this whendealers trade for their own account as part of their responsibility for maintaining an orderly market. Since most brokerage firms operate as bothbrokers and principals (dealers) the term "broker-dealer" is commonly used.Amended: April 2013
Adopted January 2010MIR-B.2.7 [Version up to 30 June 2016]
"Discount Broker" means a
person who arranges orders to buy and sellsecurities and who supplies these orders to a licensed broker for execution.Amended: April 2013
Adopted January 2010MIR-B.2.8 [Version up to 30 June 2016]
"Director" is any
person who occupies theposition of aDirector , as defined in Article 173 of the Commercial Companies Law (Legislative Decree No. 21 of 2001).Adopted January 2010MIR-B.2.8A [Version up to 30 June 2016]
"External trading member" means an eligible foreign institution who is a member of a
licensed exchange and licensed by the CBB but who conducts their regulated activity (including trading on behalf of their clients) exclusively outside the jurisdiction of the Kingdom of Bahrain.Added: April 2013MIR-B.2.9 [Version up to 30 June 2016]
"Head of Function" means a
person who exercises major managerial responsibilities, is responsible for a significant business or operating unit, or has senior managerial responsibility for maintaining accounts or other records of the licensee.Adopted January 2010MIR-B.2.10 [Version up to 30 June 2016]
"Licensed Exchange" means an exchange licensed by the CBB under the Markets & Exchange Module (MAE) of Rulebook Volume 6.
Amended: April 2013
Adopted January 2010MIR-B.2.11 [Version up to 30 June 2016]
"Licensed Clearing House" means a clearing house and/or depository licensed by the CBB under the Clearing, Settlement and Central Depository Module (CSD) of Rulebook Volume 6.
Adopted January 2010MIR-B.2.12 [Version up to 30 June 2016]
"Licensed Market Operator" means a market operator licensed by the CBB under the Markets and Exchanges Module (MAE) of Rulebook Volume 6.
Adopted January 2010MIR-B.2.13 [Version up to 30 June 2016]
"Licensed Member" for the purpose of this Module means a
member who is licensed by the CBB under this Module.Adopted January 2010MIR-B.2.14 [Version up to 30 June 2016]
"Listing Rules" in relation to a
licensed exchange means rules governing or relating to:(a) The admission to the official list of thelicensed exchange or licensed market operator of thesecurities of corporations, governments, bodies unincorporated or otherpersons for the purpose of the quotation on thesecurities market of thelicensed exchange ofsecurities issued, or made available by such corporations, governments, bodies unincorporated or otherpersons , or the removal from that official list and for other purposes; or(b) The activities or conduct of corporations, governments, bodies unincorporated and otherpersons who are admitted to that list.Adopted January 2010MIR-B.2.15 [Version up to 30 June 2016]
"Market Analysis" means research aimed at predicting or anticipating the direction of stock, debt
securities , or commodity markets based on technical data about the movement of market prices or on fundamental data such as corporate earnings prospect or supply and demand.Adopted January 2010MIR-B.2.16 [Version up to 30 June 2016]
"Market Contract or Contracts" means:
(a) A contract subject to thebusiness rules of alicensed clearing house or central depository that is entered into between thelicensed clearing house and a member pursuant to a novation (however described), whether before or after default proceedings have commenced, which is in accordance with thosebusiness rules and for the purposes of the clearing or settlement of transactions using the clearing facility of thelicensed clearing house ; or(b) A transaction which is being cleared or settled using the clearing facility of alicensed clearing house and in accordance with thebusiness rules of thelicensed clearing house , whether or not a novation referred to in paragraph (a) is to take place.Adopted January 2010MIR-B.2.17 [Version up to 30 June 2016]
"Market Intermediary and Representative" means a
person falling within a category referred to in MIR-2.2.3 which undertakesregulated activities .Adopted January 2010MIR-B.2.17A [Version up to 30 June 2016]
"Market Maker" means a licensed
member authorised by alicensed exchange to provide buy and sell quotes as a principal in a security on a regular and continuous basis at fair market value.Added: April 2013MIR-B.2.18 [Version up to 30 June 2016]
"Member" in relation to an
SRO means aperson who holds membership of any class or description in theSRO , whether or not he holds any share in the share capital of theSRO , as the case may be, and who has been approved by alicensed exchange to effect transactions on the trading system of thelicensed exchange and/or approved by alicensed clearing house to effect the clearing, settlement or depositing ofsecurities thereof.Adopted January 2010MIR-B.2.19 [Version up to 30 June 2016]
"Person", for the purpose of this Module, shall mean a natural
person , corporation, limited liability company, joint stock company, partnership, association, trust, fund or any organized group ofpersons whether incorporated or not.Adopted January 2010MIR-B.2.20 [Version up to 30 June 2016]
"Position" in relation to a
securities or futures contract, means asecurities or futures contract which is outstanding and which has not been liquidated:(a) By an off-setting transaction;(b) By delivery of thesecurities or the commodity (or any other asset class) underlying the futures contract;(c) Through settlement of thesecurities or futures contract in accordance with thebusiness rules or practices of asecurities or futures contracts, as the case may be; or(d) By substituting the futures contract for a cash commodity.Adopted January 2010MIR-B.2.20A [Version up to 30 June 2016]
"Proprietary trading member" means a locally incorporated entity accepted as a member by a
licensed exchange and licensed by the CBB, and who conducts trading only for its own account or funds and who does not trade or accept instructions on behalf of clients or other third parties.Added: April 2013MIR-B.2.21 [Version up to 30 June 2016]
"Registered representative" means an employee of a broker-dealer who acts as an account executive for
clients . As such, theregistered representative gives advice on whichsecurities to buy and sell and he collects a percentage of the commission income he generates as compensation. To qualify as aregistered representative , aperson must acquire a background in thesecurities business and pass a series of tests and other qualifications imposed by the CBB and/orlicensed exchange . "Registered" means licensed or authorised by the CBB and thelicensed exchange .Amended: April 2013
Adopted January 2010MIR-B.2.22 [Version up to 30 June 2016]
"Regulated Activities" for the purpose of this Module means any activity stipulated under the CBB Law Article (80).
Adopted January 2010MIR-B.2.23 [Version up to 30 June 2016]
"Securities" means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:
(a)Shares in companies and othersecurities equivalent to shares in companies or other entities, and depository receipts in respect of shares;(b)Bonds or other forms of debt, including depository receipts in respect of suchsecurities ;(c)Warrants ;(d)Units, rights or interests (however described) of theparticipants in a collective investment scheme;(e)Options, futures and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);(f)Options, futures and any other derivative contract relating to commodities that can be physically settled;(g) Units in Real Estate Investment Trusts (REITs);(h) Index tracking products including Islamic indices;(i) Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such instrument on an exchange; and(j) Islamicsecurities , being those financial instruments that are Shari'a compliant.Adopted January 2010MIR-B.2.24 [Version up to 30 June 2016]
"SRO" means a self-regulatory organization, being a
licensed exchange or market operator, alicensed clearing house or depository under Module MAE and/or Module CSD respectively.Adopted January 2010MIR-B.2.25 [Version up to 30 June 2016]
"Transaction information" means information relating to:
(a) Offers or invitations to purchase, sell, or exchangesecurities or futures contracts;(b) Executed transactions insecurities or futures contracts; and(c) Transactions cleared or settled by a designatedclearing house .Amended: April 2014
Adopted January 2010