Back Custom print Link Text Only Rich Text Print

  • CRA-4.5 CRA-4.5 Client Protection

    • Segregation and Handling of Clients' Assets

      • CRA-4.5.1

        Licensees undertaking regulated crypto-asset service and authorised to hold clients’ assets must apply the same standards and comply with the requirements of segregation and handling of clients’ assets Rules set out in this Section.

        Amended: April 2023
        Added: April 2019

      • CRA-4.5.1A

        For the purpose of this Module, “clients assets” means crypto-assets, money and other assets received or held on behalf of a client by the licensee and any crypto-assets, money or other assets accruing therefrom.

        Added: April 2023

      • CRA-4.5.2

        For purposes of safeguarding client's rights in relation to crypto-assets and client money which are held or controlled by the licensee, a licensee must hold clients' money and/or to crypto-assets in specially created and segregated accounts. These accounts must be identified separately from any other accounts used to hold money and/or to crypto-assets belonging to the licensee.

        Amended: April 2023
        Added: February 2019

      • CRA-4.5.3

        A licensee must obtain a written declaration from the entities with whom the licensee has deposited client assets that the said entity renounces and will not attempt to enforce or execute, any charge, right of set-off or other claim against the account.

        Amended: April 2023
        Added: April 2019

    • Client Money Client Money

      • CRA-4.5.4

        A licensee must properly handle and safeguard client money. The arrangement to handle and safeguard client money, must include, but not be limited to the following:

        (a) Establishing one or more client bank accounts with a retail bank licensed in the Kingdom of Bahrain for safekeeping of client money;
        (b) Client money must not be paid out of a client bank account other than for:
        (i) Paying the client on whose behalf it is being held;
        (ii) Meeting the client’s settlement obligations in respect of dealings in crypto-assets carried out by the licensee for the client, being the client on whose behalf it is being held;
        (iii) Paying money that the client owes to the licensee in respect of the conduct of regulated crypto-asset services; or
        (iv) Paying in accordance with the client’s written instructions, including standing authorities or one-off directions; and
        (c) Not used for licensee’s own use or given as collateral for any purpose to a third party or be subject to any restrictions.
        Amended: April 2023
        Added: April 2019

      • CRA-4.5.5

        Client money must be received by the licensee directly into a client bank account.

        Added: April 2019

      • CRA-4.5.5A

        A licensee must match any unidentified receipts in its client bank accounts with all relevant information in order to establish the nature of any payment and the identity of the person who has made it. Where the receipt is not client money, within one business day of becoming so aware, that amount of money should be paid out of the client bank account.

        Added: April 2023

    • Reconciliation of Clients' Money

      • CRA-4.5.6

        Licensees must reconcile, at least on a monthly basis, the balance on each client's money account as recorded by the licensee with the balance on that account as set out in the statement issued by the entity with whom the licensee has deposited clients' money.

        Added: April 2019

      • CRA-4.5.7

        Licensees must also reconcile, at least on a monthly basis, the total of the balances on all clients' money accounts as recorded by the licensee with the total of the corresponding credit balances in respect of each of its clients as recorded by the license.

        Added: April 2019

      • CRA-4.5.7A

        Licensees must ensure that the client money reconciliations referred to in Paragraphs CRA-4.5.6 and CRA-4.5.7 are completed within 10 business days from the end of the months. Any differences, shortfalls and excess balances must be investigated, and corrective measures taken to restore correct client asset balance.

        Added: April 2023

    • Risk Disclosure to Clients

      • CRA-4.5.8

        As part of establishing a relationship with a client, and prior to entering into an initial transaction with such client, licensee must disclose in clear, conspicuous, and legible writing in both Arabic and English languages, all material risks associated with crypto-asset products and services including at a minimum, the following:

        (a) A crypto-asset is not a legal tender and is not backed by the government;
        (b) legislative and regulatory changes or actions at national level or international level may adversely affect the use, transfer, exchange, and value of crypto-assets;
        (c) transactions in crypto-assets may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable;
        (d) some crypto-asset transactions may be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that the client initiates the transaction;
        (e) the value of crypto-assets may be derived from the continued willingness of market participants to exchange fiat currency for crypto-asset, which may result in the potential for permanent and total loss of value of a particular crypto-asset should the market for that crypto-asset disappear;
        (f) the volatility and unpredictability of the price of crypto-assets relative to fiat currency may result in significant loss over a short period of time;
        (g) [This Subparagraph was deleted in April 2023];
        (h) the nature of crypto-assets means that any technological difficulties experienced by the licensee may prevent the access or use of a client's crypto-assets; and
        (i) any investor protection mechanism.
        Amended: April 2023
        Added: April 2019

    • Disclosure of General Terms and Conditions

      • CRA-4.5.9

        When registering a new client, and prior to entering into transactions with such client, a licensee must disclose in clear, conspicuous, and legible writing in both Arabic and English languages, all relevant terms and conditions associated with its products and services including at a minimum, the following:

        (a) the client's liability for unauthorized crypto-asset transactions;
        (b) the client's right to stop payment of a preauthorized crypto-asset transfer and the procedure to initiate such a stop-payment order;
        (c) under what circumstances the licensee will disclose information concerning the client's account to third parties;
        (d) the client's right to receive periodic account statements from the licensee;
        (e) the client's right to receive a confirmation note or other evidence of a transaction;
        (f) the client's right to prior notice of a change in the licensee's rules or policies or terms and conditions; and
        (g) [This Subparagraph was deleted in April 2023].
        (h) cybersecurity risks associated with crypto-assets including the risk of partial or full loss of crypto-assets in the event of a cyber-attack, and measures that have been put in place to mitigate the cyber security risks.
        Amended: April 2023
        Added: April 2019

      • CRA-4.5.9A

        In addition to the disclosure requirements stipulated in Paragraph CRA-4.5.9, Category-1, Category-2 and Category-3 crypto-asset licensees must disclose, in writing, the following information to clients:

        (a) How they execute and route client’s order and source liquidity (e.g. whether they pass or route orders to an exchange to execute). Where the licensee routes client orders to one or more crypto-asset exchanges for execution, it must disclose details of all the crypto-asset exchanges;
        (b) Whether it may carry trading in crypto-assets as principal, and if so, whether, it may trade against client’s position; and
        (c) How it determines the prices of the crypto-assets it quotes to clients.
        Added: April 2023

    • Disclosure of the Terms of Transactions

      • CRA-4.5.10

        Prior to each transaction in a crypto-asset with a client, a licensee must furnish to the client a written disclosure in clear, conspicuous, and legible writing in both Arabic or English languages, containing the terms and conditions of the transaction, which must include, at a minimum, to the extent applicable:

        (a) the amount of the transaction;
        (b) any fees, expenses, and charges borne by the client, including applicable exchange rates;
        (c) the type and nature of the crypto-asset transaction;
        (d) a warning that once executed the transaction may not be undone; and
        (e) such other disclosures as are customarily given in connection with a transaction of this nature.
        Amended: April 2023
        Added: April 2019

    • Acknowledgement of Disclosure

      • CRA-4.5.11

        A licensee must ensure that all disclosures required in this Section are acknowledged as received by clients.

        Added: April 2019

    • Confirmation Note

      • CRA-4.5.12

        Upon completion of any transaction, a licensee must provide to the client a confirmation note containing the following information:

        (a) the type, value, date, and precise time of the transaction;
        (b) the fee charged;
        (c) the exchange rate, if applicable;
        (d) the name and contact information of the licensee, including a telephone number established by the licensee to answer questions and register complaints;
        Added: April 2019

      • CRA-4.5.12A

        Where a client undertakes more than one transaction, the licensee may prepare a single confirmation note which:

        (a) Records all of those transactions; and
        (b) In respect of each of those transactions includes all of the information which would have been required to be included in the confirmation note.
        Added: April 2023

      • CRA-4.5.12B

        Licensees must provide the confirmation note to the client no later than the end of the business day on which the transaction was undertaken.

        Added: April 2023

      • CRA-4.5.13

        [This Paragraph was deleted in April 2023].

        Deleted: April 2023
        Added: April 2019

    • Prevention of Fraud

      • CRA-4.5.14

        Licensees must take reasonable steps to detect and prevent fraud, including by establishing and maintaining a written anti-fraud policy. The anti-fraud policy must, at a minimum, include:

        (a) the identification and assessment of fraud-related risk areas;
        (b) procedures and controls to protect against identified risks;
        (c) allocation of responsibility for monitoring risks and establish real-time/near real-time fraud risk monitoring and surveillance system; and
        (d) procedures for the periodic evaluation and revision of the anti-fraud procedures, controls, and monitoring mechanisms.
        Amended: April 2023
        Added: April 2019

      • CRA-4.5.14A

        A client account must be considered dormant if the client does not trade for a period of 12 (twelve) continuous months. All the accounts designated as dormant need to be monitored carefully in order to avoid unauthorized transactions in the account.

        Added: April 2023

      • CRA-4.5.14B

        If a client wishes to make his/her account active after 12 continuous months or thereafter, the licensee must ensure that the client submits a request to reactivate his/her account. In case there is any change in the information such as; address, contact details, email ID, bank account, financial disclosure provided in KYC at the time of registration as client, the same must be submitted along with the request. After verification of the updated / revised details and approval from the compliance officer or money laundering reporting officer (MLRO), the account can be made active and transactions can take place.

        Added: April 2023

    • Client Agreements and Statements

      • CRA-4.5.15

        Licensees must not provide a regulated crypto-asset service to a client as mentioned unless there is a client agreement entered into between the licensee and the client containing the key information specified in Rule CRA-4.5.16.

        Amended: April 2023
        Added: April 2019

      • CRA-4.5.16

        The client agreement referred to in Rule CRA-4.5.15 must include:

        (a) the name and address of the licensee;
        (b) the regulatory status of the licensee;
        (c) when and how the client agreement is to come into force and how the agreement may be amended or terminated;
        (d) details of fees, costs and other charges and the basis upon which the licensee will impose those fees, costs and other charges;
        (e) sufficient details of the service that the licensee will provide, including where relevant, information about any product or other restrictions applying to the licensee in the provision of its services and how such restrictions impact on the service offered by the licensee; or if there are no such restrictions, a statement to that effect;
        (f) details of any conflicts of interests;
        (g) any soft dollar arrangements;
        (h) key particulars of the licensee's complaints handling procedures or dispute resolution procedure; and
        (i) the crypto-asset risk disclosure referred to in Rule CRA-4.5.8 and disclosure of general terms and conditions referred to in Rule CRA-4.5.9.
        Amended: April 2023
        Added: April 2019

      • CRA-4.5.16A

        Licensees must provide periodic statements i.e. confirmation note, monthly statement of account and annual statement of account to their clients. Licensees may provide to their clients the periodic statement information through their website and/or application. Where a licensee provides the periodic statement through its website and application, the licensee is not required to send the periodic statement to their clients separately.

        Added: April 2023

    • Monthly Statement of Account

      • CRA-4.5.17

        A licensee must prepare and provide a monthly statement of account to the client no later than 7 business days following the month where any of the following circumstances apply:

        (a) During a month, the licensee has provided a confirmation note (refer CRA-4.5.12) or has received funds from the client;
        (b) At any time during a month, the client has an account balance (funds) that is not nil; or
        (c) At any time during a month, crypto-assets are held for the account of the client.
        Added: April 2023

      • CRA-4.5.18

        The monthly statement of account referred to in Paragraph CRA-4.5.17 must include the following information:

        (a) The name and address of the licensee;
        (b) The name, address and account number of the client;
        (c) The date on which the statement of account is issued;
        (d) The outstanding balance of that account as at the beginning and as at the end of the month;
        (e) Details of all transactions undertaken by the client during the month;
        (f) Inward and outward transfer of crypto-assets during the month;
        (g) The quantity, and, in so far as readily ascertainable, the market price and total value of each crypto-asset held at the end of the month;
        (h) Details of all funds credited to and fees and charges levied during the month; and
        (i) Details of any restrictions, such as blocks pursuant to an order by a court or other competent authority.
        Added: April 2023

    • Duty to Provide Statement of Account on Request

      • CRA-4.5.19

        Where a licensee receives a request from a client for a statement of account it must provide the client, as soon as practicable after the date of the request but no later than 5 working days from the date of the request, such statement of account which must include the information required as per Paragraph CRA-4.5.18 for the period specified by the client.

        Added: April 2023

      • CRA-4.5.20

        Where a licensee provides the statement of account at the request of the client (refer to CRA-4.5.19), it may impose a reasonable charge on the client for providing the statement of account.

        Added: April 2023

      • CRA-4.5.21

        A licensee must prepare and provide a statement of account to the client, on an annual basis, no later than the end of the seventh business day after the end of the financial year except under following circumstances:

        (a) There are no transactions;
        (b) The account balance (funds) is nil; and
        (c) The balance of crypto-assets held on behalf of the client is nil.
        Added: April 2023

    • No Restriction on Withdrawal of Client Assets

      • CRA-4.5.22

        Where a client requests for withdrawal of client assets, a licensee, unless the restriction is pursuant to a freeze or block order from a court or due to factors related to money laundering and terror financing (suspicious transactions), must not impose restriction on withdrawal of the client assets held under its control.

        Added: April 2023