Chapter 4 Chapter 4 Membership of the Exchange
Article 15
The membership of the Exchange shall include:
1— Natural and legal stockbrokers.2— Natural and legal market makers.3— Any other natural or legal person to be admitted as a member.Article 16
First: Natural person:
A natural person can be admitted as a broker or market maker subject to the following conditions:
1— He should be a Bahraini national, resident in Bahrain, with the exception of brokers or market makers who are licensed to practice brokerage or market making business in securities, prior to the implementation of the Bahrain Stock Exchange Law and the Internal Regulation.2— The broker should carry out brokerage business on a full-time basis.3— The broker or market maker, must submit to the Exchange final accounts and an annual balance sheet audited by a licensed auditor in accordance with the applicable standards within three months prior to the financial year-end, and shall submit also half-yearly accounts reviewed by a licensed auditor. The Exchange shall have the right to ask, from time to time, for the said documents and information, as and when they are needed (1).4— He should not be less than twenty-five years of age.5— He should be of good conduct and behaviour.6— He should not have been declared bankrupt in Bahrain or abroad, nor previously convicted for a crime and/or by punishment restricting his freedom, or for a crime affecting his integrity or honesty, unless he has been reinstated in all respects.7— His educational qualifications should not be less than the secondary school certificate or its equivalent. Alternatively, he must be experienced in financial or commercial matters, to an extent that is acceptable to the Board. The Board may amend or add any other qualifications as it deems fit.8— He shall participate in the Guarantee Fund during his membership in the Exchange's Clearing, Settlement and Central Depository, with a minimum amount of BD10,000.(2)9— The capital of the market maker should not be less than BD100,000 and the Board may stipulate a higher minimum capital requirement for individual dealers.10— The broker or market maker shall be obliged to pay all his financial obligations, including fees and commissions payable to the Exchange.11— He should be registered with the Ministry of Commerce and Agriculture, and be a member of the Bahrain Chamber of Commerce and Industry.12— He should be aware of the trading and clearing rules applicable on the Exchange.13— A broker or market maker should not transfer or sell the brokerage or market making licence to any other person, without a prior consent of the Board.14— He should comply with all other conditions, stipulated by the Board.Second: Legal person
An entity licensed to carry out brokerage or market making activities shall comply with the following conditions:
1— It should be a Bahraini joint stock company or a limited liability company, whose shareholders are all of Bahraini nationality. The following companies shall be exempted from the above conditions:a— companies permitted to carry out brokerage or market making activities in accordance with the provisions of Legislative Decree No. (18) of 1975, in respect of the Commercial Companies and their organization.b— branches of foreign companies and exempt companies which carry out brokerage and market making activities on international securities.2— The company shall exclusively carry out brokerage or market making activities on securities. It may perform other related activities with the approval of the Board.
As an exception to Article (16) Clause (1) above, foreign brokerage companies may be licensed to undertake the business of securities brokerage or market making on the Exchange, provided that the concerned company should have distinguished experience in the field of securities, deems to enrich the brokerage profession on the Exchange, that could add international dimension to the profession and contribute towards attracting foreign investors.
The same conditions stipulated in the Exchange's Internal Regulation for the admission of Bahrain brokerage companies member at the Exchange shall be applied to foreign brokerage companies subject to the provisions of Article (16) second, in addition to any other conditions specified by the Exchange's Board of Directors(3).3— Brokerage companies and market making companies must submit to the Exchange final accounts and an annual balance sheet audited by a licensed auditor in accordance with the applicable standards within three months prior to the financial year-end and shall submit also half-yearly accounts reviewed by a licensed auditor. The Exchange shall have the right to ask, from time to time, for the said documents and information, as and when they are needed(4).4— The employees performing brokerage and market making functions on behalf of their companies must satisfy the following conditions:a— In respect of the employees in Bahraini companies: he should be a Bahraini national, with educational qualifications of not less than the Investment Representatives Programme Certificate (previously series seven) and a secondary school certificate or equivalent thereof, or alternatively, possess adequate experience in financial and commercial matters, acceptable to the Board.
He should also be of good reputation and exclusively perform his duties on a full-time basis(5).b— In respect of non-Bahraini companies, branches of foreign companies and exempt companies:
The persons performing brokerage and market making functions may be non-Bahraini with academic qualifications of not less than Investment Representatives Programme Certificate (previously series seven) and a university degree or the equivalent thereof or alternatively should possess sufficient experience in financial and commercial matters acceptable to the Board. He should be of good reputation and exclusively perform his duties on a full-time basis. The Board may amend or add to these qualifications, as it deems fit(6).
As an exception to Article (16) Clause (1) above foreign brokerage companies may be licensed to undertake the business of securities brokerage or market making on the Exchange, provided that the concerned company should have distinguished experience in securities, deems to enrich brokerage profession on the Exchange, that could add international dimension to the profession and contribute towards attracting foreign investors.
The conditions of the acceptance of natural and legal persons as brokers or market makers on the Exchange stipulated in Article (16) of the Exchange's Internal Regulation shall be applied to the non-Bahraini brokers or market makers, in addition to any other conditions to be prescribed by the Exchange's Board of Directors(7).5— The company, its manager, partners who are authorised to manage the company or those who assume brokerage or market making functions in the company, should not have been declared bankrupt in Bahrain or abroad, or been convicted of an offence, or punishment restricting his freedom or for a crime affecting his integrity or honesty, unless he has been reinstated.6— The minimum capital of the brokerage company shall be BD30,000 for limited liability companies, and BD200,000 for joint stock companies.
The Board may increase the minimum capital at any time.7— Companies shall during their membership in the Exchange's Clearing, Settlement and the Central Depository participate, in the Guarantee Contribution Fund with a minimum amount of BD.50,000(8).8— The minimum capital for a market making company shall be BD200,000. However, the Board may increase it.9— The company shall be registered with the Ministry of Commerce and Agriculture and a member of the Bahrain Chamber of Commerce and Industry as well.10— The company's representative should have adequate knowledge of the trading and settlement rules applicable on the Exchange.11— Any brokerage or market making company should not transfer or sell its brokerage or market making licence to any other company, without the prior consent of the Board.12— The company shall satisfy any other conditions, stipulated by the Board.
(1) Amended by the Ministerial Resolution No. 1/1999
(2) Amended by Ministerial Resolution No. 4/2000 with respect to the establishment of a Guarantee Contribution Fund at the Bahrain Stock Exchange.
(3) Innovated by Resolution No. 4/1999, Amending certain provisions of the Bahrain Stock Exchange's Internal Regulation.
(4) Amended by Resolution No. 1/1999.
(5) Amended by Resolution No. 2/1999.
(6) Amended by Resolution No. 2/1999.
(7) Amended by Resolution No. 4/1999. In respect of amending certain provisions of the Bahrain Stock Exchange's Internal Regulation.
(8) Amended by Resolution No. 2/2000 in respect of the establishment of the Exchange's collective Guarantee Fund.
Article 17
Brokers registered with the Ministry of Commerce and Agriculture at the time of the issuance of this Internal Regulation, shall apply to the Exchange management within three months from the date this Internal Regulation come into force, for a new licence for undertaking brokerage in securities, in accordance with the terms prescribed in the preceding Article.
Article 18
The application for obtaining a brokerage licence shall be submitted to the Exchange's management, accompanied by all documents establishing compliance with the conditions stipulated in Article 16. The management shall review the applications and make its recommendations to the Board for taking a decision thereupon, which shall be final. Any person whose application has been rejected may appeal against such a decision before the Civil High Court, within sixty days from the date of his notification of such rejection or taking cognizance thereof.
The Board shall, from time-to-time determine the number of brokers, subject to the Exchange's need.
Article 19
Brokerage commission for undertaking brokerage services on the Exchange shall be as follows:
i— A fee of 0.03% (three over one thousand) for the first BD20,000 or less.ii— A fee of 0.2% (two over one thousand) for amounts exceeding BD20,000 and up to BD50,000.iii— A fee of 0.1% (one over one thousand) for amounts exceeding BD50,000.The commission stipulated above shall be considered the base for calculating the Exchange's commission and a broker may charge more or less than the above prescribed commission(1).
The Exchange's commission shall be 20% of the broker's commission chargeable for trading transactions executed in the Trading Floor and according to the above commission categories.
A broker may receive commission from each of the parties of the contract in which he mediated to its conclusion. Each contracting party shall be liable for the payment of commission owed by him to the broker. A broker shall be entitled to payment of commission upon the conclusion of the contract. Such commission shall become payable immediately upon conclusion of the contract, irrespective of whether it has been fully or partially performed.
(1) Amended by Ministerial Resolution No. 1/2000, in respect of defining the broker's commission at the Bahrain Stock Exchange.
Article 20
1— A broker shall conclude all deals for himself, his wife, or one of his relatives of the first degree through another broker, in compliance with the terms stipulated by the Board.2— A broker may not act as an agent as well as a broker in any contract he mediates to conclude.Article 21
Brokers shall undertake to provide all information, particulars, statistics and documents required by the Exchange's management on the form, and at the dates prescribed by the management. The Exchange's management may verify the accuracy of the information and particulars by any method it deems fit.
Article 22
1— A broker shall be prohibited from inducing investors, or procuring clients in a way that may be detrimental to the reputation of the brokerage profession.2— A broker shall inform the Exchange's management before publishing any advertisement for himself or his work through any means of communications.Article 23
A broker shall not conclude any deal in securities before verifying that the relevant share certificate is in the possession of the holder, or his legally appointed representative. In the absence of such share certificates, the broker shall require the concerned parties to obtain a certificate from the issuer, showing the number of shares held and confirming that the share certificate is in the issuer's possession, which certificate is neither mortgaged, attached or lost, or a replacement thereof has been issued.
The broker is barred from concluding deals in disputed securities, or payment of any value of such securities before executing the selling order in the Trading Floor, in compliance with the Exchange's rules and regulations.
Article 24
Brokers shall act on behalf of investors in securities, in compliance with the instructions received from such investors. They should check the identity of the investor, the accuracy of the orders, and the investor's possession of the necessary securities or funds for the soundness of trading.
Article 25
Brokers shall maintain commercial books and records for the registration of all transactions and deals undertaken by them according to their respective dates and times, in the manner prescribed by the Exchange's management. Such books and registers shall be approved by the Exchange's management and shall be subject to its supervision.
Article 26
A broker shall inform the Exchange's management before executing any sell or buy order of a certain type of security as a block to a single investor, if the value of such exceeds the limit prescribed by the Board.
Article 27
A broker may not accept an authorization from any person, if he knows that such a person has appointed another broker for the sale or purchase of the same shares during the prescribed period for trading in those securities.
Article 28
The Board may, as it deems fit, determine the percentage of increase or decrease in the prices of securities during the trading period.
Article 29
The Board shall determine the rules and procedures for trading of securities on the Exchange in accordance with resolutions to be issued by the Board.
Article 30
The trading of securities on the Exchange Floor shall be carried out in accordance with the Resolution No. 4/1999 of the Electronic Trading rules and procedures(1).
(1) Amended by the Minister of provisional Resolution No. 4/1999.
Article 31
Trading transactions pursuant to Court's orders or resolutions adopted by the companies boards of directors, shall be executed in public auctions in the Exchange Floor in accordance with the rules and procedures prescribed by the trading system.
Article 32
A member shall be struck off the members' register for any of the following reasons:
1. If he fails to meet any of the conditions provided for in Article 16 of this Internal Regulation.2. Dismissed by a disciplinary decision.3. Failed to pay the registration fee, annual subscription fee, or the Exchange's commissions.4. If he did not replenish the bank guarantee during the period specified by the Exchange's management.5. If he committed a gross breach of any of the duties or obligations provided by the Exchange's Law or the Internal Regulation.6. If he is declared either bankrupt or deceased.7. If he decided to abandon the profession for good, provided that he should submit a written application to that extent three months prior to ceasing activities.8. If the company has been dissolved by liquidation, or by expiry of its duration.The Board shall issue a resolution deleting the company from the Exchange's membership.
Market Makers
Article 33
No person may carry out the business of market making (dealing in securities), pursuant to Exchange Law and its Internal Regulation, unless he obtains a licence from the Board. The market maker may be a natural or legal person, who must satisfy the conditions provided for herein.
Article 34
The Exchange's management shall review the applications submitted for carrying out the business of market making, and submit its recommendation to the Board for the decision. The decision of the Board in this respect shall be final. The applicant whose application has been rejected shall have the right to appeal against the decision before the Civil High Court within 30 days from the date of notification of such a decision.
Article 35
The Board shall determine the number of market makers, who shall be bound to submit all data, information, particulars and documents required by the Exchange's management subject to the form and on the specified date. The Exchange's administration shall verify the accuracy of such particulars and information, by any means it deems fit.
