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BDE-4.2.1

A Bahrain domiciled expert CIU may enter into permitted financial derivative transactions, provided that the following conditions are adhered to at all times:

(a) The underlying positions continue to satisfy the limits specified in ARR(iv);
(b) The transactions are consistent with the stated investment objectives;
(c) The counterparties are licensed financial institutions or licensed exchanges or clearing houses;
(d) The prospectus of the CIU clearly specifies the use and rationale of such transactions (i.e. for hedging purposes or for achieving investment goals), and provides a clear description of the associated risks, including the risk of volatility in net asset values;
(e) The derivative positions and balances allow independent and reliable daily valuations and can be sold, liquidated or closed by an offsetting transaction at any time, at their fair value and at the initiative of the CIU;
(f) The transactions are subject to sound and documented risk management policies and practices; and
(g) The arrangement is consistent with good market practice.
April 2012