CBB Volume 1: Contents

Central Bank of Bahrain Volume 1—Conventional Banks
Part A
Business Standards
BC Business and Market Conduct
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Location: Central Bank of Bahrain Volume 1—Conventional Banks > Part A > Business Standards > BC Business and Market Conduct > BC-8 Investment Business Activities
  • BC-8 Investment Business Activities

    • BC-8.1 Scope of Application in Relation to Customer Categories

      • BC-8.1.1

        This Chapter provides for two categories of customersG , and applies different levels of protection to each, depending on their level of sophistication.

        Added: April 2008

      • BC-8.1.2

        The scope of application of this Chapter BC-8 with regards to customerG categories is as follows:

        Section Subject Matter Customer Category
        BC-8.3 Overarching Principles All categories.
        BC-8.4 Customer Classification All categories.
        BC-8.5 Marketing and Promotion All categories; BC-8.5.3 and BC-8.5.4 apply to retail customers only.
        BC-8.6 Accepting Customers Retail customers only.
        BC-8.7 Suitability Retail customers only.
        BC-8.8 Disclosure of Information All categories; BC-8.8.5 to BC-8.8.12 apply to retail customers only.
        BC-8.9 Dealing and Managing All categories; various Rules apply to retail customers only.
        BC-8.10 Reporting to Customers All categories.
        BC-8.11 Complaints All categories.
        BC-8.12 Conflicts of Interest All categories.
        BC-8.13 Appendix All categories; various Paragraphs apply to retail customers only.


        Added: April 2008

      • Overseas Branches and Subsidiaries

        • BC-8.1.3

          Locally incorporated conventional bank licenseesG must ensure that their branches and subsidiaries operating in foreign jurisdictions comply, at a minimum, with local conduct of business standards and regulatory requirements (where applicable).

          Added: April 2008

        • BC-8.1.4

          For branches of foreign banks located in Bahrain, these requirements only apply to the business and customersG of the Bahrain branch.

          Amended: January 2011
          Added: April 2008

        • BC-8.1.5

          The CBB encourages locally incorporated conventional bank licenseesG to apply — with respect to their overseas branches and subsidiaries — conduct of business standards at least equivalent to those set out in this Module. Where this is not the case, then the CBB will consider any potential risk to the conventional bank licenseeG that may arise through adverse reputational or other consequences.

          Amended: January 2011
          Added: April 2008

    • BC-8.2 General Rules

      • BC-8.2.1

        This Module applies to the regulated banking servicesG listed in Subparagraphs LR-1.3.1 (h to l) of all conventional bank licenseesG .

        Amended: April 2012
        Amended: January 2011
        Added: April 2008

      • BC-8.2.2

        This Module aims to encourage high standards of business conduct, which are broadly applicable to all conventional bank licenseesG , all regulated banking servicesG referred to in Paragraph BC-8.2.1, and all types of customersG . The CBB, nevertheless, recognises that customersG ' level of sophistication and understanding of risks underlying financial instruments vary. Accordingly, the level of safeguards provided for in the business conduct requirements for retail customersG , for instance, are different from those for accredited investors.

        Amended: January 2011
        Added: April 2008

      • BC-8.2.3

        This Chapter comprises a number of overarching principles of business conduct, with respect to the conduct of regulated banking servicesG by conventional bank licenseesG ; these cover the various stages of the life of a customerG relationship.

        Added: April 2008

      • BC-8.2.4

        Conventional bank licenseesG must maintain adequate records to demonstrate compliance with the requirements in this Chapter.

        Added: April 2008

      • BC-8.2.5

        The CBB will monitor compliance with this Chapter. If required, the CBB may develop more detailed rules and guidance to supplement the existing IBCP.

        Added: April 2008

    • BC-8.3 Overarching Principles

      • BC-8.3.1

        In the course of offering regulated banking servicesG listed in Paragraph BC-8.2.1, licensees must:

        (a) Act with due skill, care and diligence in all dealings with customersG ;
        (b) Act fairly and reasonably in all dealings with customersG ;
        (c) Identify customers'G specific requirements in relation to the products and services about which they are enquiring;
        (d) Ensure that any advice to customersG is aimed at the customers'G interests and based on adequate standards of research and analysis;
        (e) Provide sufficient information to enable customersG to make informed decisions when purchasing investment products and services offered to them;
        (f) Provide sufficient and timely documentation to customersG to confirm that their investment arrangements are in place and provide all necessary information about their products, rights and responsibilities;
        (g) Maintain fair treatment of customersG through the lifetime of the customerG relationships, and ensure that customersG are kept informed of important events;
        (h) Ensure complaints from customersG are dealt with fairly and promptly;
        (i) Ensure that all information provided to customersG is clear, fair and not misleading, and appropriate to customers'G information needs; and
        (j) Take appropriate measures to safeguard any money and property handled on behalf of customersG and maintain confidentiality of customerG information.
        Amended: January 2011
        Added: April 2008

      • BC-8.3.2

        The Rules contained in Chapter BC-8 are largely principles-based and focus on desired outcomes rather than on prescribing detailed measures to achieve those outcomes. This gives conventional bank licenseesG flexibility in how to implement the basic standards prescribed in this Module.

        Added: April 2008

    • BC-8.4 Customer Classification

      • BC-8.4.1

        A conventional bank licenseeG must classify the persons with or for whom it intends to carry on regulated banking servicesG listed in Paragraph BC-8.2.1, in accordance with the requirements in this Section, and communicate its classification to the person concerned. The customer must be notified of his/her customer classification before any documentation is finalised or where regulated banking servicesG or products listed in Paragraph BC-8.2.1 are offered.

        Amended: January 2011
        Added: April 2008

      • BC-8.4.2

        The purpose of the classification is to ensure that conventional bank licenseesGcustomersG are appropriately categorised so that regulatory protections are focused on those classes of customerG that need them most: The following wording may be used for customerG notification of status. ‘According to the Central Bank of Bahrain Rulebook, we are required to notify all customers of their status for the purpose of investment business and certain regulated banking services. For the purpose of this relationship, you are classified as an accredited investor/retail customer.’

        Added: April 2008

      • BC-8.4.3

        Before conducting regulated banking servicesG listed in Paragraph BC-8.2.1 with or for any personG , a conventional bank licenseeG must take reasonable steps to obtain appropriate information to establish whether that personG is an accredited investor or a retail customerG .

        Amended: January 2011
        Added: April 2008

      • BC-8.4.4

        The treatment of a conventional bank licenseeG ’s customersG must be in accordance with the classification it has established for the purpose of Rule BC-8.4.3.

        Added: April 2008

      • BC-8.4.5

        Where specific rules do not exist for a particular class of customersG , the CBB requires appropriate treatment in accordance with the overarching principles set forth in Section BC-8.3.

        Added: April 2008

      • Accredited Investors

        • BC-8.4.6

          For the purpose of Rule BC 8.4.3, an accredited investorG includes:

          (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 in financial instrumentsG (such as state pension funds).
          Amended: January 2011
          Added: April 2008

        • BC-8.4.7

          Conventional bank licenseesG must notify a customerG (that is not licensee of the CBB or a licensed financial institution in a foreign country) in writing, that he is being classified as an accredited investorG and provide a written warning that he will not benefit from the specific protections afforded to retail investors.

          Amended: January 2011
          Added: April 2008

        • BC-8.4.8

          Persons classified as accredited investorsG under Rule BC-8.4.6 may, however, request treatment as retail customersG where the concerned product is a listed security or is retail in nature, in which case conventional bank licenseesG must agree to treat them as retail customersG .

          Amended: January 2011
          Added: April 2008

        • BC-8.4.9

          A retail customerG , as defined in Rule BC-8.4.10, may voluntarily elect to be treated as an accredited investorG . In this instance the conventional bank licenseeG must obtain a signed declaration to that effect prior to any provision of regulated banking servicesG .

          Added: April 2008

      • Retail Customer

        • BC-8.4.10

          For the purposes of Rule BC-8.4.3 a retail customerG means a customerG who is not classified as an accredited investorG under Rule BC-8.4.6 .

          Amended: January 2011
          Added: April 2008

      • Records

        • BC-8.4.11

          A conventional bank licenseeG must make a record of the classification established for each customerG , including sufficient information to support such classification.

          Added: April 2008

    • BC-8.5 Marketing and Promotion

      • BC-8.5.1

        The requirements of this section apply to product specific or service specific material and not to general brand awareness promotional material.

        Added: April 2008

      • BC-8.5.2

        Conventional bank licenseesG must ensure that all advertising and promotional material that is sent to any class of customerG is fair, clear and not misleading.

        Added: April 2008

      • BC-8.5.3

        With respect to retail customersG , in ensuring that the description of the product or the service in the promotional material is fair, clear and not misleading, the conventional bank licenseeG should, among other precautionary measures, ensure that:

        a) The purpose, and to the extent practicable, the content, of the information or communication are likely to be understood by the average member of the group to whom the communication is addressed;
        b) Key items contained in the information are given due prominence;
        c) The method of presentation in the information does not disguise, diminish, or obscure important risks, warnings or information; and
        d) The communication does not omit information that is material to ensure it is fair, clear and not misleading.

        Added: April 2008

      • BC-8.5.4

        In ensuring that the description of the product or the service in the promotional material is fair, the conventional bank licenseeG should avoid exaggerating the potential benefits of the investment service or financial instrumentG in any communication with a retail customerG or potential retail customerG .

        Added: April 2008

      • BC-8.5.5

        In ensuring that the description of the product or the service in relation to promotional material directed at retail customersG is adequate, the conventional bank licenseeG should: ensure that the promotional material contains a balanced description of the main characteristics of the financial instrumentG and/or service state it relates, including the nature of the financial commitment and risks involved; whether or not the financial instrumentsG involved are illiquid, and traded in a recognised exchange or market; the existence or absence of any right of withdrawal or cancellation and, where such a right exists, its duration and the conditions for exercising it, including information on any amount that the retail customerG may be required to pay to exercise that right; and state if the communication relates to a financial instrumentG or service of a person other than the conventional bank licenseeG , the name of the person.

        Added: April 2008

      • BC-8.5.6

        Conventional bank licenseesG must ensure that the accuracy of all material statements of fact in promotional materials is supported by adequate evidence.

        Added: April 2008

      • BC-8.5.7

        Conventional bank licenseesG must not, in any form of communication with an individual customerG or any class of customerG , unreasonably attempt to limit or avoid any duty or liability it may have to that individual customerG or class of customerG in relation to regulated banking servicesG , unless otherwise agreed in writing by both parties.

        Added: April 2008

      • BC-8.5.8

        An example of an unreasonable attempt to limit liability is where a financial product is given protection or compensation status in its home country and such status is not given by the Bahrain Bank (or branch) to its customers.

        Added: April 2008

      • BC-8.5.9

        Conventional bank licenseesG that underwrite or market public offeringsG must ensure that their promotional material complies with the relevant capital markets disclosure standards of the CBB.

        Added: April 2008

      • BD-8.5.10

        Capital markets disclosure standards are currently contained in the Disclosure Standards Regulation of 3 December 2003.

        Added: April 2008

      • Content of Promotions

        • BC-8.5.11

          Before a conventional bank licenseeG communicates any promotional material on a specific product or service to a customerG or a potential customerG it must ensure that the promotional material at the very least contains the information laid out in Paragraph BC-8.13.1.

          Added: April 2008

        • BC-8.5.12

          Conventional bank licenseesG must not make use of the name of the CBB in any promotionG in such a way that would indicate endorsement or approval of its products or services.

          Added: April 2008

        • BC-8.5.12A

          For greater certainty, notification in promotion material that a bank is licensed by the CBB is not regarded as endorsement or approval by the CBB of any products or services being offered by the bank and does not contravene the requirements of Paragraph BC-8.5.12.

          Added: July 2012

      • Records

        • BC-8.5.13

          Conventional bank licenseesG must maintain a record of all promotional materials issued by them or on their behalf.

          Added: April 2008

      • Real Time Promotions

        • BC-8.5.14

          Conventional bank licenseesG must not make a real time promotionG to retail customers unless the concerned customerG has been notified of the fact in advance and has agreed in writing to receive real time promotionsG .

          Added: April 2008

        • BC-8.5.15

          For the purposes of Paragraph BC-8.5.14, a real time promotionG is a promotion made in the course of a personal visit, telephone conversation or other interactive dialogue.

          Added: April 2008

        • BC-8.5.16

          Consent to receive real time promotionsG could be, for instance, at the time of the initial customer profiling, by means of signing a form clearly indicating such consent.

          Added: April 2008

        • BC-8.5.17

          A representative of the conventional bank licenseeG must, on making contact for the first time with a customerG , and again at any time when asked to do so by the customerG :

          (a) Identify himself as being a representative of the conventional bank licenseeG ;
          (b) State the name of the conventional bank licenseeG ; and
          (c) Present the customerG with a business card on meeting that customerG , unless he has given him such a card at a previous meeting. The business card must include a statement of the conventional bank licensee'sG licensing status.
          Amended: October 2010
          Added: April 2008

        • BC-8.5.18

          For the purposes of Rule BC-8.5.17(c), the statement on the business card should make clear the licensing status of the conventional bank licenseeG ; however it should not lead the customer to believe that the product being offered has been approved by the CBB. The suggested wording for the statement of licensing status is as follows: "Licensed as a conventional retail /wholesale bank by the CBB".

          Amended: October 2010
          Added: April 2008

        • BC-8.5.19

          In oral communications with a retail customerG , whether in person or by telephone, the representative of the conventional bank licenseeG must:

          (i) Conduct himself in a polite manner and respect the wishes of the customerG ;
          (ii) State the genuine purpose of the call at the commencement of the conversation;
          (iii) Ascertain whether or not the customerG wishes him to proceed with the conversation if the time of the conversation was not previously agreed by the customerG ;
          (iv) Explain clearly the financial instrumentsG or other services which he is authorised to arrange;
          (v) Recognise and respect the right of the customerG to terminate the call at any time; and
          (vi) If he requests another appointment and the customerG refuses, shall accept that refusal courteously and in such a manner as to cause no embarrassment to the customerG .

          Added: April 2008

        • Records

          • BC-8.5.20

            Conventional bank licenseesG must keep sufficient records of real time promotionsG made by them, or on their behalf by other persons, for CBB’s supervision purposes.

            Added: April 2008

          • BC-8.5.21

            These records should include evidence that customersG have been notified in advance and agreed to receive real time promotionsG , as required under Rule BC-8.5.14.

            Added: April 2008

    • BC-8.6 Accepting Customers

      • Applicability

        • BC-8.6.1

          This Section applies to retail customersG only.

          Added: April 2008

      • Terms of Business

        • BC-8.6.2

          Conventional bank licenseesG must provide their retail customersG with their terms of businessG , setting out the basis on which the regulated banking servicesG are to be conducted (see also Paragraph BC-8.8.13).

          Amended: January 2011
          Added: April 2008

        • BC-8.6.3

          The terms of businessG in relation to providing regulated banking servicesG as defined in Paragraph BC-8.2.1 to a retail customerG must take the form of a customer agreementG .

          Amended: January 2011
          Added: April 2008

        • BC-8.6.4

          The terms of businessG must include the rights and obligations of parties to the agreement, as well as other terms relevant to the regulated banking servicesG . The terms of businessG must include, but are not limited to, the items included in Paragraph BC-8.13.2.

          Added: April 2008

        • BC-8.6.5

          An application form in relation to regulated banking servicesG will be deemed to be a customer agreementG , provided the form includes the principal terms and conditions of the service, such that the customerG is provided sufficient information to allow him to understand the basis on which the service is to be conducted.

          Added: April 2008

        • BC-8.6.6

          The customer agreementG must be provided in good time prior to providing the regulated banking serviceG .

          Added: April 2008

        • BC-8.6.7

          For the purposes of Rule BC-8.6.6, ‘good time’ should be taken to mean sufficient time to enable the customerG to consider properly the service or financial instrumentG on offer before he is bound.

          Added: April 2008

      • Customer Understanding and Acknowledgement

        • BC-8.6.8

          Conventional bank licenseesG must not enter into a customer agreementG unless they have taken reasonable care to ensure that their retail customerG has had a proper opportunity to consider the terms.

          Added: April 2008

        • BC-8.6.9

          Conventional bank licenseesG must obtain their retail customerG ’s consent to the terms of the customer agreementG as evidenced by a signature or an equivalent mechanism.

          Added: April 2008

        • BC-8.6.10

          The equivalent mechanism refers to instances where a customerG may have signed a mandate letter or other document accompanying the terms of the customer agreementG .

          Added: April 2008

        • BC-8.6.11

          The customer agreementG must contain the signatures of both parties to the agreement. If the agreement is signed by only the customerG (in case it is in the form of an application), copies of the signed agreement must be provided by the conventional bank licenseeG to the customerG .

          Added: April 2008

      • Records

        • BC-8.6.12

          Conventional bank licenseesG must keep sufficient records of customer agreementsG and any documents referred to in the customer agreementG as soon as the agreement comes into force, for CBB’s supervision purposes.

          Added: April 2008

        • BC-8.6.13

          Detailed record-keeping requirements are contained in Module GR (General Requirements) and Module FC (Financial Crime).

          Added: April 2008

    • BC-8.7 Suitability

      • Applicability

        • BC-8.7.1

          This Section applies to retail customersG only.

          Added: April 2008

      • Information and Communication

        • BC-8.7.2

          Conventional bank licenseesG must seek information from their retail customersG (and potential retail customersG about their needs, circumstances and investment objectives (including their risk appetite), relevant to the services to be provided.

          Added: April 2008

        • BC-8.7.3

          For the purposes of Rule BC-8.7.2, the conventional bank licenseeG , when providing the regulated investment servicesG , should ask the customerG or potential customerG to provide information regarding his knowledge and experience in the investment field relevant to the specific type of financial instrumentG or service offered or demanded so as to enable the licensee to assess whether the financial instrument or service is appropriate to the customerG . The evaluation of the customer'sG needs, circumstances and investment objectives (including risk appetite) can be done through a structured questionnaire.

          Amended: January 2011
          Added: April 2008

        • BC-8.7.4

          For the purposes of satisfying the requirement under Rule BC-8.7.2, conventional bank licenseesG must ensure that the information and facts they hold about their customersG are accurate, complete and up to date.

          Added: April 2008

        • BC-8.7.5

          Where a conventional bank licenseeG is managing financial instrumentsG for a customerG , it must periodically assess whether the customerG ’s portfolio or account remains suitable over the lifetime of the customerG relationship and advise the customerG if it is no longer suitable.

          Added: April 2008

        • BC-8.7.6

          Where a conventional bank licenseeG has pooled a customerG ’s assets with those of others, with a view to taking common discretionary management decisions, the conventional bank licenseeG must take reasonable steps to ensure that the transaction is suitable for the related customersG having regard to their stated investment objectives.

          Added: April 2008

      • Records

        • BC-8.7.7

          Conventional bank licenseesG must keep a record of each recommendation made to retail customersG , and be able to demonstrate to the CBB compliance with this Section.

          Added: April 2008

    • BC-8.8 Disclosure of Information

      • Applicability

        • BC-8.8.1

          This Section applies to conventional bank licenseesG in relation to their dealings with all categories of customersG , except when stated otherwise.

          Added: April 2008

      • Initial Disclosure Requirement

        • BC-8.8.2

          A conventional bank licenseeG must provide (with respect to regulated banking servicesG ), comprehensible information to customersG or potential customersG on:

          a) Itself and the types of services that it can provide;
          b) Whether it is acting as agent or principal;
          c) Fees, costs and associated charges payable by the customer such as:
          i. The basis or amount of its charges, remuneration and commission for conducting regulated financial services and
          ii. The nature or amount of any other income receivable by it or, to its knowledge, by its associate and attributable to that regulated banking serviceG ;
          d) Financial instrumentsG and proposed strategies and appropriate guidance on and warnings of the risks associated with those financial instrumentsG and strategies; and
          e) Information about methods of redress.

          Added: April 2008

        • BC-8.8.3

          The purpose of Paragraph BC-8.8.2 is to ensure that customersG are reasonably able to understand the nature and risks of the investment service and type of financial instrumentG that is being offered and, consequently, to take investment decisions on an informed basis. This information may be provided in standard format.

          Amended: January 2011
          Added: April 2008

      • Risks

        • BC-8.8.4

          Conventional bank licenseesG must disclose adequate information to all classes of customersG about risks underlying the financial instrumentG that are not readily apparent and which relate to the regulated banking serviceG being provided.

          Added: April 2008

        • BC-8.8.5

          Without prejudice to the scope of the requirement under Rule BC-8.8.2(c), conventional bank licenseesG must provide retail customersG with appropriate guidance on, and warnings of, relevant risks when providing regulated banking servicesG , in relation to:

          (a) Transactions in illiquid financial instrumentsG ;
          (b) Leveraged transactions, including asset portfolios or collective investment schemes that have embedded leverage;
          (c) Financial instrumentsG subject to high volatility in normal market conditions;
          (d) Securities repurchase agreements or securities lending agreements;
          (e) Transactions which involve credit, margin payments, or deposit of collateral;
          (f) Transactions involving material foreign exchange risk;
          (g) Interests in real estate; and/or
          (h) Islamic financial instrumentsG .
          Amended: January 2011
          Added: April 2008

        • BC-8.8.6

          In relation to transactions involving warrants or derivatives, conventional bank licenseesG must provide retail customersG with a written statement that includes explanations of their characteristics, in particular their leverage effect, liquidity and price volatility.

          Added: April 2008

        • BC-8.8.7

          To satisfy Rule BC-8.8.6, with respect to warrants, conventional bank licenseesG should provide retail customersG with a statement that includes, at a minimum, the information contained in Paragraph BC-8.13.3.

          Added: April 2008

        • BC-8.8.8

          To satisfy Rule BC-8.8.6, with respect to futures contracts, conventional bank licenseesG should provide retail customersG with a statement that includes, at a minimum, the information contained in Paragraph BC-8.13.4.

          Added: April 2008

        • BC-8.8.9

          To satisfy Rule BC-8.8.6, with respect to option transactions, conventional bank licenseesG should provide retail customers with a statement that includes, at a minimum, the information contained in Paragraphs BC-8.13.5 and BC-8.13.6.

          Added: April 2008

        • BC-8.8.10

          In relation to a transaction in a financial instrumentG that is not readily realisable, conventional bank licenseesG must:

          (a) Warn the retail customerG that there is a restricted market for such financial instrumentsG , and that it may therefore be difficult to deal in the financial instrumentG or to obtain reliable information about its value; and
          (b) Disclose any position knowingly held by the conventional bank licenseeG or any of its associates in the financial instrumentG or in a related financial instrumentG .

          Added: April 2008

        • BC-8.8.11

          The risk warning given to a retail customerG or potential retail customerG must be given due prominence in all related materials and must not be concealed or masked in any way by the wording, design or format of the information provided.

          Added: April 2008

        • BC-8.8.12

          Risk warnings provided to a retail customerG or potential retail customerG about warrants or derivatives must make clear that the instrument can be subject to sudden and sharp falls in value. Where the retail customerG may not only lose his entire investment but may also be required to pay more later, he must also be warned about this fact and the possible obligation to provide extra funding.

          Added: April 2008

      • Cancellations and Withdrawals

        • BC-8.8.13

          Conventional bank licenseesG must disclose in their terms of business the existence or absence of a right to cancel as per the provisions of Paragraph BC-8.6.2.

          Added: April 2008

        • BC-8.8.14

          Conventional bank licenseesG must pay due regard to the interests of their customersG and treat them fairly.

          Added: April 2008

      • Records

        • BC-8.8.15

          Conventional bank licenseesG must keep a record of statements issued in compliance with Rule BC-8.8.6, and of other information or recommendations provided to their customersG , and be able to demonstrate to the CBB compliance with this Section.

          Added: April 2008

    • BC-8.9 Dealing and Managing

      • BC-8.9.1

        Conventional bank licenseesG must apply the requirements contained in this Section to all customerG categories.

        Added: April 2008

      • Best and Timely Execution

        • BC-8.9.2

          Conventional bank licenseesG must take all reasonable steps to obtain, when executing orders, the best possible result for customersG taking into account price, costs, speed, likelihood of execution and settlement, and any other consideration relevant to the execution of the order (subject to Paragraph BC-8.9.5 below).

          Amended: January 2011
          Added: April 2008

        • BC-8.9.3

          Conventional bank licenseesG must establish and implement effective arrangements for complying with Rule BC-8.9.2 including:

          a) Execution policies for each class of financial instrumentG ;
          b) Maintenance of and disclosure to customersG of information regarding execution venues and arrangements for disclosure to customersG if orders are to be executed outside regulated markets;
          c) Monitoring of effectiveness of the order execution arrangements and execution policies in order to identify and, where appropriate, correct any deficiencies; and
          d) Maintenance of audit trails to demonstrate to their customersG that orders were executed in accordance with the relevant execution policy.

          Added: April 2008

        • BC-8.9.4

          Conventional bank licenseesG are not required to provide best execution (as defined in Paragraph BC-8.9.5 below) where they have agreed with the customerG in writing that they will not provide best execution.

          Amended: January 2011
          Added: April 2008

        • BC-8.9.5

          In determining whether a conventional bank licenseeG has taken reasonable care to provide the best overall price for a customerG in accordance with Rules BC-8.9.2 to BC-8.9.4, the CBB will take into account whether an conventional bank licenseeG has:

          (a) Executed orders promptly and sequentially;
          (b) Discounted any fees and charges previously disclosed to the customerG ;
          (c) Disclosed the price at which an order is executed; and
          (d) Taken into account the available range of price sources for the execution of its customersG ’ transactions. In the case where the conventional bank licenseeG has access to prices of different regulated financial markets or alternative trading systems, it must execute the transaction at the best overall price available having considered other relevant factors.

          Added: April 2008

        • BC-8.9.6

          Conventional bank licenseesG may only postpone the execution of a transaction if it is in the best interests of the customerG , and the prior consent of the customerG has been given, or when circumstances are beyond its control. The conventional bank licenseeG must maintain a record of all postponements together with the reasons for the postponement.

          Added: April 2008

        • BC-8.9.7

          Factors relevant to whether the postponement of an existing customerG order may be in the best interests of the customerG include where:

          (a) The customerG order is received outside of normal trading hours;
          (b) A foreseeable improvement in the level of liquidity in the financial instrumentG is likely to enhance the terms on which the conventional bank licenseeG can execute the order; or
          (c) Executing the order as a series of partial executions over a period of time is likely to improve the terms on which the order as a whole is executed.

          Added: April 2008

      • Non-market Price Transactions

        • BC-8.9.8

          Conventional bank licenseesG must not enter into a non-market price transaction in any capacity, with or for a customerG , if it has reasonable grounds to suspect that the customerG is entering into the transaction for an illegal or improper purpose.

          Added: April 2008

        • BC-8.9.9

          For the purposes of Paragraph BC-8.9.8, a non-market price transaction is one where the price paid by the conventional bank licenseeG , or its customerG , differs from the prevailing market price. With respect to transactions in financial instrumentsG traded on a licensed exchangeG , licensees are reminded that in Bahrain the law prohibits off-market transactions.

          Amended: January 2011
          Added: April 2008

        • BC-8.9.10

          For the purposes of Paragraph BC-8.9.8, examples of improper purposes for transactions include:

          (a) The perpetration of a fraud;
          (b) The disguising or concealment of the nature of a transaction or of profits, losses or cash flows;
          (c) Transactions which amount to market abuse;
          (d) High-risk transactions under the Anti Money Laundering Regulations; and
          (e) "Window dressing", in particular around the year end, to disguise the true financial position of the person concerned.

          Added: April 2008

        • BC-8.9.11

          Rule BC-8.9.8 does not apply to a non-market-price transaction if it is subject to the rules of a recognised investment exchange.

          Added: April 2008

      • Aggregation and Allocation

        • BC-8.9.12

          Conventional bank licenseesG may only aggregate an order for a customerG with an order for other customers, or with an order for its own account, where:

          (a) It is unlikely that the aggregation will disadvantage the customersG whose orders have been aggregated; and
          (b) It has disclosed to each customerG concerned in writing that it may aggregate orders, where these work to the customer’s advantage.

          Added: April 2008

        • BC-8.9.13

          If a conventional bank licenseeG has aggregated orders of customersG , it must make a record of the intended basis of allocation and the identity of each customerG before the order is effected (subject to the "best execution" provisions of Paragraph BC-8.9.2).

          Amended: January 2011
          Added: April 2008

        • BC-8.9.14

          Where an allocation takes place, prices must not be changed. The order must be allocated equally so that no customer or broker is advantaged over any change.

          Amended: April 2013
          Added: April 2008

        • BC-8.9.15

          Conventional bank licenseesG must have written policies on aggregation and allocation which are consistently applied; these must include the policy that will be adopted when only part of the aggregated order has been filled.

          Added: April 2008

        • BC-8.9.16

          Where a conventional bank licenseeG has aggregated a customerG order with an order for other customersG or with an order for its own account, and part or all of the aggregated order has been filled, it must:

          (a) Promptly allocate the financial instrumentsG concerned;
          (b) Allocate the financial instrumentsG in accordance with its stated policy;
          (c) Ensure the allocation is done fairly and uniformly by not giving undue preference to itself or to any of those for whom it dealt;
          (d) Give priority to satisfying customerG orders where the aggregation order combines a customerG order and an own account order, if the aggregate total of all orders cannot be satisfied, unless it can demonstrate on reasonable grounds that without its own participation it would not have been able to execute those orders on such favourable terms, or at all; and
          (e) Make and maintain a record of:
          (i) The date and time of the allocation;
          (ii) The relevant financial instrumentsG ;
          (iii) The identity of each customerG concerned;
          (iv) The amount allocated to each customerG and to the conventional bank licenseeG ; and
          (v) The price of each financial instrumentG and allocation.
          Amended: April 2013
          Added: April 2008

      • Excessive Dealing

        • BC-8.9.17

          Conventional bank licenseesG must not advise any customerG to transact with a frequency or in amounts that might result in those transactions being deemed excessive in light of historical volumes, market capitalisation, customer portfolio size and related factors. This Rule does not apply to customersG classified as market counterpartiesG .

          Added: April 2008

      • Right to Realise a Retail Customer's Assets

        • BC-8.9.18

          Conventional bank licenseesG must not realise a retail customerG ’s assets, unless it is legally entitled to do so, and has either:

          (a) Set out in the terms of business:
          (i) The action it may take to realise any assets of the retail customerG ;
          (ii) The circumstances in which it may do so;
          (iii) The asset (if relevant) or type or class of asset over which it may exercise the right; or
          (b) Given the retail customerG written or oral notice of its intention to exercise its rights before it does so.

          Added: April 2008

      • Margin Requirements

        • BC-8.9.19

          Before conducting a transaction with or for a retail customerG , conventional bank licenseesG must notify the customerG of:

          (a) The circumstances in which the customerG may be required to provide any margin;
          (b) The form in which the margin may be provided;
          (c) The steps the conventional bank licenseeG may be required or entitled to take if the customerG fails to provide the required margin, including:
          (i) The fact that the customerG 's failure to provide margin may lead to the conventional bank licenseeG closing out his position after a time limit specified by the firm;
          (ii) The circumstances in which the conventional bank licenseeG will have the right or duty to close out the customerG 's position; and
          (iii) The circumstances, other than failure to provide the required margin, that may lead to the conventional bank licenseeG closing out the customerG ’s position without prior reference to him.

          Added: April 2008

        • BC-8.9.20

          Conventional bank licenseesG must close out a retail customerG 's open position if that customerG has failed to meet a margin call within a maximum of five business days following the date on which the obligation to meet the call accrues, unless:

          (a) The conventional bank licenseeG has received confirmation from a relevant third party (such as a clearing firm) that the retail customerG has given instructions to pay in full; or
          (b) The conventional bank licenseeG has taken reasonable care to establish that the delay is owing to circumstances beyond the retail customerG 's control.
          Amended: January 2011
          Added: April 2008

        • BC-8.9.21

          For the purposes of Rule BC-8.9.20, conventional bank licenseesG may require the closing of a retail customerG ’s open position in less than five business days, for their own risk management purposes.

          Added: April 2008

        • BC-8.9.22

          Conventional bankG licensees must also follow the requirements of Chapter BC-7 concerning the operation of the margin trading system.

          Amended: January 2011
          Added: April 2008

      • Programme Trading

        • BC-8.9.23

          Before a conventional bank licenseeG executes a programme trade, it must disclose to its customerG whether it will be acting as a principal or agent. A conventional bank licenseeG must not subsequently act in a different capacity from that which is disclosed without the prior consent of the customerG .

          Added: April 2008

        • BC-8.9.24

          The term ‘programme trade’ describes a single transaction or series of transactions executed for the purpose of acquiring or disposing of, for a customerG , all or part of a portfolio or a large basket of financial instrumentsG .

          Added: April 2008

        • BC-8.9.25

          Conventional bank licenseesG must ensure that neither they, nor an associate, execute an own account transaction in any financial instrumentG included in a programme trade, unless they have notified the customerG in advance that they may do this, or can otherwise demonstrate that they have provided fair treatment to the customerG concerned.

          Added: April 2008

      • Records

        • BC-8.9.26

          Conventional bank licenseesG must keep a record of each step they undertake in relation to each transaction to demonstrate to the CBB compliance with Section BC-8.9.

          Added: April 2008

    • BC-8.10 Reporting to Customers

      • BC-8.10.1

        Section BC-8.10 applies to all customerG categories.

        Added: April 2008

      • Confirmation of Transactions

        • BC-8.10.2

          When a conventional bank licenseeG executes a transaction in a financial instrumentG for a customerG on a specific order, it must establish procedures to keep the customer informed of the essential details of the transaction and essential information regarding the carrying out of his order.

          Added: April 2008

        • BC-8.10.3

          For the purposes of Rule BC-8.10.2, the essential details of the transaction and essential information regarding the carrying out of the order include:

          (a) Execution price;
          (b) Charges; and
          (c) Date of execution.

          Added: April 2008

        • BC-8.10.4

          For the purposes of Rule BC-8.10.2, conventional bank licenseesG must include at the very least in their confirmation notes, the information included in Paragraph BC-8.13.7.

          Added: April 2008

      • Periodic Statements

        • BC-8.10.5

          Conventional bank licenseesG must promptly and at suitable intervals provide their customersG with a written statement when they:

          (a) Undertake the activity of managing financial instrumentsG ; or
          (b) Operate a customerG 's account containing financial instrumentsG .
          Added: April 2008

        • BC-8.10.6

          Conventional bank licenseesG must provide a periodic statement:

          (a) Monthly, if the customerG is a retail customerG and the retail customer'sG portfolio includes derivative transactions in highly volatile classes of financial instrumentsG or leveraged transactions; or
          (b) At least every six months in other cases.
          Amended: July 2012
          Added: April 2008

        • BC-8.10.7

          Periodic statements, issued in accordance with Rule BC-8.10.6, must contain, at the very least, the information contained in Paragraph BC-8.13.8, as at the end of the period covered.

          Amended: January 2011
          Added: April 2008

        • BC-8.10.8

          Where a conventional bank licenseeG undertakes the activity of managing financial instrumentsG on a discretionary basis, the periodic statements, issued in accordance with Rule BC-8.10.6, must also include at the very least the information included in Paragraph BC-8.13.9.

          Amended: January 2011
          Added: April 2008

        • BC-8.10.9

          In addition to Rules BC-8.10.7 and BC-8.10.8, where the retail customerG may not only lose his entire investment but may also be required to pay more later, conventional bank licenseesG must also include the additional information included in Paragraph BC-8.13.10.

          Added: April 2008

      • Records

        • BC-8.10.10

          Conventional bank licenseesG must immediately record the essential elements of all orders that are received.

          Added: April 2008

        • BC-8.10.11

          For the purposes of Rule BC-8.10.10, essential elements of orders received include the particulars of the customerG and order, time, price of execution, and number of instruments.

          Added: April 2008

        • BC-8.10.12

          Conventional bank licenseesG must record the essential elements of all:

          (a) Orders executed;
          (b) Transactions executed for their own account;
          (c) Non-market price transactions entered into by the conventional bank licenseeG ; and
          (d) Orders that have been aggregated with their basis of allocation.

          Added: April 2008

        • BC-8.10.13

          For purposes of Rule BC-8.10.12, conventional bank licenseesG should include, at the very least, the information provided in Paragraph BC-8.13.9.

          Added: April 2008

        • BC-8.10.14

          Conventional bank licenseesG must make a copy of any confirmation of a transaction or periodic statement provided to a customerG , and retain it for at least five years from the date on which it was provided.

          Added: April 2008

    • BC-8.11 [This section was deleted in October 2011]

      • BC-8.11.1

        [This paragraph was deleted in October 2011]

        Deleted: October 2011
        Added: April 2008

      • BC-8.11.2

        [This paragraph was deleted in October 2011]

        Deleted: October 2011
        Added: April 2008

      • BC-8.11.3

        [This paragraph was deleted in October 2011]

        Deleted: October 2011
        Added: April 2008

      • [Deleted]

        Deleted: October 2011

        • BC-8.11.4

          [This paragraph was deleted in October 2011]

          Deleted: October 2011
          Added: April 2008

        • BC-8.11.5

          [This paragraph was deleted in October 2011]

          Deleted: October 2011
          Added: April 2008

    • BC-8.12 Conflicts of Interest

      • BC-8.12.1

        Conventional bank licenseesG must undertake all reasonable steps to identify conflicts of interest between themselves (or any person directly or indirectly linked to them by control) and their customersG , which may arise in the course of providing a regulated banking serviceG .

        Added: April 2008

      • BC-8.12.2

        Where conflicts arise, conventional bank licenseesG must:

        (a) Disclose any material interest or conflict of interest to the customerG in writing (which may include a disclosure in the conventional bank licenseeG ’s terms of business) either generally or in relation to a specific transaction, and take reasonable steps to ensure that the customerG does not object;
        (b) Establish information barriers between activities such as proprietary trading, portfolio management and corporate finance business; and
        (c) Produce a written policy of independence, which requires an employee to disregard any conflict of interest or material interest when advising a customerG or exercising discretion.

        Added: April 2008

      • BC-8.12.3

        If a conventional bank licenseeG determines that it is unable to manage a conflict of interest or material interest using one of the methods described in Rule BC-8.12.2 it must decline to act for the customerG .

        Added: April 2008

      • Personal Account Transactions

        • BC-8.12.4

          Conventional bank licenseesG must establish and maintain adequate policies and procedures, to ensure that:

          (a) Employees involved with advising and arranging do not undertake a personal account transaction unless:
          (i) The conventional bank licenseeG has, in a written notice, drawn to the attention of the employee the conditions upon which the employee may undertake personal account transactionsG and that the contents of such a notice are made a term of his contract of employment or services;
          (ii) The conventional bank licenseeG has given its written permission to that employee for that transaction or to transactions generally in financial instrumentsG of that kind; and
          (iii) The transaction will not conflict with the conventional bank licenseeG ’s duties to its customersG ;
          (b) It receives prompt notification or is otherwise aware of each employee’s personal account transactionsG ; and
          (c) If an employee’s personal account transactionsG are conducted with the conventional bank licenseeG , each employee’s account must be clearly identified and distinguishable from other customersG ’ accounts.

          Added: April 2008

        • BC-8.12.5

          The written notice in sub-Paragraph BC-8.12.4 (a)(i) must make it explicit that, if an employee is prohibited from undertaking a personal account transactionG , he must not, except in the proper course of his employment:

          (a) Procure another person to enter into such a transaction; or
          (b) Communicate any information or opinion to another person if he knows, or ought to know, that the person will as a result, enter into such a transaction or procure some other person to do so.

          Added: April 2008

        • BC-8.12.6

          Where a conventional bank licenseeG has taken reasonable steps to determine that an employee will not be involved to any material extent in, or have access to information about, the conventional bank licenseeG ’s investment business, then the conditions or restrictions on personal account transactionsG , in Rule BC-8.12.4, need not be applied to that employee.

          Added: April 2008

        • BC-8.12.7

          Conventional bank licenseesG must establish and maintain procedures and controls so as to ensure that an investment analystG does not undertake a personal account transactionG in a financial instrumentG if the investment analystG is preparing investment research:

          (a) On that investment or its issuer; or
          (b) On a related investment, or its issuer;

          until the investment researchG is published or made available to the conventional bank licenseeG ’s customers.

          Added: April 2008

      • Investment Research

        • BC-8.12.8

          Where a conventional bank licenseeG issues investment researchG , its conflict of interest policy must specify the types of investment researchG issued by it. A conventional bank licenseeG that prepares and publishes investment research must have adequate procedures and controls to ensure:

          (a) The effective supervision of investment analystsG by following at the very least the items listed in Paragraph BC-8.13.11;
          (b) That any actual or potential conflicts of interest are managed in accordance with Rule BC-8.12.1; and
          (c) That the investment research issued to customersG is not biased.

          Added: April 2008

        • BC-8.12.9

          Conventional bank licenseesG that publish investment researchG must take reasonable steps to ensure that the investment researchG :

          (a) Identifies the types of customersG for which it is principally intended;
          (b) Distinguishes fact from opinion or estimates, and includes references to sources of data used;
          (c) Specifies the date when it was first published;
          (d) Specifies the period the ratings or recommendations are intended to cover;
          (e) Contains a clear and unambiguous explanation of the rating or recommendation system used;
          (f) Includes a price chart or line graph depicting the performance of the financial instrumentG for the period that the conventional bank licenseeG has assigned a rating or recommendation for that financial instrumentG , which must also show the dates on which the ratings were revised; and
          (g) Includes a distribution of the different ratings or recommendations, in percentage terms:
          (i) For all financial instrumentsG in respect of which the conventional bank licenseeG publishes investment research; and
          (ii) For financial instrumentsG , if any, where the conventional bank licenseeG has undertaken corporate finance business with or for the issuer over the past 12 months.

          Added: April 2008

        • BC-8.12.10

          A conventional bank licenseeG must take reasonable steps to ensure that when it publishes investment researchG , disclosure is made of the following matters:

          (a) Any financial interest or material interest that the investment analystG or a close relative has, which relates to the financial instrumentG ;
          (b) Any shareholding by the conventional bank licenseeG or its associate of 1% or more of the total issued share capital of the issuer;
          (c) Whether the conventional bank licenseeG or its associate acts as corporate broker for the issuer;
          (d) Any material shareholding by the issuer in the conventional bank licenseeG ;
          (e) Any corporate finance business undertaken by the conventional bank licenseeG with or for the issuer over the past 12 months, and any future relevant corporate finance business initiatives; and
          (f) Whether the conventional bank licenseeG is a market maker in the financial instrumentG .
          Amended: January 2011
          Added: April 2008

        • BC-8.12.11

          If a conventional bank licenseeG acts as a manager or co-manager of an initial public offering or a secondary offering it must take reasonable steps to ensure that it does not publish investment researchG relating to the financial instrumentG during the period beginning on the day of publication of the listing particulars or a prospectus relating to the offering of that financial instrumentG and ending on the 30th calendar day after the day on which the financial instrumentG is admitted to trading.

          Amended: January 2011
          Added: April 2008

        • BC-8.12.12

          A conventional bank licenseeG and its associates must not knowingly execute an own account transaction in a financial instrumentG , which is the subject of investment researchG , prepared either by the conventional bank licenseeG or its associate, until the customersG for whom the investment researchG was principally intended have had a reasonable opportunity to act upon it.

          Amended: January 2011
          Added: April 2008

        • BC-8.12.13

          The restriction in Rule BC-8.12.11 does not apply if:

          (a) The conventional bank licenseeG or its associate is a market maker in the relevant financial instrumentG ;
          (b) The conventional bank licenseeG or its associate executes an unsolicited transaction for a customerG ; or
          (c) It is not expected to materially affect the price of the financial instrumentG .

          Added: April 2008

      • Inducements

        • BC-8.12.14

          Conventional bank licenseesG must have systems and controls, policies and procedures to ensure that neither they, nor any of their employees, offer, give, solicit or accept any inducement which is likely to conflict significantly with any duty that they owe to their customersG .

          Added: April 2008

        • BC-8.12.15

          A conventional bank licenseeG may only accept goods and services under a soft dollar agreementG if:

          (a) The goods and services do not constitute an inducement;
          (b) The goods and services are reasonably expected to assist in the provision of regulated investment activities to the conventional bank licenseeG ’s customersG ;
          (c) The agreement is a written agreement for the supply of goods or services described in Rule BC-8.12.14, and these goods and services do not take the form of, or include, cash or any other direct financial benefit; and
          (d) The conventional bank licenseeG makes adequate disclosures regarding the use of soft dollar agreementsG .

          Added: April 2008

        • BC-8.12.16

          For the purpose of Sub-Paragraph BC-8.12.15(d), Paragraph BC-8.13.12 sets out the minimum disclosure requirements.

          Added: April 2008

        • BC-8.12.17

          A soft dollar agreementG is an agreement in any form under which a conventional bank licenseeG receives goods or services in return for investment business put through or in the way of another person.

          Added: April 2008

        • BC-8.12.18

          Before a conventional bank licenseeG enters into a transaction for a customerG , either directly or indirectly, with or through the agency of another person, under a soft dollar agreementG which the conventional bank licenseeG has, or knows that another member of its group has, with that other person, it must disclose to its customerG :

          (a) The existence of the soft dollar agreementG ; and
          (b) The conventional bank licenseeG ’s or its group’s policy relating to soft dollar agreementsG .

          Added: April 2008

        • BC-8.12.19

          If a conventional bank licenseeG has a soft dollar agreementG under which the conventional bank licenseeG deals for a customerG , the conventional bank licenseeG must provide that customerG with information as set out in Paragraph BC-8.13.12.

          Added: April 2008

    • BC-8.13 Appendix

      • BC-8.13.1

        The minimum information that should be contained in promotional material for specific products includes:

        (a) The name of the conventional bank licenseeG communicating the promotional material;
        (b) The conventional bank licenseeG ’s Category of license;
        (c) The conventional bank licenseeG ’s address;
        (d) A description of the main characteristics of the financial instrumentG involved or service offered;
        (e) Suitable warning regarding the risks of the financial instrumentG involved and/or service offered; and
        (f) A clear statement indicating that, if a retail customerG (as defined in Section BC-8.4) is in any doubt about the suitability of the agreement which is the subject of the promotion, he should consult his own financial adviser, or else the conventional bank licenseeG .

        Added: April 2008

      • BC-8.13.2

        The minimum information that should be contained in the terms of business includes:

        (a) The regulatory status of the conventional bank licenseeG ;
        (b) A statement that the licensee is bound by the CBB's regulation and licensing conditions;
        (c) The licensee's name, address, e-mail and telephone number;
        (d) A statement of the products and services provided by the licensee, as permitted by the CBB;
        (e) The total price to be paid by the customerG to the conventional bank licenseeG for its services, or, where an exact price cannot be indicated, the basis for the calculation of the price enabling the customerG to verify it;
        (f) Information on any rights the parties may have to terminate the contract early or unilaterally under its terms, including any penalties imposed by the contract in such cases;
        (g) Where appropriate, the customer'sG investment objectives;
        (h) Where appropriate, the extent to which the conventional bank licenseeG will consider the customers'G personal circumstances when considering suitability (as required under Section BC-8.7) and the details of such matters that will be taken into account;
        (i) Any conflict of interest disclosure as required by Section BC-8.12;
        (j) Any disclosure of soft dollar agreementsG under Section BC-8.12;
        (k) A statement that clearly indicates the following:
        (i) The customer'sG right to obtain copies of records relating to his business with the licensee;
        (ii) The customer'sG record will be kept for 5 years or as otherwise required by Bahrain Law; and
        (l) The name and job title, address and telephone number of the person in the conventional bank licenseeG to whom any complaint should be addressed (in writing) by the customerG .
        Added: April 2008

      • BC-8.13.3

        The minimum information that should be contained in a notice in relation to a warrant includes:
        "A warrant is a time-limited right to subscribe for shares or debentures and is exercisable against the original issuer of the underlying securities. A relatively small movement in the price of the underlying security results in a disproportionately large movement, unfavourable or favourable, in the price of the warrant. The prices of warrants can therefore be volatile. It is essential for anyone who is considering purchasing warrants to understand that the right to subscribe which a warrant confers is invariably limited in time, with the consequence that if the investor fails to exercise this right within the predetermined time-scale then the investment becomes worthless. You should not buy a warrant unless you are prepared to sustain a total loss of the money you have invested plus any commission or other transaction charges."

        Added: April 2008

      • BC-8.13.4

        The minimum information that should be contained in a notice in relation to a futures transaction includes:
        "Transactions in futures involve the obligation to make, or to take, delivery of the underlying asset of the contract at a future date, or in some cases to settle the position with cash. They carry a high degree of risk. The 'gearing' or 'leverage' often obtainable in futures trading means that a small deposit or down payment can lead to large losses as well as gains. It also means that a relatively small movement can lead to a proportionately much larger movement in the value of your investment, and this can work against you as well as for you. Futures transactions have a contingent liability, and you should be aware of the implications of this, in particular the margining requirements."

        Added: April 2008

      • BC-8.13.5

        The minimum information that should be contained in a notice in relation to a purchased option includes:
        "Buying options: buying options involves less risk than selling options because, if the price of the underlying asset moves against you, you can simply allow the option to lapse. The maximum loss is limited to the premium, plus any commission or other transaction charges. However, if you buy a call option on a futures contract and you later exercise the option, you will acquire the future. This will expose you to the risks associated with 'futures' and 'contingent liability investment transactions'."

        Added: April 2008

      • BC-8.13.6

        The minimum information that should be contained in a notice in relation to a written option includes:
        "Writing options: if you write an option, the risk involved is considerably greater than buying options. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you, however far the market price has moved away from the exercise price. If you already own the underlying asset which you have contracted to sell (when the options will be known as 'covered call options') the risk is reduced. If you do not own the underlying asset ('uncovered call options') the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, and then only after securing full details of the applicable conditions and potential risk exposure."

        Added: April 2008

      • BC-8.13.7

        The minimum information that should be included in a transaction confirmation includes:

        (a) The conventional bank licenseeG ’s name and address;
        (b) Whether the conventional bank licenseeG executed the transaction as principal or agent;
        (c) The customerG ’s name, account number or other identifier;
        (d) Where relevant, a description of the collective investment undertaking or fund, including the amount invested or number of units involved;
        (e) Whether the transaction was a sale or purchase;
        (f) The price or unit price at which the transaction was executed;
        (g) If applicable, a statement that the transaction was executed on an execution only basis;
        (h) The date and time of the transaction or a statement that the time of execution will be provided on request;
        (i) Due date and procedure for settlement of transaction and the bank account;
        (j) The amount the conventional bank licenseeG charges in connection with the transaction, including commission charges and the amount of any mark-up or mark-down, fees, taxes or duties;
        (k) The amount or basis of any charges shared with another person or statement that this will be made available on request;
        (l) For collective investment undertakings, a statement that the price at which the transaction has been executed is on a historic price or forward price basis, as the case may be;
        (m) The regulated market on which the transaction was carried out or the fact that the transaction was undertaken outside a regulated market; and
        (n) Whether the retail customerG ’s counterparty was the conventional bank licenseeG itself or any other person in the conventional bank group.

        Added: April 2008

      • BC-8.13.8

        The minimum information that should be included in a periodic statement includes:

        (a) The number, description and value of each financial instrumentG ;
        (b) The amount of cash held;
        (c) The total value of the portfolio; and
        (d) A statement as to the basis on which the value of each financial instrumentG was calculated.

        Added: April 2008

      • BC-8.13.9

        The minimum information that should be included in a periodic statement, where the relationship includes portfolio management, includes:

        (a) A statement of which financial instrumentsG , if any, were at the closing date loaned to any third party and which financial instrumentsG , if any, were at that date charged to secure borrowings made on behalf of the portfolio;
        (b) The aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during that period;
        (c) A management report on the strategy implemented (provided at least yearly);
        (d) Total amount of fees and charges incurred during the period and an indication of their nature;
        (e) Information on any remuneration received from a third party and details of calculation basis;
        (f) Total amount of dividends, interest and other payments received during the period in relation to the customersG ’ portfolio;
        (g) Details of each transaction which have been entered into for the portfolio during the period;
        (h) The aggregate of money and details of all financial instrumentsG transferred into and out of the portfolio during the period;
        (i) The aggregate of any interest payments, including the dates of their application and dividends or other benefits received by the conventional bank licenseeG from the portfolio for its own account during that period;
        (j) A statement of the aggregate charges of the conventional bank licenseeG and its associates; and
        (k) A statement of the amount of any remuneration received by the conventional bank licenseeG or its associates or both from a third party.

        Added: April 2008

      • BC-8.13.10

        The minimum information that should be included in periodic statements, where the relationship includes contingent liability investment transactions, includes:

        (a) The aggregate of money transferred into and out of the portfolio during the valuation period;
        (b) In relation to each open position in the account at the end of the account period, the unrealised profit or loss to the customerG (before deducting or adding any commission which would be payable on closing out);
        (c) In relation to each transaction executed during the account period to close out a customerG ’s position, the resulting profit or loss to the customerG after deducting or adding any commission;
        (d) The aggregate of each of the following in, or relating to, the customerG ’s portfolio at the close of business on the valuation date:
        (i) Cash;
        (ii) Collateral value;
        (iii) Management fees; and
        (iv) Commissions;
        (e) OptionG account valuations in respect of each open optionG contained in the account on the valuation date stating:
        (i) The shareG , or futureG or other financial instrumentG involved;
        (ii) The trade price and date for the opening transaction, unless the valuation statement follows the statement for the period in which the optionG was opened;
        (iii) The market price of the contract; and
        (iv) The exercise price of the contract.

        Added: April 2008

      • BC-8.13.11

        The minimum requirements that should be met where the conventional bank licenseeG prepares and publishes investment researchG include:

        (a) Analysts must not trade in securities or related derivatives ahead of publishing research on the issuer of these securities;
        (b) Analysts must not trade in securities or related derivatives of any issuer that they review in a manner contrary to their existing recommendations except in special circumstances subject to pre-approval by compliance or legal personnel;
        (c) Analysts must not accept inducements by issuers or others with a material interest in the subject matter of investment research; and
        (d) Conventional banks must not promise issuers favorable research coverage, specific ratings or specific target prices in return for a future or continued business relationship, service or investment.
        Amended: January 2011
        Added: April 2008

      • BC-8.13.12

        The minimum requirements that should be met where the conventional bank licenseeG has a soft dollar agreementG under which it deals with customersG include:

        (a) The percentage paid under soft dollar agreementsG of the total commission paid by or at the direction of:
        (i) The conventional bank licenseeG ; and
        (ii) Any other member of the conventional bank licenseeG ’s group which is a party to those agreements;
        (b) The value, on a cost price basis, of the goods and services received by the conventional bank licenseeG under soft dollar agreementsG , expressed as a percentage of the total commission paid by or at the direction of:
        (i) The conventional bank licenseeG ; or
        (ii) Other members of the conventional bank licenseeG ’s group;
        (c) A summary of the nature of the goods and services received by the conventional bank licenseeG under the soft dollar agreementsG ; and
        (d) The total commission paid from the portfolio of that customerG .

        Added: April 2008

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