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Location: Central Bank of Bahrain Volume 4—Investment Business > Part A > Introduction
  • Introduction

    • UG User's Guide

      • UG-A Introduction

        • UG-A.1 Purpose

          • Executive Summary

            • UG-A.1.1

              The Central Bank of Bahrain ("the CBB"), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, issues regulatory instruments that licensees and other specified persons are legally obliged to comply with. These regulatory instruments are contained in the CBB Rulebook. Much of the Rulebook’s substantive content was previously issued by the Bahrain Monetary Agency (‘the BMA’), and was carried forward when the CBB replaced the BMA in September 2006.

              Amended: January 2007

            • UG-A.1.2

              The Rulebook is divided into 7 Volumes, covering different areas of financial services activity. These Volumes are being progressively issued. Volumes 1 and 2, covering conventional bank licenseesG and Islamic bank licenseesG respectively, were issued in July 2004 and January 2005; Volume 3, covering insurance licenseesG , was issued in April 2005. This Volume (Volume 4), was issued in April 2006. Volume 5 (covering specialised licenseesG ), and Volume 6 (capital markets) are being issued progressively. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.

              Amended: July 2012
              Amended: January 2008
              Amended: January 2007

            • UG-A.1.3

              This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 4 (Investment Business); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.

              Amended: January 2007

            • UG-A.1.4

              Volume 4 (Investment Business) covers investment firm licenseesG , i.e. those CBB licensees that solely undertake regulated investment servicesG . It contains prudential requirements (such as rules on minimum capital and risk management); and conduct of business requirements (such as rules on the giving of investment advice and the treatment of client moneyG ). Collectively, these requirements are aimed at ensuring the safety and soundness of CBB-licensed investment firms, and providing an appropriate level of protection to the clients of such firms.

              Amended: January 2007
              Amended: January 2008

            • UG-A.1.5

              For the sake of clarity, Volume 4 (Investment Business) does not cover requirements that are generally applicable to participants in Bahrain's capital markets, irrespective of whether they are a CBB licensee or not, such as disclosure standards with regards to the issuance of securities or rules against insider trading or other forms of market abuse. Nor does it cover requirements applicable to recognised exchanges (such as the Bahrain Stock Exchange) and their related infrastructure (such as central clearing and depository systems), or the membership rules applicable to members of such exchanges. These other requirements are currently issued separately, in the form of individual instruments issued by the CBB's Capital Markets Supervision Directorate, and the Bahrain Stock Exchange; those issued by the CBB’s Capital Markets Supervision Directorate will be re-issued in 2007/08 as Volume 6 of the CBB Rulebook (see Paragraph UG-A.1.2 above).

              Amended: January 2007

          • Legal Basis

            • UG-A.1.6

              This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 4 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all investment firm licenseesG .

              Amended: January 2011
              Amended: January 2008
              Added: January 2007

            • UG-A.1.7

              For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.

              Added: January 2007

        • UG-A.2 Module History

          • Evolution of Module

            • UG-A.2.1

              This Module was first issued in April 2006 by the BMA, as part of the first phase of Volume 4 (Investment Business) to be released. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

              Amended: January 2007

            • UG-A.2.2

              When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 4 was updated in July 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.

              Added: January 2007

            • UG-A.2.3

              A list of recent changes made to this Module is provided below:

              Module Ref. Change Date Description of Changes
              UG-A.1 07/2007 Updated to reflect new CBB Law: various references changed and new Rule A.1.6 introduced categorising this Module as a Directive.
              UG-1.2 07/2007 New Rules UG-1.2.6 and UG-1.2.7 to reflect the CBB Law; other material reordered as a consequence.
              UG-A.1.6 01/2008 Corrected that this Module applies only to investment firm licensees (including their approved persons).
              UG-3.2.1 01/2008 Updated CBB policy re distribution of hard copies of Volumes of Rulebook.
              Order Form 01/2008 Amended Order Form to reflect new policy re hard copy availability.
              UG-A.1.6 01/2011 Clarified legal basis.
              UG-2.1.2 01/2011 Updated to reflect structure of Volume 5.
              UG-A.1.2, UG-1.2.1 and UG-2.1 07/2012 Various minor corrections to reflect structure of Rulebook, including issuance of Volume 7.
              UG-1.2.1, UG-1.2.7, UG-2.1.2, UG-2.1.3 and UG-2.2.2 10/2012 Various minor amendments.
              UG-3.2 and Annex 01/2013 Amended as CBB Rulebook only now available on CBB Website.
              UG-1.3.4 10/2016 Add section to clarify reference to 'he' 'his' 'she' and 'her'.

          • Superseded Requirements

            • UG-A.2.3

              Deleted: January 2007

            • UG-A.2.4

              Guidance on the implementation and transition to Volume 4 (Investment Business) is given in Module ES (Executive Summary).

      • UG-1 Rulebook Status and Application

        • UG-1.1 Legal Basis

          • General

            • UG-1.1.1

              Volume 4 (Investment Business) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 (‘the CBB Law’). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Articles 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).

              Amended: January 2007

            • UG-1.1.2

              The Purpose Section of each Module specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.

              Amended: January 2007

            • UG-1.1.3

              Investment firm licenseesG that are members of the Bahrain Stock Exchange are reminded that they are also subject to the membership and operating rules of that exchange. These rules are issued by the Bahrain Stock Exchange under powers given the Exchange under the Bahrain Stock Exchange Law, Decree No. 4 of 1987 (as amended by Decree No. 21 of 2002). These rules are additional to the requirements contained in Volume 4 (Investment Business).

              Amended: January 2007

          • CBB's Rulemaking Instruments

            • UG-1.1.4

              Regulations are made pursuant to Article 37 of the CBB Law. These instruments have general application throughout the Kingdom and bind all persons ordinarily affected by Bahraini legislative measures (i.e. residents and/or Bahraini persons wherever situated).

              Added: January 2007

            • UG-1.1.5

              Because Regulations have wide general application, they are subject to two important safeguards: (i) the CBB is under a duty to consult with interested parties and to review and consider their comments; and (ii) the finalised Regulations only become effective after they are published in the Official Gazette.

              Added: January 2007

            • UG-1.1.6

              Directives are made pursuant to Article 38 of the CBB Law. These instruments do not have general application in the Kingdom, but are rather addressed to specific licenseesG (or categories of licenseesG ), approved personsG or registered personsG . Directives are binding on those to whom they are addressed.

              Added: January 2007

            • UG-1.1.7

              Unlike Regulations, there is no duty on the CBB to either consult with addressees or publicise a Directive by publishing it in the Official Gazette (save that an addressee must obviously have actual or constructive notice of a Directive). However, as a matter of general policy, the CBB also consults on Rulebook content issued by way of a Directive.

              Added: January 2007

            • UG-1.1.8

              All of the content of the CBB Rulebook has the legal status of at least a Directive, issued pursuant to Article 38 of the CBB Law. Certain of the requirements contained in the CBB Rulebook may also have the status of a Regulation, in which case they are also separately issued pursuant to Article 37 of the CBB Law and published in the Official Gazette. Where this is the case, then the Rulebook cross-refers to the Regulation in question and specifies the requirements concerned.

              Added: January 2007

            • UG-1.1.9

              In keeping with the nature of these regulatory instruments, Regulations are used to supplement the CBB Rulebook, either where explicitly required under the CBB Law, or where a particular requirement needs to have general applicability, in addition to being applied to licenseesG , approved personsG or registered personsG .

              Added: January 2007

        • UG-1.2 Status of Provisions

          • UG-1.2.1

            The contents of the CBB Rulebook are categorised either as Rules or as Guidance. Rules have a binding effect. If a licensee breaches a Rule to which it is subject, it is liable to enforcement action by the CBB and, in certain cases, criminal proceedings by the Office of the Public Prosecution.

            Amended: October 2012
            Amended: July 2012
            Amended: January 2007

          • UG-1.2.2

            Where relevant, compliance with Guidance will generally lead the CBB to assess that the rule(s) to which the Guidance relates has been complied with. Conversely, failure to comply with Guidance will generally be viewed by the CBB as tending to suggest breach of a Rule.

            Amended: January 2007

          • UG-1.2.3

            The categorisation of each Paragraph within the Rulebook is identified by its text format, as follows:

            •  Rules are in bold, font size 12. The Paragraph reference number is also highlighted in a coloured box.
            •  Guidance is in normal type, font size 11.
            Amended: January 2007

          • UG-1.2.4

            Where there are differences of interpretation over the meaning of a Rule or Guidance, the CBB reserves the right to apply its own interpretation.

            Amended: January 2007

          • UG-1.2.5

            Rule UG-1.2.4 does not prejudice the rights of an authorised person to make a judicial appeal, should it believe that the CBB is acting unreasonably or beyond its legal powers.

            Amended: January 2007

          • UG-1.2.6

            All Rulebook content has the formal status of at least a Directive. Some Rulebook content may also have the status of Regulations. Rulebook content that is categorised as a Rule is therefore legally mandatory and must be complied with by those to whom the content is addressed.

            Amended: January 2007

          • UG-1.2.7

            [This Paragraph was deleted in October 2012].

            Deleted: October 2012

          • UG-1.2.8

            The CBB’s enforcement powers and processes are set out in Module EN.

            Amended: January 2007

        • UG-1.3 Application

          • UG-1.3.1

            Volume 4 of the CBB Rulebook for the most part applies only to investment firm licenseesG , and to individuals undertaking key functions in those licensees (so-called 'approved personsG '). (Representative officesG are subject to the relevant requirements in Volume 5 of the CBB Rulebook.) Most of the content of Volume 4 therefore only has the formal status of a Directive.

            Amended: January 2007
            Amended: January 2008

          • UG-1.3.2

            A few Rules and Guidance have general applicability (and thus also have the formal status of a Regulation): for instance, no one may carry on investment business within or from Bahrain without the appropriate license, and controllersG of investment firm licenseesG are also subject to various requirements.

            Amended: January 2007
            Amended: January 2008

          • UG-1.3.3

            Each Module in Volume 4 (except those listed under the 'Introduction' and 'Sector Guides' headings) contains a Scope of Application Chapter, setting out which Rules and Guidance apply to which particular type of investment firm licenseeG or person, for the Module concerned. In addition, each Rule (or Section containing a series of Rules) is drafted such that its application is clearly highlighted for the user. Finally, each Module, in its Purpose Section, specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module’s requirements.

            Amended: January 2007

          • UG-1.3.4

            All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.

            Added: October 2016

        • UG-1.4 Effective Date

          • UG-1.4.1

            Volume 4 (Investment Business) of the CBB Rulebook was first issued in April 2006. Its contents have immediate effect, subject to any specific transition arrangements that may be specified.

            Amended: January 2007

          • UG-1.4.2

            Module ES (Executive Summary) contains details of the implementation and transition arrangements for Volume 4 (Investment Business).

      • UG-2 Rulebook Structure and Format

        • UG-2.1 Rulebook Structure

          • Rulebook Volumes

            • UG-2.1.1

              The Rulebook is divided into 7 Volumes, covering different areas of financial services activity, as follows:

              Volume 1   Conventional Banks
              Volume 2   Islamic Banks
              Volume 3   Insurance
              Volume 4   Investment Business
              Volume 5   Specialised Activities
              Volume 6   Capital Markets
              Volume 7   Collective Investment Undertakings
              Amended: July 2012
              Amended: January 2007

            • UG-2.1.2

              Volume 5 (Specialised Activities), covers money changersG ; financing companiesG ; representative officesG ; administratorsG ; trust service providersG , micro-finance institutionsG and ancillary services providers.

              Amended: October 2012
              Amended: January 2011
              Amended: January 2008

          • Rulebook Contents (Overview)

            • UG-2.1.3

              Except for Volumes 5, 6 and 7, the basic structure of each Rulebook is the same. Each Volume starts with a contents page and an introduction containing a User's Guide and Executive Summary. Subsequent material is organised underneath the following headings:

              (a) High-level Standards;
              (b) Business Standards;
              (c) Reporting Requirements;
              (d) Enforcement and Redress; and, where appropriate,
              (e) Sector Guides.
              Amended: October 2012
              Amended: July 2012
              Amended: January 2008
              Amended: January 2007

            • UG-2.1.4

              Volume 5 is organised by the Category of specialised firm concerned, whilst Volume 6 by subject area (authorised exchanges; issuers of securities etc).

              Amended: January 2007

            • UG-2.1.5

              The material in Volumes 1–4 is contained in Modules, each covering a specific area of requirements (e.g. capital). In turn, each Module is divided into Chapters, Sections and Paragraphs, as detailed below.

            • UG-2.1.6

              Each Volume has its own appendix Volume containing relevant reporting and authorisation forms; a glossary; and any supplementary information. In all cases, the main Volume is called "Part A" and the appendix Volume is called "Part B".

        • UG-2.2 Volume Structure

          • Modules

            • UG-2.2.1

              Rulebook Volumes are subdivided into Modules, arranged in groups according to their subject matter, underneath the headings listed in Paragraph UG-2.1.3 above.

            • UG-2.2.2

              Each Module in a Volume is referenced using a two-or three-letter code, which is usually a contraction or abbreviation of its title. These codes are used for cross-referencing within the text.

              Amended: October 2012

          • Chapters

            • UG-2.2.3

              Each Module consists of Chapters, categorised into two types:

              • Standard introductory Chapters (referenced with a letter: e.g. UG-A); and
              • Chapters containing the substantive content of the Module (referenced with a number: e.g. CA-1, ML-2, etc.)

            • UG-2.2.4

              The introductory Chapters summarise the purpose of the Module, its history (in terms of changes made to its contents) and, where relevant, lists previously issued circulars and regulations that were replaced by the Rulebook Module. A separate introductory Chapter also prescribes the scope of application of the Module's requirements.

              Amended: January 2007

          • Sections and Paragraphs

            • UG-2.2.5

              Chapters are further sub-divided into Sections: these extend the Chapter numbering (e.g. FC-1.1, FC-1.2, FC-1.3 etc). In turn, Sections are sub-divided into Paragraphs; these extend the Chapter and Section numbering (e.g. FC-1.1.1, FC-1.1.2, FC-1.1.3 etc.). Where appropriate, sub-section headings may be used, to guide the reader through a Section; sub-Section headings are italicised and unnumbered, and act purely as an indicator (without limitation) as to the contents of the Paragraphs that follow.

              Amended: January 2007

          • Table of Contents

            • UG-2.2.6

              Each Volume's contents page lists all the Modules contained within it (Part A) and the information contained in the relevant appendix Volume (Part B).

            • UG-2.2.7

              The contents page of each Module lists the Chapters and Sections it contains, and the latest version date of each Section in issue.

              Amended: January 2007

        • UG-2.3 Format and Page Layout

          • Headers

            • UG-2.3.1

              The top of each page in the Rulebook identifies the Volume, Module and Chapter in question.

          • Footers

            • UG-2.3.2

              The bottom of each page in the Rulebook (on the left hand side) identifies the Module in question, its section and page number. Page numbering starts afresh for each Section: the total number of pages in each Section is shown as well as the individual page number. The bottom right hand side shows an end-calendar quarter issue date. The contents page for each Module, and each Section in a Module, are each given their own issue date. In addition, the Module contents page lists the latest issue date for each Section in that Module. The contents page thus acts as a summary checklist of the current issue date in force for each Section. Further explanation is provided in Section UG-3.1 below.

          • Defined terms

            • UG-2.3.3

              Defined terms used in the Rulebook are underlined. Each Volume has its own glossary listing defined terms and giving their meaning. Definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.

          • Cross-references

            • UG-2.3.4

              Any cross-references given in a text state the Module code, followed (where appropriate) by the numbering convention for any particular chapter, section or paragraph being referred to. For example, the cross-reference FC-1.2.3 refers to the third Paragraph in the second Section of the first Chapter of the Financial Crime Module. Many references will be quite general, referring simply to a particular Module, Chapter or Section, rather than a specific Paragraph.

          • Text format

            • UG-2.3.5

              Each Paragraph is assigned a complete reference to the Module, Chapter, and Section, as well as its own paragraph number, as explained in Paragraph UG-2.3.4 above. The format of the Paragraph reference and text indicates its status as either a Rule or Guidance, as explained in Paragraph UG-1.2.4 above.

            • UG-2.3.6

              When cross-referring to specific Paragraphs, and it is important to make clear the status of the Paragraph in question as a Rule or Guidance, then the words 'Rule' or 'Guidance' may be used instead of 'Paragraph', followed by the reference number (e.g. 'As required by Rule FC-1.1.1, licensees must...').

              Amended: January 2007

      • UG-3 Rulebook Maintenance and Access

        • UG-3.1 Rulebook Maintenance

          • Quarterly Updates

            • UG-3.1.1

              Any changes to the Rulebook are generally made on a quarterly cycle (the only exception being when changes are urgently required), in early January, April, July and October. When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page.

              Amended: January 2007

            • UG-3.1.2

              The contents page for each amended Module is also updated: the table of contents is changed to show the new version date for each amended Section (in the ‘Date Last Changed’ column), and the contents page itself is also given its own new version date in the bottom right-hand corner. The Module contents pages thus act as a checklist for hard-copy users to verify which are the current version dates for each Section in that Module.

              Amended: January 2007

            • UG-3.1.3

              A summary of any changes made to a Module is included in the Module History section of each Module. The table summarises the nature of the change made, the date of the change, and the Module components and relevant pages affected. The Module History can thus be used to identify which pages were updated within individual Sections.

            • UG-3.1.4

              Hard-copy users of the CBB Rulebook can check that they have the latest copy of each Module’s contents pages, by referring to the overall table of contents for each Volume. The Volume table of contents lists the date each Module was last changed; users can use this table to check the date showing in the bottom right-hand corner of each Module’s contents page.

              Amended: January 2007

            • UG-3.1.5

              The website version of the Rulebook acts at all times as the definitive version of the Rulebook. Any changes are automatically posted to the CBB website, together with a summary of those changes. Licensees are in addition e-mailed every quarter, to notify them of any changes (if any). Hard-copy users are invited to print off the updated pages from the website to incorporate in their Rulebook in order to keep it current.

              Amended: January 2007

          • Changes to Numbering

            • UG-3.1.6

              In order to limit the knock-on impact of inserting or deleting text on the numbering of text that follows the change, the following conventions apply:

              (a) Where a new Paragraph is to be included in a Section, such that it would impact the numbering of existing text that would follow it, the Paragraph retains the numbering of the existing Paragraph immediately preceding it, but with the addition of an 'A'; a second inserted Paragraph that follows immediately afterwards would be numbered with a 'B', and so on.

              For example, if a new Paragraph needs to be inserted after UG-3.1.6, it would be numbered UG-3.1.6A; a second new Paragraph would be numbered UG-3.1.6B, and so on. This convention avoids the need for renumbering existing text that follows an insertion. The same principle is applied where a new Section or a new Chapter needs to be inserted: for example, UG-3.1A (for a new Section), and UG-3A (for a new Chapter).
              (b) Where a Paragraph is deleted, then the numbering of the old Paragraph is retained, and the following inserted in square brackets: '[This Paragraph was deleted in April 2006.]' (The date given being the actual end-calendar quarter date of the deletion.) The same principle is applied with respect to Sections and Chapters.
              Amended: January 2007

            • UG-3.1.7

              Where many such changes have built up over time, then the CBB may reissue the whole Section, Paragraph, Chapter or even Module concerned, consolidating all these changes.

              Amended: January 2007

        • UG-3.2 Rulebook Access

          • Availability

            • UG-3.2.1

              The Rulebook is available on the CBB website.

              Amended: January 2013
              Amended: January 2008
              Amended: January 2007

          • Queries

            • UG-3.2.2

              Questions regarding the administration of the Rulebook (e.g. website availability, the updating of material etc) should be addressed to the Rulebook Section of the Licensing & Policy Directorate:

              Rulebook Section
              Licensing & Policy Directorate
              Central Bank of Bahrain
              P.O. Box 27
              Manama
              Kingdom of Bahrain

              Tel: +973-17 547 413
              Fax: +973-17 530 228
              E-mail: rulebook@cbb.gov.bh
              Web: www.cbb.gov.bh

              Questions regarding interpretation of the policy and requirements contained in the Rulebook should be addressed to the licensee's regular supervisory point of contact within the CBB.
              Amended: January 2013
              Amended: January 2007

      • CBB Rulebook Order Form [This form was deleted in January 2013]

        Deleted: January 2013

    • ES Executive Summary

      • ES-A Introduction

        • ES-A.1 Purpose

          • Executive Summary

            • ES-A.1.1

              The purpose of this Module is to:

              (a) Provide an overview of the structure of Volume 4 (Investment Business);
              (b) Provide a summary of each Module; and
              (c) Outline the transition rules for the implementation of Volume 4.
              Amended: January 2007

            • ES-A.1.2

              The Central Bank of Bahrain ('CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, has as its mission:

              (a) To ensure monetary and financial stability in the Kingdom of Bahrain; and
              (b) To regulate, develop and maintain confidence in the financial sector.
              Amended: January 2007

            • ES-A.1.3

              As the single regulator, the CBB ensures the consistent application of regulatory standards in banking, insurance and capital markets, as well as encourages an open and cooperative approach in dealing with financial institutions.

              Amended: January 2007

            • ES-A.1.4

              The supervision of the investment business sector in the Kingdom pays particular regard to the standards set by the International Organisation of Securities Commissions (IOSCO). The CBB plays an important role in meeting stakeholders' expectations — the principal stakeholders of the CBB are the Government of the Kingdom of Bahrain, regulated financial institutions, their clients, IOSCO and other relevant international organisations.

              Amended: January 2007

            • ES-A.1.5

              To carry out its responsibilities in relation to the investment business sector, the CBB has four supervisory objectives, namely to:

              (a) Promote the stability and soundness of the sector;
              (b) Provide an appropriate degree of protection to investors and clients of investment firmsG ;
              (c) Promote transparency and market discipline; and
              (d) Reduce the likelihood of investment firmsG being used for financial crime (including money laundering activities).
              Amended: January 2007

          • Legal Basis

            • ES-A.1.6

              This Module contains the CBB's Directive (as amended from time to time) relating to transition rules and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all investment firm licenseesG (including their approved personsG ).

              Amended: January 2011
              Amended: October 2009
              Amended: January 2007

            • ES-A.1.7

              For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.

              Added: January 2007

        • ES-A.2 Module History

          • Evolution of Module

            • ES-A.2.1

              This Module was first issued in April 2006 by the BMA, as part of the first phase of Volume 4 (Investment Business). Any material changes that have subsequently been made to this Module are annotated with the end calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

              Amended: January 2007

            • ES-A.2.2

              When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 4 was updated in July 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued for Module ES where the update necessitated changes to substance (as opposed to merely updating 'BMA' to 'CBB', and similar references).

              Added: January 2007

            • ES-A.2.3

              A list of recent changes made to this Module is provided below:

              Module Ref. Change Date Description of Changes
              ES-A.1 07/2007 New Rule ES-A.1.6 introduced, categorising this Module as a Directive.
              ES-1.2 07/2007 Text amended to reflect changes to Module UG.
              ES-1.3 07/2007 Text amended to reflect changes to Module AU.
              ES-1.4 07/2007 Text amended to reflect changes to Module PB.
              ES-1.5 07/2007 Updated to reflect issue of Module HC in July 2007.
              ES-1.11 07/2007 Updated to reflect issue of Module RM in July 2007.
              ES-1.15 07/2007 Updated to reflect issue of Module BR in July 2007.
              ES-2.1, ES-2.3 &
              ES-2.4
              07/2007 Changes to reflect slight delay in release of Phase 2 contents of Volume 4: implementation deadline for Modules HC, RM and BR — released in July 2007 — now set as 1 January 2008.
              ES-2.4.1A 07/2008 Further transition period granted for requirements of Chapter BR-1, Prudential Reporting.
              ES-A.1.6 10/2009 Reference to registered administrators removed.
              ES-1.1.1 10/2009 Reference to administrator removed.
              ES-1.1.5 10/2009 Updated to reflect issue of Modules.
              ES-1.3 10/2009 Updated to reflect changes to Module AU.
              ES-1.3.9 10/2009 Reference to registration of administrators removed.
              ES-1.8 10/2009 Updated to reflect changes to Module CA.
              ES-2.4.1A 10/2009 Updated to reflect issue of Form QPR.
              ES-1.1, ES-1.3, ES-1.5.3, ES-1.6.1, ES-1.7, ES-1.15-3, ES-2.2.7, ES-2.3.2 07/2010 Updated and corrected typos.
              ES-1.13 07/2010 Updated to reflect the issuance of Module TC
              ES-2.5 07/2010 New section added to reflect transition rules for Module TC.
              ES-A.1.6 01/2011 Clarified legal basis.
              ES-1.5 04/2011 Amended to reflect new structure of Module HC.
              ES-1.6.1 01/2012 Deleted reference to reporting accountants to be in line with October 2011 amendment.
              ES-1.6.3 01/2012 Deleted reference to Module FC.
              ES-1.14 01/2012 Deleted Section on Module GS (Group Supervision).
              ES-1.18 01/2012 This Section was deleted as it is included in Chapter BC-3.
              ES-2.6 01/2012 Added Section on transitional Rules for Section BC-3 dealing with customer complaints procedures.
              ES-1.3.6 10/2013 Removed reference to Deputy Money Laundering Officer to be aligned with the Rule under Paragraph AU-1.2.2 that was amended in January 2011.
              ES-1.7.1, ES-1.13.1 and ES-2.5.2 10/2013 Removed reference to appointed representatives.
              ES-1.8.5 10/2014 Added new guidance for capital for underwriting purposes.

          • Superseded Requirements

            • ES-A.2.4

              This Module does not supersede any previously issued circulars or other regulatory instruments.

              Amended: January 2007

            • ES-A.2.5

              Guidance on the implementation and transition to Volume 4 (Investment Business) is given in Chapter ES-2.

              Amended: January 2007

      • ES-1 Structure and Summary of Volume 4

        • ES-1.1 Structure of Volume 4 (Investment Business)

          • ES-1.1.1

            Volume 4 of the Rulebook covers the investment business sector, i.e. the provision of regulated investment servicesG by investment firm licenseesG . It also includes requirements regarding approved personsG .

            Amended: October 2009

          • ES-1.1.2

            Volume 4 excludes representative offices of overseas investment firm licenseeG , and ancillary services providersG : these activities are covered by separate regulations (see AU-A.1.11 and AU-A.1.12). These regulations will later be incorporated into Volume 5 (Specialised Activities) of the CBB Rulebook, to be released later.

            Amended: July 2010
            Amended: January 2007

          • ES-1.1.3

            Volume 4 is made up of two volumes: Part A is the main Volume (comprising a range of Modules that contains all applicable Rules and Guidance), whilst Part B is an appendix Volume (containing a glossary of defined terms, CBB authorisation forms, CBB reporting forms and supplementary information).

            Amended: July 2010
            Amended: January 2007

          • ES-1.1.4

            Part A of Volume 4 is organised under the following headings:

            • Introduction
            • High Level Standards
            • Business Standards
            • Reporting Requirements
            • Enforcement and Redress; and
            • Sector Guides
            Amended: July 2010

          • ES-1.1.5

            Including this Executive Summary Module, there are plans to issue 23 Modules for inclusion in Part A of Volume 4 (Investment Business). It is planned to release Volume 4 in two phases: the first phase release was in April 2006, and comprised 11 Modules, including most of the key requirements. Remaining Modules will be issued later.

            Amended: July 2010
            Amended: October 2009
            Amended: January 2007

          • ES-1.1.6

            Each Module covers a particular subject area — such as capital or conduct of business. The requirements are tailored according to the three categories of investment firm licenseeG provided for under the authorisation rules, reflecting the different risk profiles of these categories. Sector Guide Modules, to be released as part of the second phase release, will summarise the key elements of the requirements for each of these 3 categories of investment firm, as well as summarise the additional requirements applicable to those investment firms operating purely on a Shari'a compliant basis.

            Amended: January 2007

          • ES-1.1.7

            Part B of Volume 4 is organised under the following headings:

            • Glossary
            • Authorisation Forms
            • Reporting Forms
            • Supplementary Information
            Amended: July 2010

          • ES-1.1.8

            Defined terms used in the Rulebook are underlined; their definitions can be found in the Glossary. Each Volume has its own Glossary, as definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.

          • ES-1.1.9

            There are three authorisation forms, comprising (i) Form 1 (application for a license); (ii) Form 2 (application for the authorisation of a controllerG ); and (iii) Form 3 (application for approved personG status); and (iv) Form 4 (application for registration).

            Amended: January 2007

          • ES-1.1.10

            When completed, Volume 4 will also contain 4 reporting forms: (i) Form QPR (Quarterly Prudential Return); (ii) Form AGR (Annual Group Return); and (iii) Form STR (Suspicious Transaction Report) and (iv) Form ALF (Annual Licence Fee).

            Amended: July 2007

          • ES-1.1.11

            Finally, space is provided in Part B of Volume 4 for any supplementary information that may be of use to users of the Rulebook. For the time being, Part B contains various additional documents relevant to the Financial Crime Module, notably a copy of Bahrain's anti-money laundering legislation (Amiri Decree Law No. 4 of 2001). It also includes information related to the Client Assets Module (CL) and Enforcement Module (EN).

            Amended: July 2010

        • ES-1.2 Module UG (User's Guide)

          • ES-1.2.1

            The User's Guide Module contains introductory material relevant to users of Volume 4. Specifically, it covers (i) the status and application of the Rulebook (with specific reference to Volume 4); (ii) the structure and design of the Rulebook; and (iii) its maintenance, version control and access. These topics are covered in Chapters UG-1 to UG-3 respectively.

          • ES-1.2.2

            The Module contains mostly Guidance material — that is, material that is not binding on licensees, but instead simply helps inform particular Rules or provides other general information. Most of the Guidance material in Module UG consists of general information.

          • ES-1.2.3

            The only Rules are contained in Sections UG-A.1, UG-1.2 and UG-1.4. Amongst other things, these specify that the Module has the legal status of a Directive, that Rules have a binding effect, and that the contents of Volume 4 apply from its date of issue in April 2006, subject to any transition arrangements specified in Module ES (see Chapter ES-2).

            Amended: July 2007

        • ES-1.3 Module AU (Authorisation)

          • ES-1.3.1

            Module AU covers (i) the licensing of persons undertaking regulated investment servicesG ; and (ii) the approval of persons undertaking controlled functionsG in licensees ('approved personsG ').

            Amended: January 2007

          • ES-1.3.2

            The Module sets out when these two types of authorisation are required, and the associated authorisation conditions that have to be satisfied in order for authorisation to be granted.

            Amended: January 2007

          • ES-1.3.3

            With respect to licensing, an investment firm licenseG is required by all persons undertaking, by way of business, regulated investment servicesG within or from the Kingdom of Bahrain. Regulated investment servicesG are fully defined in Section AU-1.4, but in summary they cover the following activities:

            (a) Dealing in financial instrumentsG as principal;
            (b) Dealing in financial instrumentsG as agent;
            (c) Arranging deals in financial instrumentsG ;
            (d) Managing financial instrumentsG ;
            (e) Safeguarding financial instrumentsG (i.e. a custodianG );
            (f) Advising on financial instrumentsG ; and
            (g) Operating a collective investment undertakingG (i.e. an operatorG ).
            Amended: January 2007

          • ES-1.3.4

            There are 3 categories of investment firm licenseG , determined by the regulated investment servicesG undertaken. Category 1 investment firmsG may undertake all regulated investment servicesG . Category 2 investment firmsG may undertake all regulated investment servicesG , except the activity of dealing in financial instrumentsG as principal. Finally, Category 3 investment firmsG may only undertake the activities of arranging or advising on financial instrumentsG . Only Category 1 and 2 investment firmsG may hold client assetsG .

          • ES-1.3.5

            A licensee may hold itself out as an Islamic investment firmG , but only if all its activities are Shari'a compliant. Islamic investment firms are required to comply with certain additional requirements, such as the need to appoint a Shari'a supervisory board.

            Amended: July 2007

          • ES-1.3.6

            Module AU also deals with the requirements and conditions for approved personsG , i.e. those wishing to undertake a controlled functionG in an investment firm licenseeG . Controlled functionsG are those of:

            (a) DirectorG ;
            (b) Chief ExecutiveG or general managerG ;
            (c) Head of functionG ;
            (d) Compliance officer;
            (e) Money Laundering Reporting Officer;
            (f) [This Subparagraph was deleted in October 2013];
            (g) Member of Shari'a Supervisory Board;
            (h) Financial instruments traderG ; and
            (i) Investment consultantG or investment adviserG .
            Amended: October 2013
            Amended: October 2009
            January 2007

          • ES-1.3.7

            The conditions for authorisation of approved personsG are set out in Chapter AU-3.

          • ES-1.3.8 [This Paragraph deleted 07/2007.]

            Deleted: July 2007

          • ES-1.3.9

            The Module also outlines (in Chapter AU-5) the information requirements and procedures that must be followed as part of the process for:

            (a) Licensing;
            (b) Approved personsG .
            Amended: July 2010
            Amended: October 2009
            Amended: January 2007

          • ES-1.3.10

            Chapter AU-6 covers the license application fees as well as the annual license fees.

            Added: July 2010

        • ES-1.4 Module PB (Principles of Business)

          • ES-1.4.1

            The 10 Principles of Business covered in Module PB are a general statement of the fundamental obligations of all CBB investment firm licenseesG and approved personsG . They have the status of Rules; and provide a basis for other, more detailed Rules elsewhere in Volume 4.

            Amended: January 2007

          • ES-1.4.2

            Principles 1 to 10 apply to activities carried out by licenseesG , including activities carried out through overseas branches. Principles 1 to 8 also apply to approved personsG , in respect of the controlled functionsG for which they have been approved. Principles 9 and 10 also take into account any activities of other members of the group of which the licenseeG is a member.

            Amended: January 2007
            Deleted: July 2007

          • ES-1.4.3

            The Principles of Business are:

            Principle 1 — Integrity
            Principle 2 — Conflicts of Interest
            Principle 3 — Due Skill, Care and Diligence
            Principle 4 — Confidentiality
            Principle 5 — Market Conduct
            Principle 6 — Customer Assets
            Principle 7 — Customer Interests
            Principle 8 — Relations with Regulators/Supervisors
            Principle 9 — Adequate Resources
            Principle 10 — Management, Systems and Controls

        • ES-1.5 Module HC (High-level Controls)

          • ES-1.5.1

            Module HC outlines the requirements that must be met by investment firm licenseesG with respect to:

            (a) Corporate governance principles issued by the Ministry of Industry and Commerce as The Corporate Governance Code; and
            (b) Related high-level controls and policies.
            Amended: April 2011
            Amended: July 2007

          • ES-1.5.1A

            The Principles referred to in this Module are in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce.

            Added: April 2011

          • ES-1.5.2

            The requirements distinguish between different Categories of investment firm licenseeG . Because of their limited business activities, and consequent lesser risk to customers, Category 3 investment firmsG are subject to applicable Guidance Paragraphs included in Chapter HC-10.

            Amended: April 2011
            Amended: July 2007

          • ES-1.5.3

            Module HC applies to Bahraini investment firm licenseesG , including their overseas branches (where either the same or equivalent provisions to those in Module HC should apply). Overseas investment firm licenseesG must demonstrate that the same or equivalent arrangements are in place at the parent entity level, and that these arrangements provide for effective high-level controls over activities conducted in the Bahrain branch.

            Amended: April 2011
            Amended: July 2010
            Added: July 2007

        • ES-1.6 Module AA (Auditors and Auditing Standards)

          • ES-1.6.1

            Module AA contains requirements regarding the appointment and functions of auditors of investment firm licenseesG . It also contains requirements dealing with accounting standards to be applied by investment firm licenseesG .

            Amended: January 2012
            Amended: July 2010
            Amended: January 2007

          • ES-1.6.2

            The auditor requirements deal with:

            (a) The appointment of auditors;
            (b) The removal and resignation of auditors;
            (c) Audit partner rotation;
            (d) Auditor independence; and
            (e) Restrictions on the relationship between a licensee and its auditor.
            Amended: January 2007

          • ES-1.6.3

            The Module also covers the CBB's requirements regarding access to auditors as well as auditors' access to outsourcing providers. In addition, the Module outlines requirements for licensees to arrange for their auditors to review their quarterly prudential returns, and compliance with Module CL (Client Assets).

            Amended: January 2012
            Amended: January 2007

        • ES-1.7 Module GR (General Requirements)

          • ES-1.7.1

            Module GR covers requirements dealing with areas not covered in other Modules. The areas covered are:

            (a) Books and records;
            (b) Corporate and trade names;
            (c) Dividends;
            (d) Business transfers;
            (e) ControllersG ;
            (f) Close linksG ;
            (g) Cessation of business;
            (h) [This Subparagraph was deleted in October 2013]; and
            (i) Professional indemnity coverage.
            Amended: October 2013
            Amended: July 2010
            Amended: January 2007

          • ES-1.7.2

            The above requirements apply to all categories of investment firm licensee, except for the requirements related to the payment of dividends, which apply to Category 1 investment firmsG and Category 2 investment firmsG and the professional indemnity requirement, which applies to Category 2 investment firmsG and Category 3 investment firmsG only.

            Amended: July 2010

        • ES-1.8 Module CA (Capital Adequacy)

          • ES-1.8.1

            Module CA contains requirements on the minimum levels of capital that must be held by investment firm licenseesG , as well as what constitutes capital for regulatory purposes. These requirements are tailored to fit the different risk profiles of the different categories of investment firm licenseesG . The requirements apply to both Bahraini investment firm licenseesG and overseas investment firm licenseesG (see Section CA-B.1)

            Amended: January 2007

          • ES-1.8.2

            Investment firm licenseesG are required to maintain their regulatory capitalG in excess of their regulatory capital requirementsG at all times. For Category 1 and 2 firms, their regulatory capital requirementG is the higher of their Minimum Capital RequirementG and their Risk-based Capital RequirementG . For Category 3 firms, their regulatory capital requirementG is simply their Minimum Capital RequirementG .

            Amended: October 2009

          • ES-1.8.3

            Minimum Capital RequirementsG are as follows:

            (a) Category 1 investment firmsG : BD 1,000,000
            (b) Category 2 investment firmsG : BD 1,000,000 if undertaking the activity of safeguarding financial instrumentsG (i.e. custodianG ), BD 250,000 in all other cases; and
            (c) Category 3 investment firmsG : BD 125,000.
            Amended: October 2009
            July 2007

          • ES-1.8.4

            Risk-based Capital RequirementsG comprise the sum of a firm's Expenditure Requirement, Position Risk Requirement, Counterparty Risk Requirement and Foreign Exchange Risk Requirement. The actual amount of capital that is required to be held varies depending on the size of an institution's cost base and its various exposures. In practice, the Risk Based Capital RequirementG of Category 2 investment firmsG , because they are not allowed to deal in financial instrumentsG as principal (and thus incur position risk), would largely be determined by its Expenditure Requirement (and any currency mismatches between its assets and liabilities).

            Amended: January 2007

          • ES-1.8.5

            In assessing the financial ability of a Category 1 investment firm licenseeG to underwriteG transactions, the CBB will consider, amongst other factors, the licensee'sG capital adequacy, its capacity to undertake the activity, and its track record in complying with applicable regulatory requirements. Any underwritingG activities require the prior approval of the CBB's Capital Market Supervision Directorate and are subject to Module OFS (Offering of Securities) of Volume 6 of the CBB Rulebook.

            Amended: October 2014
            Amended: January 2007

        • ES-1.9 Module BC (Business Conduct)

          • ES-1.9.1

            This Module set out minimum standards of good practice to be applied by investment firm licenseesG , when dealing with their clientsG . These comprise certain base requirements, supplemented by more detailed requirements in the form of an Investment Business Code of Practice.

            Amended: January 2007

          • ES-1.9.2

            The Investment Business Code of Practice covers various matters, relevant to contact throughout a clientG relationship. They are:

            (a) Overarching principles;
            (b) ClientG classification;
            (c) Marketing and promotion;
            (d) Accepting clients;
            (e) Suitability;
            (f) Disclosure of information;
            (g) Dealing and managing;
            (h) Reporting to clients;
            (i) Complaints;
            (j) Conflicts of interest;
            (k) Confidentiality; and
            (l) An appendix, covering various specific matters to be addressed in promotional material, transaction confirmations and the like.
            Amended: January 2007

          • ES-1.9.3

            These requirements may be modified or supplemented over time, in response to evolving market practices or as issues arise.

        • ES-1.10 Module CL (Client Assets)

          • ES-1.10.1

            This Module provides detailed Rules and Guidance with respect to the holding of client assetsG by investment firm licenseesG . They are aimed at ensuring the proper protection of such assets, to restrict the risk of client assetsG being commingled with investment firm licenseeG assets (without clients' consent), or otherwise misused.

            Amended: January 2007

          • ES-1.10.2

            As a general rule, client assetsG are required to be segregated from a firm's own assets, and client moneyG must be held in a client bank accountG . Various other restrictions and protections apply to client moneyG , whilst the rules also apply certain reconciliation and reporting requirements.

          • ES-1.10.3

            Finally, the Module also contains certain requirements relating to the provision of custody services (Chapter CL-2), the treatment of assets when held as collateral (Chapter CL-3), controls surrounding the application of client mandatesG (Chapter CL-4), and rules regarding third party related distribution events (Chapter CL-5).

        • ES-1.11 Module RM (Risk Management)

          • ES-1.11.1

            Module RM provides detailed requirements on risk management systems and controls required for investment firm licenseesG . It builds on the high-level controls requirements contained in Module HC.

            Amended: July 2007

          • ES-1.11.2

            The Module obliges firms to identify the range of risks that they face and to put in place appropriate systems to address those risks. It also requires the establishment of an appropriate framework for identifying, monitoring and managing risks across an investment firm licensee'sG operations.

            Amended: July 2007

          • ES-1.11.3

            Module RM applies to Bahraini investment firm licenseesG , including their overseas branches (where either the same or equivalent provisions to those in Module RM should apply). Overseas investment firm licenseesG must demonstrate that the same or equivalent arrangements apply to the whole company, and that these arrangements provide for effective risk management of activities conducted in the Bahrain branch.

            Added: July 2007

        • ES-1.12 Module FC (Financial Crime)

          • ES-1.12.1

            Module FC implements the Financial Action Task Force (FATF) recommendations on money laundering and special recommendations on terrorism financing that are relevant to the investment business sector in Bahrain.

          • ES-1.12.2

            The Module contains detailed requirements relating to:

            (a) Customer identification;
            (b) Reporting;
            (c) Staff awareness and training;
            (d) The appointment of a money laundering reporting officer;
            (e) Compliance monitoring;
            (f) Record-keeping arrangements;
            (g) Segregation of duties;
            (h) Special measures for non-cooperative countries; and
            (i) Contact with relevant authorities.
            Amended: January 2007

          • ES-1.12.3

            Item FC (iv) in Part B of Volume 4 (Investment Business) provides further examples of transactions that may be suspicious or unusual.

          • ES-1.12.4

            In addition, Module FC has a chapter dealing with financial fraud, which imposes certain basic systems and control, and reporting requirements, in this area. These requirements apply to Category 1 investment firmsG and Category 2 investment firmsG only.

            Amended: July 2007

        • ES-1.13 Module TC (Training and Competency)

          • ES-1.13.1

            Module TC contains requirements that have to be met by investment firm licenseesG with respect to training and competency of individuals undertaking controlled functionsG (i.e. approved personsG ).

            Amended: October 2013
            Amended: July 2010
            Amended: January 2007

          • ES-1.13.2

            Module TC provides Rules and Guidance to investment firm licenseesG to ensure satisfactory levels of competence, in terms of an individual's knowledge, skills, experience and professional qualifications.

            Amended: July 2010
            Amended: January 2007

          • ES-1.13.3

            Module TC applies in full to all three categories of investment firm licenseesG authorised in Bahrain.

            Added: July 2010

          • ES-1.13.4

            The requirements in the Module cover the recruitment and assessing of competence as well as the training and maintenance of competence. In addition, it includes appendices providing guidance on qualifications and core competencies for controlled functionsG as well professional bodies and qualifications.

            Added: July 2010

        • ES-1.14 [This Section was deleted in January 2012]

          • ES-1.14.1

            [This paragraph was deleted in January 2012]

            Deleted: January 2012

          • ES-1.14.2

            [This paragraph was deleted in January 2012]

            Deleted: January 2012

        • ES-1.15 Module BR (CBB Reporting)

          • ES-1.15.1

            Module BR sets out requirements regarding prudential reporting to the CBB, as well as certain pre- and post-notification requirements. It also describes the information gathering powers of the CBB.

            Amended: July 2007

          • ES-1.15.2

            Module BR, amongst other things, prescribes quarterly prudential reporting to the CBB (Form QPR). All investment firm licenseesG are required to submit these: however, Category 3 investment firmsG are only required to complete a subset of the sections included in Form QPR.

            Amended: July 2007

          • ES-1.15.3

            Module BR also obliges all investment firm licenseesG to seek prior approval for certain events, including proposed changes in the licensee'sG name, legal status and controllersG , as well as other events such as carrying out new regulated investment servicesG or opening new offices overseas.

            Amended: July 2010
            Added: July 2007

          • ES-1.15.4

            Finally, Module BR also requires the post-notification of various events, such as breaches of CBB requirements; legal, regulatory or other proceedings being taken against the licenseeG ; or instances of fraud, errors or other irregularities occurring, that could have a material impact on the licenseeG .

            Added: July 2007

        • ES-1.16 Module PD (Public Disclosure)

          • ES-1.16.1

            This Module is to be issued as part of the second phase release of Volume 4.

            Amended: January 2007

          • ES-1.16.2

            When finalised, the Module will contain certain provisions relating to public disclosures, such as the need to publish annual accounts.

        • ES-1.17 Module EN (Enforcement)

          • ES-1.17.1

            This Module outlines enforcement powers and processes that may be applied by the CBB to address failures by investment firm licenseesG , approved personsG or registered persons. The purpose of such measures is to encourage a high standard of compliance by all those authorised by the CBB, thus reducing risk to licensees' clients, counterparties and the financial system.

            Amended: January 2007

          • ES-1.17.2

            The enforcement measures contained in the Module are of varying severity and will be used in keeping with the CBB's assessment of the contravention, reserving the most serious enforcement measures for the most serious of contraventions.

            Amended: January 2007

          • ES-1.17.3

            The CBB's enforcement mechanisms include:

            (a) Formal requests for information;
            (b) Investigations;
            (c) Formal warnings;
            (d) Directions;
            (e) Financial penalties;
            (f) Administration;
            (g) Cancellation of license; and
            (h) Cancellation of 'fit and proper' approval.
            Amended: July 2007

          • ES-1.17.4

            A reminder of criminal sanctions contained in the CBB Law is also set out in Chapter EN-10.

            Amended: January 2007

        • ES-1.18 [This Section was deleted in January 2012 as it is included in Chapter BC-3]

          • ES-1.18.1

            [This paragraph was deleted in January 2012 as it is included in Chapter BC-3]

            Deleted: January 2012

          • ES-1.18.2

            [This paragraph was deleted in January 2012 as it is included in Chapter BC-3]

            Deleted: January 2012

        • ES-1.19 Module CP (Compensation)

          • ES-1.19.1

            This Module provides space, for possible inclusion at a later date, for a description of any investor protection scheme, should such a scheme be developed in cooperation with the industry.

            Amended: January 2007

        • ES-1.20 Sector Guides (Modules C1, C2, C3 and IF)

          • ES-1.20.1

            These Modules will be issued as part of the second phase release of Volume 4.

            Amended: January 2007

          • ES-1.20.2

            When finalised, these Modules will provide a summary — consisting solely of Guidance material — highlighting the key requirements applicable to the different categories of  investment firm licenseesG , as well as to those investment firm licenseesG that operate solely on Islamic principles.

            Amended: July 2007

      • ES-2 Implementation and Transition Rules

        • ES-2.1   30 April 2006

          • ES-2.1.1

            Investment firm licenseesG issued a license after 30 April 2006 must comply with the requirements contained in the first phase release of Volume 4 (Investment Business) from the date of issue of their license.

            Amended: January 2007

          • ES-2.1.2

            The earliest effective date of Volume 4 (Investment Business), therefore, is 30 April 2006.

          • ES-2.1.3

            The first phase release of Volume 4 comprises Modules ES, UG, AU, PB, AA, GR, CA, BC, CL, FC and EN.

          • ES-2.1.4

            Other implementation deadlines are prescribed in Sections ES-2.2 to ES-2.4.

        • ES-2.2   1 July 2006

          • ES-2.2.1

            Unless otherwise agreed to in writing with the CBB, investment firm licenseesG issued a license before 30 April 2006 must comply with the requirements contained in the first phase release of Volume 4 (Investment Business) by 1 July 2006, with the exceptions of Modules CA, BC and CL.

            Amended: January 2007

          • ES-2.2.2

            Therefore, for investment firmsG already licensed when Volume 4 was first issued in April 2006, the first implementation date (unless additional transition arrangements have been agreed with in writing with the CBB) is 1 July 2006. A later implementation deadline is given for Modules CA, BC and CL, on account of the wide scope of their requirements: see Section ES-2.3

            Amended: January 2007

          • ES-2.2.3

            The first phase release of Volume 4 comprises Modules ES, UG, AU, PB, AA, GR, CA, BC, CL, FC and EN.

          • ES-2.2.4

            Other implementation deadlines are prescribed in Sections ES-2.1, ES-2.3 and ES-2.4.

          • ES-2.2.5

            On an exceptional basis, the CBB may provide for grandfathering or additional transitional measures for certain firms, where these are faced with difficulties in meeting their implementation deadlines, provided such arrangements do not cause excessive risk to investors or other licensees.

            Amended: January 2007

          • ES-2.2.6

            Investment firm licenseesG who were licensed prior to the publication of Volume 4 (Investment Business) do not need to resubmit an application for a license.

          • ES-2.2.7

            Investment firm licensees licensed prior to 30 April 2006 will have their license category, and the scope of their authorisation, confirmed in an exchange of letters.

            Amended: July 2010

        • ES-2.3   1 January 2007

          • ES-2.3.1

            Unless otherwise agreed to in writing, investment firm licenseesG issued a license before 30 April 2006 must comply with the requirements contained in Modules CA, BC and CL by 1 January 2007.

          • ES-2.3.2

            In other words, investment firm licenseesG licensed prior to the introduction of Volume 4 in April 2006 are required to comply with the first phase release of Volume 4 by 1 July 2006, except for Modules CA, BC and CL which have to be complied with from 1 January 2007 onwards (cf. Rules ES-2.2.1 and ES-2.3.1). Investment firm licenseesG licensed after the introduction of Volume 4 in April 2006, are required to comply with the first phase release of Volume 4 from the date of issue of their license (cf. Rule ES-2.1.1).

            Amended: July 2010
            Amended: July 2007

          • ES-2.3.3 [This Paragraph deleted 07/2007.]

            Deleted: July 2007

          • ES-2.3.4 [This Paragraph deleted 07/2007.]

            Deleted: July 2007

        • ES-2.4 1 January 2008

          • ES-2.4.1

            Investment firm licenseesG licensed prior to 1 July 2007 must comply with the requirements contained in Modules HC, RM and BR by 1 January 2008. LicenseesG issued a license after 1 July 2007 must comply with these Modules (as well as other content of Volume 4 of the CBB Rulebook), from the date of issue of their license.

            Amended: July 2007

          • ES-2.4.1A

            As the reporting forms under Chapter BR-1, Prudential Reporting, other than the Quarterly Prudential Report which has been issued in March 2009, are under development, investment firm licenseesG benefit from a further transition period from the requirements of this Chapter. Licensees will be informed at a later date of the implementation date of Chapter BR-1.

            Amended: October 2009
            Added: July 2008

          • ES-2.4.2

            Modules HC, RM and BR were issued in July 2007. Rule ES-2.4.1 means that existing investment firm licenseesG have therefore a 6-month implementation grace period.

            Amended: July 2008
            Amended: July 2007

        • ES-2.5 Module TC — Training and Competency

          • ES-2.5.1

            The requirements of Module TC for investment firm licenseesG are effective from 1st July 2010.

            Adopted: July 2010

          • ES-2.5.2

            Where approved personsG holding controlled functionsG within the investment firm licenseeG , do not meet the qualifications and core competencies outlined in Appendix TC-1 at the time of the issuance of Module TC, the investment firm licenseeG must ensure that such individuals will meet the requirements of Module TC by 31st December 2011 at the latest.

            Amended: October 2013
            Adopted: July 2010

        • ES-2.6 Module BC — Business Conduct

          • ES-2.6.1

            The requirements of Chapter BC-3, customer complaints procedures, for investment firm licenseesG are effective from 31st March 2012.

            Added: January 2012

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