CBB Volume 6: Contents

Central Bank of Bahrain Volume 6—Capital Markets
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Location: Central Bank of Bahrain Volume 6—Capital Markets
  • Central Bank of Bahrain Volume 6—Capital Markets

    • Part A


      Table of Contents
      Under development: completed Modules are listed here as and when they are issued. 'Old Style' regulatory instruments that remain in force can be accessed under 'CBB Capital Markets Regulations'.
        Module Title Module
      Code
      Date last
      changed
       
      Introduction User's Guide UG Oct 16 PDF Version
      Executive Summary ES (to be issued)  
      Institutions Markets and Exchanges MAE Jan 19 PDF Version
      Clearing, Settlement and Depository CSD Apr 18 PDF Version
      Market Intermediaries and Representatives MIR Jan 19 PDF Version
      Collective Investment Undertakings [Replaced by Volume 7 in April 2012] CIU Apr 12  
      Market Standards Offering of Securities OFS July 18 PDF Version
      Take-overs, Mergers and Acquisitions TMA Apr 13 PDF Version
      Prohibition of Market Abuse and Manipulation MAM Nov 10 PDF Version
      Market Surveillance, Investigation & Enforcement MIE Nov 10 PDF Version
      Anti-Money Laundering & Combating Financial Crime AML Jan 19 PDF Version
      Ongoing Obligations Listing Requirements LIR (to be issued)  
      Disclosure Requirements DIS (to be issued)  
      High Level Standards High-Level Controls (Corporate Governance) HC Apr 17 PDF Version
      Dispute Resolution and Investor Protection Dispute Resolution, Arbitration and Disciplinary Proceedings DRA Jul 10 PDF Version
      International Co-operation International Co-operation & Exchange of Information ICO Mar 09 PDF Version

      • 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 Bahrain's financial markets, issues regulatory instruments that CBB licenseesG 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.

                • 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; and Volume 4 (covering investment firm licenseesG ), 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: April 2013

                • UG-A.1.3

                  This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 6 (Capital Markets); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.

                • UG-A.1.4

                  Volume 6 (Capital Markets) covers the regulation and supervision of Bahrain's capital markets. When complete, it will include requirements dealing with (i) the offering and listing of securities; (ii) the authorisation and supervision of exchanges (notably the Bahrain Bourse); and (iii) capital market behaviour (such as insider dealing and market abuse, and the conduct of mergers and acquisitions of listed companies). Collectively, these requirements aim to ensure transparent and orderly markets, which help protect the rights of investors and shareholders, whilst enabling an attractive environment for those seeking to raise capital.

                  Amended: April 2013

                • UG-A.1.5

                  Capital market participants should note that the requirements contained in Volume 6 of the CBB Rulebook are additional to those contained in other Rulebook Volumes. Thus, market participants licensed as investment firms (for example) are required to comply with their license requirements contained in Volume 4, in addition to requirements contained in Volume 6 that apply to their capital markets activities.

              • 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 6 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 CBB licenseesG (including their approved personsG ) that undertake relevant capital markets activity (as specified in the Scope of Application Chapters contained in each Volume 6 Module).

                  Amended: April 2013

                • UG-A.1.7

                  The contents of this Module are also included in Regulations, to be issued by the CBB, by virtue of which they are applicable to non-CBB licenseesG that also undertake relevant capital markets activity (as specified in the Scope of Application Chapters contained in each Volume 6 Module).

                • UG-A.1.8

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

            • UG-A.2 Module History

              • UG-A.2.1

                This Module was first issued in April 2007, as part of the first phase of Volume 6 (Capital Markets) 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.

              • UG-A.2.2

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

                Module Ref. Change Date Description of Changes
                UG-A.1 and UG-2.1 04/2013 Various amendments to update evolution of CBB Rulebook.
                UG-1.1.3 04/2013 Updated reference to membership rules of exchanges.
                UG-3.2 and Annex 04/2013 Amended as CBB Rulebook only now available on CBB Website.
                UG-1.3.3 10/2016 Added a paragraph to clarify reference to 'he' 'his' 'she' and 'her'.

              • UG-A.2.3

                Guidance on the implementation and transition to Volume 6 (Capital Markets) is given in Module ES (Executive Summary).

          • UG-1 Rulebook Status and Application

            • UG-1.1 Legal Basis

              • General

                • UG-1.1.1

                  Volume 6 (Capital Markets) 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)).

                • 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.

                • UG-1.1.3

                  CBB licenseesG that are members of a Self Regulatory Organisation (SRO) such as licensed exchanges and licensed clearing houses are reminded that they are also subject to the membership and operating rules of such SRO. These rules are additional to the requirements contained in the CBB Rulebook.

                  Amended: April 2013

              • 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, and non-residents wishing to undertake activities in Bahrain).

                • 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.

                • 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 CBB licenseesG (or categories of CBB licenseesG ), approved personsG or registered personsG . Directives are binding on those to whom they are addressed.

                • 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.

                • 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.

                • 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 CBB licenseesG , approved personsG or registered personsG .

            • 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. Guidance is not binding: rather, it is material that helps inform a particular Rule or set of Rules, or provides other general information.

              • 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.

              • 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.

              • 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.

              • 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.

              • 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.

              • UG-1.2.7

                Breaches of Rules constitute breaches of the CBB Law. If a CBB licenseeG or person breaches a Rule to which they are subject, they are liable to enforcement action by the CBB and, in certain cases, criminal proceedings by the Office of the Public Prosecutor.

              • UG-1.2.8

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

            • UG-1.3 Application

              • UG-1.3.1

                Volume 6 of the CBB Rulebook applies to a wide range of persons, i.e. all those involved as participants in Bahrain's capital markets, for instance by issuing or trading securities, or operating a regulated exchange or collective investment undertaking. As a consequence, much of the content of Volume 6, in addition to having the status of a Directive, is also issued by way of Regulation.

              • UG-1.3.2

                The precise scope of application of Volume 6 is specified in the Scope of Application Chapter contained in each Module (except those listed in the 'Introduction' part of Volume 6): these specify the particular activities (and associated persons) to which the requirements in the Module concerned apply. 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.

              • UG-1.3.3

                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 6 (Capital Markets) of the CBB Rulebook was first issued in April 2007. Its contents have immediate effect, subject to any specific transition arrangements that may be specified.

              • UG-1.4.2

                Module ES (Executive Summary) contains details of the implementation and transition arrangements for Volume 6 (Capital Markets).

          • 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: April 2013

                • UG-2.1.2

                  Volume 5 (Specialised Activities), covers money changers; financing companies; representative offices; administrators; trust services providers, microfinance institutions and providers of ancillary services to the financial sector.

                  Amended: April 2013

              • Rulebook Contents (Overview)

                • UG-2.1.3

                  Except for Volume 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) Prudential requirements;
                  (d) Reporting Requirements;
                  (e) Enforcement and Redress; and, where appropriate,
                  (f) Sector Guides.
                  Amended: April 2013

                • UG-2.1.4

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

                • 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.

                  Amended: April 2013

                • 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 headings (such as those 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.

              • 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.

              • 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.

              • 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.

            • 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...').

          • UG-3 Rulebook Maintenance and Access

            • UG-3.1 Rulebook Maintenance

              • Quarterly Updates

                • UG-3.1.1

                  If changes to the Rulebook are required, these will usually only be made every quarter, in early January, April, July and October (the only exceptions being when changes are urgently required). This way, users are generally aware when to expect any changes. Not every quarter will necessarily see changes being made, however.

                • UG-3.1.2

                  When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page. 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-had corner. The Module contents pages thus act as a checklist for hard-copy users to verify the current version dates for each Section in that Module.

                • 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

                  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.

                • UG-3.1.5

                  Capital market participants should note that the requirements contained in Volume 6 of the CBB Rulebook are additional to those contained in other Rulebook Volumes. Thus, market participants licensed as investment firms (for example) are required to comply with their license requirements contained in Volume 4, in addition to requirements contained in Volume 6 that apply to their capital markets activities.

              • 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.
                  (b) 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)
                  (c) 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 2007].' (The date given being the actual calendar quarter date of the deletion.) The same principle is applied with respect to Sections and Chapters.

                • 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.

            • UG-3.2 Rulebook Access

              • Availability

                • UG-3.2.1

                  The Rulebook is available on the CBB website, on CD-ROM and in hard copy. Order forms for CD-ROMs and hard copies are available on the CBB website or from the Licensing & Policy Directorate of the CBB; a copy is also attached to this Section. Contact details are as follows:

                  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

              • Queries

                • UG-3.2.2

                  Questions regarding the administration of the Rulebook (e.g. ordering additional copies, 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: April 2013

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

            Deleted: April 2013

        • ES — Executive Summary

          (to be issued)

      • Institutions

        • MAE — Markets and Exchanges

          • MAE-A Introduction

            • MAE-A.1 Purpose

              • Executive Summary

                • MAE-A.1.1

                  Module MAE sets out the Central Bank of Bahrain's regulatory framework governing licensed exchangesG and licensed market operatorsG (other trading instruments platforms) operating in or from the Kingdom of Bahrain.

                • MAE-A.1.2

                  The MAE Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of licensed exchangesG and licensed market operatorsG in the Kingdom of Bahrain. It sets out the CBB requirements for their authorisation, the initial as well as ongoing compliance requirements.

                • MAE-A.1.3

                  The key principles underlying the approach of the CBB in this Module aim:

                  (a) To promote fair, orderly and transparent marketsG ;
                  (b) To facilitate efficient marketsG for the allocation of capital and the transfer of risks;
                  (c) To reduce systemic risk;
                  (d) To detect and deter manipulation and other unfair trading practices; and
                  (e) To maintain integrity of trading through fair and equitable rules that strike an appropriate balance between the demands of different market participantsG .

                • MAE-A.1.4

                  PersonsG or entities undertaking functions falling within the meaning of licensed exchangesG and licensed market operatorsG require prior CBB approval. MAE-B.2 provides the definitions for licensed exchangesG and licensed market operatorsG which are impacted by this Module. These include entities providing the services including those:

                  (a) That provide a platform through which the exchange of securitiesG takes place;
                  (b) Which provide listings of securitiesG for trading;
                  (c) Which provide trade matching services, as these services may result in a transaction between investors; and
                  (d) Which provide a service which leads an investor to the reasonable expectation that they may trade in securitiesG .

                • MAE-A.1.4A

                  The MAE Module sets out the requirements that have to be met by crowdfunding platform operatorsG .

                  Added: October 2017

              • Legal Basis

                • MAE-A.1.5

                  Article 4(4) and Part 2 of the CBB Law provides the power of the CBB to license and exercise regulatory control over financial institutions providing regulated services stated in Article 39, including marketsG and exchanges.

                • MAE-A.1.6

                  As per Article 39(b) of the CBB Law, the CBB shall issue regulations specifying the regulated services. The operation of a licensed market operatorG or a licensed exchangeG is hereby specified as one of the regulated services which require licensing pursuant to Article 40 and Article 44 of the CBB Law.

                • MAE-A.1.7

                  This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

                  Added: April 2016

                • MAE-A.1.8

                  This Module contains Resolution No (1) of 2007 (issued under Article 180 of the CBB Law) amended by Resolution No (26) of 2010 and further amended by Resolution No (1) of 2016 with respect to determining fees categories due for licensees and services provided by the CBB.

                  Added: April 2016

            • MAE-A.2 Module History

              • Evolution of Module

                • MAE-A.2.1

                  This Module was first issued in October 2008. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                  Amended: April 2013

                • MAE-A.2.2

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

                  Module Ref. Change Date Description of Changes
                  MAE-1.1.4 to MAE-1.1.6 04/2013 References added to requirements under Resolution No.(16) for the year 2012.
                  MAE-1.2.4 04/2013 Updated name change to Form 3.
                  MAE-1.9.1 and MAE-1.9.1A 04/2013 Provided details of annual fee due to the CBB.
                  MAE-2.4.3 and MAE-2.4.4 04/2013 Added reference to report institutional information (IIS) to the CBB.
                  MAE-5.3.12 04/2013 Added reference to Form 3: Application for Approved Person Status
                  MAE-5.3 04/2013 Expanded the scope of this Section to include all approved persons occupying controlled functions and the various related Rules and Guidance.
                  MAE-1.9 04/2014 Clarified Rules and guidance on annual license fees.
                  Module MAE 04/2016 Various minor corrections to clarify language and link defined terms to glossary.
                  MAE-A.1.7 04/2016 Legal basis updated to reflect Resolution No (23) of 2015.
                  MAE-2.1.1 and MAE-2.1.1A 04/2016 Added requirements dealing with shareholders' meetings.
                  MAE-5.3 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                  MAE-5.3.2A 04/2016 New Paragraph added to ensure segregation of responsibilities in licensees' staffing arrangements.
                  MAE-B.2 07/2016 Section deleted and moved to Glossary.
                  MAE-1.8.4 07/2016 Corrected cross reference.
                  MAE-1.8.6, MAE-4.3.3, MAE-5.4.5, MAE-5.4.7, MAE-6.1.4, MAE-6.1.8, 07/2016 Changed from Rule to Guidance.
                  MAE-1.9.1 07/2016 Deleted legal reference as already included under MAE-A.1.8
                  MAE-2.1.1 07/2016 Corrected wording of Subparagraphs.
                  MAE-2.3.10 07/2016 Added due date for publication requirement.
                  MAE-2.3.11 07/2016 Clarified accounting standards to be used.
                  MAE-1.10.2 07/2017 Added Paragraph to clarify the cost of publication.
                  MAE-1.10.3 07/2017 Added Paragraph on means of publication.
                  MAE-A.1.4A 10/2017 Added a new Paragraph on Crowd funding platform operators.
                  MAE-A.4.3 10/2017 Amended Paragraph to include crowdfunding platform operator.
                  MAE-B.1.3 10/2017 Added a new Paragraph.
                  MAE-2-11 10/2017 Added a new Section to Introduce new rules for licensed equity crowdfunding platform operators.
                  MAE-2-12 10/2017 Added a new Section on new rules for licensed equity crowdfunding platform operators.
                  MAE-5.3.7B 04/2018 Amended Paragraph.
                  MAE-2.11.17 10/2018 Amended Paragraph to further clarify the scope of exemption.
                  MAE-A.3.9 01/2019 Added a new Paragraph on market making.
                  MAE-2.11.19 01/2019 Deleted Paragraph.
                  MAE-2.11.29A 01/2019 Added a new Paragraph on Cooling-off Period for the Crowd Funding.
                  MAE-2.12.3 01/2019 Amended Paragraph.
                  MAE-4.6 01/2019 Added a new Section on registration of market makers.

              • Superseded Requirements

                • MAE-A.2.3

                  This Module supersedes the following provisions contained in Circulars, or any other regulatory instruments:

                  Circular/Other Ref. Provisions Subject
                  MOU between CBB and BSE All Supervision of BSE
                  BSE Internal Regulation Article 5(4) Registration of Brokers and Market Makers and Listing of Companies. Article 5(4) will be superseded only in so far as the board acts not " in accordance with a resolution to be issued by the Minister", but rather "in accordance with the requirements of Module MAE".
                    Article 5(16) Determination of Brokers' Commission
                  BSE may determine its own fees and commissions, but this will be done by The Board and not through the Minister, and shall be included in the rules of the BSE to be approved by the CBB in terms of this Module.
                    Articles 46 & 49 Final accounts and auditing. The first sentence of Article 46 and the whole of Article 49 is superseded by MAE-2.3

            • MAE-A.3 Interaction with Other Modules

              • MAE-A.3.1

                PersonsG wishing to act as a Clearing HouseG or a DepositoryG should refer to Module CSD (Clearing, Settlement and Central Depository) which sets forth the CBB requirements for the operating of and licensing requirements of a Clearing HouseG and/or DepositoryG , as well as Module MIR (Market Intermediaries and Representatives).

                Amended: April 2016

              • MAE-A.3.2

                Issuers wishing to seek approval to list securitiesG on exchanges licensed under this Module should refer to Resolution No (17) of 2012 regarding the Listing and Trading of Securities and Financial Instruments in a Licensed Exchange issued pursuant to Article 86 of the CBB Law which sets forth the CBB requirements for the listing of securitiesG on licensed exchangesG .

                Amended: April 2016

              • MAE-A.3.3

                PersonsG wishing to list or trade in securities on exchanges licensed under this Module should refer to Resolution No. (1) of 2004 with Respect to Directives Relating to the Prevention and Prohibition of Money Laundering at the Bahrain Stock Exchange.

              • MAE-A.3.4

                Licensed exchangesG must in addition to complying with the business standards in this Module, refer to and comply with Module HC (High-level Controls) outlining corporate governance requirements.

                Amended: April 2016

              • MAE-A.3.5

                Licensed exchangesG and licensed market operatorsG must comply with the provisions of Module MIE (Market Surveillance, Investigation and Enforcement), Module MAM (Prohibition of Market Abuse and Manipulation), Module DRA (Dispute Resolution, Arbitration and Disciplinary Proceedings) and Module AML (Anti-Money Laundering & Combating Financial Crime).

                Amended: April 2016

              • MAE-A.3.6

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016

              • MAE-A.3.7

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016

              • MAE-A.3.8

                Licensed exchangesG must in addition implement and comply with the Disclosure Standards issued on 3rd December 2003 and available on the CBB Website.

                Added: April 2016

              • MAE-A.3.9

                Licensed exchangesG , licensed market operatorsG , market makersG and issuersG must in addition to complying with the market makingG provision under this Module refer to and comply with Module MIR (Market Intermediaries and Representatives) which sets forth the CBB requirements for market makingG .

                Added: January 2019

            • MAE-A.4 Division of Responsibilities

              • MAE-A.4.1

                A clear division of responsibilities between CBB as the regulator and the licensed exchangesG or the licensed market operatorsG as a self regulatory organisation (SRO) is required:

                (a) To maximise the regulatory effectiveness;
                (b) To permit flexibility to the licensed exchangesG or the licensed market operatorsG in their functioning;
                (c) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations; and
                (d) To minimise the regulatory cost.
                Amended: April 2016

              • MAE-A.4.2

                As a regulator, CBB's role is as follows:

                (a) Regulatory supervision;
                (b) Maintaining and promoting fairness, efficiency and transparency within the capital marketG ;
                (c) Acting as an enforcement agency with powers to investigate and take administrative, civil or criminal actions as it may deem appropriate;
                (d) Approving the rules, by-laws and regulations of the licensed exchangesG or the licensed market operatorsG , whereby any change in the rules, by-laws and regulations of the licensed exchangeG or the licensed market operatorG would need prior approval of CBB; and
                (e) Licensing, supervision, inspection, investigation and enforcement.
                Amended: April 2016

              • MAE-A.4.3

                The licensed exchangeG or the licensed market operatorG established as an SRO and the crowdfunding platform operatorG must comply with the requirements laid down under law as well as by the CBB Law, this Module and the other applicable laws and regulations.

                Amended: October 2017
                Amended: April 2016

              • MAE-A.4.4

                As an SRO, the main objective of the exchange or the operator is to promote:

                (a) Fairness and investor protection;
                (b) Fair access to marketG facilities and information;
                (c) The provision of timely and accessible relevant marketG data; and
                (d) The efficient regulation of its members.
                Amended: April 2016

          • MAE-B Purpose

            • MAE-B.1 Scope

              • MAE-B.1.1

                This Module shall apply to marketsG operated by a licensed exchangeG or licensed market operatorG in or from the Kingdom of Bahrain for the trading of securitiesG , including commodities and/or futures contractsG .

                Amended: April 2016

              • MAE-B.1.2

                Article 186 of the CBB Law states that the Bahrain Bourse (previously referred to as the Bahrain Stock Exchange (BSE)) is to be regarded as a licenseeG of the CBB. Accordingly all rules and regulations applicable to marketsG and exchanges will be applicable to the Bahrain Bourse.

                Amended: April 2016

              • MAE-B.1.3

                Certain provisions of this Module shall apply to crowdfunding platform operatorsG .

                Added: October 2017

            • MAE-B.2 Definitions

              [This Section was deleted and moved to the Glossary under Part B in July 2016.]

              Deleted: July 2016

          • MAE-1 Licensing

            • MAE-1.1 Requirement to be Licensed

              • MAE-1.1.1

                No personG shall establish or operate a marketG , or hold himself out as operating a marketG in or from the Kingdom of Bahrain, unless the personG is:

                (a) A licensed exchangeG ;
                (b) A licensed market operatorG ; or
                (c) An exempt exchangeG or marketG operator.
                Amended: April 2016

              • MAE-1.1.2

                No personG in the Kingdom of Bahrain shall hold himself out:

                (a) As a licensed exchangeG unless he is a licensed exchangeG ; or
                (b) As a licensed market operatorG unless he is a licensed market operatorG .

              • MAE-1.1.3

                Except with the written approval of the CBB, no personG other than a licensed or exempt exchangeG shall take or use, or have attached to or exhibited at any place:

                (a) The title or description "securities exchange", "stock exchange", "futures exchange" or "derivatives exchange" in any language; or
                (b) Any title or description which resembles a title or description referred to in Subparagraph MAE-1.1.3 (a).
                Amended: April 2016

              • MAE-1.1.4

                No personG may market any financial servicesG in the Kingdom of Bahrain unless:

                (a) Allowed to do by the terms of a license issued by the CBB;
                (b) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
                (c) Has obtained the express written permission of the CBB to offer financial servicesG .
                Added: April 2013

              • MAE-1.1.5

                In accordance with Resolution No.(16) for the year 2012 and for the purpose of Paragraph MAE-1.1.4, the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial servicesG in return for monetary payment or some other form of valuable consideration.

                Added: April 2013

              • MAE-1.1.6

                Persons in breach of Paragraph MAE-1.1.4 are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law.

                Added: April 2013

            • MAE-1.2 Application for License

              • MAE-1.2.1

                A personG may apply to the CBB to be:

                (a) Licensed as a licensed exchangeG ;
                (b) Licensed as a licensed market operatorG ; or
                (c) An exempt exchangeG or exempt market operatorG .

              • MAE-1.2.2

                Unless otherwise approved by the CBB, the exchange shall be established as a joint stock company subject to the Commercial Company Law 2001.

              • MAE-1.2.3

                Where the entity is not a joint stock company, the CBB may impose other structural and disclosure requirements.

              • MAE-1.2.4

                An application for approval as a licensed exchangeG or licensed market operatorG under Article 39 of the CBB Law shall be made in Form 1 (Application for Approval as a licensed exchangeG or licensed market operatorG ) and shall be lodged with the CBB together with:

                (a) Form 2 (Information on Shareholders and Subsidiaries) and Form 3 (Application for Approved Person Status);
                (b) Any relevant annex and information specified in those forms;
                (c) A non-refundable prescribed application fee of BD100;
                (d) A business plan setting forth the internal controlling procedures of the enterprise;
                (e) A business plan containing a budgeted accounting plan for the first three business years;
                (f) Memorandum and Articles of Association of the corporation, copies of the by-laws, its constitution and powers of management and the manner in which its business is proposed to be transacted;
                (g) Policies and procedures for all the exchange and marketG operations;
                (h) The proposed organisation structure and the powers and duties of the officials of the exchange or marketG operator;
                (i) The criteria for admission into the licensed exchangeG or the operator of various classes of membersG , the qualifications for membership, and the exclusion, suspension, expulsion and readmission of membersG therefrom or thereto;
                (j) A description of the proposed trading and settlement system;
                (k) Arrangements for risk management, compliance and internal controls;
                (l) Where activities would be outsourced, copies of contracts and arrangements for oversight of their activities; and
                (m) Business rulesG covering membership including capital requirements, instruments to be admitted to trading and listing, trading and execution rules, conflicts of interest requirements, professional standards, clearing and depository rulesG , data transmission, marketG conduct including avoidance of marketG abuse, compliance arrangements, and such other rules as may be required by the CBB.
                Amended: April 2013

              • MAE-1.2.5

                The applications must include evidence that:

                (a) Any trading conducted will operate in an orderly, transparent and fair manner;
                (b) The licensed exchangeG or licensed market operatorG will be subject to regulation by the CBB;
                (c) The licensed exchangeG or licensed market operatorG has taken adequate measure to prudently manage any risks associated with its business and operations;
                (d) The licensed exchangeG or licensed market operatorG , in discharging its obligations, will not act contrary to the interests of the public, the investing public, or to the requirements of the CBB;
                (e) The licensed exchangeG or licensed market operatorG will enforce compliance by its membersG with its business rulesG and listing rulesG ;
                (f) The business rulesG and listing rulesG of the licensed exchangeG or licensed market operatorG make satisfactory provisions for: an orderly, transparent and fair marketG trading through its facilities; and the proper rules and supervision of its membersG ; and
                (g) The licensed exchangeG or licensed market operatorG has sufficient financial, human, and technical resources to establish and operate a fair and efficient system for marketG trading; meet contingencies or disasters criteria; and provide adequate trading instruments arrangements.

              • MAE-1.2.6

                The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.

              • MAE-1.2.7

                The CBB may refuse to accept any application if:

                (a) It is not completed in accordance with this Module; or
                (b) It is not accompanied by the relevant fee.

              • MAE-1.2.8

                Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner as the CBB deems fit.

                Amended: April 2016

              • MAE-1.2.9

                The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.

            • MAE-1.3 Licensing of Exchanges and Market Operators

              • MAE-1.3.1

                The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.

              • MAE-1.3.2

                The CBB may grant an 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

                Amended: April 2016

              • MAE-1.3.2A

                An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Industry and Commerce unless it receives the final approval from the CBB.

                Added: April 2016

              • MAE-1.3.3

                The operations of the licensed exchangeG or licensed market operatorG may only commence after the CBB grants the license to the applicant.

                Amended: April 2016

              • MAE-1.3.4

                The CBB may license a personG as a licensed exchangeG or license an overseas exchangeG as a licensed market operatorG , subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing, including conditions or restrictions relating to:

                (a) The activities that the personG may undertake;
                (b) The securitiesG or futures contractsG that may be traded on any marketG established or operated by the personG ; and
                (c) The nature of the investors or participantsG who may use, invest in or participate in the securitiesG or futures contractsG traded on any marketG established or operated by the personG .
                Amended: April 2016

              • MAE-1.3.5

                The CBB may, at any time, by notice in writing to the personG , vary any condition or restriction or impose such further condition or restriction as it may deem fit.

                Amended: April 2016

              • MAE-1.3.6

                A licensed exchangeG or a licensed market operatorG shall, for the duration of the license, satisfy all conditions and restrictions that may be imposed on it.

              • MAE-1.3.7

                Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.

            • MAE-1.4 Exemption of Exchanges and Market Operators

              • MAE-1.4.1

                The CBB may:

                (a) Exempt any personG operating any marketG from the requirement under MAE-1.1 to be a licensed exchangeG or a licensed market operatorG ;
                (b) Declare that personG to be an exempt market operatorG , by order published in the Gazette; and
                (c) Impose such conditions or restrictions relating to the exemption as the CBB may deem fit, by notice in writing to that personG .
                Amended: April 2016

              • MAE-1.4.2

                An application to be exempted from the requirement under MAE-1.2 to be a licensed exchangeG or a licensed market operatorG shall be made in Form 4.

              • MAE-1.4.3

                The CBB may exempt an applicant referred to in MAE-1.4.1 from the requirement under MAE-1.2 if, in the opinion of the CBB, the objectives specified in MAE-1.2.5 can be achieved without regulating the applicant as a licensed exchangeG or a licensed market operatorG .

              • MAE-1.4.4

                An application made under MAE-1.4.1 shall be accompanied by a non-refundable prescribed application fee of BD100, which shall be paid in the manner specified by the CBB.

                Amended: April 2016

              • MAE-1.4.5

                The CBB may require an applicant to furnish it with such information or document as the CBB considers necessary in relation to the application.

              • MAE-1.4.6

                The CBB may, by notice in writing, impose on a personG exempted under MAE-1.4.3 such conditions or restrictions relating to the exemption as the CBB may deem fit, including conditions or restrictions relating to:

                (a) The activities that the personG may undertake;
                (b) The securitiesG or futures contractsG that may be traded on any marketG established or operated by the personG ; and
                (c) The nature of the investors or participantsG who may use, participate or invest in the securitiesG or futures contractsG traded on any marketG established or operated by the personG .
                Amended: April 2016

              • MAE-1.4.7

                The CBB may, at any time, by notice in writing to a personG exempted under MAE-1.4.3, vary any condition or restriction referred to in MAE-1.4.6 or impose such further condition or restriction relating to the exemption as the CBB may think fit.

              • MAE-1.4.8

                The CBB shall give notice in the Gazette of any personG exempted under MAE-1.4.3, and such notice may include the conditions or restrictions imposed by the CBB on the personG under MAE-1.4.6 in relation to the securitiesG or futures contractsG that may be traded on any marketG established or operated by the personG .

                Amended: April 2016

              • MAE-1.4.9

                An exempt market operatorG shall comply with all conditions or restrictions imposed on it under MAE-1.4.6, 1.4.7, or 1.4.8, as the case may be.

            • MAE-1.5 Power of CBB to Revoke Exemption

              • MAE-1.5.1

                The CBB may revoke any exemption granted to a personG under MAE-1.4.3 if:

                (a) The personG does not commence operating its marketG or, where it operates more than one marketG , all of its marketsG , within 6 months from the date on which it was granted the exemption;
                (b) The personG ceases to operate its marketG or, where it operates more than one marketG , all of its marketsG ;
                (c) The personG contravenes:-
                (i) Any condition or restriction relating to the exemption;
                (ii) Any direction issued to it by the CBB; or
                (iii) Any provision of the CBB Law or Regulations;
                (d) The CBB is of the opinion that the personG has operated in a manner that is contrary to the interests of the public;
                (e) The personG is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
                (f) A receiver, a receiver and manager or an equivalent personG has been appointed, whether in Bahrain or elsewhere, in relation to, or in respect of, any property of the personG ;
                (g) The personG has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly;
                (h) The CBB is of the opinion that the personG would be more appropriately regulated as a licensed exchangeG or a licensed market operatorG ; or
                (i) Any information or document provided by the personG to the CBB is false or misleading.
                Amended: April 2013

              • MAE-1.5.2

                Subject to MAE-1.5.3, the CBB shall not revoke under MAE-1.5.1 any exemption granted to a personG without giving the personG an opportunity to be heard.

              • MAE-1.5.3

                The CBB may revoke any exemption granted to a personG on any of the following grounds without giving the personG an opportunity to be heard:

                (a) The personG is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
                (b) A receiver, a receiver and manager or an equivalent personG has been appointed, whether in Bahrain or elsewhere, in relation to, or in respect of any property of the personG ; or
                (c) The personG has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud and dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.

              • MAE-1.5.4

                For the purposes of MAE-1.5.1(b), a personG shall be deemed to have ceased to operate its marketG if:

                (a) It has ceased to operate the marketG for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or
                (b) It has ceased to operate the marketG under a direction issued by the CBB.

              • MAE-1.5.5

                Any revocation under MAE-1.5.1 of an exemption granted to a personG shall not operate so as to:

                (a) Avoid or affect any agreement, transaction or arrangement entered into on a marketG operated by the personG , whether the agreement, transaction or arrangement was entered into before or after the revocation of the exemption; or
                (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.
                Amended: April 2013

              • MAE-1.5.6

                The CBB shall give notice in the Gazette of any revocation of an exemption referred to in MAE-1.5.1.

            • MAE-1.6 Criteria for Granting License

              • MAE-1.6.1

                The CBB may license a personG as a licensed exchangeG or licensed market operatorG if:

                (a) The CBB is satisfied that the establishment of a marketG or exchange to be operated by a personG will;
                (i) Develop the financial sector and enhance confidence therein; and
                (ii) Protect the interests of investors in the marketG and exchanges and enhance the Kingdom's credibility as an international financial centre; and
                (b) The CBB is satisfied that the personG , having applied to be a licensed exchangeG or licensed market operatorG under this Module, is able to comply with the obligations or requirements imposed on licensed exchangesG or licensed market operatorsG .
                Amended: April 2013

              • MAE-1.6.2

                The CBB may have regard to the following matters in determining whether a licensed exchangeG or licensed market operatorG has satisfied the criteria referred to in Subparagraphs MAE-1.6.1 (a) or (b):

                (a) The size and structure, or proposed size and structure, of the marketG to be operated by the applicant;
                (b) The nature of the services provided, or to be provided, by the marketG to be operated by the applicant;
                (c) The nature of the securitiesG or futures contractsG traded, or to be traded, on the marketG to be operated by the applicant;
                (d) The nature of the investors or participantsG , or proposed investors or participantsG , who may use or have an interest in the marketG to be operated by the applicant;
                (e) Whether the applicant is regulated by the CBB under this Module or any other law;
                (f) That the rules and by-laws of an applicant are in conformity with such conditions as may be prescribed with a view to ensure fair dealing and to protect investors;
                (g) That the applicant is willing to comply with any other conditions (including conditions as to the number of membersG ) which the CBB, having regard to the the nature of the securitiesG dealt with by it, may impose;
                (h) The proposed trading and settlement systems comply with up-to-date industry standards;
                (i) The personsG who may be affected in the event that the applicant, or the marketG to be operated by the applicant, runs into difficulties;
                (j) Where the head office or principal place of business of the applicant is outside Bahrain, whether the applicant in the country or territory in which the head office or principal place of business of the applicant is situated, is subject to requirements and supervision comparable to those in the Kingdom of Bahrain;
                (k) The interests of the public; and
                (l) Any other circumstances that the CBB may consider relevant.
                Amended: April 2016

              • MAE-1.6.3

                The applicant must additionally be able to demonstrate to the CBB and the CBB must be satisfied that it has:

                (a) The financial resources, and the management and human resources with appropriate experience, necessary for the operation of a marketG or exchange;
                (b) Made arrangements for the proper supervision of all transactions effected through the marketG or exchange so as to ensure compliance with its rules;
                (c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the records of transactions effected through the marketG or exchange;
                (d) Insurance, a guarantee or compensation fund or other warranty plans in place to enable it to provide compensation, subject to the business rulesG , to clients; and
                (e) Made provisions, to the satisfaction of the CBB, for the clearing and settlement of transactions effected through the marketG or exchange and for the management of trade and settlement risk.

              • MAE-1.6.4

                In addition, the CBB may, for the purposes of licensing an overseas exchangeG as a licensed market operatorG , have regard in addition to any criteria prescribed under Paragraph MAE-1.6.1 whether adequate arrangements exist for cooperation between the CBB and the financial services regulator responsible for the supervision of the operator in the country or territory in which the head office or principal place of business of the operator is situated.

              • MAE-1.6.5

                In considering whether it is satisfied that an overseas exchangeG has met the requirements mentioned in Paragraph MAE-1.6.1, the CBB may have regard to:

                (a) The relevant laws and practices of the country or territory in which the head office or principal place of business of the operator is situated; and
                (b) The rules and practices of the operator.

            • MAE-1.7 Surrender of License or Cessation of Business

              • MAE-1.7.1

                A licensed exchangeG or licensed market operatorG which intends to cease operating its marketG or, where it operates more than one marketG , all of its marketsG , must apply to the CBB to surrender its approval as a licensed exchangeG or licensed market operatorG , as the case may be.

                Amended: April 2016

              • MAE-1.7.2

                The CBB may, subject to MAE-1.8.1 cancel the license if it is satisfied that the licensed exchangeG or licensed market operatorG referred to in MAE-1.7.1 has ceased operating its marketG or all of its marketsG , as the case may be and that there are no pending obligations of the licensed exchangeG or licensed market operatorG or contracts traded.

              • MAE-1.7.3

                The licensed exchangeG or licensed market operatorG shall publish a notice of its intention to cease to operate its marketG in 2 daily newspapers, one in Arabic and the other in English, in Bahrain.

              • MAE-1.7.4

                Any objections received from any memberG , userG or participantG of the licensed exchangeG or licensed market operatorG shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the exchange or the operator.

              • MAE-1.7.5

                The notice referred to in Paragraph MAE-1.7.3 shall be subject to the approval of the CBB and shall be published at least 30 days prior to the cessation taking effect.

            • MAE-1.8 Cancellation or Amendment of License

              • MAE-1.8.1

                The CBB may cancel any license of a personG as a licensed exchangeG or licensed market operatorG if:

                (a) There exists criteria under MAE-1.2 that the licensed exchangeG or licensed market operatorG does not meet and on which grounds the CBB would refuse an application;
                (b) The licensed exchangeG or licensed market operatorG does not commence operating its marketG or, where it operates more than one marketG , all of its marketsG within 6 months from the date on which it was granted the license.
                (c) The licensed exchangeG or licensed market operatorG ceases to operate its marketG or, where it operates more than one marketG , all of its marketsG .
                (d) The licensed exchangeG or licensed market operatorG contravenes:
                (i) Any condition or restriction applicable in respect of its license;
                (ii) Any direction issued to it by the CBB;
                (iii) Any provision in this Module; or
                (iv) Any other CBB law, rule or regulation;
                (e) The licensed exchangeG or licensed market operatorG operates in a manner that is in the opinion of the CBB, contrary to the interests of the public or userG ; and
                (f) Any information or document knowingly or willingly provided by the licensed exchangeG or licensed market operatorG to the CBB is false or misleading.
                Amended: April 2013

              • MAE-1.8.2

                The CBB may not, subject to MAE-1.8.3, cancel any license that was granted to a licensed exchangeG or licensed market operatorG without giving the opportunity to be heard.

              • MAE-1.8.3

                The CBB may cancel a license that was granted to a licensed exchangeG or licensed market operatorG on any of the following grounds without giving an opportunity to be heard:

                (a) The licensed exchangeG or licensed market operatorG is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
                (b) A receiver, a receiver and manager, or an equivalent personG has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the licensed exchangeG or licensed market operatorG ; and
                (c) The licensed exchangeG or licensed market operatorG has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.

              • MAE-1.8.4

                For the purposes of Subparagraph MAE-1.8.1(c), a licensed exchangeG or licensed market operatorG shall be deemed to have ceased to operate its marketG if:

                (a) It has ceased to operate the marketG for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or
                (b) It has ceased to operate the marketG under a direction issued by the CBB.
                Amended: July 2016
                Amended: April 2016

              • MAE-1.8.5

                Any cancellation of a license of a licensed exchangeG or licensed market operatorG referred to in Paragraph MAE-1.8.1 shall not operate so as to:

                (a) Avoid or affect any agreement, transaction or arrangement entered into a marketG operated by the corporation, whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or
                (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.

              • MAE-1.8.6

                Where the CBB cancels or amends a license of a licensed exchangeG or licensed market operatorG , notification to the licensed exchangeG and an appeal against such a decision shall be governed by Article 48 of the CBB Law.

                Amended: July 2016

            • MAE-1.9 Annual Fees Payable by Licensed Exchange and Licensed Market Operator

              • MAE-1.9.1

                Every licensed exchangeG and licensed market operatorG must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.

                Amended: July 2016
                Amended: April 2016
                Amended: April 2014
                Amended: April 2013

              • MAE-1.9.1A

                The following fee is currently prescribed for licensed exchangesG and licensed market operatorsG :

                Managing and operating markets and systems for trading in securities and financial instruments (fixed) BD15,000
                Amended: April 2016
                Added: April 2013

              • MAE-1.9.1B

                For new licenseesG , their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license is granted, is prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.

                Added: April 2014

              • MAE-1.9.2

                Where a license is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question, should a fee have been paid for that year.

                Amended: April 2014

              • MAE-1.9.3

                A licensed exchangeG or licensed market operatorG failing to comply with Paragraph MAE-1.9.1 may be subject to financial penalties as prescribed by the CBB.

                Added: April 2016

            • MAE-1.10 Publication of the Decision to Grant, Cancel or Amend a License

              • MAE-1.10.1

                The CBB shall publish its decision to grant, cancel or amend a license in the Official Gazette as well as in 2 local newspapers, one published in Arabic and the other in English in Bahrain.

              • MAE-1.10.2

                For the purpose of Paragraph MAE-1.10.1, the cost of publication of this notice must be borne by the Licensee.

                Added: July 2017

              • MAE-1.10.3

                The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

                Added: July 2017

            • MAE-1.11 Place of Business

              • MAE-1.11.1

                No licensed exchangeG or licensed market operatorG must, without a prior written approval of the CBB:

                (a) Open a new place of business in the Kingdom;
                (b) Close or change an existing place of business in the Kingdom;
                (c) Open a new place of business abroad if the licensed exchangeG or licensed market operatorG is not an overseas exchangeG ; and
                (d) The CBB may restrict its approval stipulated in MAE-1.6.1, subject to any other conditions, as it may deem necessary.
                Amended: April 2016

          • MAE-2 Obligation of Licensed Exchanges, Market Operators and Crowdfunding Platform Operators

            • MAE-2.1 General Obligations

              • Licensing Requirements

                • MAE-2.1.1

                  A licensed exchangeG or licensed market operatorG shall, in respect of every marketG it operates:

                  (a) As far as is reasonably practicable, ensure that the marketG is fair, orderly and transparent;
                  (b) Manage any risks associated with its business and operations prudently;
                  (c) Not act contrary to the interests of the public, having particular regard to the interests of the investing public;
                  (d) Ensure that access for participation in its facilities is subject to criteria that are fair and objective, and that are designed to ensure the orderly functioning of the marketG and to protect the interests of the investing public;
                  (e) Maintain business rulesG and, where appropriate, listing rulesG that make satisfactory provision for:
                  (i) A fair, orderly and transparent marketG in securitiesG and futures contracts that are traded through its facilities; and
                  (ii) The proper regulation and supervision of its membersG ;
                  (f) Enforce compliance with its business rulesG and, where appropriate, its listing rulesG ;
                  (g) Have sufficient financial, human and system resources:
                  (i) To operate a fair, orderly and transparent marketG ;
                  (ii) To meet contingencies or disasters; and
                  (iii) To provide adequate security arrangements;
                  (h) Ensure that it appoints or employs fit and proper personsG as its chairman, chief executive officer, directors and key management officers;
                  (i) Have a well designed Disaster Recovery Plan in place and the same shall be submitted to the CBB in accordance with Section MAE-2.10;
                  (j) Have the capacity, authority, expertise and resources to enforce compliance by its membersG , shareholders, usersG and participantsG with laws, regulations and rules;
                  (k) Ensure that the rules and regulations of the stock exchange are clearly expressed, understandable and readily available to anyone who needs to use them;
                  (l) Ensure that the rules are applied equally to all participantsG without favour or discrimination;
                  (m) Ensure that there is a system in place to record all trades and capture order entry data for surveillance purposes;
                  (n) Ensure that it has a complaints and whistleblowing procedure; and
                  (o) Have an operating manual, including the structure of the licensed exchange or licensed market operator;
                  (p) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders meetings referred to in Subparagraph MAE-2.1.1(r);
                  (q) Ensure that any agenda items to be discussed or presented during the course of meetings which require the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;
                  (r) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and
                  (s) Within a maximum of 15 calendar days of any shareholders' meetings referred to in Subparagraph MAE-2.1.1(r), provide to the CBB a copy of the minutes of the meeting.
                  Amended: July 2016
                  Amended: April 2016

              • Notification Requirements

                • MAE-2.1.2

                  A licensed exchangeG or licensed market operatorG shall, as soon as practicable after the occurrence of any of the following circumstances, notify the CBB of the circumstance:

                  (a) Any material change to the information provided by the licensed exchangeG or licensed market operatorG in its application under MAE-1.2;
                  (b) The carrying on of any business by the licensed exchangeG or licensed market operatorG other than:
                  (i) The business of operating a marketG ;
                  (ii) A business incidental to operating a marketG ; or
                  (iii) Such business or class of businesses as the CBB may prescribe;
                  (c) The acquisition by the licensed exchangeG or licensed market operatorG of a substantial shareholding in a corporation which does not carry on:
                  (i) The business of operating a marketG ;
                  (ii) A business incidental to operating a marketG ; or
                  (iii) Such business or class of businesses as the CBB may prescribe;
                  (d) The licensed exchangeG or licensed market operatorG becoming aware of a financial irregularity or other matter which in its opinion:
                  (i) May affect its ability to discharge its financial obligations; or
                  (ii) May affect the ability of a memberG of the licensed exchangeG or licensed market operatorG to meet its financial obligations to the licensed exchangeG or licensed market operatorG ;
                  (e) The licensed exchangeG or licensed market operatorG reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against a memberG of the licensed exchangeG or licensed market operatorG ;
                  (f) The licensed exchange or licensed market operator reprimands, suspends, dismisses or otherwise takes disciplinary action against any of its directors, or key management officers or if any director or key management officer is subject to an order or petition of bankruptcy or criminal prosecution;
                  (g) Any civil or criminal legal proceeding instituted against the licensed exchangeG or licensed market operatorG , whether in Bahrain or elsewhere;
                  (h) Any disciplinary action taken against the licensed exchangeG or licensed market operatorG by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
                  (i) Any significant change to the regulatory requirements imposed on the licensed exchangeG or licensed market operatorG by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
                  (j) A failure by the licensed exchangeG or licensed market operatorG to adhere to the trading days, hours or sessions of the licensed exchangeG or licensed market operatorG ;
                  (k) Any disruption of, delay in, suspension of, or termination in any trading procedure or trading practice of the licensed exchangeG or licensed market operatorG including those resulting from any system failure;
                  (l) Any other matter that the CBB may specify by notice in writing to the licensed exchangeG or licensed market operatorG .
                  Amended: April 2013

                • MAE-2.1.3

                  The CBB may, at any time after receiving a notification referred to in Paragraph MAE-2.1.2 and after providing the licensed exchangeG and licensed market operatorG an opportunity to be heard, issue directions to the licensed exchangeG or licensed market operatorG :

                  (a) Where the notification relates to a matter referred to in Subparagraph MAE-2.1.1 (b):
                  (i) To cease carrying on the first-mentioned business referred to in Subparagraph MAE-2.1.1 (b); or
                  (ii) To carry on the first-mentioned business referred to in Subparagraph MAE-2.1.1 (b) subject to such conditions or restrictions as the CBB may impose; or
                  (b) Where the notification relates to a matter referred to in Subparagraph MAE-2.1.1 (c):
                  (i) To dispose of the shareholding referred to in Subparagraph MAE-2.1.1 (c); or
                  (ii) To exercise its rights relating to such shareholding subject to such conditions or restrictions as the CBB may impose, and the licensed exchangeG or licensed market operatorG shall comply with such directions.
                  Amended: April 2016
                  Amended: April 2013

                • MAE-2.1.4

                  Where a circumstance referred to in MAE-2.1.2 has occurred, the licensed exchangeG or licensed market operatorG shall, in addition to the notification required under Paragraph MAE-2.1.2, within 14 days of the occurrence of the circumstance or such longer period as the CBB may permit, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken at the time of the occurrence, and the subsequent follow-up actions that the licensed exchangeG or licensed market operatorG has taken or intends to take.

                  Amended: April 2016

                • MAE-2.1.5

                  An exchange may levy on its membersG , participantsG and usersG such fees as it may deem necessary in the form of:

                  (a) Membership fees; and/or
                  (b) Listing fees
                  Amended: April 2013

                • MAE-2.1.6

                  The fees shall be paid quarterly, semi-annually or annually at the discretion of the exchange.

                • MAE-2.1.7

                  A licensed exchangeG or licensed market operatorG shall, within a reasonable period of time prior to entering into negotiations to establish a trading linkage, clearing arrangement or cooperative arrangement with the personG establishing or operating an overseas marketG or clearing facility, notify the CBB of such intent to enter into negotiations.

                • MAE-2.1.8

                  In Paragraph MAE-2.1.7, "cooperative arrangement" shall not include:

                  (a) Any joint development of products and services;
                  (b) Any joint marketing efforts between the licensed exchangeG and the personG operating an overseas marketG or clearing facility in promoting the services of either entity; or
                  (c) Any memoranda of understanding for the exchange of information.

            • MAE-2.2 Obligation to Maintain Proper Records

              • MAE-2.2.1

                Every licensed exchangeG or licensed market operatorG shall ensure that all relevant books and other information, as may be required by the CBB for the purposes of this Module, be kept for a minimum of 10 years.

            • MAE-2.3 Final Accounts and Auditing

              • MAE-2.3.1

                Every licensed exchangeG or licensed market operatorG shall appoint one or more qualified and experienced external auditors for its accounts for every financial year. A prior written approval by the CBB will be required before appointing an auditor.

              • MAE-2.3.2

                If a licensed exchangeG or licensed market operatorG fails to appoint an auditor within 4 months from the beginning of the financial year, the CBB shall appoint such auditor.

              • MAE-2.3.3

                The licensed exchangeG or licensed market operatorG shall pay the fees of the auditor regardless of the manner in which such auditor is appointed.

              • MAE-2.3.4

                An auditor shall not be the chairman or a director in the licensed exchangeG or licensed market operator'sG board or a managing director, agent, representative or taking up any administrative work therein, or supervising its accounts, or a next of kin to someone who is responsible for the administration or accounts of a licensed exchangeG or licensed market operatorG , or having an extraordinary interest in a licensed exchangeG or licensed market operatorG as the CBB may determine.

              • MAE-2.3.5

                If any of the circumstances referred to in Paragraph MAE-2.3.4 occurs after the appointment of the auditor, the licensed exchangeG or licensed market operatorG must appoint another auditor.

                Amended: April 2016

              • MAE-2.3.6

                The licensed exchangeG or licensed market operatorG shall provide the external auditor with all information and assistance necessary for carrying out his duties.

              • MAE-2.3.7

                The duties of the auditor shall include the preparation of a report on the final accounts. The report shall contain a statement on whether the licensed exchangeG or licensed market operator'sG accounts are correct and reflect the actual state of affairs of the licensed exchangeG or licensed market operatorG according to the auditing standards prescribed by the CBB and whether the licensed exchangeG or licensed market operatorG has provided the auditor with any required information and clarifications.

              • MAE-2.3.8

                The final audited accounts shall be presented to the general meeting of the licensed exchangeG or licensed market operatorG together with the auditor's report. A copy of these documents shall be sent to the CBB at least 15 days before the date of the general meeting.

              • MAE-2.3.9

                If the licensed exchangeG or licensed market operatorG is a foreign company, a copy of its final audited accounts together with the auditor's report shall be sent to its main office abroad.

              • MAE-2.3.10

                Every licensed exchangeG or licensed market operatorG must, within 3 months following every financial year, send to the CBB and make public its final audited accounts, for all the transactions carried out until year end as well as any other financial statements required by the CBB. Extracts of the final audited accounts shall be published in 2 local daily newspapers, one in Arabic and the other in English, within 60 calendar days from the end of the financial year.

                Amended: July 2016

              • MAE-2.3.11

                Audited financial statements must comply with International Financial Reporting Standards (IFRS)/International Accounting Standards (IAS). For Islamic institutions, audited financial statements must comply with AAOIFI standards or where AAOIFI standards do not cover a subject, IFRS must be followed.

                Amended: July 2016

            • MAE-2.4 Obligation to Submit Periodic Reports

              • MAE-2.4.1

                A licensed exchangeG or licensed market operatorG shall submit to the CBB:

                (a) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a copy of its:
                (i) Annual report and directors' report; and
                (ii) Auditor's report;
                (b) Within 45 days after the end of each of the first 3 quarters of its financial year or such longer period as the CBB may permit, or the preceding quarter, in such form as may be approved by the CBB, a copy of its:
                (i) Profit and loss accounts; and
                (ii) Balance sheet;
                (c) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a report on how the licensed exchangeG or licensed market operatorG has discharged its responsibilities under the CBB Law and these Rules during that financial year;
                (d) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a copy of the balance sheet of any fidelity fund of the licensed exchangeG prepared in such form as may be approved by the CBB;
                (e) The following reports relating to the business of the licensed exchangeG or licensed market operatorG :
                (i) Prescribed monthly statistics in Form 5 within 10 business days from the end of the month;
                (ii) Prescribed quarterly statistics in Form 6 within 10 business days from the end of each quarter; and
                (iii) Where the licensed exchangeG is operating a futures marketG , Form 7 within 10 business days from the end of each month;
                (f) Such other report as the CBB may require for the proper administration of this Module, at such time or on such periodic basis as may be required by the CBB.
                Amended: April 2013

              • MAE-2.4.2

                The auditor's report referred to in Paragraph MAE-2.4.1 (a)1 shall unless otherwise provided to the CBB by way of a management letter, include the findings and recommendations of the auditors, if any, on the internal controls of the licensed exchangeG or licensed market operatorG ; and

                (a) Any provision of this Module;
                (b) Any direction issued by the CBB under this Module; or
                (c) Any other relevant laws or regulations.
                Amended: April 2013

              • IIS Reporting Requirements

                • MAE-2.4.3

                  A licensed exchangeG or licensed market operatorG is required to complete online non-financial information related to its institution by accessing the CBB's institutional information system (IIS). Licensees must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, the licensee must still access the IIS quarterly and confirm the information contained in the IIS. Licensees must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.

                  Added: April 2013

                • MAE-2.4.4

                  Licensees failing to comply with the requirements of Paragraph MAE-2.4.3 or reporting inaccurate information are subject to financial penalties or other enforcement actions.

                  Added: April 2013

            • MAE-2.5 Obligation to Assist CBB

              • MAE-2.5.1

                A licensed exchangeG and licensed market operatorG shall provide such assistance to the CBB as the CBB may require for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provisions of:

                (a) Such books and information:
                (i) Relating to the business of the licensed exchangeG or licensed market operatorG ; or
                (ii) In respect of such dealings in securitiesG or trading in futures contracts; and
                (b) Such other information, as the CBB may require for the proper administration of this Module.
                Amended: April 2013

              • MAE-2.5.2

                The CBB may at is discretion:

                (a) Call for the provision of additional information about the affairs of the exchange or the operator;
                (b) Carry out inspections of the office of the exchanges and inspect the books of accounts and other relevant books of the exchange or the operator; and
                (c) Appoint one or more personG to inquire into the affairs of the exchange or operator.

            • MAE-2.6 Obligation to Maintain Confidentiality

              • MAE-2.6.1

                Subject to Paragraph MAE-2.6.2, a licensed exchangeG and licensed market operatorG and its officers and employees must maintain, and aid in maintaining the confidentiality of all userG information that:

                (a) Comes to the knowledge of the licensed exchangeG or licensed market operatorG , or any of its officers or employees; and
                (b) Is in possession of the licensed exchangeG or licensed market operatorG , or any of its officers or employees.
                Amended: April 2016

              • MAE-2.6.2

                Paragraph MAE-2.6.1 does not apply to:

                (a) The disclosure of userG information for such purposes, or in such circumstances as the CBB may prescribe;
                (b) Any disclosure of userG information which is authorised by the CBB to be disclosed or furnished; or
                (c) The disclosure of userG information pursuant to any requirement imposed under any law or order of court in the Kingdom of Bahrain.
                Amended: April 2016

              • MAE-2.6.3

                For the avoidance of doubt, nothing in this Section shall be construed as preventing a licensed exchangeG or licensed market operatorG from entering into a written agreement with a userG which obliges the licensed exchangeG or licensed market operatorG to maintain a higher degree of confidentiality than that specified in this Section.

                Amended: April 2016

            • MAE-2.7 Exceptions to Obligation to Maintain Confidentiality

              • MAE-2.7.1

                The obligation to maintain confidentiality shall not apply to the disclosure of userG information by a licensed exchangeG or licensed market operatorG , or its officers or employees for the following purposes or in the following circumstances:

                (a) The disclosure of userG information is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;
                (b) The disclosure of userG information is permitted for such purpose specified in writing by the userG or, where the userG is deceased, by his appointed personal representative;
                (c) The disclosure of userG information is necessary for the execution by the licensed exchangeG or licensed market operatorG of a transaction in any securitiesG or futures contracts or clearing or settlement of a transaction and such disclosure is made only to another userG which is:
                (i) A party to the transaction; or
                (ii) A memberG of a licensed exchangeG or licensed market operatorG , or a designated clearing houseG through which that transaction is executed, cleared or settled;
                (d) The disclosure of userG information is necessary:
                (i) In any disciplinary proceedings of the licensed exchangeG or licensed market operatorG , provided that reasonable steps are taken to ensure that userG information disclosed to any third personG is used strictly for the purpose for which the userG information is disclosed; or
                (ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
                (e) The userG information disclosed is already in the public domain;
                (f) The disclosure of userG information is made in connection with:
                (i) The outsourcing or proposed outsourcing of any function of the licensed exchangeG or licensed market operatorG to a third party;
                (ii) The engagement or potential engagement of a third party by the licensed exchangeG or licensed market operatorG to create, install or maintain systems of the licensed exchangeG or licensed market operatorG ; or
                (iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed exchangeG or licensed market operatorG under a contract for service;
                (g) The disclosure of userG information is necessary in:
                (i) An application for a grant of probate or letters of administration or the resealing thereof in relation to the estate of a deceased userG ; or
                (ii) The administration of the estate of a deceased userG , including such disclosure as may be required for this purpose by the relevant authority; or
                (h) The disclosure of userG information is made in connection with:
                (i) In the case where the userG is an individual, the bankruptcy of a userG ; or
                (ii) In the case where the userG is a body corporate, the winding up or receivership of a userG .
                Amended: April 2013

              • MAE-2.7.2

                Where user informationG is disclosed under MAE-2.7.1 (f), the licensed exchangeG or licensed market operatorG shall:

                (a) Maintain a record of the circumstances relating to the disclosure of userG information referred to in MAE-2.7.1 (f); and the particulars of:
                (i) In the case of the disclosure of information under MAE-2.7.1 (f), the outsourcing of the function of the licensed exchangeG ;
                (ii) In the case of the disclosure of information under MAE-2.7.1 (f), the engagement of the third party; and
                (iii) In the case of the disclosure of information under MAE-2.7.1 (f), the appointment or engagement of the auditor, lawyer, consultant or other professional and make that record available for inspection by the CBB;
                (b) Disclose the user informationG only insofar as this is necessary for the relevant purpose; and
                (c) Take reasonable steps to ensure that the user informationG disclosed is used by the personG to whom the disclosure is made strictly for the relevant purpose, and that the user informationG is not disclosed by that personG to any other personG except with the consent of the licensed exchangeG or licensed market operatorG .
                Amended: April 2013

              • MAE-2.7.3

                Where disclosure of user informationG is permitted to be made for any purpose or in any circumstance under Paragraph MAE-2.7.1 to a body corporate, the user informationG may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.

              • MAE-2.7.4

                In Paragraphs MAE-2.7.2 and MAE-2.7.3, "relevant purpose" means:

                (a) In the case of the disclosure of information under Paragraph MAE-2.7.1 (f), facilitating the outsourcing of the function of the licensed exchangeG or licensed market operatorG ;
                (b) In the case of the disclosure of information under Paragraph MAE-2.7.1 (f), facilitating the engagement of the third party; and
                (c) In the case of the disclosure of information under Paragraph MAE-2.7.1 (f), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.

            • MAE-2.8 Provision of Information to Investors

              • MAE-2.8.1

                A licensed exchangeG or licensed market operatorG shall:

                (a) Make available upon request by; or
                (b) Publish in a manner that is accessible to, any investor who accesses or potential investor who may access, any marketG that the licensed exchangeG or licensed market operatorG operates information on:
                (i) All services of the licensed exchangeG or licensed market operatorG ;
                (ii) All products available on the marketG operated by the licensed exchangeG or licensed market operatorG ;
                (iii) Applicable fees and charges;
                (iv) Applicable margin requirements; and
                (v) Any arrangement that may be in place to compensate an investor who suffers pecuniary loss as a result of these activities or insolvency of a participantG of the licensed exchangeG or licensed market operatorG .
                Amended: April 2013

              • MAE-2.8.2

                In Paragraph MAE-2.8.1 "investor" means:

                (a) In the case where the licensed exchangeG is incorporated in Bahrain, any investor, whether in Bahrain or elsewhere; and
                (b) In the case of licensed market operatorsG , any investor in Bahrain.

            • MAE-2.9 Transmission and Storage of User Information

              • MAE-2.9.1

                A licensed exchangeG or licensed market operatorG shall take all reasonable measures to maintain the integrity and security of the transmission and storage of user informationG .

            • MAE-2.10 Business Continuity Plan

              • MAE-2.10.1

                A licensed exchangeG or licensed market operatorG shall maintain at all times a plan of action (referred to in this regulation as a business continuity plan) setting out the procedures and establishing the systems necessary to restore fair, orderly and transparent operations of any marketG it operates, in the event of any disruption to the operations of the marketG .

              • MAE-2.10.2

                A licensed exchangeG or licensed market operatorG shall review the procedures and systems referred to in MAE-2.10.1 on such regular basis as may be specified in the business continuity plan.

              • MAE-2.10.3

                A licensed exchangeG or licensed market operatorG shall immediately notify the CBB of any activation of its business continuity plan and of any action taken or intended to be taken to restore fair, orderly and transparent operations of any marketG it operates.

              • MAE-2.10.4

                A licensed exchangeG or licensed market operatorG shall, within 14 days or such longer period as the CBB may permit, inform the CBB of any material change to the business continuity plan, and shall submit at the request of the CBB, a copy of the new plan to the CBB.

            • MAE-2.11 Obligations of Crowdfunding Platform Operators

              • MAE-2.11.1

                The content of MAE-2.11 and MAE-2.12 of this Module applies to crowdfunding platform operatorsG licensed under CBB Rulebook Volume 5 (Ancillary Service Providers) undertaking equity crowdfundingG activities.

                Added: October 2017

              • MAE-2.11.2

                A crowdfunding platform operatorG must, in respect of market it operates:

                (a) Carry out a due diligence exercise on prospective equity crowdfunding issuersG planning to use its platform;
                (b) Monitor and ensure compliance of its rules;
                (c) Carry out investor education programmes;
                (d) Ensure the equity crowdfunding offering statementG lodged with the crowdfunding platform operatorG is verified for accuracy and made accessible to investors through the platform;
                (e) Upon approval granted to an equity crowdfunding issuerG to make an equity crowdfunding offer,G immediately notify the CBB and file a copy of the following documents with the Capital Market Supervision Directorate:
                (i) A letter of approval from the crowdfunding platform operatorG clearly mentioning that the equity crowdfunding issuer'sG application has been verified and approved, and that the crowdfunding offerG adheres to the CBB Law, rules and regulations and any other applicable law, rules and regulations;
                (ii) A copy of the equity crowdfunding offering statementG filed by the equity crowdfunding issuer;G and
                (iii) Any amendments to the equity crowdfunding offering statementG filed by the equity crowdfunding issuer.G
                (f) Inform investors of any material adverse change to the crowdfunding issuer'sG proposal as set out under Paragraph MAE-2.11.4;
                (g) Ensure that the fundraising limit imposed on an equity crowdfunding issuerG is not breached;
                (h) Enter into a signed written agreement with an equityG crowdfunding issueG with all applicable terms and conditions. The crowdfunding platform operatorG and the equity crowdfunding issuerG must fulfil all obligations in their respective capacities in accordance with the signed written agreement.
                (i) Ensure that adequate policy for identifying and managing the risk of fraud by equity crowdfunding issuerG that, at the minimum:
                (i) checks, against information that is readily accessible and information that is otherwise available to the public, the identity of the issuer and information provided by the issuer relating to the identity and satisfy the "fit and proper" requirements of its directors and senior managers; and
                (ii) excludes an equity crowdfunding issuerG from using the crowdfunding platformG if :
                A. It is not satisfied as to the identity of the equity crowdfunding issuerG or of the equity crowdfunding issuerG directors and senior managers; or
                B. Has reason to believe that any of the equity crowdfunding issuer'sG directors or managers do not meet the "fit and proper" requirements. In assessing a person's fitness and propriety, a crowdfunding platform operatorG must consider previous professional and personal conduct including whether directors or managers has been convicted of offence involving fraud, dishonesty, or has been disqualified by a court, regulator or other competent body as a director or as a manager of a corporation, or has been subject of any disciplinary proceedings, investigation or fines by any government authority, regulatory agency or professional body or association; or
                C. Has reason to believe that the equity crowdfunding issuerG is not likely to comply with the obligations imposed on it under the equity crowdfunding platform services.
                (j) Appoint a Money Laundering Reporting Officer (MLRO) and comply with the requirements of Module FC of the CBB Rulebook Volume 5 in respect of Anti-Money Laundering and Combating Financial Crime requirements;
                (k) Establish effective systematic internal procedures for establishing and verifying the identity of investors and the source of their funds and must undertake investors due diligence (KYC) including FATCA report. Such procedures must be set out in writing and strictly adhered to.
                (l) Establish a framework which sets out policies and procedures to effectively and efficiently manage conflicts of interest and the need to have fair, orderly, and transparent systems and procedures to carry out its functions. Such conflicts must be managed in a timely manner.
                (m) Ensure that its business activities is restricted to arranging deals by bringing together equity crowdfunding issuers and investors. It must not provide any investment advice to investors.
                (n) The board members, shareholders, management and their close family members:
                (i) Must not holds any shares or invest in whatever form, in any of the equity crowdfunding issuersG hosted on its platform;
                (ii) Must not pay any referrer or introducer, or receive payment in whatever form, including payment in the form of shares, in connection with an equity crowdfunding issuerG hosted on its platform; and
                (iii) Must not provide any financial assistance to investors to invest in shares of an equity crowdfunding issuerG hosted on its platform.
                (o) Must not invest in an equity crowdfunding offerG to the extent that it operates a crowdfunding platformG . In order to undertake investment in crowdfunding issues, a crowdfunding platform operatorG must obtain a separate license from the CBB for investment activities and also disclose conflicts of interests that may arise between its interest and those of its clients.
                (p) Have an adequate policy (a fair dealing policy) for excluding an equity crowdfunding issuerG from using the crowdfunding platformG if the provider has information that gives it reason to believe that the equity crowdfunding issuerG , in relation to any dealing in shares has:
                (i) engaged in conduct that is misleading or deceptive or likely to mislead or deceive; or
                (ii) made a false or misleading representation; or
                (iii) made an unsubstantiated representation
                (q) Ensure cyber-security at all times including the conduct of IT security penetration testing semi-annually by an independent consultant.
                (r) Maintain relevant systems in place for mitigating and managing operational and other risks.</div>
                (s) Subsequent to an equity crowdfunding offerG , the crowdfunding platform operatorG must submit to the CBB the results of the crowdfunding offerG , including an allotment report, within 7 calendar days from the closing date of the offer period.
                (t) Ensure that entities engaged in real estate projectsG comply with applicable real estate laws;
                (u) Provide frequent updates on its platform regarding the progress of an equity crowdfunding offerG meeting the offer size.
                (v) Notify the CBB on the progress of an equity crowdfunding offerG towards meeting the offer size within 2 calendar days after reaching 50% and 80% of the offer size.
                (w) Must be a member of the Bahrain Credit Reference Bureau.
                Added: October 2017

              • MAE-2.11.3

                The scope of the due diligence exercise by a crowdfunding platform operatorG , referred to in Paragraph MAE- 2.11.2(a), must include taking reasonable steps including but not limited to:

                (a) Conduct background checks on the equity crowdfunding issuerG to ensure "fit and proper" requirements are met by the issuer, its board of directors, senior management and controlling owner; and
                (b) Verify that the equity crowdfunding offering statement,G lodged by the equity crowdfunding issuer,G does not contain information that is false or misleading, in its opinion does not prejudice the interests of present or future investors and does not omit any material information.
                Added: October 2017

              • MAE-2.11.4

                For the purpose of Paragraph MAE-2.11.2(f), a material adverse change concerning the equity crowdfunding issuerG , may include any of the following matters:

                (a) The discovery of a false or misleading statement in the equity crowdfundingG offering statementG in relation to the equity crowdfunding offerG ; or
                (b) The discovery of a material omission of information required to be included in the equity crowdfunding offering statementG ; or
                (c) There is a material change or development in the circumstances relating to the equity crowdfunding offerG or the equity crowdfunding issuerG .
                Added: October 2017

                • Appointment of Shari'a Advisor

                  • MAE-2.11.5

                    For the purposes of Islamic equity crowdfunding offersG , crowdfunding platform operatorsG must appoint an independent Shari'a advisor. The appointed Shari'a advisor must be a person or a corporation.

                    Added: October 2017

                  • MAE-2.11.6

                    The appointed Shari'a advisor must advise the equity crowdfunding issuerG on all aspects of the Islamic equity crowdfunding offer,G including documentation, structuring, investment, as well as other administrative and operational matters in relation to the Islamic equity crowdfunding offerG , and ensure compliance with applicable Shari'a principles.

                    Added: October 2017

                  • MAE-2.11.7

                    The crowdfunding platform operatorG must disclose the name of the Shari'a advisor appointed to advise on the Islamic equity crowdfunding offerG and information relating to the structure of the Islamic equity crowdfunding offerG .

                    Added: October 2017

                  • MAE-2.11.8

                    The Shari'a advisor must produce and sign a Shari'a pronouncement report or declaration that the equity crowdfunding offerG is in compliance with the principles of Shari'a and include the report in the equity crowdfunding offering statementG which is submitted to the crowdfunding platform operatorG .

                    Added: October 2017

                  • MAE-2.11.9

                    The equity crowdfunding issuerG is responsible for the compliance of the issue with Shari'a principles. The Shari'a advisor's role does not release equity crowdfunding issuer'sG management from their responsibility in ensuring such compliance.

                    Added: October 2017

                • Type of Securities Eligible for Hosting

                  • MAE-2.11.10

                    Ordinary shares fully paid and free from all encumbrances of closed, private, family companies, start-up, small and medium size companies and real estate projectsG are eligible for hosting on a crowdfunding platformG .

                    Added: October 2017

                  • MAE-2.11.11

                    In order to approve a real estate equity crowdfunding offer,G a crowdfunding platform operatorG must ensure that real estate projectsG comply with the following additional requirements; (a) The real estate projectG must be duly incorporated and registered with relevant authority in respective jurisdiction.; and (b)The real estate projectG must be an income producing (rental income, leasing etc.) project or property and the intended uses may be for commercial and/or dwelling purpose.

                    Added: October 2017

                • Permitted Equity Crowdfunding Issuers

                  • MAE-2.11.12

                    An equity crowdfunding issuerG must be a duly incorporated entity under the law of the Kingdom of Bahrain, or in case of overseas equity crowdfunding issuerG , under the law of its place of incorporation.

                    Added: October 2017

                  • MAE-2.11.13

                    The following entities are prohibited from raising funds through a crowdfunding platform operatorG :

                    (i) Commercially or financially complex structures (i.e. investment fund companies or financial institutions);
                    (ii) Public-listed companies and their subsidiaries;
                    (iii) Companies with no specific business plan or its business plan is to merge or acquire an unidentified entity (i.e. blind pool);/div>
                    (iv) Companies with paid-up share capital exceeding BD250,000 or equivalent amount in other currency; and
                    (v) Any other type of entity that is specified by the CBB.
                    Added: October 2017

                  • MAE-2.11.14

                    An equity crowdfunding issuerG must not be allowed to be hosted concurrently on multiple crowdfunding platforms.

                    Added: October 2017

                • Overseas Equity Crowdfunding Issuers

                  • MAE-2.11.15

                    The equity crowdfunding requirements for locally incorporated equity crowdfunding issuersG shall apply equally to overseas equity crowdfunding issuers.G

                    Added: October 2017

                  • MAE-2.11.16

                    An overseas equity crowdfunding issuerG must provide the following additional information, documents along with the equity crowdfunding offering statement;G

                    (a) A copy of the home market's relevant laws, rules and regulations that show no restrictions are imposed for making an equity crowdfunding offerG ;
                    (b) A copy of necessary approval from the home regulator;
                    (c) Confirmation that it shall adhere to the general requirements as well as with the additional requirements, as stipulated in this Module;
                    (d) The applicable governing law and specify the various risk factors associated with cross border transactions; and
                    (e) The necessary share registrar arrangements with the crowdfunding platform operatorG .
                    Added: October 2017

                • Limits to Funds Raised

                  • MAE-2.11.17

                    The following limits shall apply to an equity crowdfunding issuerG being hosted on a crowdfunding platformG , except where, subject to the CBB's prior written approval, the funding raised is to be used for a Government of Bahrain-led initiative/project:

                    (a) Equity crowdfunding issuerG , excluding entities engaged in real estate projectsG , can raise up to BD 250,000 or equivalent amount in other currency within a 12-month period, irrespective of the number of projects an equity crowdfunding issuerG may seek funding for during the 12-month period; and
                    (b) Equity crowdfunding issuerG who qualify as entity engaged in real estate projectsG can raise up to BD 500,000 or equivalent amount in other currency within a 12-month period, irrespective of the number of projects an equity crowdfunding issuerG may seek funding for during the 12-month period.
                    Amended: October 2018
                    Added: October 2017

                • Eligible Investors and Investment Limits

                  • MAE-2.11.18

                    Only accredited investorsG and expert investorsG are eligible to register with a crowdfunding platform operatorG and participate in an equity crowdfunding offerG .

                    Added: October 2017

                  • MAE-2.11.19

                    [This Paragraph was deleted in January 2019].

                    Deleted: January 2019
                    Added: October 2017

                  • MAE-2.11.20

                    A crowdfunding platform operatorG must ensure that registered expert investorsG comply with the applicable investment limits and on identification of any breach of applicable investment limit, report such breach to the CBB.

                    Added: October 2017

                  • MAE-2.11.21

                    Expert investorsG must submit to crowdfunding platform operatorG a "self- declaration form" confirming that their investment is within the applicable investment limit.

                    Added: October 2017

                • Disclosure Requirements

                  • MAE-2.11.22

                    A crowdfunding platform operatorG must disclose and display prominently on its platform, any relevant information relating to equity crowdfunding including:

                    (a) Information relating to equity crowdfunding issuerG as specified under Section MAE-2.12;
                    (b) Investor education materials and appropriate risk disclosure;
                    (c) Information on how to facilitates the investor's investment including providing communication channels to permit discussions about equity crowdfunding issuersG hosted on its platform;
                    (d) General risk warning in participating in equity crowdfunding;
                    (e) Information on rights of investor relating to participation in equity crowdfunding;
                    (f) Information about complaints handling or dispute resolution and its procedures;
                    (g) Fees, charges and other expenses that it may charge to, impose on an equity crowdfunding issuerG or investor; and
                    (h) Information on processes and contingency arrangement in the event the crowdfunding platform operatorG is unable to carry out its operations or cessation of business.
                    Added: October 2017

                  • MAE-2.11.23

                    A crowdfunding platform operatorG must immediately notify to the CBB of any non-compliance with CBB Law, rules and regulations and other applicable law, rules and regulations, money laundering, fraud or other dishonest conduct involving the crowdfunding platform operatorG , investor or equity crowdfunding issuerG .

                    Added: October 2017

                • Warning Statement

                  • MAE-2.11.24

                    A crowdfunding platform operatorG must ensure that a warning statement is prominently displayed on the home page of its website. The warning statement must be in the following form;

                    "Warning statement about equity crowdfunding

                    Equity crowd funding is risky.

                    Equity crowdfunding issuers using this equity crowdfunding platform includes closed, private, family companies, start-up and small and medium size companies incorporated in the Kingdom of Bahrain or elsewhere and entities engaged in real estate projectsG in the Kingdom of Bahrain or elsewhere.

                    Investment in these types of businesses is very speculative and carries high risks. You may lose your entire investment, and must be in a position to bear this risk without undue hardship.

                    The CBB Law, Rules and Regulations normally requires people who offer financial products to give information to investors before they invest. This requires those offering financial products to have disclosed information that is important for investors to make an informed decision.

                    The usual rules do not apply to crowdfunding offer by equity crowdfunding issuers using this equity crowdfunding platform. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.

                    Ask questions, read all information given carefully, and seek independent financial advice before committing yourself."

                    Added: October 2017

                  • MAE-2.11.25

                    A crowdfunding platform operatorG :

                    (a) Must obtain from each investor, a confirmation to the following effect:
                    (i) "I confirm that I have seen the warning statement about equity crowd funding and—
                    (ii) I understand that equity crowd funding is risky and I may lose my entire investment; and
                    (iii) I confirm that I could bear that loss without suffering undue hardship;
                    (iv) I understand that the usual legal protections do not apply to this investment; and
                    (v) I understand that I may not be given the same information as is usually required by the CBB Law, Rules and Regulations for investments."
                    (b) Must obtain the "warning statement confirmation" referred to in Paragraph MAE-2.11.25(a) in writing in a separate document or, if it is obtained by electronic means, through a process by which it is obtained separately from the investor agreement to use the service.
                    (c) Must obtain the warning statement confirmation before the investor is authorised to use the service.
                    Added: October 2017

                • Investor Agreement

                  • MAE-2.11.26

                    A crowdfunding platform operatorG must enter into a written agreement (investor agreement) with each investor before the investor is authorized to use the service.

                    Added: October 2017

                  • MAE-2.11.27

                    The investor agreement referred to in Paragraph MAE-2.11.26 must include:

                    (a) How investors and equity crowdfunding issuersG apply for, and obtain, access to the facility and the eligibility criteria that apply in each case;
                    (b) How shares are issued and allotted;
                    (c) How investor money is received and dealt with;
                    (d) The nature, extent, and frequency of monitoring the performance of the equity crowdfunding issuerG by the crowdfunding platform operatorG ;
                    (e) The charges that may be payable to the crowdfunding platform operatorG by an investor and when the investor must pay the charges; and
                    (f) The warning statement referred to in Paragraph MAE-2.11.24.
                    Added: October 2017

                • Investor Money

                  • MAE-2.11.28

                    A crowdfunding platform operatorG must:

                    (a) Establish systems and controls for maintaining accurate and up-to-date records of investors' monies held;
                    (b) Ensure that investors' monies are properly safeguarded from inappropriate use;
                    (c) Subscription monies received in respect of an equity crowdfunding offerG must be held in a separate bank account with a licensed retail bank based in Kingdom of Bahrain;
                    (d) Designate a separate bank account for each issue of equity crowdfunding offerG . The name of the designated bank must be provided to investors as part of information relating to equity crowdfunding issuerG specified under Paragraph MAE-2.11.22(a).
                    (e) Hold subscription monies received in respect of crowdfunding offerG in the designated separate bank account held with a licensed retail bank, until the final allotment of shares has been approved by the crowdfunding platform operatorG .

                    Release the fund to the equity crowdfunding issuerG after the following conditions are met:

                    (i) The equity crowdfunding offerG confirms to minimum subscription requirement and conditions regarding unsubscribed portion of an equity crowdfunding offerG stipulated under Paragraphs MAE-2.12.7 and MAE-2.12.8; There is no material adverse change relating to the equity crowdfunding offerG during the offer period; and
                    (ii) In the event of non-receipt of minimum subscription, all investors monies received must be refunded to the investors forthwith, but no later than 7 calendar days from the closing date of the equity crowdfunding offerG .
                    Added: October 2017

                  • MAE-2.11.29

                    The crowdfunding platform operatorG , subject to the approval of the CBB, may impose any other additional conditions before releasing the fund specified in Paragraph MAE-2.11.28, provided that they serve the investors' interest.

                    Added: October 2017

                • Cooling-off Period

                  • MAE-2.11.29A

                    Crowdfunding platform operators must allow persons (whether natural or legal) who commit to invest through a crowdfunding platform, a minimum of 48 hours from the time the commitment is made, to withdraw the commitment. No fee or penalty must be charged to such persons if a commitment is withdrawn.

                    Added: January 2019

                • Segregation of Client Assets

                  • MAE-2.11.30

                    A crowdfunding platform operatorG must maintain sufficient systems and procedures in respect of the handling of clients' money and assets, including but not limited to the requirement of maintaining books and records, segregation of the clients' money and assets and the risk management and internal controls systems to address this requirement.

                    Added: October 2017

                  • MAE-2.11.31

                    A crowdfunding platform operatorG must hold client assets separate from its own at all times. The crowdfunding platform operatorG must, in connection with any clients' assets and funds received in the course of their business, establish and maintain separate client accounts, segregated from those used for their own accounts.

                    Added: October 2017

                • Client Money

                  • MAE-2.11.32

                    A crowdfunding platform operatorG must hold client money in a separate client bank account. Client bank accounts may only be opened with banks licensed to do business in the Kingdom of Bahrain.

                    Added: October 2017

                • Record-keeping

                  • MAE-2.11.33

                    A crowdfunding platform operatorG must ensure that proper records, sufficient to show and explain the crowdfunding platform operator'sG transactions and commitments in respect of its client assets are kept. These records must be retained for a period of a minimum of 10 years after they were made, unless otherwise required by law.

                    Added: October 2017

                • Compliance

                  • MAE-2.11.34

                    A crowdfunding platform operatorG that hold or control client assets must arrange for their external auditor to report on the crowdfunding platform operator'sG compliance with the requirements related to the holding and segregation of the client's assets requirements.

                    Added: October 2017

                  • MAE-2.11.35

                    The report referred to under Paragraph MAE-2.11.34 must be in line with the Agreed Upon Procedure provided by the CBB, and must be submitted to the CBB immediately whenever such report contains serious deficiencies and on a regular basis within 60 calendar days of the crowdfunding operator'sG financial year end.

                    Added: October 2017

                • Share Register

                  • MAE-2.11.36

                    A crowdfunding platform operatorG must:

                    (a) Establish a framework which sets out policies and procedures to perform the function of creation, maintenance and update of the share register;
                    (b) Must provide the CBB on request as well as on a quarterly basis, a summary of the list of investors they maintain in the form required by the CBB; and
                    (c) Be responsible for any loss or damage to the investor due to any inaccurate information or entries made in the share register.
                    Added: October 2017

                  • MAE-2.11.37

                    The CBB may, by notice in writing, issue a direction to the crowdfunding platformG operatorG , the board, chief executive, controller or any other person regarding—

                    (a) Compliance with the requirements of the CBB Law, Rules and Regulations;
                    (b) The conduct of business or operations of the equity crowdfunding market;
                    (c) The appointment or removal of the approved persons;
                    (d) Fees payable;
                    (e) Restrictions on the types of investors or participants who may have access to an equity crowdfunding market;
                    (f) The capital market products or Islamic capital market products that may be hosted on equity crowdfunding market;
                    (g) The services that may be offered;
                    (h) The requirement to notify the CBB of any changes to the equity crowdfunding platform operator's business;
                    (i) The requirement to submit periodic reports to the CBB;
                    (j) The requirement to maintain relevant records;
                    (k) The requirement to submit to the CBB for its approval, any proposed rules or any proposed amendment to existing rules of the equity crowdfunding market; and
                    (l) Any other matter as the CBB considers necessary for the protection of investor or the proper functioning of an equity crowdfunding market.
                    Added: October 2017

                  • MAE-2.11.38

                    The CBB may, at any time, by notice in writing to a crowdfunding platform operatorG , vary any condition or restriction or impose such further condition or restriction as it may deem fit.

                    Added: October 2017

                  • MAE-2.11.39

                    A crowdfunding platform operatorG must ensure that an equity crowdfunding issuerG adheres to the requirements of equity crowdfunding offerG as stipulated under Section MAE-2.12.

                    Added: October 2017

            • MAE-2.12 Equity Crowdfunding Offer

              • MAE-2.12.1

                An equity crowdfunding issuerG making an equity crowdfunding offerG must comply with the rules stated under Section MAE-2.12 and is exempted from such requirements under Module OFS whereby requisite permission for public offering of equity securities is made to and approved by the CBB.

                Added: October 2017

              • MAE-2.12.2

                Equity crowdfunding offerG must be exclusively made through a crowdfunding platformG . An application for equity crowdfunding offerG must only be made to and approved by a crowdfunding platform operatorG .

                Added: October 2017

              • MAE-2.12.3

                In order for the CBB to regard an offer as an equity crowdfunding offerG , the equity crowdfunding issuerG must meet the following conditions:

                (a) It must be a closed, private, family companies, entities engaged in real estate projects,G start-up and small and medium size companies, incorporated either in Kingdom of Bahrain or elsewhere;
                (b) Ordinary shares fully paid and free from all encumbrances are issued as part of the offer;
                (c) The total amount raised from such offers within a 12 month period must not exceed BD 250,000, or equivalent amount in other currency, irrespective of the number of projects an equity crowdfunding issuerG may seek funding for during the 12-month period. This limit is not applicable for entities engaged in real estate projects;G
                (d) Entities engaged in real estate projectsG can raise up to BD 500,000, or equivalent amount in other currency, within a 12-month period, irrespective of the number of projects an equity crowdfunding issuerG may seek funding for during the 12-month period;
                (e) Such offer is made only to accredited investorsG and/or expert investorsG ; and
                (f) The use of the proceeds from equity crowdfunding offerG must be for undertaking proposed business activities disclosed in the equity crowdfunding offering statementG .
                Amended: January 2019
                Added: October 2017

                • Equity Crowdfunding Offering Statement Disclosure

                  • MAE-2.12.4

                    An equity crowdfunding issuerG proposing to make an equity crowdfunding offerG must submit an equity crowdfunding offering statementG with all relevant information to the crowdfunding platform operatorG including the following:

                    (a) The first page of the equity crowdfunding offering statementG must contain the following particulars:
                    (i) Full name and registration number of the equity crowdfunding issuer;G
                    (ii) Number and amount of ordinary shares to be offered: Face or par value of the ordinary shares;
                    (iii) Offer Price
                    (iv) Minimum Subscription limit; and
                    (v) Standard disclaimer statement, written in capital letters and box framed, as follows:

                    THIS OFFER DOES NOT CONSTITUTE AN OFFER OF SECURITIES IN THE KINGDOM OF BAHRAIN IN TERMS OF ARTICLE (81) OF THE CENTRAL BANK AND FINANCIAL INSTITUTION LAW 2006 (DECREE LAW NO. 64 OF 2006). THIS OFFER IS MADE IN RELIANCE ON THE EXEMPTION UNDER SECTION OFS-1.4.1(e) OF MODULE OFS, CBB RULEBOOK VOLUME-6. THIS EQUITY CROWDFUNDING OFFERING STATEMENT AND RELATED OFFERING DOCUMENTS HAVE NOT BEEN AND WILL NOT BE REGISTERED AS A PROSPECTUS WITH THE CENTRAL BANK OF BAHRAIN (CBB). THE CBB HAS NOT REVIEWED, APPROVED OR REGISTERED THE EQUITY CROWDFUNDING OFFERING STATEMENT OR RELATED OFFERING DOCUMENTS AND IT HAS NOT IN ANY WAY CONSIDERED THE MERITS OF THE SECURITIES TO BE OFFERD FOR INVESTMENT, WHETHER IN OR OUTSIDE THE KINGDOM OF BAHRAIN.
                    THE CENTRAL BANK OF BAHRAIN ASSUME NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE EQUITY CROWDFUNDING OFFERING STATEMENT AND INFORMATION CONTAINED IN THIS DOCUMENT AND EXPRESSLY DISCLAIM ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS DOCUMENT
                    (vi) Standard risk disclosure statement, written in capital letter and box framed, as follows:

                    COMPANIES HOSTED ON EQUITY CROWDFUNDING PLATFORMS MAY CARRY HIGHER RISK WHEN COMPARED WITH LARGER OR MORE ESTABLISHED COMPANIES LISTED ON LICENSED EXCHANGES. IN PARTICULAR, COMPANIES MAY HOST ON EQUITY CROWDFUNDING PLATFORMS WITHOUT A TRACK RECORD OF PROFITABILITY AND THERE IS NO ASSURANCE THAT THERE WILL BE A LIQUID MARKET IN EQUITY SECURITIES HOSTED ON EQUITY CROWDFUNDING PLATFORMS. YOU SHOULD BE AWARE OF THE RISK OF INVESTING IN SUCH COMPANIES, INCLUDING THE RISK OF LOSING ALL OF YOUR INVESTMENT, AND SHOULD MAKE THE DECISION TO INVEST ONLY AFTER CAREFUL CONSIDERATION AND, IF APPROPRIATE, CONSULTATION WITH YOUR PROFESSIONAL ADVISER(S)
                    (vii) If not disclosed on the front cover, the document should include on the inside cover the following declaration by those responsible for it (usually the Directors of the equity crowdfunding issuer):G

                    THE DIRECTORS OF THE COMPANY, WHOSE NAMES APPEAR HEREIN, ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS DOCUMENT. TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE DIRECTORS, WHO HAVE TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE, THE INFORMATION CONTAINED IN THIS DOCUMENTIS IN ACCORDANCE WITH THE FACTS AND CONTAINS NO OMMISSIONS LIKELY TO AFFECT THE IMPORTANCE AND COMPLETENESS OF THE DOCUMENT.
                    (b) Information that explains the nature of business, key characteristics of the company and relevant risk factors;
                    (c) Information that explains the purpose of the fund raising, the offer size and the closing date;
                    (d) The price to the investors and the method for determining the price;
                    (e) Information relating to the business plan of the company;
                    (f) Information about management, directors and owners of 5 percent or more of the issue;
                    (g) Related-party transactions;
                    (h) The basis of allotment must be clearly stated and all investors must be treated equally in all aspect and in accordance with allotment basis;
                    (i) Financial information relating to the company:
                    (i) Audited financial statements of the company where the equity crowdfunding issuerG has been established for at least 12 months; and
                    (ii) Certified financial statements or information by the issuer's management where the equity crowdfunding issuerG is newly established (less than 12 months period);
                    (j) A roadmap that includes the proposed exit channels for investors and number of year to planned exit;
                    (k) Disclose the fees that the crowdfunding platform operatorG is charging for its services and other expenses related to the equity crowdfunding offerG ; and
                    (l) Where the equity crowdfunding issuerG makes an Islamic crowdfunding offerG , a copy of Shari'a Pronouncement report that the transactionG is in compliance with the principles of Shari'a;
                    (m) Information regarding the option to be availed in event of the equity crowdfunding offerG is not fully subscribed but meets the minimum subscription requirement of 80%:
                    (i) All monies shall be refunded to investors; or
                    (ii) Provide details of the means by which the shortfall in subscription money shall be funded
                    (n) Applicable governing law;
                    (o) In case of overseas equity crowdfunding issuersG , various risk factors associated with cross border transactions;
                    (p) The equity crowdfunding offering statementG must be submitted in Arabic and/or English language.
                    Added: October 2017

                  • MAE-2.12.5

                    An equity crowdfunding issuerG proposing to be hosted on a crowdfunding platform:G

                    (a) Must ensure that all information submitted or disclosed to the crowdfunding platform operatorG is true and accurate and shall not contain any information or statement which is false or misleading or from which there is a material omission;
                    (b) Amend its equity crowdfunding offering statementG to disclose changes, addition or update to information already furnished. An amendment is required for changes, addition or updates that are material;
                    (c) Enter into a share subscription agreement with the investors. A share subscription agreement is an agreement between the investors and the equity crowdfunding issuerG , under which each investor agrees to purchase ordinary shares fully paid and free from all encumbrances from the equity crowdfunding issuerG pursuant to terms specified therein and the equity crowdfunding offering statementG .
                    Added: October 2017

                • Offer Period

                  • MAE-2.12.6

                    The offer period for an equity crowdfunding offerG must not be less than 10 calendar days after the day of commencement of the offer and must not exceed a maximum period of 3 months.

                    Added: October 2017

                • Minimum Subscription

                  • MAE-2.12.7

                    The minimum subscription to be received in an equity crowdfunding offerG must not be less than 80% of the equity crowdfunding offerG size. In the event of non-receipt of minimum subscription, all subscription monies received shall be refunded to the investors forthwith, but no later than 7 calendar days of the closing date of the equity crowdfunding offerG .

                    Added: October 2017

                  • MAE-2.12.8

                    Where the equity crowdfunding offerG is not fully subscribed but meets the minimum subscription requirement specified under Paragraph MAE-2.12.7, the equity crowdfunding issuerG may either;

                    (i) Seek transfer and utilization of funds collected, provided adequate disclosures regarding the means by which the shortfall in subscription money shall be funded, is made in the equityG crowdfunding offering statementG ; or
                    (ii) Refund all monies paid by investors in respect of the equity crowdfunding offerG . The crowdfunding platform operatorG must refund the subscription money to investors no later than 7 calendar days from the closing date of the equity crowdfunding offerG .
                    Added: October 2017

                • Investment Commitment

                  • MAE-2.12.9

                    An investor that has signed the share subscription agreement with the equity crowdfunding issuerG must contribute their committed

                    Investment into the designated separate bank account held with a licensed retail bank no later than the closing date of subscription period.

                    Added: October 2017

                  • MAE-2.12.10

                    An investor may cancel or amend an investment commitment until the end of the closing date of subscription period.

                    Added: October 2017

                  • MAE-2.12.11

                    If there is any material adverse change, an equity crowdfunding issuerG must notify of such change to potential investors and seek a reconfirmation of investment commitment.

                    Added: October 2017

                • Oversubscription

                  • MAE-2.12.12

                    If an equity crowdfunding offerG is over-subscribed after the closing of the offering period, the equity crowdfunding issuerG must make allotment in accordance with the pre-determined basis which must be described in the equity crowdfunding offering statementG . No allotment shall be made by the equity crowdfunding issuerG in excess of the offer size stated in the equity crowdfunding offering statementG .

                    Added: October 2017

                • Allotment, Dispatch and Refund

                  • MAE-2.12.13

                    An equity crowdfunding issuerG must allot or allocate, in accordance with the allotment basis stipulated in the equity crowdfunding offering statementG , ordinary shares within 4 calendar days from closing date.

                    Added: October 2017

                  • MAE-2.12.14

                    The equity crowdfunding issuerG must refund the excess subscription money and dispatch ordinary shares within a maximum of 7 calendar days from the closing date.

                    Added: October 2017

                • Reporting Requirements

                  • MAE-2.12.15

                    An equity crowdfunding issuerG must provide on a semi-annual basis, to it investors, the crowdfunding platform operatorG on which it is hosted and the CBB a performance progress report. The semi-annual report is to be provided as of 30th June and 31st December and must be provided to the investors, the crowdfunding platform operatorG and the CBB within three months of the reporting period.

                    Added: October 2017

                  • MAE-2.12.16

                    Equity crowdfunding issuers,G other than entities engaged in real estate projects,G must provide the following information in the report required under Paragraph MAE-2.12.15:

                    (i) Update of development at company:
                    (a) Report on any strategic or organizational changes since last report.
                    (b) Business review and future plans.
                    (ii) Disclosure of financial result: Reviewed quarterly or audited annual financial statements.
                    (iii) Information about the board members and members of senior management.
                    (iv) Litigation or disputes: Disclosure of any claims brought against the equity crowdfunding issuerG or any complaint brought by investors or any investigation by regulatory bodies against the concerned equity crowdfunding issuerG , their directors and management.
                    (v) Board Resolution: Briefing on resolutions passed by the board.
                    (vi) Pledging or sale of assets of, or acquisition of additional debt by the equity crowdfunding issuer:G
                    (a) Details of any charges or pledges created over the assets of the equity crowdfunding issuerG , or sales of assets and whether such sales or pledges are consistent with the disclosure made in the original disclosure statement.
                    (b) Details of any additional debt facilities undertaken by the equity crowdfunding issuerG and the amount drawn down.
                    Added: October 2017

                  • MAE-2.12.17

                    Equity crowdfunding issuersG engaged in real estate projects,G must provide the following information in the report required under Paragraph MAE-2.12.15:

                    (i) Update of onsite development of projects:
                    A. Original development plan and its deliverables and milestones and any amendments thereon.
                    B. Report on physical progress made since last report.
                    C. Report on any official planning or other permission obtained or outstanding.
                    D. Next step and anticipated completion date.
                    (ii) Utilisation of Proceeds: Report of amount spent during the preceding 6 months period and on a cumulative basis, and identification of the recipients of material amounts (10% or above) of such amount spent. This would include payments made to any related party of the equity crowdfunding issuer.G
                    (iii) Disclosure of financial result: Reviewed quarterly or audited annual financial statements.
                    (iv) Information about the board members and members of senior management.
                    (v) Litigation or disputes: Disclosure of any claims brought against the equity crowdfunding issuerG or any complaint brought by investors or any investigation by regulatory bodies against the concerned equity crowdfunding issuerG , their directors and management.
                    (vi) Board Resolution: Briefing on resolutions passed by the board
                    (vii) Pledging or sale of assets of, or acquisition of additional debt by the equity crowdfunding issuer:G
                    A. Details of any charges or pledges created over the assets of the equity crowdfunding issuerG , or sales of assets and whether such sales or pledges are consistent with the disclosure made in the original equity crowdfunding offering statementG .
                    B. Details of any additional debt facilities undertaken by the equity crowdfunding issuerG and the amount drawn down.
                    Added: October 2017

                • Limits on Advertising

                  • MAE-2.12.18

                    An equity crowdfunding issuerG must not advertise the terms of an equity crowdfunding offerG except in a notice that directs investors to the crowdfunding platformG and includes no more than the following information:

                    (i) A statement that the equity crowdfunding issuerG is conducting an equity crowdfunding offerG pursuant to Section MAE-2.12 of Module MAE, CBB Rulebook Volume 6, the name of the crowdfunding platform operatorG through which the equity crowdfunding offerG is being conducted, and a link directing the potential investor to the crowdfunding platformG ;
                    (ii) The terms of the equity crowdfunding offerG , which means the amount of ordinary shares offered, the nature of the ordinary shares, the price of the ordinary shares, and the closing date of the offering period; and
                    (iii) Factual information about the legal identity and business location of the equity crowdfunding issuerG , limited to the name of the equity crowdfunding issuerG , the address, phone number, and website of the equity crowdfunding issuerG , the e-mail address of a representative of the equity crowdfunding issuerG , and a brief description of the business.
                    Added: October 2017

                  • MAE-2.12.19

                    Advertising the terms of the equity crowdfunding offerG off the crowdfundingG platformG is limited to a brief notice. However, an equity crowdfunding issuerG may communicate with investors and potential investors about the terms of the equity crowdfunding offerG through communication channels provided on the crowdfunding platformG . An equity crowdfunding issuerG must identify itself as the issuer and persons acting on behalf of the equity crowdfunding issuerG must identify their affiliation with the equity crowdfunding issuerG in all communications on the crowdfunding platform.

                    Added: October 2017

                  • MAE-2.12.20

                    The following statement, in bold, must be included in all advertisements specified under Paragraph MAE-2.12.19.

                    "THIS EQUITY CROWDFUNDING OFFER IS MADE ONLY TO ACCREDITED INVESTORS AND/OR EXPERT INVESTORS. THE CBB HAS NOT ASSESSED, REVIEWED OR APPROVED THIS EQUITY CROWDFUNDING OFFER."

                    Added: October 2017

          • MAE-3 Rules of Licensed Exchanges

            • MAE-3.1 General Obligations

              • MAE-3.1.1

                The CBB may prescribe the matters that a licensed exchangeG or licensed market operatorG shall make provision for in the business rulesG or listing rulesG of the licensed exchangeG or licensed market operatorG and the licensed exchangeG or licensed market operatorG shall make provision for those matters in its business rulesG or listing rulesG , as the case may be.

              • MAE-3.1.2

                A licensed exchangeG or licensed market operatorG shall provide the business rulesG and listing rulesG in conformity with law and relevant CBB regulations or directives.

              • MAE-3.1.3

                Any reference to an amendment to a business ruleG or listing ruleG shall be construed as a reference to a change to the scope of or to any requirement, obligation or restriction under the business ruleG or listing ruleG , as the case may be, whether the change is made by an alteration to the text of the rule or by any other notice issued by or on behalf of the licensed exchangeG or licensed market operatorG .

            • MAE-3.2 Content of Rules of Licensed Exchanges

              • MAE-3.2.1

                For the purposes of MAE-3.1.2, a licensed exchangeG or licensed market operatorG shall in its business rulesG or in its listing rulesG as the case may be, make provision to the satisfaction of the CBB for:

                (a) The criteria that it would use to determine the admission, or denial of admission, of personsG to or from membership;
                (b) Continuing requirements for each memberG , including requirements:
                (i) That prohibit or prevent the memberG from engaging in improper conduct when dealing as an agent for the customers of the memberG on any marketG operated by the licensed exchangeG or licensed market operatorG ;
                (ii) That prohibit or prevent the memberG from engaging in improper conduct when participating in any marketG operated by the licensed exchangeG or licensed market operatorG ;
                (iii) On the financial condition of the memberG such as to provide reasonable assurance that all obligations arising out of the activities of the memberG in any marketG operated by the licensed exchangeG or licensed market operatorG will be met;
                (iv) That facilitate the monitoring by the licensed exchangeG or licensed market operatorG of the compliance of the memberG with the business rulesG of the licensed exchangeG or licensed market operatorG ; and
                (v) That provide for the expulsion, suspension or disciplining of memberG s for conduct inconsistent with just and equitable principles in the transaction of business, or for a contravention of the business rulesG of the licensed exchangeG or licensed market operatorG ;
                (c) The class or classes of securitiesG or futures contractsG that may be traded on any marketG operated by the licensed exchangeG or licensed market operatorG ;
                (d) The terms and conditions under which securitiesG may be listed for quotation by the licensed exchangeG ;
                (e) The terms and conditions relating to the calculation of the final settlement price, the daily price limits and the accumulation of positionsG of futures contractsG traded on any marketG operated by the licensed exchangeG or licensed market operatorG ;
                (f) The manner in which trades in securitiesG or futures contractsG are effected on any marketG operated by the licensed exchangeG or licensed market operatorG ;
                (g) Where the licensed exchangeG or licensed market operatorG operates a trading floor, fair and properly supervised floor trading practices;
                (h) The measures to prevent and deal with manipulation, market rigging and artificial marketG conditions in any marketG operated by the licensed exchangeG or licensed market operatorG ;
                (i) The arrangements for the safe and efficient clearing and settlement of trades concluded on any marketG operated by the licensed exchangeG or licensed market operatorG ;
                (j) The establishment of any compensation arrangement, or any other scheme or system accepted by the CBB, which would compensate any customer who suffers pecuniary loss through the defalcation of a memberG , or any of its directors, officers, employees or representatives, in respect of any money or other property:
                (i) That was entrusted to or received by a memberG , or any of its directors, officers, employees, or representatives, for or on behalf of the customer; or
                (ii) In respect of which the memberG was a trustee;
                (k) The dissemination of announcements by companies listed on any marketG operated by the licensed exchangeG or licensed market operatorG through a single and central facility; and
                (l) The carrying on of business of the licensed exchangeG or licensed market operatorG with due regard to the interests and protection of the investing public.
                Amended: April 2016
                Amended: April 2013

            • MAE-3.3 Amendment of Business Rules and Listing Rules

              • MAE-3.3.1

                A licensed exchangeG or licensed market operatorG which intends to amend its business rulesG or listing rulesG shall, prior to making the amendment, notify the CBB of:

                (a) The proposed amendment;
                (b) The purpose of the proposed amendment; and
                (c) The date on which the proposed amendment is intended to come into force.

              • MAE-3.3.2

                The licensed exchangeG shall, prior to notifying the CBB under MAE-3.3.1, consult its usersG and participantsG on the proposed amendment, unless the proposed amendment would have limited impact on its usersG and participantsG .

              • MAE-3.3.3

                Provided however that on receipt of the notification, if CBB is of the opinion that the usersG and the participantsG would be impacted by the amendments, it may require the licensed exchangeG to consult its usersG and participantsG .

              • MAE-3.3.4

                Subject to Paragraphs MAE-3.3.5 and MAE-3.3.7, an amendment shall not come into force unless the notification referred to in Paragraph MAE-3.3.1 is submitted at least 21 days before the date on which the amendment is proposed to come into force.

              • MAE-3.3.5

                The CBB may, on its own initiative or on the application of the licensed exchangeG or licensed market operatorG , by notice in writing to the licensed exchangeG or licensed market operatorG , make or allow an amendment to come into force before the expiry of the period of 21 days referred to in Paragraph MAE-3.3.2.

              • MAE-3.3.6

                The CBB may, subject to Paragraph MAE-3.3.7, within 21 days after the receipt of the notification referred to in Paragraph MAE-3.3.1, by notice in writing to the licensed exchangeG , disallow, alter or supplement the whole or any part of the proposed amendment and, thereupon such whole or part of the proposed amendment as the case may be:

                (a) Where it is disallowed, shall not come into force; or
                (b) Where it is altered or supplemented, shall come into force as altered or supplemented accordingly.

              • MAE-3.3.7

                The CBB, may on its own initiative, by notice in writing to the licensed exchangeG or licensed market operatorG , vary the period specified in Paragraph MAE-3.3.6, and where the period in that paragraph is extended, the amendment shall not come into force before the expiry of the extended period.

            • MAE-3.4 Business Rules of Licensed Exchanges and Licensed Market Operators have Effect as Contract

              • MAE-3.4.1

                The business rulesG of a licensed exchangeG or licensed market operatorG shall be deemed to be, and shall operate as, a binding contract:

                (a) Between the licensed exchangeG or licensed market operatorG and each memberG ; and
                (b) Between each memberG and every other memberG .

              • MAE-3.4.2

                The licensed exchangeG or licensed market operatorG and each memberG shall be deemed to have agreed to observe and perform the provisions of the business rulesG that are in force for the time being, so far as those provisions are applicable to the licensed exchangeG or licensed market operatorG , or that memberG , as the case may be.

            • MAE-3.5 Determination of Position and Trading Limits

              • MAE-3.5.1

                The positionG and trading limits in respect of any security or contract including futures and options contracts traded by, through or with a memberG of a licensed exchangeG or licensed market operatorG which holds an appropriate license to trade such contracts, shall be determined from time-to-time by the licensed exchangeG or licensed market operatorG using such criteria or methodology as may be established by the licensed exchangeG or licensed market operatorG with the approval of the CBB.

              • MAE-3.5.2

                The positionG and trading limits under Paragraph MAE-3.5.1 may include limits on a personG holding or controlling positionsG , separately or in combination, net long or net short, for the purchase or sale of any securitiesG or contracts, including futures or options contracts.

              • MAE-3.5.3

                The licensed exchangeG or licensed market operatorG :

                (a) Shall require a personG or any personG acting for him pursuant to an express or implied agreement or understanding, who holds or controls net long or net short positionsG in any contract in excess of the positionG limits determined under Paragraph MAE-3.5.1, to trade under such conditions and restrictions as the licensed exchangeG or licensed market operatorG considers necessary to ensure compliance with the positionG limits determined under that Paragraph; and
                (b) May require the personG referred to in MAE-3.5.3 (a) to do one or more of the following actions:
                (i) Cease any further increase in his positionG ;
                (ii) Liquidate his positionG to comply with the positionG limits determined under Paragraph MAE-3.5.1 within such time as may be determined by the licensed exchangeG or licensed market operatorG ; and
                (iii) Be subject to higher margin requirements in respect of his positionG .
                Amended: April 2013

            • MAE-3.6 Non-Compliance with Business Rules or Listing Rules not to Substantially Affect Rights of Person

              • MAE-3.6.1

                Any failure by a licensed exchangeG or licensed market operatorG to comply with:

                (a) This Module;
                (b) Its business rulesG ; or
                (c) Where applicable, its listing rulesG ;

                in relation to a matter shall not prevent the matter from being treated, for the purposes of this Module as done in accordance with the business rulesG or listing rulesG , so long as the failure does not substantially affect the rights of the personG entitled to require compliance with the business rulesG or listing rulesG .

                Amended: April 2016

            • MAE-3.7 Requirements to Register Trading Personnel

              • MAE-3.7.1

                The exchange shall make provision for the registration with the CBB of personnel having access to trading facilities or trading terminals and restricting access only to such registered personnel of the membersG .

            • MAE-3.8 Compliance Officer

              • MAE-3.8.1

                Every licensed exchangeG or licensed market operatorG must appoint a Compliance Officer. The Compliance Officer is responsible for discharging the obligations of the licensed exchangeG or the licensed market operatorG .

              • MAE-3.8.2

                In accordance with MAE-3.8.1:

                (a) The Compliance Officer should be competent and knowledgeable regarding the CBB Laws, rules and regulations of the securities marketG and the various applicable modules;
                (b) The Compliance Officer shall:
                (i) Monitor the transactions undertaken by their membersG or participantsG ;
                (ii) Identify disorderly trading conditions or conduct that may involve marketG abuse;
                (iii) Identify and monitor transactions undertaken by insiders;
                (iv) Identify any breach of CBB Law, rules and regulations;
                (c) The licensed exchangeG or the licensed market operatorG shall on the identification of any breach referred to in MAE-3.8.2 (b) report such breach to the CBB without delay for the investigation and prosecution of marketG abuse and shall provide full assistance to the latter in investigating and prosecuting marketG abuse occurring on or through the systems of the licensed exchangeG or licensed market operatorG .
                Amended: April 2013

            • MAE-3.9 Outsourcing

              • MAE-3.9.1

                The licensed exchangeG or the licensed market operatorG seeking to outsource functions or activities should have the following in place:

                (a) Comprehensive policy to guide the assessment of whether and how these functions or activities can be appropriately outsourced;
                (b) The Board shall have the responsibility for the outsourcing policy and related overall responsibility for activities undertaken under that policy;
                (c) The licensed exchangeG or the licensed market operatorG retains the ultimate responsibility for the functions or activities that are outsourced;
                (d) The licensed exchangeG or the licensed market operatorG must notify the CBB and seek its approval before committing to an outsourcing arrangement;
                (e) The licensed exchangeG or the licensed market operatorG must maintain and regularly review contingency plans to enable them to set-up alternative arrangements should the outsourcing provider fail;
                (f) The exchange must nominate a memberG of senior management with day-to-day responsibility for handling the relationship with the outsourcing provider and ensuring that relevant risks are addressed;
                (g) All the outsourcing contract must be legally enforceable;
                (h) A notice period of at least three months shall be required from the outsourcing party to terminate the contract; and
                (i) On termination all data pertaining to the licensed exchangeG or the licensed market operatorG shall be returned by the outsource provider to the licensed exchangeG or the licensed market operatorG .

          • MAE-4 Instruments, Transactions and Contracts

            • MAE-4.1 Listing of Contracts and Instruments

              • MAE-4.1.1

                No licensed exchangeG or licensed market operatorG shall without the approval of the CBB, list, delist, or permit the trading of:

                (a) Any securities, contracts, instruments or transactions;
                (b) Any right, option or derivative in respect of any debentures, stocks or shares;
                (c) Any right under a contract for differences or under any other contract the purpose or purported purpose of which is to secure a profit or avoid a loss by reference to fluctuations in:
                (i) The value or price of any debentures, stocks or shares;
                (ii) The value or price of any group of debentures, stocks or shares; or
                (iii) An index of any debentures, stocks, or shares.
                Amended: April 2013

              • MAE-4.1.2

                The CBB may grant approval for a licensed exchangeG or licensed market operatorG to list, delist or permit the trading of any contract or instrument, or any class of contracts or instruments referred to in Paragraph MAE-4.1.1, subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing to the licensed exchangeG or licensed market operatorG .

                Amended: April 2016

            • MAE-4.2 Listing of Licensed Exchanges on Securities Market

              • MAE-4.2.1

                The securitiesG of a licensed exchangeG shall not be listed for quotation on a securities marketG that is operated by the licensed exchangeG or any of its related companies unless the licensed exchangeG and the operator of the securities marketG have entered into such arrangements as the CBB may require:

                (a) For dealing with possible conflicts of interest that may arise from such listing; and
                (b) For the purpose of ensuring the integrity of the trading of the securitiesG of the licensed exchangeG on the securities marketG .

              • MAE-4.2.2

                Where the securitiesG of a licensed exchangeG are listed for quotation on a securities marketG operated by the licensed exchangeG or any of its related companies, the listing rulesG of the securities marketG shall be deemed to allow the CBB to act in place of the operator of the securities marketG in making decisions and taking action, or to require the operator of the securities marketG to make decisions and to take action on behalf of the CBB on:

                (a) The admission or removal of the licensed exchangeG to or from the official list of the securities marketG ; and
                (b) Granting approval for the securitiesG of the licensed exchangeG to be or stopping or suspending the securitiesG of the licensed exchangeG from being listed for quotation or quoted on the securities marketG .

              • MAE-4.2.3

                The CBB may, by notice in writing to the operator of the securities marketG :

                (a) Modify the listing rulesG of the securities marketG for the purpose of their application to the listing for quotation or trading of the securitiesG of the licensed exchangeG ; or
                (b) Waive the application of any listing ruleG of the securities marketG to the licensed exchangeG .

            • MAE-4.3 Suspension of Securities

              • MAE-4.3.1

                Where the CBB is of the opinion that it is necessary to prohibit trading in particular securitiesG or contracts listed or traded on a licensed exchangeG or licensed market operatorG , as the case may be;

                (a) In order to protect personsG buying or selling the securitiesG or contracts; or
                (b) In the interests of the public;

                the CBB may give notice in writing to the licensed exchangeG or licensed market operatorG stating that it is of that opinion and setting out the reasons for its opinion.

              • MAE-4.3.2

                If after the receipt of the notice given under Paragraph MAE-4.3.1, the licensed exchangeG or licensed market operatorG fails to take any action in relation to those securitiesG or contracts on that marketG and the CBB continues to be of the opinion that it is necessary to prohibit trading in those securitiesG or contracts on that marketG , the CBB may by notice in writing to the licensed exchangeG or licensed market operatorG , prohibit trading in those securitiesG or contracts on that marketG for such period, as is specified in the notice.

              • MAE-4.3.3

                Where the CBB gives a notice to a licensed exchangeG or licensed market operatorG under Paragraph MAE-4.3.2, the CBB shall:

                (a) At the same time send a copy of the notice to the issuer of such security or participantG , as the case may be; and
                (b) As soon as practicable, furnish to the licensed exchangeG or licensed market operatorG a written report setting out the reasons for giving the notice.
                Amended: July 2016

            • MAE-4.4 Emergency Powers of the CBB

              • MAE-4.4.1

                Where the CBB has reason to believe that an emergency exists, or thinks that it is necessary or expedient in the interests of the public or a section of the public or for the protection of investors, the CBB may direct by notice in writing a licensed exchangeG or licensed market operatorG to take such action as it considers necessary to maintain or restore orderly trading in securitiesG or futures contracts or any class of securitiesG or futures contracts.

              • MAE-4.4.2

                Without prejudice to MAE-4.4.1, these activities which the CBB may direct a licensed exchangeG or licensed market operatorG to take shall include:

                (a) Terminating or suspending trading on the licensed exchangeG or licensed market operatorG ;
                (b) Confining trading to liquidation of securitiesG or futures contracts positionsG ;
                (c) Ordering the liquidation of all positionsG or any part thereof or the reduction in such positionsG ;
                (d) Limiting trading to a specific price range;
                (e) Modifying trading days or hours;
                (f) Altering conditions of delivery;
                (g) Fixing the settlement price at which positionsG are to be liquidated;
                (h) Requiring any personG to act in a specified manner in relation to trading in securitiesG or futures contracts or any class of securitiesG or futures contracts;
                (i) Requiring margins or additional margins for any securitiesG or futures contracts; and
                (j) Modifying or suspending any of the business rulesG of the licensed exchangeG or licensed market operatorG .

              • MAE-4.4.3

                Where the licensed exchangeG or licensed market operatorG fails to comply with any direction of the CBB under Paragraph MAE-4.4.1 within such time as is specified by the CBB, the CBB may:

                (a) Set margin levels in any securitiesG or futures contract or class of securitiesG or futures contracts to cater for the emergency;
                (b) Set limits that may apply to market positionsG acquired in good faith prior to the date of the notice issued by the CBB; or
                (c) Take such action as the CBB may deem fit to maintain or restore orderly trading in any securitiesG or futures contracts or class of securitiesG or futures contracts, or liquidation of any positionG in respect of any securitiesG or futures contract or class of securitiesG or futures contracts.
                Amended: April 2016

              • MAE-4.4.4

                In this section "emergency" means any threatened or actual marketG manipulation or cornering, and includes:

                (a) Any act of any government affecting a commodity or securitiesG ;
                (b) Any major marketG disturbance which prevents the marketG from accurately reflecting the forces of supply and demand for such commodity or securitiesG ; or
                (c) Any undesirable situation or practice which in the opinion of the CBB, constitutes an emergency.

              • MAE-4.4.5

                The CBB may modify any action taken by a licensed exchangeG under Paragraph MAE-4.4.1, including the setting aside of that action.

            • MAE-4.5 Additional Powers of the CBB in Respect of Auditors

              • MAE-4.5.1

                If an auditor of a licensed exchangeG or licensed market operatorG in the course of the performance of his duties becomes aware of:

                (a) Any matter which in his opinion, adversely affects or may adversely affect the financial positionG of the licensed exchangeG or licensed market operatorG to a material extent;
                (b) Any matter which in his opinion, constitutes or may constitute a breach of the CBB Law and regulations or an offence involving fraud or dishonesty; or
                (c) Any irregularity that has or may have a material effect upon the accounts of the licensed exchangeG or licensed market operatorG , including any irregularity that affects or jeopardises or may affect or jeopardise, the funds or property of investors in securitiesG or futures contractsG ,

                the auditor shall immediately send to the CBB a written report of the matter or the irregularity.

                Amended: April 2016

              • MAE-4.5.2

                An auditor of a licensed exchangeG or licensed market operatorG shall not be, in the absence of malice on his part, liable to any action for defamation at the suit of any personG in respect of any statement made in his report under Paragraph MAE-4.5.1.

              • MAE-4.5.3

                Paragraph MAE-4.5.2 shall not restrict or affect any right, privilege or immunity that the auditor of a licensed exchangeG or licensed market operatorG may have as a defendant in an action for defamation.

              • MAE-4.5.4

                The CBB may impose all or any of the following duties on an auditor of a licensed exchangeG or licensed market operatorG :

                (a) A duty to submit such additional information and reports in relation to his audit as the CBB considers necessary;
                (b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of the licensed exchangeG or licensed market operatorG ;
                (c) A duty to carry out any other examination or establish any procedure in any particular case;
                (d) A duty to submit a report on any matter arising out of his audit, examination or establishment of procedure referred to in Paragraph MAE-4.5.4 (b) or (c), and the auditor shall carry out such duties.

              • MAE-4.5.5

                The licensed exchangeG or licensed market operatorG shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in Paragraph MAE-4.5.4.

            • MAE-4.6 Registration of Market Maker

              • Eligibility

                • MAE-4.6.1

                  A licensed exchangeG or licensed market operatorG must ensure that a licenseeG meets the following requirements prior to being registered as a market makerG :

                  (a) The licenseeG is incorporated in the Kingdom of Bahrain;
                  (b) The licenseeG must be licensed by the CBB as a Bank or as an Investment Firm(Category 1 or Category 2) or as a Broker-DealerG under CBB Rulebook Volume 6; and
                  (c) The licenseeG is a member of the licensed exchangeG or licensed market operatorG .
                  Added: January 2019

                • MAE-4.6.2

                  A licensed exchangeG or licensed market operatorG must formulate its own objective eligibility criteria for registration of market makerG . The criteria, at the minimum, must include;

                  (a) Capital requirement;
                  (b) Infrastructure requirements;
                  (c) Trading and market makingG experience;
                  (d) Business continuity arrangements;
                  (e) Risk management policy including settlement guarantee mechanism;
                  (f) Rights and obligations of the market makerG including quoting obligations, inventory size, order type and minimum order size; and
                  (g) Terms and conditions under which market making may be terminated;
                  Added: January 2019

                • MAE-4.6.3

                  A licensed exchangeG or licensed market operatorG may have regard to the following matters in determining whether an applicant has satisfied the eligibility criteria:

                  (a) Adequate financial capital and qualified technical and administrative staff to practice market makingG ;
                  (b) Separation between market makingG and any other activities that the memberG is licensed to practice in terms of organisational, technical, financial and administrative arrangements. Evidence thereof may be submitted by the memberG through the following;
                  (i) The adopted mechanism to separate the market makingG from other licensed activities;
                  (ii) The staff assigned to perform market makingG activities;
                  (iii) Experience and qualification of technical and administrative staff assigned to perform market makingG activities;
                  (c) Details of risk management systems and internal control procedures.
                  Added: January 2019

                • MAE-4.6.4

                  A licenseeG , as specified in Paragraph MAE-4.6.1, desirous of undertaking market makingG activity must apply to the licensed exchangeG or licensed market operatorG for registration as a market makerG .

                  Added: January 2019

                • MAE-4.6.5

                  A licenseeG must demonstrate to the satisfaction of the licensed exchangeG or licensed market operatorG that it is suitably qualified to undertake market makingG activity.

                  Added: January 2019

                • MAE-4.6.6

                  A licensed exchangeG or licensed market operatorG may, prior to issuing its consent for registration of a memberG as a market makerG , may conduct on-site inspection of the memberG to ensure the availability of requisite systems, processes and infrastructure for undertaking market makingG activity.

                  Added: January 2019

                • MAE-4.6.7

                  If the licensed exchangeG or licensed market operatorG is satisfied that the memberG is eligible to carryout market makingG activities, the licensed exchangeG or licensed market operatorG may appoint the memberG as a market makerG and enter into a market maker agreementG with the memberG specifying the date of commencement of its term as market makerG .

                  Added: January 2019

                • MAE-4.6.8

                  The market maker agreementG referred to in Paragraph MAE-4.6.7 may at the minimum, include the following terms and conditions:

                  (a) Rights and obligations of the market makerG ;
                  (b) Duration of the market maker agreementG ;
                  (c) Conditions under which market maker agreementG may be terminated;
                  (d) Time window during trading hours that the market makerG should be obliged to ensure presence on the order book;
                  (e) The maximum spread between the bid and offer price that market makerG should maintain; and
                  (f) Minimum, maximum and normal order size with agreed specifications.
                  Added: January 2019

              • Market Making Scheme

                • MAE-4.6.9

                  A licensed exchangeG or licensed market operatorG must ensure that:

                  (a) The market makingG scheme is objective, transparent, non-discretionary and non-discriminatory and must not give rise to disorderly marketG conditions or marketG abuse;
                  (b) The transactions carried out under the market makingG scheme are solely for the purpose of enhancing liquidity and regularity of trading in illiquid securitiesG ;
                  (c) The scheme does not compromise on marketG integrity and risk management;
                  (d) All necessary systems and processes are in place to monitor marketG abuse and manipulation including collusion between membersG indulging in trades with an objective to enhance liquidity artificially;
                  (e) The activities of a market makerG is continuously monitored for effective compliance with applicable law, rules and regulations;
                  (f) Orderly trading conditions are maintained and the minimum set of requirements to be met by the market makerG in terms of presence, size and spread under normal trading conditions are adhered to;
                  (g) The number of market makersG in a market makingG scheme is not restricted; and
                  (h) The CBB is informed of any violations of the provisions of applicable law, rules and regulations.
                  Added: January 2019

                • MAE-4.6.10

                  A licensed exchangeG or licensed market operatorG must put in place the internal procedures and controls to regulate the activity of market makingG . Such procedures and controls, at the minimum, must include:

                  (a) The technical requirements;
                  (b) The trading and settlement mechanism relating to the orders of a market makerG ;
                  (c) The type and amount of settlement guarantees required for practising the activity of market makingG ;
                  (d) The obligations of a market makerG in connection with providing liquidity;
                  (e) Determine the list of securitiesG eligible for market making;
                  (f) Mechanism to identify the market maker'sG orders/trades in order to ensure separation between brokerage and market makingG activities performed by the memberG ;
                  (g) Reporting requirements by market makersG and issuersG ; and
                  (h) Disclosure requirements by market makersG and issuersG .
                  Added: January 2019

                • MAE-4.6.11

                  A licensed exchangeG or licensed market operatorG must review and approve the market making agreementG entered between an issuerG of listed security and a market makerG . While assessing the market making agreementG , the licensed exchangeG or licensed market operatorG must take into account the requirements contained in Section MIR-4.19.

                  Added: January 2019

                • MAE-4.6.12

                  A licensed exchangeG or licensed market operatorG must at all times ensure that a market makerG maintains a level of financial resources, risk management, compliance and internal control requirements that are commensurate with the scale and complexity of their business activities.

                  Added: January 2019

                • MAE-4.6.13

                  A licensed exchangeG or licensed market operatorG may lay down additional criteria for market makersG as risk containment measure.

                  Added: January 2019

              • Temporary Suspension of Market Making Activity

                • MAE-4.6.14

                  A licensed exchangeG or licensed market operatorG must specify the exceptional circumstances wherein a market maker'sG obligation to provide liquidity on a regular and predictable basis does not apply.

                  Added: January 2019

                • MAE-4.6.15

                  A licensed exchangeG or licensed market operatorG may have regards to the following situations in determining exceptional circumstances referred to under Paragraph MAE-4.6.14:

                  (a) A situation of extreme volatility;
                  (b) Disorderly trading conditions where the maintenance of fair, orderly and transparent execution of trades is compromised, and evidence of any of the following is provided;
                  (i) the performance of the licensed exchangeG or licensed market operatorG system being significantly affected by delays and interruptions;
                  (ii) force majeure or cyber sabotage.
                  (c) Where the market maker'sG ability to maintain prudent risk management practices is prevented by any one of the following;
                  (i) technological issues, including problems with the data feed or other systems to carry out market making; and
                  (ii) risk management issues in relation to capital requirement, margining and access to clearing.
                  Added: January 2019

                • MAE-4.6.16

                  A licensed exchangeG or licensed market operatorG must set out clear procedures for resumption of normal trading after the exceptional circumstance have ceased to exist and must make those procedures publicly available.

                  Added: January 2019

                • MAE-4.6.17

                  A licensed exchangeG or licensed market operatorG must make public the occurrence of the exceptional circumstances referred to under Paragraph-4.6.14 and, as soon as technically possible, the resumption of their normal trading after the exceptional circumstances have ceased to exist.

                  Added: January 2019

              • Deregistration of Market Maker

                • MAE-4.6.18

                  A licensed exchangeG or licensed market operatorG must set out the requirements for deregistration of a market makerG .

                  Added: January 2019

                • MAE-4.6.19

                  A market makerG intending to surrender its registration, must submit a written request and seek prior written approval from the licensed exchangeG or licensed market operatorG in the manner prescribed by the rules and regulations of the licensed exchangeG or licensed market operatorG .

                  Added: January 2019

              • Suspension and Cancellation of Registration

                • MAE-4.6.20

                  A licensed exchangeG or licensed market operatorG must restrict or suspend activities of market makerG or cancel its registration where the market makerG ;

                  (a) Is found involved in activities that are not commensurate with the responsibilities assigned to the market makerG or are detrimental to the interest of marketsG and investors;
                  (b) Fails to perform its duties in accordance with the applicable rules and regulations of the licensed exchangeG or licensed market operatorG ; and
                  (c) Fails to comply with any of the eligibility criteria and/or the conditions set out at the time of registration;
                  Added: January 2019

                • MAE-4.6.21

                  Where the CBB is satisfied that a market makerG has contravened the CBB Law, rules and regulations, the CBB may if it thinks it is necessary in the interest of the marketsG or for the protection of investors, by notice in writing direct the licensed exchangeG or licensed market operatorG to restrict, suspend or cancel the registration of the market makerG .

                  Added: January 2019

                • MAE-4.6.22

                  A licensed exchangeG or licensed market operatorG must disseminate to the marketsG as soon as possible the information relating to imposition of restriction, suspension or cancellation of registration on a market makerG .

                  Added: January 2019

              • Disclosure, Notification and Reporting

                • MAE-4.6.23

                  A licensed exchangeG or licensed market operatorG must publish on its website the market makingG rules, the name of the members that have been registered as market makersG , name of the issuerG and market makerG who have entered into market making agreementG and the securityG in which the market makerG undertakes market makingG .

                  Added: January 2019

                • MAE-4.6.24

                  A licensed exchangeG or licensed market operatorG must notify the CBB immediately in the following events:

                  (a) Whenever a market maker agreementG is entered into between a memberG and the licensed exchangeG or licensed market operatorG along with a copy of the agreement and details of the trading account number which the memberG uses for the purpose of market makingG ;
                  (b) Where a memberG has surrendered its registration as a market makerG ; and
                  (c) The licensed exchangeG or licensed market operatorG takes disciplinary action, suspend activities or revokes the registration of a market makerG .
                  Added: January 2019

                • MAE-4.6.25

                  A licensed exchangeG or licensed market operatorG must submit a monthly report, within 10 business days from the end of the month, summarizing the market makingG activities undertaken by market makersG , in the format specified by the CBB.

                  Added: January 2019

          • MAE-5 Matters Requiring Approval of CBB

            • MAE-5.1 Control of Substantial Shareholding in Licensed Exchanges

              • MAE-5.1.1

                No personG shall enter into any agreement to acquire shares in a licensed exchangeG by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of the licensed exchangeG without first obtaining the approval of the CBB to enter into the agreement.

              • MAE-5.1.2

                In Paragraph MAE-5.1.1 "substantial shareholder" means a personG who alone or together with his associates:

                (a) Holds not less than 5% of the shares in the licensed exchangeG ; or
                (b) Is in a position to control not less than 5% of the votes in the licensed exchangeG .

              • MAE-5.1.3

                In this Section:

                (a) A personG holds a share if:
                (i) He is deemed to have an interest in that share in terms of the Commercial Companies Law (CCL); or
                (ii) He otherwise has a legal or a beneficial interest in that share, except such interest as is to be disregarded in the terms of the CCL;
                (b) A reference to the control of a percentage of the votes in a licensed exchangeG shall be construed as a reference to the control, whether direct or indirect, of that percentage of the total number of votes that might be cast in a general meeting of the licensed exchangeG ; and
                (c) An associate of another personG means in respect of individuals, a direct family memberG and in the case of a company, means the company is bound to follow the directives of the substantial shareholder, or the company in which the substantial shareholder has 20% of the votes of that company.
                Amended: April 2016
                Amended: April 2013

              • MAE-5.1.4

                The CBB may grant its approval referred to in Paragraphs MAE-5.1.1 or MAE-5.1.2 subject to such conditions or restrictions as the CBB may deem fit.

                Amended: April 2016

            • MAE-5.2 Application and Criteria for Approval to Acquire Substantial Shareholding

              • MAE-5.2.1

                Any personG applying for approval under MAE-5.1.1 shall submit to the CBB a written application that sets out:

                (a) The name of the applicant;
                (b) In the case where the applicant is a company:
                (i) Its place of incorporation;
                (ii) Its substantial shareholders;
                (iii) Its directors and chief executive officer; and
                (iv) Its principal business.
                (c) In the case where the applicant is a natural personG :
                (i) His nationality;
                (ii) His principal occupation; and
                (iii) His directorships;
                (d) All the companies in which the applicant has a substantial shareholding;
                (e) The percentage of shareholding and voting power that the applicant has in the licensed exchangeG ;
                (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed exchangeG ;
                (g) The reasons for making the application;
                (h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;
                (i) Whether the applicant will seek representation on the board of directors of the licensed exchangeG ; and
                (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper personG for the purposes of Paragraph MAE-5.2.3 (a).
                Amended: April 2013

              • MAE-5.2.2

                The CBB may require the applicant to furnish it with such information or documents as the CBB considers necessary in relation to the application and the applicant shall furnish such additional information or documents as required by the CBB.

              • MAE-5.2.3

                The CBB may approve an application made under Paragraph MAE-5.2.1 of this Module if the CBB is satisfied that:

                (a) The applicant is a fit and proper personG to be a substantial shareholder;
                (b) Having regard to the applicant's likely influence, the licensed exchangeG will or will continue to conduct its business prudently and in compliance with the provisions of this Module; and
                (c) It would not be contrary to the interests of the public to do so.
                Amended: April 2016

              • MAE-5.2.4

                The CBB may, for the purposes of securing compliance with Paragraphs MAE-5.1.1 or MAE-5.2.2, or any condition or restriction imposed under Paragraph MAE-5.2.5, by notice in writing direct the transfer or disposal of all or any of the shares of a licensed exchangeG in which a substantial shareholder of the licensed exchangeG has an interest.

              • MAE-5.2.5

                Until a personG to whom a direction has been issued under Paragraph MAE-5.2.4 transfers or disposes of the shares which are subject to the direction and notwithstanding anything to the contrary, the Memorandum or Articles of Association or other constituent document or documents of the licensed exchangeG :

                (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
                (b) The licensed exchangeG shall not offer or issue any shares (whether by way of rights, bonus, share dividend or otherwise) in respect of the shares which are the subject of the direction; and
                (c) Except in liquidation of the licensed exchangeG , the licensed exchangeG shall not make any payment (whether by way of cash dividend, dividend in kind or otherwise) in respect of the shares which are the subject of the direction.

              • MAE-5.2.6

                Any issue of shares by a licensed exchangeG in contravention of Paragraph MAE-5.2.5 (b) shall be deemed to be null and void, and a personG to whom a direction has been issued under Paragraph MAE-5.2.4 shall immediately return those shares to the licensed exchangeG , upon which the licensed exchangeG shall return to the personG any payment received from him in respect of those shares.

              • MAE-5.2.7

                Any payment made by a licensed exchangeG in contravention of Paragraph MAE-5.2.5 (c) shall be deemed to be null and void, and a personG to whom a direction has been issued under Paragraph MAE-5.2.4 shall immediately return the payment he has received to the licensed exchangeG .

              • MAE-5.2.8

                The CBB may exempt:

                (a) Any personG or class of personsG ; or
                (b) Any class or description of shares or interests in shares;

                from the requirement under paragraph MAE-5.2.1 or MAE-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB.

            • MAE-5.3 Authorisation of Approved Persons

              • Prior Approval Requirements and Process

                • MAE-5.3.1

                  LicenseesG must obtain the CBB's prior written approval for any person wishing to undertake a controlled functionG in a licenseeG . The approval from the CBB must be obtained prior to their appointment.

                  Amended: April 2016
                  Amended: April 2013

                • MAE-5.3.2

                  Controlled functionsG are those functions occupied by board members and persons in executive positions and include:

                  (a) Board members;
                  (b) Chief ExecutiveG or General ManagerG ;
                  (c) Head of functionG ;
                  (d) Compliance Officer; and
                  (e) Money Laundering Reporting Officer (MLRO).
                  Amended: April 2016
                  Amended: April 2013

                • MAE-5.3.2A

                  For the purpose of this Module, the following positions are considered as head of functionG :

                  (a) Head of listing;
                  (b) Head of trading;
                  (c) Head of market control;
                  (d) Head of member affairs;
                  (e) Head of risk management; and
                  (g) Head of other functions.
                  Added: April 2016

                • MAE-5.3.2B

                  Whether a person is head of functionG will depend on the nature, scale and complexity of the function and is not determined by the presence or absence of the word in their job title.

                  Added: April 2016

                • MAE-5.3.2C

                  LicenseesG must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. The segregation of responsibilities must ensure avoidance of any conflict of interest and maintain a Chinese Wall such critical controlled functionsG .

                  Added: April 2016

                • MAE-5.3.3

                  The Chief Executive Officer or General Manager, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.

                  Amended: April 2013

                • MAE-5.3.4

                  All personsG wishing to undertake any of the controlled functions shall be subject to the fit and proper requirements in this Section.

                  Amended: April 2016
                  Amended: April 2013

                • MAE-5.3.5

                  In accordance with Subparagraph MAE-5.3.2(d), every licensed exchangeG must appoint a compliance officer. The compliance officer is responsible for discharging the obligations of the licensee.

                  Amended: April 2013

                • MAE-5.3.6

                  In accordance with Paragraph MAE-5.3.5:

                  (a) The Compliance Officer should be competent and knowledgeable regarding the CBB Law, rules and regulations, as well as the various applicable Volume 6 Modules;
                  (b) The Compliance Officer shall: ;
                  (i) Monitor the transactions undertaken by the memberG , its representatives, or participantsG ;
                  (ii) Identify disorderly transactions or conduct that may involve market abuse or disruption;
                  (iii) Identify and monitor transactions undertaken by insiders dealing through or with the memberG ;
                  (iv) Identify any breach of CBB Law, rules and regulations; and
                  (v) Identify any breach of the rules of the SROG .
                  Added: April 2013

                • MAE-5.3.7

                  The Compliance Officer shall on the identification of any breach referred to in Paragraph MAE-5.3.6(b), report such breach to the CBB without delay for the investigation and prosecution of marketG abuse and shall provide full assistance to the latter in investigating and prosecuting market abuse occurring on or through the licensed exchangeG .

                  Amended: April 2013

                • MAE-5.3.7A

                  The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in the Form 3, including previous experience, is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms MAE Forms of the CBB Rulebook.

                  Added: April 2016

                • MAE-5.3.7B

                  When the request for approved personG status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake a controlled functionG is in relation to an existing licenseeG , the Form 3 must be marked for the attention of the Director, Capital Markets Supervision. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

                  Amended: April 2018
                  Added: April 2016

                • MAE-5.3.7C

                  When submitting Form 3, licenseesG must ensure that the Form 3 is:

                  (a) Submitted to the CBB with a covering letter signed by an authorised representative of the licenseeG , seeking approval for the proposed controlled functionG ;
                  (b) Submitted in original form;
                  (c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
                  (d) Signed by an authorised representative of the licenseeG and all pages stamped on with the licensee'sG seal.
                  Added: April 2016

                • MAE-5.3.7D

                  For existing licenseesG applying for the appointment of a Board DirectorG or the Chief ExecutiveG /General ManagerG , the authorised representative should be the Chairman of the Board or a DirectorG signing on behalf of the Board. For all other controlled functionsG , the authorised representative should be the Chief ExecutiveG /General ManagerG .

                  Added: April 2016

              • Fit and Proper Requirements

                • MAE-5.3.8

                  LicenseesG seeking an approved personG authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled functionG in question.

                  Amended: April 2016
                  Added: April 2013

                • MAE-5.3.8A

                  Each applicant applying for approved personG status and those individuals occupying approved personG positions must comply with the following conditions:

                  (a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;
                  (b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;
                  (c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;
                  (d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;
                  (e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;
                  (f) Must have personal integrity, good conduct and reputation;
                  (g) Has appropriate professional and other qualifications for the controlled functionG in question, including qualifications such as the Securities Market Regulation Certification Programme (Series 7), the General Securities Representative Qualification (Series 79), and/or any other relevant examinations and qualifications recognised by the CBB that are appropriate to capital market functions, as the case may be. However the CBB reserves the right to impose a higher level of qualifications as it deems necessary; and
                  (h) Has sufficient experience to perform the duties of the controlled functionG .
                  Added: April 2016

                • MAE-5.3.8B

                  In assessing the conditions prescribed in Rule MAE-5.3.8A, the CBB will take into account the criteria contained in Paragraph MAE-5.3.8C. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled functionG but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled functionG in one licenseeG may not be considered to have sufficient expertise and experience to undertake nominally the same controlled functionG but in a much bigger licenseeG .

                  Added: April 2016

                • MAE-5.3.8C

                  In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

                  (a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
                  (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
                  (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
                  (d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;
                  (e) The contravention of any financial services legislation;
                  (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
                  (g) Dismissal or a request to resign from any office or employment;
                  (h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
                  (i) The extent to which the person has been truthful and open with supervisors; and
                  (j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.
                  Added: April 2016

                • MAE-5.3.8D

                  With respect to Paragraph MAE-5.3.8C, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

                  Added: April 2016

                • MAE-5.3.9

                  Approved personsG undertaking a controlled functionG must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking a controlled functionG and shall be subject, among all accepted market conducts, to the insider trading rules.

                  Added: April 2013

                • MAE-5.3.10

                  In determining where there may be a conflict of interest arising, factors that may be considered will include whether:

                  (a) A personG has breached any fiduciary obligations to the licensed exchangeG or terms of employment;
                  (b) A personG has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensed exchangeG ; and
                  (c) A personG has failed to declare a personal interest that has a material impact in terms of the person'sG relationship with the licensed exchangeG in general, and interest in holding any listed securitiesG or futures contracts in particular.
                  Added: April 2013

                • MAE-5.3.11

                  [This Paragraph was deleted in April 2016.]

                  Deleted: April 2016
                  Added: April 2013

                • MAE-5.3.12

                  [This Paragraph was deleted in April 2016.]

                  Deleted: April 2016
                  Added: April 2013

                • MAE-5.3.13

                  [This Paragraph was moved to Paragraph MAE-5.3.7B in April 2016.]

                  Amended: April 2016
                  Added: April 2013

              • Assessment of Application

                • MAE-5.3.14

                  The CBB shall review and assess the application for approved personG status to ensure that it satisfies all the conditions required in Paragraph MAE-5.3.8A and the criteria outlined in Paragraph MAE-5.3.8C.

                  Amended: April 2016
                  Added: April 2013

                • MAE-5.3.14A

                  For purposes of Paragraph MAE-5.3.14, licenseesG should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.

                  Added: April 2016

                • MAE-5.3.15

                  The CBB reserves the right to refuse an application for approved personG status if it does not satisfy the conditions provided for in Paragraph MAE-5.3.8A and the criteria outlined in Paragraph MAE-5.3.8C. A notice of such refusal is issued by registered mail to the licenseeG concerned, setting out the basis for the decision.

                  Amended: April 2016
                  Added: April 2013

              • Appeal Process

                • MAE-5.3.16

                  LicenseesG or the nominated approved personsG may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved personG status. The CBB shall decide on the appeal and notify the licenseeG of its decision within 30 calendar days from submitting the appeal.

                  Amended: April 2016
                  Added: April 2013

                • MAE-5.3.17

                  Where notification of the CBB's decision to grant a person approved personG status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, licenseesG or the nominated approved personsG may appeal to the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the licenseeG of its decision within 30 calendar days from the date of submitting the appeal.

                  Amended: April 2016
                  Amended: April 2013

              • Notification Requirements and Process

                • MAE-5.3.18

                  A licensed exchangeG must immediately notify the CBB when an approved personG ceases to hold a controlled functionG together with an explanation as to the reasons why. In such cases, their approved personG status is automatically withdrawn by the CBB.

                  Amended: April 2013

                • MAE-5.3.18A

                  LicenseesG must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved personG .

                  Added: April 2016

                • MAE-5.3.19

                  The licensed exchangeG shall provide for the composition and duties of the board of directors or any committee of a licensed exchangeG after obtaining CBB approval.

                  Amended: April 2013

                • MAE-5.3.20

                  In this section "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a memberG of a licensed exchangeG .

                  Amended: April 2013

              • Amendment of Authorisation

                • MAE-5.3.21

                  A licensed exchangeG must seek prior CBB approval before an approved personG may move from one controlled functionG to another within the same licenseeG .

                  Added: April 2013

                • MAE-5.3.22

                  In such instances, a new application should be completed and submitted to the CBB. Note that a personG may be considered 'fit and proper' for one controlled functionG , but not for another, if for instance the new role requires a different set of skills and experience. Where an approved personG is moving to a controlled functionG in another licensed exchangeG , the first licenseeG should notify the CBB of that person'sG departure, and the new licenseeG should submit a request for approval under this Section.

                  Added: April 2013

              • Cancellation of Authorisation and Power of CBB to Remove Approved Person

                • MAE-5.3.23

                  Where the CBB is satisfied that an approved personG :

                  (a) Has wilfully contravened or wilfully caused that licensed exchangeG to contravene the CBB Law, rules and regulations;
                  (b) Has without reasonable excuse, failed to ensure compliance by the licensed exchangeG , or a personG associated with that licenseeG with the CBB Law rules and regulations;
                  (c) Has failed to discharge the duties or functions of his office or employment;
                  (d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;
                  (e) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;

                  the CBB may if it thinks it is necessary in the interests of or for the protection of investors, by notice in writing direct that a licenseeG remove the approved personG from his office or employment, and that licenseeG shall comply with such notice.

                  Added: April 2013

                • MAE-5.3.24

                  Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an approved personG has failed to discharge the duties or functions of his office or employment for the purposes of paragraph MAE-5.3.23 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing, after consultation with the licensed exchangeG and/or licensed clearing houseG , as the case may be.

                  Added: April 2013

                • MAE-5.3.25

                  Subject to Paragraph MAE-5.3.26, the CBB shall not direct a licenseeG to remove an approved personG from his office or employment without giving the approved person an opportunity to be heard.

                  Added: April 2013

                • MAE-5.3.26

                  The CBB may direct a licenseeG to remove an approved personG from his office or employment under Paragraph MAE-5.3.23 on any of the following grounds, without giving the approved personG an opportunity to be heard:

                  (a) The approved personG is an undischarged bankrupt whether in Bahrain or elsewhere;
                  (b) The approved personG has been convicted whether in Bahrain or elsewhere, of an offence:
                  (i) Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and
                  (ii) Punishable with imprisonment for a term of 3 months or more.
                  Added: April 2013

              • Criteria to Determine Failure to Discharge Duties or Functions by Approved Persons

                • MAE-5.3.27

                  The CBB may, in determining whether approved personsG have taken reasonable steps to discharge their duties, have regard to whether or not the approved person:

                  (a) Ensured the proper functioning of the licensed exchangeG ;
                  (b) Ensured the compliance of the licensed exchangeG with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides its regulated activitiesG ;
                  (c) Set out and ensured compliance with written policies on all operational areas of the licensed exchangeG , including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed exchangeG in general;
                  (d) Identified, monitored and addressed the risks associated with the business of the licensed exchangeG ;
                  (e) Ensured that the regulated activitiesG of the licensed exchangeG were subject to adequate internal audit;
                  (f) Oversaw the financial undertakings or exposure of thelicensed exchangeG to risks of any nature by setting out proper delegation limits and risk management controls; and
                  (g) Ensured:
                  (i) That the licensed exchangeG maintained written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and provided relevant procedures; and
                  (ii) That every report, return or statement submitted by the licensed exchangeG to the CBB was complete and accurate.
                  Added: April 2013

            • MAE-5.4 Business Transfer

              • MAE-5.4.1

                A licensed exchangeG or licensed market operatorG shall not transfer all or any part of its business to others without the prior written approval from the CBB.

                Amended: April 2016

              • MAE-5.4.2

                A licensed exchangeG or licensed market operatorG who desires to transfer all or any part of its business referred to in Paragraph MAE-5.4.1 shall make an application to the CBB in Form 8.

              • MAE-5.4.3

                A Transfer of Business application shall be published by the CBB in the Official Gazette and also in 2 daily newspapers, one in Arabic and one in English in Bahrain. The publication should include a call to the concerned parties to submit any objections to the CBB within 3 months from the date of publication.

              • MAE-5.4.4

                The CBB shall consider the objections referred to in the preceding Paragraph before taking any action on the application for transfer.

              • MAE-5.4.5

                The CBB shall determine the procedure of processing applications for business transfer.

                Amended: July 2016

              • MAE-5.4.6

                The following shall apply in order to approve a business transfer:

                (a) The business, subject of transfer, shall not be prohibited by the CBB;
                (b) The Transfer of Business shall not cause damages to the interests of the licensed exchangeG or licensed market operator's usersG ;
                (c) The transferee must be licensed to carry out the business in the place to which it is to be transferred;
                (d) The transferee company should fulfil all the eligibility criteria laid down in this module to operate as a licensed exchangeG ; and
                (e) The CBB must be satisfied that the Transfer of Business is appropriate under relevant regulations issued in this respect.

              • MAE-5.4.7

                The CBB shall give its approval to a Transfer of Business if the application satisfies the requirements set in Paragraph MAE-5.4.6. Such approval may be given subject to any conditions deemed appropriate by the CBB.

                Amended: July 2016

              • MAE-5.4.8

                The decision of the CBB on a Transfer of Business shall be published in the Official Gazette as well as in 2 daily newspapers, one in Arabic and one in English in Bahrain. The decision shall be effective from the date set therein.

              • MAE-5.4.9

                An applicant whose application has been turned down or who faces restrictions regarding the transfer of his business may appeal to a competent court within 30 days from the date of publishing of such decision on the Official Gazette.

          • MAE-6 Control of Licensed Exchanges

            • MAE-6.1 Control of Licensed Exchanges

              • MAE-6.1.1

                The CBB must be notified in any of the following cases:

                (a) If effective control over a licensed exchangeG or licensed market operatorG takes place indirectly whether by way of inheritance or otherwise;
                (b) Gaining control directly as a result of any action leading to it;
                (c) The intention to take any of the actions that would lead to control;

                The controller or the personG intending to take control over the licensed exchangeG or licensed market operatorG , as the case may be and by the licensed exchangeG or licensed market operatorG itself if it is aware of such case.

                Amended: April 2013

              • MAE-6.1.2

                For the purposes of Paragraph MAE-6.1.1, "control" means the right to appoint majority of the directors or to control the management or policy decisions exercisable by a personG or personsG acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

              • MAE-6.1.3

                Notice of control shall contain a request for the CBB's approval for taking control over a licensed exchangeG or licensed market operatorG or taking any action that may lead to control by submitting Form 6 and shall also contain such particulars and information and be accompanied by such documents as the CBB may specify. In the cases referred to in items (a) and (b) of Paragraph MAE-6.1.1, the notice shall be made within 15 days from the date of control. In the case referred to in item (c) of Paragraph MAE-6.1.1, the notice shall be made before taking any of the actions that would lead to control.

              • MAE-6.1.4

                The CBB must, within 3 months from the date of receipt of the notice referred to above, notify the controller or the personG intending to take control over a licensed exchangeG or licensed market operatorG , as the case may be, of its approval of control, any of the actions which would lead to a control, or the refusal thereof as the CBB may determine at its own discretion.

                Amended: July 2016

              • MAE-6.1.5

                The CBB may impose any restrictions that it considers necessary to be observed in case of its approval of a control or any of the actions that would lead to a control.

              • MAE-6.1.6

                If the period specified in Paragraph MAE-6.1.4 lapses without a decision being taken on the application seeking approval of a control or any intended actions that would lead to a control, the application shall be considered as accepted.

              • MAE-6.1.7

                The controller or the personG intending to take control over a licensed exchangeG or licensed market operatorG , may within 30 days of the notification, lodge a grievance against the CBB's decision to refuse the control or any conditions imposed in respect of such control.

              • MAE-6.1.8

                The CBB shall decide on the grievance and notify the personG intending to take control over the licensed exchangeG or licensed market operatorG of its decision within 30 days from the date of submitting the grievance.

                Amended: July 2016

              • MAE-6.1.9

                An appeal against a decision on control may be submitted within 30 days from the date when the concerned personG was aware of such decision.

              • MAE-6.1.10

                The CBB may refuse to give approval to a control if it will affect the legitimate interests of the usersG , or if it is detrimental to the relevant sector, or if the CBB decides, according to its own discretion that it would be inappropriate to control a licensed exchangeG or licensed market operatorG according to the criteria set by the CBB.

              • MAE-6.1.11

                Any personG who acquires control or shares in breach of the provisions of this Module shall carry out any instructions issued to him by the CBB to transfer such control or shares or refrain from exercising control or voting rights according to the procedures prescribed in such instructions.

              • MAE-6.1.12

                The CBB may seek a court order to take appropriate precautionary measures or sell such shares if the licensed exchangeG or licensed market operatorG fails to carry out the order referred to above. The value of the shares sold shall be paid to the party who has rights therein after the deduction of expenses.

              • MAE-6.1.13

                A licensed exchangeG or licensed market operatorG incorporated in the Kingdom shall not perform any of the following without a prior written approval of the CBB:

                (a) Merge, amalgamate or enter into a partnership with any personG outside the Kingdom, except in the ordinary course of business;
                (b) Transfer all or a major part of its assets or liabilities inside or outside the Kingdom, without prejudice to the provisions of Chapter 6 of the CBB Law;
                (c) Make any modification to its issued or paid-up share capital;
                (d) Modify its Memorandum and Articles of Association; or
                (e) Engage in major acquisition or investment operations as determined by the CBB.
                Amended: April 2016

              • MAE-6.1.14

                The CBB, in granting any approval under the preceding Paragraph, may impose such conditions as it considers appropriate.

          • MAE-7 Immunity from Criminal or Civil Liability

            • MAE-7.1 Immunity from Criminal or Civil Liability

              • MAE-7.1.1

                No criminal or civil liability shall be incurred by:

                (a) A licensed exchangeG ;
                (b) Any personG acting on behalf of a licensed exchangeG ; including:
                (i) Any director of the licensed exchangeG ; or
                (ii) Any memberG of any committee established in the licensed exchangeG ;

                for anything done (including any statement made) or omitted to be done with reasonable care and in good faith in the course of or in connection with the discharge or purported discharge of its obligations under this Module, or the business rulesG or where appropriate, listing rulesG of the licensed exchangeG or licensed market operatorG .

                Amended: April 2013

          • MAE-8 General Powers of the CBB

            • MAE-8.1 Power of CBB to Remove Officers

              • MAE-8.1.1

                Where the CBB is satisfied that an officer of a licensed exchangeG or licensed market operatorG :

                (a) Has wilfully contravened or wilfully caused that licensed exchangeG or licensed market operatorG to contravene:
                (i) The CBB Law or Module MAE;
                (ii) Where applicable, its business rulesG ; or
                (iii) Where applicable, its listing rulesG ;
                (b) Has without reasonable excuse, failed to ensure compliance by that licensed exchangeG or licensed market operatorG , a memberG of that licensed exchangeG or licensed market operatorG , or a personG associated with that memberG with:
                (i) The CBB Law or Module MAE;
                (ii) Where applicable the business rulesG of that licensed exchangeG or licensed market operatorG ; or
                (iii) Where applicable, the listing rulesG of that licensed exchangeG or licensed market operatorG ;
                (c) Has failed to discharge the duties or functions of his office or employment;
                (d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;
                (e) Has had execution against him in respect of a judgement debt returned unsatisfied in whole or in part;
                (f) Has whether in Bahrain or elsewhere, made a compromise or scheme of arrangement with his creditors, being a compromise or scheme of arrangement that is still in operation; or
                (g) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;

                the CBB may if it thinks it is necessary in the interests of the public or a section of the public, or for the protection of investors, by notice in writing direct that a licensed exchangeG or licensed market operatorG remove the officer from his office or employment, and that licensed exchangeG or licensed market operatorG shall comply with such notice.

                Amended: April 2016
                Amended: April 2013

              • MAE-8.1.2

                Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an officer of a licensed exchangeG or licensed market operatorG has failed to discharge the duties or functions of his office or employment for the purposes of Paragraph MAE-8.1.1 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing.

              • MAE-8.1.3

                Subject to Paragraph MAE-8.1.4, the CBB shall not direct a licensed exchangeG or licensed market operatorG to remove an officer from his office or employment without giving the licensed exchangeG or licensed market operatorG an opportunity to be heard.

              • MAE-8.1.4

                The CBB may direct a licensed exchangeG or licensed market operatorG to remove an officer from his office or employment under Paragraph MAE-8.1.1 on any of the following grounds without giving the licensed exchangeG or licensed market operatorG an opportunity to be heard:

                (a) The officer is an undischarged bankrupt whether in Bahrain or elsewhere; or
                (b) The officer has been convicted whether in Bahrain or elsewhere, of an offence:
                (i) Involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and
                (ii) Punishable with imprisonment for a term of 3 months or more.
                Amended: April 2016
                Amended: April 2013

              • MAE-8.1.5

                Where the CBB directs a licensed exchangeG or licensed market operatorG to remove an officer from his office or employment under Paragraph MAE-8.1.4, the CBB need not give that officer an opportunity to be heard.

            • MAE-8.2 Criteria to Determine Failure to Discharge Duties or Functions by Officers

              • MAE-8.2.1

                The CBB may, in determining whether the Chief Executive Officer, directors and officers of a licensed exchangeG or licensed market operatorG , as the case may be, has taken reasonable steps to discharge their duties, have regard to the following:

                (a) Ensure the proper functioning of the licensed exchangeG or licensed market operatorG , as the case may be;
                (b) Ensure the compliance of the licensed exchangeG or licensed market operatorG , as the case may be, with any relevant laws or regulations of any jurisdiction in which it is incorporated or in which it operates;
                (c) Set out and ensure compliance with written policies on all operational areas of the licensed exchangeG or licensed market operatorG , as the case may be, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed exchangeG or licensed market operatorG ;
                (d) Identify, monitor and address the risks associated with the business activities of the licensed exchangeG or licensed market operatorG , as the case may be;
                (e) Ensure that the business activities of the licensed exchangeG or licensed market operatorG , as the case may be, are subject to adequate internal audit;
                (f) Oversee the financial undertakings or exposure of the licensed exchangeG or licensed market operatorG , as the case may be, to risks of any nature by setting out proper delegation limits and risk management controls; and
                (g) Ensure:
                (i) That the licensed exchangeG or licensed market operatorG , as the case may be, maintains written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and operating procedures; and
                (ii) That every report, return or statement submitted by the licensed exchangeG or the licensed market operatorG as the case may be, to the CBB is complete and accurate.
                Amended: April 2013

        • CSD — Clearing, Settlement and Depository

          • CSD-A Introduction

            • CSD-A.1 Purpose

              • Executive Summary

                • CSD-A.1.1

                  Module CSD sets out the Central Bank of Bahrain's regulatory framework governing licensing of clearing housesG and central depositoriesG operating in or from the Kingdom of Bahrain.

                • CSD-A.1.2

                  The CSD Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of licensed clearing housesG and central depositoriesG in the Kingdom of Bahrain. It sets out the CBB requirements for their licensing and authorisation, and the initial as well as ongoing compliance requirements.

                • CSD-A.1.3

                  The key principles underlying the approach of the CBB in this Module aim:

                  (a) To promote the safety and efficiency of clearing and settlementG facilities that support systemically-important markets or form an integral part of the financial infrastructure;
                  (b) To reduce systemic risk;
                  (c) To reduce direct counterparty risk in securitiesG transactions by use of contributions from depository participants'G members, as well as by imposing adequate risk management techniques, including the requirement of cash cover and collateral;
                  (d) To ensure finality of settlement;G
                  (e) To reduce cost of clearing and settlementG of transactions; and
                  (f) To ensure that the ownership and rights of investors are protected.

              • Legal Basis

                • CSD-A.1.4

                  Article 1 of the CBB Law defines "Financial Sector Support Institutions" and "Financial Institutions" and the definition includes institutions licensed for operating clearance houses, settlement of payments, cheques and financial papers, and institutions which are wholly or partly set-up by financial institutions licensed by the Central Bank in order to provide services of a pure financial nature to the financial services industry. Articles 38 and 39 of the CBB Law provides the Governor of the CBB with the power to issue Directives or regulations in respect of regulated services.

                • CSD-A.1.5

                  Article 40 of the CBB Law states that no financial institution should be established or carry out any regulated services without the prior approval of the CBB.

                • CSD-A.1.6

                  Article 80 (4) includes depository, clearance and settlement of securities as regulated activities of companies in the securities market.

                • CSD-A.1.7

                  Article 94 of the CBB Law provides the CBB with the power to authorise registration of ownership of the securitiesG of a depositor in the name of a depository under a securitiesG deposit agreement in accordance with the form issued for this purpose by a depository.

                • CSD-A.1.8

                  Subject to the rules and laws of evidence and electronic transactions, Article 96 specifies that computer data, electronic files, recorded telephone calls, telex and facsimile correspondance may be considered as forms of evidence of ownership of securitiesG when disputes relating to securitiesG occur.

                • CSD-A.1.9

                  Articles 108 and 109 provides the CBB with the power to issue regulations regarding procedures for clearing and netting of transactions and related exceptions.

                • CSD-A.1.10

                  Article 110 provides that the Central Bank shall issue terms and conditions for the provision of any pledge, insurance, collateral or title transfer collateral to beneficiaries according to a market contractG . Such terms and conditions are stipulated in detail under Resolution No (59) of 2011 in respect of Procedures Related to Pledging and Lien of Securities and the Discharge and Lifting of such Pledge and Liens, later amended as per Resolution No (30) of 2015.

                  Amended: April 2016

                • CSD-A.1.11

                  Article 178 provides the CBB with the power to issue regulations for enabling title to securitiesG to be evidenced and transferred without the need to produce a written instrument.

                • CSD-A.1.12

                  Article 95 states that the CBB shall by regulation specify the procedures to be followed for the registration of pledges and liens on securitiesG and the discharge and lifting of such pledges and liens.

                • CSD-A.1.13

                  Licensed clearing housesG and central depositoriesG shall be subject to Part 10 (Articles from 133 to 159) of the CBB Law with regards to cases of insolvency, the consequences of such insolvency and violation of the insolvency law by licenseesG , and compulsory liquidation. The CBB is entitled to place a licenseeG under administration in the event of insolvency, cancellation or amendment of the license of the clearing houseG or central depositoryG , and when it is in the best interests of the public to do so. Rules and regulations for placing a licenseeG under administration are set out in Articles 136143 of the CBB Law.

                • CSD-A.1.14

                  Article 161 of the CBB Law stipulates a penalty for contravention of Article 40 of the CBB Law.

                • CSD-A.1.15

                  This Module recognises Decree Law No (50) of 2014 regarding amendments to the provision of the Commercial Companies Law No (21) of 2001, particularly Articles 119 and 358A with respect to promulgating the CBB Law No (64) of 2006 related to the capital market regulated activities.

                  Added: April 2016

                • CSD-A.1.16

                  This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

                  Added: April 2016

                • CSD-A.1.17

                  This Module contains Resolution No (1) of 2007 (issued under Article 180 of the CBB Law) amended by Resolution No (26) of 2010 and further amended by Resolution No (1) of 2016 with respect to determining fees categories due for licensees and services provided by the CBB.

                  Added: April 2016

                • CSD-A.1.18

                  This Module contains Resolution No. (30) of 2015 in respect of amending Resolution No. (59) of 2011 for the purpose of extending the requirements related to the pledging and lien of securities and the discharge and lifting of such pledge and liens on securities issued by closed joint stock companies.

                  Added: April 2016

                • CSD-A.1.19

                  This Module contains Resolution No. (44) of 2014 with respect to promulgating a Regulation for Close-Out Netting under a Market Contract.

                  Added: April 2016

            • CSD-A.2 Module History

              • Evolution of Module

                • CSD-A.2.1

                  This Module was first issued in April 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                  Amended: April 2013

                • CSD-A.2.1A

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

                  Module Ref. Change Date Description of Changes
                  CSD-1.1.1A to CSD-1.1.1C 04/2013 References added to requirements under Resolution No.(16) for the year 2012.
                  CSD-1.2.3 04/2013 Updated name change to Form 3.
                  CSD-1.4.1 and CSD-1.4.1A 04/2013 Provided details of annual fee due to the CBB.
                  CSD-3.1.9A and CSD-3.1.9B 04/2013 Added reference to report institutional information (IIS) to the CBB.
                  CSD-5.3.12 04/2013 Added reference to Form 3: Application for Approved Person Status
                  CSD-5.3 04/2013 Expanded the scope of this Section to include all approved persons occupying controlled functions and the various related Rules and Guidance.
                  CSD-1.4 04/2014 Clarified Rules and guidance on annual license fees.
                  Module CSD 04/2016 Various minor corrections to clarify language and link defined terms to the glossary.
                  CSD-A.1 04/2016 Legal basis updated to reflect various Resolutions.
                  CSD-3.1.1 and CSD-3.1.1A 04/2016 Added requirements dealing with shareholders' meetings.
                  CSD-5.3 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                  CSD-5.3.2A 04/2016 New Paragraph added to ensure segregation of responsibilities in licensees' staffing arrangements.
                  CSD-B.2 07/2016 Section deleted and moved to Glossary.
                  CSD-1.2.1 07/2016 Deleted duplicate type of license.
                  CSD-1.3.3, CSD-1.3.11, CSD-3.5.3 and CSD-6.4.3 07/2016 Changed from Rule to Guidance.
                  CSD-1.4.1 07/2016 Deleted legal reference as already included under CSD-A.1.17.
                  CSD-2.16 and CSD-2.17 07/2016 CSD-2.1.7 deleted and content moved to CSD-2.1.6 as Rule.
                  CSD-2.6.11 07/2016 Corrected cross reference.
                  CSD-3.1.1 07/2016 Corrected wording of Subparagraphs.
                  CSD-3.1.18 07/2016 Amended requirement to be applicable to all approved persons.
                  CSD-1.3.12 07/2017 Amended wording of paragraph.
                  CSD-1.3.13 07/2017 Added Paragraph to clarify the cost of publication.
                  CSD-1.3.14 07/2017 Added Paragraph on means of publication.
                  CSD-5.3.7B 04/2018 Amended Paragraph.

              • Superseded Requirements

                • CSD-A.2.2

                  This Module supersedes the following provisions contained in circulars or other regulatory instruments:

                  Circular/ other references Provision Subject
                  BSE Clearing, Settlement & Central Depository & Registry Rules Rules that are contradictory to the provisions in this Module Rules and regulations relating to registry, clearing, settlement & central depository.
                  BSE Clearing, Settlement and Central Depository Procedures Procedures that are contradictory to the provisions in this Module Scope of procedures to be carried out by clearance and settlement facilities and central depository.
                  BSE Brokers & Custodians Resolutions Resolutions that are contradictory to the provisions in this Module Provisions for custodial services and services provided by brokerage companies at the BSE.
                       
                       

            • CSD-A.3 Interaction with other Modules

              • CSD-A.3.1

                All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.

              • CSD-A.3.2

                Licensed clearing housesG and licensed central depositoriesG must comply with Decree Law No. 4 of 2001 with respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 7 of 2001 with respect to Obligations Governing Institutions Concerning the Prohibition and Combating of Money Laundering; Ministerial Order No. 18 of 2002 Specifying the Powers of the Enforcement Unit in Implementing the Provisions of the Decree Law Promulgated with Respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 23 of 2002 with Respect to Procedures of Money Laundering Prevention and Prohibition; and Module AML (Anti-Money Laundering & Combating Financial Crime).

                Amended: April 2016

              • CSD-A.3.3

                Licensed clearing housesG must also comply with the CBB's Real Time Gross Settlement System (Membership) Regulations 2007 and other related rules, regulations and guidelines.

            • CSD-A.4 Division of Responsibilities

              • CSD-A.4.1

                SROs should be subject to the oversight of the regulator, and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

              • CSD-A.4.2

                SROs shall:

                (a) Have the capacity to carry out the purposes of governing laws, regulations and SRO rules, and to enforce compliance by its members and associated persons with those laws, regulations, and rules;
                (b) Treat all members of the SRO and applicants for membership in a fair and consistent manner;
                (c) Develop rules that are designed to set standards of behaviour for its members and to promote investor protection;
                (d) Submit to the regulator its rules for review and/or approval as the regulator deems appropriate, and ensure that the rules of the SRO are consistent with the public policy directives established by the regulator;
                (e) Cooperate with the regulator and other SROs to investigate and enforce applicable laws and regulations;
                (f) Enforce its own rules and impose appropriate sanctions for non-compliance;
                (g) Assure a fair representation of members in selection of its directors and administration of its affairs;
                (h) Avoid rules that may create uncompetitive situations; and
                (i) Avoid using the oversight role to allow any market participant to gain unfair advantage in the market.

              • CSD-A.4.3

                Regardless of the extent to which self-regulation is used, the CBB retains the authority to enquire into matters affecting investors or the market.

              • CSD-A.4.4

                Where the powers of an SRO are inadequate for enquiring into or addressing particular misconduct, or where a conflict of interest necessitates it, the CBB shall take over the responsibility for an enquiry from an SRO. It is important therefore, to ensure that the information provided by the SRO to the regulator allows these matters to be identified at an early stage.

              • CSD-A.4.5

                SRO's should follow similar professional standards of behaviour on matters such as confidentiality and procedural fairness as would be expected of the CBB.

          • CSD-B Scope of Application

            • CSD-B.1 Scope

              • CSD-B.1.1

                This Module shall apply to:

                (a) Clearing and settlementG services provided by a licensed clearing houseG in or from the Kingdom of Bahrain for the clearing and settlementG of securitiesG transactions; and
                (b) Custodial services for securitiesG offered by a central depositoryG in or from the Kingdom of Bahrain.

            • CSD-B.2 Definitions

              [This Section was deleted and moved to the Glossary under Part B in July 2016.]

              Deleted: July 2016

          • CSD-1 Establishment of Clearing House and Central Depository Facilities

            • CSD-1.1 Licensing Conditions

              • Requirement to be Licensed

                • CSD-1.1.1

                  As per Article 40 of the CBB Law, no personG shall operate or hold himself out as a licensed clearing houseG or licensed central depositoryG in the Kingdom of Bahrain, unless he has been licensed by the CBB under this section.

                  Amended: April 2016

                • CSD-1.1.1A

                  No personG may market any financial servicesG in the Kingdom of Bahrain unless:

                  (a) Allowed to do by the terms of a license issued by the CBB;
                  (b) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
                  (c) Has obtained the express written permission of the CBB to offer financial servicesG .
                  Added: April 2013

                • CSD-1.1.1B

                  In accordance with Resolution No.(16) for the year 2012 and for the purpose of Paragraph CSD-1.1.1A, the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial servicesG in return for monetary payment or some other form of valuable consideration.

                  Added: April 2013

                • CSD-1.1.1C

                  Persons in breach of Paragraph CSD-1.1.1A are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law.

                  Amended: April 2016
                  Added: April 2013

                • CSD-1.1.2

                  No person shall establish, maintain, operate or hold himself out as intending to establish, maintain or operate a clearing houseG or central depositoryG , without notifying the CBB of such intention at least 90 days prior to the establishment or commencement of operations of the clearing houseG or central depositoryG .

                • CSD-1.1.3

                  A person may apply to the CBB to reduce the period referred to in rule CSD-1.1.2 and the CBB may substitute such other period at its discretion.

                  Amended: April 2016

                • CSD-1.1.4

                  The CBB may require a person providing the notice period referred to in rule CSD-1.1.2 to furnish the CBB with such information or documents as the CBB considers necessary in relation to the notice.

                  Amended: April 2016

              • Persons Operating Clearing or Depository Facilities

                • CSD-1.1.5

                  The CBB may license a person operating a clearing or depository facility as a licensed clearing houseG or licensed central depositoryG for the purposes of this Module, if it has satisfied the criteria laid out in this Module. The CBB may, on application, give authorisation to overseas clearing houses, clearing corporations, or central depositories, particularly for facilitating the operations of the licensed market operators and cross-listings.

                  Amended: April 2016

                • CSD-1.1.6

                  The CBB shall give notice in the Official Gazette of any personG licensed under rule CSD-1.1.5.

                • CSD-1.1.7

                  A license provided by the CBB under rule CSD-1.1.5 shall continue to have effect until it is withdrawn by the CBB.

                • CSD-1.1.8

                  The CBB may withdraw the license of any licensed clearing houseG or licensed central depositoryG at any time, on its own initiative or on the application of the licensed clearing houseG or licensed central depositoryG , if the CBB is of the opinion that the considerations in rule CSD-1.1.5 are no longer valid or satisfied.

                  Amended: April 2016

                • CSD-1.1.9

                  The CBB shall give notice in the Official Gazette of any withdrawal under paragraph CSD-1.1.8.

                • CSD-1.1.10

                  The CBB shall not withdraw on its own initiative the license of any personG operating a clearing facility or depository as a licensed clearing houseG or licensed central depositoryG , without giving the personG an opportunity to be heard.

                  Amended: April 2016

            • CSD-1.2 Licensing Process and Timeline

              • CSD-1.2.1

                A person may apply to the CBB to be:

                (a) A licensed clearing houseG (including the function of central depositoryG ); and
                (b) A licensed central depositoryG .
                Amended: July 2016

              • CSD-1.2.2

                Unless otherwise approved, a person licensed as a clearing houseG or central depositoryG , or either a licensed clearing houseG or licensed central depositoryG is required to be registered as a joint stock company in Bahrain in accordance with the Commercial Companies Law (CCL) 2001.

              • CSD-1.2.3

                An application for a license to operate as a clearing houseG or central depositoryG under Article 39 of the CBB Law shall be made in Form 1 and shall be lodged with the CBB, together with the following:

                (a) Form 3 (Application for Approved Person Status) and Form 4 (Information on Shareholders and Subsidiaries);
                (b) Any relevant annexe and information specified in those forms;
                (c) A non-refundable prescribed application fee of BD100;
                (d) A business plan setting forth the internal controlling and risk management procedures of the enterprise; furthermore, the business plan must contain a budgeted accounting plan for the first three business years;
                (e) The memorandum and articles of association of the company or any of its constituent documents;
                (f) Three-year operational plans including the organisational structure, communication facilities and training programmes;
                (g) Draft business rules in respect of its operations as a licensed clearing house or central depository; and
                (h) The details of the proposed authorised and paid-up capital.
                Amended: April 2013

              • CSD-1.2.4

                The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.

              • CSD-1.2.5

                Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner.

              • CSD-1.2.6

                The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.

              • CSD-1.2.7

                The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.

              • CSD-1.2.8

                The CBB may grant an 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

                Amended: April 2016

              • CSD-1.2.8A

                An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Industry and Commerce unless it receives the final approval from the CBB.

                Added: April 2016

              • CSD-1.2.9

                At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with rule CSD-1.2.3.

              • CSD-1.2.10

                The CBB may call for further information if it is of the opinion that the information provided is incomplete or needs to be substantiated.

              • CSD-1.2.11

                Where a clearing house applies to be licensed as a clearing house including the function of a central depositoryG , the licensed clearing houseG shall apply for a single license as a clearing house and central depository, but must comply with the requirements of both a clearing house and central depository.

              • CSD-1.2.12

                A clearing houseG or central depositoryG shall confirm that, for the duration of the license, it shall satisfy all conditions and restrictions that may be imposed on it.

              • General Criteria Applicable to a Clearing House and Central Depository

                • CSD-1.2.13

                  The applicant must also demonstrate to the satisfaction of the CBB that it has:

                  (a) The financial resources, and the management and human resources with appropriate experience, necessary for the operation of a clearing houseG or central depositoryG ;
                  (b) Made arrangements for the proper supervision of all transactions effected through the clearing houseG or central depository,G so as to ensure compliance with the clearing houseG or central depositoryG rules;
                  (c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the recordsG of transactions effected through the clearing houseG or central depositoryG ;
                  (d) IT infrastructure and necessary systems to perform its function and comply with its obligations, including business continuity and disaster recovery systems;
                  (e) Procedures in place for compliance with obligations in respect of Anti-Money Laundering and the Combating of Financial Crime;
                  (f) Rules and procedures in place for the disciplining of its members and depository participantsG ;
                  (g) The ability to avoid and manage any conflicts of interest;
                  (h) The ability to maintain confidentiality as required in this Module.

              • Criteria for Granting License of a Clearing House

                • CSD-1.2.14

                  The CBB may license a personG as a clearing houseG if:

                  (a) The CBB is satisfied that the establishment of a clearing houseG to be operated by a personG will;
                  (i) Contribute towards developing the financial sector and enhance confidence therein; and
                  (ii) Protect the interests of investors;
                  (b) The CBB is satisfied that the personG , having applied to be a licensed clearing houseG under this Module, is able/will be able to comply with the obligations or requirements imposed on the clearing house;G and
                  (c) If the CBB shall be satisfied that the rules of the applicant make satisfactory provision for:
                  (i) The size and structure, or proposed size and structure, of the clearing facility;
                  (ii) The nature of the services provided, or to be provided, by the clearing facility;
                  (iii) The nature of the transactions cleared, or to be cleared, by the clearing facility;
                  (iv) The clearing and settlement of transactions and for the management of trade and settlement risk;
                  (v) The market where the transactions cleared through the clearing facility are traded or are to be traded;
                  (vi) The nature of the investors or members, or proposed investors or members, who may use or have an interest in the clearing facility;
                  (vii) Whether the personG operating the clearing facility is otherwise regulated by the CBB Law or any other law;
                  (viii) Whether the clearing facility has the ability to perform its function as a central counterparty;
                  (ix) Whether the clearing facility takes on counterparty risks, through novation or otherwise, in the clearing or settlementG of transactions;
                  (x) The parties who may be affected in the event that the clearing facility runs into difficulties;
                  (xi) The interests of the public;
                  (xii) The ability to meet international standards and related protocols including IOSCO;
                  (xiii) The ability to meet the International Securities Identification Number (ISIN) Standards and other international standards and protocols; and
                  (xix) Any other circumstances that the CBB may deem relevant.

                • CSD-1.2.15

                  This Paragraph has been left blank.

                  Added: April 2013

              • Criteria for Granting License of a Central Depository

                • CSD-1.2.16

                  The CBB may license a personG as a central depositoryG if:

                  (a) The CBB is satisfied that the establishment of a central depositoryG to be operated by a personG will;
                  (i) Contribute towards developing the financial sector and enhance confidence therein; and
                  (ii) Protect the interests of investors; and
                  (b) The CBB is satisfied that the personG , having applied to be a licensed central depositoryG under this Module, is able/will be able to comply with the obligations or requirements imposed on the central depository.G
                  (c) The CBB shall be satisfied that the rules of the applicant make satisfactory provision:
                  (i) With respect to the conditions under which securities may be deposited with, held by, withdrawn from, or transferred within, the central depository;
                  (ii) For the holding of securities deposited with the central depository or its nominee company;
                  (iii) For the processing of dealings in deposited securities;
                  (iv) For facilitating the settlement of deposited securities;
                  (v) For the protection of the interests of depositors and the protection and control of information on deposited securities and dealings therein;
                  (vi) For the monitoring of compliance with, and for the enforcement of, the rules of the central depository;
                  (vii)With respect to the maintenance of a policy or policies of insurance, and the establishment and maintenance of compensation funds, for the purpose of settling claims by depositors against the central depository, its nominee companies and depository participants; and
                  (viii) Adequate regulation and supervision of its depository participants.

                • CSD-1.2.17

                  Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.

            • CSD-1.3 Withdrawal of License or Cessation of Business

              • Voluntary Surrender

                • CSD-1.3.1

                  A clearing houseG or central depositoryG which intends to cease operating must apply to the CBB to surrender its license.

                • CSD-1.3.2

                  Any objections received from any user, member or depository participant of the clearing houseG or central depositoryG shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the licenseeG .

                • CSD-1.3.3

                  The CBB may, subject to paragraph CSD-1.3.2, cancel the licenseG if it is satisfied that the licensed clearing houseG or licensed central depositoryG has ceased operating and that there are no pending obligations of the licensed clearing houseG or licensed central depositoryG or contracts traded.

                  Amended: July 2016
                  Amended: April 2016

                • CSD-1.3.4

                  The licensed clearing houseG or licensed central depositoryG shall publish a notice of its intention to cease to operate its market in 2 daily newspapers, one in Arabic and the other in English, in Bahrain.

                  Amended: April 2016

                • CSD-1.3.5

                  The notice referred to in rule CSD-1.3.4 shall be subject to the approval of the CBB and shall be published at least 60 days prior to the cessation taking effect.

              • Cancellation of License

                • CSD-1.3.6

                  The CBB may cancel any license held by a licensed clearing houseG or licensed central depositoryG if:

                  (a) There exists a ground under which the CBB may refuse an application;
                  (b) The licensed clearing houseG or licensed central depositoryG is in the course of being wound up or otherwise dissolved;
                  (c) The licensed clearing houseG or licensed central depositoryG contravenes:
                  (i) Any condition or restriction applicable in respect of its licenseG ;
                  (ii) Any direction issued to it by the CBB;
                  (iii) Any provision in this Module; or
                  (iv) Any other CBB law, rule or regulation;
                  (d) The licensed clearing houseG or licensed central depositoryG operates in a manner that is in the opinion of the CBB, contrary to the interests of the public or user; or
                  (e) Any information or document provided by the licensed clearing houseG or licensed central depositoryG to the CBB is false or misleading.
                  Amended: April 2016

                • CSD-1.3.7

                  The CBB may not, subject to paragraph CSD-1.3.6, cancel any license that was granted to a licensed clearing houseG or licensed central depositoryG without giving the opportunity to be heard.

                  Amended: April 2016

                • CSD-1.3.8

                  The CBB may cancel a license that was granted to a licensed clearing houseG or licensed central depositoryG on any of the following grounds without giving an opportunity to be heard:

                  (a) The licensed clearing houseG or licensed central depositoryG is in the course of being wound up or otherwise dissolved;
                  (b) A receiver, a receiver and manager, or an equivalent personG has been appointed, in relation to or in respect of any propertyG of the licensed clearing houseG or licensed central depositoryG ; or
                  (c) The licensed clearing houseG or licensed central depositoryG has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.
                  Amended: April 2016

                • CSD-1.3.9

                  A licensed clearing houseG or licensed central depositoryG shall be deemed to have ceased to operate if:

                  (a) It has ceased to offer its services as a licensed clearing houseG or licensed central depositoryG for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or
                  (b) It has ceased to offer a licensed clearing houseG or licensed central depositoryG services under a direction issued by the CBB.
                  Amended: April 2016

                • CSD-1.3.10

                  Any cancellation of a license of a licensed clearing houseG or licensed central depositoryG shall not operate so as to:

                  (a) Avoid or affect any agreement, transaction or arrangement entered into by a licensed clearing houseG or licensed central depositoryG , whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or
                  (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.
                  Amended: April 2016

                • CSD-1.3.11

                  Where the CBB cancels or amends a license of a licensed clearing houseG or licensed central depositoryG , notification to the licensed clearing houseG or licensed central depositoryG and an appeal against such a decision shall be governed by Article 48 of the CBB Law.

                  Amended: July 2016
                  Amended: April 2016

              • Publication of the Decision to Grant, Cancel or Amend a License

                • CSD-1.3.12

                  The CBB shall publish its decision to grant, cancel or amend a license in the Official Gazette as well as in 2 local newspapers, one published in Arabic and the other in English in Bahrain.

                  Amended: July 2017

                • CSD-1.3.13

                  For the purpose of Paragraph CSD-1.3.12, the cost of publication of this notice must be borne by the clearing houseG or central depositoryG .

                  Added: July 2017

                • CSD-1.3.14

                  The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

                  Added: July 2017

            • CSD-1.4 Annual Fees

              • Annual Fees Payable by Clearing House and Central Depository

                • CSD-1.4.1

                  Every licensed clearing houseG or central depositoryG must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.

                  Amended: July 2016
                  Amended: April 2016
                  Amended: April 2014
                  Amended: April 2013

                • CSD-1.4.1A

                  The following fee is currently prescribed for licensed clearing housesG and licensed central depositoriesG :

                  Managing and operating clearing, settlement and central depository systems (fixed) BD10,000
                  Amended: April 2016
                  Added: April 2013

                • CSD-1.4.1B

                  For new licenseesG , their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license is granted, is prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.

                  Added: April 2014

                • CSD-1.4.2

                  Where a license is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question, should a fee have been paid for that year.

                  Amended: April 2014

                • CSD-1.4.3

                  A licensed clearing houseG or licensed central depositoryG failing to comply with Paragraph CSD-1.4.1 may be subject to financial penalties as prescribed by the CBB.

                  Added: April 2016

            • CSD-1.5 Power to Stop Commencement or Order Cessation

              • CSD-1.5.1

                The CBB may order a personG who has applied under rule CSD-1.1.1 not to establish or commence operation of a clearing or depository facility if:

                (a) The personG did not furnish the CBB with such information or documents as required under rule CSD-1.2.3 of this Module;
                (b) Any information or document provided by the personG to the CBB is or proves to be false or misleading; or
                (c) The CBB is of the opinion that it is in the interests of the capital market or financial sector.

              • CSD-1.5.2

                The CBB may, by notice in writing, order a licensed clearing houseG or central depositoryG to cease operating its clearing or depository facility if:

                (a) It has contravened any provision of the CBB Law, or any other law or rule in the course of operating its clearing facility;
                (b) It has not complied with any of the licensing requirements contained in this Module;
                (c) It provided any information or document to the CBB that is false or misleading;
                (d) In the opinion of the CBB, it is operating the clearing or depository facility in a manner that is likely to pose systemic risk to the financial system of Bahrain;
                (e) It is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
                (f) A receiver, a receiver and manager, or an equivalent personG has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any propertyG of the licensed clearing houseG or central depositoryG ;
                (g) It has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly; or
                (h) The CBB is of the opinion that it is in the interests of the public to do so.

              • CSD-1.5.3

                The CBB shall give notice in the Official Gazette of any order made under rule CSD-1.5.2.

              • CSD-1.5.4

                Subject to CSD-1.5.5, the CBB shall not make an order under rule CSD-1.5.1 or rule CSD-1.5.2 without giving the personG an opportunity to be heard.

              • CSD-1.5.5

                The CBB may order a personG not to establish or commence operation of a clearing or central depository facility under rule CSD-1.5.1, or to cease operating its clearing or central depository facility under rule CSD-1.5.2 on any of the following grounds without giving the personG an opportunity to be heard:

                (a) The personG is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
                (b) A receiver, a receiver and manager, or an equivalent personG has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any propertyG of the personG ;
                (c) The personG has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly.

              • CSD-1.5.6

                The CBB may direct, by notice in writing, a licensed clearing houseG or licensed central depositoryG , to whom an order to cease operations of its clearing facility has been made by the CBB under rule CSD-1.5.2, to take such action as it considers necessary, including any of the following actions:

                (a) Ordering the liquidation of all positionsG or part thereof, or the reduction in such positionsG ;
                (b) Altering conditions of deliveryG of transactions clearedG or settled,G or to be clearedG or settledG through the clearing or depository facility;
                (c) Fixing the settlementG price at which transactions are to be liquidated;
                (d) Requiring margins or additional margins for transactions clearedG or settledG or to be clearedG or settledG through the clearing or depository facility;
                (e) Modifying or suspending any of the business rulesG of the licensed clearing houseG or licensed central depositoryG ; or
                (f) Transferring the rights and obligations of that licensed clearing houseG or licensed central depositoryG to another licensed clearing houseG and licensed central depositoryG ; and

                the licensed clearing houseG or licensed central depositoryG shall comply with that direction.

                Amended: April 2016

              • CSD-1.5.7

                The CBB may modify any action taken by a licensed clearing houseG or licensed central depositoryG , including the setting aside of that action.

                Amended: April 2016

              • CSD-1.5.8

                Any order made under rule CSD-1.5.2 shall not operate so as to:

                (a) Avoid or affect any agreement, transaction or arrangement entered into in connection with the use of a clearing facility operated by the personG , whether the agreement, transaction or arrangement was entered into before or after the order of the cessation; or
                (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.

            • CSD-1.6 Establishment of a Clearing House and Central Depository as an SRO

              • CSD-1.6.1

                A licensed clearing houseG or licensed central depositoryG shall be established as self-regulatory organisations (SROs) and must comply with the requirements laid down under the CBB Law, this Module, its approved business rules and the other applicable laws, rules and regulations.

                Amended: April 2016

              • CSD-1.6.2

                As an SRO, the objectives and functions of the licensed clearing houseG and licensed central depositoryG will be to:

                (a) Promote fairness and investor protection;
                (b) Provide for admission, regulation, supervision and expulsion of participation or membership;
                (c) Promote fair access to its facilities and information;
                (d) Promote the provision of timely and accessible relevant data;
                (e) Treat all its members, depository participants, users and investors in a fair and transparent manner;
                (f) Promptly inform the CBB of any violations of the provision of this Module or any relevant act, laws or regulations by its members, depository participants, users or investors;
                (g) Act in good faith and avoid conflict of interest in the conduct of its functions;
                (h) Comply with the norms of corporate governance, as provided under Module HC (High-level Controls (Corporate Governance)); and
                (i) Provide adequate supervision and regulation over its members.
                Amended: April 2016

          • CSD-2 Clearing House and Central Depository Function

            • CSD-2.1 Clearing House Function

              • CSD-2.1.1

                A licensed clearing houseG shall act as the central counterparty of the clearing members for clearing and settlementG of transactions and for delivering securitiesG to and receiving securitiesG from clearing members and making paymentG to and receiving paymentG from clearing members in connection with any transaction.

              • Settlement Bank(s)

                • CSD-2.1.2

                  The licensed clearing houseG may undertake the settlementG function directly, or from time-to-time appoint settlement bank(s)G to act as the settlement bank(s)G for the settlementG of the transactions.

                  Amended: April 2016

                • CSD-2.1.3

                  The appointed settlement bank(s)G shall act as agent(s) of the licensed clearing houseG for the collection and paymentG for funds towards settlementG obligations, margins and other dues.

                  Amended: April 2016

              • Clearing Houses to Have Designated Accounts with Settlement Bank(s)

                • CSD-2.1.4

                  Every clearing member of the licensed clearing houseG shall maintain a designated bank account with a settlement bankG .

                  Amended: April 2016

                • CSD-2.1.5

                  The clearing members shall operate the designated bank accounts only for the purpose of paymentG of their monetary obligations to the licensed clearing houseG and/or the licensed exchangeG and receipt of monetary entitlements from the licensed clearing houseG or licensed exchangeG .

                  Amended: April 2016

              • Settlement Bank to Act on Instructions of the Clearing House

                • CSD-2.1.6

                  The licensed clearing houseG shall instruct the settlement banksG to debit or credit the account maintained by the licensed clearing houseG and also the designated bank accounts of the clearing membersG . The settlement banksG shall act on such instructions, which shall be deemed to be confirmed orders by the clearing membersG to debit and/or credit funds, as may be specified in the instructions from time-to-time.

                  Amended: July 2016
                  Amended: April 2016

                • CSD-2.1.7

                  [This Paragraph was merged with CSD-2.1.6 in July 2016.]

                  Amended: July 2016
                  Amended: April 2016

                • CSD-2.1.8

                  Clearing membersG shall authorise settlement banksG to access their designated bank accounts for debiting and/or crediting their accounts electronically, on the instructions of the licensed exchangeG or licensed clearing houseG .

                  Amended: April 2016

              • Settlement Banks to Inform Status

                • CSD-2.1.9

                  If there is any shortage in meeting monetary obligations by a clearing memberG relating to debits into a designated bank account, the settlement bankG shall forthwith report such instances of shortage to the officer of the licensed clearing houseG and licensed exchangeG designated for the purpose in a mutually agreed mode of communication.

                  Amended: April 2016

            • CSD-2.2 Settlement by Clearing House

              • CSD-2.2.1

                All securities transactions shall be settled through the licensed clearing houseG , by deliveryG and paymentG by the clearing membersG to the licensed clearing houseG in accordance with the provisions contained in this Module, the rules of the licensed clearing houseG and relevant directives or provisions that the CBB may from time-to-time prescribe.

                Amended: April 2016

              • CSD-2.2.2

                Arrangements for clearing and settlementG systems should provide for the prompt verification of a trade, as close as possible to real-time verification (including pre-validation).

              • CSD-2.2.3

                Information which records the transaction, allows it to be checked and provides the basis for settlementG should be available.

              • Settlement Rules and Regulations Form Part of Contracts

                • CSD-2.2.4

                  All the clearance and settlementG rules and regulations in force from time-to-time relating to any procedure for the clearing and settlementG of transactions by or through the licensed clearing houseG and the provisions of this Module shall be construed to be part of the contracts entered into by any trading member and/or clearing member with his clients and between trading members, inter-se, in any securityG or securitiesG .

              • Settlement Procedure

                • CSD-2.2.5

                  The licensed exchange or clearing houseG shall prescribe the procedure, schedule, manner and mode to be followed in respect of settlementG of all transactions contracts entered into or to be entered into in any securityG or securitiesG by the clearing membersG through the licensed clearing houseG .

                  Amended: April 2016

                • CSD-2.2.6

                  All the clearing membersG , custodians, clearing banks, central depositoriesG , depository participantsG and other personsG having beneficial interest in settlementG shall comply with the provisions contained in the rules and regulations of the licensed exchangeG and the rules of the licensed clearing houseG from time-to-time.

                  Amended: April 2016

                • CSD-2.2.7

                  Key aspects of the settlementG process that the legal framework should support include the following:

                  (a) Enforceability of transactions;
                  (b) Protection of customer assets, particularly against loss upon the insolvency of a custodian;
                  (c) Dematerialisation of securitiesG and the transfer of securitiesG by book entry;
                  (d) Netting arrangements;
                  (e) SecuritiesG lending, including repurchase agreements and other economically equivalent transactions;
                  (f) Finality of settlementG ;
                  (g) Margin trading and securities lending and borrowing;
                  (h) Arrangements for achieving deliveryG versus paymentG ;
                  (i) Default rulesG addressing the consequences of a member's default;
                  (j) Arrangement for registration of pledges and liens; and
                  (k) Liquidation of assets pledged or transferred as collateral to support members' obligations.
                  Amended: April 2016

                • CSD-2.2.8

                  The licensed clearing houseG shall maintain a settlement guarantee fundG to guarantee settlementG obligations of clearing membersG .

                  Amended: April 2016

                • CSD-2.2.9

                  The licensed clearing houseG shall deliver, at its discretion, securitiesG which it has received from a clearing memberG to any other clearing memberG who is entitled to the same.

                  Amended: April 2016

                • CSD-2.2.10

                  The licensed clearing houseG shall determine the settlementG obligations relating to deliveryG and receipt of securitiesG by and between clearing membersG to be exchanged electronically through the clearing and settlementG system of the licensed clearing houseG .

                  Amended: April 2016

              • Timing of Settlement

                • CSD-2.2.11

                  Final settlementG should occur no later than the end of the settlementG day as approved by the CBB.

                • CSD-2.2.12

                  The timing of settlementG finality should be defined clearly to all the members.

              • Approval of Settlement System

                • CSD-2.2.13

                  The settlement system of a licensed clearing houseG must be able to effect:

                  (a) SettlementG of transfer orders within the system itself; and
                  (b) Be able to comply with the requirements stipulated in Paragraph CSD-2.2.7.
                  Amended: April 2016

                • CSD-2.2.14

                  If the CBB determines that the criteria specified in rule CSD-2.2.13 have been met as regards a designated system, it shall issueG in respect of the system a certificate certifying to that effect ("certificate of finality"), and specify a date and time from which the certificate shall have effect.

                • CSD-2.2.15

                  If the CBB is unable to make a determination in the terms mentioned in rule CSD-2.2.13 as regards a designated system, it shall inform the system operator in writing accordingly, giving particulars of the criteria specified in paragraph CSD-2.2.7 which have not been met, or of the further information it requires in order to make a determination in relation to such criteria.

                • CSD-2.2.16

                  A certificate of finality in respect of a designated system remains in effect until it is revoked.

              • Finality of Settlement and Precedence Over Law of Insolvency

                • CSD-2.2.17

                  In line with Article 108 of the CBB Law:

                  (a) This Module shall be regarded as the requirements regarding conditions and controls to be incorporated in a Market Contract, as well as the procedures for carrying out clearing according to such contract;
                  (b) Notwithstanding the provisions of any other law relating to clearing, bankruptcy or insolvency, any Close-out Netting shall be carried out according to the Market Contract in connection with debts, loans and dealings between the parties thereof that were originated or completed before any of the parties became insolvent or bankrupt. The same shall apply against the parties of the contract, their receivers in bankruptcy and their creditors; and
                  (c) The previous paragraph shall not apply if one party knows or ought to have known that:
                  (i) An application for the liquidation and winding up of the other party by reason of insolvency, is being considered by the concerned authority; or
                  (ii) The other party has taken formal steps under any other applicable law to liquidate or wind up by reason of bankruptcy.

                • CSD-2.2.18

                  In line with Article 109 of the CBB Law:

                  (a) Notwithstanding the provisions of any other law, no restriction or suspensions shall be applied to any provision related to clearance according to a Market Contract; and
                  (b) Notwithstanding the provisions of any other law relating to clearance, bankruptcy or insolvency, the parties in a Market Contract may:
                  (i) Agree to any system which will enable the parties to convert a non-financial obligation into a financial one of equivalent value and to valuate such an obligation for the purposes of any clearance or netting;
                  (ii) Agree on the rate of exchange, or the method to be used to establish the rate of exchange to be applied in effecting any clearance or netting when the sums to be cleared or netted are in different currencies, and to establish the currency in which payment of the net sum is to be effected; or
                  (iii) Agree that any transactions carried out pursuant to any Market Contract shall be treated as a single transaction for the purposes of the contract, whether such transactions were complete by the parties, a receiver in bankruptcy, a competent court, an officer representing the parties or that such transactions have been categorized or attributed to a certain type of trading.

            • CSD-2.3 Arrangements for Depository Services

              • CSD-2.3.1

                The clearing houseG shall put in place necessary arrangements to avail of the services of depositoriesG licensed by the CBB.

              • CSD-2.3.2

                A clearing memberG shall be required to maintain a designated account with one or more depositoriesG .

                Amended: April 2016

            • CSD-2.4 Central Depository Function

              • Securities Accounts and Records

                • CSD-2.4.1

                  No personG shall deal in deposited securities without first having a securities accountG .

                • CSD-2.4.2

                  A depository participantG which deals in deposited securitiesG as principal shall, in relation to such dealing, open and maintain a securities accountG with the central depositoryG .

                  Amended: April 2016

                • CSD-2.4.3

                  A central depositoryG may establish different types of securities accountsG for different classes of personsG .

                • CSD-2.4.4

                  Every securities accountG opened with a central depositoryG shall be in the name of the beneficial ownerG of the deposited securities.

                • CSD-2.4.5

                  The personG opening the securities accountG shall make a declaration in such manner as may be specified in the rules of the central depositoryG that he is the beneficial ownerG of deposited securitiesG .

              • Issuance of Statements of Accounts

                • CSD-2.4.6

                  A central depositoryG shall issue to all securities holders statements of accounts in respect of all deposited securitiesG held in custody by, or registered in the name of the central depositoryG for the securities holders at such time and in such manner as may be provided in the rules of the central depositoryG .

                • CSD-2.4.7

                  Notwithstanding rule CSD-2.4.6, a securities holder may, at any time, by written notice, require the central depositoryG to issue to him a statement of account in respect of all or any of the deposited securitiesG for the time being held in custody by, or registered in the name of the central depositoryG .

                  Amended: April 2016

                • CSD-2.4.8

                  A central depositoryG shall, on receipt of a written notice under paragraph CSD-2.4.7 and upon paymentG of any charges which may be imposed under these rules, issue to the securities holder the statement so required.

                • CSD-2.4.9

                  A statement of account issued under this rule shall be prima facie evidence of the truth of the matters specified in the statement.

            • CSD-2.5 Authorised Depository Participant

              • CSD-2.5.1

                A central depositoryG must appoint any of the personsG referred to in Paragraph CSD-2.5.2 to be a depository participantG for all or any of the following purposes:

                (a) To facilitate the deposit of securitiesG ;
                (b) To open, maintain and close securities accountsG ;
                (c) To make entries in securities accountsG ;
                (d) To collect such fees and charges imposed by the central depositoryG as may be provided under these rules; or
                (e) Such other incidental and ancillary purposes as may be specified by the rules of the central depositoryG .
                Amended: April 2016

              • CSD-2.5.2

                A central depositoryG may appoint as a depository participantG any of the following:

                (a) A stock exchange;
                (b) A clearing houseG or depository;
                (c) A bank licensed by the CBB;
                (d) [This Subparagraph was deleted in April 2016]; or
                (e) An investment firm licenseeG licensed by the CBB;

                and any depository participantG so appointed, in carrying out all or any of the purposes mentioned in rule CSD-2.5.1, shall, when so required by the central depositoryG , in respect of such purposes, be authorised to give, divulge, reveal or disclose to the central depositoryG any information or documents relating to a securities accountG .

                Amended: April 2016

              • Agreement Between Depository and Depository Participant

                • CSD-2.5.3

                  A central depositoryG shall enter into an agreement with one or more depository participantsG as its agent.

                • CSD-2.5.4

                  Every agreement shall be consistent with the provisions of this Module.

            • CSD-2.6 Provisions Relating to Immobilised Securities

              • CSD-2.6.1

                A company or issuer must, in respect of securitiesG listed or quoted on a licensed exchangeG or market operator give notice to the public and its security holders of its intention to immobilise the securitiesG .

                Amended: April 2016

              • CSD-2.6.2

                A listed company may from time-to-time after consultation with the licensed exchangeG prescribe that any securityG listed or quoted on the licensed exchangeG , or proposed to be listed or quoted on the licensed exchangeG or licensed market operator, be immobilised by depositing such securityG with the central depositoryG .

                Amended: April 2016

              • CSD-2.6.3

                A central depositoryG or its depository participantG , as the case may be shall, within the period prescribed in the rules, after the deposit by any personG of a certificate and the instruments of transfer in respect thereof, if any, lodge the certificate and instrument with the issuerG of the securityG within two market days.

              • Verification of Certificates and Transfer to a Central Depository

                • CSD-2.6.4

                  The issuerG shall, on receipt of the certificate and instrument, forthwith, do all such acts and things as may be necessary in order to register the transfer of the securityG underlying such certificate in the name of the central depositoryG .

                • CSD-2.6.5

                  Where an issuerG refuses registration of a transfer, it shall serve on the transferor and the central depositoryG , being the transferee, a written notice giving the reasons for such refusal, within 7 days.

                • CSD-2.6.6

                  Without prejudice to the right of an issuerG to refuse to register a transfer under any written law, the issuerG shall refuse registration of the transfer mentioned in rule CSD-2.6.8 if:

                  (a) It ascertains that the certificate is not a genuine certificate, or is a certificate that was reported lost or destroyed; or
                  (b) In relation to any such securityG , it discovers that:
                  (i) There has been a duplication in the issuance of the certificate representing the securityG ;
                  (ii) Such certificate is a certificate issued in excess of the issued share capital of the issuerG ; or
                  (iii) It has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of the securityG underlying such certificate.
                  Amended: April 2016

                • CSD-2.6.7

                  Within seven market days after a transfer is lodged with an issuerG or within such longer period as may be allowed in writing by a central depository,G the issuerG shall complete and deliver the appropriate certificate to the central depositoryG .

                  The central depository may refuse entry of the certificates deposited where prima facie:

                  (a) There are discrepancies between the securities received and the transfer lodged; or
                  (b) The securities are invalid, not genuine.

                • CSD-2.6.7A

                  The central depositoryG may refuse entry of the certificates deposited where prima facie:

                  (a) There are discrepancies between the securitiesG received and the transfer lodged; or
                  (b) The securitiesG are invalid, not genuine.
                  Added: April 2016

              • Issuance of Consolidated Statements

                • CSD-2.6.8

                  A central depositoryG may require an issuerG of deposited securities to issueG in the name of the central depositoryG a consolidated statement for such securitiesG .

                • CSD-2.6.9

                  The issuerG shall, upon receipt of a requirement as mentioned in Paragraph CSD-2.6.8 forthwith take such action as may be appropriate for the issuance of the consolidated statement to the central depositoryG .

                  Amended: April 2016

              • Withdrawal of Immobilised Securities

                • CSD-2.6.10

                  A depositor may by an application to the central depositoryG withdraw an immobilised securityG standing to the credit of his securities accountG .

                  Amended: April 2016

                • CSD-2.6.11

                  Where an application is made under paragraph CSD-2.6.10 for the withdrawal of an immobilised securityG which is registered in the name of a central depositoryG or its depository participantG , the central depositoryG shall forthwith place such securityG under suspense with the issuerG including:

                  (a) The certificate representing the securityG ; and
                  (b) The instrument of transfer duly executed by the central depositoryG or its depository participantG , as the case may be,

                  for the purpose of effecting the transfer in favour of the depositor.

                  Amended: July 2016
                  Amended: April 2016

                • CSD-2.6.12

                  An issuerG shall, within two weeks after the certificate and the instrument of transfer in respect thereof are lodged with it:

                  (a) Complete and have ready for deliveryG to the depositor, the appropriate certificate registered in the name of such depositor; and
                  (b) Unless otherwise instructed by the depositor, send or deliver the completed certificate to the depositor.

                • CSD-2.6.13

                  No personG shall trade any securityG withdrawn from a central depositoryG on a licensed exchange,G unless such securityG is redeposited in a central depositoryG .

              • Central Depository Deemed a Bare Trustee

                • CSD-2.6.14

                  A central depositoryG shall, in relation to deposited securities which are registered in its name:

                  (a) Not be deemed to have an interest in relation to the book-entry securitiesG which are registered in its name; and
                  (b) Be deemed to be a bare trustee.

              • Central Depository and Depository Participant not Liable for Loss

                • CSD-2.6.15

                  A central depositoryG and depository participantG shall not, except in the case of any willful act, omission, neglect or default on the part of the central depositoryG or its authorised depository participantG , be liable for any loss, damage or liability suffered or incurred by any personG in respect of dealing in any securityG .

                  Amended: April 2016

            • CSD-2.7 Dematerialisation and Central Registry Function

              • Dematerialisation of Securities

                • CSD-2.7.1

                  A company shall, in respect of securitiesG listed or quoted on a licensed exchangeG give notice to the public and its shareholders of its intention to dematerialise the securitiesG . Any issue of such securitiesG after this Module comes into effect shall be in dematerialised form.

                  Amended: April 2016

                • CSD-2.7.2

                  A listed company may from time-to-time after consultation with the licensed exchangeG prescribe that any securityG listed or quoted on the licensed exchange,G or proposed to be listed or quoted on the licensed exchange,G be dematerialised.

                  Amended: April 2016

                • CSD-2.7.3

                  On or after the dematerialisationG date, every issuerG of a securityG prescribed as a dematerialised securityG shall:

                  (a) Surrender the physical register of securities holders to the central depositoryG ; and
                  (b) Provide or instruct its registrar to provide information to the central depositoryG of any securities holder who appears in the appropriate register as a holder of a certificate not already dematerialised by the central depositoryG .
                  Amended: April 2016

                • CSD-2.7.4

                  A central depositoryG shall maintain information of the holders of securitiesG in a computerised recordG form, in accordance with the relevant provisions of Module AML (Anti-Money Laundering & Combating Financial Crime).

                  Amended: April 2016

                • CSD-2.7.5

                  No issuerG shall after the dematerialisationG date issue any certificate in respect of a dematerialised securityG .

                  Amended: April 2016

                • CSD-2.7.6

                  With effect from the dematerialisation date, a reference in respect of a dematerialised securityG , to:

                  (a) A register of members or securities holders including branch registers, maintained by a company under the Commercial Companies Law, 2001, shall be deemed to be a reference to the recordG of securities holders maintained by the central depositoryG ;
                  (b) A transfer of securitiesG from a transferee shall be deemed to be a reference to a book entry transfer performed by the central depositoryG ; and
                  (c) Any certificate, instrument of transfer or any movable propertyG representing any securityG which is used as prima facie evidence of ownership of the securityG shall be deemed to be a reference to a statement of account issued by the central depositoryG .
                  Amended: April 2016

              • Dealings Effected by Means of Electronic Process

                • CSD-2.7.7

                  A dealing by a beneficial ownerG in respect of a dematerialised securityG shall be effected by means of an entry in the securitiesG account of the beneficial ownerG .

                  Amended: April 2016

                • CSD-2.7.8

                  Transfer of securitiesG shall be effected by beneficial ownersG or their authorised nominees.

            • CSD-2.8 Entries in Securities Accounts

              • CSD-2.8.1

                An entry in a securities accountG in respect of a dealing, shall:

                (a) In the case of a securities accountG established and maintained directly by a central depositoryG , be deemed to have been made by, or with the authority of, the central depositoryG ; and
                (b) In the case of a securities accountG established through and maintained by a depository participantG on behalf of a central depositoryG , be deemed to have been made by, or with the authority of, the depository participantG .
                Amended: April 2016

              • Entries in Securities Accounts to Specify Date, Time and Person Making the Entries

                • CSD-2.8.2

                  An entry in a securities accountG made under the rule CSD-2.8.1 shall specify the date and time of the making of such entry and, in the case of an entry made by a personG , the identity of the personG making the entry.

              • Record of an Entry Prima Facie Evidence

                • CSD-2.8.3

                  A recordG of an entry in a securities accountG in respect of a dealingG in deposited securitiesG shall be prima facie evidence of the truth of the matters so recorded.

              • Record of Securities Holders Beneficial Owner to be Issued to an Issuer on Request

                • CSD-2.8.4

                  An issuerG of any deposited securityG may, in the manner and period prescribed by the rules of the central depositoryG , request the central depositoryG to issue him a recordG of the securities holders holding the aforementioned securitiesG under their securities accountsG , as at the date of the notice or such other date as may be specified in the notice.

                • CSD-2.8.5

                  The recordG of securities holders referred to in Paragraph CSD-2.8.4 shall contain the names, addresses, number of the deposited securitiesG acquired by each securities holder and such other information and particulars of the securities holders as may be required and prescribed by the rules of the depository.

                  Amended: April 2016

              • Charging or Pledging of Securities

                • CSD-2.8.6

                  The central depositoryG shall include in its Business Rules the rules and procedures in respect of the pledge of securitiesG , including the acceptance of a pledge by a beneficial ownerG and the responsibilities of the pledger in respect of effecting the pledge.

                  Amended: April 2016

                • CSD-2.8.7

                  Where a deposited security is charged or pledged by a securities holder (hereinafter referred to as "pledger") in favour of any personG ("pledgee"), a central depositoryG or a depository participantG , with or through whom the securities accountG of the securities holder is maintained shall, on a request on the prescribed form made by the securities holder or pledger, create a pledge on the relevant securities within the securities accountG .

                  Amended: April 2016

                • CSD-2.8.8

                  Where a request is made by a securities holder as provided under Paragraph CSD-2.8.7, such request shall be supported by documents evidencing such charge or pledge.

                  Amended: April 2016

                • CSD-2.8.9

                  Where a pledge over a deposited securityG has been discharged or released, the central depositoryG or its depository participantG , as the case may be, shall, upon receipt of a notice in writing from the pledgee confirming the same, release the pledge within the securities accountG of the pledger.

                  Amended: April 2016

              • Securities in Suspense

                • CSD-2.8.10

                  A central depositoryG must specify that any deposited security in a securities accountG as being in suspense in any of the following circumstances:

                  (a) Where the securitiesG have not been made fully paid-up;
                  (b) Where the central depositoryG has reason to believe or is satisfied that there is a breach of the rules of the central depositoryG , licensed exchangeG or licensed clearing houseG ;
                  (c) Where the central depositoryG has been served with a notice by the CBB that the CBB suspects or has reason to believe that a provision of a related law has been contravened and that securities accountG of a securities holder is relevant to its investigations regarding the contravention;
                  (d) Where the central depositoryG has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of a deposited securityG ;
                  (e) Where the securitiesG or interim certificates are lost and no other securitiesG or certificates are given in lieu; or
                  (f) Such other circumstances as may be prescribed by the CBB.
                  Amended: April 2016

                • CSD-2.8.11

                  In the case of a securityG that is specified in the securities accountG as being in suspense pursuant to rule CSD-2.8.10:

                  (a) The rights, benefits, powers and privileges of a securities holder; and
                  (b) The liabilities, duties and obligations of a securities holder, in respect of, or arising from, the suspension of such a securityG ,

                  shall be as prescribed by the suspension order.

                  Amended: April 2016

                • CSD-2.8.12

                  Where the central depositoryG specifies that any deposited security in a securities accountG has been suspended, the central depositoryG shall inform the securities accountG holder, issuer, the relevant depository participantsG and the relevant licensed exchangeG .

                  Amended: April 2016

            • CSD-2.9 Proceedings of Licensed Clearing House and Licensed Central Depository Take Precedence Over Law of Insolvency

              • CSD-2.9.1

                In line with Articles 108 and 109 of the CBB Law and Resolution No (44) of 2014 with respect to promulgating a Regulation for Close-out Netting under a Market Contract, none of the following shall be regarded as to any extent invalid under the law on the grounds of inconsistency with the law relating to distribution of the assets of a personG on insolvency, bankruptcy or winding up, or on the appointment of a receiver over any of the assets of a personG :

                (a) A market contractG ;
                (b) The rules of a licensed clearing houseG relating to the settlementG of a market contractG ;
                (c) Any proceeding or other action taken under the rules of a licensed clearing houseG relating to the settlementG of a market contractG ;
                (d) A market chargeG ;
                (e) The default rulesG of a licensed clearing houseG or central depositoryG ; and
                (f) Any default proceedingsG .
                Amended: April 2016

              • CSD-2.9.2

                The powers of a relevant office-holder in his capacity as such, and the powers of a court acting under the law of insolvency, shall not be exercised in such a way so as to prevent or interfere with:

                (a) The settlementG in accordance with the rules of a licensed clearing houseG or licensed central depositoryG of a market contract