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Location: Central Bank of Bahrain Volume 6—Capital Markets > Archive > Part A > Collective Investment Undertakings > CIU — Collective Investment Undertakings
  • CIU — Collective Investment Undertakings

    • CIU-A Introduction

      • CIU-A.1 Purpose

        • Executive Summary

          • CIU-A.1.1

            Module CIU (Collective Investment Undertakings) sets out the Central Bank of Bahrain's regulatory framework governing collective investment undertakings ('CIUs')G . The Module sets out requirements relevant to all CIUsG that are domiciled in the Kingdom of Bahrain ('Bahrain domiciled CIUsG '). It also prescribes requirements relating to CIUsG that are domiciled in an overseas jurisdiction ('overseas domiciled CIUsG ') and offered to investors in the Kingdom of Bahrain.

          • CIU-A.1.2

            In summary, CIUsG are defined in Section CIU-B.3 as undertakings the sole object of which is the collective investment of capital raised from the public and which operates on the basis of risk-spreading; and the holdingsG of which are re-purchased or redeemed out of those undertakings' assets. The definition of CIUsG further specifies the various legal forms that a CIUG may take.

          • CIU-A.1.3

            The definition of CIUsG includes closed-ended fundsG as well as open-ended fundsG , and includes funds formed under statute (as investment companies), as well as contract law and trust law (respectively, as common funds and as unit trusts).

          • CIU-A.1.4

            Module CIU distinguishes between CIUsG that are classed as retail CIUsG , which may be offered to all types of investors, and expert CIUsG , which may only be offered to expert investorsG (as defined in this Module). Retail CIUsG are subject to more restrictive investment rules, aimed at protecting the general retail investor.

          • CIU-A.1.5

            Module CIU also defines a category of exempt CIUG . CIUsG that fall under this category are mostly exempt from the requirements contained in this Module; however, they may only be offered to a very restricted investor base ('accredited investorsG ').

          • CIU-A.1.6

            Bahrain domiciled retail CIUsG and Bahrain domiciled expert CIUsG must be authorised by the CBB prior to being offered to investors (whether resident in the Kingdom of Bahrain or outside). Bahrain domiciled exempt CIUsG need only register with the CBB before being offered to investors.

          • CIU-A.1.7

            Overseas domiciled retail CIUsG and overseas domiciled expert CIUsG also require CBB authorisation before being offered to investors in the Kingdom of Bahrain. However, those CIUsG domiciled in a recognised jurisdiction are only required to register with the CBB, rather than seek authorisation, on the basis that they have already been adequately vetted in their home jurisdiction. Overseas domiciled exempt CIUsG are only required to register with the CBB, regardless of their home jurisdiction.

          • CIU-A.1.8

            Module CIU replaces previous circulars and other regulatory instruments relating to CIUsG , issued over a number of years (see Rule CIU-A.2.3). It updates these previous requirements, which were effectively geared towards the retail investor, and provides for a greater range of CIUsG to be offered, through its provisions regarding expert CIUsG and exempt CIUsG .

        • Legal Basis

          • CIU-A.1.9

            Module CIU constitutes the CBB's Directive relating to CIUsG , 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'). Module CIU is applicable to all CBB licenseesG that are relevant personsG , as defined in Section CIU-B.2.

          • CIU-A.1.10

            The contents of this Module are also included in Regulations, to be issued by the CBB, by virtue of which they are applicable to all those who are relevant personsG but are not CBB licenseesG .

          • CIU-A.1.11

            Thus, persons that are not CBB licenseesG (because they are not undertaking regulated services within Bahrain), yet are still relevant personsG (because their activities relate to a CIUG falling within the scope of this Module), are also subject to the requirements of this Module, with respect to the CIU(s)G concerned.

          • CIU-A.1.12

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

      • CIU-A.2 Module History

        • Evolution of Module

          • CIU-A.2.1

            This Module was first issued with an April 2007 date, as part of the initial release of the contents of Volume 6 (Capital Markets); it was given an effective date of 1 June 2007, with a one-year transition for existing CIUsG (see Chapter CIU-7). 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.

          • CIU-A.2.2

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

            Module Ref. Change Date Description of Changes
            CIU-B.5 July 2007 Amendment of definition of expert and accredited investors who are individuals, to focus on financial assets held (the same as for companies etc).
            CIU-2.1 July 2007 Amendment of Paragraph CIU-2.1.4 to reflect above.
            CIU-3.1 July 2007 Addition to Rule CIU-3.1.1 to restrict promotion by Bahrain domiciled exempt CIUsG . Amendment of Paragraph CIU-3.1.4 to reflect changes to CIU-B.5 above.
            CIU-4.2 July 2007 Corrections in Paragraphs CIU-4.2.7 and CIU-4.2.10; amendment of Paragraph CIU-4.2.5 to reflect changes to CIU-B.5 above.
            CIU-5.2 July 2007 Amendment of Sub-paragraph CIU-5.1.2(b).
            CIU-7.1 July 2007 Expansion of Rule CIU-7.1.3 regarding first reporting date.

        • Superseded requirements

          • CIU-A.2.3

            This Module supersedes the following circulars or other regulatory instruments:

            Circular/ other references Provision Subject
            Regulation with respect to the General supervision, Operation and Marketing of Collective Investment CIUs. BMA Circular No. OG/356/92 dated 18th November, 1992. Collective Investment Undertakings.
            Principles of Supervision, Operations and Marketing with respect to Collective Investment CIUsG . BMA Circular No. OG/318/95 dated 4th November, 1995. Collective Investment Undertakings.
            Collective investment CIUsG (Amendment to item I.B of the regulation). BMA Circular No. OG/121/99 dated 19th April, 1999. Collective Investment Undertakings.
            Guidelines on Advertising and Public Announcements for Collective Investment CIUsG . BMA Circular No. BC/23/99 dated 27th October, 1999. Collective Investment Undertakings.
            Quarterly information Returns for Collective Investment CIUs. BMA Circular No. BC/13/2001 dated 9th December, 2001. Collective Investment Undertakings.
            Information to be Contained in the CIU Particulars Document. BMA Circular No. BC/05/2002 dated 1st June, 2002. Collective Investment Undertakings.

    • CIU-B Scope of Application

      • CIU-B.1 Application

        • CIU-B.1.1

          Module CIU applies to all relevant personsG , with respect to collective investment undertakingsG ('CIUs') that are:

          (i) Domiciled in the Kingdom of Bahrain (irrespective of the jurisdiction in which they are offered); and
          (ii) Domiciled in an overseas jurisdiction, and offered to investors resident in Bahrain.

        • CIU-B.1.2

          The terms relevant personsG , collective investment undertakingsG , Bahrain domiciled CIUsG and overseas domiciled CIUsG are as defined in Sections CIU-B.2, CIU-B.3 and CIU-B.4 respectively.

        • CIU-B.1.3

          No person may establish a Bahrain domiciled CIUG , unless the CIUG is either authorised or registered, as required under this Module.

        • CIU-B.1.4

          No person may offer CIUG holdingsG to investors resident in the Kingdom of Bahrain, unless the CIUG concerned is either authorised or registered, as required under this Module.

        • CIU-B.1.5

          For the purposes of this Module, 'offering' CIUG holdingsG means, by way of business, soliciting investors to purchase holdingsG , by whatever means. (These may include, but are not limited to, advertising in print or other media, or use of the telephone, face-to-face contact, e-mail or internet.) Such activity would be viewed as offering holdingsG to investors resident in Bahrain, where it could reasonably be viewed as addressed to Bahrain residents (e.g. advertising in Bahrain print media, or addressing communications to Bahrain residents).

        • CIU-B.1.6

          For the purposes of this Module, holdingsG mean the unit of measurement of the beneficial interest of participantsG in a CIUG , by whatever name it is called (including 'units' and, in the case of investment trusts or companies, shares). Each holdingG (which may be in fractions of a holdingG ) represents a right to the assets of the CIUG .

      • CIU-B.2 Relevant Persons

        • CIU-B.2.1

          A relevant personG , for the purpose of Module CIU, is any person:

          (a) Acting as the operatorG , managerG , administratorG , or custodianG of a CIUG subject to this Module; or
          (b) Offering CIUG holdingsG to investors resident within the Kingdom of Bahrain.

        • CIU-B.2.2

          CIUsG subject to this Module are those defined in Rule CIU-B.1.1, namely, CIUsG that are:

          (i) Domiciled in the Kingdom of Bahrain (irrespective of the jurisdiction in which they are offered); and
          (ii) Domiciled in an overseas jurisdiction, and offered to investors resident in Bahrain.

        • CIU-B.2.3

          Note that relevant personsG undertaking in Bahrain the activity of an operatorG , managerG , administratorG or custodianG , are also required to hold an appropriate CBB license, in addition to complying with the requirements contained in this Module. These licensing requirements can be found in CBB Rulebook Volumes 1, 2 and 4 (which deal, respectively, with conventional bank licenseesG , Islamic bank licenseesG , and investment firm licenseesG ).

        • CIU-B.2.4

          Conversely, relevant personsG undertaking outside Bahrain the activity of an operatorG , managerG , administratorG or custodianG are not required to hold a CBB license, in addition to complying with the requirements contained in this Module. However, to be authorised, Bahrain domiciled retail CIUsG and Bahrain domiciled expert CIUsG must satisfy the administration and custody requirements prescribed in this Module (see Section CIU-1.4).

        • CIU-B.2.5

          The activity of offering CIUG holdingsG to investors resident in Bahrain is a regulated activity (that of dealing in financial instrumentsG ). As such, it requires the appropriate CBB license to be held (see CBB Rulebook Volumes 1, 2 and 4). It is therefore not possible to offer CIUG holdingsG to investors resident in Bahrain, on a 'cross-border' basis from outside Bahrain. Where an overseas operatorG of a CIUG wishes to offer an overseas domiciled CIUG to investors resident in Bahrain, they must themselves hold the appropriate CBB license or appoint an appropriate CBB licenseeG as their distributor — see also Rule CIU-4.1.5.

      • CIU-B.3 Collective Investment Undertakings ('CIUs')

        • CIU-B.3.1

          Collective investment undertakingsG ('CIUs') are undertakings:

          (i) The sole object of which is the collective investment of capital raised from the public in financial instrumentsG or other assets and which operates on the basis of risk-spreading; and
          (ii) The holdingsG of which are re-purchased or redeemed, directly or indirectly, out of those undertakings' assets.

        • CIU-B.3.2

          In the case of CIUsG whose holdingsG are listed and traded on a stock exchange (such as a closed-ended fundG ), actions taken by the CIUG to align the stock exchange value of its holdingsG and its net asset value is taken as equivalent to the repurchase or redemption specified in Rule CIU-B.3.1(ii). The definition thus recognises both open-ended fundsG and closed-ended fundsG : unit trusts, investment trusts, mutual funds, SICAV and collective investment schemes are all examples of CIUsG . As further specified in Section CIU-B.4, CIUsG may be constituted under contract law (as common funds managed by management companies); trust law (as unit trusts); or under statute (as investment companies).

        • CIU-B.3.3

          Closed-ended fundsG are CIUsG with a limited number of holdingsG . Where the fund vehicle is a company, holdingsG can take the form of shares. New holdingsG are rarely issued after the fund is launched and are not normally redeemable until the fund liquidates. Typically an investor can acquire or dispose of holdingsG in a closed-ended fundG by buying or selling them on a secondary market, from a market intermediary or other investor, rather than by dealing with the CIUG itself.

        • CIU-B.3.4

          The following arrangements do not fall within the definition given in Rule CIU-B.3.1 above:

          (a) A contract of insurance, insurance linked investment products or investments managed as part of a takaful contract of insurance;
          (b) Unrestricted or restricted investment accounts offered by Islamic bank licenseesG ;
          (c) Unilateral arrangements to hold or manage assets on a discretionary basis;
          (d) Arrangements entirely between bodies corporate who are members of the same group, or entirely between family members;
          (e) Pension, annuity and other employee benefit products, organised and managed for the benefit of employees or for another corporate body, which are governed by separate laws of the Kingdom of Bahrain (e.g. GOSI);
          (f) Structured products;
          (g) Cash savings schemes; and
          (h) Special Purpose Vehicles used to issue debt securities.

        • CIU-B.3.5

          Where a person is in any doubt as to whether a particular product or structure falls within the definition of a CIUG given in Rule CIU-B.3.1 above, they must refer the matter to the CBB.

        • CIU-B.3.6

          Where a CIUG is structured as a series of separate offerings, such as an umbrella fund with a series of sub-funds, whereby each is a separate offering and financially independent of others established within the same legal vehicle, each sub-fund shall be treated as a separate CIUG .

        • CIU-B.3.7

          The consequence of Rule CIU-B.3.5 above is that each sub-fund, or separate offering, requires a separate authorisation or registration (as the case may be), and the operatorG of the CIUG in question — together with the directors or trustees of the CIUG (as appropriate) — are required to ensure that each sub-fund or separate offering complies with the applicable rules prescribed in this Module.

      • CIU-B.4 Bahrain and Overseas Domiciled CIUs

        • CIU-B.4.1

          Bahrain domiciled CIUsG are undertakings where the legal form of the CIUG is established under the laws of the Kingdom of Bahrain.

        • CIU-B.4.2

          Bahrain domiciled CIUsG may be constituted either as:

          (a) Common funds, established under the law of contract;
          (b) Trusts, established under trust law; or
          (c) Investment companies, established under company law.

        • CIU-B.4.3

          Bahrain domiciled retail CIUsG and Bahrain domiciled expert CIUsG must be authorised by the CBB prior to being established. Bahrain domiciled exempt CIUsG are required only to register with the CBB (see Section CIU-3.2). Definitions of retail CIUsG , expert CIUsG and exempt CIUsG are provided in Section CIU-B.5.

        • CIU-B.4.4

          Overseas domiciled CIUsG are undertakings that fall outside the definition provided in Rule CIU-B.4.1.

        • CIU-B.4.5

          Overseas domiciled CIUsG are only impacted by the requirements contained in this Module, if they are offered to investors resident in the Kingdom of Bahrain (see Section CIU-B.1).

        • CIU-B.4.6

          Overseas domiciled CIUsG must be authorised by the CBB prior to being offered to investors resident in the Kingdom of Bahrain, unless they are domiciled in a recognised jurisdictionG , in which case they are only require to register with the CBB (see Section CIU-B.6). Overseas domiciled exempt CIUsG , regardless of the jurisdiction in which they are domiciled, are required only to register with the CBB (see Section CIU-B.6).

      • CIU-B.5 Categories of CIUs

        • Retail CIUs

          • CIU-B.5.1

            Retail CIUsG are CIUsG that may be offered to all types of investors.

          • CIU-B.5.2

            The requirements in this Module are framed such that retail CIUsG are subject to relatively detailed requirements, including restrictions on the types of financial instrumentsG or other assets that may be held in the CIUG , in order to limit risks to the general investor.

        • Expert CIUs

          • CIU-B.5.3

            Expert CIUsG are CIUsG that may be offered only to expert investorsG , and impose a minimum initial investment of USD 10,000 (or equivalent in foreign currency).

          • CIU-B.5.4

            Expert CIUsG are subject to less restrictive requirements than retail CIUsG : specifically, expert CIUsG have greater investment flexibility, notably in terms of asset classes and risk concentration limits. They therefore potentially offer higher risks and are therefore only suitable for expert investorsG , who are better able to assess those risks than less sophisticated investors.

          • CIU-B.5.5

            The minimum initial investment requirement specified in Rule CIU-B.5.3 means that the first payment made by an investor into the CIUG must be at least USD 10,000 (or its equivalent in foreign currency). Subsequent investments may be for smaller amounts.

          • CIU-B.5.6

            Expert investorsG are:

            (a) Individuals holding financial assets (either singly or jointly with their spouse) of USD 100,000 or more;
            (b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 100,000; or
            (c) Governments, supranational organisations, central banks or other national monetary authorities, local authorities and state organisations.
            Amended: July 2007

        • Exempt CIUs

          • CIU-B.5.7

            Exempt CIUsG are largely unregulated CIUsG that may be offered only to accredited investorsG , and impose a minimum initial investment of USD 100,000 (or equivalent in foreign currency).

          • CIU-B.5.8

            Exempt CIUsG are only regulated to the extent that they must register with the CBB prior to being offered to investors; may only be offered to accredited investorsG ; and are subject only to high-level disclosure and reporting requirements. They are not subject to any restrictions on their investment policies, as a result of which they may exhibit high risk characteristics, such as high levels of leverage and the taking of large speculative positions. Because of this, exempt CIUsG may only be offered to a highly restricted investor base (i.e. those defined as accredited investorsG ).

          • CIU-B.5.9

            The minimum initial investment requirement specificed in Rule CIU-B.5.7 means that the first payment made by an investor into the CIUG must be at least USD 100,000 (or its equivalent in foreign currency). Subsequent investments may be for smaller amounts.

          • CIU-B.5.10

            Accredited investorsG are:

            (a) Individuals holding financial assets (either singly or jointly with their spouse) of USD 1,000,000 or more;
            (b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 1,000,000; or
            (c) Governments, supranational organisations, central banks or other national monetary authorities, and state organisations whose main activity is to invest in financial instrumentsG (such as state pension funds).
            Amended: July 2007

          • CIU-B.5.11

            Note that the definition of accredited investorsG , compared to that of expert investorsG , not only imposes higher liquid asset thresholds, but also prevents local authorities, as well as state organisations whose main activity is not related to investing in financial instrumentsG , from investing in exempt fundsG . Investors that satisfy the definition of accredited investorG also satisfy the definition of expert investorG .

        • Overseas Domiciled CIUs

          • CIU-B.5.12

            Overseas domiciled CIUsG are classified as retail CIUsG , expert CIUsG , or exempt CIUsG , depending on whether they fall under the same or equivalent definitions as those provided in Rules CIU-B.5.1, CIU-B.5.3 and CIU-B.5.7.

          • CIU-B.5.13

            If a relevant personG is in doubt as to which of the definitions provided in Rules CIU-B.5.1, CIU-B.5.3 and CIU-B.5.7 an overseas domiciled CIUG satisfies, that person must consult with the CBB to confirm the classification of the CIU in question.

      • CIU-B.6 Recognised Jurisdictions

        • CIU-B.6.1

          Overseas domiciled retail CIUsG and overseas domiciled expert CIUsG included in the CBB's list of recognized jurisdictions (as defined in Rule CIU-B.6.3) are required only to register with the CBB, rather than be authorised, prior to their being offered to investors resident in the Kingdom of Bahrain.

        • CIU-B.6.2

          Overseas domiciled CIUsG that are not included in the CBB's list of recognised jurisdictionsG are required to seek authorisation from the CBB prior to their being offered within the Kingdom of Bahrain. Exempt CIUsG , regardless of their jurisdiction of domicile, are required only to be registered with CBB, prior to their being offered within the Kingdom of Bahrain.

        • CIU-B.6.3

          Recognised jurisdictionsG for the purposes of this Module are:

          Jurisdiction Fund Type
          Australia A retail fund established and registered under the Managed Investment CIU provisions of the Corporations Act (Chapter 5 C) 2001 where the Australian Securities and Investments Commission ('ASIC') has approved the constitution of the CIU.
          Bermuda An "investment fund" authorized by the Bermuda Monetary Authority as defined under section 3 of the Investment Funds Act 2006
          Canada A mutual fund which has been authorised by any of the 13 respective Canadian provincial regulatory authorities in accordance with National Instrument 81-101 and National Instrument 81-102 issued by the Canadian Securities Administrators (CSA).
          Cayman Islands A mutual fund that is licensed by the Cayman Islands Monetary Authority under the Mutual Funds Law (2003 Revision) and the Mutual Funds (Amendment) Regulations 2006.
          European Economic Area (see list below) A UCITS compliant fund or CIU, authorised by the relevant EEA State's regulator as a UCITS fund or CIU.
          Other GCC countries (see list below) Any fund incorporated in another GCC member state, authorised and supervised by the central bank or other appropriate regulatory authority, to a standard equivalent to those in this Module.
          Guernsey Any authorised CIU (within the meaning of the Collective Investment CIUs (Class A) Rules 2002, as amended by the Collective Investment CIUs (Class A) Rules 2000 (Amendment) Rules 2003), managed in and authorised under the law of Guernsey.
          Ireland The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above): non-UCIT funds licensed by the Financial Regulator under the Investment Funds, Companies and Miscellaneous Provisions Act 2005.
          Isle of Man Any CIU which is an authorised CIU within the meaning of the Financial Supervision Act 1988 (an Act of Tynwald) (as last amended by the Corporate Service Providers Act 2000), where the CIU is managed in and authorised under the law of the Isle of Man.
          Jersey Any CIU which is a recognised fund within the meaning of the Collective Investment Funds (Recognised Funds) (Rules) (Jersey) Order 2003, managed in and authorised under the law of Jersey.
          Luxembourg The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above): (a) Undertaking for Collective Investments (UCIs) as registered under Part II of the Law of 1988 Relating to Undertakings for Collective Investment; and (b) Funds registered under the Law Of 13th February, 2007 Relating To Specialised Investment Funds.
          New Zealand A unit trust authorised under the Unit Trusts Act 1960 and in accordance with the interpretation of section 2 of that act.
          Singapore A collective investment CIU authorised by the Monetary Authority of Singapore under section 286 of the Securities and Futures Act, and whose units may be offered to the general public.
          South Africa A collective investment CIU which is registered with the Financial Services Board under the Collective Investment CIUs Control Act (Act 45 of 2002) of 2002 ("CISCA").
          Switzerland A securities fund which corresponds to a UCITs fund in accordance with the Swiss Investment Fund Act and where the manager is licensed by the Swiss Federal Banking Commission.
          United Kingdom The following CIUs, in addition to any UCITs compliant fund or CIU (see EEA Member States above):
          (a) Unit trust CIUs authorised under section 243 of the Financial Services and Markets Act 2000 (FSMA), authorised open ended investment companies incorporated by virtue of regulations made under section 262 of FSMA in respect of which an authorisation order is in force; and
          (b) Authorised Qualified Investor CIUs whether in the form of a unit trust or an investment company with variable capital.
          United States of America A collective investment CIU registered under the Investment Company Act of 1940, which has also registered the offering of its securities under the Securities Act of 1933 and where the registration statement has become effective in accordance with the Securities and Exchange Commission's Regulations and the Operator is registered with the SEC.
          EEA Member States are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom
          GCC Member States (besides Bahrain) are Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

    • CIU-1 Bahrain Domiciled Retail CIUs

      • CIU-1.1 Authorisation

        • Authorisation Requirement

          • CIU-1.1.1

            Bahrain domiciled retail CIUsG must be authorised by the CBB prior to being offered to investors.

          • CIU-1.1.2

            An application for authorisation may only be made by one of the following:

            (a) The operatorG of the CIUG ; or
            (b) The directors or trustees of the CIUG (as appropriate).

          • CIU-1.1.3

            An applicant may appoint a representative — such as the CIU'sG proposed administratorG /custodianG , or a law firm or professional consultancy — to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the authorisation process, when seeking clarification of any issues.

          • CIU-1.1.4

            An application for authorisation under Rule CIU-1.1.1 involving an overseas operatorG will only be considered if:

            (a) The overseas operatorG is duly authorised to operate similar CIUsG in its home jurisdiction and is supervised by an overseas financial services authority acceptable to the CBB; and
            (b) The overseas operatorG has identified an appropriate institution licensed by the CBB, with which it would enter into service agreements in order to satisfy the administration and custody requirements contained in Rule CIU-1.4.9.

        • Authorisation Process

          • CIU-1.1.5

            An application for authorisation under Rule CIU-1.1.1 must be made using a Form CIU(A) (Application for Authorisation of a CIU), submitted under a formal cover letter signed by two authorised signatories of the applicant, together with all supporting documentation requested.

          • CIU-1.1.6

            The application for authorisation must identify an individual, for approval by CBB as an approved personG , in their capacity as the person responsible for the CIUG . This person must be:

            (a) An officer of a CBB licenseeG ;
            (b) Resident in Bahrain; and
            (c) An individual capable of being contacted by the CBB by post, telephone, fax and/or e-mail.

          • CIU-1.1.7

            The CBB will acknowledge applications made under Rule CIU-1.1.5 within 7 calendar days of receipt and provide formal feedback on the application within 21 calendar days of receipt. This feedback will confirm whether the application is complete, or whether further information is required.

          • CIU-1.1.8

            Should the application be deemed complete, then a final decision on the application will be issued within 30 calendar days of its receipt by the CBB. Should further information be required, then the applicant has 90 calendar days from the date of the CBB's feedback in which to complete the application, failing which the application will be cancelled by the CBB and a new one will need to be submitted. If all outstanding information is submitted and the CBB confirms the application to be complete, then the CBB will take a final decision within 30 calendar days of the CBB's confirmation that the application is complete.

        • Granting or Refusal of Authorisation

          • CIU-1.1.9

            To be granted authorisation, an applicant must demonstrate compliance with the applicable requirements of this Module. Should an authorisation application be granted, the CBB will notify the applicant in writing of the fact. The authorisation may be subject to additional conditions being met.

          • CIU-1.1.10

            The CBB may refuse to grant authorisation if in its opinion:

            (a) The requirements of this Module are not met;
            (b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or
            (c) The CBB believes it necessary in order to safeguard the interests of potential investors.

          • CIU-1.1.11

            Where the CBB proposes to refuse an application for authorisation, it must give the applicant written notice to that effect. Applicants have 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.

        • Fees Payable to CBB

          • CIU-1.1.12

            Each application for authorisation made under Rule CIU-1.1.1 must be accompanied by a BD 100 processing fee. This fee is non-refundable.

          • CIU-1.1.13

            Each Bahrain domiciled retail CIUG authorised by CBB is subject to an annual fee of BD 2,000. In the case of umbrella funds, each sub-fund is also charged BD 2,000 a year.

          • CIU-1.1.14

            Where the fee specified in Rule CIU-1.1.13 is paid, it exempts those Bahrain domiciled retail CIUG wishing to list on the Bahrain Stock Exchange ('BSE') from having to pay the listing fee normally levied by the BSE.

        • Revocation of Authorisation

          • CIU-1.1.15

            The CBB may revoke authorisation of a Bahrain domiciled retail CIUG if the CIUG is not in operation within 6 months of the date of its authorisation.

          • CIU-1.1.16

            The CBB will normally only exempt a CIUG from the above 6 months rule if exceptional unforeseen circumstances have intervened and delaying the start of the CIU'sG operations would not prejudice the interests of potential investors (for instance, due to a sudden downturn in markets).

          • CIU-1.1.17

            The CBB may also revoke authorisation of a Bahrain domiciled retail CIUG if in its opinion:

            (a) Any of the applicable requirements contained in Module CIU are not met;
            (b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or
            (c) The CBB believes it necessary in order to safeguard the interests of potential investors or the CIU'sG participantsG .

          • CIU-1.1.18

            Where the CBB proposes to cancel a CIU'sG authorisation, it shall give the CIUG concerned a written notice of its intention to do so and the reasons for such action. The CIUG has 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.

        • CBB Powers

          • CIU-1.1.19

            Part 9 of the CBB Law provides the CBB with various investigative and administrative powers to help discharge its regulatory and supervisory functions. These include the right to appoint investigators (Article 121), to assist overseas authorities (Article 122), to demand information (Article 123), and to compel access to premises or information (Article 124).

          • CIU-1.1.20

            The CBB aims to achieve an open, constructive and cooperative relationship with those persons it regulates, but will resort to more formal enforcement powers where cooperation is not forthcoming.

      • CIU-1.2 The Instrument Constituting the CIU

        • CIU-1.2.1

          Every Bahrain domiciled retail CIUG must have an instrument constituting the CIUG , containing the information listed in Appendix A.

        • CIU-1.2.2

          The operatorG of a Bahrain domiciled retail CIUG together with the directors of the CIUG concerned (or trustees in the case of a trust arrangement) must ensure that the instrument constituting the CIUG :

          (a) Does not contain information that is untrue, misleading, or unfairly prejudicial to the interests of the CIU participantsG ;
          (b) Does not contain any provisions that conflict with either CBB requirements or other laws and regulations, that may apply to the CIU operatorG , managerG and other relevant personsG to the CIU; and
          (c) Is not unfairly prejudicial to the interests of the CIU participantsG , either generally or to a particular class of CIU participantG .

        • CIU-1.2.3

          The operatorG of a Bahrain domiciled retail CIUG together with the directors of the CIUG concerned (or trustees in the case of a trust arrangement) must maintain the instrument constituting the CIUG and make any necessary revisions in accordance with applicable legislation as and when required.

        • CIU-1.2.4

          Once authorised, prior approval must be obtained from the CBB for any subsequent material changes to the instrument. An updated copy of the instrument must be made available to the CBB within 30 calendar days of the revision being agreed.

        • CIU-1.2.5

          The operatorG of a Bahrain domiciled retail CIUG must make available for inspection, free of charge by any member of the public in an office in Bahrain, the following documents:

          (a) The instrument constituting the CIUG ;
          (b) The prospectusG (both simplified and full);
          (c) All annual and half yearly reports issued to date by the CIUG ; and
          (d) Copies of all CBB approvals, where required.

      • CIU-1.3 Holdings

        • Rights

          • CIU-1.3.1

            If a Bahrain domiciled retail CIUG has different classes of holdingsG , the instrument constituting the CIUG must clearly set out the different features of each class of holdingG , including their respective rights; the allocation of expenses and fees; and how the proportion of the value of the assets of the CIUG and the proportion of income available for allocation attributable to each such class is to be calculated.

          • CIU-1.3.2

            For the purposes of this Module, the interest of the CIU participantsG in a Bahrain domiciled retail CIUG (by whatever name these interests are called), are deemed to consist of holdingsG (including fractions of a holding), each holdingG representing one undivided share of the entitlement in the CIU'sG assets.

          • CIU-1.3.3

            The instrument constituting the CIUG may provide for different classes of holdingsG to be issued in an authorised CIUG and, in the case of umbrella CIUsG , may provide that different classes of holdingsG may be issued for each sub-CIUG .

        • Issue, Purchase and Redemption

          • CIU-1.3.4

            HoldingsG may not be created or issued unless the equivalent of the net issue price is paid into the assets of the Bahrain domiciled retail CIUG within the usual time limits. This shall not preclude the distribution of bonus holdingsG .

          • CIU-1.3.5

            CIU participantsG shall, in accordance with the CIUG documents, either be:

            (a) Issued with registered certificates evidencing title to holdingsG , in a form and substance satisfactory to the CBB; or
            (b) Provided with written confirmation of entry in a register for such holdingsG which shall be kept current and up-to-date at all times and shall contain full details of the names and addresses of the CIU participantsG , the number of holdingsG held by them, and the date of acquisition of such holdingsG .

          • CIU-1.3.6

            HoldingsG in a CIUG (except for those in closed-end fundsG ), must be redeemed, repurchased, reimbursed or repaid (as may be appropriate) at the request of the CIU participantsG and in accordance with the Bahrain domiciled retail CIU'sG documents.

          • CIU-1.3.7

            HoldingsG may only be created, issued or sold, and redeemed, repurchased, reimbursed or repaid (as may be appropriate), in accordance with the prospectusG constituting the Bahrain domiciled retail CIUG and at a price arrived at by dividing the net asset value of the CIUG by the number of holdingsG outstanding, after taking into account any charges as agreed in advance with the CBB.

          • CIU-1.3.8

            The prospectusG constituting the Bahrain domiciled retail CIUG must clearly state the frequency and basis for calculation of the issue price, repurchase price and other appropriate prices of the holdingsG in the CIUG .

      • CIU-1.4 Governance of the CIU

        • Governing Body Requirements

          • CIU-1.4.1

            The governing body of a Bahrain domiciled retail CIUG (i.e. its directors or trustees, as appropriate) must comprise of persons with appropriate experience.

          • CIU-1.4.2

            Bahrain domiciled retail CIUsG are in addition required to comply with any legal requirements imposed by virtue of the legal form used to create the CIUG .

          • CIU-1.4.3

            The governing body of a Bahrain domiciled retail CIUG (i.e. its directors or trustees, as appropriate) must meet at least once every financial year (or more frequently if required by law), to review the performance and operations of the CIUG .

          • CIU-1.4.4

            If the CIU participantsG have a right to call for a general meeting of CIU participantsG , the instrument constituting the CIUG must describe how the meeting may be convened.

          • CIU-1.4.5

            If a general meeting of CIU participantsG is called, the Bahrain domiciled retail CIUG must ensure that:

            (a) Each CIU participantG is given at least 14 calendar days written notice of the meeting;
            (b) The notice specifies the place, day and time of the meeting; and
            (c) The terms and resolutions to be proposed, as well as a copy of the notice, are sent to the CIU'sG administratorG /custodianG and to the CBB.

        • Governance Framework

          • CIU-1.4.6

            Bahrain domiciled retail CIUsG must maintain an adequate framework for the governance and operation of the CIUG . This framework must seek to ensure that the CIUG is governed effectively and in the interests of the CIU's participantsG .

          • CIU-1.4.7

            The main aim of the framework should be to ensure that when faced with a conflict, the CIUG respects all applicable rules and its contractual obligations from an objective perspective, withouth favouring CIUG insiders (including relevant personsG ) at the expense of the interests of the CIU's participantsG .

          • CIU-1.4.8

            The CIU'sG directors (or trustees in the case of a trust) may not delegate their oversight responsibilities, although execution of operational functions may be outsourced to other entities.

        • Relevant Persons

          • CIU-1.4.9

            Bahrain domiciled retail CIUsG must delegate the administration and safe-keeping of their assets to an administratorG /custodianG (with the two functions either undertaken by a single institution or two separate institutions). These functions must be undertaken by one or more CBB licenseesG acceptable to the CBB for the role. The administratorG /custodianG must:

            (a) Be independent of the CIU'sG operatorG ;
            (b) Act solely in the interests of the CIU's participantsG ;
            (c) Have sufficient financial and other resources in order to undertake properly its function as administratorG /custodianG of the CIUG ; and
            (d) Accept liability to the CIUG and its participantsG , for any loss suffered by them as a result of its unjustifiable failure to perform its obligations adequately.

          • CIU-1.4.10

            In applying Rule CIU-1.4.9 above, the CBB will allow 'hub and spoke' arrangements, whereby actual operations of the administratorG /custodianG are undertaken outside of Bahrain, providing a suitably licensed office is maintained in Bahrain, through which the CBB can access the CIU'sG records, and providing the overseas operations are undertaken in reputable jurisdictions by regulated entities that belong to the same group as the Bahrain administratorG /custodianG . Also, Rule CIU-1.4.9 does not prevent the custodianG from appointing sub-custodians, providing the custodianG retains ultimate responsibility for the CIU'sG assets, and providing suitable outsourcing arrangements have been put in place (equivalent to the standards applied by the CBB — see for instance Chapter OM-2 in Volume 1 of the CBB Rulebook.

          • CIU-1.4.11

            The operatorG and managerG (if different) of a Bahrain domiciled retail CIUG must be acceptable to the CBB.

          • CIU-1.4.12

            In applying Rule CIU-1.4.11 above, the CBB will take into account an institution's financial soundness, relevant experience with respect to CIUsG , and regulatory track record. See also Chapter CIU-5.

      • CIU-1.5 Prospectus Requirements

        • Prospectus

          • CIU-1.5.1

            Every Bahrain domiciled retail CIUG authorised under Section CIU-1.1 must publish a prospectusG containing (at a minimum) the information set out in Appendix B.

          • CIU-1.5.2

            The CIU'sG directors (or trustees in the case of a trust) must declare that the prospectusG :

            a) Does not contain information that is untrue, misleading, or is unfairly prejudicial to the interests of the CIU participantsG generally or to the participantsG of other classes of instruments issued by the CIUG ; and
            b) Does not contain any provision that conflicts with any rule in this Rulebook, or other legal or regulatory requirements that apply to the CIUG or other relevant personsG connected to the CIUG .

          • CIU-1.5.3

            The instrument constituting the Bahrain domiciled retail CIUG (i.e. the CIU'sG rules or instruments of incorporation — see also Section CIU-1.2) must form an integral part of the prospectusG and must be annexed to it. Alternatively, the prospectusG must specify where the instrument constituting the Bahrain domiciled retail CIUG may be obtained.

          • CIU-1.5.4

            The CIUG must keep the prospectusG up-to-date, such that the information it contains is materially current.

          • CIU-1.5.5

            Once authorised, prior approval must be obtained from the CBB for any subsequent material changes to the prospectusG . An updated copy of the prospectusG must be made available to CBB within 30 calendar days of the revision being agreed, and CIU participantsG must be notified of the changes at least 14 calendar days before they take effect.

          • CIU-1.5.6

            For the purposes of above, material revisions include changes in the CIU'sG managerG , administratorG or custodianG ; a change to the investment strategy; or a change in fees.

          • CIU-1.5.7

            The CIUG must provide a copy of its most recent prospectusG free of charge to a potential investor.

          • CIU-1.5.8

            The CIUG must upon request provide explanations and such other information supplementary to the prospectusG as may reasonably be required by a potential investor.

        • Simplified Prospectus

          • CIU-1.5.9

            Where a simplified prospectusG is published by a Bahrain domiciled retail CIUG , it must include (as a minimum) the information specified in Appendix C. It must also include a statement specifying that more detailed information on the CIUG is contained in the prospectusG , a copy of which must be made available free of charge to potential investors upon request.

          • CIU-1.5.10

            A simplified prospectusG must contain a summary of the key features of the CIUG , including its investment policy and fee structure. It must not be misleading.

          • CIU-1.5.11

            A simplified prospectusG must be kept up to date, such that the information it contains is materially current and accurately represents the prospectusG .

          • CIU-1.5.12

            There is no requirement for a simplified prospectusG to be approved by the CBB, nor for any subsequent material changes to be approved or notified. However, the simplified prospectusG must accurately reflect the prospectusG , which is subject to approval and notification requirements (see Rule CIU-1.5.4 above).

      • CIU-1.6 Investments

        • Risk Management

          • CIU-1.6.1

            Bahrain domiciled retail CIUsG must operate on the principle of risk spreading and must maintain and implement investment and risk management policies aimed at the prudent control of risks.

          • CIU-1.6.2

            The prospectusG must summarise the policies and limits which the Bahrain domiciled retail CIUG will apply, including (but not limited to):

            (a) The type of assets which the CIUG may invest in;
            (b) The aggregate limits for each asset class;
            (c) Permitted individual exposures under each asset class; and
            (d) A description of remedial measures to be taken in the event of limit exceptions.

          • CIU-1.6.3

            If the investment and risk management policies specified in Rule CIU-1.6.2 are breached, the Bahrain domiciled retail CIUG must take all necessary steps to remedy the situation immediately, taking into account the interests of the CIU's participantsG .

        • Investment Limits

          • CIU-1.6.4

            Subject to Rule CIU-1.6.6, Bahrain domiciled retail CIUsG may only invest in the assets specified and in accordance with the limits prescribed in Appendix D.

          • CIU-1.6.5

            In the case of an umbrella fund (as defined in Rule CIU-B.3.5), the limits referred to in Rule CIU-1.6.4 are applicable to each sub-fund.

          • CIU-1.6.6

            The limits prescribed in Appendix D do not apply until the expiry of a period of six months after the date of initial offering of the CIUG .

          • CIU-1.6.7

            Where the limits specified in Appendix D are breached, the Bahrain domiciled retail CIUG must report the fact as soon as it becomes aware of the situation to the CBB.

          • CIU-1.6.8

            The CBB may authorise a CIUG to widen its investment policy to allow investments in financial assets other than those specified in Appendix D, if it is satisfied that such assets are sufficiently liquid and the interests of the CIU participantsG are not prejudiced. The CBB may similarly also authorise limits beyond those specified in Appendix D, if it is satisfied that such relief is in the interests of the CIU participantsG . Where such approvals are given, the fact must be notified to CIU participantsG as an amendment to the prospectusG (and simplified prospectusG where applicable).

          • CIU-1.6.9

            If the name or particulars of a Bahrain domiciled retail CIUG indicates a specific objective, asset class, geographic region or market, the CIUG must invest at least 60% of its assets in investments that reflect the specific objective, asset class, region or market. The remaining balance of the CIU'sG assets may only be held in cash or cash equivalents.

        • Derivative Transactions

          • CIU-1.6.10

            Subject to the conditions below, a Bahrain domiciled retail CIUG may enter into permitted financial derivative transactions provided that:

            (a) The underlying positions continue to satisfy Rule CIU-1.6.4 (and the limits specified in Appendix D);
            (b) The transactions are consistent with the stated investment objectives;
            (c) The counterparties are licensed financial institutions or recognised exchanges or clearing houses;
            (d) The instrument constituting the CIUG and its prospectusG clearly specify the use and rationale of such transactions (i.e. for hedging purposes or for achieving investment goals), as well as a clear description of the associated risks, including that of volatility in net asset values;
            (e) The derivative positions and balances are capable of independent and reliable daily valuations and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the initiative of the CIUG ;
            (f) The transactions are subject to sound and documented risk management policies and practices; and
            (g) The arrangement is consistent with good market practice.

        • Significant Influence

          • CIU-1.6.11

            Bahrain domiciled retail CIUsG may not acquire securities issued by a relevant personG , without prior written CBB approval.

          • CIU-1.6.12

            Exemption from Rule CIU-1.6.11 will normally only be given by CBB in cases where a Bahrain domiciled retail CIUG is pursuing a market index strategy, such that it is obliged to invest in a relevant person'sG securities in order to replicate a market index.

        • Other Restrictions

          • CIU-1.6.13

            Bahrain domiciled retail CIUsG may not:

            (a) Assume, guarantee, endorse or otherwise become directly or contingently liable for the obligations or indebtedness of any person, except in accordance with its prospectusG or instrument constituting the CIUG ;
            (b) Acquire any asset which involves the assumption of any liability which is unlimited;
            (c) Invest in any security (of any class) in a company or other undertaking, if any director or officer of the CIUG (or of any relevant personG and its affiliates) individually owns more than ½ % of the total nominal amount of all the issued securities of that class, or collectively the directors or officers of the CIUG (or of any relevant personG and its affiliates) own more than 5% of those securities. This prohibition shall also apply where the ownership of the directors or officers specified above is in the parent, subsidiary or other associated undertaking of the company in which the CIUG is to make the investment; and
            (d) Invest in other CIUsG of the same operatorG .

      • CIU-1.7 Borrowing, Lending and Short Selling

        • Borrowing

          • CIU-1.7.1

            A Bahrain domiciled retail CIUG may only borrow subject to the following conditions:

            (a) The borrowing is temporary and not persistent;
            (b) The borrowing is to be repayable out of the assets of the CIUG ;
            (c) The assets of the CIUG are not hypothecated or mortgaged or otherwise encumbered, except for the purposes of stock lending;
            (d) The borrowing does not at any time exceed 20% of the CIU'sG assets; and
            (e) The circumstances and applicable conditions for such borrowings are disclosed in its prospectusG .

          • CIU-1.7.2

            The CBB expects any borrowing to be exceptional and to assist with liquidity management, rather than to leverage returns. With regards to Rule CIU-1.7.1(a), the CBB will take into account both the duration of any period of borrowing and the number of occasions on which resort is had to borrowing in any given period. Thus, occasional, short-term borrowings might be viewed as permissible, whilst longer-term frequent borrowings, such that the CIUG was commonly or permanently indebted, would generally not. In the case of investment companies, longer-term borrowings may be allowed where required to make possible the acquisition of immovable assets essential to the direct pursuit of its business.

        • Lending

          • CIU-1.7.3

            A Bahrain domiciled retail CIUG may not lend its assets, except as otherwise provided for in Rule CIU-1.7.5 (in relation to stock lending) or for the purposes of meeting margin requirements where the CIUG is using financial derivatives.

          • CIU-1.7.4

            For the purpose of Rule CIU-1.7.3, the placing of money on short-term deposit (i.e. for a term of less than one year) or in a current account is not considered lending.

          • CIU-1.7.5

            A Bahrain domiciled retail CIUG may only enter into stock lending arrangements (including repurchase arrangements) in respect of any securities held by it, provided that:

            (a) The counterparty is a licensed financial institution;
            (b) The arrangement is consistent with good market practice;
            (c) Acceptable collateral with a value equal to the securities lent is obtained to secure the obligation;
            (d) The aggregate value of stocks lent does not at any time exceed 20% of the net asset value of the CIU'sG assets; and
            (e) The circumstances and applicable conditions for such borrowings are disclosed in its prospectusG .

        • Short Selling

          • CIU-1.7.6

            A Bahrain domiciled retail CIUG may not undertake uncovered sales of its assets ('short selling').

      • CIU-1.8 Fees and Dividends

        • Fees

          • CIU-1.8.1

            All costs and charges payable from the assets of a Bahrain domiciled retail CIUG must be clearly stated in its prospectusG . This must detail the estimated or actual amount of costs and charges payable; their nature and the basis for their calculation; together with maximum amounts payable expressed as percentages of the CIU'sG assets, on a per annum basis. The level of fees for investment management or advisory functions including administration, custody, transfer agency and registrar fees must also be disclosed.

          • CIU-1.8.2

            Where a performance fee is charged by way of deduction from the assets of a Bahrain domiciled retail CIUG , the following must be stated:

            (a) The frequency with which the performance fee is charged to the CIUG ; and
            (b) The basis upon which the performance fee is calculated.

          • CIU-1.8.3

            If a performance fee is levied, the fee may only be payable:

            (a) No more frequently than annually; and
            (b) If the net asset value per holdingG exceeds the net asset value per holdingG on which the performance fee was last calculated and paid.

          • CIU-1.8.4

            Costs and charges which have not been disclosed in a Bahrain domiciled retail CIU'sG prospectusG may not be paid from the CIU'sG assets.

        • Dividends

          • CIU-1.8.5

            All dividends on holdingsG must be approved in writing by the CBB prior to being announced or distributed to participantsG of a Bahrain domiciled retail CIUG .

      • CIU-1.9 Valuation and Record-keeping

        • Valuation

          • CIU-1.9.1

            The administratorG appointed by a Bahrain domiciled retail CIUG (under Rule CIU-1.4.9 above) must ensure an independent, fair and regular valuation of all the CIU'sG assets, by appropriately qualified persons.

          • CIU-1.9.2

            The valuation principles to be applied must be laid down in the CIU'sG rules or instruments of incorporation (as appropriate), and details of these provided in the CIU'sG prospectusG .

          • CIU-1.9.3

            The detailed methods and frequency of the valuation of assets must be documented in a valuation policy drawn up by the administratorG and agreed with the CBB.

          • CIU-1.9.4

            The CBB would expect the valuation policy to reflect 'good practice' industry standards. Amongst other things, the CBB would expect wherever possible that valuations be based on multiple and independent price sources. Where unavoidable, valuations based on trader, broker or pricing model input should be sufficiently tested and controlled, and declared, such that conflicts of interest are minimised. Procedures should be developed to identify stale prices or illiquid assets. Valuations should normally be undertaken at least weekly, in the case of exchange traded financial instrumentsG , and at least monthly in all other cases.

        • Record Keeping

          • CIU-1.9.5

            Bahrain domiciled retail CIUsG must make and retain for 5 years such records that enable:

            (a) The CIUG and its relevant personsG , as appropriate, to comply with the rules in this Module; and
            (b) The CIUG to demonstrate at any time that such compliance has been achieved.

          • CIU-1.9.6

            The obligation under Rule CIU-1.9.5 is additional to any record-keeping requirements that may apply as a result of applicable laws (such as the commercial companies law), and any regulatory requirements that may apply to relevant personsG that are licensed institutions (such as the CBB's record-keeping requirements applicable to CBB licenseesG ).

          • CIU-1.9.7

            Bahrain domiciled retail CIUsG must arrange for a register of holdingsG in the CIUG to be maintained, containing the names of CIU participantsG and their holdingsG , as well as the sale, issue, repurchase, redemption and cancellation of holdingsG . The register must be kept up to date.

          • CIU-1.9.8

            Rule CIU-1.9.7 may normally be satisfied by an independent registrar being appointed to maintain such a register on behalf of the Bahrain domiciled retail CIUG .

          • CIU-1.9.9

            Bahrain domiciled retail CIUsG must arrange for the CIU'sG operatorG or any other institution offering its holdingsG to investors to comply with applicable anti-money laundering and combating the financing of terrorism ('AML/CFT') requirements. It is the responsibility of the Bahrain domiciled retail CIUG to ensure that copies of required AML/CFT identification documentation are retained as part of the register specified in Rule CIU-1.9.7. Alternatively, they may be kept by the institution(s) offering the CIU'sG holdingsG , provided the documentation may be accessed by the Bahrain domiciled retail CIUG and the CBB on request.

      • CIU-1.10 Reporting and Auditors

        • Publication Requirements

          • CIU-1.10.1

            Bahrain domiciled retail CIUsG must publish semi annual and annual financial statements in respect of each financial year. These statements must be prepared in accordance with International Financial Reporting Standards.

          • CIU-1.10.2

            Publication on the CIU'sG or operator'sG website would satisfy the requirement in Rule CIU-1.10.1 that the report be published.

          • CIU-1.10.3

            The annual financial statement must be published and distributed to CIU participantsG within 4 months of the end of the CIU'sG financial year. The semi annual financial statement must be published and distributed to CIU participantsG within 2 months of the period end. Both the annual and semi-annual reports must contain at least the minimum information specified in Appendix E.

          • CIU-1.10.4

            The annual financial statement must be subject to independent audit by a qualified auditor located in Bahrain and acceptable to the CBB. The semi-annual financial statement must be subject to an independent review by the same qualified auditor.

          • CIU-1.10.5

            Bahrain domiciled retail CIUsG must publish the issue, sale, repurchase or redemption price of its holdingsG each time it issues, sells, repurchases or redeems its holdingsG , and at least twice a month.

          • CIU-1.10.6

            Publication on the CIU'sG or operator'sG website, or in a local newspaper, would satisfy the publication requirement in Rule CIU-1.10.5.

        • Reporting to the CBB

          • CIU-1.10.7

            Bahrain domiciled retail CIUsG must file the annual and semi annual reports required under Rule CIU-1.10.1 with the CBB within the time periods specified in Rule CIU-1.10.3.

          • CIU-1.10.8

            Bahrain domiciled retail CIUsG must file with the CBB Form CIU (QS), the CIU Quarterly Statistical Return, within the deadline specified on the return.

          • CIU-1.10.9

            Bahrain domiciled retail CIUsG must notify the CBB of any AGMs or EGMs they intend to hold, with at least 14 calendar days' notice. The CBB may attend such meetings at its discretion.

          • CIU-1.10.10

            Bahrain domiciled retail CIUsG must provide the CBB, upon request, any additional information relevant to the CIU'sG financial reports and accounts.

          • CIU-1.10.11

            Bahrain domiciled retail CIUsG must, in their terms of engagement with their external auditor, administratorG /custodianG , provide for them to report to the CBB in writing without delay, if they become aware of any of the following:

            (a) The information provided to the CIU's participantsG or the CBB does not truly reflect the financial situation of the CIUG ;
            (b) There has been a material breach of the requirements of this Module, the CIUG documents, or any directions issued by the CBB;
            (c) There exist circumstances that may materially affect the ability of the CIUG to fulfill its obligations to the CIU participantsG ;
            (d) There are material defects in the financial systems, controls or accounting records of the CIUG ;
            (e) There are material inaccuracies in any reporting provided to the CBB; or
            (f) In the case of the external auditor, they are likely to qualify any opinion they are to provide in relation to the financial statements of the CIUG .

        • Auditors

          • CIU-1.10.12

            Bahrain domiciled retail CIUsG must appoint an external auditor resident in Bahrain, and acceptable to the CBB.

      • CIU-1.11 Advertising

        • CIU-1.11.1

          Advertisements in respect of Bahrain domiciled retail CIUsG must be:

          (a) Fair and not misleading;
          (b) Clear and self-explanatory (describing the nature or type of CIUG to which the advertisement relates);
          (c) State any assumptions on which claims in advertisements are based;
          (d) Include risk warnings, including the potential for loss, that are prominently presented and not obscured or disguised;
          (e) Not describe CIUsG as "guaranteed" unless there is a legally enforceable capital guarantee; and
          (f) Not include any comparisons which may be misleading considering the circumstances of the CIUG .

        • CIU-1.11.2

          Where an advertisement contains any forecast or projection, it must make clear the basis upon which that forecast or projection is made.

        • CIU-1.11.3

          The advertisements must include a statement informing the client that more detailed information on the CIUG is contained in the prospectusG , a copy of which must be made available free of charge.

      • CIU-1.12 Mergers and Transfers, Suspension and Winding-Up

        • Mergers and Transfers

          • CIU-1.12.1

            A Bahrain domiciled retail CIUG must seek prior written approval from the CBB in order to merge with, or else transfer its assets to another CIUG . The Bahrain domiciled retail CIUG concerned must set out in writing the reasons for the proposed merger or transfer, the alternatives available to CIU participantsG (including redemption and if possible a right to redeem or switch without charge into another authorised CIUG ), the estimated costs of the merger or transfer, and information on who is expected to bear these.

          • CIU-1.12.2

            In all cases, a merger or transfer of a Bahrain domiciled retail CIUG must be in accordance with the instrument constituting the CIUG and all applicable laws.

        • Suspension

          • CIU-1.12.3

            A Bahrain domiciled retail CIUG may only suspend the issue and cancel the sale and redemption of its holdingsG with the prior written approval of the CBB. Such approval will only be given in exceptional circumstances and when in the interest of the CIU's participantsG .

          • CIU-1.12.4

            Resumption of dealing in holdingsG may only take place with the prior written approval of the CBB. Once dealing is restarted, the CIUG must confirm this to the CBB.

          • CIU-1.12.5

            The circumstances in which dealing in holdingsG may be suspended must be specified in the CIU'sG prospectusG .

        • Winding-Up

          • CIU-1.12.6

            A Bahrain domiciled retail CIUG may only initiate winding-up procedures with the prior written approval of the CBB, and subject to the terms of the instrument constituting the CIUG and any applicable laws.

          • CIU-1.12.7

            CBB approval in response to a request to wind-up a retail CIUG will normally be given in the following circumstances:

            (a) The purpose of the CIU cannot be accomplished;
            (b) The constitutional documents of the CIU provide for a termination;
            (c) The NAV of the CIU has fallen below US$ 5 million (or some other threshold agreed by CBB); or
            (d) A resolution of a duly convened meeting of the CIU participantsG has been passed to wind-up the CIU.

          • CIU-1.12.8

            A CIUG may also be wound up under a directive of the CBB or other competent authority, such as a court that has issued an order to liquidate the CIUG . See also Rules CIU-1.1.17 and CIU-1.1.18 regarding the revocation of authorisation by the CBB.

          • CIU-1.12.9

            Bahrain domiciled CIUsG must give at least one months' written notice to CIU participantsG of their intention to wind-up the CIUG , together with an explanation for wishing to do so, and the options available to CIU participantsG (such options to include, if possible, a right to switch without charge into another CIUG ). A copy of this notice must be provided to the CBB at the time it is issued to CIU participantsG .

          • CIU-1.12.10

            Winding-up of a Bahrain domiciled retail CIUG must comply with all applicable laws and directions issued by the CBB. In all cases, the CBB requires independent verification by auditors that the CIU'sG assets have been distributed to CIU participantsG in accordance with the instrument constituting the CIUG , or switched into another CIUG .

          • CIU-1.12.11

            Once the CIU'sG assets have been distributed to the CIU's participantsG , or switched into another CIUG , the Bahrain domiciled retail CIUG must confirm the fact to the CBB and request that it be taken off the register of authorised CIUsG .

    • CIU-2 Bahrain Domiciled Expert CIUs

      • CIU-2.1 Rule Variations

        • Restrictions

          • CIU-2.1.1

            Bahrain domiciled expert CIUsG may only be offered to expert investorsG (as defined in Rule CIU-B.5.6), when offered within the Kingdom of Bahrain.

          • CIU-2.1.2

            Bahrain domiciled expert CIUsG , if offered to non-resident investors, are also required to comply with any applicable local laws and regulations in the jurisdiction concerned. These may be more or less restrictive than the restriction contained in Rule CIU-2.1.1.

          • CIU-2.1.3

            A Bahrain domiciled expert CIUG must be able to demonstrate that each of its participantsG falls within the definition of an expert investorG . They should also be able to demonstrate that the additional risks potentially represented by an expert CIUG have been clearly communicated and understood by their participantsG .

          • CIU-2.1.4

            To help demonstrate compliance with Rule CIU-2.1.3, Bahrain domiciled expert CIUsG should be able to provide a written confirmation from each participantG , stating that they satisfy the definition of an expert investorG and confirming they understand the higher risks involved in an expert CIUG . The CBB also expects supporting documentation to be kept, demonstrating that the minimum financial asset threshold specified in Rule CIU-B.5.6 has been satisfied, such as a copy of a bank or broker's statement. Where the investor’s initial investment matches or exceeds the financial asset threshold, this may by itself be taken as evidence that the client meets the minimum financial asset threshold.

            Amended: July 2007

        • Exemptions

          • CIU-2.1.5

            Bahrain domiciled expert CIUsG must comply with all the requirements contained in Chapter CIU-1, subject to the exemptions specified below in Rule CIU-2.1.6. References to Bahrain domiciled retail CIU(s)G in Chapter CIU-1 should be read as also applying to Bahrain domiciled expert CIUsG .

          • CIU-2.1.6

            Expert CIUsG may avail themselves of the following exemptions:

            (a) They may utilize higher aggregate and individual exposure limits, as specified in Appendix D;
            (b) They may invest in a wider range of asset classes, as specified in Appendix D;
            (c) They may borrow up to 30% of the CIU'sG assets, instead of the 20% limit applied to Bahrain domiciled retail CIUsG (see Rule CIU-1.7.1); and
            (d) They may enter into stock lending arrangements of up to 30% of the CIU'sG net asset value, instead of the 20% limit applied to Bahrain domiciled retail CIUsG .

          • CIU-2.1.7

            Bahrain domiciled expert CIUsG are, in short, subject to mostly the same requirements applicable to Bahrain domiciled retail CIUsG . In return to being limited to expert investorsG , however, they are subject to fewer investment restrictions and can utilize more liberal borrowing and stock-lending limits. The looser investment restrictions allow them, amongst other things, to invest in additional asset classes (such as real estate and commodities, unlisted securities, and to offer funds of hedge funds).

    • CIU-3 Bahrain Domiciled Exempt CIUs

      • CIU-3.1 Exemption Conditions

        • Promotion

          • CIU-3.1.1

            Bahrain domiciled exempt CIUsG may only be offered to accredited investorsG (as defined in Rule CIU-B.5.10), when offered within the Kingdom of Bahrain. They may not be promoted through mass communication channels (such as the press, radio or television).

            Amended: July 2007

          • CIU-3.1.2

            Bahrain domiciled exempt CIUsG , if offered to non-resident investors, are required to comply with any applicable local laws and regulations in the jurisdiction concerned. These may be more or less restrictive than the restriction contained in Rule CIU-3.1.1.

          • CIU-3.1.3

            A Bahrain domiciled exempt CIUG must be able to demonstrate that each of its participantsG falls within the definition of an accredited investorG . They should also be able to demonstrate that the additional risks potentially represented by a Bahrain domiciled exempt CIUG have been clearly communicated and understood by their participantsG .

          • CIU-3.1.4

            To help demonstrate compliance with Rule CIU-3.1.3, Bahrain domiciled exempt CIUsG should be able to provide a written confirmation from each participantG , stating that they satisfy the definition of an accredited investorG and confirming they understand the higher risks involved in an exempt CIUG . The CBB also expects supporting documentation to be kept, demonstrating that the minimum financial asset threshold specified in Rule CIU-B.5.10 has been satisfied, such as a copy of a bank or broker’s statement. Where the investor’s initial investment matches or exceeds the financial asset threshold, this may by itself be taken as evidence that the client meets the minimum financial asset threshold.

            Amended: July 2007

        • Disclosures

          • CIU-3.1.5

            Bahrain domiciled exempt CIUsG must not quote the CBB as the regulator of the CIUG in any document or material, and must clearly display a statement to the fact that the CIUG is considered an exempt CIUG for the purposes of the CBB's CIUG regulations.

          • CIU-3.1.6

            Bahrain domiciled exempt CIUsG must disclose all relevant features of the CIUG in their prospectusG (including but not limited to their investment strategy; extent of any leverage; key risks; and expenses, fees and charges).

        • Relevant Persons

          • CIU-3.1.7

            Bahrain domiciled exempt CIUsG must delegate the administration and safe-keeping of their assets to an administratorG /custodianG (with the two functions either undertaken by a single institution or two separate institutions). These functions must be undertaken by one or more licensed institutions acceptable to the CBB for the role. The administratorG / custodianG must:

            (a) Be independent of the CIU'sG operatorG ;
            (b) Act solely in the interests of the CIU'sG participantsG ;
            (c) Have sufficient financial and other resources in order to undertake properly its function as administratorG / custodianG of the CIUG ; and
            (d) Accept liability to the CIUG and its participantsG , for any loss suffered by them as a result of its unjustifiable failure to perform its obligations adequately.

          • CIU-3.1.8

            The CBB would normally expect the administratorG /custodianG required under Rule CIU-3.1.7 to be a CBB licenseeG (although 'hub and spoke' arrangements are allowed — see Paragraph CIU-1.4.10). However, with respect to Bahrain domiciled exempt CIUsG , the CBB may additionally consider allowing non-CBB licenseesG to be used, on a case-by-case basis, where there is a strong rationale for doing so (e.g. prime broking arangements for hedge funds).

        • Auditors

          • CIU-3.1.9

            Bahrain domiciled exempt CIUsG must appoint an auditor resident in Bahrain, and acceptable to the CBB.

        • Record-Keeping

          • CIU-3.1.10

            Bahrain domiciled exempt CIUsG must make and retain for 5 years such records that enable:

            (a) The CIUG and its relevant personsG , as appropriate, to comply with the rules in Chapter CIU-3; and
            (b) The CIUG to demonstrate at any time that such compliance has been achieved.

          • CIU-3.1.11

            The obligation under Rule CIU-3.1.10 is additional to any record-keeping requirements that may apply as a result of applicable laws (such as the commercial companies laws), and any regulatory requirements that may apply to relevant personsG that are licensed institutions (such as the CBB's record-keeping requirements applicable to CBB licenseesG ).

          • CIU-3.1.12

            Bahrain domiciled exempt CIUsG and their relevant personsG are reminded that they must also comply with all applicable AML/CFT laws and regulations. Relevant personsG that are CBB licenseesG are required to comply with the relevant CBB Rulebook Volume in this respect.

      • CIU-3.2 Registration Requirements

        • Registration Requirement

          • CIU-3.2.1

            Bahrain domiciled exempt CIUsG must be registered with the CBB prior to their being offered to investors.

          • CIU-3.2.2

            Bahrain domiciled exempt CIUsG are not subject to the CBB's authorisation or on-going supervisory requirements. The registration requirement is to allow the CBB to monitor developments in the financial services sector.

          • CIU-3.2.3

            An application for registration may only be made by one of the following:

            (a) The operatorG of the CIUG ; or
            (b) The directors or trustees of the CIUG (as appropriate).

          • CIU-3.2.4

            An applicant may appoint a representative — such as the CIU'sG proposed administratorG /custodianG , or a law firm or professional consultancy — to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the registration process, when seeking clarification of any issues.

          • CIU-3.2.5

            An application for registration under Rule CIU-3.2.1 involving an overseas operatorG will only be considered if the overseas operatorG has a suitable track record in operating CIUsG .

        • Registration Process

          • CIU-3.2.6

            An application for registration under Rule CIU-3.2.1 must be made using a Form CIU (R) (Application for Registration of a CIU), submitted under a formal cover letter signed by two authorised signatories of the applicant.

          • CIU-3.2.7

            The application must identify an individual who should be capable of being contacted by the CBB by post, telephone, fax and/or e-mail.

          • CIU-3.2.8

            The CBB's review of registration applications is mainly limited to satisfying itself that the exemption conditions specified in Section CIU-3.1 are likely to be complied with. CBB does not review the proposed structure or operations in detail, although it reserves the right to seek appropriate confirmations or additional information from the applicant. The CBB takes a decision on an application for registration made under Rule CIU-3.2.1 within 15 calendar days of the application being received and assessed by the CBB as complete.

        • Granting or refusal of registration

          • CIU-3.2.9

            To be registered, an applicant must demonstrate that it will comply with the exemption conditions specified in Section CIU-3.1. Should the application for registration be accepted, the CBB will notify the applicant in writing of the fact. The registration may be subject to additional conditions being met.

          • CIU-3.2.10

            The CBB may refuse to register a Bahrain domiciled exempt CIUG , if in its opinion:

            (a) The exemption requirements in Section CIU-3.1 are unlikely to be met;
            (b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or
            (c) The CBB believes it necessary in order to safeguard the interests of potential investors.

          • CIU-3.2.11

            Where the CBB proposes to refuse an application for registration, it must give the applicant written notice to that effect. Applicants have 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.

        • Fees Payable to CBB

          • CIU-3.2.12

            Each application for registration made under Rule CIU-3.2.1 must be accompanied by a BD 100 processing fee. This fee is non-refundable.

          • CIU-3.2.13

            Each Bahrain domiciled exempt CIUG registered by CBB is subject to an annual fee of BD 2,000. In the case of umbrella funds, each sub-fund is also charged BD 2,000 a year.

          • CIU-3.2.14

            Where the fee specified in Rule CIU-3.2.13 is paid, it exempts those Bahrain domiciled exempt CIUsG wishing to list on the Bahrain Stock Exchange ('BSE') from having to pay the listing fee normally levied by the BSE.

      • CIU-3.3 Reporting Requirements

        • Notifications to the CBB

          • CIU-3.3.1

            Bahrain domiciled exempt CIUsG must file with the CBB Form CIU (QS), the CIU Quarterly Statistical Return, within the deadline specified on the return.

          • CIU-3.3.2

            All annual and interim reports produced by a Bahrain domiciled exempt CIUG must be filed with CBB (within four months of the period end for annual reports and two months of the period end for interim reports).

          • CIU-3.3.3

            Bahrain domiciled exempt CIUsG must notify the CBB in a timely manner of any intention to merge, transfer, wind up or suspend dealings in the CIUG .

      • CIU-3.4 De-registration

        • CIU-3.4.1

          Bahrain domiciled exempt CIUsG must give at least one months' written notice to CIU participantsG of their intention to de-register the CIUG , together with an explanation for wishing to do so, and the options available to CIU participantsG (such options to include, if possible, a right to switch without charge into another CIUG ). A copy of this notice must be provided to the CBB at the time it is issued to CIU participantsG .

        • CIU-3.4.2

          Once the CIU'sG assets have been distributed to the CIU'sG participantsG , or switched to another CIUG , the Bahrain domiciled exempt CIUG must confirm the fact to the CBB and request that it be taken off the CBB register of exempt CIUsG .

        • CIU-3.4.3

          In the meantime, the Bahrain domiciled exempt CIUG should keep the CBB informed about their timetable and progress made in either transferring CIU participantsG into another CIUG , or returning moneys due to them.

        • CIU-3.4.4

          CBB may cancel the registration of a CIUG if in its opinion:

          (a) Any of the applicable requirements contained in Module CIU are not met;
          (b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or
          (c) The CBB believes it necessary in order to safeguard the interests of potential investors or the CIU'sG participantsG .

        • CIU-3.4.5

          Where the CBB proposes to cancel a CIU'sG registration, it shall give the CIUG concerned a written notice of its intention to do so and the reasons for such action. The CIUG has 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.

    • CIU-4 Overseas Domiciled CIUs

      • CIU-4.1 Registration and Authorisation

        • Registration Requirements

          • CIU-4.1.1

            Overseas domiciled CIUsG that fall under the categories listed in the table appearing in Rule CIU-B.6.3, must be registered with the CBB before they are offered to investors in Bahrain.

          • CIU-4.1.2

            Overseas domiciled CIUsG that do not appear under the categories listed in the table appearing in Rule CIU-B.6.3, but which satisfy the exemption conditions specified in Section CIU-3.1, must also be registered with the CBB before they are offered to investors in Bahrain.

          • CIU-4.1.3

            All other overseas domiciled CIUsG , i.e. those that satisfy neither the conditions specified in Rules CIU-4.1.1 and CIU-4.1.2, are required to be authorised by the CBB prior to being offered to investors in Bahrain: see Rules CIU-4.1.20 below.

        • Registration Process

          • CIU-4.1.4

            An application for registration under either Rules CIU-4.1.1 or CIU-4.1.2 must be made using a Form CIU (R) (Application for Registration of a CIU), submitted under a formal cover letter signed by two authorised signatories of the applicant. The application may only be made by the CBB licenseeG that is proposing to offer the CIUG to investors in Bahrain.

          • CIU-4.1.5

            Only CBB licenseesG that are licensed either as conventional bank licenseesG (Volume 1 of the CBB Rulebook), Islamic bank licenseesG (Volume 2) or investment firm licenseesG (Volume 4), may offer overseas domiciled CIUsG in Bahrain.

          • CIU-4.1.6

            The application must identify an individual who should be capable of being contacted by the CBB by post, telephone, fax and/or e-mail.

          • CIU-4.1.7

            The CBB's review of registration applications is mainly limited to satisfying itself that the applicant satisfies the conditions specified in Rules CIU-4.1.1 and CIU-4.1.2, and which category of scheme it falls under (i.e. retail CIUG , expert CIUG or exempt CIUG ): this may require seeking confirmation of the CIU'sG regulatory status from its home regulator, and reviewing the CIU'sG documentation (such as promotional material and its prospectus). The CBB does not however review the proposed structure or operations in detail, although it reserves the right to seek appropriate confirmations or additional information from the applicant.

          • CIU-4.1.8

            The CBB takes a decision on an application for registration made under Rules CIU-4.1.1 and CIU-4.1.2 within 15 calendar days of the application being received and assessed by the CBB as complete.

        • Granting or refusal of registration

          • CIU-4.1.9

            To be registered, an applicant must demonstrate that it will comply with the conditions specified in Rules CIU-4.1.1 or CIU-4.1.2 (as appropriate). Should the application for registration be accepted, the CBB will notify the applicant in writing of the fact. The registration may be subject to additional conditions being met.

          • CIU-4.1.10

            The CBB may refuse to register an overseas domiciled CIUG , if in its opinion:

            (a) The conditions in Rules CIU-4.1.1 or CIU-4.1.2 (as appropriate) are not met;
            (b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or
            (c) The CBB believes it necessary in order to safeguard the interests of potential investors.

          • CIU-4.1.11

            Where the CBB proposes to refuse an application for registration, it must give the applicant written notice to that effect. Applicants have 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.

        • Fees Payable to CBB (registered overseas domiciled CIUs)

          • CIU-4.1.12

            No processing or annual registration fees are payable by overseas domiciled CIUsG subject to Rules CIU-4.1.1 or CIU-4.1.2.

        • De-registration

          • CIU-4.1.13

            The CBB licenseeG responsible for distributing an overseas domiciled CIUG must must seek prior written approval from the CBB if they wish to de-register the fund. They must provide an explanation for wishing to de-register, and the options available to participantsG in the event of de-registration (such options to include, if possible, a right to switch without charge into another CIUG ).

          • CIU-4.1.14

            The CBB will normally respond to such requests within 15 calendar days of the request being made.

          • CIU-4.1.15

            Once approval has been granted under Rule CIU-4.1.13, the CBB licenseeG concerned must give at least one month's written notice to participantsG . The notice must provide an explanation and explain the participants'G options (as specified in Rule CIU-4.1.13). A copy of this notice must be provided to the CBB at the time it is issued to participantsG .

          • CIU-4.1.16

            Once the CIU'sG participantsG have been repaid, or transferred to another CIUG , the CBB licenseeG must notify the CBB of the fact and request that the CIUG concerned be taken off the CBB register of overseas domiciled CIUsG .

          • CIU-4.1.17

            In all cases, the CBB licenseeG should keep the CBB informed about their timetable and progress made in either transferring CIU participantsG into another CIUG , or returning moneys due to them.

          • CIU-4.1.18

            The CBB may cancel the registration of an overseas domiciled CIUG if in its opinion:

            (a) Any of the applicable requirements contained in Module CIU are not met;
            (b) False or misleading information has been provided to the CBB, or significant information which should have been provided to the CBB has not been so provided; or
            (c) The CBB believes it necessary in order to safeguard the interests of potential investors or the CIU'sG participantsG .

          • CIU-4.1.19

            Where the CBB proposes to cancel a CIU registration pursuant to Paragraph CIU-4.1.18, it shall give the CIU operatorG or its appointed representative a written notice of its intention to do so and the reasons for such action, together with a description of the process for appealing such a decision.

        • Authorisation — Requirement, Process and Revocation

          • CIU-4.1.20

            Overseas domiciled CIUsG that do not come under either of the categories specified in Rules CIU-4.1.1 or CIU-4.1.2 must be authorised by the CBB before being offered to investors in Bahrain.

        • Authorisation — Requirement, Process and Revocation

          • CIU-4.1.21

            The authorisation process for overseas domiciled CIUsG falling under Rule CIU-4.1.20 is the same as that specified for Bahrain domiciled CIUsG , in Rules CIU-1.1.5 to CIU-1.1.11. The same requirements and processes are also applicable with respect to the revocation of an authorisation (Rules CIU-1.1.15 to CIU-1.1.18).

        • Fees Payable to CBB (authorised overseas domiciled CIUs)

          • CIU-4.1.22

            No processing or annual authorisation fees are payable by overseas domiciled CIUsG subject to Rule CIU-4.1.20.

      • CIU-4.2 Requirements

        • Promotion and Advertising of Overseas Domiciled CIUs

          • CIU-4.2.1

            The CBB licenseeG responsible for distributing an overseas domiciled retail CIUG or overseas domiciled expert CIUG must ensure that the CIU'sG prospectusG (and simplified prospectusG where applicable) are kept up-to-date. A most recent copy of the prospectusG (and simplified prospectusG where applicable) must be made available to the CBB within 30 calendar days of any revision.

          • CIU-4.2.2

            The CBB licenseeG responsible for distributing an overseas domiciled retail CIUG or overseas domiciled expert CIUG must always make available a copy of the CIU's most recent prospectusG (and simplified prospectusG where applicable) free of charge to any person on request.

          • CIU-4.2.3

            The CBB licenseeG responsible for distributing an overseas domiciled retail CIUG or overseas domiciled expert CIUG must provide explanations and such other information supplementary to the prospectusG as may be reasonably required by a potential investor.

          • CIU-4.2.4

            The CBB licenseeG responsible for distributing an overseas domiciled expert CIUG and overseas domiciled exempt CIUG must be able to demonstrate that each of its participantsG falls within the definition of an expert investorG or accredited investorG (as appropriate). They should also be able to demonstrate that the additional risks potentially represented by an expert CIUG or exempt CIUG have been clearly communicated and understood by their participantsG .

          • CIU-4.2.5

            To demonstrate compliance with Rule CIU-4.2.4, the CBB would expect to see a written confirmation from each participantG , stating that they satisfy the definition of an expert investorG or accredited investorG (as appropriate) and confirming they understand the higher risks involved in an expert CIUG or exempt CIUG . The CBB also expects supporting documentation to be kept, demonstrating that the minimum financial assets threshold specified in Rules CIU-B.5.6 and CIU-B.5.10 (as appropriate) has been satisfied, such as copies of bank or broker statements. Where the investor’s initial investment matches or exceeds the threshold, this may by itself be taken as evidence that the client meets the minimum financial asset threshold.

            Amended: July 2007

          • CIU-4.2.6

            Overseas domiciled CIUsG may not be offered directly to investors in Bahrain, by non-resident persons. Only CBB licenseesG that are licensed either as conventional bank licenseesG (Volume 1 of the CBB Rulebook), Islamic bank licenseesG (Volume 2) or investment firm licenseesG (Volume 4), may offer overseas domiciled CIUsG to investors in Bahrain.

          • CIU-4.2.7

            Advertisements in respect of overseas domiciled retail CIUsG and overseas domiciled expert exempt CIUsG must comply with the requirements applicable to their Bahrain domiciled equivalents, as specified in Section CIU-1.11.Overseas domiciled exempt CIUsG must comply with the restrictions on promotions applied to Bahrain domiciled exempt CIUsG (see Rule CIU-3.1.1).

            Amended: July 2007

        • Reporting to CIU Participants

          • CIU-4.2.8

            Overseas domiciled retail CIUsG and overseas domiciled expert CIUsG must publish and distribute to their Bahrain resident participantsG at least two reports in respect of each financial year. Annual reports and accounts prepared in accordance with local accounting standards must be published and distributed to Bahrain resident participantsG within the time scales specified by their home jurisdiction.

          • CIU-4.2.9

            Overseas domiciled retail CIUsG and overseas domiciled expert CIUsG must distribute to their Bahrain resident participants any other reports (such as valuation reports), where these are specified in the CIU'sG prospectusG .

        • CBB Reporting

          • CIU-4.2.10

            The CBB licenseeG responsible for distributing an overseas domiciled retail expert CIUG and overseas domiciled expert CIUG must file copies of the reports required under Rule CIU-4.2.8 with the CBB, within the same time periods.

            Amended: July 2007

          • CIU-4.2.11

            The CBB licenseeG responsible for distributing an overseas domiciled exempt CIUG must file with the CBB all annual and interim reports produced by the CIUG (within the time scales specified in Rule CIU-4.2.8).

          • CIU-4.2.12

            The CBB licenseeG responsible for distributing an overseas domiciled CIUG must notify the CBB in a timely manner of any intention to merge, transfer, wind up or suspend dealings in the CIUG .

          • CIU-4.2.13

            The CBB licenseeG responsible for distributing an overseas domiciled CIUG must file with the CBB Form CIU (QS), the CIU Quarterly Statistical Return, within the deadline specified on the return.

    • CIU-5 Relevant Persons

      • CIU-5.1 General Requirements

        • CIU-5.1.1

          Relevant personsG must maintain proper standards of market conduct, in relation to their role with respect to a CIUG , in addition to any applicable legal and regulatory requirements (such as those imposed on them by virtue of their license, in the case of CBB licenseesG ).

        • CIU-5.1.2

          To demonstrate compliance with Rule CIU-5.1.1, relevant personsG are thus expected, in relation to their role with respect to a CIUG , to:

          (a) Observe high standards of integrity and fair dealing, including being honest and straightforward in their dealings with clients;
          (b) Take all reasonable steps to identify, and prevent or manage, potential or actual conflicts of interest that could harm the interests of a client (such steps to include, wherever appropriate, declaring such conflicts). This includes a prohibition on administratorsG and custodiansG being participantsG in a CIUG in respect of which they are a relevant personG — unless, in the case of overseas domiciled CIUsG , the applicable regulations of their jurisdiction of domicile permit such investments;
          (c) Act with due skill, care and diligence;
          (d) Act impartially and refrain from any action which may be to the advantage of one CIUG and/or its participantsG , at the expense of another CIUG and/or its participantsG ;
          (e) Observe in full any obligations of confidentiality, including with respect to client information. This requirement does not over-ride lawful disclosures;
          (f) Observe proper standards of market conduct, and avoid action that would generally be viewed as improper;
          (g) Take reasonable care to safeguard the assets of clients for which they are responsible, and ensure that those assets are kept separate from their own assets and are separately identifiable from the assets of other CIUsG with which they are involved;
          (h) Pay due regard to the legitimate interests and information needs of the clients and communicate with them in a fair and transparent manner;
          (i) Act in an open and co-operative manner with CBB and other regulatory/supervisory bodies under whose authority they come under. They should take reasonable care to ensure that their activities comply with all applicable laws and regulations;
          (j) Maintain adequate human, financial and other resources sufficient to run the CIUG in an orderly manner;
          (k) Keep accurate accounts and records for each CIUG for which it holds assets;
          (l) Take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations. Their systems and controls, as far as is reasonably practical, should also be sufficient to manage the level of risk inherent in their business; and
          (m) Ensure that when outsourcing functions, such outsourcing is properly controlled and that ultimate responsibility for the proper discharge of those functions is retained by the relevant personG concerned.
          Amended: July 2007

        • CIU-5.1.3

          Rules CIU-1.4.9 and CIU-1.4.11 state that relevant personsG must be acceptable to the CBB, in order for a retail CIUG or expert CIUG to be authorised. Compliance with Rule CIU-5.1.1 is an essential element of this assessment.

      • CIU-5.2 Requirements for Operators

        • CIU-5.2.1

          OperatorsG of CIUsG authorised or registered under this Module must:

          (a) Ensure compliance of the CIUG with the requirements of this Module, the instrument constituting the CIU, and of its prospectusG ;
          (b) Take all reasonable steps to rectify any failure to comply with the obligations specified in (a) above, and to notify the CBB of such a breach as soon as it becomes aware of the fact; and
          (c) Not withdraw as operatorG of the CIUG except upon the appointment of a new operatorG and subject to the prior approval of the CBB.

        • CIU-5.2.2

          OperatorsG of Bahrain domiciled retail CIUsG and Bahrain domiciled expert CIUsG who have introduced seed capital into a CIUG authorised or registered under this Module must not seek redemption or buy back the seed capital without the prior written approval of the CBB.

        • CIU-5.2.3

          OperatorsG of Bahrain domiciled retail CIUsG and Bahrain domiciled expert CIUsG are liable for any loss suffered by participantsG , because of of their unjustifiable failure to perform their obligations adequately, as required under the CIUG documents or this Module. This liability shall not in any way be diminished by any provision in any document, save to the extent that any release or indemnity from liability relates to a prior event and/or where clients holding not less than 75% in value of the units in issue at that date have agreed to such a release or indemnity.

    • CIU-6 Shari'a Compliant CIUs

      • CIU-6.1 Additional Requirements

        • Application

          • CIU-6.1.1

            This Chapter applies to all retail CIUsG and expert CIUsG that hold themselves out to be managed in accordance with Shari'a compliant principles.

          • CIU-6.1.2

            The rules included in this Chapter are additional to other applicable rules contained in other Chapters of this Module. In applying Rule CIU-6.1.1 to overseas domiciled retail CIUsG and overseas domiciled expert CIUsG , the CBB may accept other specific arrangements as having equivalent effect.

        • Constitution

          • CIU-6.1.3

            All CIUsG defined in Rule CIU-6.1.1 must ensure that their prospectusG contains provisions describing the Shari'a compliant nature of the CIUG , the process for achieving such compliance, and the names of the Shari'a Advisers appointed under Rule CIU-6.1.4.

        • Shari'a Advisers

          • CIU-6.1.4

            The operatorG of CIUsG defined in Rule CIU-6.1.1 must appoint two or more Shari'a Advisers and ensure that:

            (a) Appointments, dismissals or other changes in respect of members of the Shari'a Advisers are approved by the governing body of the CIUG (i.e. its directors or trustees, as appropriate);
            (b) The Shari'a Advisers are independent of the CIU and its operatorG — amongst other things, no Shari'a Adviser should be a director, trustee or controller of the CIUG or its operatorG ;
            (c) The Shari'a Advisers selected are suitably qualified and experienced for their role; and
            (d) The Shari'a Advisers are given sufficient resources and access to information and personnel in order to undertake effectively their role as Shari'a Advisers to the CIUG .

        • Shari'a Compliance

          • CIU-6.1.5

            CIUsG defined in Rule CIU-6.1.1 must comply with all applicable standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

        • Compliance Monitoring and Reporting

          • CIU-6.1.6

            The operatorG of CIUsG defined in Rule CIU-6.1.1 must ensure that the operations and investments of the CIUG are subject to compliance reporting and monitoring by its Shari'a Advisers, in accordance with applicable AAOIFI standards.

          • CIU-6.1.7

            The annual report to CIU participantsG must contain a report and opinion from the CIU'sG Shari'a Advisers:

            (a) Explaining the work undertaken by the Shari'a Advisers to verify compliance by the CIUG with the Shari'a; and
            (b) Giving an opinion on the extent of the CIU'sG compliance with the Shari'a.

          • CIU-6.1.8

            CIUsG defined in Rule CIU-6.1.1 must report without delay to the CBB changes to their Shari'a Advisers, together with an explanation for the change. All such changes must be reflected in an update to the CIU'sG prospectusG (and simplified prospectusG where applicable).

          • CIU-6.1.9

            With reference to Rule CIU-6.1.8, CIUsG should also note Rules CIU-1.5.4 and CIU-1.5.5.

    • CIU-7 Transition Arrangements

      • CIU-7.1 Implementation by Existing CIUs

        • CIU-7.1.1

          CIUsG approved by the CBB prior to the date of commencement of this Module (1 June 2007) are not required to submit a new application for authorisation or registration.

        • CIU-7.1.2

          Rather, the CBB will confirm with the CIUsG concerned which category they fall under according to the new framework contained in this Module (i.e. a retail CIUG , expert CIUG or exempt CIUG ; and, in the case of overseas domiciled CIUsG , whether they qualify as a recognised jurisdictionG ). The CBB will then update its published list of CIUsG accordingly.

        • CIU-7.1.3

          CIUsG approved by the CBB prior to the date of commencement of this Module must ensure compliance with the requirements of this Module within the 12 months following the date of commencement of this Module (i.e. by June 2008). In addition, they must submit the Form CIU(QS) starting with the quarter-period ending 30 June 2007: i.e., the first such Form must be filed by 21 July 2007.

          Amended: July 2007

        • CIU-7.1.4

          With respect to overseas domiciled CIUsG , which comprise the bulk of CIUsG approved by the CBB prior to the commencement date of this Module, the impact of Rule CIU-7.1.3 is that those CBB licenseesG responsible for distributing overseas domiciled CIUsG must ensure compliance with applicable requirements contained in Section CIU-4.2. These requirements mostly apply to overseas domiciled retail CIUsG and overseas domiciled expert CIUsG , and are relatively limited in scope.

        • CIU-7.1.5

          For CIUsG authorised or registered after 1 June 2007, the requirements of this Module have immediate effect.

    • CIU-8 Appendices

      • Appendix A — Instrument constituting the CIU

        The instrument constituting the CIUG must contain the following minimum information:

        (a) Name and legal form of the CIUG (i.e. company, trust or other contractual structure);
        (b) Name of operatorG ;
        (c) The governing law;
        (d) Objective of the investment vehicle;
        (e) Classes of holdingsG and, if any rights of any class of holdingsG differ, a statement describing those differences in relation to the differing classes;
        (f) Rules regarding the organizational and operational framework of the CIUG , including provisions on the manner in which meetings are to be conducted, and interests of participantsG protected;
        (g) The date on which the annual accounting period ends; and
        (h) A statement of terms and circumstances in which the CIUG may be wound up, merged with other CIUsG , suspended or otherwise terminated.

      • Appendix B — Prospectus

        The prospectusG of the CIUG must contain the following minimum information:

        (a) Constitution of the CIUG :
        (i) Name
        (ii) Registered address
        (iii) Nature of corporate form
        (iv) If it is a company, particulars of its capital structure
        (v) Date of creation
        (vi) Place of creation
        (vii) Indication of duration if limited
        (b) Governing law of the CIUG :
        (c) Details of any tax levied on the income and capital of the CIUG , including tax deducted on distributions to participantsG (if applicable)
        (d) Investment objectives and restrictions:
        (i) Details of investment objectives and policy;
        (ii) A summary of the different asset classes that may be held, and the extent to which derivatives, borrowings and stock lending may be undertaken;
        (iii) A summary of the risk management policy, processes and limits structure to be applied; and
        (iv) An assessment of the risks that the CIUG may incur, and its overall risk profile.
        (e) OperatorG and principals:
        (i) Names and registered addresses of the following parties (where applicable) and any additional information as stated:
        a. The Directors or trustees (as appropriate) of the CIUG , including a summary of their professional experience and other positions held;
        b. The operatorG , managerG , administratorG and custodianG , plus
        i. Nature of their corporate form;
        ii. If a subsidiary, the name of their ultimate holding company and the country or territory where the holding company is incorporated;
        iii. The address of their registered offices;
        iv. A description of their principal business activity;
        v. The nature of any licenses held, and their lead regulators; and
        vi. A summary of any material provisions, if applicable.
        c. The investment advisor (if applicable)
        i. Their function
        ii. Whether or not it is the holder of a license
        iii. If it is body corporate in a group of which the operatorG or administratorG is a member
        iv. If the advisor's principal activity is not providing services as an investment advisor, what the principal activity is
        v. Main terms of any agreement or arrangement between the advisor and the operatorG
        d. The Kingdom of Bahrain representative
        e. The Kingdom of Bahrain distribution company, if different from d.
        f. The auditors
        g. The registrar
        (f) Characteristics of holdingsG :
        (i) Minimum investment and subsequent investment requirements (if any).
        (ii) A description of the different types of holdingsG , including their currency of denomination, their nominal value and any applicable requirements for minimum level of holdingsG .
        (iii) In relation to each available class of holdingG , the entitlement of the holder to participate in the assets of the CIUG and its income.
        (iv) The voting rights that are exercisable at meetings of participantsG by the participantsG and, if different rights attach to different classes of holdingsG , what those rights are.
        (v) Form of certification.
        (g) Valuation:
        (i) How frequently and at what time of day in a specified country or territory the assets of the CIUG will be valued for the purpose of determining prices at which units in the CIUG may be sold or repurchased.
        (ii) The method of valuation of assets and liabilities of the CIUG and the method of pricing and determination of investment returns of the CIUG .
        (iii) The circumstances under which the method of valuation and pricing may change for a CIUG .
        (h) Seed Capital:
        (i) The amount of any seed capital invested in the CIUG (if any), who by, and the investor's proposed intention regarding retaining the seed capital in the CIUG or redeeming it. Also, a statement must be included that any redemption of seed capital is subject to the CBB's prior approval.
        (i) Application and redemption procedures:
        (i) Names of any Bahraini daily newspapers in which prices will be published, and details of other sources where prices may be published (e.g. website), as applicable.
        (ii) Procedure for subscribing/redeeming holdingsG .
        (iii) The maximum interval between the request for redemption and the dispatch of the redemption proceeds
        (iv) A summary of the circumstances under which dealings in holdingsG may be deferred or suspended.
        (v) A statement that no money will be paid to any financial intermediary in the Kingdom of Bahrain who is not licensed or registered.
        (j) Distribution policy:
        (i) The distribution policy and the approximate dates on which dividends (if any) will be paid (if applicable).
        (k) Fees and charges:
        (i) The level of all fees and charges payable by a participantG , including all charges levied on subscription, redemption and conversion.
        (ii) The level of all fees and charges payable by the CIUG , including management fees, administration fees, custodianG fees and start up expenses.
        (iii) The notice period for fee increases.
        (l) Reports and accounts:
        (i) The date of the CIU'sG financial year.
        (ii) Particulars of what reports will be sent to participantsG and when.
        (iii) When annual and half yearly reports will be published.
        (m) Warnings:
        (i) The following statement should be predominantly displayed in the offering document as follows:
        "Important — if you are in any doubt about the contents of this prospectus, you should seek independent professional financial advice. Remember that all investments carry varying levels of risk and that the value of your investment may go down as well as up. Investments in this collective investment undertaking are not considered deposits and are therefore not covered by the Kingdom of Bahrain's deposit protection scheme. The fact that this collective investment undertaking has been authorised by the Central Bank of Bahrain, does not mean that the CBB takes responsibility for the performance of these investments, nor for the correctness of any statements or representations made by the operator of this collective investment undertaking."
        (n) General information:
        (i) A list of the documents constituting the CIUG and an address in the Kingdom of Bahrain where they can be inspected free of charge.
        (ii) The date of publication of the offering document.
        (iii) A statement that the directors or trustees (as appropriate) of the CIUG , together with the CIU'sG operatorG , accept responsibility for the information contained in the offering document as being accurate at the date of publication.
        (iv) A statement that participantsG will be notified, at least 14 calendar days before the changes take effect, in the following circumstances:
        a. Any changes in the investment policy;
        b. Any changes in the operatorG , managerG , administratorG or custodianG of the CIUG ;
        c. The merger, division or termination of the CIUG ; and
        d. Any major issues that may affect the participantsG of the CIUG .
        (vi) Details of the documentation to be provided by participantsG in order to satisfy applicable AML/CFT requirements.
        (o) Termination of CIUG :
        (i) A summary of circumstances in which the CIUG can be terminated.

      • Appendix C — Simplified Prospectus

        The simplified prospectusG must contain at the very least the following information:

        (a) The nature of the CIUG , including a brief description of the legal status of the CIUG , the date it was established and how long it will continue;
        (b) The CIUG objectives, investment strategy or management style or policy;
        (c) The significant benefits to which a client in the CIUG will or may become entitled, including details about the circumstances and times at which these benefits will or may be provided, and the way these benefits will or may be provided;
        (d) The significant risks associated with investing in the CIUG ;
        (e) The costs, fees and other charges or expenses associated with an investment in or redemption of the CIUG , including a brief description of how they are determined and whether they are payable directors by clients or the CIUG ;
        (f) Key details about the pricing of the CIUG interest and how current pricing information may be obtained;
        (g) The date of issue and expiry (if applicable) of the simplified prospectusG ;
        (h) How a client can ask for a full prospectusG or other detailed information about the CIUG with an explanation that such information can be obtained free of charge;
        (i) Key details about the CIUG operatorG (including contact information), managerG , administratorG , custodianG , and auditor including their domicile, their key obligations to investors and their relationship to the CIUG operatorG ;
        (j) In summary form, selected financial information of the CIUG — including historic;
        (k) Performance of the CIUG over various time periods, compared to established and consistent benchmarks;
        (l) In summary form, the key operating rules of the CIUG , including the key client rights, such as ability to purchase holdingsG , redemption right or cooling off rights; and
        (m) The statement:
        "Important — if you are in any doubt about the contents of this simplified prospectus, you should refer to the full prospectus, or else seek independent professional financial advice. Remember that all investments carry varying levels of risk and that the value of your investment may go down as well as up. Investments in this collective investment undertaking are not considered deposits and are therefore not covered by the Kingdom of Bahrain's deposit protection scheme. The fact that this collective investment undertaking has been authorized by the Central Bank of Bahrain, does not mean that the CBB takes responsibility for the performance of these investments, nor for the correctness of any statements or representations made by the operatorG of this collective investment undertaking."

      • Appendix D — Admissible Assets and Limits (Retail CIU)

        Admissible assets Descriptions and Limits
        Cash and cash equivalents (including bank deposits and certificates of deposit — i.e. assets that may be realised in cash immediately).
        •   Not more than 20% of total value of the CIU'sG assets may be placed with a single party (or group of connected counterparties).
        Transferable securities including equity and debt securities.
        •   Not more than 10% of the total assets of the CIUG may be placed with a single party. (Where a stock represents more than 10% of a market index, and the CIU'sG investment objective is to replicate that market index, then the CIUG can hold up to the market weight of the stock in the index.)
        •   Not more than 20% of the total assets of the CIUG may be placed with a single group of connected parties.
        •   Securities not regularly traded on a recognised exchange are limited to 10% of the total assets of the CIUG .
        Government and public sector securities issued by GCCG and OECDG countries.
        •   Not more than 20% of total value of the CIU'sG assets may be with a single party.
        Authorised and regulated funds of the open ended type.
        •   Retail CIUsG with a 'fund of funds' investment strategy may invest up to 100% of their assets in authorised/regulated open-ended fundsG , providing the investment objectives of these funds is consistent with the investment objective of the CIUG , and providing its exposure to any single fund (or group of connected funds) does not exceed 10% of its assets.
        •   Other CIUsG may only invest in authorized/regulated open ended fundsG , consistent with their investment objectives, up to 20% of the total value of the CIU'sG assets. The CIU'sG exposure to any single fund (or group of connected funds) must not exceed 10% of its assets.
        REITsG listed on a recognised exchange
        •   Not more than 20% of total assets of the CIUG may be invested in this asset class. Single exposure limit is 10% of the CIU'sG total assets.
        Physical commodities and commodity based investments traded on a recognised market.
        •   Not more than 20% of total assets of the CIUG may be invested in this asset class. Single exposure limit is 10% of the CIU'sG total assets
        Approved financial derivatives and positions are (i) exchange traded options — long positions; (ii) long positions in forwards and futures; and (iii) sold positions in exchange traded options, forwards and financial futures if matching long positions exist or for hedging purposes. Underlying assets of the derivatives are:
        •   Any of the above, subject to limits specified above.
        •   With respect to interest rate or foreign exchange derivatives, the value of the underlying assets must be restricted to 20% of the total assets of the CIUG .
        Cash and cash equivalents (including bank deposits and certificates of deposit — i.e. assets that may be realised in cash immediately).
        •   Not more than 20% of total value of the CIU'sG assets may be placed with a single party (or group of connected counterparties).
        Transferable securities including equity and debt securities
        •   Not more than 10% of the total assets of the CIUG may be placed with a single party. (Where a stock represents more than 10% of a market index, and the CIU'sG investment objective is to replicate that market index, then the CIUG can hold up to the market weight of the stock in the index.)
        •   Not more than 20% of the total assets of the CIUG may be placed with a single group of connected parties.
        •   Securities not regularly traded on a recognised exchange are limited to 20% of the total assets of the CIUG .
        Government and public sector securities issued by GCCG and OECDG countries.
        •   Not more than 20% of total value of the CIU'sG assets may be with a single party.
        Collective Investment Undertakings
        •   Expert funds with a 'fund of funds' investment strategy may invest up to 100% of their assets in other CIUG (whether regulated or not), providing the investment objectives of these funds is consistent with the investment objective of the expert fund, and providing their exposure to any single fund (or group of connected funds) does not exceed 10% of their assets.
        •   Expert funds without a 'fund of funds' strategy may only invest in other CIUsG , consistent with their investment objectives, up to 20% of the total value of their assets
        REITsG and real estate holdings
        •   Allowed up to 100% of the CIU'sG assets. Single exposure limit is 10% of the CIU'sG total assets.
        Physical commodities and commodity based investments traded on a recognised market.
        •   Allowed up to 100% of the CIU'sG assets. Single exposure limit is 10% of the CIU'sG total assets.
        Approved financial derivatives and positions are: (i) exchange traded options — long positions; (ii) long positions in forwards and futures; and (iii) sold positions in exchange traded options, forwards and financial futures if matching long positions exist or for hedging purposes Underlying assets of the derivatives are:
        •   Any of the above, subject to limits specified above.
        •   With respect to interest rate or foreign exchange derivatives, the value of the underlying assets must be restricted to 20% of the total assets of the CIUG .

      • Appendix E — Contents of Financial Reports

        •   Annual reports must contain all the information required in this Appendix as well as a report issued by the administratorG .
        •   Half-year reports must contain at the very least the Statement of Assets and Liabilities and the Investment Portfolio Statement.
        •   All reports must contain the comparative figures for the previous period except for the Investment Portfolio Statement.
        •   All reports must be prepared in accordance with International Financial Reporting Standards.

        Statement of Assets and Liabilities:

        The following must be separately disclosed

        (a) Total value of investments
        (b) Bank balances
        (c) Dividends and other receivables
        (d) Amounts receivable on subscription
        (e) Bank loans and overdrafts or other forms of borrowings
        (f) Amounts payable on redemption
        (g) Distributions payable
        (h) Total value of all assets
        (i) Total value of all liabilities
        (j) Net asset value
        (k) Number of holdingsG in issue
        (l) Net asset value per holdingG

        Revenue Statement:

        (a) Total investment income net of withholding tax, broken down by category
        (b) Total other income, broken down by category
        (c) Equalisation on issue and cancellation of holdingsG
        (d) An itemized list of various costs debited to the CIUG including:
        a. Fees paid to the operatorG
        b. Remuneration of the administratorG , custodianG and managerG (as appropriate)
        c. Fees paid to the investment advisor (if any)
        d. Other amounts paid to any connected personsG of the CIUG
        e. Director's fee and remuneration
        f. Safe custody and bank charges
        g. Auditor's remuneration
        h. Interest on borrowings
        i. Legal and other professional expense
        j. Other
        (e) Amounts transferred to and from the capital account
        (f) Net income to be carried forward for distribution

        Distribution Statement:

        (a) Amount brought forward at the beginning of the period
        (b) Net income for the period
        (c) Interim distribution per holdingG and date of distribution
        (d) Final distribution per holdingG and date of distribution
        (e) Undistributed income carried forward

        Statement of Movements in Capital Account:

        (a) Value of the CIUG as at the beginning of the period
        (b) Number of holdingsG issued and the amounts received upon such issuance
        (c) Number of holdingsG redeemed and the amount paid on redemption
        (d) Any items resulting in an increase/decrease in value of the CIUG including:
        a. Surplus/loss on sale of investments
        b. Exchange gain/loss
        c. Unrealised appreciation/diminution in value of investments
        d. Net income for the period less distribution
        (e) Value of the CIUG as at the end of the period

        Notes to the accounts:

        The following matters should be set out in the notes to the accounts:

        (a) Principal accounting, investment and risk management policies
        (b) Transactions with connected persons
        (c) Details of any soft commission arrangements relating to dealings in the assets of the CIUG
        (d) Borrowings are secured or unsecured and the duration of the borrowings
        (e) Contingent liabilities and commitments
        (f) If the free negotiability of any asset is restricted by statutory or contractual requirements, this must be stated

        Contents of the Auditor's Report

        The report of the Auditor should state:

        (a) Whether, in the auditor's opinion, the accounts prepared for that period have been properly prepared in accordance with the relevant provisions of the rules in this Module;
        (b) Whether in the auditor's opinion, a true and fair view is given of the financial position of the CIUG at the period-end, and of its financial performance and its cash flows for the period then ended, in accordance with International Financial Reporting Standards;
        (c) Whether, in the auditor's opinion, proper books and records have been kept by the CIUG and the accounts prepared are in agreement with the CIU'sG books and records; and
        (d) Whether, in the auditor's opinion, the CIUG has complied with all applicable laws and regulations.
        (e) If an auditor of a CIUG :
        a. has reason to believe that the information provided to its participantsG or to the CBB does not truly describe the financial situation of the CIUG , or
        b. has reason to believe that there has been some breach of the CIUG documents, applicable laws and regulations or the CBB's directions, or
        c. has reason to believe that there exist circumstances which are likely to affect materially the ability of the CIUG to fulfill its obligations to its participantsG or to meet any of its financial obligations under the CIUG documents, applicable laws and regulations, or the CBB's directions, or
        d. has reason to believe that there are material defects in the financial systems, controls or accounting records of the CIUG , or has reason to believe that there are material inaccuracies in, or omissions from, any returns of a financial nature made by the CIUG and/or, as may be appropriate, any one or more of the relevant personsG , to the CBB, or
        e. proposes to qualify any certificate which he is to provide in relation to the financial statements or returns of the CIUG under Bahrain law and these rules
        he shall report the matter to the CBB in writing, with a copy to the CIUG and its relevant personsG , as appropriate, without delay.
        (f) The auditor of a CIUG shall, if requested by the CBB, furnish to it, with a copy to the CIUG and/or (as may be appropriate) the relevant personsG , a report stating whether in his opinion and to the best of his knowledge the CIUG has complied with the CIUG documents, applicable laws and regulations, and/or any relevant directions of the CBB. The auditor may be requested by the CBB to supply it with information available to him as a result of his audit of the CIUG .

        Investment Portfolio

        (a) Number or quantity of each investment together with the description and market value
        (b) The total investment stated at cost
        (c) The value of each investment as a percentage of the net asset value
        (d) Statement of movements in portfolio investments since the end of the preceding accounting period

        Performance Table

        (a) A comparative table covering the last 3 financial years and including, for each financial year, at the end of the financial year :
        a. The total net asset value; and
        b. The net asset value per holdingG .
        (b) A performance record over the last 10 financial years; or of the CIUG has not been in existence during the whole of that period, over the whole period in which it has been in existence, showing the highest issue price and the lowest redemption price of its holdingsG during each of those years.

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