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  • HC-2 Approved Persons Loyalty

    • HC-2.1 Principle

      • HC-2.1.1

        The approved persons must have full loyalty to the investment firm licensee.

        January 2011

    • HC-2.2 Personal Accountability

      • HC-2.2.1

        The Board and its members must act with honesty, integrity, due skill and care, and in the best interests of the licensee, its shareholders and clients.

        January 2011

      • HC-2.2.2

        In assessing compliance with Paragraph HC-2.2.1, the CBB will take into account all actions of the Board and its members. The interest of the licensee includes the licensee's continued compliance with all relevant rules and regulations, and the interests of employees, clients and other stakeholders. The interest of shareholders includes the current and future value of the licensee, its status as a going concern, transparency and disclosure of information to the market. The interest of clients includes ensuring that the licensee fulfils its obligations under its terms of business and treats all clients fairly and pays equal regard to the interests of all clients.

        January 2011

      • HC-2.2.3

        Each member of the board must understand that under the Company Law he is personally accountable to the investment firm licensee and the shareholders if he violates his legal duty of loyalty to the investment firm licensee, and that he can be personally sued by the investment firm licensee or the shareholders for such violations.

        Amended: January 2013
        January 2011

      • HC-2.2.4

        An investment firm licensee's Board must establish and disseminate to all employees of the licensee a corporate code of conduct.

        Amended: October 2013
        January 2011

      • HC-2.2.5

        The code of conduct must establish standards by giving examples or expectations as regards:

        (a) Honesty;
        (b) Integrity;
        (c) The avoidance or disclosure of conflicts of interest;
        (d) Maintaining confidentiality;
        (e) Professionalism;
        (f) Commitment to the law and best practices; and
        (g) Reliability.
        January 2011

      • HC-2.2.6

        The Board must establish and disseminate to employees policies and processes for the identification, reporting and prevention or management of potential conflicts of interest, including matters such as:

        (a) Related party transactions;
        (b) The misuse of the licensee's assets; and
        (c) The use of privileged information for personal advantage ('insider trading').
        Amended: October 2013
        January 2011

      • HC-2.2.7

        Any transaction in which Board members or any member of management have potential conflicts of interest should either be proscribed or require formal documented approval by the Board, with measures taken to manage those conflicts (see also Paragraph HC-2.4.1).

        January 2011

      • HC-2.2.8

        The Board must ensure that policies and procedures are in place to ensure that necessary customer confidentiality is maintained.

        January 2011

      • HC-2.2.9

        The duty of loyalty includes a duty not to use property of the investment firm licensee for his personal needs as though it was his own property, not to disclose confidential information of the investment firm licensee or use it for his personal profit, not to take business opportunities of the investment firm licensee for himself, not to compete in business with the investment firm licensee, and to serve the investment firm licensee's interest in any transactions with the company in which he has a personal interest.

        January 2011

      • HC-2.2.10

        For purposes of Paragraph HC-2.2.9, an approved person should be considered to have a "personal interest" in a transaction with the company if:

        (a) He himself;
        (b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or
        (c) Another company of which he is a director or controller,

        is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)

        January 2011

    • HC-2.3 Avoidance of Conflicts of Interest

      • HC-2.3.1

        Investment firm licensees must maintain an organisational structure that minimises the risk of conflicts of interest arising.

        January 2011

      • HC-2.3.2

        For the purposes of Rule HC-2.3.1, the CBB would expect investment firm licensees to separate front and back office functions, as well as proprietary trading and client trading/advisory functions.

        January 2011

      • HC-2.3.3

        Each approved person must make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the investment firm licensee.

        January 2011

      • HC-2.3.4

        Board members must absent themselves from any discussion or decision-making that involves a subject where they are incapable of providing objective advice, or which involves a subject, transaction or proposed transaction where there is a potential conflict of interest.

        January 2011

      • HC-2.3.5

        Bahraini investment firm licensees must have in place a board approved policy on the employment of relatives of approved persons and a summary of such policy must be disclosed in the annual report of the Bahraini investment firm licensees.

        Amended: July 2016
        Added: April 2016

      • HC-2.3.6

        Overseas investment firm licensees must have in place a policy on the employment of relatives of approved persons pertaining to their Bahrain operations.

        Added: July 2016

    • HC-2.4 Disclosure of Conflicts of Interest

      • HC-2.4.1

        Each approved person must inform the entire Board of conflicts of interest as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure must include all material facts in the case of a contract or transaction involving the approved person. The approved persons must understand that any approval of a conflict transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.

        Amended: January 2013
        January 2011

      • HC-2.4.2

        Board members must declare annually in writing all of their interests (and those of their family) in other enterprises or activities (whether as a Director, shareholder, senior executive or other form of participation) to the Board (or appropriate Board sub-Committee).

        January 2011

      • HC-2.4.2A

        The chief executive/general manager of the Bahraini investment firm licensees must disclose to the board of directors on an annual basis those individuals who are occupying controlled functions and who are relatives of any approved persons within the Bahraini investment firm licensee.

        Amended: July 2016
        Added: April 2016

      • HC-2.4.2B

        The chief executive/general manager of the overseas investment firm licensees must disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupying controlled functions and who are relatives of any approved persons within the overseas investment firm licensee.

        Added: July 2016

      • HC-2.4.3

        The Board of the Bahraini investment firm licensee should establish formal procedures for:

        (a) Periodic disclosure and updating of information by each approved person on his actual and potential conflicts of interest; and
        (b) Advance approval by directors or shareholders who do not have an interest in the transactions in which an investment firm licensee's approved person has a personal interest. The Board should require such advance approval in every case.
        Amended: July 2016
        January 2011

    • HC-2.5 Disclosure of Conflicts of Interest to Shareholders

      • HC-2.5.1

        The investment firm licensee must disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and must disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.

        January 2011

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