CBB Volume 6: Contents

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

    • Part A


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

      • Introduction

        • UG — User's Guide

          • UG-A Introduction

            • UG-A.1 Purpose

              • Executive Summary

                • UG-A.1.1

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

                • UG-A.1.2

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

                  Amended: April 2013

                • UG-A.1.3

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

                • UG-A.1.4

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

                  Amended: April 2013

                • UG-A.1.5

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

              • Legal Basis

                • UG-A.1.6

                  This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 6 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all CBB licensees (including their approved persons) that undertake relevant capital markets activity (as specified in the Scope of Application Chapters contained in each Volume 6 Module).

                  Amended: April 2013

                • UG-A.1.7

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

                • UG-A.1.8

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

            • UG-A.2 Module History

              • UG-A.2.1

                This Module was first issued in April 2007, as part of the first phase of Volume 6 (Capital Markets) to be released. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

              • UG-A.2.2

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

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

              • UG-A.2.3

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

          • UG-1 Rulebook Status and Application

            • UG-1.1 Legal Basis

              • General

                • UG-1.1.1

                  Volume 6 (Capital Markets) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 ('the CBB Law'). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Articles 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).

                • UG-1.1.2

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

                • UG-1.1.3

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

                  Amended: April 2013

              • CBB's Rulemaking Instruments

                • UG-1.1.4

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

                • UG-1.1.5

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

                • UG-1.1.6

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

                • UG-1.1.7

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

                • UG-1.1.8

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

                • UG-1.1.9

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

            • UG-1.2 Status of Provisions

              • UG-1.2.1

                The contents of the CBB Rulebook are categorised either as Rules or as Guidance. Rules have a binding effect. Guidance is not binding: rather, it is material that helps inform a particular Rule or set of Rules, or provides other general information.

              • UG-1.2.2

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

              • UG-1.2.3

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

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

              • UG-1.2.4

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

              • UG-1.2.5

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

              • UG-1.2.6

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

              • UG-1.2.7

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

              • UG-1.2.8

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

            • UG-1.3 Application

              • UG-1.3.1

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

              • UG-1.3.2

                The precise scope of application of Volume 6 is specified in the Scope of Application Chapter contained in each Module (except those listed in the 'Introduction' part of Volume 6): these specify the particular activities (and associated persons) to which the requirements in the Module concerned apply. In addition, each Rule (or Section containing a series of Rules) is drafted such that its application is clearly highlighted for the user. Finally, each Module, in its Purpose Section, specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module's requirements.

              • UG-1.3.3

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

                Added: October 2016

            • UG-1.4 Effective Date

              • UG-1.4.1

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

              • UG-1.4.2

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

          • UG-2 Rulebook Structure and Format

            • UG-2.1 Rulebook Structure

              • Rulebook Volumes

                • UG-2.1.1

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

                  Volume 1 Conventional Banks
                  Volume 2 Islamic Banks
                  Volume 3 Insurance
                  Volume 4 Investment Business
                  Volume 5 Specialised Activities
                  Volume 6 Capital Markets
                  Volume 7 Collective Investment Undertakings
                  Amended: April 2013

                • UG-2.1.2

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

                  Amended: April 2013

              • Rulebook Contents (Overview)

                • UG-2.1.3

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

                  (a) High-level Standards;
                  (b) Business Standards;
                  (c) Prudential requirements;
                  (d) Reporting Requirements;
                  (e) Enforcement and Redress; and, where appropriate,
                  (f) Sector Guides.
                  Amended: April 2013

                • UG-2.1.4

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

                • UG-2.1.5

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

                  Amended: April 2013

                • UG-2.1.6

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

            • UG-2.2 Volume Structure

              • Modules

                • UG-2.2.1

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

                • UG-2.2.2

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

              • Chapters

                • UG-2.2.3

                  Each Module consists of Chapters, categorised into two types:

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

                • UG-2.2.4

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

              • Sections and Paragraphs

                • UG-2.2.5

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

              • Table of Contents

                • UG-2.2.6

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

                • UG-2.2.7

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

            • UG-2.3 Format and Page Layout

              • Headers

                • UG-2.3.1

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

              • Footers

                • UG-2.3.2

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

              • Defined Terms

                • UG-2.3.3

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

              • Cross-references

                • UG-2.3.4

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

              • Text Format

                • UG-2.3.5

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

                • UG-2.3.6

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

          • UG-3 Rulebook Maintenance and Access

            • UG-3.1 Rulebook Maintenance

              • Quarterly Updates

                • UG-3.1.1

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

                • UG-3.1.2

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

                • UG-3.1.3

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

                • UG-3.1.4

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

                • UG-3.1.5

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

              • Changes to Numbering

                • UG-3.1.6

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

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

                • UG-3.1.7

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

            • UG-3.2 Rulebook Access

              • Availability

                • UG-3.2.1

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

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

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

              • Queries

                • UG-3.2.2

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

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

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

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

                  Amended: April 2013

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

            Deleted: April 2013

        • ES — Executive Summary

          (to be issued)

      • Institutions

        • MAE — Markets and Exchanges

          • MAE-A Introduction

            • MAE-A.1 Purpose

              • Executive Summary

                • MAE-A.1.1

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

                • MAE-A.1.2

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

                • MAE-A.1.3

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

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

                • MAE-A.1.4

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

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

                • MAE-A.1.4A

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

                  Added: October 2017

              • Legal Basis

                • MAE-A.1.5

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

                • MAE-A.1.6

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

                • MAE-A.1.7

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

                  Added: April 2016

                • MAE-A.1.8

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

                  Added: April 2016

            • MAE-A.2 Module History

              • Evolution of Module

                • MAE-A.2.1

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

                  Amended: April 2013

                • MAE-A.2.2

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

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

              • Superseded Requirements

                • MAE-A.2.3

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

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

            • MAE-A.3 Interaction with Other Modules

              • MAE-A.3.1

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

                Amended: April 2016

              • MAE-A.3.2

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

                Amended: April 2016

              • MAE-A.3.3

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

              • MAE-A.3.4

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

                Amended: April 2016

              • MAE-A.3.5

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

                Amended: April 2016

              • MAE-A.3.6

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016

              • MAE-A.3.7

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016

              • MAE-A.3.8

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

                Added: April 2016

              • MAE-A.3.9

                Licensed exchanges, licensed market operators, market makers and issuers must in addition to complying with the market making provision under this Module refer to and comply with Module MIR (Market Intermediaries and Representatives) which sets forth the CBB requirements for market making.

                Added: January 2019

            • MAE-A.4 Division of Responsibilities

              • MAE-A.4.1

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

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

              • MAE-A.4.2

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

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

              • MAE-A.4.3

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

                Amended: October 2017
                Amended: April 2016

              • MAE-A.4.4

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

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

          • MAE-B Purpose

            • MAE-B.1 Scope

              • MAE-B.1.1

                This Module shall apply to markets operated by a licensed exchange or licensed market operator in or from the Kingdom of Bahrain for the trading of securities, including commodities and/or futures contracts.

                Amended: April 2016

              • MAE-B.1.2

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

                Amended: April 2016

              • MAE-B.1.3

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

                Added: October 2017

            • MAE-B.2 Definitions

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

              Deleted: July 2016

          • MAE-1 Licensing

            • MAE-1.1 Requirement to be Licensed

              • MAE-1.1.1

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

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

              • MAE-1.1.2

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

                (a) As a licensed exchange unless he is a licensed exchange; or
                (b) As a licensed market operator unless he is a licensed market operator.

              • MAE-1.1.3

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

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

              • MAE-1.1.4

                No person may market any financial services in the Kingdom of Bahrain unless:

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

              • MAE-1.1.5

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

                Added: April 2013

              • MAE-1.1.6

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

                Added: April 2013

            • MAE-1.2 Application for License

              • MAE-1.2.1

                A person may apply to the CBB to be:

                (a) Licensed as a licensed exchange;
                (b) Licensed as a licensed market operator; or
                (c) An exempt exchange or exempt market operator.

              • MAE-1.2.2

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

              • MAE-1.2.3

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

              • MAE-1.2.4

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

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

              • MAE-1.2.5

                The applications must include evidence that:

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

              • MAE-1.2.6

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

              • MAE-1.2.7

                The CBB may refuse to accept any application if:

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

              • MAE-1.2.8

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

                Amended: April 2016

              • MAE-1.2.9

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

            • MAE-1.3 Licensing of Exchanges and Market Operators

              • MAE-1.3.1

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

              • MAE-1.3.2

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

                Amended: April 2016

              • MAE-1.3.2A

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

                Added: April 2016

              • MAE-1.3.3

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

                Amended: April 2016

              • MAE-1.3.4

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

                (a) The activities that the person may undertake;
                (b) The securities or futures contracts that may be traded on any market established or operated by the person; and
                (c) The nature of the investors or participants who may use, invest in or participate in the securities or futures contracts traded on any market established or operated by the person.
                Amended: April 2016

              • MAE-1.3.5

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

                Amended: April 2016

              • MAE-1.3.6

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

              • MAE-1.3.7

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

            • MAE-1.4 Exemption of Exchanges and Market Operators

              • MAE-1.4.1

                The CBB may:

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

              • MAE-1.4.2

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

              • MAE-1.4.3

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

              • MAE-1.4.4

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

                Amended: April 2016

              • MAE-1.4.5

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

              • MAE-1.4.6

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

                (a) The activities that the person may undertake;
                (b) The securities or futures contracts that may be traded on any market established or operated by the person; and
                (c) The nature of the investors or participants who may use, participate or invest in the securities or futures contracts traded on any market established or operated by the person.
                Amended: April 2016

              • MAE-1.4.7

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

              • MAE-1.4.8

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

                Amended: April 2016

              • MAE-1.4.9

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

            • MAE-1.5 Power of CBB to Revoke Exemption

              • MAE-1.5.1

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

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

              • MAE-1.5.2

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

              • MAE-1.5.3

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

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

              • MAE-1.5.4

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

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

              • MAE-1.5.5

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

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

              • MAE-1.5.6

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

            • MAE-1.6 Criteria for Granting License

              • MAE-1.6.1

                The CBB may license a person as a licensed exchange or licensed market operator if:

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

              • MAE-1.6.2

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

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

              • MAE-1.6.3

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

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

              • MAE-1.6.4

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

              • MAE-1.6.5

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

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

            • MAE-1.7 Surrender of License or Cessation of Business

              • MAE-1.7.1

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

                Amended: April 2016

              • MAE-1.7.2

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

              • MAE-1.7.3

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

              • MAE-1.7.4

                Any objections received from any member, user or participant of the licensed exchange or licensed market operator shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the exchange or the operator.

              • MAE-1.7.5

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

            • MAE-1.8 Cancellation or Amendment of License

              • MAE-1.8.1

                The CBB may cancel any license of a person as a licensed exchange or licensed market operator if:

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

              • MAE-1.8.2

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

              • MAE-1.8.3

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

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

              • MAE-1.8.4

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

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

              • MAE-1.8.5

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

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

              • MAE-1.8.6

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

                Amended: July 2016

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

              • MAE-1.9.1

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

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

              • MAE-1.9.1A

                The following fee is currently prescribed for licensed exchanges and licensed market operators:

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

              • MAE-1.9.1B

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

                Added: April 2014

              • MAE-1.9.2

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

                Amended: April 2014

              • MAE-1.9.3

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

                Added: April 2016

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

              • MAE-1.10.1

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

              • MAE-1.10.2

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

                Added: July 2017

              • MAE-1.10.3

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

                Added: July 2017

            • MAE-1.11 Place of Business

              • MAE-1.11.1

                No licensed exchange or licensed market operator must, without a prior written approval of the CBB:

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

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

            • MAE-2.1 General Obligations

              • Licensing Requirements

                • MAE-2.1.1

                  A licensed exchange or licensed market operator shall, in respect of every market it operates:

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

              • Notification Requirements

                • MAE-2.1.2

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

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

                • MAE-2.1.3

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

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

                • MAE-2.1.4

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

                  Amended: April 2016

                • MAE-2.1.5

                  An exchange may levy on its members, participants and users such fees as it may deem necessary in the form of:

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

                • MAE-2.1.6

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

                • MAE-2.1.7

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

                • MAE-2.1.8

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

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

            • MAE-2.2 Obligation to Maintain Proper Records

              • MAE-2.2.1

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

            • MAE-2.3 Final Accounts and Auditing

              • MAE-2.3.1

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

              • MAE-2.3.2

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

              • MAE-2.3.3

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

              • MAE-2.3.4

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

              • MAE-2.3.5

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

                Amended: April 2016

              • MAE-2.3.6

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

              • MAE-2.3.7

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

              • MAE-2.3.8

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

              • MAE-2.3.9

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

              • MAE-2.3.10

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

                Amended: July 2016

              • MAE-2.3.11

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

                Amended: July 2016

            • MAE-2.4 Obligation to Submit Periodic Reports

              • MAE-2.4.1

                A licensed exchange or licensed market operator shall submit to the CBB:

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

              • MAE-2.4.2

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

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

              • IIS Reporting Requirements

                • MAE-2.4.3

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

                  Added: April 2013

                • MAE-2.4.4

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

                  Added: April 2013

            • MAE-2.5 Obligation to Assist CBB

              • MAE-2.5.1

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

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

              • MAE-2.5.2

                The CBB may at is discretion:

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

            • MAE-2.6 Obligation to Maintain Confidentiality

              • MAE-2.6.1

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

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

              • MAE-2.6.2

                Paragraph MAE-2.6.1 does not apply to:

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

              • MAE-2.6.3

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

                Amended: April 2016

            • MAE-2.7 Exceptions to Obligation to Maintain Confidentiality

              • MAE-2.7.1

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

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

              • MAE-2.7.2

                Where user information is disclosed under MAE-2.7.1 (f), the licensed exchange or licensed market operator shall:

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

              • MAE-2.7.3

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

              • MAE-2.7.4

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

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

            • MAE-2.8 Provision of Information to Investors

              • MAE-2.8.1

                A licensed exchange or licensed market operator shall:

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

              • MAE-2.8.2

                In Paragraph MAE-2.8.1 "investor" means:

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

            • MAE-2.9 Transmission and Storage of User Information

              • MAE-2.9.1

                A licensed exchange or licensed market operator shall take all reasonable measures to maintain the integrity and security of the transmission and storage of user information.

            • MAE-2.10 Business Continuity Plan

              • MAE-2.10.1

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

              • MAE-2.10.2

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

              • MAE-2.10.3

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

              • MAE-2.10.4

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

            • MAE-2.11 Obligations of Crowdfunding Platform Operators

              • MAE-2.11.1

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

                Added: October 2017

              • MAE-2.11.2

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

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

              • MAE-2.11.3

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

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

              • MAE-2.11.4

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

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

                • Appointment of Shari'a Advisor

                  • MAE-2.11.5

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

                    Added: October 2017

                  • MAE-2.11.6

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

                    Added: October 2017

                  • MAE-2.11.7

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

                    Added: October 2017

                  • MAE-2.11.8

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

                    Added: October 2017

                  • MAE-2.11.9

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

                    Added: October 2017

                • Type of Securities Eligible for Hosting

                  • MAE-2.11.10

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

                    Added: October 2017

                  • MAE-2.11.11

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

                    Added: October 2017

                • Permitted Equity Crowdfunding Issuers

                  • MAE-2.11.12

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

                    Added: October 2017

                  • MAE-2.11.13

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

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

                  • MAE-2.11.14

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

                    Added: October 2017

                • Overseas Equity Crowdfunding Issuers

                  • MAE-2.11.15

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

                    Added: October 2017

                  • MAE-2.11.16

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

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

                • Limits to Funds Raised

                  • MAE-2.11.17

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

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

                • Eligible Investors and Investment Limits

                  • MAE-2.11.18

                    Only accredited investors and expert investors are eligible to register with a crowdfunding platform operator and participate in an equity crowdfunding offer.

                    Added: October 2017

                  • MAE-2.11.19

                    [This Paragraph was deleted in January 2019].

                    Deleted: January 2019
                    Added: October 2017

                  • MAE-2.11.20

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

                    Added: October 2017

                  • MAE-2.11.21

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

                    Added: October 2017

                • Disclosure Requirements

                  • MAE-2.11.22

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

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

                  • MAE-2.11.23

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

                    Added: October 2017

                • Warning Statement

                  • MAE-2.11.24

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

                    "Warning statement about equity crowdfunding

                    Equity crowd funding is risky.

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

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

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

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

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

                    Added: October 2017

                  • MAE-2.11.25

                    A crowdfunding platform operator:

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

                • Investor Agreement

                  • MAE-2.11.26

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

                    Added: October 2017

                  • MAE-2.11.27

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

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

                • Investor Money

                  • MAE-2.11.28

                    A crowdfunding platform operator must:

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

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

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

                  • MAE-2.11.29

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

                    Added: October 2017

                • Cooling-off Period

                  • MAE-2.11.29A

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

                    Added: January 2019

                • Segregation of Client Assets

                  • MAE-2.11.30

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

                    Added: October 2017

                  • MAE-2.11.31

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

                    Added: October 2017

                • Client Money

                  • MAE-2.11.32

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

                    Added: October 2017

                • Record-keeping

                  • MAE-2.11.33

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

                    Added: October 2017

                • Compliance

                  • MAE-2.11.34

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

                    Added: October 2017

                  • MAE-2.11.35

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

                    Added: October 2017

                • Share Register

                  • MAE-2.11.36

                    A crowdfunding platform operator must:

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

                  • MAE-2.11.37

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

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

                  • MAE-2.11.38

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

                    Added: October 2017

                  • MAE-2.11.39

                    A crowdfunding platform operator must ensure that an equity crowdfunding issuer adheres to the requirements of equity crowdfunding offer as stipulated under Section MAE-2.12.

                    Added: October 2017

            • MAE-2.12 Equity Crowdfunding Offer

              • MAE-2.12.1

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

                Added: October 2017

              • MAE-2.12.2

                Equity crowdfunding offer must be exclusively made through a crowdfunding platform. An application for equity crowdfunding offer must only be made to and approved by a crowdfunding platform operator.

                Added: October 2017

              • MAE-2.12.3

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

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

                • Equity Crowdfunding Offering Statement Disclosure

                  • MAE-2.12.4

                    An equity crowdfunding issuer proposing to make an equity crowdfunding offer must submit an equity crowdfunding offering statement with all relevant information to the crowdfunding platform operator including the following:

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

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

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

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

                  • MAE-2.12.5

                    An equity crowdfunding issuer proposing to be hosted on a crowdfunding platform:

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

                • Offer Period

                  • MAE-2.12.6

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

                    Added: October 2017

                • Minimum Subscription

                  • MAE-2.12.7

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

                    Added: October 2017

                  • MAE-2.12.8

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

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

                • Investment Commitment

                  • MAE-2.12.9

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

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

                    Added: October 2017

                  • MAE-2.12.10

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

                    Added: October 2017

                  • MAE-2.12.11

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

                    Added: October 2017

                • Oversubscription

                  • MAE-2.12.12

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

                    Added: October 2017

                • Allotment, Dispatch and Refund

                  • MAE-2.12.13

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

                    Added: October 2017

                  • MAE-2.12.14

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

                    Added: October 2017

                • Reporting Requirements

                  • MAE-2.12.15

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

                    Added: October 2017

                  • MAE-2.12.16

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

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

                  • MAE-2.12.17

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

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

                • Limits on Advertising

                  • MAE-2.12.18

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

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

                  • MAE-2.12.19

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

                    Added: October 2017

                  • MAE-2.12.20

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

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

                    Added: October 2017

          • MAE-3 Rules of Licensed Exchanges

            • MAE-3.1 General Obligations

              • MAE-3.1.1

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

              • MAE-3.1.2

                A licensed exchange or licensed market operator shall provide the business rules and listing rules in conformity with law and relevant CBB regulations or directives.

              • MAE-3.1.3

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

            • MAE-3.2 Content of Rules of Licensed Exchanges

              • MAE-3.2.1

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

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

            • MAE-3.3 Amendment of Business Rules and Listing Rules

              • MAE-3.3.1

                A licensed exchange or licensed market operator which intends to amend its business rules or listing rules shall, prior to making the amendment, notify the CBB of:

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

              • MAE-3.3.2

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

              • MAE-3.3.3

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

              • MAE-3.3.4

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

              • MAE-3.3.5

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

              • MAE-3.3.6

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

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

              • MAE-3.3.7

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

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

              • MAE-3.4.1

                The business rules of a licensed exchange or licensed market operator shall be deemed to be, and shall operate as, a binding contract:

                (a) Between the licensed exchange or licensed market operator and each member; and
                (b) Between each member and every other member.

              • MAE-3.4.2

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

            • MAE-3.5 Determination of Position and Trading Limits

              • MAE-3.5.1

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

              • MAE-3.5.2

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

              • MAE-3.5.3

                The licensed exchange or licensed market operator:

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

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

              • MAE-3.6.1

                Any failure by a licensed exchange or licensed market operator to comply with:

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

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

                Amended: April 2016

            • MAE-3.7 Requirements to Register Trading Personnel

              • MAE-3.7.1

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

            • MAE-3.8 Compliance Officer

              • MAE-3.8.1

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

              • MAE-3.8.2

                In accordance with MAE-3.8.1:

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

            • MAE-3.9 Outsourcing

              • MAE-3.9.1

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

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

          • MAE-4 Instruments, Transactions and Contracts

            • MAE-4.1 Listing of Contracts and Instruments

              • MAE-4.1.1

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

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

              • MAE-4.1.2

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

                Amended: April 2016

            • MAE-4.2 Listing of Licensed Exchanges on Securities Market

              • MAE-4.2.1

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

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

              • MAE-4.2.2

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

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

              • MAE-4.2.3

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

                (a) Modify the listing rules of the securities market for the purpose of their application to the listing for quotation or trading of the securities of the licensed exchange; or
                (b) Waive the application of any listing rule of the securities market to the licensed exchange.

            • MAE-4.3 Suspension of Securities

              • MAE-4.3.1

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

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

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

              • MAE-4.3.2

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

              • MAE-4.3.3

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

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

            • MAE-4.4 Emergency Powers of the CBB

              • MAE-4.4.1

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

              • MAE-4.4.2

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

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

              • MAE-4.4.3

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

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

              • MAE-4.4.4

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

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

              • MAE-4.4.5

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

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

              • MAE-4.5.1

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

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

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

                Amended: April 2016

              • MAE-4.5.2

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

              • MAE-4.5.3

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

              • MAE-4.5.4

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

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

              • MAE-4.5.5

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

            • MAE-4.6 Registration of Market Maker

              • Eligibility

                • MAE-4.6.1

                  A licensed exchange or licensed market operator must ensure that a licensee meets the following requirements prior to being registered as a market maker:

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

                • MAE-4.6.2

                  A licensed exchange or licensed market operator must formulate its own objective eligibility criteria for registration of market maker. The criteria, at the minimum, must include;

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

                • MAE-4.6.3

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

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

                • MAE-4.6.4

                  A licensee, as specified in Paragraph MAE-4.6.1, desirous of undertaking market making activity must apply to the licensed exchange or licensed market operator for registration as a market maker.

                  Added: January 2019

                • MAE-4.6.5

                  A licensee must demonstrate to the satisfaction of the licensed exchange or licensed market operator that it is suitably qualified to undertake market making activity.

                  Added: January 2019

                • MAE-4.6.6

                  A licensed exchange or licensed market operator may, prior to issuing its consent for registration of a member as a market maker, may conduct on-site inspection of the member to ensure the availability of requisite systems, processes and infrastructure for undertaking market making activity.

                  Added: January 2019

                • MAE-4.6.7

                  If the licensed exchange or licensed market operator is satisfied that the member is eligible to carryout market making activities, the licensed exchange or licensed market operator may appoint the member as a market maker and enter into a market maker agreement with the member specifying the date of commencement of its term as market maker.

                  Added: January 2019

                • MAE-4.6.8

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

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

              • Market Making Scheme

                • MAE-4.6.9

                  A licensed exchange or licensed market operator must ensure that:

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

                • MAE-4.6.10

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

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

                • MAE-4.6.11

                  A licensed exchange or licensed market operator must review and approve the market making agreement entered between an issuer of listed security and a market maker. While assessing the market making agreement, the licensed exchange or licensed market operator must take into account the requirements contained in Section MIR-4.19.

                  Added: January 2019

                • MAE-4.6.12

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

                  Added: January 2019

                • MAE-4.6.13

                  A licensed exchange or licensed market operator may lay down additional criteria for market makers as risk containment measure.

                  Added: January 2019

              • Temporary Suspension of Market Making Activity

                • MAE-4.6.14

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

                  Added: January 2019

                • MAE-4.6.15

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

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

                • MAE-4.6.16

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

                  Added: January 2019

                • MAE-4.6.17

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

                  Added: January 2019

              • Deregistration of Market Maker

                • MAE-4.6.18

                  A licensed exchange or licensed market operator must set out the requirements for deregistration of a market maker.

                  Added: January 2019

                • MAE-4.6.19

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

                  Added: January 2019

              • Suspension and Cancellation of Registration

                • MAE-4.6.20

                  A licensed exchange or licensed market operator must restrict or suspend activities of market maker or cancel its registration where the market maker;

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

                • MAE-4.6.21

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

                  Added: January 2019

                • MAE-4.6.22

                  A licensed exchange or licensed market operator must disseminate to the markets as soon as possible the information relating to imposition of restriction, suspension or cancellation of registration on a market maker.

                  Added: January 2019

              • Disclosure, Notification and Reporting

                • MAE-4.6.23

                  A licensed exchange or licensed market operator must publish on its website the market making rules, the name of the members that have been registered as market makers, name of the issuer and market maker who have entered into market making agreement and the security in which the market maker undertakes market making.

                  Added: January 2019

                • MAE-4.6.24

                  A licensed exchange or licensed market operator must notify the CBB immediately in the following events:

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

                • MAE-4.6.25

                  A licensed exchange or licensed market operator must submit a monthly report, within 10 business days from the end of the month, summarizing the market making activities undertaken by market makers, in the format specified by the CBB.

                  Added: January 2019

          • MAE-5 Matters Requiring Approval of CBB

            • MAE-5.1 Control of Substantial Shareholding in Licensed Exchanges

              • MAE-5.1.1

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

              • MAE-5.1.2

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

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

              • MAE-5.1.3

                In this Section:

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

              • MAE-5.1.4

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

                Amended: April 2016

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

              • MAE-5.2.1

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

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

              • MAE-5.2.2

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

              • MAE-5.2.3

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

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

              • MAE-5.2.4

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

              • MAE-5.2.5

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

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

              • MAE-5.2.6

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

              • MAE-5.2.7

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

              • MAE-5.2.8

                The CBB may exempt:

                (a) Any person or class of persons; or
                (b) Any class or description of shares or interests in shares;

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

            • MAE-5.3 Authorisation of Approved Persons

              • Prior Approval Requirements and Process

                • MAE-5.3.1

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

                  Amended: April 2016
                  Amended: April 2013

                • MAE-5.3.2

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

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

                • MAE-5.3.2A

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

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

                • MAE-5.3.2B

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

                  Added: April 2016

                • MAE-5.3.2C

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

                  Added: April 2016

                • MAE-5.3.3

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

                  Amended: April 2013

                • MAE-5.3.4

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

                  Amended: April 2016
                  Amended: April 2013

                • MAE-5.3.5

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

                  Amended: April 2013

                • MAE-5.3.6

                  In accordance with Paragraph MAE-5.3.5:

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

                • MAE-5.3.7

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

                  Amended: April 2013

                • MAE-5.3.7A

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

                  Added: April 2016

                • MAE-5.3.7B

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

                  Amended: April 2018
                  Added: April 2016

                • MAE-5.3.7C

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

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

                • MAE-5.3.7D

                  For existing licensees applying for the appointment of a Board Director or the Chief Executive/General Manager, the authorised representative should be the Chairman of the Board or a Director signing on behalf of the Board. For all other controlled functions, the authorised representative should be the Chief Executive/General Manager.

                  Added: April 2016

              • Fit and Proper Requirements

                • MAE-5.3.8

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

                  Amended: April 2016
                  Added: April 2013

                • MAE-5.3.8A

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

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

                • MAE-5.3.8B

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

                  Added: April 2016

                • MAE-5.3.8C

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

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

                • MAE-5.3.8D

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

                  Added: April 2016

                • MAE-5.3.9

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

                  Added: April 2013

                • MAE-5.3.10

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

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

                • MAE-5.3.11

                  [This Paragraph was deleted in April 2016.]

                  Deleted: April 2016
                  Added: April 2013

                • MAE-5.3.12

                  [This Paragraph was deleted in April 2016.]

                  Deleted: April 2016
                  Added: April 2013

                • MAE-5.3.13

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

                  Amended: April 2016
                  Added: April 2013

              • Assessment of Application

                • MAE-5.3.14

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

                  Amended: April 2016
                  Added: April 2013

                • MAE-5.3.14A

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

                  Added: April 2016

                • MAE-5.3.15

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

                  Amended: April 2016
                  Added: April 2013

              • Appeal Process

                • MAE-5.3.16

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

                  Amended: April 2016
                  Added: April 2013

                • MAE-5.3.17

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

                  Amended: April 2016
                  Amended: April 2013

              • Notification Requirements and Process

                • MAE-5.3.18

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

                  Amended: April 2013

                • MAE-5.3.18A

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

                  Added: April 2016

                • MAE-5.3.19

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

                  Amended: April 2013

                • MAE-5.3.20

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

                  Amended: April 2013

              • Amendment of Authorisation

                • MAE-5.3.21

                  A licensed exchange must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

                  Added: April 2013

                • MAE-5.3.22

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

                  Added: April 2013

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

                • MAE-5.3.23

                  Where the CBB is satisfied that an approved person:

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

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

                  Added: April 2013

                • MAE-5.3.24

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

                  Added: April 2013

                • MAE-5.3.25

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

                  Added: April 2013

                • MAE-5.3.26

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

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

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

                • MAE-5.3.27

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

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

            • MAE-5.4 Business Transfer

              • MAE-5.4.1

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

                Amended: April 2016

              • MAE-5.4.2

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

              • MAE-5.4.3

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

              • MAE-5.4.4

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

              • MAE-5.4.5

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

                Amended: July 2016

              • MAE-5.4.6

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

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

              • MAE-5.4.7

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

                Amended: July 2016

              • MAE-5.4.8

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

              • MAE-5.4.9

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

          • MAE-6 Control of Licensed Exchanges

            • MAE-6.1 Control of Licensed Exchanges

              • MAE-6.1.1

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

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

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

                Amended: April 2013

              • MAE-6.1.2

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

              • MAE-6.1.3

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

              • MAE-6.1.4

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

                Amended: July 2016

              • MAE-6.1.5

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

              • MAE-6.1.6

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

              • MAE-6.1.7

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

              • MAE-6.1.8

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

                Amended: July 2016

              • MAE-6.1.9

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

              • MAE-6.1.10

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

              • MAE-6.1.11

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

              • MAE-6.1.12

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

              • MAE-6.1.13

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

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

              • MAE-6.1.14

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

          • MAE-7 Immunity from Criminal or Civil Liability

            • MAE-7.1 Immunity from Criminal or Civil Liability

              • MAE-7.1.1

                No criminal or civil liability shall be incurred by:

                (a) A licensed exchange;
                (b) Any person acting on behalf of a licensed exchange; including:
                (i) Any director of the licensed exchange; or
                (ii) Any member of any committee established in the licensed exchange;

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

                Amended: April 2013

          • MAE-8 General Powers of the CBB

            • MAE-8.1 Power of CBB to Remove Officers

              • MAE-8.1.1

                Where the CBB is satisfied that an officer of a licensed exchange or licensed market operator:

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

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

                Amended: April 2016
                Amended: April 2013

              • MAE-8.1.2

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

              • MAE-8.1.3

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

              • MAE-8.1.4

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

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

              • MAE-8.1.5

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

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

              • MAE-8.2.1

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

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

        • CSD — Clearing, Settlement and Depository

          • CSD-A Introduction

            • CSD-A.1 Purpose

              • Executive Summary

                • CSD-A.1.1

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

                • CSD-A.1.2

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

                • CSD-A.1.3

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

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

              • Legal Basis

                • CSD-A.1.4

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

                • CSD-A.1.5

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

                • CSD-A.1.6

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

                • CSD-A.1.7

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

                • CSD-A.1.8

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

                • CSD-A.1.9

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

                • CSD-A.1.10

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

                  Amended: April 2016

                • CSD-A.1.11

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

                • CSD-A.1.12

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

                • CSD-A.1.13

                  Licensed clearing houses and central depositories shall be subject to Part 10 (Articles from 133 to 159) of the CBB Law with regards to cases of insolvency, the consequences of such insolvency and violation of the insolvency law by licensees, and compulsory liquidation. The CBB is entitled to place a licensee under administration in the event of insolvency, cancellation or amendment of the license of the clearing house or central depository, and when it is in the best interests of the public to do so. Rules and regulations for placing a licensee under administration are set out in Articles 136–143 of the CBB Law.

                • CSD-A.1.14

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

                • CSD-A.1.15

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

                  Added: April 2016

                • CSD-A.1.16

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

                  Added: April 2016

                • CSD-A.1.17

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

                  Added: April 2016

                • CSD-A.1.18

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

                  Added: April 2016

                • CSD-A.1.19

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

                  Added: April 2016

            • CSD-A.2 Module History

              • Evolution of Module

                • CSD-A.2.1

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

                  Amended: April 2013

                • CSD-A.2.1A

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

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

              • Superseded Requirements

                • CSD-A.2.2

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

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

            • CSD-A.3 Interaction with other Modules

              • CSD-A.3.1

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

              • CSD-A.3.2

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

                Amended: April 2016

              • CSD-A.3.3

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

            • CSD-A.4 Division of Responsibilities

              • CSD-A.4.1

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

              • CSD-A.4.2

                SROs shall:

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

              • CSD-A.4.3

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

              • CSD-A.4.4

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

              • CSD-A.4.5

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

          • CSD-B Scope of Application

            • CSD-B.1 Scope

              • CSD-B.1.1

                This Module shall apply to:

                (a) Clearing and settlement services provided by a licensed clearing house in or from the Kingdom of Bahrain for the clearing and settlement of securities transactions; and
                (b) Custodial services for securities offered by a central depository in or from the Kingdom of Bahrain.

            • CSD-B.2 Definitions

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

              Deleted: July 2016

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

            • CSD-1.1 Licensing Conditions

              • Requirement to be Licensed

                • CSD-1.1.1

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

                  Amended: April 2016

                • CSD-1.1.1A

                  No person may market any financial services in the Kingdom of Bahrain unless:

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

                • CSD-1.1.1B

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

                  Added: April 2013

                • CSD-1.1.1C

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

                  Amended: April 2016
                  Added: April 2013

                • CSD-1.1.2

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

                • CSD-1.1.3

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

                  Amended: April 2016

                • CSD-1.1.4

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

                  Amended: April 2016

              • Persons Operating Clearing or Depository Facilities

                • CSD-1.1.5

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

                  Amended: April 2016

                • CSD-1.1.6

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

                • CSD-1.1.7

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

                • CSD-1.1.8

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

                  Amended: April 2016

                • CSD-1.1.9

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

                • CSD-1.1.10

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

                  Amended: April 2016

            • CSD-1.2 Licensing Process and Timeline

              • CSD-1.2.1

                A person may apply to the CBB to be:

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

              • CSD-1.2.2

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

              • CSD-1.2.3

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

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

              • CSD-1.2.4

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

              • CSD-1.2.5

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

              • CSD-1.2.6

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

              • CSD-1.2.7

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

              • CSD-1.2.8

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

                Amended: April 2016

              • CSD-1.2.8A

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

                Added: April 2016

              • CSD-1.2.9

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

              • CSD-1.2.10

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

              • CSD-1.2.11

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

              • CSD-1.2.12

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

              • General Criteria Applicable to a Clearing House and Central Depository

                • CSD-1.2.13

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

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

              • Criteria for Granting License of a Clearing House

                • CSD-1.2.14

                  The CBB may license a person as a clearing house if:

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

                • CSD-1.2.15

                  This Paragraph has been left blank.

                  Added: April 2013

              • Criteria for Granting License of a Central Depository

                • CSD-1.2.16

                  The CBB may license a person as a central depository if:

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

                • CSD-1.2.17

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

            • CSD-1.3 Withdrawal of License or Cessation of Business

              • Voluntary Surrender

                • CSD-1.3.1

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

                • CSD-1.3.2

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

                • CSD-1.3.3

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

                  Amended: July 2016
                  Amended: April 2016

                • CSD-1.3.4

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

                  Amended: April 2016

                • CSD-1.3.5

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

              • Cancellation of License

                • CSD-1.3.6

                  The CBB may cancel any license held by a licensed clearing house or licensed central depository if:

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

                • CSD-1.3.7

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

                  Amended: April 2016

                • CSD-1.3.8

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

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

                • CSD-1.3.9

                  A licensed clearing house or licensed central depository shall be deemed to have ceased to operate if:

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

                • CSD-1.3.10

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

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

                • CSD-1.3.11

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

                  Amended: July 2016
                  Amended: April 2016

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

                • CSD-1.3.12

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

                  Amended: July 2017

                • CSD-1.3.13

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

                  Added: July 2017

                • CSD-1.3.14

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

                  Added: July 2017

            • CSD-1.4 Annual Fees

              • Annual Fees Payable by Clearing House and Central Depository

                • CSD-1.4.1

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

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

                • CSD-1.4.1A

                  The following fee is currently prescribed for licensed clearing houses and licensed central depositories:

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

                • CSD-1.4.1B

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

                  Added: April 2014

                • CSD-1.4.2

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

                  Amended: April 2014

                • CSD-1.4.3

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

                  Added: April 2016

            • CSD-1.5 Power to Stop Commencement or Order Cessation

              • CSD-1.5.1

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

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

              • CSD-1.5.2

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

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

              • CSD-1.5.3

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

              • CSD-1.5.4

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

              • CSD-1.5.5

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

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

              • CSD-1.5.6

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

                (a) Ordering the liquidation of all positions or part thereof, or the reduction in such positions;
                (b) Altering conditions of delivery of transactions cleared or settled, or to be cleared or settled through the clearing or depository facility;
                (c) Fixing the settlement price at which transactions are to be liquidated;
                (d) Requiring margins or additional margins for transactions cleared or settled or to be cleared or settled through the clearing or depository facility;
                (e) Modifying or suspending any of the business rules of the licensed clearing house or licensed central depository; or
                (f) Transferring the rights and obligations of that licensed clearing house or licensed central depository to another licensed clearing house and licensed central depository; and

                the licensed clearing house or licensed central depository shall comply with that direction.

                Amended: April 2016

              • CSD-1.5.7

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

                Amended: April 2016

              • CSD-1.5.8

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

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

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

              • CSD-1.6.1

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

                Amended: April 2016

              • CSD-1.6.2

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

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

          • CSD-2 Clearing House and Central Depository Function

            • CSD-2.1 Clearing House Function

              • CSD-2.1.1

                A licensed clearing house shall act as the central counterparty of the clearing members for clearing and settlement of transactions and for delivering securities to and receiving securities from clearing members and making payment to and receiving payment from clearing members in connection with any transaction.

              • Settlement Bank(s)

                • CSD-2.1.2

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

                  Amended: April 2016

                • CSD-2.1.3

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

                  Amended: April 2016

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

                • CSD-2.1.4

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

                  Amended: April 2016

                • CSD-2.1.5

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

                  Amended: April 2016

              • Settlement Bank to Act on Instructions of the Clearing House

                • CSD-2.1.6

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

                  Amended: July 2016
                  Amended: April 2016

                • CSD-2.1.7

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

                  Amended: July 2016
                  Amended: April 2016

                • CSD-2.1.8

                  Clearing members shall authorise settlement banks to access their designated bank accounts for debiting and/or crediting their accounts electronically, on the instructions of the licensed exchange or licensed clearing house.

                  Amended: April 2016

              • Settlement Banks to Inform Status

                • CSD-2.1.9

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

                  Amended: April 2016

            • CSD-2.2 Settlement by Clearing House

              • CSD-2.2.1

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

                Amended: April 2016

              • CSD-2.2.2

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

              • CSD-2.2.3

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

              • Settlement Rules and Regulations Form Part of Contracts

                • CSD-2.2.4

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

              • Settlement Procedure

                • CSD-2.2.5

                  The licensed exchange or clearing house shall prescribe the procedure, schedule, manner and mode to be followed in respect of settlement of all transactions contracts entered into or to be entered into in any security or securities by the clearing members through the licensed clearing house.

                  Amended: April 2016

                • CSD-2.2.6

                  All the clearing members, custodians, clearing banks, central depositories, depository participants and other persons having beneficial interest in settlement shall comply with the provisions contained in the rules and regulations of the licensed exchange and the rules of the licensed clearing house from time-to-time.

                  Amended: April 2016

                • CSD-2.2.7

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

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

                • CSD-2.2.8

                  The licensed clearing house shall maintain a settlement guarantee fund to guarantee settlement obligations of clearing members.

                  Amended: April 2016

                • CSD-2.2.9

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

                  Amended: April 2016

                • CSD-2.2.10

                  The licensed clearing house shall determine the settlement obligations relating to delivery and receipt of securities by and between clearing members to be exchanged electronically through the clearing and settlement system of the licensed clearing house.

                  Amended: April 2016

              • Timing of Settlement

                • CSD-2.2.11

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

                • CSD-2.2.12

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

              • Approval of Settlement System

                • CSD-2.2.13

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

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

                • CSD-2.2.14

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

                • CSD-2.2.15

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

                • CSD-2.2.16

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

              • Finality of Settlement and Precedence Over Law of Insolvency

                • CSD-2.2.17

                  In line with Article 108 of the CBB Law:

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

                • CSD-2.2.18

                  In line with Article 109 of the CBB Law:

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

            • CSD-2.3 Arrangements for Depository Services

              • CSD-2.3.1

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

              • CSD-2.3.2

                A clearing member shall be required to maintain a designated account with one or more depositories.

                Amended: April 2016

            • CSD-2.4 Central Depository Function

              • Securities Accounts and Records

                • CSD-2.4.1

                  No person shall deal in deposited securities without first having a securities account.

                • CSD-2.4.2

                  A depository participant which deals in deposited securities as principal shall, in relation to such dealing, open and maintain a securities account with the central depository.

                  Amended: April 2016

                • CSD-2.4.3

                  A central depository may establish different types of securities accounts for different classes of persons.

                • CSD-2.4.4

                  Every securities account opened with a central depository shall be in the name of the beneficial owner of the deposited securities.

                • CSD-2.4.5

                  The person opening the securities account shall make a declaration in such manner as may be specified in the rules of the central depository that he is the beneficial owner of deposited securities.

              • Issuance of Statements of Accounts

                • CSD-2.4.6

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

                • CSD-2.4.7

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

                  Amended: April 2016

                • CSD-2.4.8

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

                • CSD-2.4.9

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

            • CSD-2.5 Authorised Depository Participant

              • CSD-2.5.1

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

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

              • CSD-2.5.2

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

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

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

                Amended: April 2016

              • Agreement Between Depository and Depository Participant

                • CSD-2.5.3

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

                • CSD-2.5.4

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

            • CSD-2.6 Provisions Relating to Immobilised Securities

              • CSD-2.6.1

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

                Amended: April 2016

              • CSD-2.6.2

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

                Amended: April 2016

              • CSD-2.6.3

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

              • Verification of Certificates and Transfer to a Central Depository

                • CSD-2.6.4

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

                • CSD-2.6.5

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

                • CSD-2.6.6

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

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

                • CSD-2.6.7

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

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

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

                • CSD-2.6.7A

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

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

              • Issuance of Consolidated Statements

                • CSD-2.6.8

                  A central depository may require an issuer of deposited securities to issue in the name of the central depository a consolidated statement for such securities.

                • CSD-2.6.9

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

                  Amended: April 2016

              • Withdrawal of Immobilised Securities

                • CSD-2.6.10

                  A depositor may by an application to the central depository withdraw an immobilised security standing to the credit of his securities account.

                  Amended: April 2016

                • CSD-2.6.11

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

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

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

                  Amended: July 2016
                  Amended: April 2016

                • CSD-2.6.12

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

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

                • CSD-2.6.13

                  No person shall trade any security withdrawn from a central depository on a licensed exchange, unless such security is redeposited in a central depository.

              • Central Depository Deemed a Bare Trustee

                • CSD-2.6.14

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

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

              • Central Depository and Depository Participant not Liable for Loss

                • CSD-2.6.15

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

                  Amended: April 2016

            • CSD-2.7 Dematerialisation and Central Registry Function

              • Dematerialisation of Securities

                • CSD-2.7.1

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

                  Amended: April 2016

                • CSD-2.7.2

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

                  Amended: April 2016

                • CSD-2.7.3

                  On or after the dematerialisation date, every issuer of a security prescribed as a dematerialised security shall:

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

                • CSD-2.7.4

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

                  Amended: April 2016

                • CSD-2.7.5

                  No issuer shall after the dematerialisation date issue any certificate in respect of a dematerialised security.

                  Amended: April 2016

                • CSD-2.7.6

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

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

              • Dealings Effected by Means of Electronic Process

                • CSD-2.7.7

                  A dealing by a beneficial owner in respect of a dematerialised security shall be effected by means of an entry in the securities account of the beneficial owner.

                  Amended: April 2016

                • CSD-2.7.8

                  Transfer of securities shall be effected by beneficial owners or their authorised nominees.

            • CSD-2.8 Entries in Securities Accounts

              • CSD-2.8.1

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

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

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

                • CSD-2.8.2

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

              • Record of an Entry Prima Facie Evidence

                • CSD-2.8.3

                  A record of an entry in a securities account in respect of a dealing in deposited securities shall be prima facie evidence of the truth of the matters so recorded.

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

                • CSD-2.8.4

                  An issuer of any deposited security may, in the manner and period prescribed by the rules of the central depository, request the central depository to issue him a record of the securities holders holding the aforementioned securities under their securities accounts, as at the date of the notice or such other date as may be specified in the notice.

                • CSD-2.8.5

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

                  Amended: April 2016

              • Charging or Pledging of Securities

                • CSD-2.8.6

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

                  Amended: April 2016

                • CSD-2.8.7

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

                  Amended: April 2016

                • CSD-2.8.8

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

                  Amended: April 2016

                • CSD-2.8.9

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

                  Amended: April 2016

              • Securities in Suspense

                • CSD-2.8.10

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

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

                • CSD-2.8.11

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

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

                  shall be as prescribed by the suspension order.

                  Amended: April 2016

                • CSD-2.8.12

                  Where the central depository specifies that any deposited security in a securities account has been suspended, the central depository shall inform the securities account holder, issuer, the relevant depository participants and the relevant licensed exchange.

                  Amended: April 2016

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

              • CSD-2.9.1

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

                (a) A market contract;
                (b) The rules of a licensed clearing house relating to the settlement of a market contract;
                (c) Any proceeding or other action taken under the rules of a licensed clearing house relating to the settlement of a market contract;
                (d) A market charge;
                (e) The default rules of a licensed clearing house or central depository; and
                (f) Any default proceedings.
                Amended: April 2016

              • CSD-2.9.2

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

                (a) The settlement in accordance with the rules of a licensed clearing house or licensed central depository of a market contract; or
                (b) Any default proceedings taken in pursuant to default rules.
                Amended: April 2016

          • CSD-3 Obligations of a Clearing House and Central Depository

            • CSD-3.1 General Obligations of a Clearing House and Central Depository

              • CSD-3.1.1

                A licensed clearing house and licensed central depository shall:

                (a) As far as is reasonably practicable, operate a safe and efficient clearing or central depository facility;
                (b) Manage any risks associated with its business and operations prudently;
                (c) In discharging its obligations under this Module, not act contrary to the interests of the public, having particular regard to the interests of the investing public;
                (d) Ensure that access for participation in its clearing or central depository facility is subject to criteria that are fair and objective, and that are designed to ensure the safe and efficient functioning of its facility and to protect the interests of the investing public;
                (e) Maintain business rules that make satisfactory provision for:
                (i) The clearing or central depository facility to be operated in a safe and efficient manner; and
                (ii) The proper regulation and supervision of its members and depository participants;
                (f) Enforce compliance by its members and depository participants with its business rules;
                (g) Have sufficient financial, human and system resources:
                (i) To operate a safe and efficient clearing or central depository facility;
                (ii) To meet contingencies or disasters; and
                (iii) To provide adequate security arrangements;
                (h) Ensure that it appoints or employs fit and proper persons as its chairman, chief executive officer, directors and key management officers;
                (i) Maintain efficient risk management and internal controls;
                (j) Maintain a record of all transactions effected through its clearing or central depository facility in such form and manner as the CBB may prescribe, including:
                (i) The extent to which the record includes details of each transaction in line with the applicable laws, rules and regulations related to the Know Your Client and the Prevention and Prohibition of Money Laundering; and
                (ii) The period of time that the record is to be maintained.
                (k) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders meetings referred to in Subparagraph CSD-3.1.1(m);
                (l) Ensure that any agenda items to be discussed or presented during the course of meetings which require the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;
                (m) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and
                (n) Within a maximum of 15 calendar days of any shareholders' meetings referred to in Subparagraph CSD-3.1.1(m), provide to the CBB a copy of the minutes of the meeting.
                Amended: July 2016
                Amended: April 2016

              • CSD-3.1.2

                The CBB may by notice in writing, exempt any clearing or central depository facility operated by a licensed clearing house or licensed central depository from all or any of the provisions of this Module, if the CBB is satisfied that such exemption would not detract from the objectives specified in rule CSD-3.1.1.

                Amended: April 2016

              • CSD-3.1.3

                In rule CSD-3.1.1 (g), "contingencies or disasters" include technical disruptions occurring within automated systems.

              • CSD-3.1.4

                A licensed clearing house or licensed central depository shall formulate and implement appropriate procedures for ensuring that its members or participants comply with the CBB Law, rules and regulations, and rules of the licensed clearing house or central depository.

                Amended: April 2016

              • CSD-3.1.5

                A licensed clearing house or licensed central depository shall, for the conduct of its business, at all times provide and maintain:

                (a) Adequate and properly equipped premises;
                (b) Competent personnel; and
                (c) Automated systems with adequate capacity, facilities to meet contingencies or emergencies, security arrangements and technical support.
                Amended: April 2016

              • CSD-3.1.6

                Internal rules and procedures of a licensed clearing house or central depository must be enforceable with a high degree of certainty, so as to ensure its effective operation.

              • CSD-3.1.7

                The rules and contracts related to the operation of the clearing house or central depository should be enforceable in the event of the insolvency of a member or depository participant.

                Amended: April 2016

              • Obligation to Submit Periodic Financial Reports

                • CSD-3.1.8

                  A licensed clearing house or central depository shall submit to the CBB such reports in such form, manner and frequency as the CBB may prescribe. A licensed clearing house or central depository shall submit to the CBB for the preceding quarter, in such form as may be approved by the CBB:

                  (a) Within 3 months after the end of its financial year, a copy of its:
                  (i) Annual report and directors' report prepared in accordance with the provisions of the IFRS; and
                  (ii) Auditors' long form report;
                  (b) Within 45 days after the end of each of the first 3 quarters of its financial year, a copy of its:
                  (i) Profit and loss accounts; and
                  (ii) Balance-sheet;
                  (c) Within 3 months after the end of its financial year, a report on how the licensed clearing house or central depository has discharged its responsibilities under the CBB Law and this Module during that financial year;
                  (d) A report reviewed by the internal auditor relating to the business of operating the licensed clearing house or central depository, at such time or on such periodic basis as may be specified by the CBB; and
                  (e) Such other report as the CBB may require at such time or on such periodic basis as may be specified by the CBB.

                • CSD-3.1.9

                  The auditors' long form report referred to in rule CSD-3.1.8 (a) (ii) shall include the findings and recommendations of the auditors, if any, on:

                  (a) The risk management and internal controls of the licensed clearing house or central depository; and
                  (b) The non-compliance with any:
                  (i) Provision of the CBB Law;
                  (ii) Direction issued by the CBB under the CBB Law and regulations; or
                  (iii) Other relevant laws or regulations.

              • IIS Reporting Requirements

                • CSD-3.1.9A

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

                  Amended: April 2016
                  Added: April 2013

                • CSD-3.1.9B

                  Licensees failing to comply with the requirements of Paragraph CSD-3.1.9A or reporting inaccurate information are subject to financial penalties or other enforcement actions.

                  Amended: April 2016
                  Added: April 2013

              • Obligation to Maintain Transparency

                • CSD-3.1.10

                  A licensed clearing house or licensed central depository must maintain complete transparency in relation to its operations, including clearing, settlement, depository and central registry with particular regard to:

                  (a) Transaction execution;
                  (b) Settlement arrangements;
                  (c) Fees and charges;
                  (d) Margin requirements, including lending and borrowing;
                  (e) Operational requirements; and
                  (f) Business rules.
                  Amended: April 2016

              • Obligation to Assist CBB

                • CSD-3.1.11

                  A person operating a clearing or depository facility shall provide such assistance to the CBB as the CBB may require for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provision of:

                  (a) Such books and other information:
                  (i) Relating to the business of the clearing or depository facility; and
                  (ii) In respect of any transaction or class of transactions cleared or settled by the clearing facility, or accepted for deposit by a depository; and
                  (b) Such other information or assistance, as the CBB may require for the proper administration of the CBB Law and regulations.
                  Amended: April 2016

              • Obligation to Notify CBB of Certain Matters

                • CSD-3.1.12

                  A person operating a clearing or depository facility shall (including where a clearing facility carries on business or acquires a substantial shareholding in a central depository, or vice-versa), notify the CBB in the event of the following:

                  (a) The carrying on of any business by the licensed clearing house or licensed central depository other than:
                  (i) The business of operating a clearing facility and/or depository;
                  (ii) A business incidental to operating a clearing facility or depository; or
                  (iii) Such business or class of businesses as the CBB may prescribe;
                  (b) The acquisition by the licensed clearing house or licensed central depository of a substantial shareholding in a corporation which does not carry on:
                  (i) The business of operating a clearing facility or central depository;
                  (ii) A business incidental to operating a clearing facility or central depository; or
                  (iii) Such business or class of businesses as the CBB may prescribe;
                  (c) The licensed clearing house or licensed central depository becoming aware of a financial irregularity or other matter which in its opinion:
                  (i) May affect its ability to discharge its financial obligations; or
                  (ii) May affect the ability of a member or participant of the licensed clearing house or licensed central depository to meet its financial obligations to the licensed clearing house or licensed central depository;
                  (d) The licensed clearing house or licensed central depository reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against a member or depository participant of the licensed clearing house or licensed central depository; and
                  (e) Any other matter that the CBB may prescribe by regulations or specify by notice in writing to the licensed clearing house or licensed central depository.
                  Amended: April 2016

                • CSD-3.1.13

                  A licensed clearing house or licensed central depository shall, immediately after becoming aware of the occurrence of any of the following circumstances, notify the CBB in writing of:

                  (a) Any civil or criminal legal proceeding instituted against the licensed clearing house or licensed central depository, or any of its members or depository participants, whether in Bahrain or elsewhere;
                  (b) Any disciplinary action taken against the licensed clearing house or licensed central depository, or any of its members or depository participants by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
                  (c) Any significant change to the regulatory requirements imposed on the licensed clearing house or licensed central depository by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
                  (d) Any admission or cessation of a bank to act as a settlement bank for the licensed clearing house;
                  (e) Any failure by any party to debit or credit the relevant accounts for the purpose of the settlement of transactions, including the settlement of moneys, securities or physically delivered futures contracts; and
                  (f) Any disruption of or delay in any clearing, settlement or central depository procedures of the licensed clearing house or licensed central depository, including those resulting from any system failure.
                  Amended: April 2016

                • CSD-3.1.14

                  Where a circumstance under Subparagraphs CSD-3.1.13 (a), (b), (e) or (f) has occurred, the licensed clearing house or licensed central depository shall, in addition to the notification required under Paragraph CSD-3.1.13, within 7 days of the occurrence of the circumstance, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken at the time of the occurrence, and the subsequent follow-up actions that the licensed clearing house or licensed central depository has taken, or intends to take.

                  Amended: April 2016

                • CSD-3.1.15

                  A licensed clearing house or licensed central depository shall, within a reasonable period of time prior to entering into negotiations to establish a clearing linkage, clearing arrangement, depository arrangement or co-operative arrangement with a person establishing or operating another clearing facility or depository, notify the CBB of such intent to enter into negotiations.

                  Amended: April 2016

                • CSD-3.1.16

                  In rule CSD-3.1.15, ''co-operative arrangement'' shall not include:

                  (a) Any joint development of products and services;
                  (b) Any joint marketing efforts between the licensed clearing house or licensed central depository and the person operating an overseas market, or clearing or depository facility, in promoting the services of either entity; or
                  (c) Any memorandum of understanding for the exchange of information.
                  Amended: April 2016

                • CSD-3.1.17

                  A licensed clearing house or licensed central depository shall seek the approval of the CBB prior to making any change to the financial resources that are available to the licensed clearing house or licensed central depository to support a default of its member; and

                  (a) The CBB may grant its approval referred to above, subject to such conditions or restrictions as the CBB may deem fit.
                  (b) For the purposes of this Paragraph, ''financial resources that are available to the licensed clearing house to support a default of its member'' shall not include margin trading facilities held with the licensed clearing house.
                  Amended: April 2016

                • CSD-3.1.18

                  A person operating a clearing facility or depository shall, no later than 7 days after the occurrence of any of the following circumstances, notify the CBB of:

                  (a) A change of an approved person, in accordance with Section CSD-5.3;
                  (b) A change of the address of the principal place of business at which it carries on the business of operating a clearing facility or depository;
                  (c) A material change in the business of the clearing facility or depository; or
                  (d) Such other matter as the CBB may prescribe.
                  Amended: July 2016

                • CSD-3.1.19

                  A licensed clearing house or licensed central depository shall seek the approval of the CBB prior to accepting any new type of securities (e.g. equities or warrants) for clearing, settlement or deposit.

                  Amended: April 2016

                • CSD-3.1.20

                  The CBB may at its discretion, unless the timeframe is stipulated by law, decide on an application by the licensed clearing house or licensed central depository to vary the timeframe for compliance with the obligations in this Module and substitute such timeframe.

                  Amended: April 2016

                • CSD-3.1.21

                  Any application for an extension of the timeframe in which to comply with the obligations of this Chapter must be made in writing, stating the extraordinary reason for such request.

                  Amended: April 2016

            • CSD-3.2 Obligation to Maintain Confidentiality

              • CSD-3.2.1

                In line with Part 8 of the CBB Law, and except under circumstances specified in Paragraphs CSD-3.2.2 and CSD-3.2.3, a licensed clearing house or licensed central depository and its officers and employees shall maintain, and aid in maintaining, confidentiality of all user information that:

                (a) Comes to the knowledge of the licensed clearing house or licensed central depository or any of its officers or employees; or
                (b) Is in the possession of the licensed clearing house or licensed central depository or any of its employees.
                Amended: April 2016

              • Exemption of Obligation to Maintain Confidentiality

                • CSD-3.2.2

                  Rule CSD-3.2.1 shall not apply to:

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

                • CSD-3.2.3

                  Rule CSD-3.2.1 shall not apply to the disclosure of user information by a licensed clearing house or licensed central depository, or its officers or employees, for the following purposes or in the following circumstances:

                  (a) The disclosure of user information is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;
                  (b) The disclosure of user information is permitted for such purpose specified in writing by the user or, where the user is deceased, by his appointed personal representative;
                  (c) The user information is disclosed to the approved holding company of the licensed clearing house or licensed central depository;
                  (d) The disclosure of user information is necessary for the execution by the licensed clearing house or licensed central depository of a transaction in any listed securities or futures contracts, or clearing or settlement of a transaction on a licensed exchange and such disclosure is made only to another user which is:
                  (i) A party to the transaction; or
                  (ii) A member of a licensed exchange or a licensed clearing house through which that transaction is executed, cleared or settled;
                  (e) The disclosure of user information is necessary:
                  (i) In any disciplinary proceedings of the licensed clearing house or licensed central depository, provided that reasonable steps are taken to ensure that user information disclosed to any third person is used strictly for the purpose for which the user information is disclosed; or
                  (ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
                  (f) The user information disclosed is already in the public domain;
                  (g) The disclosure of user information is made in connection with an arrangement for protection against a default by a member or participant of the licensed clearing house or licensed central depository to another member or participant of the licensed clearing house or licensed central depository, who is identified by the licensed clearing house or licensed central depository for the purposes of carrying out or undertaking the obligations under the arrangement;
                  (h) The disclosure is required in accordance with international and multilateral arrangements including, but not limited to the IOSCO MMoU;
                  (i) The disclosure of user information is made to a member or depository participant of the licensed clearing house or licensed central depository in connection with an arrangement for the transfer to that member or depository participant of any contract or position from another member of the licensed clearing house or licensed central depository who is in default;
                  (j) The disclosure of user information is made in connection with:
                  (i) The outsourcing or proposed outsourcing of any function of the licensed clearing house or licensed central depository to a third party after obtaining the approval of the CBB;
                  (ii) The engagement or potential engagement of a third party by the licensed clearing house or licensed central depository to create, install or maintain systems of the licensed clearing house or licensed central depository; or
                  (iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing house or licensed central depository under a contract for service;
                  (k) The disclosure of user information is necessary in:
                  (i) An application for a grant of probate or letters of administration, or the resealing thereof in relation to the estate of a deceased user; or
                  (ii) The administration of the estate of a deceased user, including such disclosure as may be required by the applicable laws, rules and regulations; or
                  (l) The disclosure of user information is made in connection with:
                  (i) In the case where the user is an individual, the bankruptcy of a user; or
                  (ii) In the case where the user is a body corporate, the winding up or receivership of a user.
                  Amended: April 2016

                • CSD-3.2.4

                  Where user information is disclosed under Subparagraphs CSD-3.2.3 (g), (h) or (i), the licensed clearing house or licensed central depository shall:

                  (a) Maintain a record of:
                  (i) The circumstances relating to the disclosure of user information referred to in that sub-paragraph; and
                  (ii) In the case of disclosure of information, the particulars of:
                  A. The arrangement for protection;
                  B. The arrangement for transfer;
                  C. The outsourcing of the function of the licensed clearing house or licensed central depository;
                  D. The engagement of the third party; and
                  E. The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing house or licensed central depository under a contract for service, and make the record available for inspection by the CBB.
                  (b) Disclose the user information insofar as this is necessary for the relevant purpose; and
                  (c) Take reasonable steps to ensure that user information disclosed is used by the person to whom the disclosure is made strictly for the relevant purpose, and that the user information is not disclosed by that person to any other person except with the consent of the licensed clearing house or licensed central depository.
                  Amended: April 2016

                • CSD-3.2.5

                  Where disclosure of user information is permitted to be made for any purpose or in any circumstance under Paragraph CSD-3.2.3 to a body corporate, the user information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.

                  Amended: April 2016

                • CSD-3.2.6

                  In Paragraphs CSD-3.2.4 and CSD-3.2.5, ''relevant purpose'' means:

                  (a) In the case of the disclosure of information under Subparagraph CSD-3.2.3(g), the carrying out of the arrangement for protection;
                  (b) In the case of the disclosure of information under Subparagraph CSD-3.2.3(h), the carrying out of the arrangement for transfer;
                  (c) In the case of the disclosure of information under Subparagraphs CSD-3.2.3(j) and (i), facilitating the outsourcing of the function of the licensed clearing house or licensed central depository;
                  (d) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (ii), facilitating the engagement of the third party; and
                  (e) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (iii), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.
                  Amended: April 2016

                • CSD-3.2.7

                  For the avoidance of doubt, nothing in this Section shall be construed as preventing a licensed clearing house or licensed central depository from entering into a written agreement with a user which obliges the licensed clearing house or licensed central depository to maintain a higher degree of confidentiality than that specified in this Section.

                  Amended: April 2016

            • CSD-3.3 Business Continuity Plan

              • CSD-3.3.1

                A licensed clearing house or licensed central depository shall maintain at all times a plan of action (referred to in this Module as a business continuity plan), setting out the procedures and establishing the systems necessary to restore safe and efficient operations of any clearing facility or depository it operates, in the event of any disruption to the processes of its clearing facility or depository.

                Amended: April 2016

              • CSD-3.3.2

                As part of a business continuity plan the licensed clearing house or licensed central depository should provide for:

                (a) Recovery situations;
                (b) Recovery situations affecting the clients, members and depository participants;
                (c) The evacuation of the office premises; and
                (d) Back-up licensed clearing house data centre.
                Amended: April 2016

              • CSD-3.3.3

                A licensed clearing house or licensed central depository shall review the procedures and systems referred to in rule CSD-3.3.1 on such regular basis as may be specified in the business continuity plan.

                Amended: April 2016

              • CSD-3.3.4

                A licensed clearing house or licensed central depository shall immediately notify the CBB of any activation of its business continuity plan and of any action taken, or intended to be taken, to restore safe and efficient operations of its clearing facility.

                Amended: April 2016

              • CSD-3.3.5

                A licensed clearing house or licensed central depository shall, within 7 days, inform the CBB of any material change to the business continuity plan and shall submit, at the request of the CBB, a copy of the new plan to the CBB.

                Amended: April 2016

            • CSD-3.4 Transmission and Storage of User Information

              • CSD-3.4.1

                A licensed clearing house or licensed central depository shall take all reasonable measures to maintain the integrity and security of the transmission and storage of its user information.

                Amended: April 2016

            • CSD-3.5 Regulation of Clearing and Deposit Fees of Licensed Clearing Houses and Licensed Central Depositories

              • CSD-3.5.1

                A licensed clearing house or licensed central depository shall not impose, modify, restructure or otherwise change any existing clearing or depository fee imposed on its members or depository participants, without the prior written approval of the CBB.

                Amended: April 2016

              • CSD-3.5.2

                The CBB may require the licensed clearing house or licensed central depository to furnish it with such information or documents as the CBB considers necessary in relation to the application referred to in rule CSD-3.5.1, and the licensed clearing house or licensed central depository shall furnish such information or documents as the CBB may require.

                Amended: April 2016

              • CSD-3.5.3

                The CBB shall, within 30 business days of receipt of a completed application referred to in paragraph CSD-3.5.2, by notice in writing to the licensed clearing house or licensed central depository, either grant the approval or notify the licensed clearing house or licensed central depository of its intention to refuse to grant the approval.

                Amended: July 2016

              • CSD-3.5.4

                The CBB may, by notice in writing to the licensed clearing house or licensed central depository, extend the period referred to in rule CSD-3.5.3:

                (a) To a maximum of 45 business days from the day of receipt of a completed application referred to in rule CSD-3.5.1; or
                (b) For a further period of such duration as the CBB thinks fit upon the expiry of the 45 business days referred to in (a) above.
                Amended: April 2016

              • CSD-3.5.5

                The CBB may have regard to the following matters for the purposes of deciding whether to grant or to refuse to grant its approval:

                (a) The effect of the proposed imposition of or change in the fee on:
                (i) Competition in the financial services industry of Bahrain; and
                (ii) Access to clearing, settlement or depository services in Bahrain;
                (b) The cost of providing the service for which such proposed imposition or change in fee is proposed;
                (c) The effect of such proposed imposition or change on the cost and efficiency of trading, clearing, settlement and depository in Bahrain of securities or futures contracts; and
                (d) The effect of such proposed imposition or change in the objective of the CBB as specified in the CBB Law.

              • CSD-3.5.6

                The CBB may grant its approval subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing to the licensed clearing house or licensed central depository, including conditions or restrictions relating to:

                (a) The period for which the approval of the fee will be in force;
                (b) The circumstances under which, or date by which the licensed clearing house or licensed central depository will be required to submit another application for approval of the clearing or depository fee under rule CSD-3.5.1 upon the expiry of the period referred (a) above; and
                (c) The circumstances under which, or the changes in the fee for which, the licensed clearing house or licensed central depository will not be required to submit another application for approval of a change in the fee under rule CSD-3.5.1 upon the expiry of the period referred to in (a) above.
                Amended: April 2016

              • CSD-3.5.7

                The CBB shall not refuse to grant its approval without giving the licensed clearing house or licensed central depository an opportunity to be heard.

                Amended: April 2016

              • CSD-3.5.8

                The licensed clearing house or licensed central depository may only charge the fee approved by the CBB under rule CSD-3.5.1 for the service or services in respect of which it was approved.

                Amended: April 2016

            • CSD-3.6 Inspection, Accounting and Internal Audit

              • CSD-3.6.1

                Every member or depository participant must submit to the licensed clearing house or licensed central depository:

                (a) Audited financial reports; and
                (b) Quarterly internal audit reports.
                Amended: April 2016

              • CSD-3.6.2

                The licensed clearing house or licensed central depository shall carry out periodic visits to the offices of its members or depository participants and clearing or depository facilities to review the operating procedures, systems maintenance and compliance with the CBB Law, rules and regulations and its business rules.

                Amended: April 2016

              • CSD-3.6.3

                The board of directors of the licensed clearing house or licensed central depository may appoint a Disciplinary Action Committee (DAC) to deal with any matter relating to allegations of improper conduct from the clients of the members or depository participants and the issuers.

                Amended: April 2016

              • CSD-3.6.4

                The DAC is empowered to :

                (a) Suspend or expel a member or depository participant;
                (b) Declare a security as ineligible on the central depository system;
                (c) Freeze a member or depository participant account; and
                (d) Conduct inspections or call for records and issue notices.

              • CSD-3.6.5

                If a member or depository participant is aggrieved by the action of the DAC, it has the right to appeal directly to the CBB against the action of the DAC, within 30 days of the action of the DAC.

              • CSD-3.6.6

                The CBB shall hear the appeal within two months from the date of filing the appeal.

              • CSD-3.6.7

                The orders passed by the DAC shall be binding on the member or depository participant and the clients.

              • CSD-3.6.8

                The information on all such actions under Paragraph CSD-3.6.4 shall be furnished to the CBB.

                Amended: April 2016

            • CSD-3.7 Specific Obligations of a Clearing House

              • Customers' Money and Assets Held by Licensed Clearing House

                • CSD-3.7.1

                  Every licensed clearing house may accept money or assets deposited with or paid by its members in respect of or in relation to the market contracts of the customers of such members.

                • CSD-3.7.2

                  A licensed clearing house, which accepts assets or money deposited with or paid to it by its members in respect of or in relation to contracts of the customers of such members, shall require each of its members to notify it in such manner as it may determine:

                  (a) Whether a market contract is a contract of a customer of the member which has been cleared and settled by the member; and
                  (b) Whether the money or assets being deposited with or paid to the licensed clearing house is, or are deposited or paid in respect of, or in relation to, a contract of a customer of the member.

                • CSD-3.7.3

                  Where a member has notified the licensed clearing house under rule CSD-3.7.2 that the money or assets are deposited or paid in respect of, or in relation to a contract of a customer of the member, the licensed clearing house shall:

                  (a) Account for all such money and assets on an aggregated basis, separate from all other money and assets received by the licensed clearing house from the member; and
                  (b) Subject to Paragraphs CSD-3.8.1 and CSD-3.8.2, ensure that such money is deposited in a trust account, or such assets are deposited in a custody account, to be held for the benefit of the customers of the member and disposed of or used only in respect of or in relation to contracts of customers of the member.
                  Amended: April 2016

              • Daily Computation of Customers' Money and Assets

                • CSD-3.7.4

                  A licensed clearing house shall, at such intervals as the licensed clearing house determines appropriate, but no less frequently than once each business day, compute the total amount of customers' money and assets held by the licensed clearing house, including money that has been kept by the licensed clearing house.

                • CSD-3.7.5

                  Any computation referred to in rule CSD-3.7.4 shall be completed no later than the commencement of the following trading session and shall be kept by the licensed clearing house together with all supporting data.

                • CSD-3.7.6

                  For the purpose of this Module, a "business day" refers to any day in which the licensed clearing house is open for business.

              • Verification of Money and Assets Placed with Licensed Clearing House

                • CSD-3.7.7

                  A licensed clearing house shall require its auditors to submit to the CBB a report on a bi-annual basis or such other time as the CBB may require:

                  (a) Certifying that the money and assets deposited by a member with the licensed clearing house in respect of, or in relation to, a contract of a customer of the member are:
                  (i) Segregated from the other money and assets deposited by the member with the designated clearing house;
                  (ii) Deposited in a trust account or custody account and are not combined with the money and assets of the licensed clearing house;
                  (iii) Used as permitted under or in accordance with Section CSD-3.8; and
                  (b) Setting out the amount, on an aggregated basis, of all money and assets deposited by the member with the licensed clearing house:
                  (i) In respect of, or in relation to, a contract of a customer of the member; and
                  (ii) In respect of, or in relation to, any other market contract.
                  Amended: April 2016

                • CSD-3.7.8

                  The business rules must support the segregation of customer assets or other arrangements for prioritizing claims in bankruptcy that serve to protect customers' holdings.

                  Amended: April 2016

                • CSD-3.7.9

                  The licensed central depository must enforce effective segregation of customer assets by custodians.

                  Amended: April 2016

            • CSD-3.8 Permissible Use of Customers' Money and Assets by Licensed Clearing House

              • CSD-3.8.1

                Where a member of a licensed clearing house fails to meet its obligations to the licensed clearing house, the licensed clearing house may use any money or assets deposited or paid in respect of or in relation to contracts of customers of the member and held by the licensed clearing house, including any money deposited in the trust account and any assets deposited in the custody account referred to in rule CSD-3.7.3 (b), to meet the obligations of the member to the licensed clearing house, if the licensed clearing house has reasonable grounds for forming an opinion that:

                (a) The failure of the member to meet the member's obligations is directly attributable to the failure of any of the customers of the member to meet that customer's obligations under any market contract; and
                (b) The failure to use the money or assets to meet the obligations of the member may jeopardize the financial integrity of the licensed clearing house.

              • CSD-3.8.2

                A licensed clearing house shall notify the CBB prior to using any such money or assets in the circumstances specified in Paragraph CSD-3.8.1.

                Amended: April 2016

              • CSD-3.8.3

                A licensed clearing house shall, in so far as any money which has been deposited in a trust account, or any asset which has been deposited in a custody account, ensure that it is used only in respect of or in relation to contracts of a customer of the member; or in accordance with its business rules.

              • CSD-3.8.4

                Where a licensed clearing house uses money and assets in contravention of Paragraph CSD-3.8.3, it shall:

                (a) In the case of money, repay the money to the trust account referred to in rule CSD-3.7.3 (b); or
                (b) In the case of assets:
                i. Return the asset to the custody account referred to in rule CSD-3.7.3 (b); or
                ii. If the asset cannot be returned to the custody account, deposit an amount of money which is equivalent to the monetary value of the asset at the time of the contravention of rule CSD-3.7.3 (b) in a trust account referred to in rule CSD-3.7.3 (b) for the benefit of the customers of the member.
                Amended: April 2016

            • CSD-3.9 Permissible Investments of Customers' Money and Assets by Licensed Clearing House

              • CSD-3.9.1

                Subject to Paragraph CSD-3.9.2, a licensed clearing house may invest any money or assets deposited, or paid in respect of, or in relation to, contracts of customers of a member and held by the licensed clearing house in the course of its clearing or settlement activities, including any money deposited in the trust account in any security, instrument or other form of investment arrangement as the CBB may prescribe, which are low risk and which are not otherwise restricted by the CBB.

                Amended: April 2016

              • CSD-3.9.2

                A licensbed clearing house may invest the money deposited with or paid to it in the following classes:

                (a) Securities of the Government;
                (b) Bank deposits;
                (c) Transferrable negotiable certificates of deposit; and
                (d) Any other investment approved by the CBB.

              • CSD-3.9.3

                The licensed clearing house shall seek the prior written approval of the CBB before investing any such money or assets under Paragraph CSD-3.9.2.

                Amended: April 2016

              • CSD-3.9.4

                The licensed clearing house seeking the approval of the CBB under Paragraph CSD-3.9.2 shall satisfy the CBB:

                (a) That the management of the investments made by the licensed clearing house is consistent with the principles of preserving principal and maintaining sufficient liquidity to meet the obligations of customers of members of the licensed clearing house;
                (b) That prudential measures have been adopted to manage the risks in respect of the licensed clearing house's investment activities; and
                (c) Of any other matter which the CBB considers necessary for the sound management of the investments.
                Amended: April 2016

              • CSD-3.9.5

                The CBB may grant the approval referred to in Paragraph CSD-3.9.3, subject to such conditions or restrictions as the CBB may deem fit.

                Amended: April 2016

            • CSD-3.10 Specific Obligations of a Licensed Central Depository

              • Obligation to Maintain Certain Records

                • CSD-3.10.1

                  A licensed central depository shall provide or cause to be provided all such facilities as may be necessary:

                  (a) To facilitate efficient deposit of securities;
                  (b) To facilitate registration of dealings in deposited securities;
                  (c) To ensure the safe custody of certificates and other documents representing deposited securities;
                  (d) To guard against falsification of any records or accounts required to be kept or maintained under the Module; and
                  (e) To establish a proper and efficient system for the verification, inspection, identification and recording of all securities deposited with the central depository.
                  Amended: April 2016

                • CSD-3.10.2

                  Every licensed central depository shall maintain the following records and documents, mainly:

                  (a) Records of securities dematerialised and re-materialised;
                  (b) The names of the transferor, transferee, and the dates of transfer of securities;
                  (c) A register and an index of beneficial owners;
                  (d) Records of instructions received from and sent to depository participants, issuers, issuers' agents and beneficial owners; and
                  (e) Records of approval, notice, entry and cancellation of pledge or charge, as the case may be.
                  Amended: April 2016

                • CSD-3.10.3

                  A licensed central depository shall also keep such records and accounts, in sufficient detail, so as to show particulars of:

                  (a) All monies received or paid by the licensed central depository, including dividends received in respect of any deposited securities and the disbursement of such dividends to depositors;
                  (b) All income received from commissions, fees, charges and other sources and all expenses, commissions and other payments made or paid by the licensed central depository;
                  (c) All assets and liabilities (including contingent liabilities) of the licensed central depository;
                  (d) All deposited securities and particulars showing for whom the certificates and the instruments of transfer in respect of such certificates are held;
                  (e) All purchases and sales of deposited securities and particulars of other dealings made in respect thereof, the charges and credits arising therefrom, the identity of the buyer and seller of each of those deposited securities or, in the case of other dealings, the identity of the persons executing such dealings and the person in whose favour such dealings are executed as the case may be.
                  Amended: April 2016

                • CSD-3.10.4

                  An entry in the records or accounts shall specify the date and time of making such entry and, in the case of an entry made by a person, the identity of such person.

                • CSD-3.10.5

                  All such records to be maintained for a minimum period of 10 years as required under the CBB law.

            • CSD-3.11 Duty Not to Acquire or Deal in Deposited Securities by a Licensed Central Depository

              • CSD-3.11.1

                No licensed central depository shall purchase, acquire, or otherwise deal in, any deposited security as principal other than for such purpose and in such manner as may be permitted by the CBB under this Module.

                Amended: April 2016

              • CSD-3.11.2

                A licensed central depository which contravenes the aforesaid provision shall be guilty of an offence and shall be subject to such penalty as the CBB may choose to levy.

                Amended: April 2016

          • CSD-4 Business Rules of a Licensed Clearing House and Licensed Central Depository

            • CSD-4.1 Business Rules of Licensed Clearing Houses and Licensed Central Depositories

              • CSD-4.1.1

                The CBB may prescribe the matters that a licensed clearing house or licensed central depository shall make provision for in the business rules of the licensed clearing house or licensed central depository.

                Amended: April 2016

              • CSD-4.1.2

                A licensed clearing house or licensed central depository shall, in line with CBB Law, and to the satisfaction of the CBB, make provision in its business rules for continuing requirements for each member or depository participant, including requirements that the member is a Category 1 Investment Firm licensed by the CBB.

                Amended: April 2016

              • CSD-4.1.3

                A licensed clearing house or licensed central depository shall, in line with CBB Law, make provision in its business rules and to the satisfaction of the CBB for continuing requirements for each member or depository participant, including requirements relating to the terms and conditions under which transactions will be cleared, settled or deposited, including but not limited to:

                (a) The legal obligations and rights of the licensed clearing house and members relating to the clearing and settlement of transactions;
                (b) The legal obligations and rights of the licensed clearing house or central depository and members or depository participants relating to payments, including netting of obligations, distribution of entitlements, assumption of obligations and method of payment.
                Amended: April 2016

              • Business Rules of a Licensed Clearing House and Licensed Central Depository Have Effect as Contract

                • CSD-4.1.4

                  The business rules of a licensed clearing house and licensed central depository shall be deemed to be, and shall operate as, a binding contract:

                  (a) Between the licensed clearing house and licensed central depository and each issuer of securities;
                  (b) Between the licensed clearing house and licensed central depository and each member or depository participant;
                  (c) Between each issuer of securities and each member or depository participant; and
                  (d) Between each member or depository participant and every other member or depository participant.
                  Amended: April 2016

            • CSD-4.2 Content of Rules of Licensed Clearing Houses and Licensed Central Depositories

              • CSD-4.2.1

                A licensed clearing house and licensed central depository shall, in line with CBB Law, make provision in its business rules and to the satisfaction of the CBB for:

                (a) Continuing requirements for each member, including requirements:
                (i) Relating to the proper conduct of the member or depository participant when participating in any clearing or central depository facility operated by the licensed clearing house or licensed central depository;
                (ii) That the member has sufficient financial resources (capital adequacy) to reasonably fulfil all its financial obligations arising out of its activities of any clearing or central depository facility operated by the licensed clearing house or licensed central depository;
                (iii) That facilitate the monitoring by the licensed clearing house or licensed central depository of the compliance of the member or depository participant with the business rules of the licensed clearing house or licensed central depository; or
                (iv) That provide for the expulsion, suspension or disciplining of the member or depository participant for a contravention of the business rules of the licensed clearing house or licensed central depository;
                (b) The class or classes of transactions that may be cleared, settled, or deposited on any facility that it operates;
                (c) Matters relating to risks in the operation of any clearing or central depository facility that it operates;
                (d) The handling of defaults, including the financial resources available to support the default of a member or depository participant, and the taking of proceedings or any other action against a member or depository participant which has failed, or appears to be unable, or is likely to become unable, to meet the member's or depository participant's obligations for all unsettled or open market contracts to which the member or depository participant is a party;
                (e) The carrying on of business of the licensed clearing house or licensed central depository with due regard to the interests and protection of the investing public.
                (f) The granting of security interests to the clearing house or central depository or to other members or depository participants pursuant to the business rules, including a decertification of the collateral charged and the obligations secured;
                (g) The default rules which provide for the taking of proceeding or other action if a member or depository participant appears to be unable, or likely to become unable to meet his obligations in respect of all unsettled or open market contracts to which he is a party;
                (h) The rules and procedures governing how losses will be shared in the event that a defaulting firm's collateral fails to cover its exposure, including the maintenance and utilization of the Settlement Guarantee Fund; and
                (i) The legal relationships between the central depository and each depository participant, and between members or depository participants, inter se.
                Amended: April 2016

              • CSD-4.2.2

                A licensed clearing house or licensed central depository shall not make any amendment to its business rules, unless it complies with such requirements as the CBB may prescribe.

                Amended: April 2016

            • CSD-4.3 Business Rules Specific to a Licensed Central Depository

              • CSD-4.3.1

                The content of the rules of the central depository must include:

                (a) The terms and conditions under which transactions will be conducted on a central depository;
                (b) The qualifications and standards for participation;
                (c) The process and criteria for the admission, suspension and termination of depository participants;
                (d) A decertification of the structure of the services;
                (i) The legal obligations and rights of the central depository and depository participants arising from the use of the services, including any indemnity;
                (ii) The legal obligations and rights of the central depository and depository participants relating to the holding of securities by the depository on behalf of depository participants, as recorded in accounts maintained by the central depository for depository participants;
                (iii) The decertification of the risk control mechanisms including system-operating caps, lines of credit, and depository participant funds;
                (iv) The criteria for determining the type of collateral, and for calculating the amount of the collateral, to be charged by a depository participant with respect to a collateral pool or a depository participant fund;
                (v) The process to be followed in the event of a depository participant suspension, and the realisation under the security interests and guarantees granted to the central depository;
                (vi) The process for adopting and amending the business rules, and for prescribing and amending the procedures and user guides; and
                (vii) The legal obligations and rights of the central depository and depository participants relating to confidentiality and use of information; and
                (e) The class or classes of transactions that may be conducted on a central depository.
                Amended: April 2016

            • CSD-4.4 Amendment of Business Rules

              • CSD-4.4.1

                A licensed clearing house or licensed central depository which intends to amend its business rules shall, prior to making the amendment, notify the CBB of:

                (a) The proposed amendment;
                (b) The purpose of the proposed amendment; and
                (c) The date on which the amendment is proposed to come into force.
                Amended: April 2016

              • CSD-4.4.2

                The licensed clearing house or licensed central depository shall, prior to notifying the CBB under rule CSD-4.4.1, consult its members and depository participants on the proposed amendment, unless the proposed amendment would have limited impact on its members or depository participants.

                Amended: April 2016

              • CSD-4.4.3

                Subject to Paragraphs CSD-4.4.4 and CSD-4.4.6, an amendment shall not come into force unless the notification referred to in rule CSD-4.4.1 is submitted at least 21 days before the date on which the amendment is proposed to come into force.

                Amended: April 2016

              • CSD-4.4.4

                The CBB may, on its own initiative or on the application of the licensed clearing house or licensed central depository, by notice in writing to the licensed clearing house or licensed central depository, allow an amendment to come into force before the expiry of the period of 21 days referred to in rule CSD-4.4.3.

                Amended: April 2016

              • CSD-4.4.5

                The CBB may, subject to Paragraph CSD-4.4.6, within 21 days after the receipt of the notification referred to in rule CSD-4.4.1, by notice in writing to the licensed clearing house or licensed central depository, disallow, alter or supplement the whole or any part of the proposed amendment and, thereupon, such whole or part of the proposed amendment, as the case may be:

                (a) Where it is disallowed, shall not come into force; or
                (b) Where it is altered or supplemented, shall come into force as altered or supplemented accordingly.
                Amended: April 2016

              • CSD-4.4.6

                The CBB may, in its discretion, by notice in writing to the licensed clearing house or licensed central depository, vary the period specified in Paragraph CSD-4.4.5, and where the period in that paragraph is extended, the amendment shall not come into force before the expiry of the extended period.

                Amended: April 2016

              • CSD-4.4.7

                This requirement shall not apply to any periodic amendment made by a licensed clearing house or licensed central depository to the initial margin requirement, or maintenance margin requirement of a market contract which it imposes on its members or depository participants, where such amendment is made in response to a change in the historical or anticipated volatility or co-relation of any market contract.

                Amended: April 2016

              • CSD-4.4.8

                Any reference to an amendment to a business rule shall be construed as a reference to a change to the scope of, or to any requirement, obligation or restriction under the business rule, whether the change is made by an alteration to the text of the rule or by any other notice issued by, or on behalf of, the licensed clearing house or licensed central depository.

                Amended: April 2016

            • CSD-4.5 Non-Compliance with Business Rules Not to Substantially Affect Rights of Person

              • CSD-4.5.1

                Any failure by a licensed clearing house or licensed central depository to comply with this Module or its business rules in relation to a matter, shall not prevent the matter from being treated, for the purposes of this Module, as done in accordance with the business rules, so long as the failure does not substantially affect the rights of any person entitled to require compliance with the business rules.

                Amended: April 2016

            • CSD-4.6 Determination of Position Limits

              • CSD-4.6.1

                A licensed clearing house shall determine, from time-to-time, based on such criteria or methodology as may be established by the licensed clearing house with the approval of the CBB, position limits in respect of any futures contract cleared by a member of the licensed clearing house.

              • CSD-4.6.2

                The position limits under rule CSD-4.6.1 may include limits on a person holding or controlling positions, separately or in combination, net long or net short, for the purchase or sale of a futures contract or an option for the futures contract on a futures equivalent basis.

              • CSD-4.6.3

                The licensed clearing house:

                (a) Shall require a person, or any person acting for him pursuant to an express or implied agreement or understanding, who holds or controls net long or net short positions in any futures contract in excess of the position limits determined under rule CSD-4.6.1 to trade under such conditions and restrictions as the licensed clearing house considers necessary to ensure compliance with the position limits determined under that paragraph; and
                (b) May require such person referred to in (a) above to do any one or more of the following actions:
                (i) Cease any further increase in his position;
                (ii) Liquidate his position to comply with the position limits determined under rule CSD-4.6.1, within such time as may be determined by the licensed clearing house; or
                (iii) Be subject to higher margin requirements in respect of his position.

              • CSD-4.6.4

                In Paragraph CSD-4.6.2, ''futures equivalent basis'' means the basis by which an option is adjusted by the risk factor or delta coefficient of that option, such risk factor or delta coefficient being calculated at the close of trading on the last day on which that option was traded, or at such other time as the CBB may determine.

                Amended: April 2016

              • CSD-4.6.5

                The CBB may provide directions for changing the position limits imposed by a licensed clearing house where market conditions or the interest of investors warrant such directions.

          • CSD-5 Administrative Provisions Applicable to Clearing House or Central Depository

            • CSD-5.1 Control of Substantial Shareholding in Licensed Clearing Houses or Licensed Central Depositories

              • CSD-5.1.1

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

                Amended: April 2016

              • CSD-5.1.2

                In rule CSD-5.1.1 "substantial shareholder" means a person who alone or together with his associates:

                (a) Holds not less than 5% of the equity shares in the licensed clearing house or licensed central depository; or
                (b) Is in a position to control not less than 5% of the votes in the licensed clearing house or licensed central depository.
                Amended: April 2016

              • CSD-5.1.3

                In this section:

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

              • CSD-5.1.4

                The CBB may grant its approval in accordance with Paragraph CSD-5.1.1, subject to such conditions or restrictions as the CBB may deem fit.

                Amended: April 2016

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

              • CSD-5.2.1

                Any person applying for approval for acquiring substantial shareholding as defined hereunder shall submit to the CBB a written application that sets out:

                (a) The name of the applicant;
                (b) In the case where the applicant is a corporation:
                (i) Its place of incorporation;
                (ii) Its substantial shareholders;
                (iii) Its directors and chief executive officer; and
                (iv) Its principal business;
                (c) In the case where the applicant is a natural person:
                (i) His nationality;
                (ii) His principal occupation; and
                (iii) His directorships;
                (d) All the corporations in which the applicant has a substantial shareholding;
                (e) The percentage of shareholding and voting power that the applicant has in the licensed clearing house or the licensed central depository;
                (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed clearing house or the licensed central depository;
                (g) The reasons for making the application;
                (h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;
                (i) Whether the applicant will seek representation on the board of directors of the licensed clearing house or the licensed central depository; and
                (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper person for the purposes of Subparagraph CSD-5.2.3 (a).
                Amended: April 2016

              • CSD-5.2.2

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

              • CSD-5.2.3

                The CBB may approve an application made under rule CSD-5.2.1 if the CBB is satisfied that:

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

              • CSD-5.2.4

                The CBB may, for the purposes of securing compliance with rule CSD-5.2.1 or paragraph CSD-5.2.2, or any condition or restriction imposed under rule CSD-5.2.5, by notice in writing, direct the transfer or disposal of all or any of the shares of a licensed clearing house or licensed central depository in which a substantial shareholder of the licensed clearing house or licensed central depository has an interest.

                Amended: April 2016

              • CSD-5.2.5

                Until a person to whom a direction has been issued under Paragraph CSD-5.2.6 transfers or disposes of the shares which are the subject of the direction, and notwithstanding anything to the contrary in the Commercial Companies Law or the memorandum or articles of association, or other constituent document or documents of the licensed clearing house or licensed central depository:

                (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
                (b) The licensed clearing house or licensed central depository shall not offer or issue any shares, whether by way of rights, bonus, share dividend or otherwise, in respect of the shares which are the subject of the direction; and
                (c) Except in a liquidation of the licensed clearing house or licensed central depository, the licensed clearing house or licensed central depository shall not make any payment, whether by way of cash dividend, dividend in kind, or otherwise, in respect of the shares which are the subject of the direction.
                Amended: April 2016

              • CSD-5.2.6

                Any issue of shares by a licensed clearing house or licensed central depository in contravention of Subparagraph CSD-5.2.5 (b) shall be deemed to be null and void, and a person to whom a direction has been issued under this paragraph shall immediately return those shares to the licensed clearing house or licensed central depository, upon which the licensed clearing house or licensed central depository shall return to the person any payment received from him in respect of those shares.

                Amended: April 2016

              • CSD-5.2.7

                Any payment made by a licensed clearing house or licensed central depository in contravention of rule CSD-5.2.5 (c) shall be deemed to be null and void, and a person to whom a direction has been issued under Paragraph CSD-5.2.6 shall immediately return the payment he has received to the licensed clearing house or licensed central depository.

                Amended: April 2016

              • CSD-5.2.8

                The CBB may exempt:

                (a) Any person or class of persons; or
                (b) Any class or decertification of shares or interests in shares,

                from rule CSD-5.2.1 or Paragraph CSD-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB.

                Amended: April 2016

            • CSD-5.3 Authorisation of Approved Persons

              • Prior Approval Requirements and Process

                • CSD-5.3.1

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

                  Amended: April 2016
                  Amended: April 2013

                • CSD-5.3.2

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

                  (a) Board member;
                  (b) Chief Executive or General Manager;
                  (c) Head of function;
                  (d) Compliance Officer; and
                  (e) Money Laundering Reporting Officer (MLRO).
                  Amended: April 2016
                  Amended: April 2013

                • CSD-5.3.2A

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

                  (a) Head of clearing;
                  (b) Head of settlement;
                  (c) Head of netting;
                  (d) Head of central depository;
                  (e) Head of central registry;
                  (f) Head of risk management; and
                  (g) Head of other functions.
                  Added: April 2016

                • CSD-5.3.2B

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

                  Added: April 2016

                • CSD-5.3.2C

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

                  Added: April 2016

                • CSD-5.3.3

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

                  Amended: April 2013

                • CSD-5.3.4

                  All persons wishing to undertake any of the controlled functions shall be subject to the fit and proper requirements.

                  Amended: April 2013

                • CSD-5.3.5

                  In accordance with Subparagraph CSD-5.3.2(d), every licensed clearing house or licensed central depository must appoint a compliance officer. The compliance officer is responsible for discharging the obligations of the licensee.

                  Amended: April 2016
                  Amended: April 2013

                • CSD-5.3.6

                  In accordance with Paragraph CSD-5.3.5:

                  (a) The Compliance Officer should be competent and knowledgeable regarding the CBB Law, rules and regulations, as well as the various applicable Volume 6 Modules;
                  (b) The Compliance Officer shall:
                  (i) Monitor the transactions undertaken by the member, its representatives, or participants;
                  (ii) Identify disorderly transactions or conduct that may involve market abuse or disruption;
                  (iii) Identify any breach of CBB Law, rules and regulations; and
                  (iv) Identify any breach of the rules of the SRO.
                  Amended: April 2013

                • CSD-5.3.7

                  The Compliance Officer shall on the identification of any breach referred to in Subparagraph CSD-5.3.6(b), report such breach to the CBB without delay for the investigation and shall provide full assistance to the latter in investigating the conduct occurring on or through the licensed clearing house or licensed central depository.

                  Amended: April 2016
                  Amended: April 2013

                • CSD-5.3.7A

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

                  Added: April 2016

                • CSD-5.3.7B

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

                  Amended: April 2018
                  Added: April 2016

                • CSD-5.3.7C

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

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

                • CSD-5.3.7D

                  For existing licensees applying for the appointment of a Board Director or the Chief Executive/General Manager, the authorised representative should be the Chairman of the Board or a Director signing on behalf of the Board. For all other controlled functions, the authorised representative should be the Chief Executive/General Manager.

                  Added: April 2016

              • Fit and Proper Requirements

                • CSD-5.3.8

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

                  Amended: April 2016
                  Amended: April 2013

                • CSD-5.3.8A

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

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

                • CSD-5.3.8B

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

                  Added: April 2016

                • CSD-5.3.8C

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

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

                • CSD-5.3.8D

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

                  Added: April 2016

                • CSD-5.3.9

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

                  Amended: April 2013

                • CSD-5.3.10

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

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

                • CSD-5.3.11

                  [This Paragraph was deleted in April 2016.]

                  Deleted: April 2016
                  Amended: April 2013

                • CSD-5.3.12

                  [This Paragraph was deleted in April 2016.]

                  Deleted: April 2016
                  Amended: April 2013

                • CSD-5.3.13

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

                  Deleted: April 2016
                  Added: April 2013

              • Assessment of Application

                • CSD-5.3.14

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

                  Amended: April 2016
                  Added: April 2013

                • CSD-5.3.14A

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

                  Added: April 2016

                • CSD-5.3.15

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

                  Amended: April 2016
                  Added: April 2016

              • Appeal Process

                • CSD-5.3.16

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

                  Amended: April 2016
                  Amended: April 2013

                • CSD-5.3.17

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

                  Amended: April 2016
                  Amended: April 2013

              • Notification Requirements and Process

                • CSD-5.3.18

                  A licensed clearing house or licensed central depository must immediately notify the CBB when an approved person ceases to hold a controlled function together with an explanation as to the reasons why. In such cases, their approved person status is automatically withdrawn by the CBB.

                  Amended: April 2016
                  Added: April 2013

                • CSD-5.3.18A

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

                  Added: April 2016

                • CSD-5.3.19

                  The CBB may impose regulations relating to the composition and duties of the board of directors or any committee of a licensed clearing house or licensed central depository.

                  Amended: April 2016
                  Amended: April 2013

                • CSD-5.3.20

                  In this section, "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a member or depository participant of a licensed clearing house or licensed central depository.

                  Amended: April 2016
                  Amended: April 2013

              • Amendment of Authorisation

                • CSD-5.3.21

                  A licensed clearing house or licensed central depository must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

                  Amended: April 2016
                  Added: April 2013

                • CSD-5.3.22

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

                  Added: April 2013

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

                • CSD-5.3.23

                  Where the CBB is satisfied that an approved person:

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

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

                  Added: April 2013

                • CSD-5.3.24

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

                  Amended: April 2016
                  Added: April 2013

                • CSD-5.3.25

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

                  Added: April 2013

                • CSD-5.3.26

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

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

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

                • CSD-5.3.27

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

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

            • CSD-5.4 Listing of Licensed Clearing House and Licensed Central Depository on Securities Market

              • CSD-5.4.1

                The securities of a licensed clearing house or a licensed central depository shall not be listed for quotation on a securities market that is operated by any of its related corporations, unless the licensed clearing house or licensed central depository and the operator of the securities market have entered into such arrangements as the CBB may require:

                (a) For dealing with possible conflicts of interest that may arise from such listing; and
                (b) For the purpose of ensuring the integrity of the trading of the securities of the licensed clearing house or licensed central depository.
                Amended: April 2016

              • CSD-5.4.2

                Where the securities of a licensed clearing house or licensed central depository are listed for quotation on a securities market operated by any of its related corporations, the listing rules of the securities market shall be deemed to allow the CBB to act in place of the operator of the securities market in making decisions and taking action, or to require the operator of the securities market to make decisions and to take action on behalf of the CBB, on:

                (a) The admission or removal of the licensed clearing house or licensed central depository, to or from the official list of the securities market; and
                (b) Granting approval for the securities of a licensed clearing house or licensed central depository to be, or stopping or suspending the securities of the licensed clearing house or licensed central depository from being listed for quotation or quoted on the securities market.
                Amended: April 2016

              • CSD-5.4.3

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

                (a) Modify the listing rules of the securities market for the purpose of their application to the listing of the securities of the licensed clearing house or licensed central depository for quotation or trading; or
                (b) Waive the application of any listing rule of the securities market to the licensed clearing house or licensed central depository.
                Amended: April 2016

          • CSD-6: Powers of CBB

            • CSD-6.1 Power to Impose Conditions or Restrictions

              • CSD-6.1.1

                The CBB may impose on a licensed clearing house or licensed central depository such conditions or restrictions as it deems fit by notice in writing, in addition to the obligations imposed on the licensed clearing house or licensed central depository under this Module, for the purposes of furthering the objectives specified in Section CSD-A.1.

                Amended: April 2016

              • CSD-6.1.2

                The CBB may, at any time, by notice in writing to the licensed clearing house or licensed central depository, vary any condition or restriction as it may deem fit.

                Amended: April 2016

              • CSD-6.1.3

                Without affecting the generality of Paragraphs CSD-6.1.1 or CSD-6.1.2, the conditions or restrictions that the CBB may impose include conditions or restrictions relating to:

                (a) The activities that the licensed clearing house or licensed central depository may undertake;
                (b) The products that may be cleared by the clearing facility;
                (c) The securities that may be accepted for deposit by the depository; or
                (d) The nature of investors, members or participants who may use or participate in the licensed clearing house facility and licensed central depository.
                Amended: April 2016

            • CSD-6.2 Power of CBB to Issue Directions

              • CSD-6.2.1

                The CBB may issue directions by notice in writing either of a general or specific nature to a licensed clearing house or licensed central depository, and the licensed clearing house or licensed central depository shall comply with such directions, if the CBB considers it necessary or expedient:

                (a) For ensuring the safe and efficient clearing and settlement of transactions through review of system mechanisms and establishment of operating standards;
                (b) For ensuring the integrity and stability of the capital markets or the financial system;
                (c) In the interests of the public or a section of the public, or for the protection of investors;
                (d) For the effective administration of the CBB Law and regulations; or
                (e) For ensuring compliance with any condition or restriction as may be imposed by the CBB.
                Amended: April 2016

              • CSD-6.2.2

                For the avoidance of doubt, a direction issued under Paragraph CSD-6.2.1 shall be deemed not to be subsidiary legislation, but any non-compliance with a directive shall be regarded as non-compliant with the rules of the CBB.

                Amended: April 2016

            • CSD-6.3 Emergency Powers of CBB

              • CSD-6.3.1

                Where the CBB has reason to believe that an emergency exists, or considers that it is necessary or expedient in the interests of the public, or a section of the public, or for the protection of investors, the CBB may direct by notice in writing a licensed clearing house or licensed central depository to take such action as it considers necessary to maintain or restore safe and efficient operations of the clearing facilities operated by the licensed clearing house and of the custodian services provided by the licensed central depository.

                Amended: April 2016

              • CSD-6.3.2

                Without prejudice to Paragraph CSD-6.3.1, the actions which the CBB may direct a licensed clearing house or licensed central depository to take include:

                (a) Ordering the liquidation of all positions or part thereof, or the reduction of such positions;
                (b) Altering conditions of delivery of transactions cleared or settled, or to be cleared or settled through the clearing facility;
                (c) Fixing the settlement price at which transactions are to be liquidated;
                (d) Requiring margins or additional margins for transactions cleared or settled, or to be cleared or settled through the clearing facility; and
                (e) Modifying or suspending any of the business rules of the licensed clearing house or licensed central depository.
                Amended: April 2016

              • CSD-6.3.3

                Where a licensed clearing house or licensed central depository fails to comply with any direction of the CBB under Paragraph CSD-6.3.1 within such time as is specified by the CBB, the CBB may:

                (a) Set margin levels for transactions cleared or settled, or to be cleared or settled through the clearing facility to cater for the emergency;
                (b) Set limits that may apply to market positions acquired in good faith prior to the date of the notice issued by the CBB; or
                (c) Take such other action as the CBB considers necessary to maintain or restore safe and efficient operations of the clearing facilities operated by the licensed clearing house and the services offered by the licensed central depository.
                Amended: April 2016

              • CSD-6.3.4

                In this section, "emergency" includes:

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

              • CSD-6.3.5

                The CBB may modify any action taken by a licensed clearing house or licensed central depository under Paragraph CSD-6.3.1, including the setting aside of that action.

                Amended: April 2016

            • CSD-6.4 Power of CBB to Remove Officers

              • CSD-6.4.1

                The CBB may, if it thinks it necessary in the interests of the public, or a section of the public, or for the protection of investors, by notice in writing direct that licensed clearing house or licensed central depository to remove the officer from his office or employment, where the CBB is satisfied that an officer of a licensed clearing house or licensed central depository:

                (a) Has wilfully contravened or wilfully caused that licensed clearing house or licensed central depository to contravene this Module or its business rules;
                (b) Has, without reasonable excuse, failed to ensure compliance with this Module or the business rules of that licensed clearing house or licensed central depository, by that licensed clearing house or licensed central depository, or a member of that licensed clearing house or licensed central depository or a person associated with that member;
                (c) Has failed to discharge the duties or functions of his office or employment;
                (d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;
                (e) Has had execution against him in respect of a judgment debt returned unsatisfied in whole or in part;
                (f) Has, whether in Bahrain or elsewhere, made a compromise or scheme of arrangement with his creditors, being a compromise or scheme of arrangement that is still in operation; or
                (g) Has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly.
                Amended: April 2016

              • CSD-6.4.2

                Without prejudice to any other matter that the CBB may consider relevant, the CBB may, in determining whether an officer of a licensed clearing house or licensed central depository has failed to discharge the duties or functions of his office or employment for the purposes of rule CSD-6.4.1 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing.

                Amended: April 2016

              • CSD-6.4.3

                Subject to Paragraph CSD-6.4.4, the CBB shall not direct a licensed clearing house or licensed central depository to remove an officer from his office or employment, without giving the licensed clearing house or licensed central depository an opportunity to be heard.

                Amended: July 2016
                Amended: April 2016

              • CSD-6.4.4

                The CBB may direct a licensed clearing house or licensed central depository to remove an officer from his office or employment under rule CSD-6.4.1 on any of the following grounds, without giving the licensed clearing house or licensed central depository an opportunity to be heard:

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

              • CSD-6.4.5

                Where the CBB directs a licensed clearing house or licensed central depository to remove an officer from his office or employment under rule CSD-6.4.1, the CBB need not give that officer an opportunity to be heard.

                Amended: April 2016

              • CSD-6.4.6

                No criminal or civil liability shall be incurred by a licensed clearing house or licensed central depository in respect of anything done or omitted to be done with reasonable care and in good faith in the discharge or purported discharge of its obligations under this Section.

                Amended: April 2016

            • CSD-6.5 Criteria to Determine Failure to Discharge Duties or Functions by Officers

              • CSD-6.5.1

                For the purposes of Paragraph CSD-6.4.2 of this Module, the CBB may, in determining whether a chairman, chief executive officer or director, or any officer who is a person stated in a notice referred to in Paragraph CSD-6.3.2, of a licensed clearing house or licensed central depository has failed to discharge the duties or functions of his office, take into consideration whether that person has taken reasonable steps to discharge the following duties:

                (a) Ensure the proper functioning of the licensed clearing house or licensed central depository;
                (b) Ensure the compliance of the licensed clearing house or licensed central depository with any relevant laws or regulations of any jurisdication in which it is incorporated, or in which it operates;
                (c) Set out and ensure compliance with written policies on all operational areas of the licensed clearing house or licensed central depository, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed clearing house or licensed central depository;
                (d) Identify, monitor and address the risks associated with the business activities of the licensed clearing house or licensed central depository on an on-going basis;
                (e) Ensure that the business activities of the licensed clearing house or licensed central depository are subject to adequate internal audit;
                (f) Oversee the financial undertakings or exposure of the licensed clearing house or licensed central depository to risks of any nature, by setting out proper delegation limits and risk management controls; and
                (g) Ensure:
                (i) That the licensed clearing house or licensed central depository maintains written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and operating procedures; and
                (ii) That every report, return or statement submitted by the licensed clearing house or licensed central depository to the CBB is complete and accurate.
                Amended: April 2016

            • CSD-6.6 Additional Powers of CBB in Respect of Auditors

              • CSD-6.6.1

                The auditor shall immediately send to the CBB a written report of the matter or the irregularity, if an auditor of a licensed clearing house or licensed central depository in the course of the performance of his duties, becomes aware of:

                (a) Any matter which, in his opinion, adversely affects or may adversely affect the financial position of the licensed clearing house or licensed central depository to a material extent;
                (b) Any matter which, in his opinion, constitutes or may constitute a breach of any provision of this Module or an offence involving fraud or dishonesty; or
                (c) Any irregularity that has or may have a material effect upon the accounts of the licensed clearing house or licensed central depository, including any irregularity that affects or jeopardises, or may affect or jeopardise, the funds or property of investors.
                Amended: April 2016

              • CSD-6.6.2

                An auditor shall not, in the absence of malice on his part, be liable to any action for defamation at the suit of any person in respect of any statement made in his report under rule CSD-6.6.1.

              • CSD-6.6.3

                Rule CSD-6.6.2 shall not restrict or affect any right, privilege or immunity that the auditor may have, apart from this section, as a defendant in an action for defamation.

              • CSD-6.6.4

                The CBB may impose all or any of the following duties on an auditor of a licensed clearing house or licensed central depository:

                (a) A duty to submit such additional information and reports in relation to his audit, as the CBB considers necessary;
                (b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of the licensed clearing house or licensed central depository;
                (c) A duty to carry out any other examination or establish any procedure in any particular case.
                Amended: April 2016

              • CSD-6.6.5

                The licensed clearing house or licensed central depository shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in Paragraph CSD-6.6.4.

                Amended: April 2016

            • CSD-6.7 Power of Court to Order Observance or Enforcement of Business Rules

              • CSD-6.7.1

                Where any person who is under an obligation to comply, observe, enforce or give effect to the business rules of a licensed clearing house, or licensed central depository fails to do so, the Court may, on the application of the CBB, a licensed clearing house, or licensed central depository, or a person aggrieved by the failure, after giving the first-mentioned person an opportunity to be heard, make an order directing the first-mentioned person to comply, observe, enforce or give effect to those business rules.

                Amended: April 2016

              • CSD-6.7.2

                In this section, "person" includes a licensed clearing house and licensed central depository.

                Amended: April 2016

              • CSD-6.7.3

                This Section is in addition to, and not in derogation of, any other remedies available to the aggrieved person referred to in rule CSD-6.7.1.

                Amended: April 2016

            • CSD-6.8 Immunity

              • CSD-6.8.1

                No civil liability, whether arising in contract, equity or otherwise, in respect of anything done or omitted to be done in good faith in the discharge or purported discharge of the duties of the licensed clearing house or licensed central depository, or in the performance or purported performance of its functions under its business rules, shall be incurred by:

                (a) A licensed clearing house;
                (b) A licensed central depository; or
                (c) Any person acting on behalf of a licensed clearing house or licensed central depository, including any member of the board of directors of the licensed clearing house or licensed central depository.
                Amended: April 2016

              • CSD-6.8.2

                In respect of anything done or omitted to be done in good faith in the performance and purported performance of that function, no civil liability, whether arising in contract, tort, defamation, equity or otherwise, shall be incurred by:

                (a) Any person performing, by virtue of a delegation under the business rules of a licensed clearing house or licensed central depository, a function of the licensed clearing house or licensed central depository;
                (b) Any person acting on behalf of a person referred to hereinabove including a member of the board of directors of that person.
                Amended: April 2016

        • MIR Market Intermediaries and Representatives License

          • MIR-A Introduction

            • MIR-A.1 Purpose

              • Executive Summary

                • MIR-A.1.1

                  Module MIR sets out the Central Bank of Bahrain's regulatory framework governing the licensing requirements of members undertaking any regulated activities in or from the Kingdom of Bahrain.

                  Adopted January 2010

                • MIR-A.1.2

                  The MIR Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of members undertaking any regulated activities in or from the Kingdom of Bahrain. It sets out the CBB requirements for authorisation of the controlled functions within the members regarding the initial, as well as ongoing compliance requirements.

                  Adopted January 2010

                • MIR-A.1.3

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

                  (a) To promote fair, orderly and transparent conduct or transactions on any regulated activity undertaken by a member;
                  (b) To facilitate and promote best international practices and conduct while undertaking or providing any regulated activity in or from Bahrain;
                  (c) To reduce systemic risk;
                  (d) To detect and deter manipulation and other misconduct;
                  (e) To maintain integrity of trading through fair and equitable rules that strike an appropriate balance between the demands of different participants;
                  (f) To maximize the regulatory effectiveness;
                  (g) To minimize the regulatory cost; and
                  (h) To maintain market integrity and investor confidence.
                  Adopted January 2010

                • MIR-A.1.4

                  Persons or entities undertaking any regulated activities or functions require prior CBB licensing and/or authorisation. MIR-B.2 provides the definitions for members which are impacted by this Module. These include, but are not limited to entities providing the following regulated activities:

                  (a) Undertaking or providing services related to arranging or trading in securities, whether as principal or as an agent;
                  (b) Undertaking or providing any services related to the clearing, settlement of securities transactions, whether as principal or agent;
                  (c) Undertaking or providing services related to the depositing of securities with a licensed depository.
                  Adopted January 2010

            • MIR-A.2 Module History

              • Evolution of Module

                • MIR-A.2.1

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

                  Adopted January 2010

                • MIR-A.2.2

                  The Bahrain Stock Exchange's Internal Regulation, issued on 24th December 1988 (particularly Chapter 4 Articles 15 to 35), stipulates the membership requirements for the Exchange.

                  Adopted January 2010

                • MIR-A.2.3

                  Resolution No. (2) of 1990, in respect of Certain Conditions Relating to Securities Trading; Resolution No. (4) of 1999, on the Rules and Procedures of Automated Trading at the Bahrain Stock Exchange; and Resolution No. (6) of 2001, in respect of Provision of Remote Trading at the Bahrain Stock Exchange; provides detailed provisions and requirements regarding the rights and obligations of the BSE members in respect of securities trading through the automated trading system at the BSE.

                  Adopted January 2010

                • MIR-A.2.4

                  Resolution No. (3) for the Year 2000, issued by the Chairman of the Bahrain Stock Exchange's Board of Directors, with Respect to the Clearing, Settlement, Depository and Registry Rules provides for "the Participant" which means a BSE member who is accepted and permitted by the BSE to effect transfer of securities and other entries in relation to securities, by means of the CSDR System and provides detailed provision and requirements to be a participant in the CSDR System.

                  Adopted January 2010

                • MIR-A.2.5

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

                  Module Ref. Change Date Description of Changes
                  MIR-B.2.7, MIR-B.2.8A, MIR-B.2.17A, MIR-B.2.20A 04/2013 Amended and added definitions.
                  MIR-2.1.1 04/2013 Clarified licensing requirements.
                  MIR-2.1.2 04/2013 Clarified Subparagraph (d).
                  MIR-2.1.4A to MIR-2.1.4C 04/2013 References added to requirements under Resolution No.(16) for the year 2012.
                  MIR-2.1.5 04/2013 Removed reference to conventional bank as Islamic banks are also covered since reference is made to Volumes 1 and 2.
                  MIR-2.2.4 04/2013 Deleted dealers and exempt members from licensing categories.
                  MIR-2.2.4A 04/2013 Included external and proprietary membership conditions.
                  MIR-2.2.5 04/2013 Deleted reference to 'dealer' as discount brokers are not able to trade through dealers.
                  MIR-2.2.7 04/2013 Deleted licensing conditions of dealers.
                  MIR-2.2.8A and MIR-2.2.8B 04/2013 Included specific external membership requirements.
                  MIR-2.2.8C 04/2013 Included the proprietary membership requirements.
                  MIR-2.2.9 04/2013 Clarified general status of clearing member.
                  MIR-2.2.11 04/2013 Updated name change to Form 3.
                  MIR-2.2.11A and MIR-2.2.11B 04/2013 New criteria for external members. CBB to retain market conduct supervision powers.
                  MIR-2.2.12 04/2013 Included specific reference to licensing.
                  MIR-2.2.12A 04/2013 Included general requirements for licensing as requirements for authorisation by the exchange.
                  MIR-2.2.12B 04/2013 Included provision for licensing amendment.
                  MIR-2.3 and MIR-2.4 04/2013 These Sections were deleted as exempted member was deleted as a licensing category.
                  MIR-2.8.1 and MIR-2.8.1A 04/2013 Provided details of annual fees due to the CBB.
                  MIR-2.10.1 04/2013 Included specific Rules for place of business.
                  MIR-3.1.6 to MIR-3.1.8 04/2013 Moved reference from Section MIR-4.17 on compliance officer and added reporting from compliance officer to the CBB.
                  MIR-3.2.2 04/2013 Added new residency requirements.
                  MIR-3.4.2 04/2013 Added reference to Form 3: Application for Approved Person Status.
                  MIR-4.7.7 04/2013 Included market maker agreement content.
                  MIR-4.7.7A 04/2013 Included criteria to be a market maker.
                  MIR-4.9.3 and MIR-4.9.4 04/2013 Added reference to report institutional information (IIS) to the CBB.
                  MIR-4.12.4(i) 04/2013 Added regulatory disclosure as exception from maintaining confidentiality.
                  MIR-4.17 04/2013 This Section was deleted and requirements moved to Paragraphs MIR-3.1.6 and MIR-3.1.7.
                  MIR-2.8 04/2014 Clarified Rules and guidance on annual license fees.
                  MIR-2.5.4, MIR-2.5.5, MIR-3.1.3 and MIR-4.8.9 07/2014 Removed reference to exempted member as this category was deleted as a licensing category in April 2013.
                  MIR-3.1.3 07/2014 Corrected reference to non-existent Subparagraph.
                  MIR-4.8.2 07/2014 Correction made to align with the requirements of the CBB Law.
                  MIR-1.1.7 04/2016 Legal basis updated to reflect Resolution No (23) of 2015.
                  MIR-3.1, MIR-3.3 and MIR-3.4 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                  MIR-3.1.3 04/2016 Clarified that controlled function (d) Head of function cannot be combined with other functions.
                  MIR-3.4.1 and MIR-3.4.2 04/2016 Paragraph MIR-3.4.1 was deleted and clarification was made to Paragraph MIR-3.4.2 that approval for controlled functions referred to under Paragraph MIR-3.1.2, must be made by submitting Form 3.
                  MIR-A.4.3(d) 07/2016 Included reference to classification of SRO members and membership requirements.
                  MIR-B.1.2 07/2016 Added reference to authorisation for external trading member and proprietary trading member in scope.
                  MIR-B.2 07/2016 Section deleted and contents moved to Glossary.
                  MIR-1.1.2 07/2016 Corrected reference to licensee.
                  MIR-1.1.3 07/2016 Corrected wording
                  MIR-1.1.8, MIR-1.1.9 and MIR-1.1.10 07/2016 Legal basis updated to reflect Resolution No (59) of 2011, Resolution No (30) of 2015 and Resolution No (1) of 2016.
                  MIR-2.1.6 07/2016 Typographical error corrected.
                  MIR-2.1.7 07/2016 Amended to make reference to categories in MIR-2.2.4
                  MIR-2.2.4 07/2016 Included authorised external trading member and authorised proprietary trading member as separate categories.
                  MIR-2.2.4A 07/2016 Added cross reference.
                  MIR-2.2.8A 07/2016 Deleted reference to dealer. Revised from licensed to authorised.
                  MIR-2.2.8B and MIR-2.2.8C 07/2016 Revised from requirement to obtain license to authorisation.
                  MIR-2.2.10, MIR-2.2.11A, MIR-3.6.1(a) 07/2016 Typographical errors corrected.
                  MIR-2.8 07/2016 Amended to be in line with Resolution No. (1) of 2016 on annual licensing fees.
                  MIR-3.1and MIR-3.3.1A(g) 07/2016 Amended to be in line Modules MAE and CSD.
                  MIR-3.4.8 and MIR-3.4.11 07/2016 Deleted Paragraph MIR-3.4.8 and included under Paragraph MIR-3.4.11.
                  MIR-4.1.1 07/2016 Introduced rules on invitation and attendance at AGM and EGM by CBB representative.
                  MIR-4.2.3 07/2016 Clarified deadline.
                  MIR-4.3.3 07/2016 Deleted reference to exempt member.
                  MIR-4.8.10 07/2016 Added due date for publication requirement.
                  MIR-4.8.11 07/2016 Clarified accounting standards to be used.
                  MIR-2.9.2 07/2017 Added Paragraph to clarify the cost of publication.
                  MIR-2.9.3 07/2017 Added Paragraph on means of publication.
                  MIR-4.7.23 01/2018 Amended Paragraph.
                  MIR-4.7.23A 01/2018 Added new guidance paragraph.
                  MIR-A.3.2 01/2019 Added a new Paragraph on market makers.
                  MIR-4.7.7(c)(iii) and MIR-4.7.7A 01/2019 Deleted client disclosure requirement and criteria to be a market maker.
                  MIR-4.19 01/2019 Added a new Section on market making for liquidity enhancement.

              • Superseded Requirements

                • MIR-A.2.6

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

                  Circular/Other Ref. Provisions Subject
                  BSE Internal Regulation Article No. 17 Article 17 Brokers registered with the Ministry of Commerce shall apply to the BSE Management for a new license for undertaking brokerage in securities.
                  Resolution No. (2) of 1995 Issued by the Chairman of the BSE All In respect of services provided by brokerage companies at the Bahrain Stock Exchange.
                  Resolution No. (2) of 2002 Issued by the Chairman of the BSE All In respect of the provision of custodial services through the Central Depository System at the Bahrain Stock Exchange.
                  Adopted January 2010

            • MIR-A.3 Interaction with other Modules

              • MIR-A.3.1

                All members and their employees and representatives must comply with all other Modules in Volume 6, in addition to other applicable laws, rules and regulations.

                Adopted January 2010

              • MIR-A.3.2

                Market makers and issuers must in addition to complying with the market making provision under this Module refer to and comply with Module MAE (Markets and Exchanges) which sets forth the CBB requirements for registration of market maker.

                Added: January 2019

            • MIR-A.4 Division of Responsibilities

              • MIR-A.4.1

                A clear division of responsibilities between CBB as the regulator, the SRO's and their members is required:

                (a) To maximise the regulatory effectiveness;
                (b) To permit flexibility to the SRO's in their functioning;
                (c) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations;
                (d) To minimise the regulatory cost; and
                (e) To enforce the requirements related to the market conduct and good practices.
                Adopted January 2010

              • MIR-A.4.2

                As a regulator, CBB's role would be as follows:

                (a) Regulatory supervision;
                (b) Maintaining and promoting fairness, efficiency and transparency within the capital market and securities businesses;
                (c) Acting as an enforcement agency with powers to investigate and take administrative, civil or criminal actions as it may deem appropriate;
                (d) Approving the business rules and by-laws of the SRO's whereby any changes in such business rules and by-laws would need prior approval of CBB; and
                (e) Licensing, supervision, inspection, investigation and enforcement on the SRO's and their members.
                Adopted January 2010

              • MIR-A.4.3

                As a CBB licensee, the main objective of the SRO is to promote:

                (a) Fairness and investor protection;
                (b) Fair access to their systems, facilities and information;
                (c) The provision of timely and accessible relevant information and data; and
                (d) The efficient regulation of their members, including classification of its membership and requirements for each class or category of membership.
                Amended: July 2016
                Adopted January 2010

              • MIR-A.4.4

                As a CBB licensee, as well as a member, the main objectives of such entities are:

                (a) Handling and execution of the investors or clients' orders or transactions in accordance with the CBB Law, rules and regulations, as well as with the business rules of the licensed exchange;
                (b) Clearing, settling and depositing of investors or clients' securities in accordance with the licensed clearing house business rules;
                (c) Handling and the protection of their client's securities, assets and money, in accordance with the applicable laws, rules and regulation and this Module;
                (d) Providing efficient and cost effective services to their clients and enhancing the public investors' confidence in the market; and
                (e) Providing any regulated activities undertaken by them in line with the industry standards and best international practices.
                Amended: July 2016
                Adopted January 2010

          • MIR-B Scope

            • MIR-B.1 Scope

              • MIR-B.1.1

                This Module shall apply to any person undertaking any regulated activities as a member of an SRO (licensed exchange and/or licensed clearing house) in or from the Kingdom of Bahrain.

                Adopted January 2010

              • MIR-B.1.2

                This Module covers the authorisation requirements pertaining to external trading members and proprietary trading members as a separate category of membership under the licensed exchange.

                Added: July 2016

            • MIR-B.2 Definitions

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

              Deleted: July 2016

          • MIR-1 Legal Basis and Regulated Activities

            • MIR-1.1 Legal Basis and Regulated Activities

              • MIR-1.1.1

                Article (1) of the CBB Law defines "Financial Institutions" as: Banks, insurance companies, companies dealing in securities, portfolios and investment funds, financing companies, money exchange companies, money brokers and mediators, insurance brokers, mediators of the securities market, consultancy firms dealing in the financial service industry, credit rating firms, Bahrain securities market, capital markets, and precious metals and strategic commodities markets, financial sector support institutions, including institutions licensed to provide financial regulated activities according to Islamic Shari'a principles".

                In addition, Article (1) defines "Financial Sector Support Institutions" as: "institutions licensed for operating clearance houses, settlement payments, cheques and financial papers, and institutions which are wholly or partly set up by financial institutions in cooperation with the Central Bank, in order to provide regulated activities of a purely financial nature to the financial regulated activities industry".

                Article (1) defines "Market Maker" as: "Any person licensed by the Central Bank to sell and buy in the Stock Exchange to encourage trading in this market".

                Adopted January 2010

              • MIR-1.1.2

                The CBB defines the securities businesses in line with Article (80) of the CBB Law, which states that "Companies trading in securities are those companies whose objectives include one or more of the following activities:

                1. Promoting and underwriting securities or financing investments therein;
                2. Participating in incorporating of securities companies or increasing the capitals thereof.
                3. Forming and managing securities portfolios.
                4. Depositing, clearance and settlement of securities.
                5. Brokering in securities transactions.
                6.Providing advisory services related to securities.
                7. Any other regulated activities as approved by the Central Bank."

                For the purpose of this Module, the abovementioned regulated activities that may be undertaken shall be only those activities within the parameters of the regulated business of the SRO, of which the licensee is a member and which may include, but not be limited to the activities below:

                "advising on corporate finance" means giving advice:
                (a) To any entity concerning compliance with or in respect of laws or regulatory requirements (including the listing rules of a securities exchange) relating to the raising of funds by any entity;
                (b) To the person making an offer or invitation to the public:
                (i) To subscribe for or purchase securities; or
                (ii) To sell or otherwise dispose of securities, concerning that offer or invitation; or
                (c) Concerning the arrangement, reconstruction, merger or takeover of a corporation or any of its assets or liabilities.
                "agreement" includes arrangement;
                "dealing in securities" means (whether as principal or agent) making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into any agreement for or with a view to acquiring, disposing of, subscribing for, or underwriting securities;
                "Portfolio management" means undertaking on behalf of a client (whether on a discretionary authority granted by the customer or otherwise):
                (a) The management of a portfolio of securities or futures contracts; or
                (b) Foreign exchange trading or leveraged foreign exchange trading for the purpose of managing the client's funds;
                "offer" or "offering" includes invitation;
                "on a margin basis", means financial institutions entering into the contract or arrangement referred to therein by providing to the investor or his agent money, securities, property or other collateral which represents only a part of the value of the contract or arrangement to be entered into by him;
                "providing depositing, clearance and settlement of securities" means providing or agreeing to provide any service where the person providing the service has, under an arrangement with another person (the client), possession or control of securities of the client and carries out one or more of the following functions for the client:
                (a) Settlement of transactions relating to the securities;
                (b) Collecting or distributing dividends or other pecuniary benefits derived from ownership or possession of the securities;
                (c) Paying tax or other costs associated with the securities;
                (d) Exercising rights, including without limitation voting rights, attached to or derived from the securities;
                (e) Any other function necessary or incidental to the safeguarding or administration of the securities, but does not include:-
                (i) The regulated activities of a corporation which is a depository, as defined in Article (94) of the Law;
                (ii) The provision of regulated activities to a related corporation or associated person, so long as none of the securities is:-
                (A) Held on trust for another person by the related corporation or associated person;
                (B) Held as a result of any custodial regulated activities undertaken by the related corporation or associated person to another person; or
                (C) Beneficially owned by any person other than the related corporation or associated person;
                (iii) The provision of regulated activities by a nominee corporation which are solely incidental to the business of a nominee corporation; or
                (iv) Any other conduct as the CBB may prescribe;
                "securities financing" means to directly or indirectly facilitate, by providing any credit facility, advance or loan:
                (a) The subscription for securities or purchase of listed or to be listed on a securities exchange or such other securities as the CBB may prescribe; and
                (b) Where applicable, the continued holding of those securities, whether or not those securities are pledged as security for the credit facility, advance or loan, but does not include the provision of any credit facility, advance or loan:-
                (i) That forms part of an arrangement to underwrite or sub-underwrite securities;
                (ii) To facilitate an acquisition of securities in accordance with the terms of a prospectus, to offer securities;
                (iii) To a licensed member undertaking regulated activities to deal in securities or provide securities financing, or a financial institution, to facilitate acquisitions or holdings of securities;
                (iv) By a listed company to its directors or employees to facilitate acquisitions or holdings'of its own securities;
                (v) By a member of a group of listed companies to another member of the group to facilitate acquisitions or holdings of securities by that other member; or
                (vi) By an individual to a company in which he holds 10% or more of its issued share capital to facilitate acquisitions or holdings of securities;
                "trading in futures contracts" means (whether as principal or agent):-
                (a) Making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into any agreement for or with a view to the purchase or sale of a futures contract; or
                (b) Soliciting or accepting any order for, or otherwise dealing in, a futures contract.
                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-1.1.3

                The regulated activities under sub-Articles 80 (1) and 80 (2) of the CBB Law is covered under the Offering of Securities Module (OFS) under this Volume.

                Amended: July 2016
                Adopted January 2010

              • MIR-1.1.4

                The CBB Law Article (89) requires that "All trading in securities listed on the Exchange shall be conducted through a mediator who is licensed by the Central Bank and registered as a member of the Exchange".

                Adopted January 2010

              • MIR-1.1.5

                The CBB Law Article (94) "Deposit of Securities" states that "No person may engage in depositing of securities without an authorisation from the Central Bank. "Deposit of Securities" means to register the ownership of the securities of a depositor in the name of a depository under a securities deposit agreement and in accordance with the form issued for this purpose by the depository. The Central Bank shall issue the rules governing the Deposit of Securities".

                Adopted January 2010

              • MIR-1.1.6

                The CBB Law Article (113) states that:

                "(a) The Central Bank may request in writing from any licensee's partner any reports that may be necessary under this law.
                (b) The person who prepares such reports referred to in the previous paragraph must be:
                1. Nominated, appointed or approved by the Central Bank.
                2. Duly qualified to prepare such reports".
                Amended: April 2013
                Adopted January 2010

              • MIR-1.1.7

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

                Added: April 2016

              • MIR-1.1.8

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

                Added: July 2016

              • MIR-1.1.9

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

                Added: July 2016

              • MIR-1.1.10

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

                Added: July 2016

          • MIR-2 Licensing

            • MIR-2.1 Licensing Requirements

              • MIR-2.1.1

                No person shall undertake any of the regulated activities under section MIR-1.1, or hold himself out as undertaking any regulated activities through a licensed exchange or licensed clearing house in or from Bahrain, unless the person is licensed by the CBB and accepted as a member of an SRO.

                Amended: April 2013
                Adopted January 2010

              • MIR-2.1.2

                A person will be deemed to be undertaking business within or from Bahrain, if for example:

                (a) Such person is incorporated in Bahrain;
                (b) Such person uses an address situated in Bahrain for the correspondence;
                (c) Such person directly solicites clients who are resident within Bahrain; or
                (d) Such person utilises the services of a licensed exchange and/or licensed clearing house.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.1.3

                Without prejudice to the generality of Article (89) of the CBB Law, no person other than a licensed member shall use, in any language a word or expression which may reasonably be understood to mean that such person is a licensed member, or is carrying out a regulated activity unless he is a licensed person.

                Amended: April 2013
                Adopted January 2010

              • MIR-2.1.4

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

                (a) The title or description "licensed member" in any language; or
                (b) Any title or description which resembles a title or description referred to in (a).
                Amended: April 2013
                Adopted January 2010

              • MIR-2.1.4A

                No person may market any financial services in the Kingdom of Bahrain unless:

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

              • MIR-2.1.4B

                In accordance with Resolution No.(16) for the year 2012 and for the purpose of Paragraph MIR-2.1.4A, the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial services in return for monetary payment or some other form of valuable consideration.

                Added: April 2013

              • MIR-2.1.4C

                Persons in breach of Paragraph MIR-2.1.4A are considered in breach of Resolution No.(16) for the year 2012 and could be subject to penalties under Articles 129 and 161 of the CBB Law.

                Added: April 2013

              • MIR-2.1.5

                Where a person is licensed under Volumes 1 or 2, then a separate license under Volume 6 is not required in order to undertake regulated activities of the kind specified under section MIR-1.1. Such person shall obtain the membership of the SRO before undertaking such regulated activities.

                Amended: April 2013
                Adopted January 2010

              • MIR-2.1.6

                Where a person is licensed under Volume 4 to undertake regulated activities of the kind specified under section MIR-1.1, such license shall be regarded as being given under this Module of Volume 6 and the licensee shall abide by this Module and Volume 6 in respect of its undertaking of the above regulated activities.

                Amended: July 2016
                Adopted January 2010

              • MIR-2.1.7

                Depending on the type of regulated activities that a person wishes to undertake, an applicant must seek to be licensed under different licensing categories as stipulated under Paragraph MIR-2.2.4.

                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

            • MIR-2.2 Application for License

              • MIR-2.2.1

                Persons wishing to be licensed to undertake regulated activities within or from the Kingdom of Bahrain must apply in writing to the CBB.

                Adopted January 2010

              • MIR-2.2.2

                Unless otherwise approved by the CBB, the person undertaking any regulated activities shall be established as a corporation subject to the Commercial Companies Law 2001.

                Adopted January 2010

              • MIR-2.2.3

                Any applicant must be independent of the SRO to which it wishes to become a member. For the purpose of this section, a person will not be considered independent if:

                (a) He owns an interest of 30% or more of equity securities of the SRO or any other company owned by the SRO. In the case of other securities, if he owns a significant interest in the securities of the SRO, or any other affiliated entity; or
                (b) He has a business relationship with, or financial interest in, the SRO or any other entity in the SRO's group that would give the SRO a material interest in the outcome of the application; or
                (c) He provides any service, assurance, or guidance in any event to the SRO, or to another entity in the SRO's group; or
                (d) A director, partner or employee of the applicant or another entity in the applicant's group has a material interest in the SRO or any other entity in the SRO's group.
                Added: April 2013

              • MIR-2.2.4

                Under this Module, a person may apply to the CBB to be:

                (1) A licensed discount broker;
                (2) A licensed broker;
                (3) [Deleted in April 2013];
                (4) A licensed broker-dealer;
                (5) A licensed clearing member;
                (6) [Deleted in April 2013];
                (7) [Deleted in April 2013];
                (8) An authorised external trading member; or
                (9) An authorised proprietary trading member.
                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.4A

                In accordance with Subparagraphs MIR-2.2.4(8) and MIR-2.2.4(9), a person may apply to the licensed exchange and the CBB to be an external trading member (provided it meets the requirements of Paragraph MIR-2.2.8A) or a proprietary trading member (as defined in the Glossary and provided it meets the requirements of Paragraph MIR-2.2.8C).

                Amended: July 2016
                Added: April 2013

              • MIR-2.2.5

                The licensed discount broker may undertake only collecting of the investors or clients order which is required to be executed on the licensed exchange through a licensed broker or broker-dealer.

                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.6

                The licensed brokers may undertake:

                (a) Trading in securities as agent;
                (b) Arranging transactions in securities as an agent.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.7

                [This Paragraph was deleted in April 2013]

                Deleted: April 2013

              • MIR-2.2.8

                The licensed broker-dealers may undertake:

                (a) Trading in securities as principal;
                (b) Trading in securities as agent;
                (c) Arranging transactions in securities as principal and agent;
                (d) Managing securities' portfolios;
                (e) Depositing of securities;
                (f) Advising on securities businesses;
                (g) Providing market research and analysis.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.8A

                An external trading member accepted for membership by a licensed exchange and authorised by the CBB may undertake only the activities of a licensed broker or broker-dealer outside the Kingdom of Bahrain. In order to be eligible, the external member must: be a member of an exchange or otherwise licensed and supervised in its home market by a securities regulator that is a signatory to the IOSCO MMOU or acceptable bilateral agreement. An external trading member may not conduct any business within the Kingdom of Bahrain.

                Amended: July 2016
                Added: April 2013

              • MIR-2.2.8B

                In order to be authorised by the CBB, an external trading member must meet the requirements of Paragraph MIR-2.2.11A and submit the application made for membership of the licensed exchange together with the approval of membership of such exchange. An external trading member's primary regulator and supervisor is the licensed exchange, of which it is a member and it is not required to comply with the provisions of this Module unless directed to do so by the CBB.

                An external trading member is required to conclude the necessary agreements for the clearing and settlement of its transactions conducted on a licensed exchange. External trading members are not eligible to be members of a licensed clearing house or central securities depository.

                Amended: July 2016
                Added: April 2013

              • MIR-2.2.8C

                In order to be authorised by the CBB, a proprietary trading member must submit the application made for membership of the licensed exchange together with the approval of membership of such exchange. A proprietary trading member's primary regulator and supervisor is the licensed exchange, of which it is a member and it is not required to comply with the provisions of this Module unless directed to do so by the CBB.

                Amended: July 2016
                Added: April 2013

              • MIR-2.2.9

                The licensed clearing member (general) may undertake any regulated activities stipulated under Module CSD in general, and in particular:

                (a) Facilitating the deposit of securities;
                (b) Clearing and settlement of securities transactions as principal;
                (c) Clearing and settlement of securities transactions as agent;
                (d) Facilitating registration of dealings in deposited securities;
                (e) Provide custody services to deposited securities;
                (f) Facilitating netting of transactions in deposited securities;
                (g) Facilitating securities lending, including repurchase agreements and other economically equivalent transactions;
                (h) Finality of settlement;
                (i) Facilitating margin trading; or
                (j) Ensure achievement of Delivery versus Payment.

                The licensed clearing house may restrict its members from undertaking part of the abovementioned regulated activities.

                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.10

                The licensed member may combine two or more regulated activities, provided these fall within the regulated activities list for their member category, and such combinations are not restricted by the CBB or SRO.

                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.11

                With the exception of external trading members and proprietary trading members, an application for a license as a member to undertake any regulated activity under Paragraph MIR-1.1.2 shall be made in Form 1 (Application for Approval as a Licensed Member) and shall be lodged with the CBB together with:

                (a) Form 2 (Information on Shareholders and Subsidiaries) and Form 3 (Application for Approved Person Status);
                (b) Any relevant annex and information specified in those forms;
                (c) A non-refundable prescribed application fee of BD100 (One Hundred Bahraini Dinars);
                (d) A business plan setting forth the internal controlling procedures of the enterprise;
                (e) A business plan containing a budgeted accounting plan for the first three business years;
                (f) Memorandum and Articles of Association of the corporation, copies of the by-laws, its constitution and powers of management and the manner in which its business is proposed to be undertaken;
                (g) Policies and procedures for regulated activities undertaken;
                (h) The proposed organisation structure and the powers and duties of the persons performing controlled functions of the licensed member;
                (i) A copy of the application submitted to the licensed exchange or licensed clearing house, as the case may be and the qualification for membership;
                (j) A description of the proposed trading, clearing and settlement arrangements;
                (k) Arrangements for risk management, compliance and internal controls;
                (l) Where regulated activities would be outsourced, copies of contracts and arrangements for oversight of their activities; and
                (m) Arrangements for complying with business rules of the licensed exchange and/or licensed clearing house.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.11A

                Any licensed exchange, that accepts an external trading member, must together with the Final Membership and Commencement of Operation Checklist, provide the CBB with:

                (a) A copy of the application made to the licensed exchange for membership as an external trading member;
                (b) A description of the clearing and settlement arrangements including a copy of the signed contract with a licensed clearing member (general);
                (c) A copy of the external trading member's membership registration certificates with an exchange in its home and any other jurisdiction;
                (d) A copy of the external trading member's licensing or registration with its home market securities regulator (where required to be licensed or registered), which regulator must be a member of IOSCO and a signatory to the IOSCO MMOU or acceptable bilateral agreement; and
                (e) A letter of confirmation that the CBB Law and this Module are not in conflict with its market rules and legislation and where a conflict is determined, details must be provided for consideration and approval by the CBB.
                Amended: July 2016
                Added: April 2013

              • MIR-2.2.11B

                The acceptance as a member of an external trading member or proprietary trading member by a licensed exchange does not in any way remove the authority of the CBB to supervise and regulate external trading members or proprietary trading members in respect of market conduct or to require the provision of any information or records and the CBB reserves its right to compel an external trading member or proprietary trading member to comply with CBB rules and regulations at any stage should it deem it necessary.

                Added: April 2013

              • MIR-2.2.12

                The applications to be a licensed member must include evidence that:

                (a) Any trading conducted will be provided in an orderly, transparent and fair manner;
                (b) The licensed member will be subject to regulation by the CBB and the business rules of the SRO;
                (c) The licensed member has taken adequate measures to prudently manage any risks associated with its business and operations;
                (d) The licensed member, in discharging its obligations, will not act contrary to the interests of the investing public, or to the requirements of the CBB;
                (e) The licensed member will enforce compliance by its employees or representatives with the business rules of the SRO, as the case may be;
                (f) The licensed member makes satisfactory provisions for an orderly, transparent and fair conduct of its business, the adherence to rules and the supervision of its employees or representatives; and
                (g) The licensed member has sufficient financial, human, and technical resources to undertake regulated activities in a fair, orderly, transparent manner and meet contingencies or disaster criteria.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.12A

                External trading members and proprietary trading members must provide the details in Paragraph MIR-2.2.12 to the licensed exchange as part of its membership application.

                Added: April 2013

              • MIR-2.2.12B

                A licensed member may apply to amend its licensing category by application to the CBB's Licensing and Policy Directorate by providing only the amended or additional information relevant to the change in regulated activities it intends to undertake.

                Added: April 2013

              • MIR-2.2.13

                The CBB will review the application and duly advise the applicant in writing when it has:

                (a) Granted the application without conditions;
                (b) Granted the application subject to conditions specified by the CBB; or
                (c) Refused the application, stating the grounds in which the application has been refused and the process for appealing against that decision, unless the licensed exchange and/or licensed clearing house refuses to grant its approval, as the case may be.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.14

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

                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.15

                The CBB may refuse to accept any application if:

                (a) It is not completed in accordance with this Module;
                (b) It is not accompanied by the relevant fee;
                (c) The licensed exchange and/or licensed clearing house refuse to grant the applicant membership, as the case may be.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.16

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

                Amended: April 2013
                Adopted January 2010

              • MIR-2.2.17

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

                Amended: April 2013
                Adopted January 2010

              • Licensing of Members

                • MIR-2.2.18

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

                  Amended: April 2013
                  Adopted January 2010

                • MIR-2.2.19

                  The CBB may grant an in principle confirmation which does not amount to a license nor commit the CBB to issuing a license within 30 days from the date of the application, following which the applicant may take steps for employment of personnel to the company at his own risk.

                  Amended: April 2013
                  Adopted January 2010

                • MIR-2.2.20

                  The member shall not undertake any regulated activities before the CBB grants the license to the applicant.

                  Amended: April 2013
                  Adopted January 2010

                • MIR-2.2.21

                  The CBB may license a person as a licensed member, subject to such conditions or restrictions as the CBB may think fit to impose by notice in writing, including conditions or restrictions relating to:

                  (a) The regulated activities that the person may undertake;
                  (b) The securities or futures contracts or any other products or instruments that a member may undertake; and
                  (c) The class or group of investors and location.
                  Amended: April 2013
                  Adopted January 2010

                • MIR-2.2.22

                  The CBB may, at any time, in consultation with the licensed exchange and/or licensed clearing house by notice in writing to the person, vary any condition or restriction or impose such further condition or restriction as it may think fit.

                  Amended: April 2013
                  Adopted January 2010

                • MIR-2.2.23

                  A licensed member shall, for the duration of the license, satisfy all conditions and restrictions that may be imposed on it.

                  Amended: April 2013
                  Adopted January 2010

                • MIR-2.2.24

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

                  Amended: April 2013
                  Adopted January 2010

            • MIR 2.3 Exempted Broker-Dealer and Exempted Clearing Member [This Section was deleted in April 2013]

              • MIR-2.3.1

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.2

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.3

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.4

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.5

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.6

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.7

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.8

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.3.9

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

            • MIR 2.4 Power of CBB to Revoke Exemption [This Section was deleted in April 2013].

              • MIR-2.4.1

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.4.2

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-2.4.3

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

            • MIR 2.5 Criteria for Granting License

              • MIR-2.5.1

                The CBB may license a person as a member if:

                (a) The CBB is satisfied that the undertaking of regulated activities by the person will;
                1. Develop the capital market and enhance confidence therein;
                2. Develop the securities businesses or services and enhance the market liquidity; and
                3. Protect the interests of investors or users of the SRO (licensed exchange and/or licensed clearing house) and enhance the Kingdom's credibility as an international financial centre; and
                (b) The CBB is satisfied that the person, having applied to be a member under this Module, is able to comply with the obligations and requirements imposed on such member.
                Adopted January 2010

              • MIR-2.5.2

                The CBB may have regard to the following matters in determining whether a member has satisfied the criteria referred to in paragraph MIR-2.5.1 (a) or (b):

                (a) The size and structure, or proposed size and structure, of the regulated activities to be undertaken by the applicant;
                (b) The nature of the regulated activities undertaking, or to be undertaken, by the applicant;
                (c) The nature of the securities, futures contracts, products or instruments that the applicant will be involved in;
                (d) The nature of the investors, clients or participants, or proposed investors, clients or participants, who may use regulated activities or services undertaken by the applicant;
                (e) Whether the applicant has been licensed by the CBB or any other regulator;
                (f) That the rules and by-laws of an applicant are in conformity with such conditions as may be prescribed with a view to ensure fair conduct of business and to protect investors;
                (g) That the applicant is willing to comply with any other conditions which the CBB, having regard to the nature of the securities, futures contracts, products or instruments dealt with by it, may impose;
                (h) The proposed securities businesses or services comply with up-to-date securities industry standards;
                (i) The persons who may be affected in the event that the applicant runs into difficulties;
                (j) Where the head office or principal place of business of the applicant is outside Bahrain, whether the applicant in the country or territory in which the head office or principal place of business of the applicant is situated, is subject to requirements and supervision comparable to those in the Kingdom of Bahrain;
                (k) The interests of the public;
                (l) Any other circumstances that the CBB may consider relevant;
                (m) Whether the applicant is satisfied or will satisfy the SRO's (licensed exchange and/or clearing house) business rules and related requirements.
                Adopted January 2010

              • MIR-2.5.3

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

                (a) The financial resources, the management and human resources with appropriate experience necessary for undertaking regulated activities;
                (b) Made arrangements for the proper supervision of all transactions effected through the SRO, so as to ensure compliance with the rules of the SRO;
                (c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the records of transactions effected through the SRO;
                (d) Insurance, a guarantee, or compensation fund, or other warranty plans placed by the SRO in respect of providing compensation, subject to the business rules of the SRO, to its clients; and
                (e) Made provisions, to the satisfaction of the CBB, for the clearing and settlement of transactions effected through a licensed clearing house and for the management of trade and settlement risk.
                Adopted January 2010

              • MIR-2.5.4

                [This Paragraph was deleted in July 2014.]

                Deleted: July 2014
                Adopted January 2010

              • MIR-2.5.5

                [This Paragraph was deleted in July 2014.]

                Deleted: July 2014
                Adopted January 2010

            • MIR 2.6 Surrender of License or Cessation of Activities or Services

              • MIR-2.6.1

                Without prejudice to the CBB Law, a member which intends to cease to undertake its regulated activities may apply to the CBB to surrender its approval as a member.

                Adopted January 2010

              • MIR-2.6.2

                The CBB, after considering the requirement of the CBB Law Articles 108, 109 & 110, may, subject to paragraph MIR-2.6.1, cancel the license if it is satisfied that the member referred to in paragraph MIR-2.6.1 has ceased undertaking its regulated activities and that there are no pending obligations of the member or securities, contracts, products or instruments traded, cleared or settled.

                Adopted January 2010

              • MIR-2.6.3

                The licensed member shall publish a notice of its intention to cease to provide its regulated activities in an SRO and in 2 daily newspapers, one in Arabic and the other in English, in Bahrain at least 30 days before ceasing its operations.

                Amended: April 2013
                Adopted January 2010

              • MIR-2.6.4

                Any objections received from the SRO, investors or clients of the member shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the related member.

                Adopted January 2010

              • MIR-2.6.5

                The notice referred to in rule MIR-2.6.3 shall be subject to the approval of the CBB and shall be published at least 30 days prior to the cessation taking effect, after obtaining clearance from the relevant SRO, as the case may be.

                Adopted January 2010

            • MIR 2.7 Cancellation or Amendment of License

              • MIR-2.7.1

                Without prejudice to the CBB Law Articles 108, 109 & 110, the CBB may cancel any license of a person as a licensed member, if:

                (a) There exists criteria under section MIR-2.5 that the member does not meet and on which grounds the CBB would refuse an application;
                (b) The member does not commence undertaking its regulated activities within 6 months from the date on which it was granted the license;
                (c) The member ceases to undertake its regulated activities;
                (d) The member contravenes:
                1. Any CBB Law, rules or regulations;
                2. Any condition or restriction applicable in respect of its license;
                3. Any direction issued to it by the CBB;
                4. Any provision in this Module; or
                5. Any provision or requirements of the business rules and requirements of an SRO.
                (e) The licensed member undertaking regulated activities in a manner that is in the opinion of the CBB contrary to the market integrity and the interests of the public or clients;
                (f) Any information or document that is submitted to the CBB that the member knows is false or misleading; and
                (g) Any false or misleading information or document knowingly or willingly disseminated by the member to the market or its clients.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.7.2

                The CBB may not, subject to paragraph MIR-2.7.3, cancel any license that was granted to a member without giving the opportunity to be heard.

                Adopted January 2010

              • MIR-2.7.3

                The CBB may cancel a license that was granted to a member on any of the following grounds without giving an opportunity to be heard:

                (a) The member is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
                (b) A receiver, a receiver and manager, or an equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the member;
                (c) The member has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly; and
                (d) The implementation of a decision or an appeal of the Disciplinary Committee resolution, whether in Bahrain or elsewhere, for the cancellation of membership of the member.
                Adopted January 2010

              • MIR-2.7.4

                For the purposes of paragraph MIR-2.7.1 (c), a member shall be deemed to have ceased to undertake its regulated activities if:

                (a) It has ceased to undertake its regulated activities for more than 30 days, unless it has obtained the prior approval of the CBB, or SRO to do so; or
                (b) It has ceased to undertake the regulated activities under a direction issued by the CBB, or SRO.
                Adopted January 2010

              • MIR-2.7.5

                In accordance with the CBB Law Articles 108, 109 & 110, any cancellation of a license of a member referred to in paragraph MIR-2.7.1 shall not operate so as to:

                (a) Avoid or affect any agreement, transaction or arrangement entered into a market contract undertaken by the member, whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or
                (b) Affect any right, obligation or liability arising under such market contracts, agreements, transactions or arrangements.
                Adopted January 2010

              • MIR-2.7.6

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

                Adopted January 2010

            • MIR 2.8 Annual Fees Payable by a Licensed Member

              • MIR-2.8.1

                Every member must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.

                Amended: July 2016
                Amended: April 2014
                Amended: April 2013
                Adopted January 2010

              • MIR-2.8.1A

                Depending on the type of license, some licensees pay only a fixed annual fee while other licensees pay a fixed and a variable fee.

                Amended: July 2016
                Added: April 2013

              • MIR-2.8.1B

                The following fixed annual fees are applicable for licensed discount brokers and licensed clearing members:

                Licensed discount broker (fixed) BD100
                Licensed clearing member (fixed) BD300
                Added: July 2016

              • MIR-2.8.1C

                Licensed brokers and licensed broker-dealers pay the following fixed and variable annual fees:

                License Type Annual Licensing Fee
                Fixed (BD) (Minimum) Variable Fee Total Fee (BD)
                  Securities Market Transactions Derivatives Market Transactions  
                Licensed broker BD200 BD5/ for each BD 100,000 of trade value BD 0.004/lot BD 0.008 for every one lot Buy+Sell Fixed (Minimum) fee + Variable fee
                Licensed broker-dealer BD300 BD5/ for each BD 100,000 of trade value BD 0.004/lot BD 0.008 for every one lot Buy+Sell Fixed (Minimum) fee + Variable fee
                Added: July 2016

              • MIR-2.8.1D

                The variable fees due on 1st December are those due for the following calendar year, and are calculated on the basis of the firm's latest (full calendar year) value of securities market transactions and/or volume of derivatives market transactions for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example) is calculated using the total value of securities market transactions and/or total volume of derivatives market transactions for 2012.

                Added: July 2016

              • MIR-2.8.1E

                A licensed broker or a licensed broker-dealer must submit the Annual Licensing Fee Form (Form ALF) duly certified by the licensed exchange or the licensed market operator. The Form ALF includes a declaration by the licensed member confirming that the amount of fees and the total transaction value and/or volume as reported in the Form ALF are accurate. Licensed brokers and licensed broker-dealers must complete and submit the Form ALF to the CBB, no later than 15th October of the preceding year for which the fees are due.

                Added: July 2016

              • MIR-2.8.2

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

                Amended: April 2014
                Adopted January 2010

              • MIR-2.8.3

                A licensed member failing to comply with Paragraph MIR-2.8.1 may be subject to financial penalties as prescribed by the CBB.

                Added: July 2016

            • MIR 2.9 Publication of the Decision to Grant, Cancel or Amend a License

              • MIR-2.9.1

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

                Adopted January 2010

              • MIR-2.9.2

                For the purpose of Paragraph MIR-2.9.1, the cost of publication of this notice must be borne by the Licensee.

                Added: July 2017

              • MIR-2.9.3

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

                Added: July 2017

            • MIR 2.10 Place of Business

              • MIR-2.10.1

                All licensed members must have a designated place of business in Bahrain. A licensed member may not, without prior written approval of the CBB:

                (a) Open a new place of business in Bahrain;
                (b) Close or change an existing place of business in Bahrain; or
                (c) Open a new place of business in a foreign jurisdiction.
                Amended: April 2013
                Adopted January 2010

              • MIR-2.10.2

                The CBB may restrict its approval stipulated in rule MIR-2.10.1, subject to any other conditions, as it may deem necessary.

                Adopted January 2010

          • MIR-3 Authorisation

            • MIR-3.1 Authorisation of Approved Persons

              • MIR-3.1.1

                Members must obtain the CBB's prior written approval for any person wishing to undertake a controlled function in a member and be registered with the SRO, as the case may be, prior to their final appointment.

                Amended: July 2016
                Amended: April 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-3.1.2

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

                (a) Board member;
                (b) Chief Executive or General Manager;
                (c) Registered representative;
                (d) Head of function;
                (e) Compliance Officer; and
                (f) Money Laundering Reporting Officer (MLRO).
                Amended: July 2016
                Amended: April 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-3.1.2A

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

                (a) Chief operating officer;
                (b) Head of dealing;
                (c) Head of risk management;
                (d) Head of market research;
                (e) Head of client services; and
                (f) Head of reconciliation (back office).
                Added: July 2016

              • MIR-3.1.2B

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

                Added: July 2016

              • MIR-3.1.3

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

                Amended: July 2016
                Amended: April 2016
                Amended: July 2014
                Amended: April 2013
                Adopted January 2010

              • Fit and Proper Requirements

                • MIR-3.1.4

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

                  Amended: July 2016
                  Amended: April 2013
                  Adopted January 2010

                • MIR-3.1.5

                  The CBB may, on being provided sufficient evidence of a member's risk management system and internal controls commensurate with its scale of operations and business plan, exempt a member from any of the requirements of rules MIR-3.1.2 and MIR-3.1.3.

                  Amended: July 2016
                  Adopted January 2010

                • MIR-3.1.6

                  In accordance with Subparagraph MIR-3.1.2(e), every member must appoint a Compliance Officer. The Compliance Officer is responsible for discharging the legal and regulatory obligations of such member.

                  Added: April 2013

                • MIR-3.1.7

                  In accordance with Paragraph MIR-3.1.6:

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

                • MIR-3.1.8

                  The Compliance Officer shall on the identification of any breach referred to in Paragraph MIR-3.1.7 (b), report such breach to the CBB without delay for the investigation and prosecution of market abuse and shall provide full assistance to the latter in investigating and prosecuting market abuse occurring on or through the member.

                  Added: April 2013

            • MIR-3.2 Basis for Approval

              • MIR-3.2.1

                As part of the licensing approval process, applicants must demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may also be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB.

                Adopted January 2010

              • MIR-3.2.2

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

                Added: April 2013

            • MIR-3.3 Fit and Proper

              • MIR-3.3.1

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

                Amended: April 2016
                Adopted January 2010

              • MIR-3.3.1A

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

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

              • MIR-3.3.1B

                In assessing the conditions prescribed in Rule MIR-3.3.1A, the CBB will take into account the criteria contained in Paragraph MAE-3.3.1C. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled function but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled function in one member may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger member.

                Added: April 2016

              • MIR-3.3.1C

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

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

              • MIR-3.3.1 D

                With respect to Paragraph MIR-3.3.1C, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

                Added: April 2016

              • MIR-3.3.2

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

                Adopted January 2010

              • MIR-3.3.3

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

                (a) A person has breached any fiduciary obligations to the member or terms of employment;
                (b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensed member and its clients; and
                (c) A person has failed to declare a personal interest that has a material impact in terms of the person's relationship with the member in general, and interest in holding any listed securities or futures contracts in particular.
                Amended: April 2013
                Adopted January 2010

              • General Guidance on 'Fit and Proper'

                • MIR-3.3.4

                  [This Paragraph was deleted in April 2016.]

                  Deleted: April 2016
                  Adopted January 2010

            • MIR-3.4 Approved Persons

              • MIR-3.4.1

                [This Paragraph was deleted in April 2016.]

                Deleted: April 2016
                Adopted January 2010

              • Prior Approval Requirements and Process

                • MIR-3.4.2

                  An application for approval for a person occupying a controlled function under Paragraph MIR-3.1.2 must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person Status) and Curriculum Vitae after verifying that the information in the Form 3, including previous experience is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms MIR Forms of the CBB Rulebook.

                  Amended: April 2016
                  Amended: April 2013
                  Adopted January 2010

                • MIR-3.4.3

                  When the request for approved person status forms part of a license application, it must be marked for the attention of the Director, Licensing and Policy Directorate. When the submission to undertake a controlled function is in relation to an existing member, except if dealing with a MLRO, it must be marked for the attention of the Director, Capital Markets Supervision Directorate. In case of the MLRO, Form 3 must be marked for the attention of the Director, Compliance Directorate.

                  Amended: April 2016
                  Adopted January 2010

                • MIR-3.4.3A

                  When submitting the Forms 3, members must ensure that the Form 3 is:

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

                • MIR-3.4.4

                  Members seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.

                  Amended: April 2016
                  Adopted January 2010

              • Assessment of Application

                • MIR-3.4.4A

                  The CBB shall review and assess the application for approved person status to ensure that it satisfies all the conditions required in Paragraph MIR-3.3.1A and the criteria outlined in Paragraph MIR-3.3.1C.

                  Added: April 2016

                • MIR-3.4.4B

                  For purposes of Paragraph MIR-3.4.4A, members should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.

                  Added: April 2016

                • MIR-3.4.5

                  The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph MIR-3.3.1A and the criteria outlined in Paragraph MIR-3.3.1C. A notice of such refusal is issued by registered mail to the member concerned, setting out the basis for the decision.

                  Amended: April 2016
                  Adopted January 2010

              • Appeal Process

                • MIR-3.4.6

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

                  Amended: April 2016
                  Adopted January 2010

                • MIR-3.4.7

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

                  Amended: April 2016
                  Amended: April 2013
                  Adopted January 2010

                • MIR-3.4.8

                  [This Paragraph was deleted in July 2016].

                  Deleted: July 2016
                  Amended: April 2016
                  Adopted January 2010

                • MIR-3.4.9

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

                  Adopted January 2010

                • MIR-3.4.10

                  In this section "committee" includes any committee of directors, audit committee, insider's committee, executive committee, or any committee established by the board for discharging its function.

                  Adopted January 2010

              • Notification Requirements and Process

                • MIR-3.4.11

                  The member must immediately notify the CBB, licensed exchange and/or licensed clearing house when an approved person ceases to hold a controlled function together with an explanation as to the reasons why. In such cases, their approved person status is automatically withdrawn by the CBB.

                  Amended: April 2016
                  Adopted January 2010

                • MIR-3.4.12

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

                  Added: April 2016

            • MIR-3.5 Amendment of Authorisation

              • MIR-3.5.1

                A licensed member must seek prior CBB approval before an approved person may move from one controlled function to another within the same member.

                Amended: April 2013
                Adopted January 2010

              • MIR-3.5.2

                In such instances, a new application should be completed and submitted to the CBB. Note that a person may be considered 'fit and proper' for one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another member, the first member should notify the CBB of that persons departure, and the new member should submit a request for approval under section MIR-3.1.

                Adopted January 2010

            • MIR-3.6 Cancellation of Authorisation and Power of CBB to Remove Approved Person

              • MIR-3.6.1

                Where the CBB is satisfied that an approved person:

                (a) Has wilfully contravened or wilfully caused that member to contravene the CBB Law, rules and regulations;
                1. The business rules of an SRO; or
                2. Where applicable, the listing rules, trading rules, and clearing, settlement and depository rules of an SRO, as the case may be;
                (b) Has without reasonable excuse, failed to ensure compliance by the member, or a person associated with that member with:
                1. The CBB Law rules and regulations;
                2. The business rules of the SRO, or
                3. Where applicable, the listing rules, trading rules, and clearing, settlement and depository rules of the SRO;
                (c) Has failed to discharge the duties or functions of his office or employment;
                (d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;
                (e) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;

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

                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-3.6.2

                Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an officer of a member has failed to discharge the duties or functions of his office or employment for the purposes of paragraph MIR-3.6.1 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing, after consultation with the licensed exchange and/or licensed clearing house, as the case may be.

                Adopted January 2010

              • MIR-3.6.3

                Subject to paragraph MIR-3.6.4, the CBB shall not direct a member to remove an officer from his office or employment without giving the member an opportunity to be heard.

                Adopted January 2010

              • MIR-3.6.4

                The CBB may direct a member to remove an officer from his office or employment under paragraph MIR-3.6.1 on any of the following grounds, without giving the member or that particular person an opportunity to be heard:

                (a) The officer is an undischarged bankrupt whether in Bahrain or elsewhere;
                (b) The officer has been convicted whether in Bahrain or elsewhere, of an offence:
                1. Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and
                2. Punishable with imprisonment for a term of 3 months or more.
                Amended: April 2013
                Adopted January 2010

            • MIR-3.7 Criteria to Determine Failure to Discharge Duties or Functions by Approved Persons

              • MIR-3.7.1

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

                (a) Ensured the proper functioning of the member;
                (b) Ensured the compliance of the member with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides its regulated activities;
                (c) Set out and ensured compliance with written policies on all operational areas of the member, including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the member in general, and rules of protection of its clients assets in particular;
                (d) Identified, monitored and addressed the risks associated with the business of the member;
                (e) Ensured that the regulated activities of the member were subject to adequate internal audit;
                (f) Oversaw the financial undertakings or exposure of the member to risks of any nature by setting out proper delegation limits and risk management controls; and
                (g) Ensured:
                1. That the member maintained written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and provided relevant procedures; and
                2. That every report, return or statement submitted by the member to the CBB was complete and accurate.
                Amended: April 2013
                Adopted January 2010

          • MIR-4 Business Standards and Ongoing Obligations

            • MIR-4.1 General Obligations

              • MIR-4.1.1

                A member shall, in respect of every regulated activity it undertakes:

                (a) Ensure that the regulated activities are undertaken in a fair, orderly and transparent manner;
                (b) Manage any risks associated with its business and operations prudently;
                (c) Not act contrary to the interests of its clients and the public investors;
                (d) Comply with the business rules of an SRO and, where appropriate, listing rules and clearing, settlement, depository rules of the licensed exchange and/or licensed clearing house, as the case may be, that make satisfactory provision for:
                1. A fair, orderly and transparent market in securities and futures contracts that are traded through the licensed exchange and/or licensed clearing house; and
                2. The proper internal regulation and controls, and the supervision of its employees and/or representatives;
                (e) Maintain proper arrangements to enforce compliance with the business rules of an SRO, listing rules, and/or clearing, settlement and central depository rules of the licensed exchange and/or licensed clearing house, as the case may be;
                (f) Have sufficient financial and human resources and back-up systems:
                1. To maintain a fair, orderly and transparent market;
                2. To establish and maintain proper segregation between the controlled functions;
                3. To meet the requirement for handling, managing and maintaining the clients' assets safely and properly;
                4. To meet contingencies or disasters; and
                5. To provide adequate security arrangements;
                (g) Ensure that it appoints or employs fit and proper persons as approved persons to perform any controlled function;
                (h) Use or arrange to use a well-designed Business Continuity Plan and Disaster Recovery Procedure;
                (i) Ensure that all its employees or representatives are provided with the required education, qualifications and experience and they fully understand the rules and regulations of the CBB, and relevant SROs;
                (j) Ensure that its clients receive fair treatment without any unjustifiable favour or discrimination for each class of clients;
                (k) Ensure that there is sufficient and appropriate records, books and systems in place to record all transactions traded, cleared and settled through its system and maintain an audit trail;
                (l) Have an operating manual and internal policies;
                (m) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders' meetings referred to in Paragraph MIR-4.1.1 (o);
                (n) Ensure that any agenda items to be discussed or presented during the course of meetings which requires the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;
                (o) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and
                (p) Within one month of any shareholders' meetings referred to in Paragraph MIR-4.1.1(o), provide to the CBB a copy of the minutes of the meeting.
                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

            • MIR-4.2 Notification Requirements

              • MIR-4.2.1

                A licensed member shall, as soon as practicable after the occurrence of any of the following circumstances, notify the CBB of the circumstance:

                (a) Any material change to the information in its application under rule MIR-2.2.10;
                (b) The carrying on of any business other than:
                1. The business of undertaking a regulated activity;
                2. A business incidental to undertaking a regulated activity;
                (c) The acquisition of a substantial shareholding in a corporation which does not carry on:
                1. The business of undertaking a regulated activity, whether in Bahrain or elsewhere;
                2. A business incidental to undertaking a regulated activity, whether in Bahrain or elsewhere;
                3. Such business or class of businesses as the CBB may allow;
                (d) It becoming aware of a financial irregularity or other matter which in its opinion:
                1. May affect its ability to discharge its financial obligations towards its clients; or
                2. May affect the ability to meet its financial obligations to an SRO, as the case may be;
                3. May affect its ability to meet the minimum working capital requirement;
                (e) Where it reprimands, suspends, dismisses or otherwise takes disciplinary action against any persons performing controlled functions or where such persons are subject to an order or petition of bankruptcy or criminal prosecution;
                (f) Any civil or criminal legal proceeding taken against the member or any person performing a controlled function, whether in Bahrain or elsewhere;
                (g) Any disciplinary action against the member or any person performing a controlled function taken by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
                (h) Any significant change to the regulatory requirements imposed by any regulatory body other than the CBB, whether in Bahrain or elsewhere;
                (i) Any arrangements or involvement related to take-overs, mergers or acquisitions;
                (j) Involvement or possible involvement of any of its clients in insider transactions or dealings;
                (k) Failure of any of its clients to comply with the disclosure standards requirements and adhering to the ownership rules in particular;
                (l) A failure to adhere to the trading days, hours or sessions and settlement period of an SRO, as the case may be;
                (m) Any other matter that is required to be notified, that the CBB or SRO may specify by notice in writing.
                Amended: April 2013
                Adopted January 2010

              • MIR-4.2.2

                The CBB may, at any time after receiving a notification referred to in rule MIR-4.2.1 and after providing the licensed member with an opportunity to be heard, issue directions to the relevant SRO, and/or such member:

                (a) Where the notification relates to a matter referred to in rule MIR-4.2.1 (b):
                1. To cease carrying on the first-mentioned business referred to in rule MIR-4.2.1 (b); or
                2. To carry on such business referred to in rule MIR-4.2.1 (b) subject to such conditions or restrictions as the CBB may impose; or
                (b) Where the notification relates to a matter referred to in rule MIR-4.2.1 (c):
                1. To dispose of the shareholding referred to in rule MIR-4.2.1 (c); or
                2. To exercise its rights relating to such shareholding subject to such conditions or restrictions as the CBB may impose;

                and the member shall comply with such directions.

                Amended: April 2013
                Adopted January 2010

              • MIR-4.2.3

                Where a circumstance referred to in rule MIR-4.2.1 has occurred, the member shall, in addition to the notification required under rule MIR-4.2.1, within 5 calendar days of the occurrence of the circumstance, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken or required to be taken at the time of the occurrence, and the subsequent follow-up actions that the member has taken or intends to take, whether as per CBB or SRO requirements.

                Amended: July 2016
                Adopted January 2010

              • MIR-4.2.4

                A member shall, within a reasonable period of time prior to entering into negotiations to provide trading, or clearing arrangement with the person establishing or operating an overseas market or clearing facility, notify the CBB of such intent to enter into negotiations.

                Adopted January 2010

            • MIR-4.3 Mind and Management

              • MIR-4.3.1

                Members with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom.

                Adopted January 2010

              • MIR-4.3.2

                In assessing the location of a member's Head Office, the CBB will take into account the residency of its persons performing controlled functions. The CBB may require the majority of key decision-makers in executive management to be resident in Bahrain.

                Adopted January 2010

              • MIR-4.3.3

                [This Paragraph was deleted in July 2016].

                Deleted: July 2016
                Amended: April 2013
                Adopted January 2010

            • MIR-4.4 Financial Resources, Initial Paid-up Capital and Capital Adequacy Requirements

              • MIR-4.4.1

                In order to maintain market integrity and meet all risks associated with its business, the SRO is responsible for establishing the minimum required initial paid-up capital, ongoing capital adequacy requirements and other financial resources of its members, which requirements shall be a part of their rulebook and which is approved by the CBB.

                Adopted January 2010

              • MIR-4.4.2

                The member must at all times maintain a level of financial resources and capital adequacy requirement required by the SRO, adequate for the level of business undertaken, or proposed to be undertaken.

                Adopted January 2010

              • MIR-4.4.3

                The SRO, as a part of its responsibility and accountability to manage all types of risks associated with its market, including the counterparty risk, must assume full responsibility for monitoring and adherence of its members to the capital adequacy requirements and shall also be responsible for reporting any significant developments or actions taken in this regard to the CBB, whether such developments or actions relate to the whole market or to a particular member.

                Adopted January 2010

              • MIR-4.4.4

                The SRO shall put in place a clearing and settlement system that promptly isolates the problem of a failing member by addressing its open proprietary positions and positions its holders on behalf of customers, or otherwise protects customers funds and assets from a member's default under the CBB Law, rules and regulations.

                Adopted January 2010

              • MIR-4.4.5

                The SRO must have a mechanism in place that is intended to monitor and evaluate continuously the risk of open positions or credit exposures that are sufficiently large to expose a risk to the market or to the clearing and settlement systems.

                Adopted January 2010

              • MIR-4.4.6

                The SRO shall use or design the clearing and settlement of securities systems to ensure that they are fair, effective and efficient and that they reduce systemic risk, large exposures risk, default risk and any other market disruption.

                Adopted January 2010

            • MIR-4.5 Systems and Controls

              • MIR-4.5.1

                The business rulebook of an SRO shall provide sufficient provision and requirements that cover the minimum requirements for maintaining systems and controls that each member is required to meet.

                Adopted January 2010

              • MIR-4.5.2

                The members must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities.

                Adopted January 2010

              • MIR-4.5.3

                The members must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. Such segregation should ensure that no single individual has control over all stages of a transaction.

                Adopted January 2010

              • MIR-4.5.4

                The members must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of money laundering and financial crime occurring in the member.

                Adopted January 2010

              • MIR-4.5.5

                As part of the licensing approval process, applicants must demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may also be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB.

                Adopted January 2010

            • MIR-4.6 Obligation to Maintain Proper Records

              • MIR-4.6.1

                The member must maintain comprehensive books of accounts and other records, which must be available for inspection within the Kingdom of Bahrain by the CBB, or persons appointed by the CBB, at any time. Members must comply with the minimum record keeping requirements contained in the rulebook of the SRO and must comply with IAS (and relevant AAOIFI) standards.

                Adopted January 2010

              • MIR-4.6.2

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

                Adopted January 2010

              • MIR-4.6.3

                The members must prepare their financial statements and accounts in accordance with the international accounts standards committee requirements and IFRS for the whole financial year, as well as for the interim financial statements, which are required to be audited by an external independent auditor in accordance with the international auditing standards.

                Adopted January 2010

              • MIR-4.6.4

                The members must prepare and submit quarterly prudential returns to be reviewed by the member's auditor before being submitted to the CBB.

                Adopted January 2010

              • MIR-4.6.5

                The members are required to submit the quarterly prudential returns (QPR) in the due timeframe. The members may apply in writing to the CBB for exemption from the requirements that the QPR be reviewed by the member's external auditor. This exemption would normally only be given where the member has established a track record of accurate and timely reporting, and there were no other supervisory issues of concern.

                Adopted January 2010

              • MIR-4.6.6

                The CBB may, without prejudice to Articles 37, 38, 89, 92, 94 and 95 of the CBB Law make regulations or issue circulars, directives, or notices in writing in respect of all or any of the matters, including the establishment and maintenance of such books for the handling of money or other assets of the member, for their clients.

                Adopted January 2010

            • MIR-4.7 Segregation and Handling of Clients' Assets

              • MIR-4.7.1

                For the purpose of this Module, "clients assets" means securities, money and other assets received or retained by, or deposited with a member in the course of its business for which it is liable to account to its client, and any securities, money or other assets accruing therefrom.

                Adopted January 2010

              • MIR-4.7.2

                The client assets are held or controlled by a member on behalf of a client if they are:

                (a) Directly held by the member;
                (b) Held in an account in the name of the member;
                (c) Held by a person, or in an account in the name of a person, controlled by the member; or
                (d) Held in an account with another person, controlled by the member.
                Adopted January 2010

              • MIR-4.7.3

                The CBB would consider a person to be controlled by a member if that person is inclined to act in accordance with the instructions of such members.

                Adopted January 2010

              • MIR-4.7.4

                The CBB would consider an account to be controlled by a member if that account is operated in accordance with the instructions of such members.

                Adopted January 2010

              • Segregation of Client Assets

                • MIR-4.7.5

                  The member, or any person acting on its behalf, shall maintain sufficient systems and procedures in respect of the handling of securities, money or other assets, including but not limited to the requirement of maintaining books and records, segregation of the clients' securities, money and assets and the risk management and internal controls systems to address this requirement.

                  Adopted January 2010

                • MIR-4.7.6

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

                  Amended: April 2013
                  Adopted January 2010

                • MIR-4.7.7

                  A member may only use a client's assets for its own account, and/or for the account of any of its other clients if:

                  (a) That client has given his express consent in writing;
                  (b) The use of the client assets is restricted to the terms and conditions stipulated on the agreement agreed and signed by it; and
                  (c) The agreement in which that client's consent is requested by the member gives clear information to him on:
                  (i) The rights, obligations and responsibilities of the member and/or of the clients for whose account the member has been allowed to use the client's assets, with respect to the use of such assets; and
                  (ii) The risks involved.
                  Amended: January 2019
                  Amended: April 2013
                  Adopted January 2010

                • MIR-4.7.7A

                  [This Paragraph was deleted in January 2019].

                  Deleted: January 2019
                  Added: April 2013

                • MIR-4.7.8

                  A member should communicate to its clients in writing, at a minimum, the information regarding client assets held. This information must be reported after the initial transaction date not later than the required date stipulated in the designated clearing, settlement and central depository system.

                  Adopted January 2010

                • MIR-4.7.9

                  The member may maintain and hold the clients assets under the following agreements or arrangements:

                  (a) Non discretionary securities account;
                  (b) Discretionary accounts and portfolios;
                  (c) Margin trading arrangements;
                  (d) Depository and custody accounts;
                  (e) Bank accounts related to the securities transactions (if applicable);
                  (f) Securities lending and borrowing arrangements;
                  (g) For the purpose of collateral arrangements;
                  (h) Under specific mandates and arrangements approved by the CBB and SRO.

                  All the abovementioned arrangements shall be entered into by and in a duly signed agreement between the member and its clients.

                  Adopted January 2010

              • Client Money

                • MIR-4.7.10

                  The member must hold client money in a separate client bank account designated for the purpose of settlement of the client's transaction.

                  Adopted January 2010

                • MIR-4.7.11

                  A client bank account is an account maintained by the Settlement Bank or other designated licensed bank holding client money of one or more clients in a bank account designated as such, in accordance with the terms of agreement with the client/clients.

                  Adopted January 2010

                • MIR-4.7.12

                  Client bank accounts may only be opened with banks licensed by the CBB to do business in the Kingdom of Bahrain, after being subject to due diligence by the member.

                  Adopted January 2010

                • MIR-4.7.13

                  For the purpose of rule MIR-4.7.12 when undertaking due diligence, the member should take reasonable steps to establish that the bank is appropriate considering, among other factors, the following:

                  (a) Whether it is acceptable to the SRO;
                  (b) Whether it is a duly licensed bank in good regulatory standing;
                  (c) The capital adequacy of the bank;
                  (d) The amount of client money to be placed, as a proportion of the bank's capital and deposits; and
                  (e) The credit rating of the bank, if available.
                  Adopted January 2010

                • MIR-4.7.14

                  If a member holds or controls client assets which are not subject to the client asset provisions in an arrangement with a market counterparty, it must disclose to that market counterparty in writing that:

                  (a) The protections conferred by the client asset protection rules do not apply to such client money;
                  (b) As a consequence of (a), such client assets may be mixed with money belonging to the member, and may be used by the member in the course of the clearing and settling of the clients' securities transaction; and
                  (c) In the event of insolvency, winding up of the member or other distribution event stipulated by the laws, rules and regulations, the clients assets shall not be considered as a part of the member's assets.
                  Adopted January 2010

              • Transfer of Money to Eligible Third Parties

                • MIR-4.7.15

                  The member may only pay, or permit to be paid, clients money into an account of a person who is a counterparty of the securities transaction, in accordance with the applicable clearing, settlement and central depository rules.

                  Adopted January 2010

                • MIR-4.7.16

                  The member must not hold money other than client money in a client bank account unless it is:

                  (a) A minimum sum required to open the account or to keep it open;
                  (b) Money temporarily held in the account in accordance with the mixed remittance requirements; or
                  (c) Interest credited to the account which exceeds the amount due to clients as interest and which has not yet been withdrawn by the client or the member.
                  Adopted January 2010

                • MIR-4.7.17

                  If a member receives a mixed remittance (that is part client money and part other money), it must:

                  (a) Pay the full sum into a client bank account; and
                  (b) Pay the money that is not client money out of the client bank account within the same business day or otherwise as per provision of the agreement under rule MIR-4.7.7 (b).
                  Adopted January 2010

              • Reconciliation

                • MIR-4.7.18

                  A member must ensure that a system is implemented to perform reconciliations of both client securities account and client bank accounts after each transaction is executed for the benefit of that particular client. In addition, these reconciliations must be carried out on a regular basis, sufficient to ensure the accuracy of its records at least once a month on the last business day of each calendar month.

                  Adopted January 2010

                • MIR-4.7.19

                  A member must perform the reconciliations required under rule MIR-4.7.18 within 10 calendar days from the end of each month.

                  Adopted January 2010

                • MIR-4.7.20

                  In respect of reconciliation, the member must ensure that unresolved differences, shortfalls and excess balances are investigated and, where applicable, corrective action is taken as soon as is practicable. In such cases, the member must confirm such corrective action to the related clients and other counterparty's broker-dealers (if required).

                  Amended: April 2013
                  Adopted January 2010

              • Record-keeping

                • MIR-4.7.21

                  Members must ensure that proper records, sufficient to show and explain the member's transactions and commitments in respect of its client assets are kept. These records must be retained for a period of a minimum of 5 years after they were made, unless otherwise required by law.

                  Adopted January 2010

              • Auditor Reports

                • MIR-4.7.22

                  Members that hold or control client assets must arrange for their external auditor to report on the members' compliance with the requirements related to the holding and segregation of the client's assets requirements.

                  Adopted January 2010

                • MIR-4.7.23

                  A member must submit the report, referred to in Paragraph MIR-4.7.22, in the form agreed by the CBB within 3 months of its financial year end.

                  Amended: January 2018
                  Adopted January 2010

                • MIR-4.7.23A

                  The format of the Auditor's Report (Agreed Upon Procedure) is included in Part B of the Rulebook, as part of the supplementary information.

                  Added: January 2018

              • Client Agreements and Statements

                • MIR-4.7.24

                  Before the member undertakes any regulated activities or services mentioned under paragraph MIR-1.1.2 they must notify the client as to the appropriate terms and conditions which apply to each service or arrangement and sign the prescribed agreement(s). The agreement must cover, at a minimum, the following matters, wherever applicable:

                  1. Representations and warranties by the client;
                  2. Acknowledgements by the client;
                  3. Clients' orders and instructions;
                  4. Settlement and clearing services;
                  5. Commission and charges;
                  6. Information and advice;
                  7. Undertaking of the client;
                  8. Members responsibilities;
                  9. The right to object to withdrawal or transfer of securities;
                  10. Correspondence and confirmation;
                  11. Terms and termination;
                  12. Joint liability;
                  13. Force Majeure;
                  14. Severability;
                  15. Notices: client; member;
                  16. Amendment of the agreement; and
                  17. Law and jurisdiction.
                  Adopted January 2010

                • MIR-4.7.25

                  The specimen of the abovementioned agreement shall be provided in the business rules of the SRO, as the case may be. The specimen shall contain the minimum requirements and information.

                  Adopted January 2010

            • MIR-4.8 Final Accounts and Auditing

              • MIR-4.8.1

                Every member shall appoint one or more qualified and experienced external auditors for its accounts for every financial year. Prior written approval by the CBB will be required before appointing an auditor.

                Adopted January 2010

              • MIR-4.8.2

                In accordance with Article 61(b) of the CBB Law, if a member fails to appoint an auditor within four months from the beginning of the financial year, the CBB shall appoint such auditor.

                Amended: July 2014
                Adopted January 2010

              • MIR-4.8.3

                The member shall pay the fees of the auditor regardless of the manner in which such auditor is appointed.

                Adopted January 2010

              • MIR-4.8.4

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

                Adopted January 2010

              • MIR-4.8.5

                If any of the circumstances referred to in rule MIR-4.8.4 occurs after the appointment of the auditor, the member must appoint another auditor.

                Adopted January 2010

              • MIR-4.8.6

                The member shall provide the external auditor with all information and assistance necessary for carrying out his duties.

                Adopted January 2010

              • MIR-4.8.7

                The duties of the auditor shall include the preparation of a report on the final accounts. The report shall contain a statement on whether the member's accounts are correct and reflect the actual state of affairs of the member according to the auditing standards prescribed by the SRO and CBB, and whether the member has undertaken the auditor with any required information and clarification.

                Adopted January 2010

              • MIR-4.8.8

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

                Adopted January 2010

              • MIR-4.8.9

                [This Paragraph was deleted in July 2014.]

                Deleted: July 2014
                Adopted January 2010

              • MIR-4.8.10

                Every member must, within 3 months following every financial year, send to the CBB its final audited accounts for all the transactions carried out until year end, as well as any other financial statements required by the SRO and CBB. Every member must publish extracts of the final audited accounts within 60 calendar days from the end of its financial year in 2 local daily newspapers, one in Arabic and the other in English.

                Amended: July 2016
                Amended: April 2013
                Adopted January 2010

              • MIR-4.8.11

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

                Amended: July 2016
                Adopted January 2010

            • MIR-4.9 Obligation to Submit Periodic Reports

              • MIR-4.9.1

                A licensed member shall submit to the CBB and SRO:

                (a) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a copy of its:
                1. Annual report and directors' report; and
                2. Auditors' report;
                (b) Within 45 days after the end of each of the first 3 quarters of its financial year or such longer period as the CBB may permit, or the preceding quarter, in such form as may be approved by the CBB, a copy of its:
                1. Profit and loss accounts;
                2. Balance sheet;
                3. Cash flow statement; and
                4. Change in shareholders equity;
                (c) Within 3 months after the end of its financial year or such longer period as the CBB may permit, a report on how the member has discharged its responsibilities under the CBB Law and regulations and the rules of the SRO during that financial year;
                (d) Such other report as the CBB may require for the proper administration of this Module, at such time or on such periodic basis as may be required by the CBB.
                Amended: April 2013
                Adopted January 2010

              • MIR-4.9.2

                The auditors' report referred to in rule MIR-4.9.1 (a) shall unless otherwise be provided to the CBB by way of a management letter, include the findings and recommendations of the auditors, if any, on the internal controls and risk management of the member; and

                (a) Any provision of this Module;
                (b) Any direction issued by an SRO and/or CBB under this Module; or
                (c) Any other relevant laws or regulations.
                Adopted January 2010

              • MIR-4.9.3

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

                Amended: April 2013

              • MIR-4.9.4

                Licensees failing to comply with the requirements of Paragraph MIR-4.9.3 or reporting inaccurate information are subject to financial penalties or other enforcement actions.

                Amended: April 2013

            • MIR-4.10 Additional Powers of the CBB in Respect of Auditors

              • MIR-4.10.1

                If an auditor of a licensed member in the course of the performance of his duties becomes aware of:

                (a) Any matter which in his opinion, adversely affects or may adversely affect the financial position of the licensed member to a material extent;
                (b) Any matter which in his opinion, constitutes or may constitute a breach of the CBB Law, rules and regulations, or an offence involving fraud or dishonesty; or
                (c) Any irregularity that has or may have a material effect upon the accounts of the licensed member, including any irregularity that affects or jeopardises or may affect or jeopardise, the assets and money of clients, then the auditor shall immediately send to the CBB and licensed exchange and/or licensed clearing house a written report of the matter or the irregularity.
                Adopted January 2010

              • MIR-4.10.2

                An auditor of a licensed member shall not be, in the absence of malice on his part, liable to any action for defamation at the suit of any person in respect of any statement made in his report under paragraph MIR-4.10.1.

                Adopted January 2010

              • MIR-4.10.3

                Rule MIR-4.10.2 shall not restrict or affect any right, privilege or immunity that the auditor of a licensed member may have as a defendant in an action for defamation.

                Adopted January 2010

              • MIR-4.10.4

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

                (a) A duty to submit such additional information and reports in relation to his audit as the CBB considers necessary;
                (b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of the licensed member;
                (c) A duty to carry out any other examination or establish any procedure in any particular case;
                (d) A duty to submit a report on any matter arising out of his audit, examination or establishment of procedure referred to in MIR-4.10.4 (b) or (c), and the auditor shall carry out such duties.
                Adopted January 2010

              • MIR-4.10.5

                The licensed member shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in paragraph MIR-4.10.4.

                Adopted January 2010

            • MIR-4.11 Obligation to Assist CBB

              • MIR-4.11.1

                A member shall provide such assistance to the CBB and/or SRO that is required for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provisions of:

                (a) Such books and information:
                1. Relating to the business of the licensed member; or
                2. In respect of such dealings in securities or trading in futures contracts, products or other instruments; and
                (b) Such other information as the CBB may require for the proper administration of this Module in general, and for the investigation and enforcement purposes in particular;
                (c) Any information related to the handling and segregation of the clients assets.
                Amended: April 2013
                Adopted January 2010

              • MIR-4.11.2

                The CBB may at is discretion:

                (a) Call for the provision of additional information about the affairs of the member;
                (b) Carry out inspections of the office of the licensed member and inspect the books of accounts and other relevant books of the licensed member; and
                (c) Appoint one or more examiner or investigator to inquire into the affairs of the licensed member.
                Adopted January 2010

            • MIR-4.12 Obligation to Maintain Confidentiality

              • MIR-4.12.1

                Subject to rule MIR-4.12.2, a member and its officers, employees and representatives shall maintain, and aid in maintaining, the confidentiality of all clients or investors information that:

                (a) Comes to the knowledge of the member, or any of its officers, employees or representatives; and
                (b) Is in possession of the member, or any of its officers, employees or representatives.
                Adopted January 2010

              • MIR-4.12.2

                Rule MIR-4.12.1 shall not apply to:

                (a) The disclosure of investors or users information for such purposes, or in such circumstances as an SRO and/or CBB may prescribe;
                (b) Any disclosure of investors or users information which is authorised by the CBB to be disclosed or furnished; or
                (c) The disclosure of investors or users information pursuant to any requirement imposed under any law or order of court in Bahrain.
                Adopted January 2010

              • MIR-4.12.3

                For the avoidance of doubt, nothing in this section shall be construed as preventing a member from entering into a written agreement with an investor or user which obliges the member to maintain a higher degree of confidentiality than that specified in this section.

                Adopted January 2010

              • Exceptions to Obligation to Maintain Confidentiality

                • MIR-4.12.4

                  Without prejudice to the requirements of Article 117 of the CBB Law and the CSD Module, the obligation to maintain confidentiality shall not apply to the disclosure of investor or client information by a member, or its officers, employees or representatives for the following purposes or in the following circumstances:

                  (a) The disclosure of investor or client information is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;
                  (b) The disclosure of investor or client information is permitted for such purpose specified in writing by the investor or client or, where the investor or client is deceased, by his appointed personal representative;
                  (c) The disclosure of investor or client information is necessary for the execution by the member of a transaction in any securities or futures contracts or clearing or settlement of a transaction, and such disclosure is made only to another user which is:
                  1. A licensed exchange and/or licensed clearing house through which the transaction is traded or cleared or settled; or
                  2. A counterparty licensed member through which that transaction is executed, cleared or settled;
                  (d) The disclosure of investor or client information is necessary:
                  1. In any disciplinary proceedings of the SRO, or securities regulator, provided that reasonable steps are taken to ensure that client information disclosed to any third person is used strictly for the purpose for which the client information is disclosed; or
                  2. For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
                  (e) The client information disclosed is already in the public domain;
                  (f) The disclosure of client information is made in connection with:
                  1. The outsourcing or proposed outsourcing of any service or activity of the member to a third party;
                  2. The engagement or potential engagement of a third party by the member to create, install or maintain back-up or internal control systems of the member; or
                  3. The appointment or engagement of an auditor, lawyer, consultant or other professional by the member under a contract for service;
                  (g) The disclosure of client information is necessary in:
                  1. An application for a grant of probate or letters of administration or the resealing thereof in relation to the estate of a deceased client; or
                  2. The administration of the estate of a deceased client, including such disclosure as may be required for this purpose by the relevant authority;
                  (h) The disclosure of client information is made in connection with:
                  1. In the case where the client is an individual, the bankruptcy of a client or
                  2. In the case where the client is a body corporate, the winding up or receivership of a client; or
                  (i) The disclosure of client information is made to an issuer for the purpose of the issuer's regulatory submission.
                  Amended: April 2013
                  Adopted January 2010

                • MIR-4.12.5

                  Where client information is disclosed under paragraph MIR-4.12.4 (f), the member shall:

                  (a) Maintain a record of the circumstances relating to the disclosure of client information referred to in paragraph MIR-4.12.4 (f); and the particulars of:
                  1. In the case of the disclosure of information under paragraph MIR-4.12.4 (f), the outsourcing of the function of the member;
                  2. In the case of the disclosure of information under paragraph MIR-4.12.4 (f), the engagement of the third party; and
                  3. In the case of the disclosure of information under paragraph MIR-4.12.4 (f), the appointment or engagement of the auditor, lawyer, consultant or other professional and make that record available for inspection by the SRO and/or CBB;
                  (b) Disclose the client information only insofar as this is necessary for the relevant purpose; and
                  (c) Take reasonable steps to ensure that the client information disclosed is used by the entitled person to whom the disclosure is made strictly for the relevant purpose, and that the client information is not disclosed by that entitled person to any other person except with the consent of the SRO and/or CBB.
                  Adopted January 2010

                • MIR-4.12.6

                  Where disclosure of client information is permitted to be made for any purpose or in any circumstance under paragraph MIR-4.12.4 to a body corporate, the client information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.

                  Adopted January 2010

                • MIR-4.12.7

                  In paragraph MIR-4.12.6, "relevant purpose" means:

                  (a) In the case of the disclosure of information under paragraph MIR-4.12.4 (f)(1), facilitating the outsourcing of the function of the member;
                  (b) In the case of the disclosure of information under paragraph MIR-4.12.4 (f)(2), facilitating the engagement of the third party; and
                  (c) In the case of the disclosure of information under paragraph MIR-4.12.4 (f)(3), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.
                  Adopted January 2010

            • MIR-4.13 Confirmation Requirements and Provision of Information to Clients

              • MIR-4.13.1

                A member shall confirm to its clients or participants the execution of a transaction, as well as the clearing, settlement and depository of securities in the manner and time prescribed by the rules of the SRO, (including the trading rules, and the clearing, settlement and depository rules of the licensed exchange and/or the licensed clearing house), as the case may be.

                Adopted January 2010

              • MIR-4.13.2

                A member shall provide its clients or participants with the periodic and ad hoc statements in the manner and time prescribed by the rules of the SRO, as the case may be.

                Adopted January 2010

              • MIR-4.13.3

                A member shall:

                (a) Make available upon request by; or
                (b) Publish in a manner that is accessible to, any investor who accesses or uses, or potential investor who may access or use, any system or services undertaken or provided by that member:
                1. All regulated activities or services of the member;
                2. All products available on the regulated activities undertaken by the member;
                3. Applicable fees and charges;
                4. Applicable margin requirements; and
                5. Any arrangement that may be in place to compensate an investor who suffers pecuniary loss as a result of these regulated activities or insolvency of the member.
                Amended: April 2013
                Adopted January 2010

            • MIR-4.14 Transmission and Storage of Transactions and Clients Information

              • MIR-4.14.1

                A member shall take or arrange to take all reasonable measures to maintain the integrity and security of the transmission and storage of client information related to the client's orders and transactions undertaken by it, in accordance with the rules of the SRO.

                Adopted January 2010

              • Records of Telephone Conversations and Electronic Communications

                • MIR-4.14.2

                  In addition to meeting the book-keeping and record-keeping requirements as per the applicable laws, rules and regulations, all members of SROs must maintain records of telephone conversations and electronic communications, including facsimile, email and other instant messaging devices relating to their activities in the securities market, as required by the CBB's rules, regulations and directives, including but not limited to the following activities:

                  (a) Receiving client orders;
                  (b) Executing client orders;
                  (c) Arranging for client orders to be executed;
                  (d) Carrying out transactions on behalf of the member of an SRO, or another person in the member of an SRO group, and which are part of the member of an SRO's trading activities, or the trading activities of another person in the member of an SRO group;
                  (e) Executing orders that result from decisions by the member of an SRO to deal on behalf of its client;
                  (f) Placing orders with other entities for execution that result from decisions by the member of an SRO to deal on behalf of its client.
                  Adopted January 2010

            • MIR-4.15 Business Continuity Plan

              • MIR-4.15.1

                A member, in accordance with the rules of the SRO, shall maintain by itself or through arrangements with the SRO, at all times a plan of action (referred to in this Module as a Business Continuity Plan) setting out the procedures and establishing the systems necessary to restore fair, orderly and transparent operations of any regulated activities it provides or undertakes, in the event of any disruption to its operations.

                Adopted January 2010

              • MIR-4.15.2

                A member shall review the procedures and internal systems referred to in rule MIR-4.15.1 on such regular basis as may be specified in the Business Continuity Plan and the rules of the SRO.

                Adopted January 2010

              • MIR-4.15.3

                A member shall immediately notify the SRO of any activation of its Business Continuity Plan and of any action taken or intended to be taken to restore fair, orderly and transparent operations it undertakes.

                Adopted January 2010

              • MIR-4.15.4

                A member shall, within 14 days or such longer period as the CBB may permit, inform the SRO and/or CBB of any material change to the Business Continuity Plan, and shall submit at the request of the CBB, a copy of the new plan to the CBB.

                Adopted January 2010

            • MIR-4.16 Outsourcing

              • MIR-4.16.1

                A member shall not outsource any function related to any regulated activities without prior approval of the CBB, and/or SRO.

                Adopted January 2010

              • MIR-4.16.2

                The CBB would normally not grant its approval related to the outsourcing application, when such outsourcing application is related to controlled functions, or core business of such licensed member.

                Amended: April 2013
                Adopted January 2010

              • MIR-4.16.3

                The member seeking to outsource functions related to any undertaking of regulated activities should have the following in place:

                (a) Comprehensive policy to guide the assessment of whether and how these functions or services can be appropriately outsourced;
                (b) The management shall have the responsibility for the outsourcing policy and related overall responsibility for outsourced functions or services undertaken under that policy;
                (c) The member retains the ultimate res'ponsibility for the functions or services that are outsourced;
                (d) The member must obtain the approval of the respective SRO and notify the CBB before committing to an outsourcing arrangement;
                (e) The member must maintain and regularly review contingency plans to enable him to set-up alternative arrangements should the outsourcing provider fail;
                (f) The member must nominate an officer of senior management with day-to-day responsibility for handling the relationship with the outsourcing provider and ensuring that relevant risks are addressed;
                (g) All the outsourcing contract must be legally enforceable;
                (h) A notice period of at least three months shall be required from the outsourcing party to terminate the contract;
                (i) On termination all data pertaining to the member and its clients shall be returned by the outsource provider to the member; and
                (j) For the entire duration of the outsourcing contact, this shall be subject to the confidentiality requirements in general, and information related to the clients or users in particular.
                Adopted January 2010

            • MIR-4.17 Compliance Officer [This Section was deleted in April 2013 as requirements are now found under Paragraphs MIR-3.1.6 and MIR-3.1.7.]

              • MIR-4.17.1

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

              • MIR-4.17.2

                [This Paragraph was deleted in April 2013].

                Deleted: April 2013

            • MIR-4.18 Non-Compliance with Business Rules, Listing Rules, Clearing and Settlement Rules not to Substantially Affect the Rights of Persons

              • MIR-4.18.1

                Any failure by a member to comply with:

                (a) The CBB Law, rules and regulations;
                (b) This Module;
                (c) The rules of the SRO; or

                in relation to a matter shall not prevent the matter from being treated, for the purposes of this Module, as done in accordance with the business rules, listing rules, trading rules, or clearing, settlement and depository rules, so long as the failure does not substantially affect the rights of the person entitled to require compliance with such rules.

                Adopted January 2010

            • MIR-4.19 Market Making Practice for Liquidity Enhancement

              • MIR-4.19.1

                This section (MIR-4.19) sets out the requirements and obligations applicable to members registered as market makers and issuers interested to enter into an agreement with market makers for the purpose of enhancing liquidity in the listed securities of the issuer.

                Added: January 2019

              • Liquidity Enhancement Practice

                • MIR-4.19.2

                  Issuers, whose securities are already listed on a licensed exchange or licensed market operator and where the securities based on the criteria established by the licensed exchange or licensed market operator are eligible for market making, may enter into a market making agreement with a market maker with an objective to enhance liquidity for a specific period of time thereby encouraging regular trading activity and avoiding price fluctuations which are not in line with the market trend.

                  Added: January 2019

                • MIR-4.19.3

                  The market making agreement referred to in Paragraph MIR-4.19.2 must define the conditions in which the market maker will trade on behalf of the issuer by buying and selling the issuer's securities with the sole purpose of enhancing liquidity and regularity of trading in the securities.

                  Added: January 2019

                • MIR-4.19.4

                  An issuer concurrently must not enter into market making agreement with more than one market maker for a listed security.

                  Added: January 2019

              • Market Making Agreement

                • MIR-4.19.5

                  The market making agreement must specify the conditions within which the market maker will trade on behalf of the issuer by buying and selling the issuer's securities.

                  Added: January 2019

                • MIR-4.19.6

                  The sole purpose of the market making agreement must be to enhance liquidity and improve regularity of trading.

                  Added: January 2019

                • MIR-4.19.7

                  The market making agreement must establish the initial balances and the minimum balances to be maintained in the securities account and the bank account to ensure continuity of market making activity and the measures to be adopted when the balances in the two accounts are insufficient to enable trades under the market making agreement.

                  Added: January 2019

                • MIR-4.19.8

                  The market making agreement must establish the market maker's independence as a provider of liquidity

                  Added: January 2019

                • MIR-4.19.9

                  The market making agreement must establish the conditions for the remuneration payable by the issuer to the market maker.

                  Added: January 2019

                • MIR-4.19.10

                  The duration of the market making agreement must not exceed a period of 12 months. Upon completion of the initial 12 months period and subject to mutual agreement of issuer and market maker, the market making agreement may be extended for an additional period of 12 months provided the licensed exchange or licensed market operator grants its approval for such an extension.

                  Added: January 2019

              • Independence of the Market Maker

                • MIR-4.19.11

                  The market maker must carry out the transactions under the market making agreement with total independence from the issuer, and neither the market maker nor the issuer may request or give any type of instructions or guidance. In particular, the issuer must not instruct, guide or intervene in the trading activity and the market maker must have sole discretion as to the timing of transactions in the issuer's securities.

                  Added: January 2019

                • MIR-4.19.12

                  The market maker must have an internal organisational structure such that trading decisions concerning the market making activities are independent from the activities related to investment services, proprietary account, client account or any other services provided by the market maker.

                  Added: January 2019

                • MIR-4.19.13

                  Without prejudice to being reimbursed for the expense incurred towards market making, the remuneration method of the market maker must be consistent with the purpose of the activity and must not impair the market maker's independence.

                  Added: January 2019

                • MIR-4.19.14

                  An issuer must ensure that the remuneration method does not encourage the market maker to influence the security price and/or trading volume through trades in the security. To that end, fees must be set within reasonable and justifiable levels with a maximum cap.

                  Added: January 2019

                • MIR-4.19.15

                  A market maker must not use its own funds to engage in trades under the market making agreement.

                  Added: January 2019

              • Securities account and bank account associated with the market making agreement

                • MIR-4.19.16

                  Trades performed under the market making agreement must be recorded through entries made by the market maker in two accounts, (i) a securities account and (ii) a bank account, both opened in the name of the issuer and used solely for market making transactions.

                  Added: January 2019

                • MIR-4.19.17

                  When the market making agreement is terminated, regardless of the reason, the securities account and the bank account referred to in Paragraph-MIR-4.19.16 must be cancelled in accordance with the following procedure:

                  a) Bank account: The market maker will transfer the balance to another account designated by the issuer.
                  b) Securities Account: The market maker must sell the securities in the securities account. Such sales must be performed in the issuer's best interests but without interfering with or hampering normal market operations and without misleading other market participants.
                  Added: January 2019

                • MIR-4.19.18

                  Provisions of Paragraph MIR-4.19.17 should not apply where:

                  a) The securities are transferred to another market maker entrusted with another market making agreement by the same issuer.
                  b) The issuer, upon termination of market making agreement, may recover a number of securities, in which case that number may not exceed the number of securities initially deposited by the issuer.
                  Added: January 2019

              • Non-withdrawal of Securities

                • MIR-4.19.19

                  Unless the market making agreement is terminated, securities allocated by the issuer for the purpose of market making or securities acquired during the course of market making activity cannot be withdrawn from the securities account except as a result of transactions carried out under the market making agreement.

                  Added: January 2019

              • Conditions for trading

                • MIR-4.19.20

                  The transactions carried out under a market making agreement must not impair the orderly functioning of the market.

                  Added: January 2019

                • MIR-4.19.21

                  Trades executed within the framework of market making agreement must not create artificial change in the securities price with respect to the market trend, or hamper the market's normal operations, or mislead other market participants.

                  Added: January 2019

                • MIR-4.19.22

                  In the course of discharging its obligation to provide liquidity, the market maker must trade in the official secondary market of the licensed exchange or licensed market operator and in accordance with the trading rules.

                  Added: January 2019

                • MIR-4.19.23

                  Where a licensed exchange or licensed market operator allows for participation of market maker during pre-opening period, a market maker must ensure that its order during the pre-opening period does not have a material influence on the securities price.

                  Added: January 2019

                • MIR-4.19.24

                  The market maker and the issuer must at all times comply with the CBB law, rules and regulations on insider trading.

                  Added: January 2019

                • MIR-4.19.25

                  Securities purchased or made available to the market maker by the issuer cannot be allocated for other purposes before the completion of the market making activity set forth in the market making agreement.

                  Added: January 2019

                • MIR-4.19.26

                  The issuer must not engage, directly or indirectly, in any other trades in its own security while the market making agreement is in force except for such transactions where the issuer has obtained necessary approvals from the CBB.

                  Added: January 2019

                • MIR-4.19.27

                  For the purposes of MIR-4.19.26, market making activity must remain suspended in the following cases:

                  (a) From the date of the announcement of a takeover bid for the issuer's shares, up until the end of offer period; and
                  (b) During share repurchase programmes.
                  Added: January 2019

                • MIR-4.19.28

                  The issuer and/or the market maker must comply with all other modules in Volume 6.

                  Added: January 2019

                • MIR-4.19.29

                  Market makers failing to comply with the requirements of Section MIR-4.19 are subject to enforcement measures as outlined in Module MIE (Market Surveillance, Investigation and Enforcement).

                  Added: January 2019

              • Reporting Requirements

                • MIR-4.19.30

                  In addition to the reporting obligations and disclosure requirements with regards to securities to which issuers are subject to, an issuer that enters into a market making agreement must disclose the following by means of a public announcement as well as post it on its website:

                  (a) Before the market making agreement comes into force, the identity of the market maker with which it has been arranged, the class of security and the licensed exchange or licensed market operator where the trades are to be made, the duration of the agreement, and the number of securities and the amount allocated to the securities account and bank account, respectively.
                  (b) Each month and when the market making agreement is terminated, the issuer must disclose the transactions in own securities made under the market making agreement, detailing the total number of own securities that were purchased and the total number of own securities sold, the total amount of money paid and the total amount of money received, and the balance of the securities account and cash accounts at the end of the reporting period. The public announcement must be made within 10 days from the end of the reporting period.
                  (c) In the event of termination of the market making agreement, in addition to complying with the requirements of MIR-4.19.30(b), the issuer must disclose the termination immediately.
                  Added: January 2019

                • MIR-4.19.31

                  An issuer must submit, to the CBB, a copy of the signed market making agreement as well as all other public announcements referred to in Paragraph MIR-4.19.30.

                  Added: January 2019

                • MIR-4.19.32

                  An issuer must file the market making agreement and obtain written approval from the licensed exchange or licensed market operator. The approval must be obtained prior to commencement of market making activity.

                  Added: January 2019

              • Termination of Market Making Agreement

                • MIR-4.19.33

                  Where an issuer or a market maker, regardless of the reason, intends to terminate the market making activity with respect to the issuer's security, the market maker must submit a written request and seek prior approval from the licensed exchange or licensed market operator.

                  Added: January 2019

                • MIR-4.19.34

                  A market maker, in the manner prescribed by the rules and regulations of the licensed exchange or licensed market operator, must by way of a public announcement inform the market regarding the date of cessation of market making activity in the issuer's security.

                  Added: January 2019

                • MIR-4.19.35

                  The public announcement referred to in Paragraph MIR-4.19.34 must be made at least 30 days prior to the effective date of cessation of market making activity. The market maker and the issuer must perform their respective obligations as specified in the market making agreement during this 30 days period. In particular, the market making activity must continue during the aforesaid period.

                  Added: January 2019

              • Record Keeping

                • MIR-4.19.36

                  An issuer and the market maker must maintain separate records of all the information pertaining to transactions under the market making agreement for a minimum period of 10 years.

                  Added: January 2019

              • Disclosure to clients

                • MIR-4.19.37

                  Where a member is registered as market maker, such member must disclose to its client the existence of the market maker agreement entered into between the licensed member and the licensed exchange and written consent must be obtained from the client stating his awareness of the market maker arrangement between the member and the licensed exchange and that he has fully understood the potential risk and conflict of interest associated with such activities.

                  Added: January 2019

              • Additional Market Making Rules for Equity Securities

                • Shareholders' Approval and Share Repurchase

                  • MIR-4.19.38

                    In addition to the aforementioned rules specified under Section MIR4.19, an issuer of equity security must seek prior approval of shareholders at a general meeting before entering into a market making agreement.

                    Added: January 2019

                  • MIR-4.19.39

                    An issuer may repurchase its own shares for the purpose of market making after obtaining shareholders' approval.

                    Added: January 2019

                  • MIR-4.19.40

                    The maximum number of shares that an issuer can repurchase for the purpose of market making must not exceed 3% of the total issued shares.

                    Added: January 2019

                  • MIR-4.19.41

                    The repurchase limit of 3% referred to in Paragraph MAE-4.19.40 must be included as part of the overall repurchase limit of 10% set out under TMA-4.1.8.

                    Added: January 2019

                  • MIR-4.19.42

                    Where an issuer undertakes share repurchase for the purpose of market making, the issuer must ensure that the share repurchase plan complies with the requirements of Module TMA (see Section TMA - 4.1).

                    Added: January 2019

                • Material Rights of Shares Deposited in the Securities Account

                  • MIR-4.19.43

                    Apart from the right to allocation of new shares free of charge, all other material rights of the shares deposited in the securities account must remain suspended.

                    Added: January 2019

                  • MIR-4.19.44

                    The issuer and the market maker must ensure that the suspension of material rights referred to in Paragraph-4.19.43 is complied with, particularly with regards to dividend payments.

                    Added: January 2019

                • Prior acquisition of shares to deposit in securities account

                  • MIR-4.19.45

                    Where the issuer does not deposit shares into the securities account or deposits a number of shares that is insufficient to enable market making operation to commence under the agreement, there should be an initial period during which the market maker may only buy shares of the issuer until it attains the volume that is predetermined in the market making agreement. Such acquisition should be for the sole purpose of enabling the market maker to commence operations under the market making agreement and they should be performed in the issuer's best interest but without interfering or hampering normal market operations and without misleading other market participants.

                    Added: January 2019

                  • MIR-4.19.46

                    The shares acquired in the initial period should be deposited in the securities account referred to in Paragraph MIR-4.19.16.

                    Added: January 2019

                  • MIR-4.19.47

                    The market maker should not sell any of the issuer's shares deposited in the securities account until the initial period concludes or until it attains the limits established in terms of number of shares or value of shares for the purpose of undertaking market making.

                    Added: January 2019

                  • MIR-4.19.48

                    Where the initial period concludes and the minimum initial balance of shares in the securities account referred to in Paragraph MIR-4.19.16 has not been attained, the issuer and the market maker may:

                    a) Extend the initial period by a length of time not greater than the initially established period.
                    a) Terminate the agreement
                    b) Establish a lower number of shares
                    Added: January 2019

          • MIR-5 Substantial Shareholding in a Licensed Member

            • MIR-5.1 Control of Substantial Shareholding in a Licensed Member

              • MIR-5.1.1

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

                Amended: April 2013
                Adopted January 2010

              • MIR-5.1.2

                In rule MIR-5.1.1 "substantial shareholder" means a person who alone or together with his associates:

                (a) Holds not less than 5% of the shares in the licensed member; or
                (b) Is in a position to control not less than 5% of the votes in the licensed member.
                Amended: April 2013
                Adopted January 2010

              • MIR-5.1.3

                In this section:

                (a) A person holds a share if:
                1. He is deemed to have an interest in that share in terms of the CBB Law, rules and regulations; or
                2. He otherwise has a legal or a beneficial interest in that share, except such interest as is to be disregarded in the terms of the CBB Law, rules and regulations;
                (b) A reference to the control of a percentage of the votes in a licensed member shall be construed as a reference to the control, whether direct or indirect, of that percentage of the total number of votes that might be cast in a general meeting of the licensed member; and
                (c) An associate of another person means in respect of individuals, a direct family member and in the case of a company, means the company is bound to follow the directives of the substantial shareholder, or the company in which the substantial shareholder has 20% of the votes of that company.
                Amended: April 2013
                Adopted January 2010

              • MIR-5.1.4

                The CBB may grant its approval referred to in rule MIR-5.1.1, subject to such conditions or restrictions as the CBB may think fit.

                Adopted January 2010

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

              • MIR-5.2.1

                Any person applying for approval under rule MIR-5.1.1 shall submit to the CBB a written application that sets out:

                (a) The name of the applicant;
                (b) In the case where the applicant is a company:
                1. Its place of incorporation;
                2. Its substantial shareholders;
                3. Its directors and chief executive officer; and
                4. Its principal business.
                (c) In the case where the applicant is a natural person:
                1. His nationality;
                2. His principal occupation; and
                3. His directorships;
                (d) All the companies in Bahrain or elsewhere, which the applicant has a substantial shareholding;
                (e) The percentage of shareholding and voting power that the applicant has in the licensed member and/or in any other licensed members;
                (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed member;
                (g) The reasons for making the application;
                (h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;
                (i) Whether the applicant will seek representation on the board of directors of the licensed member; and
                (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper person for the purposes of paragraph MIR-5.2.3 (a).
                Amended: April 2013
                Adopted January 2010

              • MIR-5.2.2

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

                Adopted January 2010

              • MIR-5.2.3

                The CBB may approve an application made under Paragraph MIR-5.2.1 if the CBB is satisfied that:

                (a) The applicant is a fit and proper person to be a substantial shareholder;
                (b) Having regard to the applicant's likely influence, the licensed member will or will continue to conduct its business prudently and in compliance with the provisions of the CBB Law, rules and regulations, and this Module; and
                (c) It would not be contrary to the interests of the public and market integrity to do so.
                Amended: April 2013
                Adopted January 2010

              • MIR-5.2.4

                The CBB may, for the purposes of securing compliance with rule MIR-5.1.1 or paragraph MIR-5.2.2, or any condition or restriction imposed under rule MIR-5.2.5, by notice in writing direct the transfer or disposal of all or any of the shares of a licensed member in which a substantial shareholder of the licensed member has an interest. The licensed exchange and/or licensed clearing house shall be notified of such extent.

                Amended: April 2013
                Adopted January 2010

              • MIR-5.2.5

                Until a person to whom a direction has been issued under paragraph MIR-5.2.4 transfers or disposes of the shares which are subject to the direction and notwithstanding anything to the contrary in the Memorandum and Articles of Association or other constituent documents of the licensed member:

                (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
                (b) The licensed member shall not offer or issue any shares (whether by way of rights, bonus share, dividend or otherwise) in respect of the shares which are the subject of the direction; and
                (c) Except in liquidation of the licensed member shall not make any payment (whether by way of cash dividend, dividend in kind or otherwise) in respect of the shares which are the subject of the direction.
                Amended: April 2013
                Adopted January 2010

              • MIR-5.2.6

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

                Amended: April 2013
                Adopted January 2010

              • MIR-5.2.7

                Any payment made by a licensed member in contravention of rule MIR-5.2.5 (c) shall be deemed to be null and void, and a person to whom a direction has been issued under paragraph MIR-5.2.4 shall immediately return the payment he has received to the licensed member.

                Amended: April 2013
                Adopted January 2010

              • MIR-5.2.8

                The CBB may exempt:

                (a) Any person or class of persons; or
                (b) Any class or description of shares or interests in shares;

                from the requirement under paragraphs MIR-5.2.1 or MIR-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB in general, and where shares of the licensed member are being listed in particular.

                Amended: April 2013
                Adopted January 2010

          • MIR-6 Control of a Licensed Member

            • MIR-6.1 Control of a Licensed Member

              • MIR-6.1.1

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

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

                The controller or the person intending to take control over the member, and the member itself, if it is aware of such case, should notify the CBB as per rule MIR-6.1.3.

                Amended: April 2013
                Adopted January 2010

              • MIR-6.1.2

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

                Adopted January 2010

              • MIR-6.1.3

                Notice of control shall contain a request for the CBB's approval for taking control over a licensed member or taking any action that may lead to control by submitting Form 2 and shall also contain such particulars and information and be accompanied by such documents as the CBB may specify. In the cases referred to in items (a) and (b) of rule MIR-6.1.1, the notice shall be made within 15 days from the date of control. In the case referred to in item (c) of rule MIR-6.1.1, the notice shall be made before taking any of the actions that would lead to control.

                Amended: April 2013
                Adopted January 2010

              • MIR-6.1.4

                The CBB must, within 60 days from the date of receipt of the notice referred to above, notify the controller or the person intending to take control over a licensed member of its approval of control, any of the actions which would lead to control, or the refusal thereof as the CBB may determine at its own discretion, after consultation with the SRO.

                Amended: April 2013
                Adopted January 2010

              • MIR-6.1.5

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

                Adopted January 2010

              • MIR-6.1.6

                If the period specified in rule MIR-6.1.4 lapses without a decision being taken on the application seeking approval of control, or any intended actions that would lead to control, the application shall be considered as accepted, unless the SRO refuses such application within the specified period.

                Adopted January 2010

              • MIR-6.1.7

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

                Amended: April 2013
                Adopted January 2010

              • MIR-6.1.8

                The CBB shall decide on the grievance and notify the person intending to take control over the licensed member of its decision within 30 days from the date of submitting the grievance.

                Amended: April 2013
                Adopted January 2010

              • MIR-6.1.9

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

                Adopted January 2010

              • MIR-6.1.10

                The CBB may refuse to give approval to control if it will affect the market integrity and interests of the investors or clients, or if the CBB decides, according to its own discretion that it would be inappropriate to control a licensed member according to the criteria set by the CBB.

                Amended: April 2013
                Adopted January 2010

              • MIR-6.1.11

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

                Adopted January 2010

              • MIR-6.1.12

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

                Adopted January 2010

              • MIR-6.1.13

                A licensed member shall not perform any of the following without prior written approval of the CBB:

                (a) Merge, amalgamate or enter into a partnership with any person in Bahrain or elsewhere, except in the ordinary course of business;
                (b) Transfer all or a major part of its assets or liabilities in Bahrain or elsewhere, without prejudice to the provisions of Chapter 6 (Articles 66, 67 & 68) of the CBB Law;
                (c) Make any modification to its issued or paid-up share capital;
                (d) Modify its Memorandum and Articles of Association;
                (e) Engage in major acquisition or investment operations as determined by the CBB.
                Amended: April 2013
                Adopted January 2010

              • MIR-6.1.14

                The CBB, in granting any approval under rule MIR-6.1.13, may impose such conditions as it considers appropriate.

                Adopted January 2010

          • MIR-7 Business Transfer

            • MIR-7.1 Business Transfer

              • MIR-7.1.1

                A licensed member shall not transfer all or any part of its business related to regulated activities to others, without prior approval from the CBB.

                Amended: April 2013
                Adopted January 2010

              • MIR-7.1.2

                A licensed member who desires to transfer all or any part of its business referred to in rule MIR-7.1.1, shall make an application to the CBB in Form 5 (Approval for Business Transfer), as well as to the licensed exchange and/or licensed clearing house, as the case may be.

                Amended: April 2013
                Adopted January 2010

              • MIR-7.1.3

                A Transfer of Business application referred to under paragraph MIR-7.1.2, shall be published in the Official Gazette and also in 2 daily newspapers, one in Arabic and one in English in Bahrain. The publication should include a call to the SRO, or any concerned parties to submit any objections to the CBB within 60 days from the date of publication.

                Adopted January 2010

              • MIR-7.1.4

                The CBB shall consider the objections referred to in paragraph MIR-7.1.3 before taking any action on the application for transfer.

                Adopted January 2010

              • MIR-7.1.5

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

                (a) The business, subject of transfer, shall not be prohibited by the CBB;
                (b) The Transfer of Business shall not cause damage to the interests of the member's users and clients;
                (c) The transferee must be licensed to carry out the business in the place to which it is to be transferred;
                (d) The transferee company should fulfil all the eligibility criteria laid down in this Module; and
                (e) The CBB must be satisfied that the Transfer of Business is appropriate under relevant regulations issued in this respect.
                Adopted January 2010

              • MIR-7.1.6

                The CBB shall give its approval to a Transfer of Business if the application satisfies the requirements set in rule MIR-7.1.5. Such approval may be given subject to any conditions deemed appropriate by the CBB.

                Adopted January 2010

              • MIR-7.1.7

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

                Adopted January 2010

              • MIR-7.1.8

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

                Adopted January 2010

          • MIR-8 Listing of a Licensed Member

            • MIR-8.1 Listing of a Licensed Member

              • MIR-8.1.1

                The shares of a licensed member shall not be listed for quotation on a licensed exchange in Bahrain or elsewhere, without the CBB's prior approval.

                The CBB may not grant its approval where such listing may:

                (a) Create possible conflicts of interest that may arise from such listing; and
                (b) When such listing may not ensure the market integrity.
                Amended: April 2013
                Adopted January 2010

          • MIR-9 Emergency Powers of the CBB

            • MIR-9.1 Emergency Powers of the CBB

              • MIR-9.1.1

                Where the CBB has reason to believe that an emergency exists, or thinks that it is necessary or expedient in the interests of the public or a section of the public or for the protection of investors, the CBB may direct by notice in writing a licensed member to take such action as it considers necessary to maintain or restore a fair, transparent and efficient market related to the trading, clearing, settlement and depository of any securities or futures contracts, or any class of securities or futures contracts that are undertaken by any licensed member.

                Amended: April 2013
                Adopted January 2010

              • MIR-9.1.2

                Without prejudice to paragraph MIR-9.1.1, the actions with the CBB may direct a licensed member to take include:

                (a) Terminating or suspending any function, or services related to the regulated activities undertaken by any member;
                (b) Ordering the liquidation of all positions or part thereof, or the reduction of such positions related to such member;
                (c) Set margin levels for transactions traded, cleared, or settled, or to be traded, cleared, or settled by or through such member to cater for the emergency;
                (d) Altering conditions of delivery of transaction cleared or settled, or to be cleared or settled through or by that member;
                (e) Fixing the settlement price at which transactions undertaken by such member are to be liquidated;
                (f) Requiring margins or additional margins for transactions traded, cleared, or settled, or to be traded, cleared, or settled through or by such member;
                (g) Modifying or suspending any transaction made by or through such member;
                (h) Requiring any member to act in a specified manner in relation to trading, clearing, settlement and depository in securities or futures contracts, or any class of securities or futures contracts.
                Amended: April 2013
                Adopted January 2010

              • MIR-9.1.3

                In this section "emergency" means any threatened or actual market manipulation or disruption, and includes:

                (a) Any act of any government affecting a securities or commodity market;
                (b) Any major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such securities or commodity; or
                (c) Any undesirable situation or practice which in the opinion of the CBB, constitutes an emergency;
                (d) Any threatened or actual market manipulation or disruption.
                Adopted January 2010

              • MIR-9.1.4

                The CBB may modify any action taken by a licensed exchange, licensed clearing house and/or licensed member under Paragraph MIR-9.1.2, including the setting aside of that action.

                Amended: April 2013
                Adopted January 2010

        • CRA Crypto-Asset

          • CRA-A Introduction

            • CRA-A.1 Purpose

              • Executive Summary

                • CRA-A.1.1

                  The purpose of this Module is to provide the CBB's Directive concerning trading, dealing, advisory services, portfolio management services in accepted crypto-assets as principal, as agent, as custodian and as a crypto-asset exchange within or from the Kingdom of Bahrain. The key requirements relevant to these activities are outlined in this Module while the licensees are also subject to other relevant Modules of the CBB Rulebook Volume 6. This Directive is supported by Article 44(c) of the Central Bank of Bahrain ('CBB') and Financial Institutions Law (Decree No. 64 of 2006) ('CBB Law').

                  Added: April 2019

                • CRA-A.1.2

                  This Module must be read in conjunction with other parts of the Rulebook, mainly:

                  a) Users' guide
                  b) High-level Controls (corporate governance);
                  c) Market Intermediaries and Representatives;
                  d) Anti-Money Laundering and Combating Financial Crime;
                  e) Dispute Resolution, Arbitration and Disciplinary Proceedings;
                  f) International Cooperation and Exchange of Information;
                  Added: April 2019

              • Legal Basis

                • CRA-A.1.3

                  This Module contains the CBB's Directive (as amended from time-to-time) relating to licensees providing regulated crypto-asset services (henceforth referred to as licensees) as defined in the Rulebook and is issued under the powers available to the CBB under Article 38 of the CBB Law. Licensees must also comply with the relevant Modules of the Rulebook Volume 6.

                  Added: April 2019

                • CRA-A.1.4

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

                  Added: April 2019

            • CRA-A.2 Module History

              • CRA-A.2.1

                This Module was first issued in February 2019. Changes made subsequently to this Module are annotated with the calendar quarter date in which the change was made as detailed in the table below. Chapter UG 3 provides further details on Rulebook maintenance and version control.

                Module Ref. Change Date Description of Changes
                CRA-1.1.6(f) 04/2019 Amended sub-paragraph.
                CRA-1.1.6(g) 04/2019 Moved to sub-paragraph (f).
                CRA-1.6.3 04/2019 Added License fee table based on Category.
                CRA-1.6.10 04/2019 Amended Paragraph.
                Added: April 2019

              • Effective Date

                • CRA-A.2.1

                  The contents of this Module are effective from the date of release of the Module or the changes to the Module unless specified otherwise.

                  Added: April 2019

          • CRA-B Introduction

            • CRA-B.1 Overview

              • CRA-B.1.1

                The CBB has recognised that the market for crypto-assets has been growing globally and people around the world and in Bahrain are currently dealing, buying, selling or otherwise holding positions in crypto-assets. The CBB's Rules are aimed at minimising the risk and, in particular, the risk of financial crime and illegal use of crypto-assets.

                Added: April 2019

              • CRA-B.1.2

                The Rules contained in this Directive cover licensing requirements, the conditions for the issuance and holding the CBB license, minimum capital requirements, measures to safeguard client or customer interests, technology standards and in particular the cyber security risk management requirements, reporting, notifications and approval requirements, conduct of business obligations, prevention of market abuse and manipulation, enforcement and the powers under the CBB Law for inspections and access.

                Added: April 2019

          • CRA-1 Licensing

            • CRA-1.1 License for crypto-asset service

              • CRA-1.1.1

                No person may market or undertake the activities, by way of business, within or from the Kingdom of Bahrain, comprised of regulated crypto-asset services without obtaining a license from the CBB.

                Added: April 2019

              • CRA-1.1.2

                For the purposes of Paragraph 1.1.1, undertake the activities, by way of business means:

                (a) Providing one or more of services specified in Paragraph CRA-1.1.6 for commercial gain;
                (b) Holding oneself out as willing and able to provide the services specified in Paragraph CRA-1.1.6; or
                (c) Regularly soliciting other persons to engage in providing the services specified in Paragraph CRA-1.1.6.
                Added: April 2019

              • CRA-1.1.3

                A person would be considered in breach of CRA-1.12 if the person attempts to operate as, or incorporate a company in Bahrain with a name containing the words (or the equivalents in any language) "crypto", "digital", "currency", or "asset" in combination with "exchange", "manager", "adviser", "investment", or "portfolio", without holding the appropriate CBB license or the prior approval of the CBB.

                Added: April 2019

              • CRA-1.1.4

                For the purpose of this Module, any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase, exchange, or otherwise acquire financial services in return for monetary payment or some other form of valuable consideration shall be considered "marketing" in accordance with Resolution No. (16) for the year 2012.

                Added: April 2019

              • CRA-1.1.5

                The activities will be deemed to be undertaken 'within or from the Kingdom of Bahrain', if, for example, the person concerned:

                (a) Is incorporated in the Kingdom of Bahrain;
                (b) Uses an address situated in the Kingdom of Bahrain for its correspondence; or
                (c) Directly solicits clients within the Kingdom of Bahrain.
                Added: April 2019

              • Regulated Crypto-Asset Services

                • CRA-1.1.6

                  Regulated crypto-asset services means the conduct of any or any combination of the following types of activities:

                  (a) Reception and Transmission of order: The reception from a client of an order to buy and/or sell one or more accepted crypto-assets and the transmission of that order to a third party for execution.
                  (b) Execution of orders on behalf of clients: Acting to conclude agreements to buy and/or sell for one or more accepted crypto-assets on behalf of the clients.
                  (c) Dealing on own account: Trading against proprietary capital resulting in conclusion of transactions in one or more accepted crypto-assets.
                  (d) Portfolio Management: Managing or agreeing to manage accepted crypto-assets belonging to a client and the arrangement for their management are such that the licensee managing or agreeing to manage those accepted crypto-assets has a discretion to invest in one or more accepted crypto-assets.
                  (e) Crypto-asset Custodian: safeguarding, storing, holding, maintaining custody of or arranging on behalf of clients for accepted crypto-assets. Investment Advice: Giving, offering or agreeing to give, to persons in their capacity as investors or potential investors or as agent for an investors or potential investor, a personal recommendation in respect of one or more transactions relating to one or more accepted crypto-assets.
                  (f) Investment Advice: Giving, offering or agreeing to give, to persons in their capacity as investors or potential investors or as agent for an investors or potential investor, a personal recommendation in respect of one or more transactions relating to one or more accepted crypto-assets. A "personal recommendation" means a recommendation presented as suitable for the client to whom it is addressed, or which is based on a consideration of the circumstances of that person, and must constitute a recommendation to buy, sell, exchange, exercise or not to exercise any right conferred by a particular accepted crypto-asset, or hold a particular accepted crypto-asset. A recommendation is not a "personal recommendation" if it is issued exclusively through distribution channel or to the public.
                  (g) [This subparagraph was moved to CRA-1.1.6(f) in April 2019].
                  Added: April 2019

              • Exclusions

                • CRA-1.1.7

                  The following activities do not constitute regulated crypto-asset services:

                  (a) the creation or administration of crypto assets;
                  (b) the development, dissemination or use of software for the purpose of creating or mining a crypto asset; or
                  (c) a loyalty programme.
                  Added: April 2019

                • CRA-1.1.8

                  Depending on the type of regulated crypto-asset services that a person wishes to undertake, applicants may seek to be licensed by the CBB under one of the following 4 categories of license:

                  Added: April 2019

              • Category 1

                • CRA-1.1.9

                  Category 1 licensees may undertake one or more regulated crypto-asset service, as listed below:

                  (i) Reception and transmission of orders;
                  (ii) Provide investment advice in relation to accepted crypto-assets.
                  Added: April 2019

                • CRA-1.1.10

                  When undertaking the regulated crypto-asset services listed under Rule CRA-1.1.9, Category 1 licensees:

                  (a) Must not hold any client assets or client money;
                  (b) Must refrain from receiving any fees or commissions from any party other than the client; and
                  (c) Must not operate a crypto-asset exchange.
                  Added: April 2019

              • Category 2

                • CRA-1.1.11

                  Category 2 licensees may undertake one or more regulated crypto-asset services, as listed below:

                  (i) Trading in accepted crypto-assets as agent;
                  (ii) Portfolio Management;
                  (iii) Crypto-asset custody;
                  (iv) Investment advice.
                  Added: April 2019

                • CRA-1.1.12

                  When undertaking the regulated crypto-asset services listed under Rule CRA-1.1.11, Category 2 licensees may hold or control client asset and client money but must not deal from their own account ("dealing as principal") or operate a crypto-asset exchange.

                  Added: April 2019

              • Category 3

                • CRA-1.1.13

                  Category 3 licensees may undertake one or more regulated crypto-asset services, as listed below:

                  (i) Trading in accepted crypto-assets as agent;
                  (ii) Trading in accepted crypto-assets as principal;
                  (iii) Portfolio Management;
                  (iv) Crypto-asset custody;
                  (v) Investment advice.
                  Added: April 2019

                • CRA-1.1.14

                  When undertaking regulated crypto-asset services listed under Rule CRA-1.1.13, Category-3 licensees may hold or control client assets and client money, may deal on their own account ("dealing as principal") but must not operate a crypto-asset exchange.

                  Added: April 2019

              • Category 4

                • CRA-1.1.15

                  Category 4 licensees may undertake one or more regulated crypto-asset service, as listed below:

                  (i) Operate a licensed crypto-asset exchange;
                  (ii) Crypto-asset custody service.
                  Added: April 2019

                • CRA-1.1.16

                  Licensees offering crypto-asset exchange service (licensed crypto-asset exchange) must not execute client orders against proprietary capital, or engage in matched principal trading.

                  Added: April 2019

                • CRA-1.1.17

                  When undertaking the regulated crypto-asset services listed under Rule CRA-1.1.15, Category-4 licensees may hold or control client asset and client money.

                  Added: April 2019

                • CRA-1.1.18

                  Persons wishing to be licensed to undertake the activities of regulated crypto-asset services must apply in writing to the CBB.

                  Added: April 2019

                • CRA-1.1.19

                  An application for a license must be in the form prescribed by the CBB and must contain, inter alia:

                  (a) A business plan specifying the type of business to be conducted;
                  (b) Application forms for all shareholders and subsidiaries; and
                  (c) Application forms for all controlled functions.
                  Added: April 2019

                • CRA-1.1.20

                  The CBB will review the application and duly advise the applicant in writing when it has:

                  (a) Granted the application without conditions;
                  (b) Granted the application subject to conditions specified by the CBB; or
                  (c) Refused the application, stating the grounds on which the application has been refused and the process for appealing against that decision.
                  Added: April 2019

                • CRA-1.1.21

                  Detailed Rules and guidance regarding information requirements and processes for licenses can be found in Section CRA-1.2. As specified in Paragraph CRA-1.2.13, the CBB will provide a formal decision on a license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB.

                  Added: April 2019

                • CRA-1.1.22

                  Applicants seeking a regulated crypto-asset service license must satisfy the CBB that they meet, by the date of grant of license, the minimum criteria for licensing, as contained in Chapter CRA-2. Once licensed, the regulated crypto-asset service licensee must continue to meet these criteria on an on-going basis.

                  Added: April 2019

              • Combining Regulated Crypto-asset Services

                • CRA-1.1.23

                  Licensees may combine two or more regulated crypto-asset services, provided these fall within the permitted list of services and such combinations does not create possible conflict of interest.

                  Added: April 2019

                • CRA-1.1.24

                  Those seeking a license should satisfy the CBB as to their suitability to carry out the regulated crypto-asset services for which they are seeking license.

                  Added: April 2019

                • CRA-1.1.25

                  In assessing applications for a license, the CBB will assess whether an applicant satisfies the licensing conditions (as specified in Chapter CRA-2) with respect to all the regulated services that the applicant proposes to undertake.

                  Added: April 2019

            • CRA-1.2 Application for License

              • CRA-1.2.1

                Applicants for a license must submit a duly completed Form 1 (Application for a License), under cover of a letter signed by an authorised signatory of the applicant marked for the attention of the Director, Licensing Directorate. The application must be accompanied by the documents listed in Rule CRA-1.2.4, unless otherwise directed by the CBB.

                Added: April 2019

              • CRA-1.2.2

                Articles 44 to 47 of the CBB Law govern the licensing process which also stipulates that the CBB will take a decision within 60 calendar days of an application being deemed complete (i.e. containing all required information and documents). See below, for further details on the licensing process and time-lines

                Added: April 2019

              • CRA-1.2.3

                References to applicant mean the proposed licensee seeking a license. An applicant may appoint a representative — such as 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 licensing process, when seeking clarification of any issues.

                Added: April 2019

              • CRA-1.2.4

                Unless otherwise directed by the CBB, the following documents must be provided in support of the application for license:

                (a) A duly completed Form 2 (Application for Authorisation of Shareholders) for each Shareholder of the proposed licensee;
                (b) A duly completed Form 3 (Application for Approved Person status), for each individual proposed to undertake a controlled function (as defined in Rule CRA-1.7.2) in the proposed licensee;
                (c) A comprehensive business plan for the application, addressing the matters described in Rule CRA-1.2.6;
                (d) For overseas companies, a copy of the company's current commercial registration, license from competent authority and/or equivalent documentation;
                (e) Where the applicant is an existing Bahraini company, a copy of the applicant's commercial registration certificate;
                (f) A certified copy of a Board resolution of the applicant, confirming its decision to seek a CBB crypto-asset service license;
                (g) In the case of applicants that are part of a group, a letter of non-objection to the proposed license application from the applicant's lead supervisor, together with confirmation that the group is in good regulatory standing and is in compliance with applicable supervisory requirements, including those relating to capital requirements;
                (h) In the case of branch applicants, a letter of non-objection to the proposed license application from the applicant's home supervisor, together with confirmation that the applicant is in good regulatory standing and the company concerned is in compliance with applicable supervisory requirements, including those relating to capital;
                (i) In the case of branch applicants, copies of the audited financial statements of the applicant (head office) for the three years immediately prior to the date of application;
                (j) In the case of applicants that are part of a group, copies of the audited financial statements of the applicant's group, for the three years immediately prior to the date of application;
                (k) In the case of applicants not falling under either (i) or (j) above, copies of the audited financial statements of the applicant's substantial shareholder (where they are a legal person), for the three years immediately prior to the date of application;
                (l) A copy of the applicant's memorandum and articles of association (in draft form for applicants creating a new company); and
                (m) Details of all banking arrangements.
                Added: April 2019

              • CRA-1.2.5

                The CBB, in its complete discretion may ask for a letter of guarantee from the applicant's controlling or major shareholders on a case by case basis as it deems appropriate/necessary as part of the required documents to be submitted as mentioned in Paragraph CRA-1.2.4 above.

                Added: April 2019

              • CRA-1.2.6

                The business plan submitted in support of an application must include:

                (a) An outline of the history of the applicant and its shareholders;
                (b) A description of the proposed, current, and historical business of the applicant, including detail on the products and services provided and to be provided, all associated websites addresses, the jurisdictions in which the applicant is engaged in business, the principal place of business, the primary market of operation and the projected customer base;
                (c) The reasons for applying for a license, including the applicant's strategy and market objectives;
                (d) The proposed Board and senior management of the applicant and the proposed organisational structure of the applicant;
                (e) An independent assessment of the risks that may be faced by the applicant, together with the proposed systems and controls framework to be put in place for addressing those risks and to be used for the main business functions; and
                (f) An opening balance sheet for the applicant, together with a three-year financial projection, with all assumptions clearly outlined, demonstrating that the applicant will be able to meet applicable capital adequacy requirements.
                Added: April 2019

              • CRA-1.2.7

                The applicant's memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the license application, and must preclude the applicant from undertaking other regulated services, or commercial activities, unless these arise out of its regulated crypto-asset services or are incidental to those.

                Added: April 2019

              • CRA-1.2.8

                All documentation provided to the CBB as part of an application for a license must be in either the Arabic or English languages. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof.

                Added: April 2019

              • CRA-1.2.9

                Any material changes or proposed changes to the information provided to the CBB in support of an licensing application that occurs prior to licensing must be reported to the CBB.

                Added: April 2019

              • CRA-1.2.10

                Failure to inform the CBB of the changes specified in Rule CRA-1.2.9 is likely to be viewed as a failure to provide full and transparent disclosure of information, and thus a failure to meet licensing condition stipulated in Paragraph CRA-2.8.2.

                Added: April 2019

              • Licensing Process and Timelines

                • CRA-1.2.11

                  By law, the 60 days' time limit referred to in Paragraph CRA-1.2.2 only applies once the application is complete and all required information (which may include any clarifications requested by the CBB) and documents have been provided. This means that all the items specified in Rule CRA-1.2.4 have to be provided, before the CBB may issue a license.

                  Added: April 2019

                • CRA-1.2.12

                  The CBB recognises, however, that applicants may find it difficult to secure suitable senior management (refer CRA-1.2.4(b) above) in the absence of preliminary assurances regarding the likelihood of obtaining a license.

                  Added: April 2019

                • CRA-1.2.13

                  Therefore, applicants may first submit an unsigned Form 1 in draft, together with as many as possible of the items specified in Rule CRA-1.2.4. This draft application should contain at least items in Rule CRA-1.2.4(a); Rule CRA-1.2.4(b), with respect to proposed Directors (but not necessarily senior management); Rule CRA-1.2.4(c); Rule-CRA-1.2.4(d); and Rule CRA-1.2.4(g) to Rule CRA-1.2.4(m) inclusive.

                  Added: April 2019

                • CRA-1.2.14

                  On the basis of the information specified in Paragraph CRA-1.2.13, the CBB may provide an initial 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

                  Added: April 2019

                • CRA-1.2.15

                  An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents required under Rule CRA-1.2.1 and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Commerce, Industry and Tourism unless it receives the final approval from the CBB.

                  Added: April 2019

                • CRA-1.2.16

                  Regardless of whether an applicant submits a draft application or not, all potential applicants are strongly encouraged to contact the CBB at an early stage to discuss their plans, for guidance on the CBB's license categories and associated requirements. The Licensing Directorate would normally expect to hold at least one pre-application meeting with an applicant, prior to receiving an application (either in draft or in final).

                  Added: April 2019

                • CRA-1.2.17

                  Potential applicants should initiate pre-application meetings in writing, setting out a short summary of their proposed business and any issues or questions that they may have already identified, once they have a clear business proposition in mind and have undertaken their preliminary research. The CBB can then guide the applicant on the specific areas in the Rulebook that will apply to them and the relevant requirements that they must address in their application.

                  Added: April 2019

                • CRA-1.2.18

                  An applicant must not hold himself out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with Rule CRA-1.2.19 below. Failure to do so may constitute grounds for refusing an application and result in a contravention of Articles 40 and 41 of the CBB Law (which carries a maximum penalty of BD 1 million).

                  Added: April 2019

              • Granting or Refusal of License

                • CRA-1.2.19

                  To be granted a license, an applicant must demonstrate compliance with the applicable requirements of the CBB Law, this Module as well as other applicable modules of Volume 6. Should a license be granted, the CBB will notify the applicant in writing of the fact; the CBB will also publish its decision to grant a license in the Official Gazette and in two local newspapers (one published in Arabic, the other in English). The license may be subject to such terms and conditions as the CBB deems necessary for the additional conditions being met.

                  Added: April 2019

                • CRA-1.2.20

                  The CBB may refuse to grant a license if in its opinion:

                  (a) The requirements of the CBB Law or 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 clients.
                  Added: April 2019

                • CRA-1.2.21

                  Where the CBB intends to refuse an application for a license, it must give the applicant written notice to that effect. Applicants will be given a minimum of 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice.

                  Added: April 2019

                • CRA-1.2.22

                  Before the final approval is granted to a licensee, a confirmation from a retail bank addressed to the CBB that the minimum capital, as specified in this Module, has been paid in must be provided to the CBB.

                  Added: April 2019

              • Readiness Assessment

                • CRA-1.2.23

                  Prior to commencement of operation, a licensee must, after obtaining the CBB's prior written approval, appoint an independent third party to undertake a readiness assessment and submit a readiness assessment report.

                  Added: April 2019

                • CRA-1.2.24

                  The readiness assessment report must include the licensee's risk management system, capital adequacy, organisational structure, operational manuals, information technology, information system security, policies and procedures and internal controls and systems.

                  Added: April 2019

                • CRA-2.2.25

                  The CBB may conduct an examination or seek further information to ascertain the readiness of the licensee to commence operation, even if a readiness assessment report has been submitted to the CBB.

                  Added: April 2019

              • Commencement of Operations

                • CRA-2.2.26

                  Within 6 months of the license being issued, the new licensee must provide to the CBB (if not previously submitted):

                  (a) The registered office address and details of premises to be used to carry out the business of the proposed licensee;
                  (b) The address in Bahrain where full business records will be kept;
                  (c) The licensee's contact details including telephone and fax number, e-mail address and website;
                  (d) A copy of its business continuity plan;
                  (e) A description of the IT system that will be used, including details of how IT systems and other records will be backed up;
                  (f) A copy of the auditor's acceptance to act as auditor for the applicant;
                  (g) A copy of an auditor's opinion certifying that the licensee's capital — as specified in the business plan submitted under Rule CRA-1.2.4 has been paid in;
                  (h) A copy of the licensee's professional indemnity insurance policy;
                  (i) A copy of the applicant's notarized memorandum and articles of association, addressing the matters described in Paragraph CRA-1.2.9;
                  (j) A copy of the commercial registration certificate in Arabic and in English from the Ministry of Commerce, Industry and Tourism;
                  (k) A copy of the licensee's business card and any written communication (including stationery, website, e-mail, business documentation, etc.) including a statement that the company is licensed by the CBB; and
                  (l) Any other information as may be specified by the CBB.
                  Added: April 2019

                • CRA-2.2.27

                  Upon receipt of a license from the CBB, the licensee must commence their commercial operations within 6 months of being granted a license by the CBB, failing which the CBB may cancel the license, as per the powers and procedures set out in Article 48 of the CBB Law.

                  Added: April 2019

                • CRA-1.2.28

                  The procedures for amending or cancelling licenses are contained in Sections CRA-1.3.

                  Added: April 2019

            • CRA-1.3 Cancellation of License

              • Voluntary Surrender of a License

                • CRA-1.3.1

                  In accordance with Article 50 of the CBB Law, licensees wishing to cancel their license, must obtain the CBB's written approval, before ceasing their activities. All such requests must be made in writing to the Director, Capital Markets Supervision, setting out in full the reasons for the request and how the business is to be wound up.

                  Added: April 2019

                • CRA-1.3.2

                  Licensees must satisfy the CBB that their clients' interests are to be safeguarded during and after the proposed cancellation.

                  Added: April 2019

                • CRA-1.3.3

                  Failure to comply with Rule CRA-1.3.1 may constitute a breach of Article 50(a) of the CBB Law. The CBB will only approve such a request where it has no outstanding regulatory concerns and any relevant client interests would not be prejudiced. A voluntary surrender of a license will not be accepted where it is aimed at pre-empting supervisory actions by the CBB. A voluntary surrender will only be allowed to take effect once the licensee, in the opinion of the CBB, has discharged all its regulatory responsibilities to clients.

                  Added: April 2019

              • Cancellation of a License by the CBB

                • CRA-1.3.4

                  As provided for under Article 48 (c) of the CBB Law, the CBB may itself move to cancel a license, for instance if a licensee fails to satisfy any of its existing license conditions or protecting the legitimate interests of clients or creditors of the licensee require a cancellation. The CBB generally views the cancellation of a license as appropriate only in the most serious of circumstances, and generally tries to address supervisory concerns through other means beforehand.

                  Added: April 2019

                • CRA-1.3.5

                  Cancellation of a license requires the CBB to issue a formal notice of cancellation to the licensee concerned. The notice of cancellation describes the CBB's rationale for the proposed cancellation, as specified in Article 48(d) of the CBB Law.

                  Added: April 2019

                • CRA-1.3.6

                  Where the cancellation of a license has been confirmed by the CBB, the CBB will only effect the cancellation once a licensee has discharged all its regulatory responsibilities to clients. Until such time, the CBB will retain all its regulatory powers towards the licensee and will direct the licensee so that no new regulated crypto-asset services may be undertaken whilst the licensee discharges its obligations to its clients.

                  Added: April 2019

            • CRA-1.4 Publication of the Decision to Grant or Cancel a License

              • CRA-1.4.1

                In accordance with Articles 47 and 49 of the CBB Law, the CBB must publish its decision to grant, cancel or amend a license in the Official Gazette and in two local newspapers, one in Arabic and the other in English.

                Added: April 2019

              • CRA-1.4.2

                For the purposes of Paragraph CRA-1.4.1, the cost of publication must be borne by the Licensee.

                Added: April 2019

              • CRA-1.4.3

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

                Added: April 2019

            • CRA-1.5 Licensing Application Fees

              • CRA-1.5.1

                Applicants seeking a regulated crypto-asset service license from the CBB must pay a non-refundable license application fee of BD 100 at the time of submitting their formal application to the CBB.

                Added: April 2019

              • CRA-1.5.2

                There are no application fees for those seeking approved person status.

                Added: April 2019

            • CRA-1.6 Annual License Fees

              • CRA-1.6.1

                Licensees must pay the relevant annual license fee to the CBB, on 1st December of the preceding year for which the fee is due.

                Added: April 2019

              • CRA-1.6.2

                The relevant fees are specified in Rule CRA-1.6.3 below. The fees due on 1st December are those due for the following calendar year, but are calculated on the basis of the firm's latest audited financial statements for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example), is calculated using the audited financial statements for 2012, assuming a 31st December year end. Where a licensee does not operate its accounts on a calendar-year basis, then the most recent audited financial statements available are used instead.

                Added: April 2019

              • CRA-1.6.3

                The variable annual license fee payable by licensees is 0.25% of their relevant operating expenses, subject to a minimum and a maximum as per the table below:

                S1. No.
                Licensing Category
                Minimum Fees (BD)
                Maximum Fees (BD)
                1.
                Category-1
                2,000
                6,000
                2.
                Category-2
                3,000
                8,000
                3.
                Category-3
                4,000
                10,000
                4.
                Category-4
                5,000
                12,000
                Added: April 2019

              • CRA-1.6.4

                Relevant operating expenses are defined as the total operating expenses of the licensee concerned, as recorded in the most recent audited financial statements available, subject to the adjustments specified in Rule CRA-1.6.5.

                Added: April 2019

              • CRA-1.6.5

                The adjustments to be made to relevant operating expenses are the exclusion of the following items from total operating expenses:

                (a) Training costs;
                (b) Charitable donations;
                (c) CBB fees paid; and
                (d) Non-executive Directors' remuneration.
                Added: April 2019

              • CRA-1.6.6

                For the avoidance of doubt, operating expenses for the purposes of this Section, do not include items such as depreciation, provisions, interest expense, and dividends.

                Added: April 2019

              • CRA-1.6.7

                The CBB would normally rely on the audited accounts of a licensee as representing a true and fair picture of its operating expenses. However, the CBB reserves the right to enquire about the accounting treatment of expenses, and/or policies on intra-group charging, if it believes that these are being used artificially to reduce a license fee.

                Added: April 2019

              • CRA-1.6.8

                Licensees must complete and submit Form ALF (Annual License Fee) to the CBB, no later than 15th October of the preceding year for which the fees are due.

                Added: April 2019

              • CRA-1.6.9

                Licensees are subject to direct debit for the payment of the annual fee and must complete and submit to the CBB a Direct Debit Authorisation Form by 15th September available under Part B of Volume 6 (Capital Markets) CBB Rulebook on the CBB Website.

                Added: April 2019

              • CRA-1.6.10

                For new licensees, the first annual license fee is payable when the license is issued by the CBB. The amount payable is the minimum amount stipulated in Paragraph CRA-1.6.3 for each category of license.

                Added: April 2019

              • CRA-1.6.11

                For the first full year of operation, the licensee would calculate its fee as the floor amount. For future years, the licensee would submit a Form ALF by 15th October of the preceding year for which the fees are due and calculate its fee using its last audited financial statements (or alternative arrangements as agreed with CBB, should its first set of accounts cover an 18-month period).

                Added: April 2019

              • CRA-1.6.12

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

                Added: April 2019

              • CRA-1.6.13

                Licensees failing to comply with this Section may be subject to financial penalties as prescribed by the CBB or may have their licenses withdrawn by the CBB.

                Added: April 2019

            • CRA-1.7 Approved Persons

              • General Requirements

                • CRA-1.7.1

                  Licensees must obtain the CBB's prior written approval for any person wishing to undertake a controlled function in a licensee. The approval from the CBB must be obtained prior to their appointment, subject to the variations contained in Paragraphs CRA-1.7.3 and Paragraph CRA-1.7.4.

                  Added: April 2019

                • CRA-1.7.2

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

                  (a) Director;
                  (b) Chief Executive or General Manager;
                  (c) Head of function;
                  (d) Chief Information Security Officer;
                  (e) Compliance Officer; and
                  (f) Money Laundering Reporting Officer (MLRO).
                  Added: April 2019

                • CRA-1.7.3

                  In the case of Bahraini regulated crypto-asset service licensee, prior approval is required for all of the above controlled functions. Combination of the above controlled functions is subject to the requirements contained in Paragraph MIR-3.1.3 of Module MIR.

                  Added: April 2019

                • CRA-1.7.4

                  In the case of overseas crypto-asset service licensees, prior approval is required for controlled function (b) defined as the 'Branch Manager' of the Bahrain branch (however titled by the licensee), (c), (d), (e) and (f). Combination of the above controlled functions is subject to the requirements contained in Paragraph MIR-3.1.3 of Module MIR.

                  Added: April 2019

                • CRA-1.7.5

                  The CBB may grant an exemption from appointment of some of the controlled functions contained in Paragraph CRA-1.7.2, provided the licensee appoints at least three of the controlled functions (i) Directors, (ii) Chief Executive or General Manager and (iii) Money Laundering Reporting Officer.

                  Added: April 2019

                • CRA-1.7.6

                  Pursuant to CRA-1.7.5, a licensee seeking exemption from appointment of persons to specific controlled functions must provide in writing to the satisfaction of the CBB:

                  (a) nature, scale and complexity of their business and how performance of the controlled function to which no appointment is be made will be managed; provide alternative arrangements which should ensure sound and prudent management and adequate consideration to the interest of clients and the integrity of the market; and
                  (b) confirmation that the individual entrusted with additional responsibilities pertaining to a controlled function is of sufficient good repute, possesses sufficient knowledge, skill and experience and ability to commit sufficient time to discharge the additional responsibility.
                  Added: April 2019

              • Basis for Approval

                • CRA-1.7.7

                  For the purposes of Paragraph CRA-1.7.1, licensees must adhere to the requirements for authorisation of approved persons as set out under Sections MIR-3.1, MIR-3.2, MIR-3.3, MIR-3.4, MIR-3.5 and MIR-3.6 under Module MIR except for Rule MIR-3.1.2 and MIR-3.1.2A.

                  Added: April 2019

                • CRA-1.7.8

                  Approval under Paragraph CRA-1.7.1 is only granted by the CBB, if it is satisfied that the person is fit and proper to hold the particular position in the licensee concerned. 'Fit and proper' is determined by the CBB on a case-by-case basis. The definition of 'fit and proper' and associated guidance is provided in Sections MIR-3.3 of Module MIR.

                  Added: April 2019

              • Cancellation of Approved Person Status

                • CRA-1.7.9

                  In accordance with Paragraphs MIR-3.4.11 of Module MIR and CRA-10.2.12, licensees must promptly notify the CBB in writing when a person undertaking a controlled function will no longer be carrying out that function. If a controlled function falls vacant, the licensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the licensee must make immediate interim arrangements to ensure continuity of the duties and responsibilities of the controlled function affected, provided that such arrangements do not pose a conflict of duties. These interim arrangements must be approved by the CBB.

                  Added: April 2019

                • CRA-1.7.10

                  The notification should identify if the planned move was prompted by any concerns over the person concerned, or is due to a routine staff change, retirement or similar reason.

                  Added: April 2019

                • CRA-1.7.11

                  The CBB may also move to declare someone as not 'fit and proper', in response to significant compliance failures or other improper behaviour by that person: see Chapter MIR-3.6 of Module MIR regarding the cancellation of 'fit and proper' approval.

                  Added: April 2019

                • CRA-1.7.12

                  A Director is any person who occupies the position of a Director, as defined in Article 173 of the Commercial Companies Law (Legislative Decree No. 21 of 2001).

                  Added: April 2019

                • CRA-1.7.13

                  The fact that a person may have 'Director' in his job title does not of itself make him a Director within the meaning of the definition noted in Paragraph CRA-1.7.12. For example, a 'Director of Marketing', is not necessarily a member of the Board of Directors and therefore may not fall under the definition of Paragraph CRA-1.7.12.

                  Added: April 2019

                • CRA-1.7.14

                  Licensees must appoint a person to undertake the function of Chief Executive or General Manager. The Chief Executive or General Manager means a person who is responsible for the conduct of the licensee (regardless of actual title). The Chief Executive or General Manager must be resident in Bahrain. This person is responsible for the conduct of the whole of the firm, or, in the case of an overseas crypto-asset exchanger licensee, for all of the activities of the branch.

                  Added: April 2019

                • CRA-1.7.15

                  The Chief Executive or General Manager of the licensee:

                  (a) Must be fully responsible for the executive management and performance of the licensee, within the framework of delegated authorities set by the Board;
                  (b) Must devote full-time working hours to the licensee; and
                  (c) Must not be employed at any other firm.
                  Added: April 2019

                • CRA-1.7.16

                  Residency requirements apply to Chief Executives, General Managers or Managing Directors as well as for other controlled functions as specified in Section CRA-2.2.

                  Added: April 2019

                • CRA-1.7.17

                  Head of function means a person who exercises major managerial responsibilities, is responsible for a significant business or operating unit, or has senior managerial responsibility for maintaining accounts or other records of the licensee.

                  Added: April 2019

                • CRA-1.7.18

                  Where a firm is in doubt as to whether a function should be considered a controlled function it must discuss the case with the CBB.

                  Added: April 2019

                • CRA-1.7.19

                  Licensees must designate an employee, of appropriate standing and resident in Bahrain, as compliance officer. The duties of the compliance officer include:

                  (a) Having responsibility for oversight of the licensee's compliance with the requirements of the CBB; and
                  (b) Reporting to the licensee's Board in respect of that responsibility.
                  Added: April 2019

          • CRA-2 Licensing Condition

            • CRA-2.1 Condition 1: Legal Status

              • CRA-2.1.1

                The legal status of a licensed crypto-asset service licensee must be:

                A. For undertaking Category-1, Category-2 and Category-3 regulated crypto-asset services
                (i) A Bahraini company with limited liability ("W.L.L."); or
                (ii) A Bahraini joint stock company (B.S.C.); or
                (iii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation.
                B. For undertaking Category-4 regulated crypto-asset services (Licensed crypto-asset exchange)
                (i) A Bahraini joint stock company (B.S.C.); or
                (ii) A branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation.
                Added: April 2019

              • CRA-2.1.2

                Where the application is for establishing a branch of an overseas crypto-asset service licensee, an application for licensing will be considered after extensive enquiries into the firm's shareholders, management structure, financial position, its activities and how these activities are regulated.

                Added: April 2019