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Location: Central Bank of Bahrain Volume 4—Investment Business > Part A > High Level Standards > AU Authorisation > AU-1 Authorisation Requirements > AU-1.1 Licensing > AU-1.1.3
  • AU-1.1 Licensing

    • AU-1.1.1

      No person may:

      (a) Undertake (or hold themselves out to undertake) regulated investment servicesG , by way of business, within or from the Kingdom of Bahrain unless duly licensed by the CBB;
      (b) Hold themselves out to be licensed by the CBB unless they have as a matter of fact been so licensed; or
      (c) Market any financial servicesG in the Kingdom of Bahrain unless:
      (i) Allowed to do by the terms of a license issued by the CBB;
      (ii) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
      (iii) Has obtained the express written permission of the CBB to offer financial servicesG .
      Amended: January 2013
      Amended: July 2007

    • AU-1.1.2

      For the purposes of Rule AU-1.1.1(a), please refer to Section AU-1.4 for the definition of 'regulated investment servicesG ' and 'by way of business'. Such 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 correspondences; or
      (c) Directly solicits clients.
      Amended: January 2011
      Amended: July 2007

    • AU-1.1.3

      For the purposes of Rule AU-1.1.1(b), persons would be considered in breach of this requirement if they were to trade as, or incorporate a company in Bahrain with a name containing the words (or the equivalents in any language) 'adviser', 'consultant', or 'manager' in combination with 'investment', or 'portfolio', without holding the appropriate CBB license or the prior approval of the CBB.

      Amended: July 2007

    • AU-1.1.3A

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

      Added: January 2013

    • AU-1.1.3B

      Persons in breach of Subparagraph AU-1.1.1(c) 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 (see also Section EN-10.2A).

      Added: January 2013

    • AU-1.1.4

      Where a person is licensed under Volumes 1 or 2, i.e. as a bank, then a separate license under Volume 4 is not required in order to undertake activities of the kind specified under Section AU-1.4.

    • AU-1.1.5

      Persons licensed as banks by the CBB may also undertake the specific activities covered by the definition of regulated investment servicesG (such as trading in financial instrumentsG as principal), since these specific activities also form part of the definition of regulated banking servicesG (or regulated Islamic banking servicesG in the case of Islamic banks). In such cases, banks are not required to hold a separate investment firm licenseG .

      Amended: July 2007

    • AU-1.1.6

      Depending on the type of regulated investment servicesG that a person wishes to undertake, applicants must seek to be licensed either as a Category 1G , a Category 2G or a Category 3G investment firm.

    • AU-1.1.7

      Persons wishing to be licensed to undertake regulated investment servicesG within or from the Kingdom of Bahrain must apply in writing to the CBB.

      Amended: July 2007

    • AU-1.1.8

      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 controllersG ; and
      (c) Application forms for all controlled functionsG .
      Amended: July 2007

    • AU-1.1.9

      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.
      Amended: July 2007

    • AU-1.1.10

      Detailed rules and guidance regarding information requirements and processes for licenses can be found in Section AU-5.1. As specified in Paragraph AU-5.1.12, 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.

      Amended: July 2007

    • AU-1.1.11

      All applicants seeking an investment firmG license must satisfy the CBB that they meet, by the date of authorisation, the minimum criteria for licensing, as contained in Chapter AU-2. Once licensed, investment firm licenseesG must maintain these criteria on an on-going basis.

      Amended: July 2007

    • Investment Firm License Categories

      • AU-1.1.12

        For the purposes of Volume 4 (Investment Business), regulated investment servicesG may be undertaken under three categories of investment firmsG as follows:

        Amended: July 2007

      • Category 1

        • AU-1.1.13

          For the purposes of Volume 4 (Investment Business), Category 1 investment firmsG may undertake (subject to Rule AU-1.1.19) any regulated investment serviceG , as listed below:

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

        • AU-1.1.14

          [This Paragraph was moved and amended to Paragraph AU-1.4.11A in January 2012].

          Amended: January 2012
          Amended: July 2007

      • Category 2

        • AU-1.1.15

          For the purposes of Volume 4 (Investment Business), Category 2 investment firmsG may undertake (subject to Rule AU-1.1.19) any regulated investment serviceG (as listed in Rule AU-1.1.13), except that of 'dealing in financial instrumentsG as principal'.

        • AU-1.1.16

          A Category 2 investment firmG cannot, therefore, trade in financial instrumentsG for its own account ('dealing in financial instrumentsG as principal'), but it may conduct all other types of regulated investment servicesG , including holding client assetsG .

          Amended: July 2007

      • Category 3

        • AU-1.1.17

          For the purposes of Volume 4 (Investment Business), Category 3 investment firmsG may undertake (subject to Rules AU-1.1.18 and AU-1.1.19) the following regulated investment servicesG only:

          a) Arranging deals in financial instrumentsG ; and
          b) Advising on financial instrumentsG .
          Amended: July 2007

        • AU-1.1.18

          When undertaking either of the regulated investment servicesG listed under Rule AU-1.1.17, Category 3 investment firmsG :

          a) Must be independent;
          b) May not hold any client assetsG ;
          c) Must refrain from receiving any fees or commissions from any party other than the clientG ; and
          (d) Must not have an 'agency' relationship (tied agent) with an investment provider.
          Amended: October 2016
          Amended: October 2009
          April 2008
          Amended: July 2007

        • AU-1.1.18A

          In assessing the independence of a Category 3 investment firmG , the CBB will take into account the regulated investment servicesG offered in relation to financial instruments of a related party.

          Amended: October 2016
          Adopted: April 2008

        • AU-1.1.18B

          For the purpose of Paragraph AU-1.1.18A, a related party of a Category 3 investment firmG includes:

          (a) A controllerG of the Category 3 investment firmG as defined in Module GR;
          (b) A close linkG of the Category 3 investment firmG as defined in Module GR;
          (c) An associate of a controllerG as defined in Module GR;
          (d) The extended family of a controllerG including a father, mother, father-in-law, mother-in-law, brother, sister, brother-in-law, sister-in-law, or grandparent;
          (e) A corporate entity, whether or not licensed or incorporated in Bahrain, where any of the persons identified in Sub-Paragraphs (c) and (d) is a Director or would be considered a controllerG were the definition of controller set out in Paragraph GR-5.2.1 applied to that corporate entity; and
          (f) [This Subparagraph has been deleted].
          Amended: October 2016
          Adopted: April 2008

    • Combining Regulated Investment Services

      • AU-1.1.19

        Investment firm licenseesG may combine two or more regulated investment servicesG , providing these fall within the permitted list of services for their investment firm category, and such combinations are not restricted by Module BC (Business Conduct).

      • AU-1.1.20

        Module BC (Business Conduct) may restrict licensees from undertaking certain combinations of activities, where such combinations potentially create conflicts of interest that could compromise the interests of customers. See Chapter BC-2.

    • Suitability

      • AU-1.1.21

        [This Paragraph was deleted in January 2011].

        Deleted: January 2011
        Amended: July 2007

      • AU-1.1.22

        [This Paragraph was deleted in January 2011].

        Deleted: January 2011
        Amended: July 2007

    • Conventional and Islamic Investment Firms

      • AU-1.1.23

        Investment firm licenseesG may deal in both conventional and Islamic financial instrumentsG . Only those investment firm licenseesG whose operations are fully shari'a compliant, however, may hold themselves out to be an Islamic investment firmG .

        Amended: July 2007

      • AU-1.1.24

        Islamic investment firmsG are required to comply with relevant AAOIFI standards (see Section AA-4.1).

        Amended: October 2014
        Amended: April 2013
        Amended: October 2009
        July 2007

      • AU-1.1.24A

        In accordance with Paragraph HC-9.2.1, Category 1 and 2 Islamic investment firmsG must maintain a Shari'a Supervisory Board, comprised of at least 3 Shari'a board members, to verify that their operations are Shari'a compliant.

        Added: October 2014

      • AU-1.1.24B

        Category 3 Islamic investment firmsG must appoint a minimum of one Shari'a advisor or scholar to verify that their operations are Shari'a compliant.

        Added: October 2014

      • AU-1.1.25

        Investment firm licenseesG (whether conventional or Islamic) may not accept shari'a money placements or deposits. They may not enter into shari'a financing contracts (except where it is an incidental part of assisting a client to buy, sell, subscribe for or underwriteG a financial instrument). Finally, they may not offer Shari'a Profit Sharing Investment Accounts (whether restricted or unrestricted).

        Amended: October 2012
        Amended: July 2007

      • AU-1.1.26

        Shari'a money placements or deposits include money taken under q'ard or al-wadia contracts. Shari'a financing contracts include contracts such as murabaha, bay muajjal, bay islam, ijara wa iktina and istisna'a. Profit sharing investment accounts include those accounts undertaken under mudaraba and musharaka contracts.

      • AU-1.1.27

        The transactions prohibited under Rule AU-1.1.25 may only be undertaken by bank licensees.

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