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Location: Central Bank of Bahrain Volume 4—Investment Business > Part A > High Level Standards > HC High-Level Controls Module > HC-1 The Board > HC-1.2 Role and Responsibilities > HC-1.2.2
  • HC-1.2 Role and Responsibilities

    • HC-1.2.1

      All directors must understand the Board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time. In particular:

      (a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and
      (b) The Board's fiduciary duties of care and loyalty to the investment firm licenseeG and the shareholders (see HC-2.1).
      January 2011

    • HC-1.2.2

      The Board's role and responsibilities include but are not limited to:

      (a) Approving and reviewing at least annually the overall business performance and strategy for the investment firm licenseeG ;
      (b) Reviewing regularly the implementation of the strategy and operational performance;
      (c) Causing financial statements to be prepared which accurately disclose the investment firm licensee'sG financial position;
      (d) Monitoring management performance;
      (e) Reviewing regularly the level of risk;
      (f) Approving and reviewing at least annually systems and controls framework (including policies and procedures);
      (g) Convening and preparing the agenda for shareholder meetings;
      (h) Monitoring conflicts of interest and preventing abusive related party transactions;
      (i) Assuring equitable treatment of shareholders including minority shareholders; and
      (j) Setting out clearly and reviewing on a regular basis who has authority to enter the licensee into contractual obligations.
      January 2011

    • HC-1.2.3

      With respect to Subparagraph HC-1.2.2(j), the Board should set a materiality threshold so that contractual obligations above this set threshold are regularly reported to the Board. In setting the materiality threshold, the Board will consider the financial impact the contractual obligation may have in relation to its capital.

      January 2011

    • HC-1.2.4

      The directors are responsible both individually and collectively for performing these responsibilities and must have sufficient expertise as a Board to understand the important issues relating to operation and control of the investment firm licenseeG . Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place. This statement must be clearly communicated to Board members and senior managementG .

      January 2011

    • HC-1.2.5

      When a new director is inducted, the chairman of the Board, or the licensee's legal counsel or compliance officer, or other individual delegated by the chairman of the board, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC (see also HC-4.3.1).

      Amended: January 2012
      January 2011

    • HC-1.2.6

      The investment firm licenseeG should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remunerationG and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

      January 2011

    • HC-1.2.7

      The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of directors.

      January 2011

    • Additional Guidance

      • HC-1.2.8

        In assessing the licensee'sG strategic plans (see Paragraph HC-1.2.2), the CBB would expect the Board to address the licensee'sG current and future aspirations with respect to its position in the market place, its size, products, value and other key aspirations that would be considered important by investors. Furthermore, the Board should demonstrate that it is able to identify proactively and understand the significant risks that the licensee faces in achieving its business objectives. A description of the licensee'sG strategy should be included in the annual financial statements.

        January 2011

      • HC-1.2.9

        In assessing the management framework (see Paragraph HC-1.2.2), the CBB would expect the Board to have effective policies and processes in place for:

        (a) Ensuring a formal and transparent Board nomination process;
        (b) Appointing senior managersG , and ensuring that they have the necessary integrity, technical and managerial competence, and experience;
        (c) Overseeing succession planning, and minimizing undue reliance on key individuals;
        (d) Reviewing key senior managementG and Board remuneration packages and ensuring such packages are consistent with the corporate values and strategy of the licenseeG and encourage prudent risk taking;
        (e) Monitoring and evaluating management's performance in implementing agreed strategy and business plans, and ensuring appropriate resources are available; and
        (f) Approving budgets and reviewing performance against those budgets.
        January 2011

      • HC-1.2.10

        In assessing the systems and controls framework (see Paragraph HC-1.2.2), the CBB would expect the Board to be able to demonstrate that the licensee'sG operations, individually and collectively:

        (a) Are measured, monitored and controlled by appropriate, effective and prudent risk management systems commensurate with the scope of the licensee'sG activities. These should pro-actively identify as well as monitor risk. The systems should produce information on a timely basis, and in a form and quality appropriate to the needs of the different recipients;
        (b) Are supported by an appropriate control environment. The risk management and financial reporting functions must be independent of business lines and must be run by individuals not involved with the day-to-day running of the various business areas; and
        (c) Make effective use of the work of internal and external auditors.
        January 2011

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