CBB Volume 4: Contents
PB Principles of Business
The Principles of Business are a general statement of the fundamental obligations of all Central Bank of Bahrain (‘CBB’) investment firm licenseesG and approved personsG . They serve as a basis for other material in Volume 4 (Investment Business), and help address specific circumstances not covered elsewhere in the Rulebook.Amended: January 2007
The Principles of Business have the status of Rules and apply alongside other Rules contained in Volume 4 (Investment Business). However, these other Rules do not exhaust the fundamental obligations contained in the Principles. Compliance with all other Rules, therefore, does not necessarily guarantee compliance with the Principles of Business.
This Module contains the CBB's Directive (as amended from time to time) relating to Principles of Business 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 investment firm licenseesG (including their approved personsG ).Amended: January 2011
Added: January 2007
For an explanation of the CBB’s rule-making powers and different regulatory instruments, see Section UG-1.1.Added: January 2007
PB-A.2 Module History
Evolution of Module
This Module was first issued in April 2006 by the BMA, as part of the first phase of Volume 4 (Investment Business) 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.Amended: January 2007
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 4 was updated in July 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.Added: July 2007
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes PB-A.1 07/2007 New Rule PB-A.1.3 introduced, categorising this Module as a Directive. PB-1.1.1 07/2007 Small expansion of Principle 1 to refer to disclosure of all relevant information to customers, as required by CBB Regulations and Directives. PB-A.1.3 01/2011 Clarified legal basis.
Guidance on the implementation and transition to Volume 4 (Investment Business) is given in Module ES (Executive Summary).
PB-B Scope of Application
PB-B.1 Scope of Application
The 10 Principles of Business apply to all CBB investment firm licenseesG , in accordance with Paragraph PB-B.1.2. Principles 1–8 (Paragraphs PB-1.1 to PB-1.8 inclusive) also apply to all approved personsG , in accordance with Paragraph PB-B.1.3.Amended: January 2007
Principles 1 to 10 apply to activities carried out by the licensee, including activities carried out through overseas branches (if any). Principles 9 and 10 also take into account any activities of other members of the group of which the licensee is a member.
Principles 1 to 8 do not apply to behaviour by an approved personG with respect to any other functions or activities they may undertake. However, behaviour unconnected to their controlled functionG duties may nonetheless be relevant to an assessment of that person's fitness and propriety.
PB-B.1.5Amended: January 2007
Breaching a Principle of Business makes the investment firm licenseeG or approved personG concerned liable to enforcement action. In the case of a licensee, this may call into question whether they continue to meet the licensing conditions (see Chapter AU-2). In the case of an approved personG , this may call into question whether they continue to meet the "fit and proper" requirements for the function for which they have been approved (see Chapter AU-3).
Module EN (Enforcement) sets out the CBB's policy and procedures on enforcement action.Amended: January 2007
PB-1 The Principles
PB-1.1 Principle 1 — Integrity
Investment firm licenseesG and approved personsG must observe high standards of integrity and fair dealing. They must be honest and straightforward in their dealings with clientsG , and disclose fully all relevant information to clientsG , as required by the CBB's Regulations and Directives.Amended: January 2007
PB-1.2 Principle 2 — Conflicts of Interest
PB-1.3 Principle 3 — Due Skill, Care and Diligence
PB-1.4 Principle 4 — Confidentiality
Investment firm licenseesG and approved personsG must observe in full any obligations of confidentiality, including with respect to client information. This requirement does not over-ride lawful disclosures.
PB-1.5 Principle 5 — Market Conduct
PB-1.6 Principle 6 — Customer Assets
PB-1.6.1Amended: January 2007
PB-1.7 Principle 7 — Customer Interests
Investment firm licenseesG and approved personsG must pay due regard to the legitimate interests and information needs of their clientsG and communicate with them in a fair and transparent manner. Investment firm licenseesG and approved personsG , when dealing with clientsG who are entitled to rely on their advice or discretionary decisions, must take reasonable care to ensure the suitability of such advice or decisions.
PB-1.8 Principle 8 — Relations with Regulators/Supervisors
Investment firm licenseesG and approved personsG must act in an open and co-operative manner with the CBB and other regulatory/supervisory bodies under whose authority they come under. They must take reasonable care to ensure that their activities comply with all applicable laws and regulations.Amended: January 2007
PB-1.9 Principle 9 — Adequate Resources
Investment firm licenseesG must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.
PB-1.10 Principle 10 — Management, Systems & Controls
Investment firm licenseesG must take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations. Investment firm licensees'G systems and controls, as far as is reasonably practical, must be sufficient to manage the level of risk inherent in their business and ensure compliance with the CBB Rulebook.Amended: January 2007