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Location: Central Bank of Bahrain Volume 4—Investment Business > Part A > High Level Standards > GR General Requirements
  • GR General Requirements

    • GR-A Introduction

      • GR-A.1 Purpose

        • Executive Summary

          • GR-A.1.1

            The General Requirements Module presents a variety of different requirements that are not extensive enough to warrant their own stand-alone Module, but for the most part are generally applicable. These include requirements on books and records; on the use of corporate and trade names; and on controllersG and close linksG . Each set of requirements is contained in its own Chapter: a table listing these and their application to licenseesG is given in Chapter GR-B.

            Amended: July 2007

        • Legal Basis

          • GR-A.1.2

            This Module contains the Central Bank of Bahrain ('CBB') Directive (as amended from time to time) regarding general requirements applicable to investment firm licenseesG , 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'). This Module contains the requirements governing control in investment firm licenseesG under Resolution No (27) of 2015. Requirements regarding transfers of business (see Chapter GR-4) are also included in Regulations, to be issued by the CBB.

            Amended: October 2015
            Amended: January 2011
            Adopted: July 2007

          • GR-A.1.3

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

            Adopted: July 2007

      • GR-A.2 Module History

        • Evolution of Module

          • GR-A.2.1

            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: July 2007

          • GR-A.2.2

            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.

            Adopted: July 2007

          • GR-A.2.3

            A list of recent changes made to this Module is detailed in the table below:

            Module Ref. Change Date Description of Changes
            GR-A.1.2 07/2007 New Rule, classifying this Module as a Directive.
            GR-B.1.2 07/2007 Reference to GR-10 in table removed, to reflect deletion of this Chapter (the contents of which have been moved to Module AU).
            GR-4 07/2007 Amendments made to align the Chapter with the requirements of the CBB Law.
            GR-5.1 07/2007 Minor changes to align controller requirements with the CBB Law.
            GR-5.2 07/2007 Clarification of definition of controller.
            GR-5.3 07/2007 Clarification of criteria for assessing suitability of controllers.
            GR-5.4 07/2007 Alignment of procedures for approving controllers with CBB Law.
            GR-7 07/2007 Amendments made to align the Chapter with the requirements of the CBB Law.
            GR-1.2.1 01/2008 Clarified the record retention period for customer and transaction records in line with Article 60 of the CBB Law.
            GR-9.1.1A 04/2008 Added Guidance concerning limitations on indemnification coverage.
            GR-B.1 10/2009 Corrected to reflect applicability of Chapter GR-3.
            GR-5.3.3 10/2009 Paragraph changed from Guidance to Rule.
            GR-5.3.5 10/2009 Paragraph changed from Guidance to Rule.
            GR-5.4.2 10/2009 Amended to read notices of refusal.
            GR-7.1 10/2009 Updated to include additional requirements for cessation of business.
            GR-9 10/2009 Amended heading to read Key Provisions
            GR-9.1.1 10/2009 Amended to include reference to Form PIIR.
            GR-9.1.4 10/2009 New rule added regarding professional indemnity insurance needs of licensees.
            GR-9.1.7 10/2009 Prior approval changed to prior notification
            GR-1 07/2010 Updated and amended to include cross reference and new paragraph regarding books and records.
            GR-2.2 07/2010 New section added regarding publication of documents by the licensee.
            GR-3.1.1 07/2010 Updated to include requirement for dividends.
            GR-A.1.2 01/2011 Clarified legal basis.
            GR-3.1.3 01/2011 Expanded guidance dealing with dividends.
            GR-5.1.4A 01/2011 Added a new Rule related to changes in shareholding when legal person is a controller.
            GR-5.1.5 01/2011 Clarified rule.
            GR-5.3.6 01/2011 Corrected minor typo.
            GR-10 04/2011 Added a new Chapter on Subsidiaries, Branches and Representative Offices.
            GR-3.1.3 10/2011 Clarified guidance Paragraph on CBB's non-objection for dividends to be in line with other Volumes of the CBB Rulebook.
            GR-5.3 10/2011 Amended to be in line with other Volumes of the CBB rulebook and to reflect the issuance of Resolution No.(43) of 2011.
            GR-7 10/2011 Clarified language on cessation of business to be in line with other Volumes of the CBB Rulebook.
            GR-1.3.1(d) 01/2012 Added reference to reports from the compliance officer.
            GR-1.1.3 04/2013 Corrected reference to 'transaction' records.
            GR-4.1.12 04/2013 Corrected cross reference to CBB Law.
            GR-B.1.2 07/2013 Added the reference to Chapter GR-10 under the scope of application.
            GR-10.1 07/2013 Various corrections and amendments.
            GR-B.1.2 and GR-8 10/2013 The Chapter on appointed representatives was deleted.
            GR-A.1.2, GR-B.1.2 and GR-5 10/2015 Updated to reflect issuance of Resolution No. (27) of 2015 governing control in investment firm licensees.
            GR-2.2 04/2016 Clarified Rule on publication of documents by the licensee.
            GR-10.1.8B 10/2016 Added reference to Module BR
            GR-5.1.5 01/2017 Consistency of notification timeline rule on controllers with other Volumes of the CBB Rulebook.
            GR-1.2.1 07/2017 Amended paragraph according to the Legislative Decree No. (28) of 2002.
            GR-1.2.2 07/2017 Deleted paragraph.
            GR-3.1.3 10/2017 Added additional requirement to submit when requesting no-objection letter for propose dividend.
            GR-5.1.1A 04/2019 Added a new Paragraph on exposure to controllers.
            GR-5.1.1B 04/2019 Added a new Paragraph on exposure to controllers.
            GR-3.1.1 07/2019 Amended Paragraph.

        • Superseded Requirements

          • GR-A.2.3

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

            Circular Ref. Module Ref. Subject
            BS/07/2004 GR-1 Record-keeping requirements
            BC/8/2000 GR-5 Controllers of, and holdings and transfers of significant ownership or controlling interests in Agency licensees
            Standard Conditions & Licensing Criteria for Licensing for Investment Advisor/Broker GR-1, GR-9, GR-10 Books and Records; Professional Indemnity Insurance
            Standard Conditions & Licensing Criteria for Licensing Investment Advisor/Consultants GR-1, GR-9, GR-10 Books and Records; Professional Indemnity Insurance; License Fees.
            Standard Conditions & Licensing Criteria for Licensing Stockbroking Company GR-1, GR-9, GR-10 Books and Records; Professional Indemnity Insurance; License Fees.
            Standard Conditions & Standard Criteria for Licensing Broking Company GR-1, GR-9, GR-10 Books and Records; Professional Indemnity Insurance; License Fees.

          • GR-A.2.4

            Further guidance on the implementation and transition to Volume 4 (Investment Business) is given in Module ES (Executive Summary).

    • GR-B Scope of Application

      • GR-B.1 Investment Firm Licensees

        • GR-B.1.1

          The requirements in Module GR (General Requirements) apply to all investment firm licenseesG , with the exception of Chapter GR-3, which applies to Category 1 investment firmsG and Category 2 investment firmsG and Chapter GR-9, which applies to Category 2 investment firmsG and Category 3 investment firmsG only.

          Amended: October 2009
          Amended: July 2007

        • GR-B.1.2

          The scope of application of Module GR (General Requirements) is as follows:

          Chapter Bahraini Investment Firm Licensee Overseas Investment Firm Licensee
          GR-1 GR-1.1 and GR-1.3 apply to the whole firm; GR-1.2 applies to business booked in Bahrain only. Applies to the Bahrain branch only.
          GR-2 Applies to the whole firm. Applies to the Bahrain branch only.
          GR-3 Applies to Category 1 investment firmsG and Category 2 investment firmsG . Doesn't apply.
          GR-4 Applies to the whole firm. Applies to the Bahrain branch only.
          GR-5 GR-5.1 to GR-5.4 apply to the whole firm. Only GR-5.5 applies.
          GR-6 Applies to the whole firm. Applies to the whole firm.
          GR-7 Applies to the whole firm. Applies to the Bahrain branch only.
          GR-8 [Chapter deleted in October 2013] [Chapter deleted in October 2013]
          GR-9 Applies to Category 2 investment firmsG and Category 3 investment firmsG , with respect to Bahrain business. Applies to the Bahrain branch only.
          GR-10 Applies to the whole firm. Does not apply.
          Amended: October 2015
          Amended: October 2013
          Amended: July 2013
          Amended: October 2009
          Amended: July 2007

        • GR-B.1.3

          In the case of Bahraini investment firm licenseesG , certain requirements apply to the whole firm, irrespective of the location of its business; other requirements apply only in respect to business booked in Bahrain. In the case of overseas investment firm licenseesG , the requirements of Module GR mostly only apply to business booked in the Bahrain branch.

    • GR-1 Books and Records

      • GR-1.1 General Requirements

        • GR-1.1.1

          In accordance with Articles 59 of the CBB Law, all investment firm licenseesG must maintain books and records (whether in electronic or hard copy form) sufficient to produce financial statements and show a complete record of the business undertaken by a licenseeG . These records must be retained for at least ten years according to Article 60 of the CBB Law.

          Amended: July 2010
          Amended: July 2007

        • GR-1.1.2

          GR-1.1.1 includes accounts, books, files and other records (e.g. trial balance, general ledger, nostro/vostro statements, reconciliations, list of counterparties). It also includes records that substantiate the value of the assets, liabilities and off-balance sheet activities of the licenseeG (e.g. client activity files and valuation documentation).

          Amended: July 2007

        • GR-1.1.3

          Separately, Bahrain Law currently requires other transaction records to be retained for at least five years (see Ministerial Order No. 23 of 2002, Article 5(2), made pursuant to the Amiri Decree Law No. 4 of 2001).

          Amended: April 2013
          Added: July 2010

        • GR-1.1.4

          Unless otherwise agreed to by the CBB in writing, records must be kept in either English or Arabic. Any records kept in languages other than English or Arabic must be accompanied by a certified English or Arabic translation. Records must be kept current. The records must be sufficient to allow an audit of the licensee'sG business or an on-site examination of the licenseeG by the CBB.

          Amended: July 2010
          Amended: July 2007

        • GR-1.1.5

          Translations produced in compliance with Rule GR-1.1.4 may be undertaken in-house, by an employee or contractor of the licenseeG , providing they are certified by an appropriate officer of the licenseeG .

          Amended: July 2010
          Amended: July 2007

        • Location of Books and Records

          • GR-1.1.6

            Records must be accessible at any time from within the Kingdom of Bahrain, or as otherwise agreed with the CBB in writing.

            Amended: July 2010
            Amended: July 2007

          • GR-1.1.7

            Where older records have been archived, or in the case of records relating to overseas branches of Bahraini investment firm licenseesG , the CBB may accept that records be accessible within a reasonably short time frame (eg. within 5 business days), instead of immediately. The CBB may also agree similar arrangements for overseas investment firm licenseesG , as well as Bahraini investment firm licenseesG , where elements of record retention and management have been centralised in another group company, whether inside or outside of Bahrain.

            Amended: July 2010
            Amended: July 2007

          • GR-1.1.8

            Paragraphs GR-1.1.1 to GR-1.1.7 apply to Bahraini investment firm licenseesG , with respect to all its business activities. These requirements also apply to overseas investment firm licenseesG , but only with respect to the business booked in their branch in Bahrain.

            Amended: July 2010

      • GR-1.2 Transaction Records

        • GR-1.2.1

          Investment firm licenseesG must keep completed transaction records for as long as they are relevant for the purposes for which they were made (with a minimum period in all cases of five years from the date when the transaction was terminated). Records of terminated transactions must be kept whether in hard copy or electronic format as per the Legislative Decree No.(28) of 2002 with respect to Electronic Transactions "The Electronic Transaction Law" and its amendments.

          Amended: July 2017
          Amended: July 2010
          Amended: January 2008

        • GR-1.2.2

          [This Paragraph has been deleted in July 2017].

          Deleted: July 2017

        • GR-1.2.3

          Rule GR-1.2.1 applies only to transactions relating to business booked in Bahrain by the licenseeG . It does not relate to transactions relating to business booked in overseas branches or subsidiaries of the licenseeG .

          Amended: July 2007

        • GR-1.2.4

          In the case of overseas investment firm licenseesG , Rule GR-1.2.1 therefore only applies to business booked in the Bahrain branch, not in the rest of the company.

      • GR-1.3 Other Records

        • Corporate Records

          • GR-1.3.1

            Investment firm licenseesG must maintain the following records in original form or in hard copy at their premises in Bahrain:

            (a) Internal policies, procedures and operating manuals;
            (b) Corporate records, including minutes of shareholders'G , Directors'G and management meetings;
            (c) Correspondence with the CBB and records relevant to monitoring compliance with CBB requirements;
            (d) Reports prepared by the investment firm licensee'sG internal and external auditors and compliance officer; and
            (e) Employee training manuals and records.
            Amended: January 2012
            Amended: July 2007

          • GR-1.3.2

            In the case of Bahraini investment firm licenseesG , these requirements apply to the licenseeG as a whole, including any overseas branches. In the case of overseas investment firm licenseesG , all the requirements of Chapter GR-1 are limited to the business booked in their branch in Bahrain and the records of that branch (see GR-1.1.7).

            Amended: July 2007

        • Customer Records

          • GR-1.3.3

            Record-keeping requirements with respect to customer records, including customer identification and due diligence records, are contained in Module FC (Financial Crime).

    • GR-2 Corporate and Trade Names

      • GR-2.1 Vetting of Names

        • GR-2.1.1

          Investment firm licenseesG must seek prior approval from the CBB for their corporate name and any trade names, and those of their subsidiaries located in Bahrain.

          Amended: July 2007

        • GR-2.1.2

          GR-2.1.1 applies to overseas investment firm licenseesG only with respect to their Bahrain branch.

        • GR-2.1.3

          In approving a corporate or trade name, the CBB seeks to ensure that it is sufficiently distinct as to reduce possible confusion with other unconnected businesses, particularly those operating in the financial services sector. The CBB also seeks to ensure that names used by unregulated subsidiaries do not suggest those subsidiaries are in fact regulated.

          Amended: July 2007

      • GR-2.2 Publication of Documents by the Licensee

        • GR-2.2.1

          Any written communication, including website, email, stationery, business cards or other business documentation published by the licenseeG , or used by its employees must include a statement that the licenseeG is regulated by the Central Bank of Bahrain, the type and category of license and the legal status. Additionally, written communication (stationery) should state the authorised and paid up capital of the licenseeG . All licenseesG should comply with this requirement by 31st December 2010 at the latest.

          Amended: April 2016
          Added: July 2010

    • GR-3 Dividends

      • GR-3.1 CBB Non-Objection

        • GR-3.1.1

          Bahraini investment firm licenseesG must obtain a letter of no-objection from the CBB to pay any dividend proposed, before announcing the proposed dividend by way of press announcement or any other means of communication and prior to submitting a proposal for a distribution of profits to a shareholderG vote.

          Amended: July 2019
          Amended: July 2010
          Amended: July 2007

        • GR-3.1.2

          The CBB will grant a no-objection letter where it is satisfied that the level of dividend proposed is unlikely to leave the licenseeG vulnerable — for the foreseeable future — to breaching the CBB's financial resources requirements, taking into account (as appropriate) trends in the licensee'sG business volumes, expenses, trend performance and investment environment.

          Amended: July 2007

        • GR-3.1.3

          To facilitate the prior approval required under Paragraph GR-3.1.1, investment firm licenseesG subject to Paragraph GR-3.1.1 must provide the CBB with:

          (a) The licensee's intended percentage and amount of proposed dividends for the coming year;
          (b) A letter of no objection from the licensee'sG external auditor on such profit distribution; and
          (c) A detailed analysis of the impact of the proposed dividend on the capital adequacy requirements outlined in Module CA (Capital Adequacy) and liquidity position of the licensee.
          Amended: October 2017
          Amended: October 2011
          Amended: January 2011
          Amended: July 2007

    • GR-4 Business Transfers

      • GR-4.1 CBB Approval

        • GR-4.1.1

          An investment firm licenseeG must seek prior written approval from the CBB before transferring any of its business to a third party.

          Amended: July 2007

        • GR-4.1.2

          Rule GR-4.1.1 is intended to apply to circumstances where an investment firm licenseeG wishes to sell all or part of its business to a third party. It does not apply where an investment firm licenseeG is simply transferring client assetsG to a third party, on instruction from the client concerned.

          Amended: July 2007

        • GR-4.1.3

          In the case of a Bahraini investment firm licenseeG , Chapter GR-4 applies both to its business booked in Bahrain and in the firm's overseas branches. In the case of an overseas investment firm licenseeG , Chapter GR-4 applies only to business booked in the firm's Bahrain branch.

          Amended: July 2007

        • GR-4.1.4

          In all cases, CBB approval to transfer business will only be given where:

          (a) The transfer of business will not damage or otherwise prejudice the legitimate interests of the licensee'sG customers;
          (b) The transferee is duly licensed to undertake the business which it is to receive; and
          (c) The CBB is satisfied that the transfer will not breach any applicable laws or regulations, and would not create any supervisory concerns.
          Amended: July 2007

        • GR-4.1.5

          In assessing the criteria outlined in Paragraph GR-4.1.4, the CBB will, amongst other factors, take into account the financial strength of the transferee; its capacity to manage the business being transferred; its track record in complying with applicable regulatory requirements; and (where applicable) its track record in treating customers fairly. The CBB will also take into account the impact of the transfer on the transferor, and any consequences this may have for the transferor's remaining customers.

          Adopted: July 2007

        • GR-4.1.6

          Investment firm licenseesG seeking to obtain the CBB's permission to transfer business must apply to the CBB in writing, in the form of a covering letter together with supporting attachments. Unless otherwise directed by the CBB, the application must provide:

          (a) Full details of the business to be transferred;
          (b) The rationale for the proposed transfer;
          (c) If applicable, an assessment of the impact of the transfer on any customers directly affected by the transfer, and any mitigating factors or measures;
          (d) If applicable, an assessment of the impact of the transfer on the transferor's remaining business and customers, and any mitigating factors or measures; and
          (e) Evidence that the proposed transfer has been duly authorised by the transferor (such as a certified copy of a Board resolution approving the transfer).
          Adopted: July 2007

        • GR-4.1.7

          Firms intending to apply to transfer business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-4.1.6 may be varied by the CBB, depending on the nature of the proposed transfer, such as the materiality of the business concerned and its impact on customers.

          Amended: July 2007

        • GR-4.1.8

          The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

          Adopted: July 2007

        • GR-4.1.9

          At its discretion, the CBB may require that a notice of proposed transfer of business be published in the Official Gazette, and/or in at least two local daily newspapers (one in Arabic, the other in English), in order to give affected customers the right to comment on the proposed transfer. Where such a requirement has been imposed, the CBB's decision on the application will also be published in the Official Gazette and in at least two local daily newspapers. In all such cases, the costs of publication must be met by the transferor.

          Adopted: July 2007

        • GR-4.1.10

          Publication under paragraph GR-4.1.9 will generally only be required where a proposed transfer involves a large number of customers or is otherwise deemed necessary in order to protect customer interests.

          Adopted: July 2007

        • GR-4.1.11

          Investment firm licenseesG are also reminded of the requirements regarding client assetsG contained in Module CL (Client Assets).

          Amended: July 2007

        • GR-4.1.12

          The requirements in this Chapter are based on the powers available to the CBB in Article 68 of the CBB Law.

          Amended: April 2013
          Adopted: July 2007

    • GR-5 Controllers

      • GR-5.1 Key Provisions for Bahraini Investment Firm Licensees

        • GR-5.1.1

          Bahraini investment firm licenseesG must obtain prior approval from the CBB for any of the following changes to their controllersG (as defined in Section GR-5.2):

          (a) A new controllerG ;
          (b) An existing controllerG increasing its holding from 10% to 20%;
          (c) An existing controllerG increasing its holding from below 20% to 30%;
          (d) An existing controllerG increasing its holding from below 30% to 40%;
          (e) An existing controller increasing its holding to above 40% for licenseesG not listed on any exchange in Bahrain or abroad; and
          (f) An existing controllerG reducing its holding to below 10%.
          Amended: October 2015
          Amended: July 2007

        • GR-5.1.1A

          LicenseesG must not incur or otherwise have an exposure (either directly or indirectly) to their controllersG , including subsidiariesG and associated companies of such controllersG .

          Added: April 2019

        • GR-5.1.1B

          For the purpose of Paragraph GR-5.1.1A, licenseesG that already have an exposure to controllersG must have an action plan agreed with the CBB's supervisory point of contact to address such exposures within a timeline agreed with the CBB.

          Added: April 2019

        • GR-5.1.2

          Articles 52 to 56 of the CBB Law require notification to the CBB of all controllersG of licenseesG and of listed companies; it further gives the CBB the right to refuse approval of controllersG if deemed damaging to the interests of the market, customers, or in contravention of the criteria set by the CBB.

          Amended: July 2007

        • GR-5.1.3 [This Paragraph deleted 07/2007.]

          Deleted: July 2007

        • GR-5.1.4

          Requests for approval under Paragraph GR-5.1.1 must be made by submitting a duly completed Form 2 (Application for Authorisation of Controller) to the CBB.

          Amended: October 2015
          Amended: July 2007

        • GR-5.1.4A

          Where the direct controllerG of a Bahraini investment firm licenseeG is not the ultimate parent undertakingG of the licenseeG , the CBB will require that Form 2 be completed by the ultimate parent undertakingG and that the details be provided of the structure of the group, clearly detailing the relationship between the licenseeG and the ultimate parent undertakingG (e.g. by providing an organisational structure of the group).

          Added: October 2015

        • GR-5.1.4B

          Bahraini investment firm licenseesG must immediately notify the CBB in case of any material change to the information provided in a Form 2 submitted for a controllerG .

          Added: October 2015

        • GR-5.1.4C

          Where a controllerG is a legal person, any change in its shareholding must be notified to the CBB at the earlier of:

          (a) When the change takes effect; and
          (b) When the controllerG becomes aware of the proposed change.
          Amended: October 2015
          Adopted: January 2011

        • GR-5.1.5

          If, as a result of circumstances outside the Bahraini investment firm licensee'sG knowledge and/or control, one of the changes specified in Paragraph GR-5.1.1 is triggered prior to CBB approval being sought or obtained, the Bahraini investment firm licenseeG must notify the CBB no later than 15 calendar days from the date on which those changes have occurred (see Paragraph BR-2.2.23).

          Amended: January 2017
          Amended: October 2015
          Amended: January 2011
          Amended: July 2007

        • GR-5.1.6

          For approval under Rule GR-5.1.1 to be granted, the applicant must satisfy the CBB that the proposed change in controllerG poses no undue risks to the licenseeG or its customers, and is not damaging to the interests of the market, as defined in the suitability criteria for controllersG , contained in Section GR-5.3.

          Adopted: July 2007

        • GR-5.1.7

          An approval of controllerG is valid for the period specified in the approval letter issued by the CBB. The CBB may impose any restrictions that it considers necessary to be observed when granting its approval.

          Amended: October 2015
          Amended: July 2007

        • GR-5.1.7A

          The approval process is specified in Section GR-5.4.

          Adopted: July 2007

        • GR-5.1.8

          Bahraini investment firm licenseesG must submit, within 3 months of their financial year-end, a report on their controllersG . This report must identify all controllersG of the licenseeG , as defined in Section GR-5.2 (see Paragraph BR-1.4.1).

          Amended: October 2015
          Amended: July 2007

      • GR-5.2 Definition of Controller of a Bahraini Investment Firm Licensee

        • GR-5.2.1

          A controllerG of a Bahraini investment firm licenseeG is a natural or legal person who, either alone or with his associates:

          (a) Holds 10% or more of the issued and paid up capital in the licenseeG or parent undertakingG ; or
          (b) Is able to exercise more than 10% of the voting power over the licenseeG or the parent undertakingG .
          Amended: October 2015
          Amended: July 2007

        • GR-5.2.2

          For the purposes of Paragraph GR-5.2.1, 'associate' includes:

          (a) In the case of natural persons, a member of the controller'sG familyG ;
          (b) An undertaking of which a controllerG is a DirectorG ;
          (c) A person who is an employee or partner of the controllerG ;
          (d) If the controllerG is a legal person, a DirectorG of the controllerG , a subsidiary of the controllerG , or a DirectorG of any subsidiary undertakingG of the controllerG ; and
          (e) Any other person or undertaking with which the controllerG has entered into an agreement or arrangement as to the acquisition, holding or disposal of shares or other interests in the investment firm licenseeG , or under which they undertake to act together in exercising their voting power in relation to the investment firm licenseeG .
          Amended: October 2015
          Amended: July 2007

        • GR-5.2.3

          In addition to the provisions of this Chapter, listed companies and their controllersG shall be bound by the CBB's regulatory requirements for capital markets stipulated in the CBB's Rulebook related to changes in the ownership of shares in listed companies. For overseas investment firm licenseesG , Section GR-5.5 shall apply.

          Amended: October 2015
          Amended: July 2007

        • GR-5.2.4

          The restrictions set forth in this Chapter shall apply to any changes in the legality of the shares' ownership of the controllersG in the licenseesG , or to the voting powers the controllersG are entitled to in the licenseesG . Failure to comply with such restrictions shall result in the imposition of penalties as indicated in Module EN (Enforcement) of the CBB Rulebook. The imposition of such penalties shall not affect the CBB's right to impose other penalties and to take any other administrative measures against the controllerG in accordance with the provisions of the Law including preventing the controllerG from exercising his voting right or transferring of shares.

          Added: October 2015

      • GR-5.3 Suitability of Controllers for Bahraini Investment Firm Licensees

        • GR-5.3.1

          Bahraini investment firm licenseesG must satisfy the CBB of the suitability of their proposed controllersG .

          Amended: October 2015
          Amended: October 2011
          Amended: July 2007

        • GR-5.3.1A

          [This Paragraph was deleted in October 2015.]

          Deleted: October 2015
          Adopted: October 2011

        • Natural Persons

          • GR-5.3.2

            The percentage of direct or indirect control of a natural person in a Bahraini investment firm licenseeG must not exceed 30% of the issued and paid up capital. This limit does not apply to category 3 investment firmsG .

            Added: October 2015

          • GR-5.3.3

            In assessing the suitability of controllersG who are natural persons, the CBB will consider the following:

            (a) Whether the approval or refusal of a controllerG is or could be detrimental to the licenseeG , Bahrain's financial sector and the national interest of the Kingdom of Bahrain;
            (b) The legitimate interests of clients, creditors, non-controlling interests, and all other stakeholders of the licenseeG ;
            (c) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
            (d) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
            (e) Whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;
            (f) The contravention of any financial services legislation or regulation;
            (g) Whether the person has ever been refused an authorisation as controllerG , a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;
            (h) Dismissal or a request to resign from any office or employment;
            (i) Disqualification by a court, regulator or other competent body, as a DirectorG or as a manager of a corporation;
            (j) Whether the person has been a DirectorG , partner or manager of a corporation or partnership which has gone into liquidation or declared bankrupt or one or more of its partners or managers have been declared bankrupt;
            (k) The extent to which the person has been truthful and open with regulators;
            (l) Whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order or has defaulted on any debts;
            (m) The track record as a controllerG in another company or investor in a financial institution, whether in the Kingdom of Bahrain or abroad;
            (n) The financial resources of the person and the stability of their shareholding;
            (o) Existing Directorships or ownership of more than 20% of the issued or paid up capital in any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interest that such Directorships or ownership may imply;
            (p) The ability of the person to deal with existing shareholdersG and the Board in a constructive and co-operative manner; and
            (q) The propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings.
            Amended: October 2015
            Amended: July 2007

        • Unregulated Legal Persons

          • GR-5.3.3A

            The percentage of direct or indirect control of an unregulated legal person in a Bahraini investment firm licenseeG must not exceed 30% of the issued and paid up capital.

            Added: October 2015

          • GR-5.3.4

            In assessing the suitability of controllersG who are unregulated legal persons, the CBB will consider the following:

            (a) Whether their approval or refusal of a controllerG is or could be detrimental to the licenseeG , Bahrain's financial sector and the national interest of the Kingdom of Bahrain;
            (b) The legitimate interests of investors, creditors, non-controlling interests and all other stakeholders of the licenseeG ;
            (c) The financial strength of the controllerG , its parent(s) and its subsidiaries, its implications for the investment firm licenseeG and the likely stability of the controller'sG shareholding in the investment firm licenseeG ;
            (d) Whether the unregulated legal person or any of its subsidiaries or any of its shareholders have ever been adjudged bankrupt, or failed to satisfy a judgement debt under a court order, or have defaulted on any debts, or entered into any arrangement with creditors in relation to the inability to pay due debts;
            (e) The controller'sG jurisdiction of incorporation, location of Head Office, group structure and close linksG , and the implications for the investment firm licenseeG as regards effective supervision of the investment firm licenseeG and potential conflicts of interest;
            (f) The controller'sG (and other subsidiaries') propriety and general standards of business conduct, including the contravention of any laws or regulations related to financial services, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;
            (g) Any conviction related to fraud, misfeasance or other misconduct;
            (h) Whether the unregulated legal person or any of its subsidiaries has been subject to any disciplinary proceeding whether by court order any proceeding by a specialised body, and whether the unregulated legal person is sued in any court;
            (i) The extent to which the controllerG or its subsidiaries have been truthful and open with regulators and supervisors;
            (j) Whether the unregulated legal person has ever been refused an authorisation as controllerG , a license to undertake regulated activities by the CBB or any other regulator in another jurisdiction;
            (k) The track record as a controllerG or investor in financial institutions;
            (l) The ability of the unregulated legal person to deal with existing shareholdersG and the Board in a constructive and co-operative manner;
            (m) Directorships in the Kingdom of Bahrain or elsewhere or ownership of more than 20% of the capital or voting rights of any financial institution, and the potential for conflicts of interest that such directorships or ownership may imply; and
            (n) Whether the unregulated legal person or any of its subsidiaries have ever entered into any arrangement with creditors in relation to the inability to pay due debts.
            Amended: October 2015
            Amended: July 2007

        • Regulated Legal Persons

          • GR-5.3.5

            The percentage of direct or indirect control of a regulated legal person in a Bahraini investment firm licenseeG must not exceed 40% of the issued and paid up capital.

            Added: October 2015

          • GR-5.3.6

            The 40% limit referred to in Paragraph GR-5.3.5 does not apply to Bahraini investment firm licenseesG not listed on a licensed exchangeG or an exchange abroad, or to mergers or acquisitions which have been approved by the CBB.

            Added: October 2015

          • GR-5.3.7

            Subject to the discretion of the CBB, regulated financial institutions may be allowed to own or control holdings of voting capital of listed licensees in excess of the abovementioned 40% level, if such control is not detrimental to the licenseeG , Bahrain's financial sector and the national interest of the Kingdom of Bahrain.

            Added: October 2015

          • GR-5.3.8

            Regulated financial institutions wishing to acquire more than 40% of the voting capital of a Bahraini investment firm licenseeG must observe the criteria set forth in Guidance GR-5.3.4 related to unregulated legal persons, in addition to the conditions set forth under Guidance GR-5.3.9.

            Added: October 2015

          • GR-5.3.9

            In assessing the suitability of controllersG who are regulated legal persons, the CBB will consider the following:

            (a) The person must be subject to effective consolidated supervision by a supervisory authority which effectively implements the Basel Committee on Banking Supervision Core Principles, or the IOSCO Core Principles or the IAIS Core Principles as well as the FATF Recommendations on Money Laundering and the financing of terrorism & proliferation;
            (b) The home supervisorG of the person must give its formal written prior approval for (or otherwise raise no objection to) the proposed acquisition of the Bahraini investment firm licenseeG ;
            (c) The home supervisorG of the person must confirm to the CBB that it will require the person to consolidate the activities of the concerned Bahraini investment firm licenseeG for regulatory and accounting purposes if the case so requires;
            (d) The home supervisorG of the person must formally agree to the exchange of customer information between the person and its prospective Bahraini subsidiary/acquisition for AML/CFT purposes and for Large Exposures monitoring purposes;
            (e) The home supervisorG of the person and the CBB must conclude a Memorandum of Understanding in respect of supervisory responsibilities, exchange of information and mutual inspection visits; and
            (f) The person must provide an acceptably worded letter of guarantee to the CBB in respect of its obligation to support the licenseeG , should such letter be requested.
            Added: October 2015

      • GR-5.4 Approval Process for Bahraini Investment Firm Licensees

        • GR-5.4.1

          Within 3 months of receipt of an approval request under Paragraph GR-5.1.1, with the complete documentation requirements to the satisfaction of the CBB, the CBB will issue a written notice of approval or of refusal by registered mail, to the Bahraini investment firm licenseeG and the applicant. Where an approval notice is given, it will specify the period for which it is valid and any conditions that may be applied.

          Amended: October 2015
          Amended: July 2007

        • GR-5.4.1A

          The CBB may refuse an application for approval if the applicant does not meet the criteria set forth in Section GR-5.3. The notice of refusal will specify the reasons for the objection and specify the applicant's right of appeal.

          Added: October 2015

        • GR-5.4.2

          Article 53 of the CBB Law allows the CBB up to 3 months in which to respond to an application, although the CBB normally aims to respond within 30 calendar days. Notices of refusal have to be approved by the concerned Executive Director of the CBB.

          Amended: October 2015
          Amended: October 2009
          Adopted: July 2007

        • Appeal Process

          • GR-5.4.2A

            The applicant has 30 calendar days from the date of a notice in which to appeal a decision to refuse the application or any conditions imposed as a condition of approval. The CBB then has 30 calendar days from the date of the appeal in which to consider any mitigating evidence submitted and make a final determination.

            Added: October 2015

          • GR-5.4.3

            Where a person has become a controllerG by virtue of their shareholding in contravention of Paragraph GR-5.1.1, or a notice of refusal has been served on them under Paragraph GR-5.4.1 and the period of appeal has expired, the CBB may, by notice in writing served on the person concerned, instruct the person concerned to transfer such shares, or refrain from exercising voting rights in respect of such shares.

            Amended: July 2007

          • GR-5.4.4

            If the person concerned fails to take the action specified under Paragraph GR-5.4.3, then the CBB may seek a court order to take appropriate measures: these may include forcing the person to sell their shares.

            Adopted: July 2007

          • GR-5.4.5

            [This Paragraph was deleted in October 2015.]

            Deleted: October 2015
            Adopted: July 2007

          • GR-5.4.6

            In addition to the above requirements, Bahraini investment firm licenseesG are encouraged to notify the CBB as soon as they become aware of events that are likely to lead to major changes in their controllersG . Any supervisory implications of such changes can then be discussed prior to the filing of a formal approval request.

            Amended: October 2015
            Adopted: July 2007

          • GR-5.4.7

            The CBB may contact references and supervisory bodies in connection with any information provided to support an application for controllerG . The CBB may also ask for further information, in addition to that provided in the Form 2, if required to satisfy itself as to the suitability of the applicant.

            Added: October 2015

          • GR-5.4.8

            In accordance with Paragraph EN-8.2.6, and where a controllerG is a natural person, the CBB may, depending on the seriousness of a situation, impose enforcement measures, which may include disqualification from being a controllerG of any licensed firm.

            Added: October 2015

      • GR-5.5 Key Provisions for Overseas Investment Firm Licensees

        • GR-5.5.1

          In the case of overseas investment firm licenseesG , the licenseeG must notify the CBB of any new significant ownership in excess of 50% of the issued and paid up capital of the concerned licensee'sG direct parent undertakingG as soon as the licenseeG becomes aware of the change (see Paragraph BR-2.2.23A). The overseas investment firm licenseeG must provide a copy of the relevant approval by the home supervisorG of the parent. The CBB will take the appropriate action in such case.

          Added: October 2015

        • GR-5.5.2

          In assessing the suitability of a controllerG of the parent of an overseas investment firm licenseeG , the CBB will take into regard that the change in control poses no undue risks to the licenseeG or its customers, and is not damaging to the interests of the market.

          Added: October 2015

        • GR-5.5.3

          Overseas investment firm licenseesG must submit, within 3 months of their financial year-end, a report on their controllersG . This report must identify all controllersG of the branch, and details of the type of control (See BR-1.4.1).

          Added: October 2015

        • GR-5.5.4

          For overseas investment firm licenseesG , the controllerG is the direct parent undertakingG . Any material changes as outlined in Paragraph GR-5.5.1, to the control of the direct parent undertakingG must be filed through submission of an updated Form 2 to the CBB.

          Added: October 2015

    • GR-6 Close Links

      • GR-6.1 Key Provisions

        • GR-6.1.1

          Condition 3 of the CBB's licensing conditions specifies, amongst other things, that investment firm licenseesG must satisfy the CBB that their close linksG do not prevent the effective supervision of the licenseeG and otherwise pose no undue risks to the licenseeG . (See Paragraph AU-2.3.1).

          Amended: July 2007

        • GR-6.1.2

          Applicants for an investment firm licenseG must provide details of their close linksG , as provided for under Form 1 (Application for a License). (See Paragraph AU-5.1.1).

        • GR-6.1.3

          Investment firm licenseesG must submit to the CBB, within 3 months of their financial year-end, a report on their close linksG . The report must identify all undertakings closely linked to the licenseeG , as defined in Section GR-6.2.

          Amended: July 2007

        • GR-6.1.4

          Investment firm licenseesG may satisfy the requirement in Paragraph GR-6.1.3 by submitting a corporate structure chart, identifying all undertakings closely linked to the licenseeG .

          Amended: July 2007

        • GR-6.1.5

          Investment firm licenseesG must provide information on undertakings with which they are closely linked, as requested by the CBB.

          Amended: July 2007

      • GR-6.2 Definition of Close Links

        • GR-6.2.1

          An investment firm licenseeG ('L') has close links with another undertaking ('U'), if:

          (a) U is a parent undertakingG of L;
          (b) U is a subsidiary undertakingG of L;
          (c) U is a subsidiary undertakingG of a parent undertakingG of L;
          (d) U, or any other subsidiary undertaking of its parent, owns or controls 20% or more of the voting rights or capital of L; or
          (e) L, any of its parent or subsidiary undertakings, or any of the subsidiary undertakings of its parent, owns or controls 20% or more of the voting rights or capital of U.
          Amended: July 2007

      • GR-6.3 Assessment Criteria

        • GR-6.3.1

          In assessing whether an investment firm licensee'sG close linksG may prevent the effective supervision of the firm, or otherwise poses no undue risks to the investment firm licenseeG , the CBB takes into account the following:

          (a) Whether the CBB will receive adequate information from the investment firm licenseeG , and those with whom the licenseeG has close linksG , to enable it to determine whether the licenseeG is complying with CBB requirements;
          (b) The structure and geographical spread of the licenseeG , its group and other undertakings with which it has close linksG , and whether this might hinder the provision of adequate and reliable flows of information to the CBB, for instance because of operations in territories which restrict the free flow of information for supervisory purposes;
          (c) In the case of an overseas investment firm licenseeG , whether the investment firm licenseeG and its group will be subject to supervision on a consolidated basis (for example, if a financial resources requirement is determined for the group as a whole); and
          (d) Whether it is possible to assess with confidence the overall financial position of the group at any particular time, and whether there are factors that might hinder this, such as group members having different financial year ends or auditors, or the corporate structure being unnecessarily complex and opaque.
          Amended: July 2007

    • GR-7 Cessation of Business

      • GR-7.1 CBB Approval

        • GR-7.1.1

          As specified in Article 50 of the CBB Law, an investment firm licenseeG wishing to cease to provide or suspend all or any of its licensed regulated services, completely or at any of its branches, must obtain prior written approval from the CBB.

          Amended: October 2011
          Amended: July 2007

        • GR-7.1.2

          If the investment firm licenseeG wishes to transfer client assetsG to a third party, it must also comply with the requirements contained in Chapter GR-4.

          Amended: July 2007

        • GR-7.1.2A

          If the investment firm licenseeG wishes to liquidate its business, the CBB will revise its license to restrict the firm from entering into new business. The licensee must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged and that it may surrender its license.

          Adopted: October 2011

        • GR-7.1.3

          In the case of a Bahraini investment firm licenseeG , Chapter GR-7 applies both to its business booked in Bahrain and in the firm's overseas branches. In the case of an overseas investment firm licenseeG , Chapter GR-7 applies only to business booked in the firm's Bahrain branch.

          Adopted: July 2007

        • GR-7.1.4

          Investment firm licenseesG seeking to obtain the CBB's permission to cease business must apply to the CBB in writing, in the form of a formal request together with supporting documents. Unless otherwise directed by the CBB, the following requirements must be provided in support of the request:

          (a) Full details of the business to be terminated;
          (b) The rationale for the cessation;
          (c) How the licenseeG proposes to cease business;
          (d) Notice of an Extraordinary Meeting setting out the agenda to discuss and approve the cessation, and inviting the CBB for such meeting;
          (e) Evidence that the proposed cessation has been duly authorised by the licenseeG (such as a certified copy of a Board resolution approving the cessation).
          (f) Formal request to the CBB for the appointment of a liquidator acceptable to the CBB;
          (g) A cut-off date by which the licenseeG will stop its operations;
          (h) If the investment firm licenseeG wishes to cease its whole business, confirmation that the licenseeG will not enter into new business with effect from the cut-off date;
          (i) Once the CBB has given its approval to an application to cease business, the licenseeG must publish a notice of its intention to cease business in two local daily newspapers (one in Arabic, the other in English). Notices must also be displayed in the premises (including any branch offices) of the licenseeG concerned. These notices must be given not less than 30 calendar days before the cessation is to take effect, and must include such information as the CBB may specify;
          (j) The audited accounts of the licenseeG as of the last date on which it stopped operations. The commencement of such accounts should be the beginning of the financial year of the licenseeG ;
          (k) If applicable, an assessment of the impact of the cessation on any customers directly affected by the cessation, and any mitigating factors or measures;
          (l) If applicable, an assessment of the impact of the cessation on the licensee'sG remaining business and customers, and any mitigating factors or measures; and
          (m) The final liquidator's report of the licenseeG .
          Amended: October 2011
          Amended: October 2009
          Adopted: July 2007

        • GR-7.1.5

          LicenseesG intending to apply to cease business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-7.1.4 may be varied by the CBB, depending on the nature of the proposed cessation, such as the materiality of the business concerned and its impact on customers.

          Adopted: July 2007

        • GR-7.1.6

          Approval to cease business will generally be given where adequate arrangements have been made to offer alternative arrangements to any affected customers. The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

          Adopted: July 2007

        • GR-7.1.7 [Deleted]

          Deleted: October 2009

        • GR-7.1.7

          The notice referred to in Subparagraph GR-7.1.4(i) must include a statement that written representations concerning the liquidation may be submitted to the CBB before a specified day, which shall not be later than thirty calendar days after the day of the first publication of the notice. The CBB will not decide on the application until after considering any representations made to the CBB before the specified day.

          Amended: October 2011
          Amended: October 2009
          Adopted: July 2007

        • GR-7.1.8

          Upon satisfactorily meeting the requirements set out in GR-7.1.4, the investment firm licenseeG must surrender the original license certificate issued by the Licensing & Policy Directorate at the time of establishment, and submit confirmation of the cancellation of its commercial registration from the Ministry of Industry and Commerce.

          Amended: October 2011
          Amended: October 2009
          Amended: July 2007

        • GR-7.1.9

          Where the CBB has given its approval to cancel or amend a license, then it will also publish its decision in the Official Gazette, as well as in two local daily newspapers (one in Arabic, the other in English), once this decision has been implemented.

          Amended: October 2011
          Amended: October 2009
          Adopted: July 2007

        • GR-7.1.9A

          The publication cost of these notices mentioned in Paragraph GR-7.1.9 is to be met by the investment firm licenseeG concerned.

          Adopted: October 2011

        • GR-7.1.10

          The investment firm licenseeG must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged.

          Amended: October 2011
          Adopted: October 2009

        • GR-7.1.11

          An investment firm licenseeG in liquidation must continue to meet its contractual and regulatory obligations to customers and creditors.

          Amended: October 2009
          Amended: July 2007

        • GR-7.1.11A

          If no objections to the liquidation are upheld by the CBB, the CBB may then issue a written notice of approval for the surrender of the license.

          Adopted: October 2011

        • GR-7.1.12

          If a Category 2 investment firmG or a Category 3 investment firmG applies to the CBB for voluntary surrender of its authorisation, it must ensure that suitable arrangements are in place for professional indemnity coverage, to continue in respect of any unreported claims arising from past sales or advice, in accordance with Rule GR-9.1.8.

          Amended: October 2011
          Adopted: October 2009

    • GR-8 Appointed Representatives [This Chapter was deleted in October 2013]

      • GR-8.1 Key Provisions [This Section was deleted in October 2013]

        • GR-8.1.1

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.2

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.3

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.4

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.5

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.6

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.7

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.8

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.9

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.10

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.11

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.12

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

        • GR-8.1.13

          [This Paragraph was deleted in October 2013].

          Deleted: October 2013

    • GR-9 Professional Indemnity Coverage

      • GR-9.1 Key Provisions

        • GR-9.1.1

          Category 2 investment firmsG and Category 3 investment firmsG must maintain professional indemnity coverage. The professional indemnity coverage must be obtained from an insurance firm acceptable to the CBB and licensed in the Kingdom of Bahrain. Category 2 investment firmsG and Category 3 investment firmsG must submit a Professional Indemnity Insurance Return (Form PIIR) on a quarterly basis as part of the Quarterly Prudential Return Form (ref. BR-1.1). Additionally, they must provide, upon request, evidence to the CBB of the coverage in force.

          Amended: October 2009
          Amended: July 2007

        • GR-9.1.1A

          In accordance with Paragraph EN-B.3.1, investment firm licenseesG may not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the financial penalties provided for in Module EN.

          Adopted: April 2008

        • GR-9.1.2

          The requirement to maintain professional indemnity coverage will normally be met by the investment firm licenseeG concerned obtaining an insurance policy from an insurance firm. The CBB may also accept an insurance indemnity policy issued at group level, e.g. issued with respect to the parent of the investment firm licenseeG , provided the terms of the policy explicitly provide indemnity coverage with respect to the investment firm licenseeG . Similarly, overseas investment firm licenseesG may provide evidence of professional indemnity coverage maintained by their head office, providing that the coverage of the professional indemnity extends to the operations of the branch operating in Bahrain.

          Amended: April 2008
          Amended: July 2007

        • GR-9.1.3

          Upon written application to the CBB, the requirement in Rule GR-9.1.1 may instead be met by the investment firm licenseeG depositing with a retail bank licensed to operate in the Kingdom of Bahrain, an amount, specified by the CBB, to be held in escrow against future claims. This amount will not be less than the minimum required policy limit.

          Amended: July 2007

        • GR-9.1.4

          An investment firm licenseeG must assess its insurance needs with respect to professional indemnity to ensure its adequacy to the level of business undertaken, notwithstanding the minimum limit of indemnity.

          Adopted: October 2009

        • GR-9.1.5

          The minimum limit of indemnity is BD 100,000 for Category 2 investment firmsG and BD 75,000 for Category 3 investment firmsG .

          Amended: October 2009

        • GR-9.1.6

          The maximum excess or deductible allowable under the policy shall be BD 15,000.

          Amended: October 2009

        • GR-9.1.7

          Unless otherwise agreed in writing with the CBB, the policy must contain a clause that it may not be cancelled or lapsed without the prior notification of the CBB. The policy must also contain a provision for an automatic extended reporting period in the event that the policy is cancelled or lapsed, such that claims relating to the period during which the policy was in force may subsequently still be reported.

          Amended: October 2009
          Amended: July 2007

        • GR-9.1.8

          If a Category 2 investment firmG or Category 3 investment firmG applies to the CBB for a voluntary surrender of its authorisation, it must ensure that suitable arrangements are in place for professional indemnity coverage to continue in respect of any unreported claims arising from past sales or advice.

          Amended: October 2009
          Amended: July 2007

        • GR-9.1.9

          The CBB will not allow a voluntary surrender of authorisation to take effect until the investment firm licenseeG , in the opinion of the CBB, has discharged all its regulatory responsibilities to its clientsG . See also Section AU-5.5, on the cancellation of authorisation.

          Amended: October 2009
          Amended: July 2007

        • GR-9.1.10

          As provided for in Module ES, professional indemnity coverage requirements must be met by Category 2 investment firmsG and Category 3 investment firmsG , which were licensed prior to the introduction of Volume 4 (Investment Business) in April 2006, by December 31, 2006. Category 2 investment firmsG and Category 3 investment firmsG licensed after April 2006 are required to comply with the CBB's professional indemnity coverage requirements, from the point they are given a license.

          Amended: October 2009
          Amended: July 2007

        • GR-9.1.11

          Category 2 investment firmsG and Category 3 investment firmsG must prominently display in their premises a notice stating that they have in place professional indemnity coverage that meets the minimum requirements of the CBB and the period of coverage, such that claims relating to the period during which the policy was in force may subsequently still be reported.

          Amended: October 2009
          Amended: July 2007

        • GR-9.1.12

          The above notice may either be issued by the insurance company on behalf of the investment firm licenseeG , or by the licenseeG itself. The notice should specify the main features of the coverage maintained (or, where relevant, the amount of funds placed in escrow, in accordance with Rule GR-9.1.3). It should also specify the procedures for submitting a claim under the coverage maintained.

          Amended: October 2009
          Amended: July 2007

    • GR-10 [This Chapter deleted 07/2007.]

      Deleted: July 2007

      • The content selected is no longer in force and cannot be presented in Whole Section view.

    • GR-10 Branches, Subsidiaries and Representative Offices

      • GR-10.1 General Requirements

        • GR-10.1.1

          As specified in Articles 51 and 57 of the CBB Law, a Bahraini investment firm licenseeG incorporated in Bahrain must seek CBB approval and give reasonable advance notice of its intention to:

          (a) Enter into a merger with another undertaking;
          (b) Enter into a proposed acquisition, disposal or establishment of a new subsidiary undertakingG ;
          (c) Open a new place of business as a subsidiary undertakingG or a branchG within the Kingdom of Bahrain or other jurisdiction; or
          (d) Open a representative officeG in another jurisdiction.
          Amended: July 2013
          Added: April 2011

        • GR-10.1.1A

          The Rules in this Section apply to all Bahraini investment firm licenseesG proposing to establish a new subsidiary undertaking, either directly by way of holding majority shareholding or having majority voting control by virtue of direct ownership or indirectly, by proxy/nominee arrangements, or through a management agreement.

          Added: July 2013

        • GR-10.1.2

          Rule GR-10.1.1 applies whether or not the Bahraini investment firm licenseeG is required to be regulated locally in the jurisdiction where it proposes to undertake the investment business.

          Amended: July 2013
          Added: April 2011

        • GR-10.1.3

          The CBB will consider as one of its criteria to approve, impose additional requirements on the Bahraini investment firm licenseeG or refuse an application under Paragraph GR-10.1.1, the information related to Paragraph GR-10.1.2.

          Amended: July 2013
          Added: April 2011

        • GR-10.1.4

          Bahraini investment firm licenseesG will also need to consider the implications of a merger, acquisition, disposal or establishment of a new subsidiary undertakingG in the context of the controllersG and close linksG rules set out in Sections GR-5 and GR-6.

          Added: April 2011

        • GR-10.1.5

          [This Paragraph was deleted in July 2013]

          Deleted: July 2013
          Added: April 2011

        • Establishment of a Subsidiary

          • GR-10.1.6

            The purpose and objectives of a subsidiary undertakingG referred to in Rule GR-10.1.1 must be limited to the permissible activities within the scope of the investment business license as defined under regulated investment servicesG in Section AU-1.4.

            Added: April 2011

          • GR-10.1.7

            Bahraini investment firm licenseesG wishing to establish or acquire a subsidiary undertakingG must submit the following information to the CBB as part of the approval process referred to in Paragraph GR-10.1.1:

            (a) Proposed name of subsidiary;
            (b) Country of incorporation;
            (c) Legal structure;
            (d) Proposed paid-up capital;
            (e) Proposed shareholding structure;
            (f) Purpose of establishing or acquiring the subsidiary;
            (g) Draft incorporation documents of the subsidiary;
            (h) Board Resolution approving the establishment or acquisition of the subsidiary;
            (i) Names of the board members of the proposed subsidiary and the relationship of the board member to the investment firm licenseeG ;
            (j) Names of the authorised signatories of the proposed subsidiary;
            (k) An undertaking from the board of the investment firm licenseeG that the board will be held ultimately responsible for any misconduct or action committed by the proposed subsidiary; and
            (l) Any other information or documentation as required by the CBB.
            Amended: July 2013
            Added: April 2011

          • GR-10.1.7A

            Any change in the criteria listed under Rule GR-10.1.7, including any changes to the incorporation documents, are subject to the CBB prior written approval, prior to the change taking place.

            Added: July 2013

          • GR-10.1.8

            Bahraini investment firm licenseesG referred to in Paragraph GR-10.1.7 must comply with Paragraphs GR-6.1.3 (reporting requirements for close links), RM-B.2.2 (risk management of subsidiaries), CA-1.2.9 and CA-2.1.13 (impact of investment in subsidiaries on capital adequacy).

            Amended: July 2013
            Added: April 2011

          • GR-10.1.8A

            Bahraini investment firm licenseesG must ensure that the scope of their internal audit extends to the activities of their subsidiaries, to satisfy themselves of the compliance of the subsidiaries with all relevant internal and regulatory rules and regulations.

            Added: July 2013

          • GR-10.1.8B

            Bahraini investment firm licenseesG must submit to the CBB audited financial statements of their subsidiariesG within 3 months of the year end of the subsidiaryG (ref. BR 1.4.6A).

            Amended: October 2016
            Added: July 2013

        • Establishment of a Branch or Representative Office

          • GR-10.1.9

            Investment firm licenseesG wishing to establish a branchG or a representative officeG in a jurisdiction other than the Kingdom of Bahrain, must submit the following information to the CBB as part of the approval process referred to in Paragraph GR-10.1.1:

            (a) Name of the host supervisorG ;
            (b) Proposed license type of the branchG ;
            (c) Purpose of establishing the branch or representative officeG ;
            (d) Board Resolution approving the establishment of the branchG or representative officeG ;
            (e) The minimum requirements of the host jurisdiction; and
            (f) Any other information or documentation as required by the CBB.
            Added: April 2011

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