CBB Volume 4: Contents
BC Business Conduct
BC-A.1.2Amended: January 2007
The Rules build upon several of the Principles of Business (see Module PB (Principles of Business)). Principle 1 (Integrity) requires investment firm licenseesG to observe high standards of integrity and fair dealing, and to be honest and straightforward in their dealings with clientsG . Principle 3 (Due skill, care and diligence) requires investment firm licenseesG to act with due skill, care and diligence when acting on behalf of their clientsG . Principle 7 (Client Interests) requires investment firm licenseesG to pay due regard to the legitimate interests and information needs of their clientsG , and to communicate with them in a fair and transparent manner.Amended: January 2007
The Rules contained in this Module are largely principles-based and focus on desired outputs rather than on prescribing detailed processes. This gives investment firm licenseesG flexibility in how to implement the basic standards prescribed in this Module.Amended: January 2007
This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) on business conduct by 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). The directive in this Module is applicable to all investment firm licenseesG .Amended: January 2011
Adopted: January 2007
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.Adopted: January 2007
BC-A.2 Module History
Evolution of the 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.Adopted: January 2007
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes BC-A.1 07/2007 New Rule BC-A.1.5 introduced, categorising this Module as a Directive. BC-2.8.14 and 2.12.2(k) 04/2008 Clarified the record retention period to be in line with Article 60 of the CBB Law. BC-A.1.3 07/2008 Corrected reference to read investment firm licensee. BC-2.2 07/2008 Added reference and definition of accredited investor and expert investor to client classification. BC-2.2 10/2009 Updated client classification and definitions. BC-2.7 10/2009 Corrected to read accredited investors. BC-2.8.6 07/2010 Paragraph amended. BC-2.9.1 and BC-2.9.2 07/2010 Updated to include requirements regarding complaints. BC-2.11.1 07/2010 Updated to be in line with Article 117 of the CBB Law. BC-A.1.6 01/2011 Clarified legal basis. BC-2.3.15 01/2001 Cross reference added to Section GR-2.2 BC-B.1.3 10/2011 Updated scope of application to reflect new Chapter BC-3. BC-2.9 and BC-3 10/2011 Updated consumer complaints Section in line with results of consultation. BC-3.2 and BC-3.3 01/2012 Minor corrections to correct typos and clarify language. BC-3.3.9 01/2012 Deleted Paragraph as it repeats what is in Paragraph BC-3.3.7. BC-3.1.3A 07/2012 Added guidance on the appointment of the customer complaints officer. BC-2.7.14 and BC-2.7.16 07/2013 Clarified Rules on allocations. BC-3.7 07/2013 Additional details provided on reporting of complaints. BC-1.1.4 10/2013 Clarified language. BC-2.3.15 and BC-2.3.17 10/2013 Clarified the application of these two Paragraphs to the employees of the investment firm licensee. BC-2.10.2, BC-2.10.9 and BC-2.10.10 07/2015 Removed reference to corporate finance to be in line with Paragraph AU-1.4.43. BC-2.4.11 10/2017 Additional requirement on signed client agreement. BC-2.13 01/2019 Added a new Section on Brokerage Fees.
This Module supersedes the following provisions contained in circulars or other regulatory requirements:
Document Ref. Date of Issue Module Ref. Document Subject OG/274/95 28 Aug 1995 Provision of investment and other financial services BC/15/98 6 Sept 1998 Code of Conduct for Investment advisory companies BC/83/96 19 May 1996 Minimum requirements for Terms and Conditions standard form BC/73/96 1 May 1996 Promotional Schemes
Further guidance on the implementation and transition to Volume 4 (Investment Business) is given in Module ES (Executive Summary).
BC-B Scope of Application
BC-B.1 License Categories and Overseas Offices
This Module provides for three categories of clientsG , and applies different levels of protection to each, depending on their level of sophistication.
The scope of application of this Module with regards to clientG categories is as follows:
Section Subject Matter Client Category BC-2.1 Overarching Principles All categories. BC-2.2 Client Classification All categories. BC-2.3 Marketing and Promotion All categories; BC-2.3.18 applies to retail clients only. BC-2.4 Accepting Clients Retail clients only. BC-2.5 Suitability Retail clients only. BC-2.6 Disclosure of Information All categories; BC-2.6.5 to BC-2.6.12 apply to retail clients only. BC-2.7 Dealing and Managing All categories; various Rules apply to retail clients only. BC-2.8 Reporting to Clients All categories. BC-2.9 Complaints [Deleted in October 2011] BC-2.10 Conflicts of Interest All categories. BC-2.11 Confidentiality All categories. BC-2.12 Appendix All categories; various Paragraphs apply to retail clients only. BC-3 Customer Complaints Procedures All categoriesAmended: October 2011
Overseas Branches and Subsidiaries
Investment firm licenseesG must ensure that their branches and subsidiaries operating in foreign jurisdictions comply, at a minimum, with local conduct of business standards and regulatory requirements (where applicable).
Where conduct of business standards applied by overseas branches and subsidiaries of an investment firm licenseeG fall below the standards set out in this Module, the investment firm licenseeG must notify the CBB of the fact.Amended: January 2007
CBB encourages its investment firm licenseesG to apply — with respect to its overseas branches and subsidiaries — conduct of business standards at least equivalent to those set out in this Module. Where this is not the case, then CBB will consider any potential risk to the investment firm licenseeG that may arise through adverse reputational or other consequences.Amended: January 2007
BC-1 Base Requirements
BC-1.1 General Rules
This Module aims to encourage high standards of business conduct, which are broadly applicable to all investment firm licenseesG , all types of regulated investment servicesG , and all types of clientsG . The CBB, nevertheless, recognises that clients'G level of sophistication and understanding of risks underlying financial instruments vary. Accordingly, the level of safeguards provided for in the business conduct requirements for retail clients, for instance, are different from those for professional clients.Amended: January 2007
Investment firm licenseesG must take responsibility for compliance with the CodeG when carrying out regulated investment servicesG . Investment firm licenseesG must put in place appropriate measures across all their business operations and distribution channels to ensure compliance with the CodeG .Amended: October 2013
The Investment Business Code of Practice comprises a number of overarching principles of business conduct, with respect to the conduct of regulated investment servicesG by investment firm licenseesG ; these cover the various stages of the life of a clientG relationship.Amended: January 2007
The CodeG focuses on desired outcomes, rather than prescribing detailed measures to achieve those outcomes.
BC-1.1.8Amended: January 2007
BC-2 The Investment Business Code of Practice
BC-2.1 Overarching Principles
BC-2.1.1(a) Act with due skill, care and diligence in all dealings with clientsG ;(b) Act fairly and reasonably in all dealings with clientsG ;(c) Identify clients'G specific requirements in relation to the products and services about which they are enquiring;(d) Ensure that any advice to clientsG is aimed at the clients'G interests and based on adequate standards of research and analysis;(e) Provide sufficient information to enable clientsG to make informed decisions when purchasing investment products and services offered to them;(f) Provide sufficient and timely documentation to clientsG to confirm that their investment arrangements are in place and provide all necessary information about their products, rights and responsibilities;(g) Maintain fair treatment of clientsG through the lifetime of the clientG relationships, and ensure that clientsG are kept informed of important events;(h) Ensure complaints from clientsG are dealt with fairly and promptly;(i) Ensure that all information provided to clientsG is clear, fair and not misleading, and appropriate to clients'G information needs; and(j) Take appropriate measures to safeguard any money and property handled on behalf of clientsG and maintain confidentiality of clientG information.Amended: January 2007
BC-2.2 Client Classification
An investment firm licenseeG must classify the persons with or for whom it intends to carry on regulated investment servicesG , in accordance with the requirements in this section, and communicate its classification to the person concerned.
The purpose of the classification is to ensure that an investment firm licensee'sG clientsG are appropriately categorised so that regulatory protections are focused on those classes of clientG that need them most.
Before conducting regulated investment servicesG with or for any clientG , an investment firm licenseeG must take reasonable steps to obtain appropriate information to establish whether that clientG is a retail clientG , expert investorG or accredited investorG .Amended: October 2009
Amended: July 2008
BC-2.2.5Amended: January 2007
Entities classified as expert investorsG or accredited investorsG under Rules BC-2.2.9 and BC-2.2.10 may request alternative treatment, in which case investment firm licenseesG must agree to treat them as retail clientsG .Amended: October 2009
Amended: January 2007
BC-2.2.7 [Deleted]Deleted: October 2009
A retail clientG , as defined in Rule BC-2.2.8, may voluntarily elect to be treated as an expert investorG , in which case the investment firm licenseeG must obtain a signed declaration to that effect prior to any provision of regulated investment servicesG and must satisfy itself that the client qualifies as an expert investorG .Amended: October 2009
BC-2.2.8 [Deleted]Deleted: October 2009
BC-2.2.8Amended: October 2009
BC-2.2.9 [Deleted]Deleted: October 2009
Expert investorsG are:(a) Individuals who have a minimum net worth (or joint net worth with their spouse) of USD 100,000, excluding that person's principal place of residence;(b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 100,000; or(c) Governments, supranational organisations, central banks or other national monetary authorities, local authorities and state organisations.Amended: October 2009
Added: July 2008
Accredited investorsG are:(a) Individuals who have a minimum net worth (or joint net worth with their spouse) of USD 1,000,000, excluding that person's principal place of residence;(b) Companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 1,000,000; or(c) Governments, supranational organisations, central banks or other national monetary authorities, and state organisations whose main activity is to invest in financial instrumentsG (such as state pension funds).Amended: October 2009
Added: July 2008
BC-2.3 Marketing and Promotion
BC-2.3.1Amended: January 2007
With respect to retail clientsG , in ensuring that the description of the product or the service in the promotional material is fair, clear and not misleading, the investment firm licenseeG should, among other precautionary measures, ensure that:a) The purpose, and to the extent practicable, the content, of the information or communication are likely to be understood by the average member of the group to whom the communication is addressed;b) Key items contained in the information are given due prominence;c) The method of presentation in the information does not disguise, diminish, or obscure important risks, warnings or information; andd) The communication does not omit information that is material to ensure it is fair, clear and not misleading.Amended: January 2007
In ensuring that the description of the product or the service in the promotional material is fair, the investment firm licenseeG should avoid exaggerating the potential benefits of the investment service or financial instrumentG in any communication with a retail clientG or potential retail clientG .
In ensuring that the description of the product or the service in relation to promotional material directed at retail clientsG is adequate, the investment firm licenseeG should ensure that the promotional material contains a balanced description of the main characteristics of the financial instrumentG and/or service to which it relates, including the nature of the financial commitment and risks involved; whether or not the financial instrumentsG involved are illiquid, and traded in a recognised exchange or market; the existence or absence of any right of withdrawal or cancellation and, where such a right exists, its duration and the conditions for exercising it, including information on any amount that the retail clientG may be required to pay to exercise that right; and if the communication relates to a financial instrumentG or service of a person other than the investment firm licenseeG , the name of the person.
Investment firm licenseesG must ensure that the accuracy of all material statements of fact in promotional materials is supported by adequate evidence.
Investment firm licenseesG must not, in any form of communication with an individual clientG or any class of clientG , attempt to limit or avoid any duty or liability it may have to that individual clientG or class of clientG in relation to regulated investment servicesG .
BC-2.3.7Amended: January 2007
Capital markets disclosure standards are currently contained in the Disclosure Standards Regulation of 3 December 2003.
Content of Promotions
Before an investment firm licenseeG communicates any promotional material to a clientG or a potential clientG it must ensure the promotional material at the very least contains the information laid out in Paragraph BC-2.12.1.
Investment firm licenseesG must not make use of the name of the CBB in any promotion in such a way that would indicate endorsement or approval of its products or services.Amended: January 2007
Investment firm licenseesG must maintain a record of all promotional materials issued by them or on their behalf.
Real Time Promotions
BC-2.3.12Amended: January 2007
Consent to receive real time promotionsG could be, for instance, at the time of the initial client profiling, by means of signing a form clearly indicating such consent.
BC-2.3.15(a) Identify himself as being an employee of the investment firm licenseeG ;(b) State the name of the investment firm licenseeG ; and(c) Present the clientG with a business card on meeting that clientG , unless he has given him such a card at a previous meeting. The business card must include the information specified in Section GR-2.2.Amended: October 2013
Amended: January 2011
For the purposes of Rule BC-2.3.15(c), the statement on the business card should make clear the authorised status of the investment firm licenseeG ; however it should not lead the client to believe that the product being offered has been approved by the CBB.Amended: January 2007
BC-2.3.17(a) State the genuine purpose of the call at the commencement of the conversation;(b) Ascertain whether or not the clientG wishes him to proceed with the conversation if the time of the conversation was not previously agreed by the clientG ;(c) Explain clearly the financial instrumentsG or other services which he is authorised to arrange;(d) Recognise and respect the right of the clientG to terminate the call at any time; and(e) If he requests another appointment and the clientG refuses, shall accept that refusal courteously and in such a manner as to cause no embarrassment to the clientG .Amended: October 2013
Amended: October 2011
Amended: January 2007
BC-2.3.18Amended: January 2007
BC-2.3.19Amended: January 2007
BC-2.4 Accepting Clients
This section applies to retail clientsG only.
Terms of Business
The terms of businessG must include the rights and obligations of parties to the agreement, as well as other terms relevant to the regulated investment servicesG . The terms of businessG must include, but are not limited to, the items included in Paragraph BC-2.12.2.
An application form in relation to regulated investment servicesG will be deemed to be a client agreementG , provided the form includes the principal terms and conditions of the service, such that the clientG is provided sufficient information to allow him to understand the basis on which the service is to be conducted.Amended: January 2007
The client agreementG must be provided in good time prior to providing the regulated investment serviceG , and it must set out or refer to, among other matters, the rights and obligations of the parties to the agreement, and the terms on which the service is to be conducted.
Client Understanding and Acknowledgement
BC-2.4.10Amended: January 2007
The client agreementG must contain the signature of both parties to the agreement. If the agreement is signed by only the clientG , copies of the signed agreement must be provided by the investment firm licenseeG to the clientG . A copy of the signed client agreementG must be provided by the Investment firm licenseeG to the client.Amended: October 2017
Investment firm licenseesG must keep sufficient records of client agreementsG and any documents referred to in the client agreementG as soon as the agreement comes into force, for CBB's supervision purposes.Amended: January 2007
This section applies to retail clientsG only.
Information and Communication
Investment firm licenseesG must seek information from their retail clientsG (and potential retail clientsG ) about their needs, circumstances and investment objectives (including their risk appetite), relevant to the services to be provided.Amended: January 2007
For the purposes of Rule BC-2.5.2, the investment firm licenseeG , when providing the regulated investment services, should ask the clientG or potential clientG to provide information regarding his knowledge and experience in the investment field relevant to the specific type of financial instrumentG or service offered or demanded so as to enable the licensee to assess whether the financial instrumentG or service is appropriate to the clientG . The evaluation of the client'sG needs, circumstances and investment objectives (including risk appetite) can be done through a structured questionnaire.
For the purposes of satisfying the requirement under Rule BC-2.5.2, investment firm licenseesG must ensure that the information and facts they hold about their clientsG are accurate, complete and up to date.
Where an investment firm licenseeG is managing financial instrumentsG for a clientG , it must assess whether the client'sG portfolio or account remains suitable over the lifetime of the clientG relationship and advise the clientG if it is no longer suitable.
Where an investment firm licenseeG has pooled a client'sG assets with those of others, with a view to taking common discretionary management decisions, the investment firm licenseeG must take reasonable steps to ensure that the transaction is suitable for the related clients having regard to their stated investment objectives.
BC-2.6 Disclosure of Information
Initial Disclosure Requirement
BC-2.6.2a) Itself and the types of services that it can provide;b) Whether it is acting as agent or principal;c) Fees, costs and associated charges such as:i. The basis or amount of its charges, remuneration and commission for conducting regulated investment services andii. The nature or amount of any other income receivable by it or, to its knowledge, by its associate and attributable to that regulated investment service;d) Financial instrumentsG and proposed strategies and appropriate guidance on and warnings of the risks associated with those financial instrumentsG and strategies; ande) Information about methods of redress.Amended: January 2007
The purpose of BC-2.6.2 is to ensure that clientsG are reasonably able to understand the nature and risks of the investment service and type of financial instrumentG that is being offered and, consequently, to take investment decisions on an informed basis. This information may be provided in standard format.
Investment firm licenseesG must disclose adequate information to all classes of clientsG about risks underlying the financial instrumentG that are not readily apparent and which relate to the regulated investment serviceG being provided.
Without prejudice to the scope of the requirement under Rule BC-2.6.2(c), investment firm licenseesG must provide retail clientsG with appropriate guidance on, and warnings of, relevant risks when providing regulated investment servicesG , in relation to:a) Transactions in illiquid financial instruments;b) Leveraged transactions, including asset portfolios or collective investment schemes that have embedded leverage;c) Financial instruments subject to high volatility in normal market conditions;d) Securities repurchase agreements or securities lending agreements;e) Transactions which involve credit, margin payments, or deposit of collateral;f) Transactions involving material foreign exchange riskg) Interests in real estate; and/orh) Islamic financial instrumentsG .Amended: January 2007
In relation to transactions involving warrants or derivatives, investment firm licenseesG must provide retail clientsG with a written statement that includes explanations of their characteristics, in particular their leverage effect, liquidity and price volatility.
To satisfy Rule BC-2.6.6, with respect to warrants, investment firm licenseesG should provide retail clientsG with a statement that includes, at a minimum, the information contained in Paragraph BC-2.12.3.
To satisfy Rule BC-2.6.6, with respect to futures contracts, investment firm licenseesG should provide retail clientsG with a statement that includes, at a minimum, the information contained in Paragraph BC-2.12.4.
To satisfy Rule BC-2.6.6, with respect to option transactions, investment firm licenseesG should provide retail clients with a statement that includes, at a minimum, the information contained in Paragraphs BC-2.12.5 and BC-2.12.6.
BC-2.6.10(a) Warn the retail clientG that there is a restricted market for such financial instrumentsG , and that it may therefore be difficult to deal in the financial instrumentG or to obtain reliable information about its value; and(b) Disclose any position knowingly held by the investment firm licenseeG or any of its associates in the financial instrumentG or in a related financial instrumentG .Amended: January 2007
The risk warning given to a retail clientG or potential retail clientG must be given due prominence in all related materials and must not be concealed or masked in any way by the wording, design or format of the information provided.
Risk warnings provided to a retail clientG or potential retail clientG about warrants or derivatives must make clear that the instrument can be subject to sudden and sharp falls in value. Where the retail clientG may not only lose his entire investment but may also be required to pay more later, he must also be warned about this fact and the possible obligation to provide extra funding.
Cancellation and Withdrawals
BC-2.7 Dealing and Managing
Best and Timely Execution
Investment firm licenseesG must take all reasonable steps to obtain, when executing orders, the best possible result for clientsG taking into account price, costs, speed, likelihood of execution and settlement, and any other consideration relevant to the execution of the order.
BC-2.7.3a) Execution policies for each class of financial instrumentG ;b) Maintenance and disclosure to clientsG of information regarding execution venues and arrangements for disclosure to clientsG if orders are to be executed outside regulated markets;c) Monitoring of effectiveness of the order execution arrangements and execution policies in order to identify and, where appropriate, correct any deficiencies; andd) Maintenance of audit trails to demonstrate to their clientsG that orders were executed in accordance with the relevant execution policy.Amended: January 2007
In determining whether an investment firm licenseeG has taken reasonable care to provide the best overall price for a clientG in accordance with Rules BC-2.7.2 to BC-2.7.4, the CBB will take into account whether an investment firm licenseeG has:(a) Executed orders promptly and sequentially;(b) Discounted any fees and charges previously disclosed to the clientG ;(c) Disclosed the price at which an order is executed; and(d) Taken into account the available range of price sources for the execution of its clients'G transactions. In the case where the investment firm licenseeG has access to prices of different regulated financial markets or alternative trading systems, it must execute the transaction at the best overall price available having considered other relevant factors.Amended: January 2007
Investment firm licenseesG may only postpone the execution of a transaction if it is in the best interests of the clientG , and the prior consent of the clientG has been given, or when circumstances are beyond its control. The investment firm licenseeG must maintain a record of all postponements together with the reasons for the postponement.Amended: January 2007
BC-2.7.7(a) The clientG order is received outside of normal trading hours;(b) A foreseeable improvement in the level of liquidity in the financial instrumentG is likely to enhance the terms on which the investment firm licenseeG can execute the order; or(c) Executing the order as a series of partial executions over a period of time is likely to improve the terms on which the order as a whole is executed.Amended: January 2007
Non-market Price Transactions
Investment firm licenseesG must not enter into a non-market price transaction in any capacity, with or for a clientG , if it has reasonable grounds to suspect that the clientG is entering into the transaction for an illegal or improper purpose.
For the purposes of Paragraph BC-2.7.8, a non-market price transaction is one where the price paid by the investment firm licenseeG , or its clientG , differs from the prevailing market price. With respect to transactions in financial instrumentsG traded on the Bahrain Stock Exchange, licensees are reminded that in Bahrain the law prohibits off-market transactions.Amended: January 2007
For the purposes of Paragraph BC-2.7.8, examples of improper purposes for transactions include:(a) The perpetration of a fraud;(b) The disguising or concealment of the nature of a transaction or of profits, losses or cash flows;(c) Transactions which amount to market abuse;(d) High-risk transactions under the Anti Money Laundering Regulations; and(e) "Window dressing", in particular around the year end, to disguise the true financial position of the person concerned.Amended: January 2007
Rule BC-2.7.8 does not apply to a non-market-price transaction if it is subject to the rules of a recognised investment exchange.
Aggregation and Allocation
BC-2.7.12(a) It is unlikely that the aggregation will disadvantage the clientsG whose orders have been aggregated; and(b) It has disclosed to each clientG concerned in writing that it may aggregate orders, where these work to the client'sG advantage.Amended: January 2007
Where an allocation takes place, prices must not be marked up or marked down, so that no customer, broker or the investment firm licenseeG is advantaged over any change.Amended: July 2013
Investment firm licenseesG must have written policies on aggregation and allocation which are consistently applied; these must include the policy that will be adopted when only part of the aggregated order has been filled.
Where an investment firm licenseeG has aggregated a clientG order with an order for other clientsG or with an order for its own account, and part or all of the aggregated order has been filled, it must:(a) Promptly allocate the financial instrumentsG concerned;(b) Allocate the financial instrumentsG in accordance with its stated policy;(c) Ensure the allocation is done fairly and uniformly by not giving undue preference to itself or to any of those for whom it dealt;(d) Give priority to satisfying clientG orders where the aggregation order combines a clientG order and an own account order, if the aggregate total of all orders cannot be satisfied, unless it can demonstrate on reasonable grounds that without its own participation it would not have been able to execute those orders on such favourable terms, or at all; and(e) Make and maintain a record of:(i) The date and time of the allocation;(ii) The relevant financial instrumentsG ;(iii) The identity of each clientG concerned;(v) The price of each financial instrument and allocation.Amended: July 2013
Amended: January 2007
Investment firm licenseesG must not advise any clientG to transact with a frequency or in amounts that might result in those transactions being deemed excessive in light of historical volumes, market capitalisation, client portfolio size and related factors. This Rule does not apply to clientsG classified as accredited investorsG .Amended: October 2009
Amended: January 2007
Right to Realise a Retail Client's Assets
BC-2.7.18(a) Set out in the terms of business:(i) The action it may take to realise any assets of the retail clientG ;(ii) The circumstances in which it may do so;(iii) The asset (if relevant) or type or class of asset over which it may exercise the right; or(b) Given the retail clientG written or oral notice of its intention to exercise its rights before it does so.Amended: January 2007
Lending to Retail Clients
BC-2.7.19(a) They have made and recorded an assessment of the retail client'sG financial standing, based on information disclosed by the retail clientG ;(b) They have taken reasonable steps to ensure that the arrangements for the loan or credit and the amount concerned are suitable, based on the information disclosed by the retail clientG , for the type of investment agreement proposed or which the retail clientG is likely to enter into; and(c) The retail clientG has given his prior written consent to both the maximum amount of the loan or credit and the amount or basis of any interest or fees to be levied in connection with the loan or credit.Amended: January 2007
BC-2.7.20(a) The circumstances in which the clientG may be required to provide any margin;(b) The form in which the margin may be provided;(c) The steps the investment firm licenseeG may be required or entitled to take if the clientG fails to provide the required margin, including:(i) The fact that the client'sG failure to provide margin may lead to the investment firm licenseeG closing out his position after a time limit specified by the firm;(d) The circumstances, other than failure to provide the required margin, that may lead to the investment firm licenseeG closing out the client'sG position without prior reference to him.Amended: January 2007
Investment firm licenseesG must close out a retail client'sG open position if that clientG has failed to meet a margin call within five business days following the date on which the obligation to meet the call accrues, unless:(i) The investment firm licenseeG has received confirmation from a relevant third party (such as a clearing firm) that the retail clientG has given instructions to pay in full; or(ii) The investment firm licenseeG has taken reasonable care to establish that the delay is owing to circumstances beyond the retail client'sG control.Amended: January 2007
Before an investment firm licenseeG executes a programme trade, it must disclose to its clientG whether it will be acting as a principal or agent. An investment firm licenseeG must not subsequently act in a different capacity from that which is disclosed without the prior consent of the clientG .
The term "programme trade" describes a single transaction or series of transactions executed for the purpose of acquiring or disposing, for a clientG , of all or part of a portfolio or a large basket of financial instrumentsG .
Investment firm licenseesG must ensure that neither they, nor an associate, execute an own account transaction in any financial instrumentG included in a programme trade, unless they have notified the clientG in advance that they may do this, or can otherwise demonstrate that they have provided fair treatment to the clientG concerned.
BC-2.8 Reporting to Clients
Confirmation of Transactions
When an investment firm licenseeG executes a transaction in a financial instrumentG for a clientG , it must promptly despatch to the clientG , or a designated agent of the clientG , a written confirmation note recording the essential details of the transaction and essential information regarding the carrying out of his order.
For the purposes of Rule BC-2.8.2, the essential details of the transaction and essential information regarding the carrying out of the order include:(a) Execution price;(b) Charges; and(c) Time of execution.Amended: January 2007
Investment firm licenseesG must promptly and at suitable intervals provide their clients with a written statement when they:(a) Undertake the activity of managing financial instrumentsG ; orAmended: January 2007
Investment firm licenseesG must provide a periodic statement:(a) Monthly, if the clientG is a retail clientG and the retail client'sG portfolio includes derivative transactions in highly volatile classes of financial instrumentsG or leveraged transactions; or(b) At least semi-annually in other cases.Amended: July 2010
Amended: January 2007
Where an investment firm licenseeG undertakes the activity of managing financial instrumentsG on a discretionary basis, the periodic statements, issued in accordance with Rule BC-2.8.5, must also include at the very least the information included in Paragraph BC-2.12.9.
In addition to Rules BC-2.8.7 and BC-2.8.8, where the retail clientG may not only lose his entire investment but may also be required to pay more later, investment firm licenseesG must also include the additional information included in Paragraph BC-2.12.10.
Investment firm licenseesG must immediately record the essential elements of all orders that are received.
Investment firm licenseesG must record the essential elements of all:(a) Orders executed;(b) Transactions executed for their own account;(c) Non-market price transactions entered into by the investment firm licenseeG ; and(d) Orders that have been aggregated with their basis of allocation.Amended: January 2007
Investment firm licenseesG must make a copy of any confirmation of a transaction or periodic statement provided to a clientG , and retain it for at least ten years from the date on which it was provided.Amended: April 2008
BC-2.9 [This section was deleted in October 2011]
[This paragraph was deleted in October 2011]Deleted: October 2011
Amended: July 2010
Amended: January 2007
[This paragraph was deleted in October 2011]Deleted: October 2011
Amended: July 2010
Amended: January 2007
[This paragraph was deleted in October 2011]Deleted: October 2011
Amended: January 2007
[Deleted]Deleted: October 2011
BC-2.10 Conflicts of Interest
Investment firm licenseesG must undertake all reasonable steps to identify conflicts of interest between themselves (or any person directly or indirectly linked to them by control) and their clientsG , which may arise in the course of providing a regulated investment serviceG .
Where conflicts arise, investment firm licenseesG must:(a) Disclose any material interest or conflict of interest to the clientG in writing (which may include a disclosure in the investment firm licensee'sG terms of business) either generally or in relation to a specific transaction, and take reasonable steps to ensure that the clientG does not object;(b) Establish information barriers between activities such as proprietary trading and portfolio management; and(c) Produce a written policy of independence, which requires an employee to disregard any conflict of interest or material interest when advising a clientG or exercising discretion.Amended: July 2015
Amended: January 2007
If an investment firm licenseeG determines that it is unable to manage a conflict of interest or material interest using one of the methods described in Rule BC-2.10.2 it must decline to act for the clientG .
Personal Account Transactions
Investment firm licenseesG must establish and maintain adequate policies and procedures, to ensure that:(a) An employee does not undertake a personal account transactionG unless:(i) The investment firm licenseeG has, in a written notice, drawn to the attention of the employee the conditions upon which the employee may undertake personal account transactions and that the contents of such a notice are made a term of his contract of employment or services;(ii) The investment firm licenseeG has given its written permission to that employee for that transaction or to transactions generally in financial instrumentsG of that kind; and(b) It receives prompt notification or is otherwise aware of each employee's personal account transactionsG ; and(c) If an employee's personal account transactionsG are conducted with the investment firm licenseeG , each employee's account must be clearly identified and distinguishable from other clients'G accounts.Amended: January 2007
The written notice in sub-Paragraph BC-2.10.4(a)(i) must make it explicit that, if an employee is prohibited from undertaking a personal account transactionG , he must not, except in the proper course of his employment:(a) Procure another person to enter into such a transaction; or(b) Communicate any information or opinion to another person if he knows, or ought to know, that the person will as a result, enter into such a transaction or procure some other person to do so.Amended: January 2007
Where an investment firm licenseeG has taken reasonable steps to determine that an employee will not be involved to any material extent in, or have access to information about, the investment firm licensee'sG investment business, then the conditions or restrictions on personal account transactionsG , in Rule BC-2.10.4, need not be applied to that employee.
Investment firm licenseesG must establish and maintain procedures and controls so as to ensure that an investment analystG does not undertake a personal account transactionG in a financial instrumentG if the investment analystG is preparing investment research:(a) On that investment or its issuer; or(b) On a related investment, or its issuer;Amended: January 2007
Where an investment firm licenseeG issues investment researchG , its conflicts policy must specify the types of investment researchG issued by it. An investment firm licenseeG that prepares and publishes investment research must have adequate procedures and controls to ensure:(a) The effective supervision of investment analystsG by following at the very least the items listed in Paragraph BC-2.12.11;(b) That any actual or potential conflicts of interest are managed in accordance with Rule BC-2.10.1; and(c) That the investment research issued to clientsG is not biased.Amended: January 2007
BC-2.10.9(a) Identifies the types of clientsG for which it is principally intended;(b) Distinguishes fact from opinion or estimates, and includes references to sources of data used;(c) Specifies the date when it was first published;(d) Specifies the period the ratings or recommendations are intended to cover;(e) Contains a clear and unambiguous explanation of the rating or recommendation system used;(f) Includes a price chart or line graph depicting the performance of the financial instrumentG for the period that the investment firm licenseeG has assigned a rating or recommendation for that financial instrumentG , which must also show the dates on which the ratings were revised; and(g) Includes a distribution of the different ratings or recommendations, in percentage terms for all financial instrumentsG in respect of which the investment business licensee publishes investment research.Amended: July 2015
Amended: January 2007
Investment firm licenseesG must take reasonable steps to ensure that when it publishes investment research, disclosure is made of the following matters:(a) Any financial interest or material interest that the investment analystG or a close relative has, which relates to the financial instrumentG ;(b) Any shareholding by the investment firm licenseeG or its associate of 1% or more of the total issued share capital of the issuer;(c) Whether the investment firm licenseeG or its associate acts as corporate broker for the issuer;(d) Any material shareholding by the issuer in the investment firm licenseeG ;(e) [This Subparagraph was deleted in July 2015]; andAmended: July 2015
Amended: January 2007
If an investment firm licenseeG acts as a manager or co-manager of an initial public offering or a secondary offering it must take reasonable steps to ensure that it does not publish investment research relating to the financial instrumentG during the period beginning on the day of publication of the listing particulars or a prospectus relating to the offering of that financial instrumentG and ending on the 30th calendar day after the day on which the financial instrumentG is admitted to trading.
Investment firm licenseesG and their associates must not knowingly execute an own account transaction in a financial instrumentG , which is the subject of investment research, prepared either by the investment firm licenseeG or its associate, until the clientsG for whom the investment research was principally intended have had a reasonable opportunity to act upon it.
The restriction in Rule BC-2.10.11 does not apply if:(a) The investment firm licenseeG or its associate is a market maker in the relevant financial instrumentG ;(b) The investment firm licenseeG or its associate executes an unsolicited transaction for a clientG ; or(c) It is not expected to materially affect the price of the financial instrumentG .Amended: January 2007
Investment firm licenseesG must have systems and controls, policies and procedures to ensure that neither they, nor any of their employees, offer, give, solicit or accept any inducement which is likely to conflict significantly with any duty that they owe to their clientsG .
BC-2.10.15(a) The goods and services do not constitute an inducement;(b) The goods and services are reasonably expected to assist in the provision of regulated investment activities to the investment firm licensee'sG clientsG ;(c) The agreement is a written agreement for the supply of goods or services described in Rule BC-2.10.14, and these goods and services do not take the form of, or include, cash or any other direct financial benefit; and(d) The investment firm licenseeG makes adequate disclosures regarding the use of soft dollar agreementsG .Amended: January 2007
BC-2.10.16Amended: January 2007
Before an investment firm licenseeG enters into a transaction for a clientG , either directly or indirectly, with or through the agency of another person, under a soft dollar agreementG which the investment firm licenseeG has, or knows that another member of its group has, with that other person, it must disclose to its clientG :(a) The existence of the soft dollar agreementG ; andAmended: January 2007
If an investment firm licenseeG has a soft dollar agreementG under which the investment firm licenseeG deals for a clientG , the investment firm licenseeG must provide that clientG with information as set out in Paragraph BC-2.12.12.
BC-2.11.1(a) They have the client'sG consent; or(b) Disclosure is made in accordance with the licensee'sG regulatory obligations.(c) The licenseeG is legally obliged to disclose the information in accordance with Article 117 of the CBB Law.Amended: July 2010
Amended: January 2007
The minimum information that should be contained in promotional material includes:(a) The name of the investment firm licenseeG communicating the promotional material;(b) The investment firm licensee'sG category of license;(c) The investment firm licensee'sG address;(d) A description of the main characteristics of the financial instrumentG involved or service offered;(e) Suitable warning regarding the risks of the financial instrumentG involved and/or service offered; and(f) A clear statement indicating that, if a retail clientG (as defined in Section BC-2.2) is in any doubt about the suitability of the agreement which is the subject of the promotion, he should consult his own financial adviser, or else the investment firm licenseeG .Amended: January 2007
The minimum information that should be contained in terms of business includes:(a) The regulatory status of the investment firm licenseeG ;(b) A statement that the licensee is bound by the CBB's regulation and licensing conditions;(c) The licensee's name, address, e-mail and telephone number;(d) A statement of the products and services provided by the licensee, as permitted by the CBB;(e) The total price to be paid by the clientG to the investment firm licenseeG for its services, or, where an exact price cannot be indicated, the basis for the calculation of the price enabling the clientG to verify it;(f) Information on any rights the parties may have to terminate the contract early or unilaterally under its terms, including any penalties imposed by the contract in such cases;(g) Where appropriate, the client'sG investment objectives;(h) Where appropriate, the extent to which the investment firm licenseeG will consider the clients'G personal circumstances when considering suitability (as required under Section BC-2.5) and the details of such matters that will be taken into account;(i) Any conflict of interest disclosure as required by Section BC-2.10;(k) A statement that clearly indicates the following:(i) The client'sG right to obtain copies of records relating to his business with the licensee; and(ii) The client'sG record will be kept for 10 years or as otherwise required by Bahrain Law; and(l) The name and job title, address and telephone number of the person in the investment firm licenseeG to whom any complaint should be addressed (in writing) by the clientG .Amended: April 2008
Amended: January 2007
The minimum information that should be contained in a notice in relation to a warrant includes:
"A warrant is a time-limited right to subscribe for shares or debentures and is exercisable against the original issuer of the underlying securities. A relatively small movement in the price of the underlying security results in a disproportionately large movement, unfavourable or favourable, in the price of the warrant. The prices of warrants can therefore be volatile. It is essential for anyone who is considering purchasing warrants to understand that the right to subscribe which a warrant confers is invariably limited in time, with the consequence that if the investor fails to exercise this right within the predetermined time-scale then the investment becomes worthless. You should not buy a warrant unless you are prepared to sustain a total loss of the money you have invested plus any commission or other transaction charges."
The minimum information that should be contained in a notice in relation to a futures transaction includes:
"Transactions in futures involve the obligation to make, or to take, delivery of the underlying asset of the contract at a future date, or in some cases to settle the position with cash. They carry a high degree of risk. The 'gearing' or 'leverage' often obtainable in futures trading means that a small deposit or down payment can lead to large losses as well as gains. It also means that a relatively small movement can lead to a proportionately much larger movement in the value of your investment, and this can work against you as well as for you. Futures transactions have a contingent liability, and you should be aware of the implications of this, in particular the margining requirements."
The minimum information that should be contained in a notice in relation to a purchased option includes:
"Buying options: buying options involves less risk than selling options because, if the price of the underlying asset moves against you, you can simply allow the option to lapse. The maximum loss is limited to the premium, plus any commission or other transaction charges. However, if you buy a call option on a futures contract and you later exercise the option, you will acquire the future. This will expose you to the risks associated with 'futures' and 'contingent liability investment transactions'."
The minimum information that should be contained in a notice in relation to a written option includes:
"Writing options: if you write an option, the risk involved is considerably greater than buying options. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you, however far the market price has moved away from the exercise price. If you already own the underlying asset which you have contracted to sell (when the options will be known as 'covered call options') the risk is reduced. If you do not own the underlying asset ('uncovered call options') the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, and then only after securing full details of the applicable conditions and potential risk exposure."
The minimum information that should be included in a transaction confirmation includes:(a) The investment firm licensee'sG name and address;(b) Whether the investment firm licenseeG executed the transaction as principal or agent;(c) The client'sG name, account number or other identifier;(d) Where relevant, a description of the collective investment undertaking or fund, including the amount invested or number of units involved;(e) Whether the transaction was a sale or purchase;(f) The price or unit price at which the transaction was executed;(g) If applicable, a statement that the transaction was executed on an execution only basis;(h) The date and time of the transaction or a statement that the time of execution will be provided on request;(i) Due date and procedure for settlement of transaction and the bank account;(j) The amount the investment firm licenseeG charges in connection with the transaction, including commission charges and the amount of any mark-up or mark-down, fees, taxes or duties;(k) The amount or basis of any charges shared with another person or statement that this will be made available on request;(l) For collective investment undertakings, a statement that the price at which the transaction has been executed is on a historic price or forward price basis, as the case may be;(m) The regulated market on which the transaction was carried out or the fact that the transaction was undertaken outside a regulated market; and(n) Whether the retail client'sG counterparty was the investment firm licenseeG itself or any other person in the investment firm group.Amended: January 2007
The minimum information that should be included in a periodic statement includes:(a) The number, description and value of each financial instrumentG ;(b) The amount of cash held;(c) The total value of the portfolio; and(d) A statement as to the basis on which the value of each financial instrumentG was calculated.Amended: January 2007
The minimum information that should be included in a periodic statement, where the relationship includes portfolio management, includes:(a) A statement of which financial instrumentsG , if any, were at the closing date loaned to any third party and which financial instrumentsG , if any, were at that date charged to secure borrowings made on behalf of the portfolio;(b) The aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during that period;(c) A management report on the strategy implemented (provided at least yearly);(d) Total amount of fees and charges incurred during the period and an indication of their nature;(e) Information on any remuneration received from a third party and details of calculation basis;(f) Total amount of dividends, interest and other payments received during the period in relation to the clients'G portfolio;(g) Details of each transaction which have been entered into for the portfolio during the period;(h) The aggregate of money and details of all financial instrumentsG transferred into and out of the portfolio during the period;(i) The aggregate of any interest payments, including the dates of their application and dividends or other benefits received by the investment firm licenseeG from the portfolio for its own account during that period;(j) A statement of the aggregate charges of the investment firm licenseeG and its associates; and(k) A statement of the amount of any remuneration received by the investment firm licenseeG or its associates or both from a third party.Amended: January 2007
The minimum information that should be included in periodic statements, where the relationship includes contingent liability investment transactions, includes:(a) The aggregate of money transferred into and out of the portfolio during the valuation period;(b) In relation to each open position in the account at the end of the account period, the unrealised profit or loss to the clientG (before deducting or adding any commission which would be payable on closing out);(c) In relation to each transaction executed during the account period to close out a client'sG position, the resulting profit or loss to the clientG after deducting or adding any commission;(d) The aggregate of each of the following in, or relating to, the client'sG portfolio at the close of business on the valuation date:(i) Cash;(ii) Collateral value;(iii) Management fees; and(iv) Commissions;(e) OptionG account valuations in respect of each open optionG contained in the account on the valuation date stating:(ii) The trade price and date for the opening transaction, unless the valuation statement follows the statement for the period in which the optionG was opened;(iii) The market price of the contract; and(iv) The exercise price of the contract.Amended: January 2007
The minimum requirements that should be met where the investment firm licenseeG prepares and publishes investment research include:(a) Analysts must not trade in securities or related derivatives ahead of publishing research on the issuer of these securities;(b) Analysts must not trade in securities or related derivatives of any issuer that they review in a manner contrary to their existing recommendations except in special circumstances subject to pre-approval by compliance or legal personnel;(c) Analysts must not accept inducements by issuers or others with a material interest in the subject matter of investment research; and(d) Investment firms must not promise issuers favorable research coverage, specific ratings or specific target prices in return for a future or continued business relationship, service or investment.Amended: January 2007
BC-2.12.12(a) The percentage paid under soft dollar agreementsG of the total commission paid by or at the direction of:(i) The investment firm licenseeG ; and(ii) Any other member of the investment firm licensee'sG group which is a party to those agreements;(b) The value, on a cost price basis, of the goods and services received by the investment firm licenseeG under soft dollar agreementsG , expressed as a percentage of the total commission paid by or at the direction of:(i) The investment firm licenseeG ; or(ii) Other members of the investment firm licensee'sG group;(c) A summary of the nature of the goods and services received by the investment firm licenseeG under the soft dollar agreementsG ; and(d) The total commission paid from the portfolio of that clientG .Amended: January 2007
BC-2.13 Brokerage Fees
BC-3 Customer Complaints Procedures
BC-3.1 General Requirements
All investment firm licenseesG must have appropriate customer complaints handling procedures and systems for effective handling of complaints made by customers by 31st March 2012.Adopted: October 2011
Customer complaints procedures must be documented appropriately and their customers must be informed of their availability.Adopted: October 2011
All investment firm licenseesG must appoint a customer complaints officer and publicise his/ her contact details at all branches. The customer complaints officer must be of a senior level at the investment business firm and must be independent of the parties to the complaint to minimize any potential conflict of interest.Adopted: October 2011
The position of customer complaints officer may be combined with that of compliance officer.Added: July 2012
In the case of an overseas investment firm licenseeG , a local complaints officer must be present and must report all complaints to the head office complaints unit.Amended: January 2012
Adopted: October 2011
BC-3.2 Documenting Customer Complaints Handling Procedures
In order to make customer complaints handling procedures as transparent and accessible as possible, all investment firm licenseesG must document their customer complaints handling procedures. These include setting out in writing:(a) The procedures and policies for:(i) Receiving and acknowledging complaints;(ii) Investigating complaints;(iii) Responding to complaints within appropriate time limits;(iv) Recording information about complaints;(v) Identifying recurring system failure issues.(b) The types of remedies available for resolving complaints; and(c) The organisational reporting structure for the complaints handling function.Amended: January 2012
Adopted: October 2011
Investment firm licenseesG must provide a copy of the procedures to all relevant staff, so that they may be able to inform customers. A simple and easy-to-use guide to the procedures must also be made available to all customers, on request, and when they want to make a complaint.Adopted: October 2011
Investment firm licenseesG are required to ensure that all investment services related documentation provided to the customer includes a statement informing the customer of the availability of a simple and easy-to-use guide on customer complaints procedures in the event the customer is not satisfied with the services provided.Amended: January 2012
Adopted: October 2011
BC-3.3 Principles for Effective Handling of Complaints
Adherence to the following principles is required for effective handling of complaints:Adopted: October 2011
"How and where to complain" must be well publicised to customers and other interested parties, in both English and Arabic languages.Adopted: October 2011
A complaints handling process must be easily accessible to all customers and must be free of charge.Adopted: October 2011
While an investment firm licensee'sG website is considered an acceptable mean for dealing with customer complaints, it should not be the only means available to customers as not all customers have access to the internet.Amended: January 2012
Adopted: October 2011
Process information must be readily accessible and must include flexibility in the method of making complaints.Adopted: October 2011
Support for customers in interpreting the complaints procedures must be provided, upon request.Adopted: October 2011
Information and assistance must be available on details of making and resolving a complaint.Adopted: October 2011
Supporting information must be easy to understand and use.Adopted: October 2011
[This Paragraph was deleted in January 2012].Deleted: January 2012
Adopted: October 2011
Receipt of complaints must be acknowledged in accordance with Section BC-3.5 "Response to Complaints".Adopted: October 2011
Complaints must be addressed promptly in accordance with their urgency.Adopted: October 2011
Customers must be treated with courtesy.Adopted: October 2011
Customers must be kept informed of the progress of their complaint.Adopted: October 2011
BC-3.3.14Adopted: October 2011
In the event that they are unable to resolve a complaint, investment firm licenseesG must outline the options that are open to that customer to pursue the matter further, including, where appropriate, referring the matter to the Compliance Directorate at the CBB.Adopted: October 2011
Objectivity and Efficiency
Complaints must be addressed in an equitable, objective, unbiased and efficient manner.Amended: January 2012
Adopted: October 2011
General principles for objectivity in the complaints handling process include:(a) Openness: The process must be clear and well publicised so that both staff and customers can understand.(b) Impartiality:(i) Measures must be taken to protect the person the complaint is made against from bias;(ii) Emphasis must be placed on resolution of the complaint not blame; and(iii) The investigation must be carried out by a person independent of the person complained about.(c) Accessibility:(i) The investment firm licenseeG must allow customer access to the process at any reasonable point in time; and(ii) A joint response must be made when the complaint affects different participants.(d) Completeness: The complaints officer must find the relevant facts, talk to both sides, establish common ground and verify explanations wherever possible;(e) Equitability: Give equal treatment to all parties.(f) Sensitivity: Each complaint must be treated on its merits and paying due care to individual circumstances.(g) Objectivity for personnel — complaints handling procedures must ensure those complained about are treated fairly which implies:(i) Informing them immediately and completely on complaints about performance;(ii) Giving them an opportunity to explain and providing appropriate support;(iii) Keeping them informed of the progress and result of the complaint investigation;(iv) Full details of the complaint are given to those the complaint is made against prior to interview; and(v) Personnel must be assured they are supported by the process and should be encouraged to learn from the experience and develop a better understanding of the complaints process.(h) Confidentiality:(i) In addition to customer confidentiality, the process must ensure confidentiality for staff who have a complaint made against them and the details must only be known to those directly concerned;(ii) Customer information must be protected and not disclosed, unless the customer consents otherwise; and(iii) Protect the customer and customer's identity as far as is reasonable to avoid deterring complaints due to fear of inconvenience or discrimination.(i) Objectivity monitoring: Investment firm licenseesG must monitor responses to customers to ensure objectivity which could include random monitoring of resolved complaints.(j) Charges: The process must be free of charge to customers;(k) Customer Focused Approach:(i) Investment firm licenseesG must have a customer focused approach;(ii) Investment firm licenseesG must be open to feedback; and(iii) Investment firm licenseesG must show commitment to resolving problems.(l) Accountability: Investment firm licensees must ensure accountability for reporting actions and decisions with respect to complaints handling.(m) Continual improvement: Continual improvement of the complaints handling process and the quality of products and services must be a permanent objective of the investment firm licenseeG .Amended: January 2012
Adopted: October 2011
BC-3.4 Internal Complaint Handling Procedures
Investment firm licensee'sG internal complaint handling procedures must provide for:(a) The receipt of written complaints;(b) The appropriate investigation of complaints;(c) An appropriate decision-making process in relation to the response to a customer complaint;(d) Notification of the decision to the customer;(e) The recording of complaints; and(f) How to deal with complaints when a business continuity plan (BCP) is operative.Adopted: October 2011
An investment firm licensee'sG internal complaint handling procedures must be designed to ensure that:(a) All complaints are handled fairly, effectively and promptly;(b) Recurring systems failures are identified, investigated and remedied;(c) The number of unresolved complaints referred to the CBB is minimized;(d) The employee responsible for the resolution of complaints has the necessary authority to resolve complaints or has ready access to an employee who has the necessary authority; and(e) Relevant employees are aware of the investment firm licensee'sG internal complaint handling procedures and comply with them and receive training periodically to be kept abreast of changes in procedures.Adopted: October 2011
BC-3.5 Response to Complaints
An investment firm licenseeG must acknowledge in writing customer written complaints within 5 working days of receipt.Adopted: October 2011
An investment firm licenseeG must respond in writing to a customer complaint within 4 weeks of receiving the complaint, explaining their position and how they propose to deal with the complaint.Adopted: October 2011
An investment firm licenseeG should decide and communicate how it proposes (if at all) to provide the customer with redress. Where appropriate, the investment firm licenseeG must explain the options open to the customer and the procedures necessary to obtain the redress.Adopted: October 2011
Where an investment firm licenseeG decides that redress in the form of compensation is appropriate, the investment firm licenseeG must provide the complainant with fair compensation and must comply with any offer of compensation made by it which the complainant accepts.Adopted: October 2011
Where an investment firm licenseeG decides that redress in a form other than compensation is appropriate, it must provide the redress as soon as practicable.Adopted: October 2011
Should the customer that filed a complaint not be satisfied with the response received as per Paragraph BC-3.5.2, he can forward the complaint to the Compliance Directorate at the CBB within 30 calendar days from the date of receiving the letter from the investment firm licenseeG .Adopted: October 2011
BC-3.6 Records of Complaints
An investment firm licenseeG must maintain a record of all customers' complaints. The record of each complaint must include:(a) The identity of the complainant;(b) The substance of the complaint;(c) The status of the complaint, including whether resolved or not, and whether redress was provided; and(d) All correspondence in relation to the complaint. Such records must be retained by the investment firm licenseeG for a period of 5 years from the date of receipt of the complaint.Adopted: October 2011
BC-3.7 Reporting of Complaints
An investment firm licenseeG must submit to the CBB's Compliance Directorate a quarterly report summarising the following:(a) The number of complaints received;(b) The substance of the complaints;(c) The number of days it took the investment firm licenseeG to acknowledge and to respond to the complaints; and(d) The status of the complaint, including whether resolved or not, and whether redress was provided.Adopted: October 2011
BC-3.7.2Added: July 2013
Where no complaints have been received by the licensee within the quarter, a 'nil' report should be submitted to the CBB's Compliance Directorate.Added: July 2013
BC-3.8 Monitoring and Enforcement