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Location: Central Bank of Bahrain Volume 6—Capital Markets > Part A > Institutions > CSD — Clearing, Settlement and Depository
  • CSD — Clearing, Settlement and Depository

    • CSD-A Introduction

      • CSD-A.1 Purpose

        • Executive Summary

          • CSD-A.1.1

            Module CSD sets out the Central Bank of Bahrain's regulatory framework governing licensing of clearing housesG and central depositoriesG operating in or from the Kingdom of Bahrain.

          • CSD-A.1.2

            The CSD Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of licensed clearing housesG and central depositoriesG in the Kingdom of Bahrain. It sets out the CBB requirements for their licensing and authorisation, and the initial as well as ongoing compliance requirements.

          • CSD-A.1.3

            The key principles underlying the approach of the CBB in this Module aim:

            (a) To promote the safety and efficiency of clearing and settlementG facilities that support systemically-important markets or form an integral part of the financial infrastructure;
            (b) To reduce systemic risk;
            (c) To reduce direct counterparty risk in securitiesG transactions by use of contributions from depository participants'G members, as well as by imposing adequate risk management techniques, including the requirement of cash cover and collateral;
            (d) To ensure finality of settlement;G
            (e) To reduce cost of clearing and settlementG of transactions; and
            (f) To ensure that the ownership and rights of investors are protected.

        • Legal Basis

          • CSD-A.1.4

            Article 1 of the CBB Law defines "Financial Sector Support Institutions" and "Financial Institutions" and the definition includes institutions licensed for operating clearance houses, settlement of payments, cheques and financial papers, and institutions which are wholly or partly set-up by financial institutions licensed by the Central Bank in order to provide services of a pure financial nature to the financial services industry. Articles 38 and 39 of the CBB Law provides the Governor of the CBB with the power to issue Directives or regulations in respect of regulated services.

          • CSD-A.1.5

            Article 40 of the CBB Law states that no financial institution should be established or carry out any regulated services without the prior approval of the CBB.

          • CSD-A.1.6

            Article 80 (4) includes depository, clearance and settlement of securities as regulated activities of companies in the securities market.

          • CSD-A.1.7

            Article 94 of the CBB Law provides the CBB with the power to authorise registration of ownership of the securitiesG of a depositor in the name of a depository under a securitiesG deposit agreement in accordance with the form issued for this purpose by a depository.

          • CSD-A.1.8

            Subject to the rules and laws of evidence and electronic transactions, Article 96 specifies that computer data, electronic files, recorded telephone calls, telex and facsimile correspondance may be considered as forms of evidence of ownership of securitiesG when disputes relating to securitiesG occur.

          • CSD-A.1.9

            Articles 108 and 109 provides the CBB with the power to issue regulations regarding procedures for clearing and netting of transactions and related exceptions.

          • CSD-A.1.10

            Article 110 provides that the Central Bank shall issue terms and conditions for the provision of any pledge, insurance, collateral or title transfer collateral to beneficiaries according to a market contractG . Such terms and conditions are stipulated in detail under Resolution No (59) of 2011 in respect of Procedures Related to Pledging and Lien of Securities and the Discharge and Lifting of such Pledge and Liens, later amended as per Resolution No (30) of 2015.

            Amended: April 2016

          • CSD-A.1.11

            Article 178 provides the CBB with the power to issue regulations for enabling title to securitiesG to be evidenced and transferred without the need to produce a written instrument.

          • CSD-A.1.12

            Article 95 states that the CBB shall by regulation specify the procedures to be followed for the registration of pledges and liens on securitiesG and the discharge and lifting of such pledges and liens.

          • CSD-A.1.13

            Licensed clearing housesG and central depositoriesG shall be subject to Part 10 (Articles from 133 to 159) of the CBB Law with regards to cases of insolvency, the consequences of such insolvency and violation of the insolvency law by licenseesG , and compulsory liquidation. The CBB is entitled to place a licenseeG under administration in the event of insolvency, cancellation or amendment of the license of the clearing houseG or central depositoryG , and when it is in the best interests of the public to do so. Rules and regulations for placing a licenseeG under administration are set out in Articles 136143 of the CBB Law.

          • CSD-A.1.14

            Article 161 of the CBB Law stipulates a penalty for contravention of Article 40 of the CBB Law.

          • CSD-A.1.15

            This Module recognises Decree Law No (50) of 2014 regarding amendments to the provision of the Commercial Companies Law No (21) of 2001, particularly Articles 119 and 358A with respect to promulgating the CBB Law No (64) of 2006 related to the capital market regulated activities.

            Added: April 2016

          • CSD-A.1.16

            This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

            Added: April 2016

          • CSD-A.1.17

            This Module contains Resolution No (1) of 2007 (issued under Article 180 of the CBB Law) amended by Resolution No (26) of 2010 and further amended by Resolution No (1) of 2016 with respect to determining fees categories due for licensees and services provided by the CBB.

            Added: April 2016

          • CSD-A.1.18

            This Module contains Resolution No. (30) of 2015 in respect of amending Resolution No. (59) of 2011 for the purpose of extending the requirements related to the pledging and lien of securities and the discharge and lifting of such pledge and liens on securities issued by closed joint stock companies.

            Added: April 2016

          • CSD-A.1.19

            This Module contains Resolution No. (44) of 2014 with respect to promulgating a Regulation for Close-Out Netting under a Market Contract.

            Added: April 2016

      • CSD-A.2 Module History

        • Evolution of Module

          • CSD-A.2.1

            This Module was first issued in April 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

            Amended: April 2013

          • CSD-A.2.1A

            A list of recent changes made to this Module is provided below:

            Module Ref. Change Date Description of Changes
            CSD-1.1.1A to CSD-1.1.1C 04/2013 References added to requirements under Resolution No.(16) for the year 2012.
            CSD-1.2.3 04/2013 Updated name change to Form 3.
            CSD-1.4.1 and CSD-1.4.1A 04/2013 Provided details of annual fee due to the CBB.
            CSD-3.1.9A and CSD-3.1.9B 04/2013 Added reference to report institutional information (IIS) to the CBB.
            CSD-5.3.12 04/2013 Added reference to Form 3: Application for Approved Person Status
            CSD-5.3 04/2013 Expanded the scope of this Section to include all approved persons occupying controlled functions and the various related Rules and Guidance.
            CSD-1.4 04/2014 Clarified Rules and guidance on annual license fees.
            Module CSD 04/2016 Various minor corrections to clarify language and link defined terms to the glossary.
            CSD-A.1 04/2016 Legal basis updated to reflect various Resolutions.
            CSD-3.1.1 and CSD-3.1.1A 04/2016 Added requirements dealing with shareholders' meetings.
            CSD-5.3 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
            CSD-5.3.2A 04/2016 New Paragraph added to ensure segregation of responsibilities in licensees' staffing arrangements.
            CSD-B.2 07/2016 Section deleted and moved to Glossary.
            CSD-1.2.1 07/2016 Deleted duplicate type of license.
            CSD-1.3.3, CSD-1.3.11, CSD-3.5.3 and CSD-6.4.3 07/2016 Changed from Rule to Guidance.
            CSD-1.4.1 07/2016 Deleted legal reference as already included under CSD-A.1.17.
            CSD-2.16 and CSD-2.17 07/2016 CSD-2.1.7 deleted and content moved to CSD-2.1.6 as Rule.
            CSD-2.6.11 07/2016 Corrected cross reference.
            CSD-3.1.1 07/2016 Corrected wording of Subparagraphs.
            CSD-3.1.18 07/2016 Amended requirement to be applicable to all approved persons.
            CSD-1.3.12 07/2017 Amended wording of paragraph.
            CSD-1.3.13 07/2017 Added Paragraph to clarify the cost of publication.
            CSD-1.3.14 07/2017 Added Paragraph on means of publication.
            CSD-5.3.7B 04/2018 Amended Paragraph.

        • Superseded Requirements

          • CSD-A.2.2

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

            Circular/ other references Provision Subject
            BSE Clearing, Settlement & Central Depository & Registry Rules Rules that are contradictory to the provisions in this Module Rules and regulations relating to registry, clearing, settlement & central depository.
            BSE Clearing, Settlement and Central Depository Procedures Procedures that are contradictory to the provisions in this Module Scope of procedures to be carried out by clearance and settlement facilities and central depository.
            BSE Brokers & Custodians Resolutions Resolutions that are contradictory to the provisions in this Module Provisions for custodial services and services provided by brokerage companies at the BSE.
                 
                 

      • CSD-A.3 Interaction with other Modules

        • CSD-A.3.1

          All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.

        • CSD-A.3.2

          Licensed clearing housesG and licensed central depositoriesG must comply with Decree Law No. 4 of 2001 with respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 7 of 2001 with respect to Obligations Governing Institutions Concerning the Prohibition and Combating of Money Laundering; Ministerial Order No. 18 of 2002 Specifying the Powers of the Enforcement Unit in Implementing the Provisions of the Decree Law Promulgated with Respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 23 of 2002 with Respect to Procedures of Money Laundering Prevention and Prohibition; and Module AML (Anti-Money Laundering & Combating Financial Crime).

          Amended: April 2016

        • CSD-A.3.3

          Licensed clearing housesG must also comply with the CBB's Real Time Gross Settlement System (Membership) Regulations 2007 and other related rules, regulations and guidelines.

      • CSD-A.4 Division of Responsibilities

        • CSD-A.4.1

          SROs should be subject to the oversight of the regulator, and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

        • CSD-A.4.2

          SROs shall:

          (a) Have the capacity to carry out the purposes of governing laws, regulations and SRO rules, and to enforce compliance by its members and associated persons with those laws, regulations, and rules;
          (b) Treat all members of the SRO and applicants for membership in a fair and consistent manner;
          (c) Develop rules that are designed to set standards of behaviour for its members and to promote investor protection;
          (d) Submit to the regulator its rules for review and/or approval as the regulator deems appropriate, and ensure that the rules of the SRO are consistent with the public policy directives established by the regulator;
          (e) Cooperate with the regulator and other SROs to investigate and enforce applicable laws and regulations;
          (f) Enforce its own rules and impose appropriate sanctions for non-compliance;
          (g) Assure a fair representation of members in selection of its directors and administration of its affairs;
          (h) Avoid rules that may create uncompetitive situations; and
          (i) Avoid using the oversight role to allow any market participant to gain unfair advantage in the market.

        • CSD-A.4.3

          Regardless of the extent to which self-regulation is used, the CBB retains the authority to enquire into matters affecting investors or the market.

        • CSD-A.4.4

          Where the powers of an SRO are inadequate for enquiring into or addressing particular misconduct, or where a conflict of interest necessitates it, the CBB shall take over the responsibility for an enquiry from an SRO. It is important therefore, to ensure that the information provided by the SRO to the regulator allows these matters to be identified at an early stage.

        • CSD-A.4.5

          SRO's should follow similar professional standards of behaviour on matters such as confidentiality and procedural fairness as would be expected of the CBB.

    • CSD-B Scope of Application

      • CSD-B.1 Scope

        • CSD-B.1.1

          This Module shall apply to:

          (a) Clearing and settlementG services provided by a licensed clearing houseG in or from the Kingdom of Bahrain for the clearing and settlementG of securitiesG transactions; and
          (b) Custodial services for securitiesG offered by a central depositoryG in or from the Kingdom of Bahrain.

      • CSD-B.2 Definitions

        [This Section was deleted and moved to the Glossary under Part B in July 2016.]

        Deleted: July 2016

    • CSD-1 Establishment of Clearing House and Central Depository Facilities

      • CSD-1.1 Licensing Conditions

        • Requirement to be Licensed

          • CSD-1.1.1

            As per Article 40 of the CBB Law, no personG shall operate or hold himself out as a licensed clearing houseG or licensed central depositoryG in the Kingdom of Bahrain, unless he has been licensed by the CBB under this section.

            Amended: April 2016

          • CSD-1.1.1A

            No personG may market any financial servicesG in the Kingdom of Bahrain unless:

            (a) Allowed to do by the terms of a license issued by the CBB;
            (b) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
            (c) Has obtained the express written permission of the CBB to offer financial servicesG .
            Added: April 2013

          • CSD-1.1.1B

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

            Added: April 2013

          • CSD-1.1.1C

            Persons in breach of Paragraph CSD-1.1.1A are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law.

            Amended: April 2016
            Added: April 2013

          • CSD-1.1.2

            No person shall establish, maintain, operate or hold himself out as intending to establish, maintain or operate a clearing houseG or central depositoryG , without notifying the CBB of such intention at least 90 days prior to the establishment or commencement of operations of the clearing houseG or central depositoryG .

          • CSD-1.1.3

            A person may apply to the CBB to reduce the period referred to in rule CSD-1.1.2 and the CBB may substitute such other period at its discretion.

            Amended: April 2016

          • CSD-1.1.4

            The CBB may require a person providing the notice period referred to in rule CSD-1.1.2 to furnish the CBB with such information or documents as the CBB considers necessary in relation to the notice.

            Amended: April 2016

        • Persons Operating Clearing or Depository Facilities

          • CSD-1.1.5

            The CBB may license a person operating a clearing or depository facility as a licensed clearing houseG or licensed central depositoryG for the purposes of this Module, if it has satisfied the criteria laid out in this Module. The CBB may, on application, give authorisation to overseas clearing houses, clearing corporations, or central depositories, particularly for facilitating the operations of the licensed market operators and cross-listings.

            Amended: April 2016

          • CSD-1.1.6

            The CBB shall give notice in the Official Gazette of any personG licensed under rule CSD-1.1.5.

          • CSD-1.1.7

            A license provided by the CBB under rule CSD-1.1.5 shall continue to have effect until it is withdrawn by the CBB.

          • CSD-1.1.8

            The CBB may withdraw the license of any licensed clearing houseG or licensed central depositoryG at any time, on its own initiative or on the application of the licensed clearing houseG or licensed central depositoryG , if the CBB is of the opinion that the considerations in rule CSD-1.1.5 are no longer valid or satisfied.

            Amended: April 2016

          • CSD-1.1.9

            The CBB shall give notice in the Official Gazette of any withdrawal under paragraph CSD-1.1.8.

          • CSD-1.1.10

            The CBB shall not withdraw on its own initiative the license of any personG operating a clearing facility or depository as a licensed clearing houseG or licensed central depositoryG , without giving the personG an opportunity to be heard.

            Amended: April 2016

      • CSD-1.2 Licensing Process and Timeline

        • CSD-1.2.1

          A person may apply to the CBB to be:

          (a) A licensed clearing houseG (including the function of central depositoryG ); and
          (b) A licensed central depositoryG .
          Amended: July 2016

        • CSD-1.2.2

          Unless otherwise approved, a person licensed as a clearing houseG or central depositoryG , or either a licensed clearing houseG or licensed central depositoryG is required to be registered as a joint stock company in Bahrain in accordance with the Commercial Companies Law (CCL) 2001.

        • CSD-1.2.3

          An application for a license to operate as a clearing houseG or central depositoryG under Article 39 of the CBB Law shall be made in Form 1 and shall be lodged with the CBB, together with the following:

          (a) Form 3 (Application for Approved Person Status) and Form 4 (Information on Shareholders and Subsidiaries);
          (b) Any relevant annexe and information specified in those forms;
          (c) A non-refundable prescribed application fee of BD100;
          (d) A business plan setting forth the internal controlling and risk management procedures of the enterprise; furthermore, the business plan must contain a budgeted accounting plan for the first three business years;
          (e) The memorandum and articles of association of the company or any of its constituent documents;
          (f) Three-year operational plans including the organisational structure, communication facilities and training programmes;
          (g) Draft business rules in respect of its operations as a licensed clearing house or central depository; and
          (h) The details of the proposed authorised and paid-up capital.
          Amended: April 2013

        • CSD-1.2.4

          The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.

        • CSD-1.2.5

          Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner.

        • CSD-1.2.6

          The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.

        • CSD-1.2.7

          The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.

        • CSD-1.2.8

          The CBB may grant an 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

          Amended: April 2016

        • CSD-1.2.8A

          An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Industry and Commerce unless it receives the final approval from the CBB.

          Added: April 2016

        • CSD-1.2.9

          At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with rule CSD-1.2.3.

        • CSD-1.2.10

          The CBB may call for further information if it is of the opinion that the information provided is incomplete or needs to be substantiated.

        • CSD-1.2.11

          Where a clearing house applies to be licensed as a clearing house including the function of a central depositoryG , the licensed clearing houseG shall apply for a single license as a clearing house and central depository, but must comply with the requirements of both a clearing house and central depository.

        • CSD-1.2.12

          A clearing houseG or central depositoryG shall confirm that, for the duration of the license, it shall satisfy all conditions and restrictions that may be imposed on it.

        • General Criteria Applicable to a Clearing House and Central Depository

          • CSD-1.2.13

            The applicant must also demonstrate to the satisfaction of the CBB that it has:

            (a) The financial resources, and the management and human resources with appropriate experience, necessary for the operation of a clearing houseG or central depositoryG ;
            (b) Made arrangements for the proper supervision of all transactions effected through the clearing houseG or central depository,G so as to ensure compliance with the clearing houseG or central depositoryG rules;
            (c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the recordsG of transactions effected through the clearing houseG or central depositoryG ;
            (d) IT infrastructure and necessary systems to perform its function and comply with its obligations, including business continuity and disaster recovery systems;
            (e) Procedures in place for compliance with obligations in respect of Anti-Money Laundering and the Combating of Financial Crime;
            (f) Rules and procedures in place for the disciplining of its members and depository participantsG ;
            (g) The ability to avoid and manage any conflicts of interest;
            (h) The ability to maintain confidentiality as required in this Module.

        • Criteria for Granting License of a Clearing House

          • CSD-1.2.14

            The CBB may license a personG as a clearing houseG if:

            (a) The CBB is satisfied that the establishment of a clearing houseG to be operated by a personG will;
            (i) Contribute towards developing the financial sector and enhance confidence therein; and
            (ii) Protect the interests of investors;
            (b) The CBB is satisfied that the personG , having applied to be a licensed clearing houseG under this Module, is able/will be able to comply with the obligations or requirements imposed on the clearing house;G and
            (c) If the CBB shall be satisfied that the rules of the applicant make satisfactory provision for:
            (i) The size and structure, or proposed size and structure, of the clearing facility;
            (ii) The nature of the services provided, or to be provided, by the clearing facility;
            (iii) The nature of the transactions cleared, or to be cleared, by the clearing facility;
            (iv) The clearing and settlement of transactions and for the management of trade and settlement risk;
            (v) The market where the transactions cleared through the clearing facility are traded or are to be traded;
            (vi) The nature of the investors or members, or proposed investors or members, who may use or have an interest in the clearing facility;
            (vii) Whether the personG operating the clearing facility is otherwise regulated by the CBB Law or any other law;
            (viii) Whether the clearing facility has the ability to perform its function as a central counterparty;
            (ix) Whether the clearing facility takes on counterparty risks, through novation or otherwise, in the clearing or settlementG of transactions;
            (x) The parties who may be affected in the event that the clearing facility runs into difficulties;
            (xi) The interests of the public;
            (xii) The ability to meet international standards and related protocols including IOSCO;
            (xiii) The ability to meet the International Securities Identification Number (ISIN) Standards and other international standards and protocols; and
            (xix) Any other circumstances that the CBB may deem relevant.

          • CSD-1.2.15

            This Paragraph has been left blank.

            Added: April 2013

        • Criteria for Granting License of a Central Depository

          • CSD-1.2.16

            The CBB may license a personG as a central depositoryG if:

            (a) The CBB is satisfied that the establishment of a central depositoryG to be operated by a personG will;
            (i) Contribute towards developing the financial sector and enhance confidence therein; and
            (ii) Protect the interests of investors; and
            (b) The CBB is satisfied that the personG , having applied to be a licensed central depositoryG under this Module, is able/will be able to comply with the obligations or requirements imposed on the central depository.G
            (c) The CBB shall be satisfied that the rules of the applicant make satisfactory provision:
            (i) With respect to the conditions under which securities may be deposited with, held by, withdrawn from, or transferred within, the central depository;
            (ii) For the holding of securities deposited with the central depository or its nominee company;
            (iii) For the processing of dealings in deposited securities;
            (iv) For facilitating the settlement of deposited securities;
            (v) For the protection of the interests of depositors and the protection and control of information on deposited securities and dealings therein;
            (vi) For the monitoring of compliance with, and for the enforcement of, the rules of the central depository;
            (vii)With respect to the maintenance of a policy or policies of insurance, and the establishment and maintenance of compensation funds, for the purpose of settling claims by depositors against the central depository, its nominee companies and depository participants; and
            (viii) Adequate regulation and supervision of its depository participants.

          • CSD-1.2.17

            Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.

      • CSD-1.3 Withdrawal of License or Cessation of Business

        • Voluntary Surrender

          • CSD-1.3.1

            A clearing houseG or central depositoryG which intends to cease operating must apply to the CBB to surrender its license.

          • CSD-1.3.2

            Any objections received from any user, member or depository participant of the clearing houseG or central depositoryG shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the licenseeG .

          • CSD-1.3.3

            The CBB may, subject to paragraph CSD-1.3.2, cancel the licenseG if it is satisfied that the licensed clearing houseG or licensed central depositoryG has ceased operating and that there are no pending obligations of the licensed clearing houseG or licensed central depositoryG or contracts traded.

            Amended: July 2016
            Amended: April 2016

          • CSD-1.3.4

            The licensed clearing houseG or licensed central depositoryG shall publish a notice of its intention to cease to operate its market in 2 daily newspapers, one in Arabic and the other in English, in Bahrain.

            Amended: April 2016

          • CSD-1.3.5

            The notice referred to in rule CSD-1.3.4 shall be subject to the approval of the CBB and shall be published at least 60 days prior to the cessation taking effect.

        • Cancellation of License

          • CSD-1.3.6

            The CBB may cancel any license held by a licensed clearing houseG or licensed central depositoryG if:

            (a) There exists a ground under which the CBB may refuse an application;
            (b) The licensed clearing houseG or licensed central depositoryG is in the course of being wound up or otherwise dissolved;
            (c) The licensed clearing houseG or licensed central depositoryG contravenes:
            (i) Any condition or restriction applicable in respect of its licenseG ;
            (ii) Any direction issued to it by the CBB;
            (iii) Any provision in this Module; or
            (iv) Any other CBB law, rule or regulation;
            (d) The licensed clearing houseG or licensed central depositoryG operates in a manner that is in the opinion of the CBB, contrary to the interests of the public or user; or
            (e) Any information or document provided by the licensed clearing houseG or licensed central depositoryG to the CBB is false or misleading.
            Amended: April 2016

          • CSD-1.3.7

            The CBB may not, subject to paragraph CSD-1.3.6, cancel any license that was granted to a licensed clearing houseG or licensed central depositoryG without giving the opportunity to be heard.

            Amended: April 2016

          • CSD-1.3.8

            The CBB may cancel a license that was granted to a licensed clearing houseG or licensed central depositoryG on any of the following grounds without giving an opportunity to be heard:

            (a) The licensed clearing houseG or licensed central depositoryG is in the course of being wound up or otherwise dissolved;
            (b) A receiver, a receiver and manager, or an equivalent personG has been appointed, in relation to or in respect of any propertyG of the licensed clearing houseG or licensed central depositoryG ; or
            (c) The licensed clearing houseG or licensed central depositoryG has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.
            Amended: April 2016

          • CSD-1.3.9

            A licensed clearing houseG or licensed central depositoryG shall be deemed to have ceased to operate if:

            (a) It has ceased to offer its services as a licensed clearing houseG or licensed central depositoryG for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or
            (b) It has ceased to offer a licensed clearing houseG or licensed central depositoryG services under a direction issued by the CBB.
            Amended: April 2016

          • CSD-1.3.10

            Any cancellation of a license of a licensed clearing houseG or licensed central depositoryG shall not operate so as to:

            (a) Avoid or affect any agreement, transaction or arrangement entered into by a licensed clearing houseG or licensed central depositoryG , whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or
            (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.
            Amended: April 2016

          • CSD-1.3.11

            Where the CBB cancels or amends a license of a licensed clearing houseG or licensed central depositoryG , notification to the licensed clearing houseG or licensed central depositoryG and an appeal against such a decision shall be governed by Article 48 of the CBB Law.

            Amended: July 2016
            Amended: April 2016

        • Publication of the Decision to Grant, Cancel or Amend a License

          • CSD-1.3.12

            The CBB shall publish its decision to grant, cancel or amend a license in the Official Gazette as well as in 2 local newspapers, one published in Arabic and the other in English in Bahrain.

            Amended: July 2017

          • CSD-1.3.13

            For the purpose of Paragraph CSD-1.3.12, the cost of publication of this notice must be borne by the clearing houseG or central depositoryG .

            Added: July 2017

          • CSD-1.3.14

            The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

            Added: July 2017

      • CSD-1.4 Annual Fees

        • Annual Fees Payable by Clearing House and Central Depository

          • CSD-1.4.1

            Every licensed clearing houseG or central depositoryG must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.

            Amended: July 2016
            Amended: April 2016
            Amended: April 2014
            Amended: April 2013

          • CSD-1.4.1A

            The following fee is currently prescribed for licensed clearing housesG and licensed central depositoriesG :

            Managing and operating clearing, settlement and central depository systems (fixed) BD10,000
            Amended: April 2016
            Added: April 2013

          • CSD-1.4.1B

            For new licenseesG , their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license is granted, is prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.

            Added: April 2014

          • CSD-1.4.2

            Where a license is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question, should a fee have been paid for that year.

            Amended: April 2014

          • CSD-1.4.3

            A licensed clearing houseG or licensed central depositoryG failing to comply with Paragraph CSD-1.4.1 may be subject to financial penalties as prescribed by the CBB.

            Added: April 2016

      • CSD-1.5 Power to Stop Commencement or Order Cessation

        • CSD-1.5.1

          The CBB may order a personG who has applied under rule CSD-1.1.1 not to establish or commence operation of a clearing or depository facility if:

          (a) The personG did not furnish the CBB with such information or documents as required under rule CSD-1.2.3 of this Module;
          (b) Any information or document provided by the personG to the CBB is or proves to be false or misleading; or
          (c) The CBB is of the opinion that it is in the interests of the capital market or financial sector.

        • CSD-1.5.2

          The CBB may, by notice in writing, order a licensed clearing houseG or central depositoryG to cease operating its clearing or depository facility if:

          (a) It has contravened any provision of the CBB Law, or any other law or rule in the course of operating its clearing facility;
          (b) It has not complied with any of the licensing requirements contained in this Module;
          (c) It provided any information or document to the CBB that is false or misleading;
          (d) In the opinion of the CBB, it is operating the clearing or depository facility in a manner that is likely to pose systemic risk to the financial system of Bahrain;
          (e) It is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
          (f) A receiver, a receiver and manager, or an equivalent personG has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any propertyG of the licensed clearing houseG or central depositoryG ;
          (g) It has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly; or
          (h) The CBB is of the opinion that it is in the interests of the public to do so.

        • CSD-1.5.3

          The CBB shall give notice in the Official Gazette of any order made under rule CSD-1.5.2.

        • CSD-1.5.4

          Subject to CSD-1.5.5, the CBB shall not make an order under rule CSD-1.5.1 or rule CSD-1.5.2 without giving the personG an opportunity to be heard.

        • CSD-1.5.5

          The CBB may order a personG not to establish or commence operation of a clearing or central depository facility under rule CSD-1.5.1, or to cease operating its clearing or central depository facility under rule CSD-1.5.2 on any of the following grounds without giving the personG an opportunity to be heard:

          (a) The personG is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
          (b) A receiver, a receiver and manager, or an equivalent personG has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any propertyG of the personG ;
          (c) The personG has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly.

        • CSD-1.5.6

          The CBB may direct, by notice in writing, a licensed clearing houseG or licensed central depositoryG , to whom an order to cease operations of its clearing facility has been made by the CBB under rule CSD-1.5.2, to take such action as it considers necessary, including any of the following actions:

          (a) Ordering the liquidation of all positionsG or part thereof, or the reduction in such positionsG ;
          (b) Altering conditions of deliveryG of transactions clearedG or settled,G or to be clearedG or settledG through the clearing or depository facility;
          (c) Fixing the settlementG price at which transactions are to be liquidated;
          (d) Requiring margins or additional margins for transactions clearedG or settledG or to be clearedG or settledG through the clearing or depository facility;
          (e) Modifying or suspending any of the business rulesG of the licensed clearing houseG or licensed central depositoryG ; or
          (f) Transferring the rights and obligations of that licensed clearing houseG or licensed central depositoryG to another licensed clearing houseG and licensed central depositoryG ; and

          the licensed clearing houseG or licensed central depositoryG shall comply with that direction.

          Amended: April 2016

        • CSD-1.5.7

          The CBB may modify any action taken by a licensed clearing houseG or licensed central depositoryG , including the setting aside of that action.

          Amended: April 2016

        • CSD-1.5.8

          Any order made under rule CSD-1.5.2 shall not operate so as to:

          (a) Avoid or affect any agreement, transaction or arrangement entered into in connection with the use of a clearing facility operated by the personG , whether the agreement, transaction or arrangement was entered into before or after the order of the cessation; or
          (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.

      • CSD-1.6 Establishment of a Clearing House and Central Depository as an SRO

        • CSD-1.6.1

          A licensed clearing houseG or licensed central depositoryG shall be established as self-regulatory organisations (SROs) and must comply with the requirements laid down under the CBB Law, this Module, its approved business rules and the other applicable laws, rules and regulations.

          Amended: April 2016

        • CSD-1.6.2

          As an SRO, the objectives and functions of the licensed clearing houseG and licensed central depositoryG will be to:

          (a) Promote fairness and investor protection;
          (b) Provide for admission, regulation, supervision and expulsion of participation or membership;
          (c) Promote fair access to its facilities and information;
          (d) Promote the provision of timely and accessible relevant data;
          (e) Treat all its members, depository participants, users and investors in a fair and transparent manner;
          (f) Promptly inform the CBB of any violations of the provision of this Module or any relevant act, laws or regulations by its members, depository participants, users or investors;
          (g) Act in good faith and avoid conflict of interest in the conduct of its functions;
          (h) Comply with the norms of corporate governance, as provided under Module HC (High-level Controls (Corporate Governance)); and
          (i) Provide adequate supervision and regulation over its members.
          Amended: April 2016

    • CSD-2 Clearing House and Central Depository Function

      • CSD-2.1 Clearing House Function

        • CSD-2.1.1

          A licensed clearing houseG shall act as the central counterparty of the clearing members for clearing and settlementG of transactions and for delivering securitiesG to and receiving securitiesG from clearing members and making paymentG to and receiving paymentG from clearing members in connection with any transaction.

        • Settlement Bank(s)

          • CSD-2.1.2

            The licensed clearing houseG may undertake the settlementG function directly, or from time-to-time appoint settlement bank(s)G to act as the settlement bank(s)G for the settlementG of the transactions.

            Amended: April 2016

          • CSD-2.1.3

            The appointed settlement bank(s)G shall act as agent(s) of the licensed clearing houseG for the collection and paymentG for funds towards settlementG obligations, margins and other dues.

            Amended: April 2016

        • Clearing Houses to Have Designated Accounts with Settlement Bank(s)

          • CSD-2.1.4

            Every clearing member of the licensed clearing houseG shall maintain a designated bank account with a settlement bankG .

            Amended: April 2016

          • CSD-2.1.5

            The clearing members shall operate the designated bank accounts only for the purpose of paymentG of their monetary obligations to the licensed clearing houseG and/or the licensed exchangeG and receipt of monetary entitlements from the licensed clearing houseG or licensed exchangeG .

            Amended: April 2016

        • Settlement Bank to Act on Instructions of the Clearing House

          • CSD-2.1.6

            The licensed clearing houseG shall instruct the settlement banksG to debit or credit the account maintained by the licensed clearing houseG and also the designated bank accounts of the clearing membersG . The settlement banksG shall act on such instructions, which shall be deemed to be confirmed orders by the clearing membersG to debit and/or credit funds, as may be specified in the instructions from time-to-time.

            Amended: July 2016
            Amended: April 2016

          • CSD-2.1.7

            [This Paragraph was merged with CSD-2.1.6 in July 2016.]

            Amended: July 2016
            Amended: April 2016

          • CSD-2.1.8

            Clearing membersG shall authorise settlement banksG to access their designated bank accounts for debiting and/or crediting their accounts electronically, on the instructions of the licensed exchangeG or licensed clearing houseG .

            Amended: April 2016

        • Settlement Banks to Inform Status

          • CSD-2.1.9

            If there is any shortage in meeting monetary obligations by a clearing memberG relating to debits into a designated bank account, the settlement bankG shall forthwith report such instances of shortage to the officer of the licensed clearing houseG and licensed exchangeG designated for the purpose in a mutually agreed mode of communication.

            Amended: April 2016

      • CSD-2.2 Settlement by Clearing House

        • CSD-2.2.1

          All securities transactions shall be settled through the licensed clearing houseG , by deliveryG and paymentG by the clearing membersG to the licensed clearing houseG in accordance with the provisions contained in this Module, the rules of the licensed clearing houseG and relevant directives or provisions that the CBB may from time-to-time prescribe.

          Amended: April 2016

        • CSD-2.2.2

          Arrangements for clearing and settlementG systems should provide for the prompt verification of a trade, as close as possible to real-time verification (including pre-validation).

        • CSD-2.2.3

          Information which records the transaction, allows it to be checked and provides the basis for settlementG should be available.

        • Settlement Rules and Regulations Form Part of Contracts

          • CSD-2.2.4

            All the clearance and settlementG rules and regulations in force from time-to-time relating to any procedure for the clearing and settlementG of transactions by or through the licensed clearing houseG and the provisions of this Module shall be construed to be part of the contracts entered into by any trading member and/or clearing member with his clients and between trading members, inter-se, in any securityG or securitiesG .

        • Settlement Procedure

          • CSD-2.2.5

            The licensed exchange or clearing houseG shall prescribe the procedure, schedule, manner and mode to be followed in respect of settlementG of all transactions contracts entered into or to be entered into in any securityG or securitiesG by the clearing membersG through the licensed clearing houseG .

            Amended: April 2016

          • CSD-2.2.6

            All the clearing membersG , custodians, clearing banks, central depositoriesG , depository participantsG and other personsG having beneficial interest in settlementG shall comply with the provisions contained in the rules and regulations of the licensed exchangeG and the rules of the licensed clearing houseG from time-to-time.

            Amended: April 2016

          • CSD-2.2.7

            Key aspects of the settlementG process that the legal framework should support include the following:

            (a) Enforceability of transactions;
            (b) Protection of customer assets, particularly against loss upon the insolvency of a custodian;
            (c) Dematerialisation of securitiesG and the transfer of securitiesG by book entry;
            (d) Netting arrangements;
            (e) SecuritiesG lending, including repurchase agreements and other economically equivalent transactions;
            (f) Finality of settlementG ;
            (g) Margin trading and securities lending and borrowing;
            (h) Arrangements for achieving deliveryG versus paymentG ;
            (i) Default rulesG addressing the consequences of a member's default;
            (j) Arrangement for registration of pledges and liens; and
            (k) Liquidation of assets pledged or transferred as collateral to support members' obligations.
            Amended: April 2016

          • CSD-2.2.8

            The licensed clearing houseG shall maintain a settlement guarantee fundG to guarantee settlementG obligations of clearing membersG .

            Amended: April 2016

          • CSD-2.2.9

            The licensed clearing houseG shall deliver, at its discretion, securitiesG which it has received from a clearing memberG to any other clearing memberG who is entitled to the same.

            Amended: April 2016

          • CSD-2.2.10

            The licensed clearing houseG shall determine the settlementG obligations relating to deliveryG and receipt of securitiesG by and between clearing membersG to be exchanged electronically through the clearing and settlementG system of the licensed clearing houseG .

            Amended: April 2016

        • Timing of Settlement

          • CSD-2.2.11

            Final settlementG should occur no later than the end of the settlementG day as approved by the CBB.

          • CSD-2.2.12

            The timing of settlementG finality should be defined clearly to all the members.

        • Approval of Settlement System

          • CSD-2.2.13

            The settlement system of a licensed clearing houseG must be able to effect:

            (a) SettlementG of transfer orders within the system itself; and
            (b) Be able to comply with the requirements stipulated in Paragraph CSD-2.2.7.
            Amended: April 2016

          • CSD-2.2.14

            If the CBB determines that the criteria specified in rule CSD-2.2.13 have been met as regards a designated system, it shall issueG in respect of the system a certificate certifying to that effect ("certificate of finality"), and specify a date and time from which the certificate shall have effect.

          • CSD-2.2.15

            If the CBB is unable to make a determination in the terms mentioned in rule CSD-2.2.13 as regards a designated system, it shall inform the system operator in writing accordingly, giving particulars of the criteria specified in paragraph CSD-2.2.7 which have not been met, or of the further information it requires in order to make a determination in relation to such criteria.

          • CSD-2.2.16

            A certificate of finality in respect of a designated system remains in effect until it is revoked.

        • Finality of Settlement and Precedence Over Law of Insolvency

          • CSD-2.2.17

            In line with Article 108 of the CBB Law:

            (a) This Module shall be regarded as the requirements regarding conditions and controls to be incorporated in a Market Contract, as well as the procedures for carrying out clearing according to such contract;
            (b) Notwithstanding the provisions of any other law relating to clearing, bankruptcy or insolvency, any Close-out Netting shall be carried out according to the Market Contract in connection with debts, loans and dealings between the parties thereof that were originated or completed before any of the parties became insolvent or bankrupt. The same shall apply against the parties of the contract, their receivers in bankruptcy and their creditors; and
            (c) The previous paragraph shall not apply if one party knows or ought to have known that:
            (i) An application for the liquidation and winding up of the other party by reason of insolvency, is being considered by the concerned authority; or
            (ii) The other party has taken formal steps under any other applicable law to liquidate or wind up by reason of bankruptcy.

          • CSD-2.2.18

            In line with Article 109 of the CBB Law:

            (a) Notwithstanding the provisions of any other law, no restriction or suspensions shall be applied to any provision related to clearance according to a Market Contract; and
            (b) Notwithstanding the provisions of any other law relating to clearance, bankruptcy or insolvency, the parties in a Market Contract may:
            (i) Agree to any system which will enable the parties to convert a non-financial obligation into a financial one of equivalent value and to valuate such an obligation for the purposes of any clearance or netting;
            (ii) Agree on the rate of exchange, or the method to be used to establish the rate of exchange to be applied in effecting any clearance or netting when the sums to be cleared or netted are in different currencies, and to establish the currency in which payment of the net sum is to be effected; or
            (iii) Agree that any transactions carried out pursuant to any Market Contract shall be treated as a single transaction for the purposes of the contract, whether such transactions were complete by the parties, a receiver in bankruptcy, a competent court, an officer representing the parties or that such transactions have been categorized or attributed to a certain type of trading.

      • CSD-2.3 Arrangements for Depository Services

        • CSD-2.3.1

          The clearing houseG shall put in place necessary arrangements to avail of the services of depositoriesG licensed by the CBB.

        • CSD-2.3.2

          A clearing memberG shall be required to maintain a designated account with one or more depositoriesG .

          Amended: April 2016

      • CSD-2.4 Central Depository Function

        • Securities Accounts and Records

          • CSD-2.4.1

            No personG shall deal in deposited securities without first having a securities accountG .

          • CSD-2.4.2

            A depository participantG which deals in deposited securitiesG as principal shall, in relation to such dealing, open and maintain a securities accountG with the central depositoryG .

            Amended: April 2016

          • CSD-2.4.3

            A central depositoryG may establish different types of securities accountsG for different classes of personsG .

          • CSD-2.4.4

            Every securities accountG opened with a central depositoryG shall be in the name of the beneficial ownerG of the deposited securities.

          • CSD-2.4.5

            The personG opening the securities accountG shall make a declaration in such manner as may be specified in the rules of the central depositoryG that he is the beneficial ownerG of deposited securitiesG .

        • Issuance of Statements of Accounts

          • CSD-2.4.6

            A central depositoryG shall issue to all securities holders statements of accounts in respect of all deposited securitiesG held in custody by, or registered in the name of the central depositoryG for the securities holders at such time and in such manner as may be provided in the rules of the central depositoryG .

          • CSD-2.4.7

            Notwithstanding rule CSD-2.4.6, a securities holder may, at any time, by written notice, require the central depositoryG to issue to him a statement of account in respect of all or any of the deposited securitiesG for the time being held in custody by, or registered in the name of the central depositoryG .

            Amended: April 2016

          • CSD-2.4.8

            A central depositoryG shall, on receipt of a written notice under paragraph CSD-2.4.7 and upon paymentG of any charges which may be imposed under these rules, issue to the securities holder the statement so required.

          • CSD-2.4.9

            A statement of account issued under this rule shall be prima facie evidence of the truth of the matters specified in the statement.

      • CSD-2.5 Authorised Depository Participant

        • CSD-2.5.1

          A central depositoryG must appoint any of the personsG referred to in Paragraph CSD-2.5.2 to be a depository participantG for all or any of the following purposes:

          (a) To facilitate the deposit of securitiesG ;
          (b) To open, maintain and close securities accountsG ;
          (c) To make entries in securities accountsG ;
          (d) To collect such fees and charges imposed by the central depositoryG as may be provided under these rules; or
          (e) Such other incidental and ancillary purposes as may be specified by the rules of the central depositoryG .
          Amended: April 2016

        • CSD-2.5.2

          A central depositoryG may appoint as a depository participantG any of the following:

          (a) A stock exchange;
          (b) A clearing houseG or depository;
          (c) A bank licensed by the CBB;
          (d) [This Subparagraph was deleted in April 2016]; or
          (e) An investment firm licenseeG licensed by the CBB;

          and any depository participantG so appointed, in carrying out all or any of the purposes mentioned in rule CSD-2.5.1, shall, when so required by the central depositoryG , in respect of such purposes, be authorised to give, divulge, reveal or disclose to the central depositoryG any information or documents relating to a securities accountG .

          Amended: April 2016

        • Agreement Between Depository and Depository Participant

          • CSD-2.5.3

            A central depositoryG shall enter into an agreement with one or more depository participantsG as its agent.

          • CSD-2.5.4

            Every agreement shall be consistent with the provisions of this Module.

      • CSD-2.6 Provisions Relating to Immobilised Securities

        • CSD-2.6.1

          A company or issuer must, in respect of securitiesG listed or quoted on a licensed exchangeG or market operator give notice to the public and its security holders of its intention to immobilise the securitiesG .

          Amended: April 2016

        • CSD-2.6.2

          A listed company may from time-to-time after consultation with the licensed exchangeG prescribe that any securityG listed or quoted on the licensed exchangeG , or proposed to be listed or quoted on the licensed exchangeG or licensed market operator, be immobilised by depositing such securityG with the central depositoryG .

          Amended: April 2016

        • CSD-2.6.3

          A central depositoryG or its depository participantG , as the case may be shall, within the period prescribed in the rules, after the deposit by any personG of a certificate and the instruments of transfer in respect thereof, if any, lodge the certificate and instrument with the issuerG of the securityG within two market days.

        • Verification of Certificates and Transfer to a Central Depository

          • CSD-2.6.4

            The issuerG shall, on receipt of the certificate and instrument, forthwith, do all such acts and things as may be necessary in order to register the transfer of the securityG underlying such certificate in the name of the central depositoryG .

          • CSD-2.6.5

            Where an issuerG refuses registration of a transfer, it shall serve on the transferor and the central depositoryG , being the transferee, a written notice giving the reasons for such refusal, within 7 days.

          • CSD-2.6.6

            Without prejudice to the right of an issuerG to refuse to register a transfer under any written law, the issuerG shall refuse registration of the transfer mentioned in rule CSD-2.6.8 if:

            (a) It ascertains that the certificate is not a genuine certificate, or is a certificate that was reported lost or destroyed; or
            (b) In relation to any such securityG , it discovers that:
            (i) There has been a duplication in the issuance of the certificate representing the securityG ;
            (ii) Such certificate is a certificate issued in excess of the issued share capital of the issuerG ; or
            (iii) It has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of the securityG underlying such certificate.
            Amended: April 2016

          • CSD-2.6.7

            Within seven market days after a transfer is lodged with an issuerG or within such longer period as may be allowed in writing by a central depository,G the issuerG shall complete and deliver the appropriate certificate to the central depositoryG .

            The central depository may refuse entry of the certificates deposited where prima facie:

            (a) There are discrepancies between the securities received and the transfer lodged; or
            (b) The securities are invalid, not genuine.

          • CSD-2.6.7A

            The central depositoryG may refuse entry of the certificates deposited where prima facie:

            (a) There are discrepancies between the securitiesG received and the transfer lodged; or
            (b) The securitiesG are invalid, not genuine.
            Added: April 2016

        • Issuance of Consolidated Statements

          • CSD-2.6.8

            A central depositoryG may require an issuerG of deposited securities to issueG in the name of the central depositoryG a consolidated statement for such securitiesG .

          • CSD-2.6.9

            The issuerG shall, upon receipt of a requirement as mentioned in Paragraph CSD-2.6.8 forthwith take such action as may be appropriate for the issuance of the consolidated statement to the central depositoryG .

            Amended: April 2016

        • Withdrawal of Immobilised Securities

          • CSD-2.6.10

            A depositor may by an application to the central depositoryG withdraw an immobilised securityG standing to the credit of his securities accountG .

            Amended: April 2016

          • CSD-2.6.11

            Where an application is made under paragraph CSD-2.6.10 for the withdrawal of an immobilised securityG which is registered in the name of a central depositoryG or its depository participantG , the central depositoryG shall forthwith place such securityG under suspense with the issuerG including:

            (a) The certificate representing the securityG ; and
            (b) The instrument of transfer duly executed by the central depositoryG or its depository participantG , as the case may be,

            for the purpose of effecting the transfer in favour of the depositor.

            Amended: July 2016
            Amended: April 2016

          • CSD-2.6.12

            An issuerG shall, within two weeks after the certificate and the instrument of transfer in respect thereof are lodged with it:

            (a) Complete and have ready for deliveryG to the depositor, the appropriate certificate registered in the name of such depositor; and
            (b) Unless otherwise instructed by the depositor, send or deliver the completed certificate to the depositor.

          • CSD-2.6.13

            No personG shall trade any securityG withdrawn from a central depositoryG on a licensed exchange,G unless such securityG is redeposited in a central depositoryG .

        • Central Depository Deemed a Bare Trustee

          • CSD-2.6.14

            A central depositoryG shall, in relation to deposited securities which are registered in its name:

            (a) Not be deemed to have an interest in relation to the book-entry securitiesG which are registered in its name; and
            (b) Be deemed to be a bare trustee.

        • Central Depository and Depository Participant not Liable for Loss

          • CSD-2.6.15

            A central depositoryG and depository participantG shall not, except in the case of any willful act, omission, neglect or default on the part of the central depositoryG or its authorised depository participantG , be liable for any loss, damage or liability suffered or incurred by any personG in respect of dealing in any securityG .

            Amended: April 2016

      • CSD-2.7 Dematerialisation and Central Registry Function

        • Dematerialisation of Securities

          • CSD-2.7.1

            A company shall, in respect of securitiesG listed or quoted on a licensed exchangeG give notice to the public and its shareholders of its intention to dematerialise the securitiesG . Any issue of such securitiesG after this Module comes into effect shall be in dematerialised form.

            Amended: April 2016

          • CSD-2.7.2

            A listed company may from time-to-time after consultation with the licensed exchangeG prescribe that any securityG listed or quoted on the licensed exchange,G or proposed to be listed or quoted on the licensed exchange,G be dematerialised.

            Amended: April 2016

          • CSD-2.7.3

            On or after the dematerialisationG date, every issuerG of a securityG prescribed as a dematerialised securityG shall:

            (a) Surrender the physical register of securities holders to the central depositoryG ; and
            (b) Provide or instruct its registrar to provide information to the central depositoryG of any securities holder who appears in the appropriate register as a holder of a certificate not already dematerialised by the central depositoryG .
            Amended: April 2016

          • CSD-2.7.4

            A central depositoryG shall maintain information of the holders of securitiesG in a computerised recordG form, in accordance with the relevant provisions of Module AML (Anti-Money Laundering & Combating Financial Crime).

            Amended: April 2016

          • CSD-2.7.5

            No issuerG shall after the dematerialisationG date issue any certificate in respect of a dematerialised securityG .

            Amended: April 2016

          • CSD-2.7.6

            With effect from the dematerialisation date, a reference in respect of a dematerialised securityG , to:

            (a) A register of members or securities holders including branch registers, maintained by a company under the Commercial Companies Law, 2001, shall be deemed to be a reference to the recordG of securities holders maintained by the central depositoryG ;
            (b) A transfer of securitiesG from a transferee shall be deemed to be a reference to a book entry transfer performed by the central depositoryG ; and
            (c) Any certificate, instrument of transfer or any movable propertyG representing any securityG which is used as prima facie evidence of ownership of the securityG shall be deemed to be a reference to a statement of account issued by the central depositoryG .
            Amended: April 2016

        • Dealings Effected by Means of Electronic Process

          • CSD-2.7.7

            A dealing by a beneficial ownerG in respect of a dematerialised securityG shall be effected by means of an entry in the securitiesG account of the beneficial ownerG .

            Amended: April 2016

          • CSD-2.7.8

            Transfer of securitiesG shall be effected by beneficial ownersG or their authorised nominees.

      • CSD-2.8 Entries in Securities Accounts

        • CSD-2.8.1

          An entry in a securities accountG in respect of a dealing, shall:

          (a) In the case of a securities accountG established and maintained directly by a central depositoryG , be deemed to have been made by, or with the authority of, the central depositoryG ; and
          (b) In the case of a securities accountG established through and maintained by a depository participantG on behalf of a central depositoryG , be deemed to have been made by, or with the authority of, the depository participantG .
          Amended: April 2016

        • Entries in Securities Accounts to Specify Date, Time and Person Making the Entries

          • CSD-2.8.2

            An entry in a securities accountG made under the rule CSD-2.8.1 shall specify the date and time of the making of such entry and, in the case of an entry made by a personG , the identity of the personG making the entry.

        • Record of an Entry Prima Facie Evidence

          • CSD-2.8.3

            A recordG of an entry in a securities accountG in respect of a dealingG in deposited securitiesG shall be prima facie evidence of the truth of the matters so recorded.

        • Record of Securities Holders Beneficial Owner to be Issued to an Issuer on Request

          • CSD-2.8.4

            An issuerG of any deposited securityG may, in the manner and period prescribed by the rules of the central depositoryG , request the central depositoryG to issue him a recordG of the securities holders holding the aforementioned securitiesG under their securities accountsG , as at the date of the notice or such other date as may be specified in the notice.

          • CSD-2.8.5

            The recordG of securities holders referred to in Paragraph CSD-2.8.4 shall contain the names, addresses, number of the deposited securitiesG acquired by each securities holder and such other information and particulars of the securities holders as may be required and prescribed by the rules of the depository.

            Amended: April 2016

        • Charging or Pledging of Securities

          • CSD-2.8.6

            The central depositoryG shall include in its Business Rules the rules and procedures in respect of the pledge of securitiesG , including the acceptance of a pledge by a beneficial ownerG and the responsibilities of the pledger in respect of effecting the pledge.

            Amended: April 2016

          • CSD-2.8.7

            Where a deposited security is charged or pledged by a securities holder (hereinafter referred to as "pledger") in favour of any personG ("pledgee"), a central depositoryG or a depository participantG , with or through whom the securities accountG of the securities holder is maintained shall, on a request on the prescribed form made by the securities holder or pledger, create a pledge on the relevant securities within the securities accountG .

            Amended: April 2016

          • CSD-2.8.8

            Where a request is made by a securities holder as provided under Paragraph CSD-2.8.7, such request shall be supported by documents evidencing such charge or pledge.

            Amended: April 2016

          • CSD-2.8.9

            Where a pledge over a deposited securityG has been discharged or released, the central depositoryG or its depository participantG , as the case may be, shall, upon receipt of a notice in writing from the pledgee confirming the same, release the pledge within the securities accountG of the pledger.

            Amended: April 2016

        • Securities in Suspense

          • CSD-2.8.10

            A central depositoryG must specify that any deposited security in a securities accountG as being in suspense in any of the following circumstances:

            (a) Where the securitiesG have not been made fully paid-up;
            (b) Where the central depositoryG has reason to believe or is satisfied that there is a breach of the rules of the central depositoryG , licensed exchangeG or licensed clearing houseG ;
            (c) Where the central depositoryG has been served with a notice by the CBB that the CBB suspects or has reason to believe that a provision of a related law has been contravened and that securities accountG of a securities holder is relevant to its investigations regarding the contravention;
            (d) Where the central depositoryG has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of a deposited securityG ;
            (e) Where the securitiesG or interim certificates are lost and no other securitiesG or certificates are given in lieu; or
            (f) Such other circumstances as may be prescribed by the CBB.
            Amended: April 2016

          • CSD-2.8.11

            In the case of a securityG that is specified in the securities accountG as being in suspense pursuant to rule CSD-2.8.10:

            (a) The rights, benefits, powers and privileges of a securities holder; and
            (b) The liabilities, duties and obligations of a securities holder, in respect of, or arising from, the suspension of such a securityG ,

            shall be as prescribed by the suspension order.

            Amended: April 2016

          • CSD-2.8.12

            Where the central depositoryG specifies that any deposited security in a securities accountG has been suspended, the central depositoryG shall inform the securities accountG holder, issuer, the relevant depository participantsG and the relevant licensed exchangeG .

            Amended: April 2016

      • CSD-2.9 Proceedings of Licensed Clearing House and Licensed Central Depository Take Precedence Over Law of Insolvency

        • CSD-2.9.1

          In line with Articles 108 and 109 of the CBB Law and Resolution No (44) of 2014 with respect to promulgating a Regulation for Close-out Netting under a Market Contract, none of the following shall be regarded as to any extent invalid under the law on the grounds of inconsistency with the law relating to distribution of the assets of a personG on insolvency, bankruptcy or winding up, or on the appointment of a receiver over any of the assets of a personG :

          (a) A market contractG ;
          (b) The rules of a licensed clearing houseG relating to the settlementG of a market contractG ;
          (c) Any proceeding or other action taken under the rules of a licensed clearing houseG relating to the settlementG of a market contractG ;
          (d) A market chargeG ;
          (e) The default rulesG of a licensed clearing houseG or central depositoryG ; and
          (f) Any default proceedingsG .
          Amended: April 2016

        • CSD-2.9.2

          The powers of a relevant office-holder in his capacity as such, and the powers of a court acting under the law of insolvency, shall not be exercised in such a way so as to prevent or interfere with:

          (a) The settlementG in accordance with the rules of a licensed clearing houseG or licensed central depositoryG of a market contractG ; or
          (b) Any default proceedingsG taken in pursuant to default rulesG .
          Amended: April 2016

    • CSD-3 Obligations of a Clearing House and Central Depository

      • CSD-3.1 General Obligations of a Clearing House and Central Depository

        • CSD-3.1.1

          A licensed clearing houseG and licensed central depositoryG shall:

          (a) As far as is reasonably practicable, operate a safe and efficient clearing or central depositoryG facility;
          (b) Manage any risks associated with its business and operations prudently;
          (c) In discharging its obligations under this Module, not act contrary to the interests of the public, having particular regard to the interests of the investing public;
          (d) Ensure that access for participation in its clearing or central depositoryG facility is subject to criteria that are fair and objective, and that are designed to ensure the safe and efficient functioning of its facility and to protect the interests of the investing public;
          (e) Maintain business rulesG that make satisfactory provision for:
          (i) The clearing or central depositoryG facility to be operated in a safe and efficient manner; and
          (ii) The proper regulation and supervision of its members and depository participants;
          (f) Enforce compliance by its members and depository participants with its business rulesG ;
          (g) Have sufficient financial, human and system resources:
          (i) To operate a safe and efficient clearing or central depositoryG facility;
          (ii) To meet contingencies or disasters; and
          (iii) To provide adequate securityG arrangements;
          (h) Ensure that it appoints or employs fit and proper personsG as its chairman, chief executive officer, directors and key management officers;
          (i) Maintain efficient risk management and internal controls;
          (j) Maintain a recordG of all transactions effected through its clearing or central depositoryG facility in such form and manner as the CBB may prescribe, including:
          (i) The extent to which the recordG includes details of each transaction in line with the applicable laws, rules and regulations related to the Know Your Client and the Prevention and Prohibition of Money Laundering; and
          (ii) The period of time that the recordG is to be maintained.
          (k) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders meetings referred to in Subparagraph CSD-3.1.1(m);
          (l) Ensure that any agenda items to be discussed or presented during the course of meetings which require the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;
          (m) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and
          (n) Within a maximum of 15 calendar days of any shareholders' meetings referred to in Subparagraph CSD-3.1.1(m), provide to the CBB a copy of the minutes of the meeting.
          Amended: July 2016
          Amended: April 2016

        • CSD-3.1.2

          The CBB may by notice in writing, exempt any clearing or central depositoryG facility operated by a licensed clearing houseG or licensed central depositoryG from all or any of the provisions of this Module, if the CBB is satisfied that such exemption would not detract from the objectives specified in rule CSD-3.1.1.

          Amended: April 2016

        • CSD-3.1.3

          In rule CSD-3.1.1 (g), "contingencies or disasters" include technical disruptions occurring within automated systems.

        • CSD-3.1.4

          A licensed clearing houseG or licensed central depositoryG shall formulate and implement appropriate procedures for ensuring that its members or participants comply with the CBB Law, rules and regulations, and rules of the licensed clearing houseG or central depositoryG .

          Amended: April 2016

        • CSD-3.1.5

          A licensed clearing houseG or licensed central depositoryG shall, for the conduct of its business, at all times provide and maintain:

          (a) Adequate and properly equipped premises;
          (b) Competent personnel; and
          (c) Automated systems with adequate capacity, facilities to meet contingencies or emergencies, security arrangements and technical support.
          Amended: April 2016

        • CSD-3.1.6

          Internal rules and procedures of a licensed clearing houseG or central depositoryG must be enforceable with a high degree of certainty, so as to ensure its effective operation.

        • CSD-3.1.7

          The rules and contracts related to the operation of the clearing houseG or central depositoryG should be enforceable in the event of the insolvency of a member or depository participantG .

          Amended: April 2016

        • Obligation to Submit Periodic Financial Reports

          • CSD-3.1.8

            A licensed clearing houseG or central depositoryG shall submit to the CBB such reports in such form, manner and frequency as the CBB may prescribe. A licensed clearing houseG or central depositoryG shall submit to the CBB for the preceding quarter, in such form as may be approved by the CBB:

            (a) Within 3 months after the end of its financial year, a copy of its:
            (i) Annual reportG and directors' report prepared in accordance with the provisions of the IFRS; and
            (ii) Auditors' long form report;
            (b) Within 45 days after the end of each of the first 3 quarters of its financial year, a copy of its:
            (i) Profit and loss accounts; and
            (ii) Balance-sheet;
            (c) Within 3 months after the end of its financial year, a report on how the licensed clearing houseG or central depositoryG has discharged its responsibilities under the CBB Law and this Module during that financial year;
            (d) A report reviewed by the internal auditor relating to the business of operating the licensed clearing houseG or central depositoryG , at such time or on such periodic basis as may be specified by the CBB; and
            (e) Such other report as the CBB may require at such time or on such periodic basis as may be specified by the CBB.

          • CSD-3.1.9

            The auditors' long form report referred to in rule CSD-3.1.8 (a) (ii) shall include the findings and recommendations of the auditors, if any, on:

            (a) The risk management and internal controls of the licensed clearing houseG or central depositoryG ; and
            (b) The non-compliance with any:
            (i) Provision of the CBB Law;
            (ii) Direction issued by the CBB under the CBB Law and regulations; or
            (iii) Other relevant laws or regulations.

        • IIS Reporting Requirements

          • CSD-3.1.9A

            A licensed clearing houseG or licensed central depositoryG is required to complete online non-financial information related to its institution by accessing the CBB's institutional information system (IIS). LicenseesG must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, the licensee must still access the IIS quarterly and confirm the information contained in the IIS. LicenseesG must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.

            Amended: April 2016
            Added: April 2013

          • CSD-3.1.9B

            LicenseesG failing to comply with the requirements of Paragraph CSD-3.1.9A or reporting inaccurate information are subject to financial penalties or other enforcement actions.

            Amended: April 2016
            Added: April 2013

        • Obligation to Maintain Transparency

          • CSD-3.1.10

            A licensed clearing houseG or licensed central depositoryG must maintain complete transparency in relation to its operations, including clearing, settlement, depository and central registry with particular regard to:

            (a) Transaction execution;
            (b) SettlementG arrangements;
            (c) Fees and charges;
            (d) Margin requirements, including lending and borrowing;
            (e) Operational requirements; and
            (f) Business rulesG .
            Amended: April 2016

        • Obligation to Assist CBB

          • CSD-3.1.11

            A personG operating a clearing or depository facility shall provide such assistance to the CBB as the CBB may require for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provision of:

            (a) Such books and other information:
            (i) Relating to the business of the clearing or depository facility; and
            (ii) In respect of any transaction or class of transactions cleared or settled by the clearing facility, or accepted for deposit by a depository; and
            (b) Such other information or assistance, as the CBB may require for the proper administration of the CBB Law and regulations.
            Amended: April 2016

        • Obligation to Notify CBB of Certain Matters

          • CSD-3.1.12

            A personG operating a clearing or depository facility shall (including where a clearing facility carries on business or acquires a substantial shareholding in a central depository, or vice-versa), notify the CBB in the event of the following:

            (a) The carrying on of any business by the licensed clearing houseG or licensed central depositoryG other than:
            (i) The business of operating a clearing facility and/or depository;
            (ii) A business incidental to operating a clearing facility or depository; or
            (iii) Such business or class of businesses as the CBB may prescribe;
            (b) The acquisition by the licensed clearing houseG or licensed central depositoryG of a substantial shareholding in a corporation which does not carry on:
            (i) The business of operating a clearing facility or central depository;
            (ii) A business incidental to operating a clearing facility or central depository; or
            (iii) Such business or class of businesses as the CBB may prescribe;
            (c) The licensed clearing houseG or licensed central depositoryG becoming aware of a financial irregularity or other matter which in its opinion:
            (i) May affect its ability to discharge its financial obligations; or
            (ii) May affect the ability of a member or participant of the licensed clearing houseG or licensed central depositoryG to meet its financial obligations to the licensed clearing houseG or licensed central depositoryG ;
            (d) The licensed clearing houseG or licensed central depositoryG reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against a member or depository participant of the licensed clearing houseG or licensed central depositoryG ; and
            (e) Any other matter that the CBB may prescribe by regulations or specify by notice in writing to the licensed clearing houseG or licensed central depositoryG .
            Amended: April 2016

          • CSD-3.1.13

            A licensed clearing houseG or licensed central depositoryG shall, immediately after becoming aware of the occurrence of any of the following circumstances, notify the CBB in writing of:

            (a) Any civil or criminal legal proceeding instituted against the licensed clearing houseG or licensed central depositoryG , or any of its members or depository participantsG , whether in Bahrain or elsewhere;
            (b) Any disciplinary action taken against the licensed clearing houseG or licensed central depositoryG , or any of its members or depository participantsG by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
            (c) Any significant change to the regulatory requirements imposed on the licensed clearing houseG or licensed central depositoryG by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
            (d) Any admission or cessation of a bank to act as a settlement bankG for the licensed clearing houseG ;
            (e) Any failure by any party to debit or credit the relevant accounts for the purpose of the settlementG of transactions, including the settlementG of moneys, securitiesG or physically delivered futures contracts; and
            (f) Any disruption of or delay in any clearing, settlementG or central depository procedures of the licensed clearing houseG or licensed central depositoryG , including those resulting from any system failure.
            Amended: April 2016

          • CSD-3.1.14

            Where a circumstance under Subparagraphs CSD-3.1.13 (a), (b), (e) or (f) has occurred, the licensed clearing houseG or licensed central depositoryG shall, in addition to the notification required under Paragraph CSD-3.1.13, within 7 days of the occurrence of the circumstance, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken at the time of the occurrence, and the subsequent follow-up actions that the licensed clearing houseG or licensed central depositoryG has taken, or intends to take.

            Amended: April 2016

          • CSD-3.1.15

            A licensed clearing houseG or licensed central depositoryG shall, within a reasonable period of time prior to entering into negotiations to establish a clearing linkage, clearing arrangement, depository arrangement or co-operative arrangement with a personG establishing or operating another clearing facility or depository, notify the CBB of such intent to enter into negotiations.

            Amended: April 2016

          • CSD-3.1.16

            In rule CSD-3.1.15, ''co-operative arrangement'' shall not include:

            (a) Any joint development of products and services;
            (b) Any joint marketing efforts between the licensed clearing houseG or licensed central depositoryG and the personG operating an overseas market, or clearing or depository facility, in promoting the services of either entity; or
            (c) Any memorandum of understanding for the exchange of information.
            Amended: April 2016

          • CSD-3.1.17

            A licensed clearing houseG or licensed central depositoryG shall seek the approval of the CBB prior to making any change to the financial resources that are available to the licensed clearing houseG or licensed central depositoryG to support a default of its member; and

            (a) The CBB may grant its approval referred to above, subject to such conditions or restrictions as the CBB may deem fit.
            (b) For the purposes of this Paragraph, ''financial resources that are available to the licensed clearing houseG to support a default of its member'' shall not include margin trading facilities held with the licensed clearing houseG .
            Amended: April 2016

          • CSD-3.1.18

            A personG operating a clearing facility or depository shall, no later than 7 daysG after the occurrence of any of the following circumstances, notify the CBB of:

            (a) A change of an approved personG , in accordance with Section CSD-5.3;
            (b) A change of the address of the principal place of business at which it carries on the business of operating a clearing facility or depository;
            (c) A material change in the business of the clearing facility or depository; or
            (d) Such other matter as the CBB may prescribe.
            Amended: July 2016

          • CSD-3.1.19

            A licensed clearing houseG or licensed central depositoryG shall seek the approval of the CBB prior to accepting any new type of securitiesG (e.g. equities or warrants) for clearing, settlementG or deposit.

            Amended: April 2016

          • CSD-3.1.20

            The CBB may at its discretion, unless the timeframe is stipulated by law, decide on an application by the licensed clearing houseG or licensed central depositoryG to vary the timeframe for compliance with the obligations in this Module and substitute such timeframe.

            Amended: April 2016

          • CSD-3.1.21

            Any application for an extension of the timeframe in which to comply with the obligations of this Chapter must be made in writing, stating the extraordinary reason for such request.

            Amended: April 2016

      • CSD-3.2 Obligation to Maintain Confidentiality

        • CSD-3.2.1

          In line with Part 8 of the CBB Law, and except under circumstances specified in Paragraphs CSD-3.2.2 and CSD-3.2.3, a licensed clearing houseG or licensed central depositoryG and its officers and employees shall maintain, and aid in maintaining, confidentiality of all user informationG that:

          (a) Comes to the knowledge of the licensed clearing houseG or licensed central depositoryG or any of its officers or employees; or
          (b) Is in the possession of the licensed clearing houseG or licensed central depositoryG or any of its employees.
          Amended: April 2016

        • Exemption of Obligation to Maintain Confidentiality

          • CSD-3.2.2

            Rule CSD-3.2.1 shall not apply to:

            (a) The disclosure of user informationG for such purposes, or in such circumstances, as the CBB may prescribe;
            (b) Any disclosure of user informationG which is authorised by the CBB to be disclosed or furnished; or
            (c) The disclosure of user informationG pursuant to any requirement imposed under any written law or order of court in Bahrain.
            Amended: April 2016

          • CSD-3.2.3

            Rule CSD-3.2.1 shall not apply to the disclosure of user informationG by a licensed clearing houseG or licensed central depositoryG , or its officers or employees, for the following purposes or in the following circumstances:

            (a) The disclosure of user informationG is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;
            (b) The disclosure of user informationG is permitted for such purpose specified in writing by the user or, where the user is deceased, by his appointed personal representative;
            (c) The user informationG is disclosed to the approved holding company of the licensed clearing houseG or licensed central depositoryG ;
            (d) The disclosure of user informationG is necessary for the execution by the licensed clearing houseG or licensed central depositoryG of a transaction in any listed securitiesG or futures contracts, or clearing or settlementG of a transaction on a licensed exchangeG and such disclosure is made only to another user which is:
            (i) A party to the transaction; or
            (ii) A member of a licensed exchangeG or a licensed clearing houseG through which that transaction is executed, cleared or settled;
            (e) The disclosure of user informationG is necessary:
            (i) In any disciplinary proceedings of the licensed clearing houseG or licensed central depositoryG , provided that reasonable steps are taken to ensure that user informationG disclosed to any third personG is used strictly for the purpose for which the user informationG is disclosed; or
            (ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
            (f) The user informationG disclosed is already in the public domain;
            (g) The disclosure of user informationG is made in connection with an arrangement for protection against a default by a member or participant of the licensed clearing houseG or licensed central depositoryG to another member or participant of the licensed clearing houseG or licensed central depositoryG , who is identified by the licensed clearing houseG or licensed central depositoryG for the purposes of carrying out or undertaking the obligations under the arrangement;
            (h) The disclosure is required in accordance with international and multilateral arrangements including, but not limited to the IOSCO MMoU;
            (i) The disclosure of user informationG is made to a member or depository participant of the licensed clearing houseG or licensed central depositoryG in connection with an arrangement for the transfer to that member or depository participant of any contract or positionG from another member of the licensed clearing houseG or licensed central depositoryG who is in default;
            (j) The disclosure of user informationG is made in connection with:
            (i) The outsourcing or proposed outsourcing of any function of the licensed clearing houseG or licensed central depositoryG to a third party after obtaining the approval of the CBB;
            (ii) The engagement or potential engagement of a third party by the licensed clearing houseG or licensed central depositoryG to create, install or maintain systems of the licensed clearing houseG or licensed central depositoryG ; or
            (iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing houseG or licensed central depositoryG under a contract for service;
            (k) The disclosure of user informationG is necessary in:
            (i) An application for a grant of probate or letters of administration, or the resealing thereof in relation to the estate of a deceased user; or
            (ii) The administration of the estate of a deceased user, including such disclosure as may be required by the applicable laws, rules and regulations; or
            (l) The disclosure of user informationG is made in connection with:
            (i) In the case where the user is an individual, the bankruptcy of a user; or
            (ii) In the case where the user is a body corporate, the winding up or receivership of a user.
            Amended: April 2016

          • CSD-3.2.4

            Where user informationG is disclosed under Subparagraphs CSD-3.2.3 (g), (h) or (i), the licensed clearing houseG or licensed central depositoryG shall:

            (a) Maintain a recordG of:
            (i) The circumstances relating to the disclosure of user informationG referred to in that sub-paragraph; and
            (ii) In the case of disclosure of information, the particulars of:
            A. The arrangement for protection;
            B. The arrangement for transfer;
            C. The outsourcing of the function of the licensed clearing houseG or licensed central depositoryG ;
            D. The engagement of the third party; and
            E. The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing houseG or licensed central depositoryG under a contract for service, and make the recordG available for inspection by the CBB.
            (b) Disclose the user informationG insofar as this is necessary for the relevant purpose; and
            (c) Take reasonable steps to ensure that user informationG disclosed is used by the personG to whom the disclosure is made strictly for the relevant purpose, and that the user informationG is not disclosed by that personG to any other personG except with the consent of the licensed clearing houseG or licensed central depositoryG .
            Amended: April 2016

          • CSD-3.2.5

            Where disclosure of user informationG is permitted to be made for any purpose or in any circumstance under Paragraph CSD-3.2.3 to a body corporate, the user informationG may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.

            Amended: April 2016

          • CSD-3.2.6

            In Paragraphs CSD-3.2.4 and CSD-3.2.5, ''relevant purpose'' means:

            (a) In the case of the disclosure of information under Subparagraph CSD-3.2.3(g), the carrying out of the arrangement for protection;
            (b) In the case of the disclosure of information under Subparagraph CSD-3.2.3(h), the carrying out of the arrangement for transfer;
            (c) In the case of the disclosure of information under Subparagraphs CSD-3.2.3(j) and (i), facilitating the outsourcing of the function of the licensed clearing houseG or licensed central depositoryG ;
            (d) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (ii), facilitating the engagement of the third party; and
            (e) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (iii), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.
            Amended: April 2016

          • CSD-3.2.7

            For the avoidance of doubt, nothing in this Section shall be construed as preventing a licensed clearing houseG or licensed central depositoryG from entering into a written agreement with a user which obliges the licensed clearing houseG or licensed central depositoryG to maintain a higher degree of confidentiality than that specified in this Section.

            Amended: April 2016

      • CSD-3.3 Business Continuity Plan

        • CSD-3.3.1

          A licensed clearing houseG or licensed central depositoryG shall maintain at all times a plan of action (referred to in this Module as a business continuity plan), setting out the procedures and establishing the systems necessary to restore safe and efficient operations of any clearing facility or depository it operates, in the event of any disruption to the processes of its clearing facility or depository.

          Amended: April 2016

        • CSD-3.3.2

          As part of a business continuity plan the licensed clearing houseG or licensed central depositoryG should provide for:

          (a) Recovery situations;
          (b) Recovery situations affecting the clients, members and depository participants;
          (c) The evacuation of the office premises; and
          (d) Back-up licensed clearing houseG data centre.
          Amended: April 2016

        • CSD-3.3.3

          A licensed clearing houseG or licensed central depositoryG shall review the procedures and systems referred to in rule CSD-3.3.1 on such regular basis as may be specified in the business continuity plan.

          Amended: April 2016

        • CSD-3.3.4

          A licensed clearing houseG or licensed central depositoryG shall immediately notify the CBB of any activation of its business continuity plan and of any action taken, or intended to be taken, to restore safe and efficient operations of its clearing facility.

          Amended: April 2016

        • CSD-3.3.5

          A licensed clearing houseG or licensed central depositoryG shall, within 7 days, inform the CBB of any material change to the business continuity plan and shall submit, at the request of the CBB, a copy of the new plan to the CBB.

          Amended: April 2016

      • CSD-3.4 Transmission and Storage of User Information

        • CSD-3.4.1

          A licensed clearing houseG or licensed central depositoryG shall take all reasonable measures to maintain the integrity and security of the transmission and storage of its user informationG .

          Amended: April 2016

      • CSD-3.5 Regulation of Clearing and Deposit Fees of Licensed Clearing Houses and Licensed Central Depositories

        • CSD-3.5.1

          A licensed clearing houseG or licensed central depositoryG shall not impose, modify, restructure or otherwise change any existing clearing or depository fee imposed on its members or depository participants, without the prior written approval of the CBB.

          Amended: April 2016

        • CSD-3.5.2

          The CBB may require the licensed clearing houseG or licensed central depositoryG to furnish it with such information or documents as the CBB considers necessary in relation to the application referred to in rule CSD-3.5.1, and the licensed clearing houseG or licensed central depositoryG shall furnish such information or documents as the CBB may require.

          Amended: April 2016

        • CSD-3.5.3

          The CBB shall, within 30 business days of receipt of a completed application referred to in paragraph CSD-3.5.2, by notice in writing to the licensed clearing houseG or licensed central depositoryG , either grant the approval or notify the licensed clearing houseG or licensed central depositoryG of its intention to refuse to grant the approval.

          Amended: July 2016

        • CSD-3.5.4

          The CBB may, by notice in writing to the licensed clearing houseG or licensed central depositoryG , extend the period referred to in rule CSD-3.5.3:

          (a) To a maximum of 45 business days from the day of receipt of a completed application referred to in rule CSD-3.5.1; or
          (b) For a further period of such duration as the CBB thinks fit upon the expiry of the 45 business days referred to in (a) above.
          Amended: April 2016

        • CSD-3.5.5

          The CBB may have regard to the following matters for the purposes of deciding whether to grant or to refuse to grant its approval:

          (a) The effect of the proposed imposition of or change in the fee on:
          (i) Competition in the financial services industry of Bahrain; and
          (ii) Access to clearing, settlementG or depository services in Bahrain;
          (b) The cost of providing the service for which such proposed imposition or change in fee is proposed;
          (c) The effect of such proposed imposition or change on the cost and efficiency of trading, clearing, settlementG and depository in Bahrain of securitiesG or futures contracts; and
          (d) The effect of such proposed imposition or change in the objective of the CBB as specified in the CBB Law.

        • CSD-3.5.6

          The CBB may grant its approval subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing to the licensed clearing houseG or licensed central depositoryG , including conditions or restrictions relating to:

          (a) The period for which the approval of the fee will be in force;
          (b) The circumstances under which, or date by which the licensed clearing houseG or licensed central depositoryG will be required to submit another application for approval of the clearing or depository fee under rule CSD-3.5.1 upon the expiry of the period referred (a) above; and
          (c) The circumstances under which, or the changes in the fee for which, the licensed clearing houseG or licensed central depositoryG will not be required to submit another application for approval of a change in the fee under rule CSD-3.5.1 upon the expiry of the period referred to in (a) above.
          Amended: April 2016

        • CSD-3.5.7

          The CBB shall not refuse to grant its approval without giving the licensed clearing houseG or licensed central depositoryG an opportunity to be heard.

          Amended: April 2016

        • CSD-3.5.8

          The licensed clearing houseG or licensed central depositoryG may only charge the fee approved by the CBB under rule CSD-3.5.1 for the service or services in respect of which it was approved.

          Amended: April 2016

      • CSD-3.6 Inspection, Accounting and Internal Audit

        • CSD-3.6.1

          Every member or depository participant must submit to the licensed clearing houseG or licensed central depositoryG :

          (a) Audited financial reports; and
          (b) Quarterly internal audit reports.
          Amended: April 2016

        • CSD-3.6.2

          The licensed clearing houseG or licensed central depositoryG shall carry out periodic visits to the offices of its membersG or depository participantsG and clearing or depository facilities to review the operating procedures, systems maintenance and compliance with the CBB Law, rules and regulations and its business rules.

          Amended: April 2016

        • CSD-3.6.3

          The board of directors of the licensed clearing houseG or licensed central depositoryG may appoint a Disciplinary Action Committee (DAC) to deal with any matter relating to allegations of improper conduct from the clients of the membersG or depository participantsG and the issuersG .

          Amended: April 2016

        • CSD-3.6.4

          The DAC is empowered to :

          (a) Suspend or expel a memberG or depository participantG ;
          (b) Declare a security as ineligible on the central depositoryG system;
          (c) Freeze a memberG or depository participantG account; and
          (d) Conduct inspections or call for records and issue notices.

        • CSD-3.6.5

          If a memberG or depository participantG is aggrieved by the action of the DAC, it has the right to appeal directly to the CBB against the action of the DAC, within 30 days of the action of the DAC.

        • CSD-3.6.6

          The CBB shall hear the appeal within two months from the date of filing the appeal.

        • CSD-3.6.7

          The orders passed by the DAC shall be binding on the memberG or depository participantG and the clients.

        • CSD-3.6.8

          The information on all such actions under Paragraph CSD-3.6.4 shall be furnished to the CBB.

          Amended: April 2016

      • CSD-3.7 Specific Obligations of a Clearing House

        • Customers' Money and Assets Held by Licensed Clearing House

          • CSD-3.7.1

            Every licensed clearing houseG may accept money or assets deposited with or paid by its members in respect of or in relation to the market contracts of the customers of such members.

          • CSD-3.7.2

            A licensed clearing houseG , which accepts assets or money deposited with or paid to it by its members in respect of or in relation to contracts of the customers of such members, shall require each of its members to notify it in such manner as it may determine:

            (a) Whether a market contractG is a contract of a customer of the member which has been cleared and settled by the member; and
            (b) Whether the money or assets being deposited with or paid to the licensed clearing houseG is, or are deposited or paid in respect of, or in relation to, a contract of a customer of the member.

          • CSD-3.7.3

            Where a member has notified the licensed clearing houseG under rule CSD-3.7.2 that the money or assets are deposited or paid in respect of, or in relation to a contract of a customer of the member, the licensed clearing houseG shall:

            (a) Account for all such money and assets on an aggregated basis, separate from all other money and assets received by the licensed clearing houseG from the member; and
            (b) Subject to Paragraphs CSD-3.8.1 and CSD-3.8.2, ensure that such money is deposited in a trust account, or such assets are deposited in a custody account, to be held for the benefit of the customers of the member and disposed of or used only in respect of or in relation to contracts of customers of the member.
            Amended: April 2016

        • Daily Computation of Customers' Money and Assets

          • CSD-3.7.4

            A licensed clearing houseG shall, at such intervals as the licensed clearing houseG determines appropriate, but no less frequently than once each business day, compute the total amount of customers' money and assets held by the licensed clearing house,G including money that has been kept by the licensed clearing houseG .

          • CSD-3.7.5

            Any computation referred to in rule CSD-3.7.4 shall be completed no later than the commencement of the following trading session and shall be kept by the licensed clearing houseG together with all supporting data.

          • CSD-3.7.6

            For the purpose of this Module, a "business day" refers to any day in which the licensed clearing houseG is open for business.

        • Verification of Money and Assets Placed with Licensed Clearing House

          • CSD-3.7.7

            A licensed clearing houseG shall require its auditors to submit to the CBB a report on a bi-annual basis or such other time as the CBB may require:

            (a) Certifying that the money and assets deposited by a member with the licensed clearing houseG in respect of, or in relation to, a contract of a customer of the member are:
            (i) Segregated from the other money and assets deposited by the member with the designated clearing houseG ;
            (ii) Deposited in a trust account or custody account and are not combined with the money and assets of the licensed clearing houseG ;
            (iii) Used as permitted under or in accordance with Section CSD-3.8; and
            (b) Setting out the amount, on an aggregated basis, of all money and assets deposited by the member with the licensed clearing houseG :
            (i) In respect of, or in relation to, a contract of a customer of the member; and
            (ii) In respect of, or in relation to, any other market contractG .
            Amended: April 2016

          • CSD-3.7.8

            The business rules must support the segregation of customer assets or other arrangements for prioritizing claims in bankruptcy that serve to protect customers' holdings.

            Amended: April 2016

          • CSD-3.7.9

            The licensed central depositoryG must enforce effective segregation of customer assets by custodians.

            Amended: April 2016

      • CSD-3.8 Permissible Use of Customers' Money and Assets by Licensed Clearing House

        • CSD-3.8.1

          Where a member of a licensed clearing houseG fails to meet its obligations to the licensed clearing houseG , the licensed clearing houseG may use any money or assets deposited or paid in respect of or in relation to contracts of customers of the member and held by the licensed clearing houseG , including any money deposited in the trust account and any assets deposited in the custody account referred to in rule CSD-3.7.3 (b), to meet the obligations of the member to the licensed clearing houseG , if the licensed clearing houseG has reasonable grounds for forming an opinion that:

          (a) The failure of the member to meet the member's obligations is directly attributable to the failure of any of the customers of the member to meet that customer's obligations under any market contractG ; and
          (b) The failure to use the money or assets to meet the obligations of the member may jeopardize the financial integrity of the licensed clearing houseG .

        • CSD-3.8.2

          A licensed clearing houseG shall notify the CBB prior to using any such money or assets in the circumstances specified in Paragraph CSD-3.8.1.

          Amended: April 2016

        • CSD-3.8.3

          A licensed clearing houseG shall, in so far as any money which has been deposited in a trust account, or any asset which has been deposited in a custody account, ensure that it is used only in respect of or in relation to contracts of a customer of the member; or in accordance with its business rules.

        • CSD-3.8.4

          Where a licensed clearing houseG uses money and assets in contravention of Paragraph CSD-3.8.3, it shall:

          (a) In the case of money, repay the money to the trust account referred to in rule CSD-3.7.3 (b); or
          (b) In the case of assets:
          i. Return the asset to the custody account referred to in rule CSD-3.7.3 (b); or
          ii. If the asset cannot be returned to the custody account, deposit an amount of money which is equivalent to the monetary value of the asset at the time of the contravention of rule CSD-3.7.3 (b) in a trust account referred to in rule CSD-3.7.3 (b) for the benefit of the customers of the member.
          Amended: April 2016

      • CSD-3.9 Permissible Investments of Customers' Money and Assets by Licensed Clearing House

        • CSD-3.9.1

          Subject to Paragraph CSD-3.9.2, a licensed clearing houseG may invest any money or assets deposited, or paid in respect of, or in relation to, contracts of customers of a member and held by the licensed clearing houseG in the course of its clearing or settlementG activities, including any money deposited in the trust account in any securityG , instrument or other form of investment arrangement as the CBB may prescribe, which are low risk and which are not otherwise restricted by the CBB.

          Amended: April 2016

        • CSD-3.9.2

          A licensbed clearing houseG may invest the money deposited with or paid to it in the following classes:

          (a) SecuritiesG of the Government;
          (b) Bank deposits;
          (c) Transferrable negotiable certificates of deposit; and
          (d) Any other investment approved by the CBB.

        • CSD-3.9.3

          The licensed clearing houseG shall seek the prior written approval of the CBB before investing any such money or assets under Paragraph CSD-3.9.2.

          Amended: April 2016

        • CSD-3.9.4

          The licensed clearing houseG seeking the approval of the CBB under Paragraph CSD-3.9.2 shall satisfy the CBB:

          (a) That the management of the investments made by the licensed clearing houseG is consistent with the principles of preserving principal and maintaining sufficient liquidity to meet the obligations of customers of members of the licensed clearing houseG ;
          (b) That prudential measures have been adopted to manage the risks in respect of the licensed clearing house'sG investment activities; and
          (c) Of any other matter which the CBB considers necessary for the sound management of the investments.
          Amended: April 2016

        • CSD-3.9.5

          The CBB may grant the approval referred to in Paragraph CSD-3.9.3, subject to such conditions or restrictions as the CBB may deem fit.

          Amended: April 2016

      • CSD-3.10 Specific Obligations of a Licensed Central Depository

        • Obligation to Maintain Certain Records

          • CSD-3.10.1

            A licensed central depositoryG shall provide or cause to be provided all such facilities as may be necessary:

            (a) To facilitate efficient deposit of securitiesG ;
            (b) To facilitate registration of dealingsG in deposited securities;
            (c) To ensure the safe custody of certificates and other documents representing deposited securities;
            (d) To guard against falsification of any recordsG or accounts required to be kept or maintained under the Module; and
            (e) To establish a proper and efficient system for the verification, inspection, identification and recording of all securities depositedG with the central depositoryG .
            Amended: April 2016

          • CSD-3.10.2

            Every licensed central depositoryG shall maintain the following recordsG and documents, mainly:

            (a) RecordsG of securitiesG dematerialised and re-materialised;
            (b) The names of the transferor, transferee, and the dates of transfer of securitiesG ;
            (c) A register and an index of beneficial ownersG ;
            (d) RecordsG of instructions received from and sent to depository participantsG , issuersG , issuers' agents and beneficial ownersG ; and
            (e) RecordsG of approval, notice, entry and cancellation of pledge or charge, as the case may be.
            Amended: April 2016

          • CSD-3.10.3

            A licensed central depositoryG shall also keep such recordsG and accounts, in sufficient detail, so as to show particulars of:

            (a) All monies received or paid by the licensed central depositoryG , including dividends received in respect of any deposited securities and the disbursement of such dividends to depositors;
            (b) All income received from commissions, fees, charges and other sources and all expenses, commissions and other paymentsG made or paid by the licensed central depositoryG ;
            (c) All assets and liabilities (including contingent liabilities) of the licensed central depositoryG ;
            (d) All deposited securities and particulars showing for whom the certificates and the instruments of transfer in respect of such certificates are held;
            (e) All purchases and sales of deposited securities and particulars of other dealings made in respect thereof, the charges and credits arising therefrom, the identity of the buyer and seller of each of those deposited securities or, in the case of other dealings, the identity of the personsG executing such dealings and the personG in whose favour such dealings are executed as the case may be.
            Amended: April 2016

          • CSD-3.10.4

            An entry in the recordsG or accounts shall specify the date and time of making such entry and, in the case of an entry made by a personG , the identity of such personG .

          • CSD-3.10.5

            All such recordsG to be maintained for a minimum period of 10 years as required under the CBB law.

      • CSD-3.11 Duty Not to Acquire or Deal in Deposited Securities by a Licensed Central Depository

        • CSD-3.11.1

          No licensed central depositoryG shall purchase, acquire, or otherwise deal in, any deposited security as principal other than for such purpose and in such manner as may be permitted by the CBB under this Module.

          Amended: April 2016

        • CSD-3.11.2

          A licensed central depositoryG which contravenes the aforesaid provision shall be guilty of an offence and shall be subject to such penalty as the CBB may choose to levy.

          Amended: April 2016

    • CSD-4 Business Rules of a Licensed Clearing House and Licensed Central Depository

      • CSD-4.1 Business Rules of Licensed Clearing Houses and Licensed Central Depositories

        • CSD-4.1.1

          The CBB may prescribe the matters that a licensed clearing houseG or licensed central depositoryG shall make provision for in the business rulesG of the licensed clearing houseG or licensed central depositoryG .

          Amended: April 2016

        • CSD-4.1.2

          A licensed clearing houseG or licensed central depositoryG shall, in line with CBB Law, and to the satisfaction of the CBB, make provision in its business rulesG for continuing requirements for each member or depository participantG , including requirements that the member is a Category 1 Investment Firm licensed by the CBB.

          Amended: April 2016

        • CSD-4.1.3

          A licensed clearing houseG or licensed central depositoryG shall, in line with CBB Law, make provision in its business rules and to the satisfaction of the CBB for continuing requirements for each member or depository participantG , including requirements relating to the terms and conditions under which transactions will be cleared, settled or deposited, including but not limited to:

          (a) The legal obligations and rights of the licensed clearing houseG and members relating to the clearing and settlement of transactions;
          (b) The legal obligations and rights of the licensed clearing houseG or central depository and members or depository participantsG relating to payments, including netting of obligations, distribution of entitlements, assumption of obligations and method of payment.
          Amended: April 2016

        • Business Rules of a Licensed Clearing House and Licensed Central Depository Have Effect as Contract

          • CSD-4.1.4

            The business rulesG of a licensed clearing houseG and licensed central depositoryG shall be deemed to be, and shall operate as, a binding contract:

            (a) Between the licensed clearing houseG and licensed central depositoryG and each issuerG of securitiesG ;
            (b) Between the licensed clearing houseG and licensed central depositoryG and each member or depository participantG ;
            (c) Between each issuerG of securitiesG and each memberG or depository participantG ; and
            (d) Between each memberG or depository participantG and every other memberG or depository participantG .
            Amended: April 2016

      • CSD-4.2 Content of Rules of Licensed Clearing Houses and Licensed Central Depositories

        • CSD-4.2.1

          A licensed clearing houseG and licensed central depositoryG shall, in line with CBB Law, make provision in its business rulesG and to the satisfaction of the CBB for:

          (a) Continuing requirements for each member, including requirements:
          (i) Relating to the proper conduct of the member or depository participant when participating in any clearing or central depository facility operated by the licensed clearing houseG or licensed central depositoryG ;
          (ii) That the member has sufficient financial resources (capital adequacy) to reasonably fulfil all its financial obligations arising out of its activities of any clearing or central depository facility operated by the licensed clearing houseG or licensed central depositoryG ;
          (iii) That facilitate the monitoring by the licensed clearing houseG or licensed central depositoryG of the compliance of the memberG or depository participantG with the business rulesG of the licensed clearing houseG or licensed central depositoryG ; or
          (iv) That provide for the expulsion, suspension or disciplining of the memberG or depository participantG for a contravention of the business rulesG of the licensed clearing houseG or licensed central depositoryG ;
          (b) The class or classes of transactions that may be cleared, settled, or deposited on any facility that it operates;
          (c) Matters relating to risks in the operation of any clearing or central depository facility that it operates;
          (d) The handling of defaults, including the financial resources available to support the default of a member or depository participant, and the taking of proceedings or any other action against a member or depository participant which has failed, or appears to be unable, or is likely to become unable, to meet the member's or depository participant's obligations for all unsettled or open market contractsG to which the memberG or depository participantG is a party;
          (e) The carrying on of business of the licensed clearing houseG or licensed central depositoryG with due regard to the interests and protection of the investing public.
          (f) The granting of security interests to the clearing houseG or central depositoryG or to other membersG or depository participantsG pursuant to the business rules, including a decertification of the collateral charged and the obligations secured;
          (g) The default rulesG which provide for the taking of proceeding or other action if a memberG or depository participantG appears to be unable, or likely to become unable to meet his obligations in respect of all unsettled or open market contractsG to which he is a party;
          (h) The rules and procedures governing how losses will be shared in the event that a defaulting firm's collateral fails to cover its exposure, including the maintenance and utilization of the Settlement Guarantee Fund; and
          (i) The legal relationships between the central depositoryG and each depository participant,G and between membersG or depository participantsG , inter se.
          Amended: April 2016

        • CSD-4.2.2

          A licensed clearing houseG or licensed central depositoryG shall not make any amendment to its business rules,G unless it complies with such requirements as the CBB may prescribe.

          Amended: April 2016

      • CSD-4.3 Business Rules Specific to a Licensed Central Depository

        • CSD-4.3.1

          The content of the rules of the central depositoryG must include:

          (a) The terms and conditions under which transactions will be conducted on a central depositoryG ;
          (b) The qualifications and standards for participation;
          (c) The process and criteria for the admission, suspension and termination of depository participantsG ;
          (d) A decertification of the structure of the services;
          (i) The legal obligations and rights of the central depositoryG and depository participantsG arising from the use of the services, including any indemnity;
          (ii) The legal obligations and rights of the central depositoryG and depository participantsG relating to the holding of securitiesG by the depository on behalf of depository participantsG , as recorded in accounts maintained by the central depositoryG for depository participantsG ;
          (iii) The decertification of the risk control mechanisms including system-operating caps, lines of credit, and depository participantG funds;
          (iv) The criteria for determining the type of collateral, and for calculating the amount of the collateral, to be charged by a depository participantG with respect to a collateral pool or a depository participantG fund;
          (v) The process to be followed in the event of a depository participantG suspension, and the realisation under the securityG interests and guarantees granted to the central depositoryG ;
          (vi) The process for adopting and amending the business rules, and for prescribing and amending the procedures and user guides; and
          (vii) The legal obligations and rights of the central depositoryG and depository participantsG relating to confidentiality and use of information; and
          (e) The class or classes of transactions that may be conducted on a central depository.G
          Amended: April 2016

      • CSD-4.4 Amendment of Business Rules

        • CSD-4.4.1

          A licensed clearing houseG or licensed central depositoryG which intends to amend its business rulesG shall, prior to making the amendment, notify the CBB of:

          (a) The proposed amendment;
          (b) The purpose of the proposed amendment; and
          (c) The date on which the amendment is proposed to come into force.
          Amended: April 2016

        • CSD-4.4.2

          The licensed clearing houseG or licensed central depositoryG shall, prior to notifying the CBB under rule CSD-4.4.1, consult its members and depository participantsG on the proposed amendment, unless the proposed amendment would have limited impact on its members or depository participantsG .

          Amended: April 2016

        • CSD-4.4.3

          Subject to Paragraphs CSD-4.4.4 and CSD-4.4.6, an amendment shall not come into force unless the notification referred to in rule CSD-4.4.1 is submitted at least 21 days before the date on which the amendment is proposed to come into force.

          Amended: April 2016

        • CSD-4.4.4

          The CBB may, on its own initiative or on the application of the licensed clearing houseG or licensed central depositoryG , by notice in writing to the licensed clearing houseG or licensed central depositoryG , allow an amendment to come into force before the expiry of the period of 21 days referred to in rule CSD-4.4.3.

          Amended: April 2016

        • CSD-4.4.5

          The CBB may, subject to Paragraph CSD-4.4.6, within 21 days after the receipt of the notification referred to in rule CSD-4.4.1, by notice in writing to the licensed clearing houseG or licensed central depositoryG , disallow, alter or supplement the whole or any part of the proposed amendment and, thereupon, such whole or part of the proposed amendment, as the case may be:

          (a) Where it is disallowed, shall not come into force; or
          (b) Where it is altered or supplemented, shall come into force as altered or supplemented accordingly.
          Amended: April 2016

        • CSD-4.4.6

          The CBB may, in its discretion, by notice in writing to the licensed clearing houseG or licensed central depositoryG , vary the period specified in Paragraph CSD-4.4.5, and where the period in that paragraph is extended, the amendment shall not come into force before the expiry of the extended period.

          Amended: April 2016

        • CSD-4.4.7

          This requirement shall not apply to any periodic amendment made by a licensed clearing houseG or licensed central depositoryG to the initial margin requirement, or maintenance margin requirement of a market contractG which it imposes on its members or depository participants, where such amendment is made in response to a change in the historical or anticipated volatility or co-relation of any market contractG .

          Amended: April 2016

        • CSD-4.4.8

          Any reference to an amendment to a business rule shall be construed as a reference to a change to the scope of, or to any requirement, obligation or restriction under the business rule, whether the change is made by an alteration to the text of the rule or by any other notice issued by, or on behalf of, the licensed clearing houseG or licensed central depositoryG .

          Amended: April 2016

      • CSD-4.5 Non-Compliance with Business Rules Not to Substantially Affect Rights of Person

        • CSD-4.5.1

          Any failure by a licensed clearing houseG or licensed central depositoryG to comply with this Module or its business rulesG in relation to a matter, shall not prevent the matter from being treated, for the purposes of this Module, as done in accordance with the business rules,G so long as the failure does not substantially affect the rights of any personG entitled to require compliance with the business rulesG .

          Amended: April 2016

      • CSD-4.6 Determination of Position Limits

        • CSD-4.6.1

          A licensed clearing houseG shall determine, from time-to-time, based on such criteria or methodology as may be established by the licensed clearing houseG with the approval of the CBB, positionG limits in respect of any futures contract cleared by a member of the licensed clearing houseG .

        • CSD-4.6.2

          The positionG limits under rule CSD-4.6.1 may include limits on a personG holding or controlling positionsG , separately or in combination, net long or net short, for the purchase or sale of a futures contract or an option for the futures contract on a futures equivalent basis.

        • CSD-4.6.3

          The licensed clearing houseG :

          (a) Shall require a personG , or any personG acting for him pursuant to an express or implied agreement or understanding, who holds or controls net long or net short positionsG in any futures contract in excess of the positionG limits determined under rule CSD-4.6.1 to trade under such conditions and restrictions as the licensed clearing houseG considers necessary to ensure compliance with the positionG limits determined under that paragraph; and
          (b) May require such personG referred to in (a) above to do any one or more of the following actions:
          (i) Cease any further increase in his positionG ;
          (ii) Liquidate his positionG to comply with the positionG limits determined under rule CSD-4.6.1, within such time as may be determined by the licensed clearing houseG ; or
          (iii) Be subject to higher margin requirements in respect of his positionG .

        • CSD-4.6.4

          In Paragraph CSD-4.6.2, ''futures equivalent basis'' means the basis by which an option is adjusted by the risk factor or delta coefficient of that option, such risk factor or delta coefficient being calculated at the close of trading on the last day on which that option was traded, or at such other time as the CBB may determine.

          Amended: April 2016

        • CSD-4.6.5

          The CBB may provide directions for changing the position limits imposed by a licensed clearing houseG where market conditions or the interest of investors warrant such directions.

    • CSD-5 Administrative Provisions Applicable to Clearing House or Central Depository

      • CSD-5.1 Control of Substantial Shareholding in Licensed Clearing Houses or Licensed Central Depositories

        • CSD-5.1.1

          No personG shall enter into any agreement to acquire shares in a licensed clearing houseG or licensed central depositoryG by virtue of which he would, if the agreement had been carried out, become a substantial shareholder of the licensed clearing houseG or licensed central depositoryG without first obtaining the approval of the CBB to enter into the agreement.

          Amended: April 2016

        • CSD-5.1.2

          In rule CSD-5.1.1 "substantial shareholder" means a personG who alone or together with his associates:

          (a) Holds not less than 5% of the equity shares in the licensed clearing houseG or licensed central depositoryG ; or
          (b) Is in a position to control not less than 5% of the votes in the licensed clearing houseG or licensed central depositoryG .
          Amended: April 2016

        • CSD-5.1.3

          In this section:

          (a) A personG holds a share if:
          1. He is deemed to have an interest in that share in terms of the Commercial Companies Law (CCL); or
          2. He otherwise has a legal or a beneficial interest in that share, except such interest as is to be disregarded in the terms of the CCL;
          (b) A reference to the control of a percentage of the votes in a licensed clearing houseG or licensed central depositoryG shall be construed as a reference to the control, whether direct or indirect, of that percentage of the total number of votes that might be cast in a general meeting of the licensed clearing houseG or licensed central depositoryG ; and
          (c) An associate of another personG means in respect of individuals, a direct family member and in the case of a company, means the company is bound to follow the directives of the substantial shareholder, or the company in which the substantial shareholder has 20% of the votes of that company.
          Amended: April 2016

        • CSD-5.1.4

          The CBB may grant its approval in accordance with Paragraph CSD-5.1.1, subject to such conditions or restrictions as the CBB may deem fit.

          Amended: April 2016

      • CSD-5.2 Application and Criteria for Approval to Acquire Substantial Shareholding

        • CSD-5.2.1

          Any personG applying for approval for acquiring substantial shareholding as defined hereunder shall submit to the CBB a written application that sets out:

          (a) The name of the applicant;
          (b) In the case where the applicant is a corporation:
          (i) Its place of incorporation;
          (ii) Its substantial shareholders;
          (iii) Its directors and chief executive officer; and
          (iv) Its principal business;
          (c) In the case where the applicant is a natural personG :
          (i) His nationality;
          (ii) His principal occupation; and
          (iii) His directorships;
          (d) All the corporations in which the applicant has a substantial shareholding;
          (e) The percentage of shareholding and voting power that the applicant has in the licensed clearing houseG or the licensed central depositoryG ;
          (f) The percentage of shareholding and voting power the applicant is seeking to have in the licensed clearing houseG or the licensed central depositoryG ;
          (g) The reasons for making the application;
          (h) The mode and structure, as appropriate, under which the increase in shareholding would be carried out;
          (i) Whether the applicant will seek representation on the board of directors of the licensed clearing houseG or the licensed central depositoryG ; and
          (j) Any other information that may facilitate the determination of the CBB as to whether the applicant is a fit and proper personG for the purposes of Subparagraph CSD-5.2.3 (a).
          Amended: April 2016

        • CSD-5.2.2

          The CBB may require the applicant to furnish it with such information or documents as the CBB considers necessary in relation to the application, and the applicant shall furnish such information or documents as required by the CBB.

        • CSD-5.2.3

          The CBB may approve an application made under rule CSD-5.2.1 if the CBB is satisfied that:

          (a) The applicant is a fit and proper personG to be a substantial shareholder;
          (b) Having regard to the applicant's likely influence, the licensed clearing houseG or licensed central depositoryG will, or will continue to conduct its business prudently and in compliance with the provisions of this Module; and
          (c) It would not be contrary to the interests of the public to do so.
          Amended: April 2016

        • CSD-5.2.4

          The CBB may, for the purposes of securing compliance with rule CSD-5.2.1 or paragraph CSD-5.2.2, or any condition or restriction imposed under rule CSD-5.2.5, by notice in writing, direct the transfer or disposal of all or any of the shares of a licensed clearing houseG or licensed central depositoryG in which a substantial shareholder of the licensed clearing houseG or licensed central depositoryG has an interest.

          Amended: April 2016

        • CSD-5.2.5

          Until a personG to whom a direction has been issued under Paragraph CSD-5.2.6 transfers or disposes of the shares which are the subject of the direction, and notwithstanding anything to the contrary in the Commercial Companies Law or the memorandum or articles of association, or other constituent document or documents of the licensed clearing houseG or licensed central depositoryG :

          (a) No voting rights shall be exercisable in respect of the shares which are the subject of the direction;
          (b) The licensed clearing houseG or licensed central depositoryG shall not offer or issue any shares, whether by way of rights, bonus, share dividend or otherwise, in respect of the shares which are the subject of the direction; and
          (c) Except in a liquidation of the licensed clearing houseG or licensed central depositoryG , the licensed clearing houseG or licensed central depositoryG shall not make any paymentG , whether by way of cash dividend, dividend in kind, or otherwise, in respect of the shares which are the subject of the direction.
          Amended: April 2016

        • CSD-5.2.6

          Any issue of shares by a licensed clearing houseG or licensed central depositoryG in contravention of Subparagraph CSD-5.2.5 (b) shall be deemed to be null and void, and a personG to whom a direction has been issued under this paragraph shall immediately return those shares to the licensed clearing houseG or licensed central depositoryG , upon which the licensed clearing houseG or licensed central depositoryG shall return to the personG any paymentG received from him in respect of those shares.

          Amended: April 2016

        • CSD-5.2.7

          Any paymentG made by a licensed clearing houseG or licensed central depositoryG in contravention of rule CSD-5.2.5 (c) shall be deemed to be null and void, and a personG to whom a direction has been issued under Paragraph CSD-5.2.6 shall immediately return the paymentG he has received to the licensed clearing houseG or licensed central depositoryG .

          Amended: April 2016

        • CSD-5.2.8

          The CBB may exempt:

          (a) Any personG or class of personsG ; or
          (b) Any class or decertification of shares or interests in shares,

          from rule CSD-5.2.1 or Paragraph CSD-5.2.2, subject to such conditions or restrictions as may be imposed by the CBB.

          Amended: April 2016

      • CSD-5.3 Authorisation of Approved Persons

        • Prior Approval Requirements and Process

          • CSD-5.3.1

            LicenseesG must obtain the CBB's prior written approval for any person wishing to undertake a controlled functionG in a licenseeG . The approval from the CBB must be obtained prior to their appointment.

            Amended: April 2016
            Amended: April 2013

          • CSD-5.3.2

            Controlled functionsG are those functions occupied by board members and persons in executive positions and include:

            (a) Board member;
            (b) Chief ExecutiveG or General ManagerG ;
            (c) Head of functionG ;
            (d) Compliance Officer; and
            (e) Money Laundering Reporting Officer (MLRO).
            Amended: April 2016
            Amended: April 2013

          • CSD-5.3.2A

            For the purpose of this Module, the following positions are considered as head of functionG :

            (a) Head of clearing;
            (b) Head of settlement;
            (c) Head of netting;
            (d) Head of central depository;
            (e) Head of central registry;
            (f) Head of risk management; and
            (g) Head of other functions.
            Added: April 2016

          • CSD-5.3.2B

            Whether a person is head of functionG will depend on the nature, scale and complexity of the function and is not determined by the presence or absence of the word in their job title.

            Added: April 2016

          • CSD-5.3.2C

            LicenseesG must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. The segregation of responsibilities must ensure avoidance of any conflict of interest and maintain a Chinese Wall between such critical controlled functions.

            Added: April 2016

          • CSD-5.3.3

            The Chief Executive Officer or General Manager, Compliance Officer and Money Laundering Reporting Officer must be resident in Bahrain.

            Amended: April 2013

          • CSD-5.3.4

            All personsG wishing to undertake any of the controlled functions shall be subject to the fit and proper requirements.

            Amended: April 2013

          • CSD-5.3.5

            In accordance with Subparagraph CSD-5.3.2(d), every licensed clearing houseG or licensed central depositoryG must appoint a compliance officer. The compliance officer is responsible for discharging the obligations of the licenseeG .

            Amended: April 2016
            Amended: April 2013

          • CSD-5.3.6

            In accordance with Paragraph CSD-5.3.5:

            (a) The Compliance Officer should be competent and knowledgeable regarding the CBB Law, rules and regulations, as well as the various applicable Volume 6 Modules;
            (b) The Compliance Officer shall:
            (i) Monitor the transactions undertaken by the memberG , its representatives, or participantsG ;
            (ii) Identify disorderly transactions or conduct that may involve market abuse or disruption;
            (iii) Identify any breach of CBB Law, rules and regulations; and
            (iv) Identify any breach of the rules of the SROG .
            Amended: April 2013

          • CSD-5.3.7

            The Compliance Officer shall on the identification of any breach referred to in Subparagraph CSD-5.3.6(b), report such breach to the CBB without delay for the investigation and shall provide full assistance to the latter in investigating the conduct occurring on or through the licensed clearing houseG or licensed central depositoryG .

            Amended: April 2016
            Amended: April 2013

          • CSD-5.3.7A

            The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in the Form 3, including previous experience, is accurate. Form 3 is available under Volume 6 Part B Authorisation Forms CSD Forms of the CBB Rulebook.

            Added: April 2016

          • CSD-5.3.7B

            When the request for approved personG status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake a controlled functionG is in relation to an existing licenseeG , the Form 3 must be marked for the attention of the Director, Capital Markets Supervision. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

            Amended: April 2018
            Added: April 2016

          • CSD-5.3.7C

            When submitting Form 3, licenseesG must ensure that the Form 3 is:

            (a) Submitted to the CBB with a covering letter signed by an authorised representative of the licenseeG , seeking approval for the proposed controlled functionG ;
            (b) Submitted in original form;
            (c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
            (d) Signed by an authorised representative of the licenseeG and all pages stamped on with the licensee'sG seal.
            Added: April 2016

          • CSD-5.3.7D

            For existing licenseesG applying for the appointment of a Board DirectorG or the Chief ExecutiveG /General ManagerG , the authorised representative should be the Chairman of the Board or a DirectorG signing on behalf of the Board. For all other controlled functionsG , the authorised representative should be the Chief ExecutiveG /General ManagerG .

            Added: April 2016

        • Fit and Proper Requirements

          • CSD-5.3.8

            LicenseesG seeking an approved personG authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled functionG in question.

            Amended: April 2016
            Amended: April 2013

          • CSD-5.3.8A

            Each applicant applying for approved personG status and those individuals occupying approved personG positions must comply with the following conditions:

            (a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;
            (b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;
            (c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;
            (d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;
            (e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;
            (f) Must have personal integrity, good conduct and reputation;
            (g) Has appropriate professional and other qualifications for the controlled functionG in question, including qualifications such as the Securities Market Regulation Certification Programme (Series 7), the General Securities Representative Qualification (Series 79), and/or any other relevant examinations and qualifications recognised by the CBB that are appropriate to capital market advisory services, as the case may be. However the CBB reserves the right to impose a higher level of qualifications as it deems necessary; and
            (h) Has sufficient experience to perform the duties of the controlled functionG .
            Added: April 2016

          • CSD-5.3.8B

            In assessing the conditions prescribed in Rule CSD-5.3.8A, the CBB will take into account the criteria contained in Paragraph CSD-5.3.8C. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled functionG but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled functionG in one licenseeG may not be considered to have sufficient expertise and experience to undertake nominally the same controlled functionG but in a much bigger licenseeG .

            Added: April 2016

          • CSD-5.3.8C

            In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

            (a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
            (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
            (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
            (d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;
            (e) The contravention of any financial services legislation;
            (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
            (g) Dismissal or a request to resign from any office or employment;
            (h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
            (i) The extent to which the person has been truthful and open with supervisors; and
            (j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.
            Added: April 2016

          • CSD-5.3.8D

            With respect to Paragraph CSD-5.3.8C, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

            Added: April 2016

          • CSD-5.3.9

            Approved personsG undertaking a controlled functionG must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid any conflict of interest arising whilst undertaking a controlled functionG and shall be subject, among all accepted market conducts, to the insider trading rules.

            Amended: April 2013

          • CSD-5.3.10

            In determining where there may be a conflict of interest arising, factors that may be considered will include whether:

            (a) A personG has breached any fiduciary obligations to the licensed clearing houseG or licensed central depositoryG or terms of employment;
            (b) A personG has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensed clearing houseG or licensed central depositoryG ; and
            (c) A personG has failed to declare a personal interest that has a material impact in terms of the person'sG relationship with the licensed clearing houseG or licensed central depositoryG in general, and interest in holding any listed securitiesG or futures contracts in particular.
            Amended: April 2013

          • CSD-5.3.11

            [This Paragraph was deleted in April 2016.]

            Deleted: April 2016
            Amended: April 2013

          • CSD-5.3.12

            [This Paragraph was deleted in April 2016.]

            Deleted: April 2016
            Amended: April 2013

          • CSD-5.3.13

            [This Paragraph was moved to Paragraph CSD-5.3.7B in April 2016.

            Deleted: April 2016
            Added: April 2013

        • Assessment of Application

          • CSD-5.3.14

            The CBB shall review and assess the application for approved personG status to ensure that it satisfies all the conditions required in Paragraph CSD-5.3.8A and the criteria outlined in Paragraph CSD-5.3.8C.

            Amended: April 2016
            Added: April 2013

          • CSD-5.3.14A

            For purposes of Paragraph CSD-5.3.14, licenseesG should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references.

            Added: April 2016

          • CSD-5.3.15

            The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph CSD-5.3.8A and the criteria outlined in Paragraph CSD-5.3.8C. A notice of such refusal is issued by registered mail to the licenseeG concerned, setting out the basis for the decision.

            Amended: April 2016
            Added: April 2016

        • Appeal Process

          • CSD-5.3.16

            LicenseesG or the nominated approved personsG may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved personG status. The CBB shall decide on the appeal and notify the licenseeG of its decision within 30 calendar days from submitting the appeal.

            Amended: April 2016
            Amended: April 2013

          • CSD-5.3.17

            Where notification of the CBB's decision to grant a person approved personG status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, licenseesG or the nominated approved personsG may appeal to the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the licenseeG of its decision within 30 calendar days from the date of submitting the appeal.

            Amended: April 2016
            Amended: April 2013

        • Notification Requirements and Process

          • CSD-5.3.18

            A licensed clearing houseG or licensed central depositoryG must immediately notify the CBB when an approved personG ceases to hold a controlled functionG together with an explanation as to the reasons why. In such cases, their approved personG status is automatically withdrawn by the CBB.

            Amended: April 2016
            Added: April 2013

          • CSD-5.3.18A

            LicenseesG must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved personG .

            Added: April 2016

          • CSD-5.3.19

            The CBB may impose regulations relating to the composition and duties of the board of directors or any committee of a licensed clearing houseG or licensed central depositoryG .

            Amended: April 2016
            Amended: April 2013

          • CSD-5.3.20

            In this section, "committee" includes any committee of directors, disciplinary committee, appeals committee or any body responsible for disciplinary action against a member or depository participant of a licensed clearing houseG or licensed central depositoryG .

            Amended: April 2016
            Amended: April 2013

        • Amendment of Authorisation

          • CSD-5.3.21

            A licensed clearing houseG or licensed central depositoryG must seek prior CBB approval before an approved personG may move from one controlled functionG to another within the same licenseeG .

            Amended: April 2016
            Added: April 2013

          • CSD-5.3.22

            In such instances, a new application should be completed and submitted to the CBB. Note that a personG may be considered 'fit and proper' for one controlled functionG , but not for another, if for instance the new role requires a different set of skills and experience. Where an approved personG is moving to a controlled functionG in another licenseeG , the first licenseeG should notify the CBB of that person'sG departure, and the new licenseeG should submit a request for approval under this Section.

            Added: April 2013

        • Cancellation of Authorisation and Power of CBB to Remove Approved Person

          • CSD-5.3.23

            Where the CBB is satisfied that an approved personG :

            (a) Has wilfully contravened or wilfully caused that licenseeG to contravene the CBB Law, rules and regulations;
            (b) Has without reasonable excuse, failed to ensure compliance by the licenseeG , or a personG associated with that licenseeG with:
            1. The CBB Law rules and regulations;
            (c) Has failed to discharge the duties or functions of his office or employment;
            (d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;
            (e) Has been convicted whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;

            the CBB may if it thinks it is necessary in the interests of or for the protection of investors, by notice in writing direct that a licenseeG remove the approved personG from his office or employment, and that licenseeG shall comply with such notice.

            Added: April 2013

          • CSD-5.3.24

            Without prejudice to any other matter that the CBB may consider relevant, the CBB may in determining whether an approved personG has failed to discharge the duties or functions of his office or employment for the purposes of Subparagraph CSD-5.3.23 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing, after consultation with the licensed clearing houseG or or licensed central depositoryG , as the case may be.

            Amended: April 2016
            Added: April 2013

          • CSD-5.3.25

            Subject to Paragraph CSD-5.3.26, the CBB shall not direct a licenseeG to remove an approved personG from his office or employment without giving the approved personG an opportunity to be heard.

            Added: April 2013

          • CSD-5.3.26

            The CBB may direct a licenseeG to remove an approved personG from his office or employment under Paragraph CSD-5.3.23 on any of the following grounds, without giving the approved personG an opportunity to be heard:

            (a) The approved personG is an undischarged bankrupt whether in Bahrain or elsewhere;
            (b) The approved personG has been convicted whether in Bahrain or elsewhere, of an offence:
            1. Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; and
            2. Punishable with imprisonment for a term of 3 months or more.
            Added: April 2013

        • Criteria to Determine Failure to Discharge Duties or Functions by Approved Persons

          • CSD-5.3.27

            The CBB may, in determining whether approved personsG have taken reasonable steps to discharge their duties, have regard to whether or not the approved personG :

            (a) Ensured the proper functioning of the licensed clearing houseG or central depositoryG ;
            (b) Ensured the compliance of the licensed clearing houseG or central depositoryG with any relevant laws or regulations of any jurisdiction in which it is incorporated, or in which it provides its regulated activitiesG ;
            (c) Set out and ensured compliance with written policies on all operational areas of the licensed clearing houseG or central depositoryG , including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed clearing houseG or central depositoryG in general;
            (d) Identified, monitored and addressed the risks associated with the business of the licensed clearing houseG or central depositoryG ;
            (e) Ensured that the regulated activitiesG of the licensed clearing houseG or central depositoryG were subject to adequate internal audit;
            (f) Oversaw the financial undertakings or exposure of the licensed clearing houseG or central depositoryG to risks of any nature by setting out proper delegation limits and risk management controls; and
            (g) Ensured:
            1. That the licensed clearing houseG or central depositoryG maintained written records of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and provided relevant procedures; and
            2. That every report, return or statement submitted by the licensed clearing houseG or central depositoryG to the CBB was complete and accurate.
            Added: April 2013

      • CSD-5.4 Listing of Licensed Clearing House and Licensed Central Depository on Securities Market

        • CSD-5.4.1

          The securitiesG of a licensed clearing houseG or a licensed central depositoryG shall not be listed for quotation on a securitiesG market that is operated by any of its related corporations, unless the licensed clearing houseG or licensed central depositoryG and the operator of the securitiesG market have entered into such arrangements as the CBB may require:

          (a) For dealing with possible conflicts of interest that may arise from such listing; and
          (b) For the purpose of ensuring the integrity of the trading of the securitiesG of the licensed clearing houseG or licensed central depositoryG .
          Amended: April 2016

        • CSD-5.4.2

          Where the securitiesG of a licensed clearing houseG or licensed central depositoryG are listed for quotation on a securitiesG market operated by any of its related corporations, the listing rules of the securitiesG market shall be deemed to allow the CBB to act in place of the operator of the securitiesG market in making decisions and taking action, or to require the operator of the securitiesG market to make decisions and to take action on behalf of the CBB, on:

          (a) The admission or removal of the licensed clearing houseG or licensed central depositoryG , to or from the official list of the securitiesG market; and
          (b) Granting approval for the securitiesG of a licensed clearing houseG or licensed central depositoryG to be, or stopping or suspending the securitiesG of the licensed clearing houseG or licensed central depositoryG from being listed for quotation or quoted on the securitiesG market.
          Amended: April 2016

        • CSD-5.4.3

          The CBB may, by notice in writing to the operator of the securitiesG market:

          (a) Modify the listing rules of the securitiesG market for the purpose of their application to the listing of the securitiesG of the licensed clearing houseG or licensed central depositoryG for quotation or trading; or
          (b) Waive the application of any listing rule of the securitiesG market to the licensed clearing houseG or licensed central depositoryG .
          Amended: April 2016

    • CSD-6: Powers of CBB

      • CSD-6.1 Power to Impose Conditions or Restrictions

        • CSD-6.1.1

          The CBB may impose on a licensed clearing houseG or licensed central depositoryG such conditions or restrictions as it deems fit by notice in writing, in addition to the obligations imposed on the licensed clearing houseG or licensed central depositoryG under this Module, for the purposes of furthering the objectives specified in Section CSD-A.1.

          Amended: April 2016

        • CSD-6.1.2

          The CBB may, at any time, by notice in writing to the licensed clearing houseG or licensed central depositoryG , vary any condition or restriction as it may deem fit.

          Amended: April 2016

        • CSD-6.1.3

          Without affecting the generality of Paragraphs CSD-6.1.1 or CSD-6.1.2, the conditions or restrictions that the CBB may impose include conditions or restrictions relating to:

          (a) The activities that the licensed clearing houseG or licensed central depositoryG may undertake;
          (b) The products that may be cleared by the clearing facility;
          (c) The securities that may be accepted for deposit by the depository; or
          (d) The nature of investors, members or participantsG who may use or participate in the licensed clearing houseG facility and licensed central depositoryG .
          Amended: April 2016

      • CSD-6.2 Power of CBB to Issue Directions

        • CSD-6.2.1

          The CBB may issue directions by notice in writing either of a general or specific nature to a licensed clearing houseG or licensed central depositoryG , and the licensed clearing houseG or licensed central depositoryG shall comply with such directions, if the CBB considers it necessary or expedient:

          (a) For ensuring the safe and efficient clearing and settlementG of transactions through review of system mechanisms and establishment of operating standards;
          (b) For ensuring the integrity and stability of the capital markets or the financial system;
          (c) In the interests of the public or a section of the public, or for the protection of investors;
          (d) For the effective administration of the CBB Law and regulations; or
          (e) For ensuring compliance with any condition or restriction as may be imposed by the CBB.
          Amended: April 2016

        • CSD-6.2.2

          For the avoidance of doubt, a direction issued under Paragraph CSD-6.2.1 shall be deemed not to be subsidiary legislation, but any non-compliance with a directive shall be regarded as non-compliant with the rules of the CBB.

          Amended: April 2016

      • CSD-6.3 Emergency Powers of CBB

        • CSD-6.3.1

          Where the CBB has reason to believe that an emergency exists, or considers that it is necessary or expedient in the interests of the public, or a section of the public, or for the protection of investors, the CBB may direct by notice in writing a licensed clearing houseG or licensed central depositoryG to take such action as it considers necessary to maintain or restore safe and efficient operations of the clearing facilities operated by the licensed clearing houseG and of the custodian services provided by the licensed central depositoryG .

          Amended: April 2016

        • CSD-6.3.2

          Without prejudice to Paragraph CSD-6.3.1, the actions which the CBB may direct a licensed clearing houseG or licensed central depositoryG to take include:

          (a) Ordering the liquidation of all positionsG or part thereof, or the reduction of such positionsG ;
          (b) Altering conditions of deliveryG of transactions cleared or settled, or to be cleared or settled through the clearing facility;
          (c) Fixing the settlementG price at which transactions are to be liquidated;
          (d) Requiring margins or additional margins for transactions cleared or settled, or to be cleared or settled through the clearing facility; and
          (e) Modifying or suspending any of the business rulesG of the licensed clearing houseG or licensed central depositoryG .
          Amended: April 2016

        • CSD-6.3.3

          Where a licensed clearing houseG or licensed central depositoryG fails to comply with any direction of the CBB under Paragraph CSD-6.3.1 within such time as is specified by the CBB, the CBB may:

          (a) Set margin levels for transactions cleared or settled, or to be cleared or settled through the clearing facility to cater for the emergency;
          (b) Set limits that may apply to market positionsG acquired in good faith prior to the date of the notice issued by the CBB; or
          (c) Take such other action as the CBB considers necessary to maintain or restore safe and efficient operations of the clearing facilities operated by the licensed clearing houseG and the services offered by the licensed central depositoryG .
          Amended: April 2016

        • CSD-6.3.4

          In this section, "emergency" includes:

          (a) Any threatened or actual market manipulation or cornering;
          (b) Any major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such commodity or securitiesG ;
          (c) Any act of any government affecting a commodity or securitiesG ; or
          (d) Any undesirable situation or practice which, in the opinion of the CBB, constitutes an emergency.

        • CSD-6.3.5

          The CBB may modify any action taken by a licensed clearing houseG or licensed central depositoryG under Paragraph CSD-6.3.1, including the setting aside of that action.

          Amended: April 2016

      • CSD-6.4 Power of CBB to Remove Officers

        • CSD-6.4.1

          The CBB may, if it thinks it necessary in the interests of the public, or a section of the public, or for the protection of investors, by notice in writing direct that licensed clearing houseG or licensed central depositoryG to remove the officer from his office or employment, where the CBB is satisfied that an officer of a licensed clearing houseG or licensed central depositoryG :

          (a) Has wilfully contravened or wilfully caused that licensed clearing houseG or licensed central depositoryG to contravene this Module or its business rulesG ;
          (b) Has, without reasonable excuse, failed to ensure compliance with this Module or the business rulesG of that licensed clearing houseG or licensed central depositoryG , by that licensed clearing houseG or licensed central depositoryG , or a member of that licensed clearing houseG or licensed central depositoryG or a personG associated with that member;
          (c) Has failed to discharge the duties or functions of his office or employment;
          (d) Is an undischarged bankrupt, whether in Bahrain or elsewhere;
          (e) Has had execution against him in respect of a judgment debt returned unsatisfied in whole or in part;
          (f) Has, whether in Bahrain or elsewhere, made a compromise or scheme of arrangement with his creditors, being a compromise or scheme of arrangement that is still in operation; or
          (g) Has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly.
          Amended: April 2016

        • CSD-6.4.2

          Without prejudice to any other matter that the CBB may consider relevant, the CBB may, in determining whether an officer of a licensed clearing houseG or licensed central depositoryG has failed to discharge the duties or functions of his office or employment for the purposes of rule CSD-6.4.1 (c), have regard to such criteria as the CBB may prescribe or specify in directions issued by notice in writing.

          Amended: April 2016

        • CSD-6.4.3

          Subject to Paragraph CSD-6.4.4, the CBB shall not direct a licensed clearing houseG or licensed central depositoryG to remove an officer from his office or employment, without giving the licensed clearing houseG or licensed central depositoryG an opportunity to be heard.

          Amended: July 2016
          Amended: April 2016

        • CSD-6.4.4

          The CBB may direct a licensed clearing houseG or licensed central depositoryG to remove an officer from his office or employment under rule CSD-6.4.1 on any of the following grounds, without giving the licensed clearing houseG or licensed central depositoryG an opportunity to be heard:

          (a) The officer is an undischarged bankrupt, whether in Bahrain or elsewhere;
          (b) The officer has been convicted, whether in Bahrain or elsewhere, of an offence:
          (i) Involving fraud or dishonesty, or the conviction for which involved a finding that he had acted fraudulently or dishonestly; or
          (ii) Punishable with imprisonment for a term of 3 months or more.
          Amended: April 2016

        • CSD-6.4.5

          Where the CBB directs a licensed clearing houseG or licensed central depositoryG to remove an officer from his office or employment under rule CSD-6.4.1, the CBB need not give that officer an opportunity to be heard.

          Amended: April 2016

        • CSD-6.4.6

          No criminal or civil liability shall be incurred by a licensed clearing houseG or licensed central depositoryG in respect of anything done or omitted to be done with reasonable care and in good faith in the discharge or purported discharge of its obligations under this Section.

          Amended: April 2016

      • CSD-6.5 Criteria to Determine Failure to Discharge Duties or Functions by Officers

        • CSD-6.5.1

          For the purposes of Paragraph CSD-6.4.2 of this Module, the CBB may, in determining whether a chairman, chief executive officer or director, or any officer who is a personG stated in a notice referred to in Paragraph CSD-6.3.2, of a licensed clearing houseG or licensed central depositoryG has failed to discharge the duties or functions of his office, take into consideration whether that personG has taken reasonable steps to discharge the following duties:

          (a) Ensure the proper functioning of the licensed clearing houseG or licensed central depositoryG ;
          (b) Ensure the compliance of the licensed clearing houseG or licensed central depositoryG with any relevant laws or regulations of any jurisdication in which it is incorporated, or in which it operates;
          (c) Set out and ensure compliance with written policies on all operational areas of the licensed clearing houseG or licensed central depositoryG , including its financial policies, accounting and internal controls, internal auditing and compliance with all laws and rules governing the operations of the licensed clearing houseG or licensed central depositoryG ;
          (d) Identify, monitor and address the risks associated with the business activities of the licensed clearing houseG or licensed central depositoryG on an on-going basis;
          (e) Ensure that the business activities of the licensed clearing houseG or licensed central depositoryG are subject to adequate internal audit;
          (f) Oversee the financial undertakings or exposure of the licensed clearing houseG or licensed central depositoryG to risks of any nature, by setting out proper delegation limits and risk management controls; and
          (g) Ensure:
          (i) That the licensed clearing houseG or licensed central depositoryG maintains written recordsG of the steps taken by it to monitor compliance with its policies, the limits on discretionary powers and its accounting and operating procedures; and
          (ii) That every report, return or statement submitted by the licensed clearing houseG or licensed central depositoryG to the CBB is complete and accurate.
          Amended: April 2016

      • CSD-6.6 Additional Powers of CBB in Respect of Auditors

        • CSD-6.6.1

          The auditor shall immediately send to the CBB a written report of the matter or the irregularity, if an auditor of a licensed clearing houseG or licensed central depositoryG in the course of the performance of his duties, becomes aware of:

          (a) Any matter which, in his opinion, adversely affects or may adversely affect the financial position of the licensed clearing houseG or licensed central depositoryG to a material extent;
          (b) Any matter which, in his opinion, constitutes or may constitute a breach of any provision of this Module or an offence involving fraud or dishonesty; or
          (c) Any irregularity that has or may have a material effect upon the accounts of the licensed clearing houseG or licensed central depositoryG , including any irregularity that affects or jeopardises, or may affect or jeopardise, the funds or propertyG of investors.
          Amended: April 2016

        • CSD-6.6.2

          An auditor shall not, in the absence of malice on his part, be liable to any action for defamation at the suit of any personG in respect of any statement made in his report under rule CSD-6.6.1.

        • CSD-6.6.3

          Rule CSD-6.6.2 shall not restrict or affect any right, privilege or immunity that the auditor may have, apart from this section, as a defendant in an action for defamation.

        • CSD-6.6.4

          The CBB may impose all or any of the following duties on an auditor of a licensed clearing houseG or licensed central depositoryG :

          (a) A duty to submit such additional information and reports in relation to his audit, as the CBB considers necessary;
          (b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of the licensed clearing houseG or licensed central depositoryG ;
          (c) A duty to carry out any other examination or establish any procedure in any particular case.
          Amended: April 2016

        • CSD-6.6.5

          The licensed clearing houseG or licensed central depositoryG shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in Paragraph CSD-6.6.4.

          Amended: April 2016

      • CSD-6.7 Power of Court to Order Observance or Enforcement of Business Rules

        • CSD-6.7.1

          Where any personG who is under an obligation to comply, observe, enforce or give effect to the business rulesG of a licensed clearing houseG , or licensed central depositoryG fails to do so, the Court may, on the application of the CBB, a licensed clearing houseG , or licensed central depositoryG , or a personG aggrieved by the failure, after giving the first-mentioned personG an opportunity to be heard, make an order directing the first-mentioned personG to comply, observe, enforce or give effect to those business rulesG .

          Amended: April 2016

        • CSD-6.7.2

          In this section, "personG " includes a licensed clearing houseG and licensed central depositoryG .

          Amended: April 2016

        • CSD-6.7.3

          This Section is in addition to, and not in derogation of, any other remedies available to the aggrieved personG referred to in rule CSD-6.7.1.

          Amended: April 2016

      • CSD-6.8 Immunity

        • CSD-6.8.1

          No civil liability, whether arising in contract, equity or otherwise, in respect of anything done or omitted to be done in good faith in the discharge or purported discharge of the duties of the licensed clearing houseG or licensed central depositoryG , or in the performance or purported performance of its functions under its business rules, shall be incurred by:

          (a) A licensed clearing houseG ;
          (b) A licensed central depositoryG ; or
          (c) Any personG acting on behalf of a licensed clearing houseG or licensed central depositoryG , including any member of the board of directors of the licensed clearing houseG or licensed central depositoryG .
          Amended: April 2016

        • CSD-6.8.2

          In respect of anything done or omitted to be done in good faith in the performance and purported performance of that function, no civil liability, whether arising in contract, tort, defamation, equity or otherwise, shall be incurred by:

          (a) Any personG performing, by virtue of a delegation under the business rules of a licensed clearing houseG or licensed central depositoryG , a function of the licensed clearing houseG or licensed central depositoryG ;
          (b) Any personG acting on behalf of a personG referred to hereinabove including a member of the board of directors of that personG .
          Amended: April 2016

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