CBB issues Consultation Paper on new market intermediaries and representatives rules

The CBB Rulebook Volume 6 seeks to introduce a comprehensive, effective and harmonized approach in licensing, regulating and supervising licensed market intermediaries and representatives of the Self-Regulating organization s(SROs) in the Kingdom of Bahrain, in order to achieve the CBB's main objective of maintaining a transparent, fair, orderly and efficient capital market for enhancing investor confidence and ensuring investor protection.

The Market Intermediaries and Representatives License (MIR) Module sets out the CBB's regulatory framework, including licensing requirements governing market intermediaries and representatives engaged in capital market regulated activities or services, as members of self-regulatory organizations (SROs) in or from the Kingdom of Bahrain, which is stipulated under Article 81 of the CBB Law and includes underwriting or promoting securities, participating in incorporating of companies or entities issuing securities, forming and managing securities' portfolios, depositing, clearing and settlement of securities, intermediating in securities' transactions, in addition to providing advisory services related to the listed securities.

The MIR Module includes 9 parts; the first part sets out the legal basis for the licensing of securities intermediaries and brokers, where the second part provides the criteria and requirements related to the securities intermediaries representatives and approved persons. The third part provides details regarding the business standards and ongoing obligations on the licensed members or authorized persons, where the other parts of the Module set out the requirements related to the criteria and requirements covering the events of changing any substantial shareholding or control in a licensed member, the role of a licensed exchange or licensed clearing house regarding the monitoring of its members, in addition to the powers and emergency powers of the CBB regarding the licensed member.

Mr. Abdul Rahman Al Baker, Executive Director of Financial Institutions at the CBB, said:

"The CBB is proud to issue for consultation with the industry the proposed Market Intermediaries and Representatives License (MIR) Module, which will enable the CBB to make appropriate use of self-regulatory organizations, such as licensed exchanges and clearing houses, that need to exercise direct oversight on their members for their respective areas of competence and to the extent appropriate to the size and complexity of the markets they operate."

"The CBB, on the other hand, will exercise overall oversight on the licensed exchanges and clearing houses and their respective members, to ensure that they observe standards of fairness and confidentiality when exercising powers and delegated responsibilities and enhancing the public investors confidence in the market," said Mr. Al Baker.

Mr. Ali Salman Thamer, Director of the Capital Markets Supervision Directorate, stated, "Based on the CBB and other capital market participants regarding the recognition of the market intermediaries and their representatives' role in developing the capital market in Bahrain, in line with the regulator and licensed exchange and licensed clearing house, the MIR Module has been issued to encourage such entities and persons to provide the market with efficient and competitive products and services under a well structured organization."

"To maintain fair, efficient and transparent markets and enhance investors protection, the CBB provides special emphasis through this Module on the compliance of market intermediaries and their representatives with the laws, rules and regulations of both the CBB and the licensed exchange and licensed clearing house, alongside the emphasis on protecting the interests of the investors, particularly on the requirements for the efficient and effective segregation and handling of clients' assets and their orders," said Mr. Thamer.

The CBB has already issued a number of Modules as part of the Capital Markets Rulebook Volume 6 and looks forward for further cooperation and comments from the market players on the upcoming Modules which are planned to be issued for consultation in the near future, in order to further develop and upgrade the whole capital market regulatory framework in line with best international standards and practices, particularly those standards issued by the International Organization of Securities Commissions (IOSCO) and International Federation of Exchanges.