BMA issues consultation to advance work on Investment Business Rulebook

The consultation covers three further Modules, for later inclusion in Volume 4 of the BMA Rulebook. The Modules address the issues of high-level controls, risk management and BMA reporting.

Volume 4 is being issued in two stages, with the first phase issued by the BMA in April 2006. Phase 2, which will comprise the regulations contained in the current consultation and a second consultation planned for later this year, is planned for issuance by the end of 2006.

"The current consultation advances BMA's work on the Investment Business Rulebook, which constitutes Volume 4 of the BMA Rulebook," said Mr. Abdul Rahman Al Baker, Executive Director, Financial Institutions Supervision, at the BMA.

"While most of the key regulatory requirements were issued in April 2006, this second phase, on which work is currently underway, will complete the full scope of rules applicable to investment business activities."

The BMA is seeing strong demand for its Investment Business licence, which is part of a new licensing framework now in place.

"The new regulatory and supervisory framework for investment business, in its entirety, will create the strongest and most comprehensive such framework in the region," said Mr. Al Baker.

The proposed regulations contained in the current consultation lay specific rules to be followed by investment firms in managing high level controls (Module HC) and risk (Module RM), as well as reporting and ad-hoc notifications to the BMA (Module BR).

Module HC contains requirements regarding the Boards of Directors and senior management of investment firm licensees, as well as other high-level controls such as internal audit, compliance arrangements, and policies on remuneration and corporate ethics. Module HC applies to Bahrain-incorporated firms, including their overseas branches, while overseas investment firms are required to demonstrate that similar rules apply at the parent entity level.

Module RM provides rules and guidance on risk management systems and controls requirements, obliging firms to identify the range of risks that they face and to put in place appropriate systems to address those risks.

Module BR lays down requirements for prudential reporting to the BMA; and circumstances when notifications to BMA or prior approvals are required. It also describes the information gathering powers of the BMA.

"We welcome comments from industry and other interested parties to the rules contained in the consultation paper," said Mr. Al Baker.

The BMA has an established policy of consulting with industry prior to the issuance of any new rules or amendments to existing rules, he pointed out.

The consultation period runs until 30 September 2006. The consultation paper is available on the BMA website.