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Mutual funds in the Kingdom of Bahrain are regulated by the Central Bank of Bahrain’s (CBB’s) collective investment undertaking (CIU)  regulations, as set out in Volume 7 of the CBB rulebook. Overseas operators wishing to offer overseas-domiciled CIUs to Bahrain residents must hold the appropriate CBB license – or appoint a CBB license as a distributor.  

 

What are CIUs?

CIUs are undertakings:

  • Where the sole object is the investment of capital – raised from the public or through private placement – in financial instruments and other assets
  • Which spread risk appropriately
  • Whose holdings may be re-purchased or redeemed out of assets

 

Types of Bahrain-domiciled CIUs

Established under the laws of the Kingdom of Bahrain, Bahrain-domiciled CIUs can be constituted as:

  • Common CIUs – established under Bahrain’s contract law
  • Trusts – established under Bahrain’s trusts law
  • Corporates – established under Bahrain’s commercial companies law

 

Bahrain-domiciled CIUs are classified as:

  • Retail
  • Expert
  • Exempt
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Relevant persons

Relevant persons required to set up a fund in Bahrain include the:

  • Operator
  • Trustee (if applicable)
  • Fund manager
  • Custodian
  • Fund administrator
  • Registrar (Transfer agent)
  • Placement agent (only a CBB licensee can offer overseas domiciled CIU to Bahrain residents)
  • Investment advisor
  • External auditor

Fund operators

Operators must be domiciled in a reputable jurisdiction acceptable to the CBB and hold an appropriate license from the CBB (or from a regulatory authority acceptable to the CBB, permitting the entity to establish and operate CIUs).

 

Operators’ duties include:

  • Taking all reasonable steps to register, authorise, establish, operate and wind up the CIU
  • Ensureing that the operations and investments of the CIU are subject to compliance monitoring and reporting by its Shari’a Board members/Advisors, in accordance with applicable AAOIFI standards in case of Shari’a compliant CIUs
  • Keeping all CIU documents consistent, current and updated, in line with applicable laws and regulations and as approved by, or notified to, the CBB
  • Making documents available to investors, including:
  • The instrument
  • The prospectus or equivalent document
  • All contractual agreements related to the CIU
  • Annual and semi-annual financial reports
  • Ensuring compliance with contracts’ terms and conditions
  • Ensuring that all applicable anti-money laundering laws are complied with
  • Liaising with the CBB as necessary
  • Appointing directors who are fit and proper and approved by the CBB
  • Putting appropriate corporate governance in place
  • Avoiding – and addressing – any conflicts of interest
  • Considering whether CIU participants should be given voting and/or other participatory rights
  • Ensuring that reports submitted to the CBB and investors are accurate and submitted on a timely basis, such as:

 

  • Financial statements
  • Financial statements of fund companies  (where CIUs are structured as corporates)
  • Quarterly statistical returns

 

 

Keypoint Consulting W.L.L. is licensed by the Central Bank of Bahrain as Fund Administrator.

Nandakumar Narasimhan
Senior Director
Srinivasa Rao Baratam
Executive Manager
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