Valsen Corporate

Bahrain Collective Investment Undertakings (CIU)_Guideline

Bahrain Collective Investment Undertakings (CIU)
The first Collective Investments Schemes rules were issued by the CBB in 1992 and were subsequently revamped in June 2007, when the CIU Module within CBB Rulebook Volume 6 was issued. The rules were further revamped and issued in a separate Volume of CBB Rulebook (Volume 7). The new Volume provides comprehensive rules and regulations pertaining to the authorization/registration and supervision of mutual funds domiciled and/or offered for marketing in Bahrain.
Portfolios and Investment Funds are Investment schemes offered and marketed in the form of negotiable securities mainly originated for the purpose of raising funds from the public and investing them in specific schemes on the basis of risk distribution. Shares in such schemes shall be directly or indirectly re-purchased, redeemed or repaid for from the assets of the scheme and according to the interest of the investors in any of such scheme.
Collective investment undertakings:
These are undertakings

  1. The sole object of which is the collective investment of capital raised from the public in financial instruments or other assets and which operates on the basis of risk-spreading; and
  2. The holdings of which are re-purchased or redeemed, directly or indirectly, out of those undertakings’ assets.

Closed-ended funds
Are CIUs with a limited number of holdings. Where the fund vehicle is a company, holdings can take the form of shares. New holdings are rarely issued after the fund is launched and are not normally redeemable until the fund liquidates. Typically an investor can acquire or dispose of holdings in a closed-ended fund by buying or selling them on a secondary market, from a market intermediary or other investor, rather than by dealing with the CIU itself.
The following arrangements do not fall within the definition given in Rule CIU-B.3.1 :

  1. A contract of insurance, insurance linked investment products or investments managed as part of a takaful contract of insurance;
  2. Unrestricted or restricted investment accounts offered by Islamic bank licensees;
  3. Unilateral arrangements to hold or manage assets on a discretionary basis;
  4. Arrangements entirely between bodies corporate who are members of the same group, or entirely between family members;
  5. Pension, annuity and other employee benefit products, organised and managed for the benefit of employees or for another corporate body, which are governed by separate laws of the Kingdom of Bahrain (e.g. GOSI);
  6. Structured products;
  7. Cash savings schemes; and
  8. Special Purpose Vehicles used to issue debt securities.

Categories of CIU

  1. Retail – open to all investors and subject to detailed regulation and supervision by the CBB. Retail collective investment undertakings are subject to restrictions on diversification and the types of financial instruments or assets that can be held by the collective investment undertaking. A retail collective investment undertaking must be authorized by the CBB.
  2. Expert – may only be offered to Expert Investors and require a minimum investment of US$10,000. Expert Investors are individuals or commercial undertakings which have financial assets of at least US$100,000. Expert collective investment undertakings are also subject to restrictions on diversification and the types of assets that can be held but are able to utilize higher aggregated and individual exposure limits than retail collective investment undertakings and may invest in a wider range of asset classes, including among other things, real estate, commodities, unlisted securities and hedge funds. An expert collective investment undertaking must be authorized by the CBB.
  3. Exempt – may only be offered to Accredited Investors and require a minimum investment of US$100,000. Accredited Investors are individuals or institutions with financial assets having a value of at least US$1,000,000. Exempt collective investment undertakings are subject only to high level disclosure and reporting requirements and not to any restrictions on their investment policies. An exempt collective investment undertaking must register with the CBB prior to being offered to prospective investors. An exempt collective investment undertaking must not quote the CBB as its regulator, must clearly disclose that it is considered exempt for the purposes of the Module and must delegate its administration and custody of assets to third party licensed institutions which are licensed by or otherwise acceptable to the CBB.

Legal Requirements

Sr.
No		 Element Requirement(s)
Entity Requirements In accordance to the Central Bank of Bahrain (CBB) Rulebook, the legal status of the entity making the application can be:

  1. A Bahraini joint stock company (BSC)
  2. A Bahraini company with limited liability (‛WLL’);
Operator An application for authorisation may only be made by the operator of the CIU
In the cases where the operator is not a CBB licensee, an application for authorisation under will only be considered if the operator :

  1. Is duly authorised to operate similar CIU in its home jurisdiction;
  2. Is supervised by an overseas regulatory authority acceptable to the CBB;
  3. Has a sound track record and/or experienced management team;
  4. Is financially sound according to home country regulatory requirements; and
  5. Is a reputable financial institution
Director’s Requirements Depending on the entity type, the following are the requirements:

  1. WLL – One manager or more, to be appointed from among the partners or non-partners by the founders for the first time and by the general assembly thereafter, shall manage the company.
  2. BSC (Public) – The number of the board members shall be at least five members appointed for a period of three years renewable.
  3. BSC (closed) – The number of the board members shall not be less than three and membership term shall not exceed three years renewable
Shareholder requirements The licensee will need at least 2 shareholders.
Fund Administrator An applicant may also appoint the CBB CIU’s proposed fund administrator
Fund Manager An applicant may also appoint CBB CIU’s proposed fund manager.

  • Must be approved by the CBB if outside Bahrain
  • Must be licensed if in Bahrain
Custodian An applicant may appoint a custodian who has been licensed by the CBB
Compliance Officer Every licensed member must appoint a Compliance Officer. The Compliance Officer is responsible for discharging the legal and regulatory obligations of such member and must be a resident in Bahrain
Bahrain Office A physical office in Bahrain is not mandatory
Auditor Every member shall appoint one or more qualified and experienced external auditors for its accounts for every financial year. Prior written approval by the CBB will be required before appointing an auditor.
Minimum Capital Requirements
  1. Retail CIU : No minimum subscription
  2. Exempt CIU: USD 10,000
  3. Expert CIU: USD 100,000
Application Fee BD 100
Annual Fee BD 2,000

Ongoing Obligations
All licensed Collective Investment Undertakings must meet the following ongoing obligations at all times to remain compliance with the CBB Law:

  1. Maintain all the conditions set in the license approval letter at all times
  2. A Licencee shall maintain such accounting and other records as may be specified by the Central Bank and shall have separate records for each branch abroad providing any of the services that are subject to this law.

About Valsen Fiduciaries
Valsen Fiduciaries is a licensed independent global service provider of a broad range of fiduciary, administrative, legal, corporate secretarial and support services.

    1. Company formations and Administration
    2. Assistance with Bank Account opening
    3. Collective Investment Setup and Administration
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    5. Trusts and Foundations setup and administration
    6. Online Payment Gateway Solutions
    7. Banking Licenses and PSP, E-Money, E- Wallet Licenses
    8. Yacht and aircraft registrations.
    9. Cryptocurrency Solutions (ICO, STO, Crypto Exchanges etc)

The Valsen Advantage

  • We will advise you on the optimal legal structure for your requirements, size, expectations and circumstances. We have extensive knowledge of a wide range of securities dealer licenses in all major jurisdictions.
  • Valsen will assist to complete every form for each process in the best way we know how (Based on our many years’ experience with various regulators and service providers across the world)
  • We are very hands on in the post filing period checking with re regulator and service providers and updating you regularly. Any queries raised by the regulators and service providers during processing will be quickly synthesized by us and we shall craft the right responses to move the process forward fast.
  • We have a full in-house compliance support for all compliance requirements with the regulator and service providers

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