CBB issues revised Collective Investment Undertakings regulations

Manama, March 29 (BNA) The Central Bank of Bahrain conducted a comprehensive review of the collective investment undertaking regulations governing the mutual fund industry as part of the Central Bank of Bahrain’s broader strategy to conduct a comprehensive review of the financial sector’s regulatory framework.

The new framework recognizes the demands placed by the rapid changes in the money management industry, and thus aims to highlight administrative processes and simplify licensing requirements for establishing and marketing CIUs.

The amendments to the regulations focus on dividing CIUs into two main categories, the first category targeting individual investors, and the second category targeting accredited and wealthy investors.

Regulations relating to the first category of CIUs contain details regarding the nature of investment in CIUs and require prior approval from the CBB while the second category requires notification to the CBB by the underwriting agent.

CIUs aimed at retail investors are low-risk with appropriate diversification and risk management, while CIUs aimed at accredited and wealthy investors contain high-risk investments with the goal of high returns.

The new regulations emphasize the importance of key areas such as corporate governance requirements, high standards of business conduct, protection and segregation of investor funds, and disclosure standards in line with international best practices.

Bahrain has enjoyed a thriving money industry since the 1980s. Since then, the mutual fund industry in Bahrain has experienced further growth and development. At the end of February 2022, the number of mutual funds was 1,664, and the net asset value (NAV) was 10.6 billion US dollars.

The mutual funds industry in Bahrain has a long standing track record and the Central Bank of Bahrain fully supports the industry. Ebtisam Al-Areedh, Director of the Financial Institutions Supervision Department at the Central Bank of Bahrain, said that the enhanced regulatory framework forms part of the CBB’s financial services development strategy (2022-2026) and will create the environment for the growth and progress of the industry.

“Local, regional and international fund operators and global investors will find the Kingdom attractive to localize funds as well as to use Bahrain as a springboard to serve global markets,” she added.

“The CBB has embarked on a comprehensive review of CIU regulations under CBB Rules – Volume 7 as part of a larger initiative to simplify and review all volumes of CBB rules,” said Sherine El-Sayed, Director of the Regulatory Policy Unit at the CBB.

“The new CIU regulations are now being combined into a single unit making it simpler and convenient for the market. It is largely based on principles giving way to the industry to pave the way for building a sound financing system thus promoting the growth of the asset management industry.”

Bahrain’s forward-looking regulations have always been a key competitive advantage that has enabled our financial sector to expand and has always attracted new financial services firms. These revised regulations are another step forward which will enable us to attract more investments to the Kingdom, in line with the strategies put forward under the Economic Recovery Plan,” the Executive Director of Investment Development – Financial Services, Technology and Innovation – at the Bahrain Economic Center Development Board Musab Abdullah said .

“The updated regulations for collective investment undertakings are a game changer for local, regional and global funds seeking international jurisdiction to localize their structures with a highly flexible framework but still within a robust regulatory environment overseen by the Central Bank of Bahrain,” SICO BSC Najla CEO Al Shirawi said.

Some of the advantages of these regulations include a significant reduction in setup and running processes that reduce operating costs, and all factors that are the salient decision-making criteria in a manager’s choice of domicile. Furthermore, simultaneous simplification of regulations provides greater flexibility on key fund terms including asset class, investor classes, provider requirements, and legal structure.

“After consulting with the market, the CBB’s new collective investment project regulations provide speed, simplicity and flexibility and should make Bahrain the leading jurisdiction in the region for the creation of investment funds. Bahrain now provides a pool of investment funds,” said Brian Howard, Partner and Head of the International Funds Team at Trowers & Hamlins. A wide range of investment fund structures are available to prospective managers following a simplified notification process to the Central Bank of Bahrain.

HF