The Banking Executive Magazine - March 2022 Issue

The Central Bank of Bahrain (“CBB”) has conducted a comprehensive re- view of its Collective Investment Un- dertakings (“CIU”) regulations governing the mutual funds industry as part of the CBB’s wider strategy to conduct a comprehensive review to the whole financial sector regulatory framework. The new framework ac- knowledges the demands placed by the fast-paced changes in the fund management industry and therefore aims at lightning the administrative processes and simplifying the author- ization requirements for establishing and marketing CIUs. The amendments to the regulations focus on dividing CIUs into two broad categories, the first category is targeting retail investors and the sec- ond category is targeting accredited and affluent investors. The regula- tions pertaining to the first category of CIUs contain details regarding the nature of investment in the CIUs and require receiving CBB’s prior ap- proval whereas the second category only requires notification to the CBB by the placement agent. The CIUs targeting retail investors are low risk with proper diversification and risk management, while CIUs targeted towards accredited and af- fluent investors contain high risk in- vestments with the aim of delivering high returns. The new regulations emphasize on the importance of key areas such as the corporate governance require- ments, high standards of business conduct, safeguarding and segrega- tion of investors’ money, and disclo- sure standards in line with international best practices. Bahrain has had a thriving funds in- dustry since the 1980s. Since then, the mutual funds industry in Bahrain experienced further growth and de- velopments. As at the end of Febru- ary 2022, the number of mutual funds stood at 1664, with a net asset value (NAV) of US$ 10.6 billion. Commenting on the new regulations, Ms. Ebtisam Al Arrayed, Director of Financial Institutions Supervision Di- rectorate at the CBB, said “The fund industry in Bahrain has established a long-standing track record, and the CBB is fully supportive to the indus- try. The enhanced regulatory frame- work forms part of CBB’s Financial Services Development Strategy (2022-2026) and will set the environ- ment for the growth and progress of the industry. Local, Regional, and in- ternational fund operators and global investors will find the Kingdom at- tractive for fund domiciliation as well as for using Bahrain as a launchpad for serving global markets” Ms. Shireen Al Sayed, Director of Regulatory Policy Unit at the CBB the BANKING EXECUTIVE 24 ISSUE 159 MARCH 2022 CENTRAL BANK OF BAHRAIN ISSUES REVISED COLLECTIVE INVESTMENT UNDERTAKINGS REGULATIONS