Depending
on the types of the products, most of financial activities within the Bahrain
or addressed to the potential investors or the investors resident in Bahrain
have to be either registered, authorized or approved by the CBB. As for foreign
notes, they cannot be marketed or offered within Bahrain or to the potential
investors or the investors resident in Bahrain until the CBB gives the
confirmation to the concerned CBB licensee to proceed with the intended
marketing or offering.
In addition to the above, the CBB requires appropriate CBB license to be held by the person intending to market the notes or offer them for sale. Non-resident persons may not offer them directly to investors resident in Bahrain. To be able to do so, the non-resident person has to either hold the appropriate CBB license itself or has to appoint an appropriate CBB licensee as its distributor (“the intermediary”). Furthermore, the concerned CBB licensee, be it the notes issuer or the intermediary as the case may be, must be authorized to undertake such activities by its Memorandum and Articles of Association.
Even though there is a set of guidelines that had been issued to regulate dealings in debt securities in general, the CBB has different set of policy and adopts a much more simplified internal procedure with regard to dealings in notes. The CBB must not be named or associated as the institution that has registered, approved or authorized any of such dealings. The CBB will only provide the confirmation to allow the appropriate CBB licensee to proceed with the marketing or the offering of the notes. Accordingly, the CBB does not specify or impose on the issuer of the notes or the intermediary what needs to be incorporated in the written material in relation to the notes; it will merely examine the issuer’s term-sheet and, when applicable, the term-sheet of the intermediary. Among the purposes of the CBB’s perusal of the term-sheet(s) are to ensure that the term-sheet does not contain any irregularities, such as a contradicting stipulation or statement of fact; and/or that the investors resident in Bahrain will not be subjected to unfair treatment as compared to their counterparts from other jurisdiction(s) in such dealings; and/or that the investors resident in Bahrain will not be subjected to suspicious transactions; and/or that the facts in the term-sheet are presented with sufficient transparency, for example, if the fund is said to be guaranteed, that has to be clearly mentioned and should not be subjected to any disclaimer.
There are some usual practices with regard to dealings in notes. However, the CBB reserves the absolute discretion in the matter and will look at each application for the CBB’s confirmation to proceed with the marketing and offering of notes on case by case basis depending, among others, on the issuer(s), the rating of the issuer(s) and the domicile of the issuer(s). Within that context while the current policy provides that generally notes may be offered to expert and accredited investors, the CBB may restrict the marketing and offering of certain notes solely to accredited investors due to particular nature or feature of such notes.
© 2008 - Hurriyah El Islamy
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