The CBB has released Volume 7 (Collective Investment Undertakings), a new Volume forming part of CBB Rulebook. The new volume provides comprehensive rules and regulations pertaining to the authorization/registration and supervision of mutual funds domiciled and/or offered for sale in Bahrain.
The introduction of Volume 7 followed an industry wide consultation that took place in October 2011, and incorporates the comments and feedback received.
“The amount of detail that has been added to the existing CIU regulations, and the fact that the area of mutual funds is increasingly attracting regional and international interest from specialized financial institutions that are actively involved in the structuring of mutual funds products, necessitated the issuance of the revamped regulations within a separate Volume,” on the introduction of Volume 7, Abdul Rahman Al Baker, Executive Director, Financial Institutions Supervision at the CBB, said.
“The new regulatory framework is aimed at enabling fund sponsors/managers and service providers to capitalize on the opportunities that best serve investors’ needs”.
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. Since then, the mutual funds industry in Bahrain experienced further growth and developments.
“When markets began to slowly recover after the financial crisis, investors immediately identified the investment opportunities in the region and there was instant demand for new, innovative investment products. This, coupled by the fact that the mutual funds industry in Bahrain had matured to a certain extent, made it necessary for the CBB to undergo the exercise of revamping the regulatory framework of mutual funds, to keep pace with the current international and regional developments and best market practice.”
“The fact that Bahrain domiciled CIU vehicles has established a reasonably tested efficiency and operational track record, has made it attractive for operators to utilize CBB’s CIU regulatory framework for the establishment of their CIU investment vehicles. This comes in addition to the fact that most of the mutual funds domiciled in Bahrain are focused on investments based in the region,” Al Baker, added.
“Recently, we have been observing a new trend in the applications for Bahraini domiciled funds, in the sense that such applications are submitted with a pre-defined investment target and a very specific objective, unlike the previous norm which entailed subscribing to a blind pool that would search for available opportunities,” Mohammed Ayman Al Tajer, Director, Financial Institutions Supervision at the CBB, said.
In drafting the new regulations, he said, the CBB recognized the importance of expanding key areas such as the corporate governance framework, and the role and responsibilities of each relevant party to a fund. “It also expands the variety of funds that can be established in Bahrain, by introducing rules and regulations governing Bahrain Real Estate Investment Trusts (B-REITs), in line with best international practices, yet tailored to serve the needs of the local and regional markets.”
“The CBB is fully supportive of the mutual funds industry and our revamped regulatory framework addresses investor needs through profiling mutual funds by category, i.e. Retail, Expert, Exempt and Private, each with a separate set of rules, observing the type of targeted investors and their level of sophistication, and applying the appropriate level of supervision on such basis. The application of such framework is crucial for the industry to grow and progress in a healthy manner,” Al Tajer, added.
It is worth noting that all CIUs’ authorised/ registered by the CBB prior to April 2012, are required to meet the provisions of Volume 7 by 31st December 2012, whereas, the rules are effective immediately for any newly established CIU.