BAHRAIN ISSUES THE GCC INVESTMENT FUNDS PASSPORTING FRAMEWORK

06 January 2025

Josleen Deeb

As of January 1, 2025, the Central Bank of Bahrain (CBB), the primary financial regulator in Bahrain, has implemented the Cross-Border Registration Regulation for Investment Funds (“Funds Passporting Framework”). This initiative aligns with the Regulatory Framework for the Cross-Border Registration of Financial Products between the Regulatory Authorities Regulating GCC Capital Markets (“Regulatory Framework”), which was initially issued in November 2022.

Manama:  The Regulatory Framework seeks to harmonize the regulation of financial product passporting across Gulf Cooperation Council (GCC) member states, serving as the foundation for individual passporting regulations tailored to different financial products. The Funds Passporting Framework establishes standardized procedures and requirements for registering and promoting investment funds across the GCC, ensuring adherence to strong governance and transparency standards.

Under this framework, 'passporting' refers to the registration of a financial product in both the regulatory authority overseeing the registration process and the regulatory authority in the target jurisdiction. The Funds Passporting Framework applies to the investment fund, the fund manager, placement agents, and other related entities.

I.  Fund Manager Responsibilities

The fund manager must initiate the passporting application with the registered regulatory authority, ensuring compliance with the following requirements:

• Submission of the official application form prescribed by the registered regulatory authority.
• Confirmation that the fund and its documentation align with the Funds Passporting Framework’s requirements.
• Provision of the fund document or an equivalent, including a disclaimer outlining the regulatory authorities' liability as specified in the framework.
• Specification of the target GCC jurisdictions for fund promotion and identification of the responsible placement agents.
• For public funds, submission of a summary of fund details in Arabic.
• Submission of any additional documents or data requested by the registered regulatory authority.
• Proof of payment for registration fees, if applicable.
  
  

II.   Approval Process

Once an application is deemed complete, the registered regulatory authority must issue a decision within ten (10) business days. If approved, the authority will notify the hosting regulatory authority within ten (10) business days. The hosting authority will then review the application and provide a decision within another ten (10) business days, with the option to extend this period if further assessment is needed.

If the application is accepted, the hosting regulatory authority will inform the registered regulatory authority, which in turn will notify the fund manager. The notification will include the effective approval date. Both regulatory authorities will then publish the details of the passported fund in their respective registers, including information on the relevant hosting jurisdictions.

III.  Placement Agent Role

The placement agent is responsible for promoting the passported fund within the jurisdiction of the designated hosting regulatory authority. Additionally, they must comply with all applicable rules and obligations set forth by the hosting regulatory authority.

IV. Strengthening GCC Economic Integration

The introduction of the GCC Funds Passporting Framework represents a significant step toward financial and economic integration within the region. By streamlining fund promotion and reinforcing regulatory oversight, the initiative is expected to create greater investment opportunities, foster economic growth, and enhance the GCC’s global standing as an attractive investment hub.

By streamlining the registration process, the framework enhances the attractiveness of investment funds as an asset class within the GCC.

In conclusion

This process simplifies the promotion and distribution of investment funds across the GCC. The application must include a completed form, a copy of the fund document, a disclaimer regarding the liability of regulatory authorities, and proof of payment of registration fees (if applicable). If the fund is public, a summary of the fund document must be provided in Arabic.

This simplifies the promotion and distribution of investment funds across the GCC. By establishing a unified regulatory approach and simplifying the registration process, the framework aims to enhance transparency, governance, and investor protection.

ALKETBI TOUCH

Our Team of professionals can guide you in establish a fund license for you in the DIFC, ADGM or in UAE under the Securities Commission Authorities and can assist you in registering your funds in Bahrain under the Passporting Regime. By leveraging this passporting framework, funds registered in the UAE can efficiently expand their reach and promote their offerings in Bahrain and other GCC member states. Stay in touch if you want further information – Contact us