Bahrain Implements GCC Fund Passporting Framework

Bahrain Adopts the GCC Funds Passporting Regime

The Cross-border Registration Regulation for Investment Funds, commonly referred to as the GCC Funds Passporting Scheme, has been issued by the Central Bank of Bahrain (CBB) and comes into force on January 1, 2025.This effort is in line with the "Regulatory Framework for the Cross-Border Registration of Financial Products between the Regulatory Authorities Regulating GCC Capital Markets" (Regulatory Framework), which was released in November 2022. The framework is a joint effort of Gulf Cooperation Council (GCC) member states to facilitate the registration and marketing of investment funds in the region with high standards of transparency and governance.

The Objectives of the GCC Funds Passporting Regime

The main aim of the GCC Funds Passporting Regime is to develop a uniform investment climate in the GCC by facilitating simplified cross-border fund registration and promotion. The scheme seeks to:

      i.       Facilitate financial market integration among member states of the GCC.

    ii.        Enable investors to gain access to diversified and readily available investment opportunities.

   iii.        Develop a regulatory regime that promotes transparency, governance, and protection of investors.

   iv.        Minimize administrative and compliance expenses related to cross-border fund registrations.

The new regime enables a single process for the registration of investment funds, enabling fund managers and promoters to conduct business in several GCC jurisdictions under a uniform set of rules.

Understanding Funds Passporting

The Regulatory Framework describes "passporting" as the act of registering a financial product in the financial product register of both the registering regulatory body (home state) and the host regulatory body (destination state). Under the Funds Passporting Regime, a number of important stakeholders are involved, including:

      i.      The passported fund

The investment vehicle that is being registered to operate across borders.

    ii.      The fund manager

The organization in charge of managing the investment fund and maintaining regulatory compliance.

   iii.      The placement agent

The organization in charge of marketing the investment fund within host jurisdictions.

   iv.      Regulatory authorities

Each GCC country's financial regulatory authorities responsible for managing fund passporting applications and compliance.

 Fund Passporting Process

To join the Funds Passporting Regime, fund managers must adhere to a formalized application process:

     I.      Submission of Application

The fund manager must submit the prescribed application form to the registered regulatory authority, ensuring that all documentation meets the specified requirements.

    II.      Fund Documentation Compliance

The fund manager must provide necessary disclosures, including a disclaimer stating the liability of regulatory authorities as per the Funds Passporting Regime.

  III.      Regional Identification

The fund manager has to state the regions in which the fund is going to be marketed and the placement agents who are going to market the fund.

  IV.      Language Compliance

If the fund is a public fund, the summary of the fund document should be given in Arabic.

   V.      Regulatory Fees

Evidence of payment of registration fees, if required, should be attached.

After an application is made, the registered regulatory authority has to consider and make a decision within ten working days. In case of approval, the application is sent to the hosting regulatory authority, which also has ten business days to make a decision. The hosting regulatory authority can extend this time for additional consideration before giving a final decision to the registered regulatory authority, which in turn notifies the fund manager.

On approval, information of the passported fund is made available in the concerned registers of both regulatory bodies to maintain transparency and investor accessibility.

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