Capital Markets Issue-7 Q5

B A H R A I N December 2005 Issue 7 Published by the Bahrain Monetary Agency (BMA) Inside Page 2 Investment business Press announcement rules Agreement with TOCOM rulebook on the way Page 3 he Bahrain Monetary Agency (BMA) Category 1 investment firm licensees Bahrain is financial center of future is finalizing work on part of a new would have the ability to deal in financial regulatory and supervisory frame- instruments as principal (the key activity Sukuk market seeing robust growth T work for investment business licensees. defining this category). They would also GCC stock market bubble? The framework will comprise Volume 4 of have the ability to undertake all other regu- the BMA Rulebook, which the Agency has been lated investment activities; Page 4 progressively issuing since 2004. The BMA is Category 2 investment firm licensees Nass family firm listed intending to issue Volume 4 by mid-2006. would be authorised to undertake all regu- lated investment activities, with the excep- Jawad shares on offer A consultation on part of the investment tion of dealing in financial instruments as Ithmaar Bank plans IPO business framework has been concluded in December 2005. The consultation explained principal. In other words, they would be Banader is listed the background to the project; outlined its allowed to hold client money, but would not proposed structure and coverage; and con- be allowed to act as principal in client trans- Page 5 sulted on five draft modules of the proposed actions or act as a market maker; and GCC IPOs: ‘Hot’ property rulebook. These modules relate to regula- Category 3 investment firm licensees tions on authorization, capital requirements, would neither be allowed to trade as princi- external auditors and accounting standards. pal, nor hold client money. They would only Page 6 Several other consultations, on other com- be allowed to undertake the activities of Equity markets: Surging ahead ponents of Volume 4, are scheduled to take “arranging deals in financial instruments” place over the next six months. and/or “advising on financial instruments”. Page 7 “The Bahrain Monetary Agency is pursu- The three-way categorisation is based on BMA licence for investment advisory ing a programme of enhancements to the nature of the risks posed to investors (and the financial system) inherent in the Investors’ Guide Bahrain’s regulatory and supervisory framework for the financial services sector, activities allowed under each. Prudential following the expansion in August 2002 of requirements would be tailored accordingly. Page 8 the BMA’s regulatory responsibilities,” said “We will begin implementing the Money market Mr. Ahmed Abdul Aziz Al Bassam, Director, Authorisation module as soon it is Debt market Licensing & Policy, at the BMA. finalised,” said Mr. Al Bassam. BSE highlights “One of the projects under way is to The proposed rules also provide for develop a more comprehensive regulatory Financial sector fact sheet investment firms to operate on a fully Shari’a and supervisory framework for investment compliant basis, in which case certain specif- business licensees.” ic requirements would apply. Conventional Editor This project, which is linked to changes investment firms would be allowed to Indira Chand, BMA separately being implemented in a new undertake Shari’a compliant transactions, licensing framework under development by but could not otherwise hold themselves out as an “Islamic investment firm”, unless all E-mail: [email protected] the BMA, will allow a much wider range of investment business activities to be licensed, their operations were conducted in accor- as well as provide for stronger regulation, in dance with Shari’a principles. BMA Contact: line with international standards. The proposed requirements are broadly Director This should further facilitate the growth consistent with existing approaches to the Capital Markets Supervision Directorate and development of investment business licensing of investment business firms, but Bahrain Monetary Agency activities in a sound and prudent manner, are more comprehensive in terms of the con- P.O.Box 27, Manama said Mr. Al Bassam. ditions for granting a license and in the range of investment activities that can be undertak- Kingdom of Bahrain In the case of Volume 4, the Authorisation Module proposes three different sub-cate- en (and require a licence from) the BMA. Tel: +973 17547909 gories of investment firm, depending on “The BMA has engaged and will continue Fax: +973 17532957 the precise range of activities undertaken, to engage the industry in the development Website: www.bma.gov.bh as follows: of this Rulebook,” said Mr. Al Bassam. B AH R AI N Rules on media statements he Bahrain Monetary Agency results, of listed companies. letterhead paper and duly signed by (BMA) has set strict rules “Such a situation poses many an authorized person. Trelating to press announce- potential risks for companies and In cases where incorrect informa- ments made by publicly listed com- investors and, therefore, the Agency tion is published, the company is panies. requires all listed companies to required to issue an official correc- The rules require companies to adhere to the rules of good practice,” tion via denial or clarification to issue public announcements to the says the Circular. the concerned newspaper/publica- media through an authorized Companies should ensure, to the tion. A copy of such correction spokesperson; set internal policies extent of their control, that all should also be sent simultaneously related to the dissemination of infor- announcements are attributed by a to the Bahrain Stock Exchange mation; and take action to avoid pub- newspaper/publication to an identi- (BSE). lication of unattributed information fied person in the company who is The Circular, issued on 20th in the media. duly authorized to make such November 2005, became effective The rules are contained in a BMA announcements. immediately upon issuance and all Circular issued to all listed compa- Companies are required to lay companies are required to abide by nies and financial services providers down internal policies, disseminated the rules detailed in it. last month. to all staff, regarding the preparation The BMA and the BSE reserve the The Circular was necessitated fol- and dissemination of news related to right to suspend trading and/or take lowing a number of instances of pub- the company. Listed Companies are disciplinary action against compa- lication of unattributed financial also required to issue all public nies that do not comply with the information, including financial announcements on company official BMA requirements. BMA pact with Tokyo exchange he Bahrain Monetary Agency (BMA) and The Tokyo such a partnership with the Bahrain Monetary Agency Commodity Exchange (TOCOM), the world’s leading (BMA).” Tbullion and energy exchange, have signed a “Since the creation of TOCOM in 1984, one of TOCOM’s Memorandum of Understanding (MoU) aimed at developing missions has been to contribute to the development of the cooperation between the two institutions. global and Asian marketplace. We are very much delighted to The agreement was signed in Tokyo in November 2005 by having this opportunity to cooperate with BMA to further H.E. Rasheed Mohammed Al Maraj, Governor of the BMA, expand the scope of this mission by making TOCOM markets and Mr. Masaaki Nangaku, Chairman of TOCOM. available to financial institutions in Bahrain.” Bahrain is the The MoU provides a formal framework for a cooperative leading international financial center in the Middle East relationship between the BMA and TOCOM. The two institu- region, he pointed out. tions intend to develop an institutional framework to enable The BMA is seeking to develop Shari’a compliant products, financial institutions, brokers and others in Bahrain to conduct which enable Islamic financial institutions to trade in various transactions on the TOCOM that comply with the require- types of commodities listed on the TOCOM. The assets of the ments of the Shari’a, Commodity Exchange Law of Japan and global Islamic banking industry are currently estimated to the general rules of the Exchange. exceed US$250 billion. Based on the MOU, TOCOM and the BMA will engage in TOCOM hopes the alliance with the BMA, which enjoys a sharing the Exchange documentation and obtaining approval reputation of being the most innovative and highly regarded from BMA’s Shari’a Advisory Board to designate the TOCOM regulator in the Middle East, will promote market growth by as the BMA’s approved and preferred trading house for oil attracting new market participants from Bahrain with the sup- exchange transactions conducted in accordance with Shari’a port of the BMA, and will strengthen TOCOM’s position as the requirements. provider of benchmark prices to the world market, and “We are delighted to enter into this agreement with The expand the trading of commodities by Islamic financial insti- Tokyo Commodity Exchange (TOCOM),” said Mr. Al Maraj, tutions. following the signing of the MoU. TOCOM is the largest commodity futures exchange in “We are keen to work closely with TOCOM and co-operate Japan, and also the world’s third largest in the area of com- in developing commodity based contracts that are in line with modity futures. The exchange lists 10 commodities: crude oil, Shari’a principles.” gasoline, kerosene, gas oil, gold, silver, platinum, palladium, Mr. Nangaku said, “It is an honor for TOCOM to establish aluminum and rubber futures contracts. 2 B AH R AI N Bahrain wins prestigious award ahrain has won a prestigious award in recognition of the Executive Director, Corporate Services, at the BMA. country’s leadership status as a key international finan- “Bahrain’s continued development as a mature and sound Bcial center. international financial center is a matter of pride and encour- The Kingdom has been named winner in the Middle East & agement for all of us at the BMA, as we strive to ensure that Africa category for the Financial Centres of the Future Awards Bahrain maintains its unrivalled reputation.

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