On 1 January 2025, the Central Bank of Bahrain (“CBB”) (the sole regulator of the financial services sector in Bahrain) implemented the ‘Cross-border Registration Regulation for Investment Funds’ (“Funds Passporting Regime”) pursuant to the ‘Regulatory Framework for the Cross-Border Registration of Financial Products between the Regulatory Authorities Regulating GCC Capital Markets (“Regulatory Framework”) that was issued in November 2022.
The Regulatory Framework aims to establish a coordinated regulatory approach among the Gulf Cooperation Council (“GCC”) member states on passporting of financial products and serves as the legal basis for the individual passporting regulations issued under the Regulatory Framework for each type of financial product. The Funds Passporting Regime is the agreed upon standards and conditions for the registration and promotion of investment funds across the GCC member states. The Funds Passporting Regime aims to ensure that investment funds adhere to high standards of transparency and governance.
The Regulatory Framework defines ‘passporting’ as ‘the process of registering a financial product in the financial products registry of both the registering regulatory authority and the host regulatory authority.’ The Funds Passporting Regime applies to the passported fund, the fund manager, the placement agent and related parties.
The fund manager is responsible for submitting the application for passporting the fund with the registered regulatory authority and is required to comply with the following:
- Completing and submitting the prescribed form specified by the registered regulatory authority;
- Ensuring that the fund and the fund document meet the requirements set out in the Funds Passporting Regime;
- Providing a copy of the fund document or its equivalent including a disclaimer regarding the liability of the regulatory authorities as stipulated in the Funds Passporting Regime;
- Specifying the region(s) of the hosting regulatory authority jurisdiction where the fund promotion is targeted and identifying the agents who shall be responsible for promoting the fund therein;
- If the fund to be passported is a public fund, a copy of the fund document data summary shall be provided in Arabic;
- Providing any other data or documents required by the registered regulatory authority; and
- Proof of payment of the registration fees (if applicable).
The registered regulatory authority is required to provide a decision within ten (10) working days from the date of the submission being deemed complete (in form and substance). If the application is accepted, the registered regulatory authority shall send a notification of the application submitted by the fund manager to the hosting regulatory authority within ten (10) business days of its acceptance. The hosting authority shall decide on the application for registering the fund in its register within a period not exceeding ten (10) business days from the date of receiving the notification from the registered regulatory authority. The hosting regulatory authority may extend this period by an additional similar duration for further review. The hosting regulatory authority shall notify the registered regulatory authority of its decision to approve or reject the fund passporting application. The registered regulatory authority shall notify the fund manager of the hosting regulatory authority’s decision regarding the application. In the case of approval by the hosting regulatory authority, the notification shall include the effective date of such approval. The registered regulatory authority and the hosting regulatory authority shall publish the details of the passporting fund in their respective registers on the effective date of the approval. The published data in the register of the registered regulatory authority shall include the identification of the hosting regulatory authorities concerning the fund.
The placement agent shall promote the passported fund in the jurisdiction of the hosting regulatory authority specified in the notification issued to the fund manager. The placement agent is also required to adhere to the duties and responsibilities assigned to them by the hosting regulatory authority in accordance with the laws and regulations in force within its jurisdiction.
The GCC Funds Passporting Regime is a landmark initiative that reinforces economic integration and fosters a stable, transparent investment landscape in the region. By simplifying fund promotion and enhancing governance, it creates new opportunities for investors and businesses alike. It is hoped that the implementation of the regulations will accelerate economic integration among GCC member states and enhance the region’s position as a global investment hub.
How Al Tamimi can help
Al Tamimi & Company’s Banking team regularly advises on regulatory matters and is well-placed to assess the opportunities derived from these guidelines. If you would like to further discuss the contents of this article and find out what it means for your business, please contact Al Tamimi and Company in Bahrain.
Key Contacts
Natalia Kumar, Senior Counsel, n.kumar@tamimi.com
Gargi Agarwal, Associate, g.agarwal@tamimi.com