MANAMA: Bahrain has become the jurisdiction of choice in the region for the creation of investment funds, with the launch of new rules that offer speed, simplicity and flexibility, according to a legal expert.
Brian Howard, partner and head of the international funds team at Trowers & Hamlins, told GDN that the Central Bank of Bahrain’s (CBB) new Collective Investment Schemes (UCI) regulations now put a wide range of structures of investment funds available to potential managers following a simplified notification process.
“Investments in crypto assets will also be available as part of retail funds which can be part of a diversified portfolio,” Howard said on the sidelines of a press conference at the Four Seasons Hotel Bahrain Bay yesterday, where the CBB shared the key features of the new rules governing the mutual fund industry.
The changes come after the CBB realized that administrative processes and authorization requirements for establishing and marketing funds needed to be simplified in line with rapid changes in the industry.
Speaking about the expected impact of the changes, Ebtisam Al Arrayed, Director of Financial Institutions Supervision Directorate at CBB, said: “The strengthened regulatory framework is part of the CBB’s financial services development strategy (2022 -2026) and will set the environment for the growth and progress of the industry. Local, regional and international fund operators and global investors will find the kingdom attractive for fund domiciliation as well as for using Bahrain as a launching pad to service global markets.
The regulatory changes focus on dividing mutual funds into two broad categories, the first targeting retail investors and the second targeting accredited and affluent investors.
Retail fund offerings require prior approval from the CBB while the second category only requires notification to the CBB by the placement agent.
Mutual funds targeting retail investors are low risk with proper diversification and risk management, while those aimed at accredited and affluent investors contain high-risk investments with the aim of generating high returns.
The new framework emphasizes the importance of key areas such as corporate governance, high standards of business conduct, protection and segregation of investors’ money and disclosure standards in line with best practices international.
According to the CBB’s Regulatory Policy Unit Director, Shireen Al Sayed, the new CIU regulations are now consolidated into a single module, making them simpler and more relevant to the market.
“They are largely principles-based, leaving room for the industry to lead the way in building a strong fund ecosystem, thereby driving the growth of the asset management industry,” he said. she asserted.
The complete revision of the CIU rules under the “CBB Rulebook – Volume 7” was part of a larger initiative to simplify and revise all volumes of the CBB rulebook.
Describing Bahrain’s forward-looking regulations as a key competitive advantage, Musab Abdulla, executive director of investment development for financial services, technology and innovation at the Economic Development Board, said the revised regulations are a another step forward that will attract new investment to the Kingdom, in line with the strategies proposed under the economic recovery plan.
Najla Al Shirawi, managing director of SICO – a regional asset manager, broker and investment bank, also commented.
Ms Al Shirawi sees the improved rules as a “game changer for local, regional and global funds seeking international jurisdiction to domicile their structures”, as Bahrain now offers a “highly flexible framework within a strong supervised regulatory environment. by the CBB”.
Benefits of the new framework include significantly reduced setup and seamless processes that reduce operating costs, all factors that are important decision criteria in a manager’s home selection.
“Simplified regulation simultaneously provides much more flexibility on key fund terms, including asset class, investor categories, service provider requirements and legal structure,” Ms. Al Shirawi added. .
Bahrain has had a thriving fund industry since the 1980s.
Since then, the mutual fund industry in Bahrain has seen further growth and developments.
At the end of February 2022, the number of mutual funds in the kingdom stood at 1,664, with a net asset value (NAV) of $10.6 billion.
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