Bahrain implements the GCC Funds Passporting Regime
Financial Services Focus
Natalia KumarSenior Counsel,Banking & Finance
Gargi AgarwalAssociate,Banking & Finance
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 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 Gulf Cooperation Council (“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 the comply with the following:
Completing and submitting the prescribed form specified by the registered regulatory authority;
Ensuring that the fund and the fund document meets 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).
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”).
The registered regulatory authority is required to provides 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 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 Funds Passporting Regime requires the registered regulatory authority and the hosting regulatory authority to establish a passporting register. The register shall record key information of the funds that have been approved for passporting including the:
name of the registered regulatory authority and the name of the hosting regulatory authority/authorities;
name of the fund, its headquarters, and its address;
type of the fund, whether it is a private fund or a public fund;
name of the fund manager, its headquarters, and its address;
name of the agent or agents (if multiple); and
date of the fund passporting, starting from the effective date of the approval for registration.
The fund manager is required to appoint a custodian for the fund on a permanent basis. The fees for passported funds promoted in any of the GCC states or exemptions therefrom, shall be determined in accordance with the regulations set by each GCC member state.
There are certain circumstances where the registered regulatory authority may remove the fund from the passporting register. This includes:
failure of the fund manager to comply with the laws and regulations in force with the registered regulatory authority;
upon a written request from the fund manager; or
when the liquidation proceedings of the passporting fund commences.
The hosting regulatory authority may de-list the fund from the passporting register if it violates the applicable laws and regulations. When such de-listing occurs, the authority that performed the de-listing shall immediately notify the other regulatory authorities of the de-listing, stating the reasons for the action. The hosting regulatory authority shall de-list the fund from its passporting fund register within ten (10) business days from the date of receiving the notification from the registered regulatory authority. Upon receiving the notification from the hosting regulatory authority, the registered regulatory authority shall update the details of the hosting regulatory authorities in the passporting fund register within ten (10) working days from the date of receiving the notification. The placement agent shall immediately cease promoting the fund in the jurisdiction of the hosting regulatory authority upon the de-listing of the fund from the passporting fund register with the hosting regulatory authority. This de-listing shall not affect the rights and obligations of investors in funds that were promoted prior to the date of removal, including the provision of administrative services to investors. In the event of any disputes between the fund manager or the placement agent and the fund unit holders, these disputes shall be resolved in accordance with the fund document and the laws and regulations in force with either the registered regulatory authority or the hosting regulatory authority, as applicable.
The 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.
For further information,please contact Natalia Kumar and Gargi Agarwal.
Published in March 2025
