1.0 Introduction
As part of its policy to maintain a fair, orderly and transparent securities market, the Central Bank of Bahrain (CBB) formally known as the Bahrain Monetary Agency (BMA) has, vide circular reference ODG/282/2004 dated 7th October 2004, informed the Bank to implement and comply with the stipulation of “Guidelines on Insiders” which regulates the trading of Bank’s securities by members of the Board of Directors, Management staff and others persons, hereinafter defined and referred to as “Insiders.
2.0 Objectives
The guidelines set forth below are introduced to ensure that insiders are aware of the legal and administrative requirement regarding the holding and trading of the Bank’s securities, with the primary objectives of preventing abuse of inside information.
3.0 Definitions
3.1 Directors
Includes any person who occupies the position of a director or a member of Board of Directors, by whatever name called, and shall in particular include a shadow director (i.e. a person in accordance with whose directions or instructions the directors of the bank are accustomed to act).
3.2 Executive Management
The executive management includes positions of Chief Executive, General Manager, Deputy General Manager, Assistant General Manager or their equivalent.
3.3 Senior Manager
Includes all ‘Senior Managers’ in the Bank.
3.4 Connected person- in relation to
(a) an individual, means:
i) The individual’s spouse, and his/her son, adopted son, stepson, daughter, step daughter, father, step father, mother, step mother, brother, step brother, sister or step sister; under his/her guardianship or control, or
ii) A firm or a corporation in which the individual or any of the persons mentioned in sub-paragraph (i) has control of not less than 10% of voting power in the firm or corporation, whether such control is exercised individually or jointly.
(b) a firm or corporation, means another firm or corporation in which the first mentioned firm or corporation has control of not less than 10% of the voting power in that firm or corporation.
3.5 Insiders Committee
A committee of Board of Directors consisting of minimum three members having responsibility for tracking, monitoring and reporting trading activities of insiders in terms of the BMA circular, referred above. A committee in the following text means Insiders Committee.
3.6 Inside Information: means information that is
(a) of a precise nature relating directly or indirectly to one or more securities.
(b) has not been made public
(c) if were made public, would likely to have a significant impact on the price of those securities or related derivative security.
(d) in the case of derivatives on commodities, which relate directly or indirectly to such derivatives which users of markets on
which such derivatives are traded, would expect to be disclosed in accordance with the rules or accepted market practices
on those markets.
3.7 Insider Trading
Refers not only to the purchase or sale of an issuer’s equity and debt securities, but also to the purchase or sale of puts, calls or other options with respect to such securities. Such trading is deemed to be done by an insider whenever he has any beneficial interest, direct or indirect, in such securities or options, regardless of whether they are actually held in his name. Included in the concept of “insider trading” is “tipping”, or revealing inside information to outside individuals, to enable such individuals to trade in the issuer’s securities on the basis of undisclosed information.
3.8 Person-in-Charge
Means a person appointed by the Insiders Committee to monitor day to day business of the committee.
3.9 Insiders Register
Means the register maintained by the ‘Person in Charge’ in accordance with BMA circular No ODG/407/03 on Disclosure Standards.
3.10 Beneficial Owner
The term "beneficial owner" of securities refers to any
person who, even if not the recorded owner of the securities, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities, or to receive the economic benefit of ownership of the securities. A person is also considered to be the "beneficial owner" of securities if that person has the right to acquire such securities within a certain period of time, either by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through issuers in which they have a "controlling interest", which means the direct or indirect power to direct the management and policies of the issuer, or any other entity in question.
3.11 Insiders
All persons who come into possession of material inside information before its public release are considered insiders for the purposes of the Agency’s disclosure policies. Such persons include controlling shareholders, “directors and senior management”, officers and employees, and frequently should also include any officials of the Agency and the Exchange who have access to such information, outside attorneys, accountants, auditors, underwriters, investment bankers, public relations advisers, advertising agencies, consultants and other independent contractors. The husbands, wives, immediate families and those under the control of insiders may also be regarded as insiders. Where acquisition or other negotiations are concerned, the above relationships apply to other parties to the negotiations as well. Finally, for purposes of the Agency’s disclosure policy, insiders include "tippees" who come into possession of material inside information.
3.12 Market Information
means information consisting of one or more of the following facts:
(a) the securities of a particular kind have been or are to be acquired or disposed of, or that their acquisition or disposal is
under consideration or the subject of negotiation;
(b) the securities of a particular kind have not been or are not to be acquired or disposed of;
(c) the number of securities acquired or disposed of or to be acquired or disposed of or whose acquisition or disposal is
under consideration or the subject of negotiation;
(d) the price (or range of prices) at which securities have been or are to be acquired or disposed of or the price (or range of
prices) at which the securities whose acquisition or disposal is under consideration or the subject of negotiation may
be acquired or disposed of;
(e) the identity of the persons involved or likely to be involved in any capacity in an acquisition or disposal of a security.
4.0 Categories of Insiders
The insiders covered by the procedures are of two categories:
4.1 Permanent Insiders
Permanent insiders are of following two types:
4.1.1 Statutory Insiders include members of the Board of Directors; Bank’s external auditor and employees of the external auditing
firm; and connected persons of the aforementioned insiders. Where an individual is represented on the Board of Directors
of the Bank as a nominee of a company/institution, in such a case the nominee as well as the company/institution shall be
deemed to be an insider.
4.1.2 Insiders by Definition are defined as any person by virtue of the exercise of their duties, regularly receive information on the
Bank that is likely to have material effect on the value of its securities. Accordingly, all members of ‘executive management’,
staff with status of ‘Senior Managers’ and above working in Bahrain, overseas branches and offices and subsidiaries; all
official staff in Financial Control Department; Board Secretary and Board secretariat staff; Secretaries of
GMCEO/DGM /Financial Controller; Legal Advisor; Compliance Officer; Head of Corporate Communication and such others
as defined, from time to time, by the AGM, Human Resources Department (HRD) will be ‘Insiders’.
4.2 Temporary Insiders
The Bank shall evaluate and determine such insiders on case-to-case basis. In broad definition temporary insiders would include employees of vendors, suppliers, printers and contractors who may have access to inside information by virtue of their assignment. AGM, HRD would identify and notify such insiders, based on the information available to him.
5.0 Monitoring
5.1 The Insider’s Committee
A directors committee with minimum three members from Board of Directors will constitute the ‘Insiders Committee’ which will have the responsibility for tracking, monitoring and reporting of trading activities of insiders to ensure compliance with Guidelines on Insiders issued by CBB and ensure prohibition of the abuse of inside information. Earlier, this task was assigned by the Board to ‘Audit Committee’ which was functioning as ‘Trading Committee’. This committee would now be known as “Insiders Committee”.
Accordingly, the members of the ‘Insiders Committee’ and their tenures will be same as of ‘Audit Committee’.
The Insiders Committee shall
- Ensure compliance with “Guidelines on Insiders” issued by BMA via circular ref. ODG/282/2004 dated 7th October 2004.
- Ensure prohibition of the abuse of inside information and disclosure requirement.
- Have the authority to consider requests and grant approval for permitting trading by insiders.
5.2 Meetings
The Committee shall hold meetings as frequently as is necessary. However, as in case of Audit Committee, the Insiders Committee will meet at least 4 times a year.
5.3 Decisions
The specific decision to permit trading and withdraw permission is vested only with the Insider Committee. The decision is to be conveyed to the insider with in 2 business days of his request.
To facilitate this process, the ‘person-in-charge’ will circulate the requests of insiders by e-mail/fax to all members of the Insiders Committee. Members will advise their objection to the person-in-charge immediately with in 2 business days. In case of any objection/rejection by any one member, it will be deemed that the request is declined by the committee and the ‘Person-in-Charge’ will advise the insider accordingly. In case no objection is received from any member with in 2 business days then it will be assumed by the person-in-charge (on behalf of Committee) that the request is approved and he would advise the insider accordingly. All such decisions will be noted/confirmed by the committee in the next meeting.
In case the committee meets to decide on requests and there is no need to adopt the circulation process as above then the appropriate decision of the committee will be conveyed by the person-in-charge.
5.4 Person-in-Charge
The Board Secretary is the ‘person-in-charge’ appointed by the Insiders Committee. The person-in-charge shall have the delegated responsibility of the committee for day to day monitoring, administration, reporting, maintenance of records and insiders register. He would carry functions on behalf of the committee. The authority to grant approval or reject approval is not delegated to the person-in-charge.
The person-in-charge shall ensure that declared data and trading activities of insiders are verified and updated and reported to the BMA as stipulated in the circular.
5.5 Internal Monitoring
For internal administration purposes, the Board Secretary shall handle activities relating to the Statutory Insiders (Board Directors, External Auditors & their staff). The AGM, HRD shall co-ordinate for all other insiders. The Board Secretary shall continue to be the overall liaison and perform role as person–in–charge of insiders.
6.0 Declarations by Insiders
Declaration forms are attached as Annexures. The forms Ins-1, Ins-2, Ins-3 and Ins-4 contain detailed instructions to complete them. Annexure 5 (Request letter from insiders) is self explanatory. All these forms are to be submitted to the person-in-charge.
6.1.1 Form Ins-1 Notification of Insider Position: This will be issued to the identified insider by person-in-charge or HRD as the case may be. Insider is supposed to sign and return the duly filled in form to the person-in-charge.
6.1.2 Insider is responsible to complete and submit following forms with in 10 business days, on being notified as insider, to the person-in-charge.
(a) Form: Ins-2 Insider’s Information Declaration.
(b) Form: Ins-3 Declarations of Insider’s Beneficial Ownership.
In form Ins-3 section 4, the insider should list his ownership in any company whether it is a listed company/Bahraini company or not if such ownership exceeds 10% of such company’s capital.
6.1.3 Any change in the declared information as stated in form Ins-2 and Ins-3 above must be reported by the insider by completing and submitting following forms.
(a) Form Ins-4: Change in Insider’s Beneficial Ownership and
(b) Form Ins-2: Declaration of Insiders Beneficial Ownership (Change in Basic Information Declaration box).
These forms must be submitted by no later than end of the next business day following the date the change took place.
6.1.4 The form (Annexure 5) is for requesting to committee’s approval for intension to buy/sell shares. The same form will be used to record/convey committees decision.
7.0 Rescricitons on Trading by Insiders
7.1 Insiders as well as persons under their guardianship and control are prohibited from buying or selling Bank’s shares either on short term (daily or weekly) or long term basis without obtaining the prior written approval of the Insiders Committee. The restriction is extended to include corporations in which permanent insiders exercise control or influence the decision making process.
7.2 As per CBB’s resolution No.(49) of 2007 article (5) all insiders are prohibited from buying, selling or transferring of Bank’s shares during the “close period” also referred to as “blackout period” starting from 15 days before the end of each financial year and each related quarter, until the company publishes its annual financial statements, or its interim quarterly financial statements respectively. Following publication of the financial statements, insiders shall refrain from trading and wait until the commencement of the following day’s trading session, or after 24 hours, whichever is less, after the publication of the financial statements released in the local newspapers.
Accordingly, the periods would start from, 15th March, 15th June 15th September and 15th December of each year, until the commencement of the following day’s trading session, or after 24 hours, whichever is less, after the publication of the financial statements released in the local newspapers.
7.3 The committee shall have the authority to refuse granting approval and/or withdraw an approval if granted, on any application if in its assessment the request is likely to result in breach of prevailing rules, regulations or abuses of inside information or includes any conflict of interest.
7.4 The committee shall communicate its decision to the applicant within a maximum of 2 working days of his request. The procedure for conveying decision as mentioned under 5.3 above will be adopted.
7.5 The approval of the committee is normally valid for a period of 20 calendar days (or less if stipulated by committee) from date of approval. After this date the approval is invalid and new approval is required to be obtained by the insider.
7.6 The restriction on trading shall not be applied in cases where:
1. buying securities by subscribing or obtaining them directly from the company or its group;
2. receiving securities in consideration of redemption, merger, demerger, or as compensation in accordance with a public
tender offer, or in another comparable manner;
3. receiving shares as dividends (bonus shares), or another form of payout from retained earnings;
4. receiving securities as compensation for work or other performance or service;
5. receiving securities as inheritance under a will, as a present or as a result of partition of an estate, or by means of
similar acquisition.
8.0 Reporting
The person-in-charge, on behalf of the committee, shall make reports as under:
8.1 Monthly
(a) Monthly statement in prescribed format, recording all insiders transactions, including any orders to buy or sell weather executed or not. The information of such statement should be based on Insiders Register maintained for the purpose.
(b) The above monthly statement will be audited/certified by the internal auditor before submitting to CMSD, CBB.
(c) The statement should be submitted no later than 15 calendar days after the end of the month.
(d) The monthly statements should be reported to the Insiders’ Committee in the following Board meeting.
(e) Any non compliance with the policy should be reported to the Insider’s Committee by the person-in-charge on monthly basis by circulation and for confirmation in the next Committee’s meeting.
8.2 Annual
Insiders’ Register data shall be audited by the Bank’s internal auditor and the audit finding shall be reported to the CBB within a period no less than 15 days prior to the Annual General Meeting.
8.3 Others
The Insiders register should be periodically reconciled with the CDS data and CBB records (preferably monthly); and any deviations should be reported immediately to CMSD, CBB as and when noticed.
AGM, HRD shall ensure that, whenever a staff becomes an insider by definition or other temporary insider is identified, the declaration forms as described above are completed and submitted to the person-in-charge. In case any staff ceases to be insider then HRD will inform person-in-charge for reporting to BMA and amending the records. Board Secretary shall follow similar procedure for all statutory insiders
9.0 Disclosure
9.1 The approved procedure may be posted on the Bank’s web site.
9.2 A copy of the approved policy/procedure will be made available to all insiders. A copy will also be available on request to all shareholders and other interested parties.
9.3 The annual report will contain a statement on the Insiders policy and also details of interest of directors in the shares of BBK.
10.0 Non- Compliance
All insiders are encouraged to note the rights of CBB in case of Non-compliant situations as detailed in the above referred CBB circular ‘Guidelines on Insiders’, which is also available on the CBB website. Any instances of breach of compliance by insiders with the Bank’s procedures will be dealt with by the ‘Insiders Committee’ as it deems fit. The Board will be advised of such instances including the action initiated by the committee.
11.0 Prohibited Conduct with respect to Possession of inside information
Pursuant to Article 100 of the CBB Law a person who is in possession of inside information, as an insider shall not use such information to:
1) Deal in any securities to which that information relates;
2) Encourage any person to deal in any securities to which that information relates;
3) Disclose inside information to any other person, otherwise than in the proper performance of the functions of his employment, office or profession;
4) Violate the rules governing the publishing of market information.
12.0 Maintenance: The maintenance of the insider’s relevant records shall be as per CBB record keeping regulations.
13.0 Information about insider register shall contain relevant information as prescribed by CBB rulebook 6.3.
14.0 Responsibilities of insiders’ Committee: The responsibilities of insiders’ Committee are as per mandated by the Board of Directors. Please refer to section 5.1.