Source: https://www.federalregister.gov/documents/2018/11/23/2018-25402/fidelity-bonds
Timestamp: 2019-10-22 11:48:54
Document Index: 120698575

Matched Legal Cases: ['§\u2009713', 'ART 713', 'art 704', 'art 713', 'arts 704', 'arts 704', 'art 713', '§\u2009741', 'art 704', 'art 713', 'art 713', 'art 713', 'art 713', '§\u2009713', 'art 704', '§\u2009704', '§\u2009704', 'art 713', '§\u2009713', '§\u2009704', '§\u2009704', '§\u2009704', 'art 713', 'art 713', '§\u2009713', '§\u2009704', 'art 713', '§\u2009713', '§\u2009713', 'art 713', 'art 741', 'art 713', 'art 713', '§\u2009704', 'art 713', '§\u2009713', '§\u2009713', '§\u2009713', 'art 713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', 'art 710', '§\u2009713', 'art 713', '§\u2009713', '§\u2009713', 'art 713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009654', 'art 704', 'art 713', 'art 713', '§\u2009713', '§\u2009713', '§\u2009741', '§\u2009704', 'art.\n6', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009710', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', '§\u2009713', 'art 713', 'art 704', 'art 713', 'art 713', '§\u2009741', 'art 713', 'art 704']

Federal Register :: Fidelity Bonds
A Proposed Rule by the National Credit Union Administration on 11/23/2018
83 FR 59318
59318-59326 (9 pages)
3133-AE87
2018-25402
a. Background and Legal Authority
b. Regulatory Reform Task Force
c. The 2017 Legal Opinion
Sec. 704.18 Fidelity Bond Coverage
Sec. 713.1 What is the scope of this section?
Sec. 713.2 What are the responsibilities of a federally insured credit union's board of directors under this section?
Sec. 713.3 What bond coverage must a federally insured credit union have?
Sec. 713.4 What bond forms may a federally insured credit union use?
Sec. 713.5-§ 713.7
PART 713—FIDELITY BOND AND INSURANCE COVERAGE FOR FEDERALLY INSURED CREDIT UNIONS
https://www.federalregister.gov/d/2018-25402 https://www.federalregister.gov/d/2018-25402
The NCUA Board (Board) is seeking comment on a proposed rule that would amend its regulations regarding fidelity bonds under Part 704 for corporate credit unions and under Part 713 for natural person credit unions. The proposed rule would accomplish four objectives. First, it would strengthen a board of directors' oversight of a credit union's fidelity bond coverage. Second, it would ensure that there is an adequate period to discover and file fidelity bond claims following a credit union's liquidation. Third, it would codify a 2017 NCUA Office of General Counsel legal opinion that permits a natural person credit union's fidelity bond to include coverage for certain credit union service organizations (CUSOs). Fourth, it would clarify the documents subject to Board approval and require that all bond forms receive Board approval every ten years.
NCUA website: http://www.ncua.gov/​news/​proposed_​regs/​proposed_​regs.html. Follow the instructions for submitting comments.Start Printed Page 59319
Email: Address to regcomments@ncua.gov. Include “[Your name] Comments on Notice of Proposed Rulemaking (Fidelity Bonds)” in the email subject line.
Public inspection: All public comments are available on the agency's website at http://www.ncua.gov/​RegulationsOpinionsLaws/​comments as submitted, except as may not be possible for technical reasons. Public comments will not be edited to remove any identifying or contact information. Paper copies of comments may be inspected in the NCUA's law library, 1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays between 9:00 a.m. and 3:00 p.m. To make an appointment, call (703) 518-6540 or send an email to OGCMail@ncua.gov.
Rob Robine, Trial Attorney, or Rachel Ackmann, Staff Attorney, Office of General Counsel, 1775 Duke Street, Alexandria, VA 22314-3428 or telephone (703) 548-2601.
The Federal Credit Union Act (FCU Act) requires that certain credit union employees and appointed and elected officials be subject to fidelity bond coverage.[1] The FCU Act directs the Board to promulgate regulations concerning both the amount and character of fidelity bond coverage and to approve bond forms.[2] The pertinent portion of the FCU Act provides:
The Board is . . . directed to require that every person appointed or elected by any Federal credit union to any position requiring the receipt, payment, or custody of money or other personal property owned by a Federal credit union or in its custody or control as collateral or otherwise, give bond in a corporate surety company holding a certificate of authority from the Secretary of Treasury . . . as an acceptable surety on Federal bonds. Any such bond or bonds shall be in a form approved by the Board with a view to providing surety coverage to the Federal credit union with reference to loss by reason of acts of fraud or dishonesty including forgery, theft, embezzlement, wrongful abstraction, or misapplication on the part of the person, directly or through connivance with others, and such other surety coverages as the Board may determine to be reasonably appropriate. Any such bond or bonds shall be in such an amount in relation to the . . . assets of the Federal credit union as the Board may from time to time prescribe by regulation[.] [3]
Parts 704 and 713 of the NCUA's regulations implement the requirements of the FCU Act regarding fidelity bonds.[4] Parts 704 and 713 reiterate the statutory requirement that certain credit union employees and appointed and elected officials are subject to fidelity bond coverage. The parts also establish the requirements for a fidelity bond, the acceptable bond forms, and the minimum permissible coverage. Both parts require a credit union's board of directors to review annually its fidelity bond coverage to ensure it is adequate in relation to the potential risks facing the credit union and the minimum requirements set by the Board. Part 713 is made applicable to all federally insured, state-chartered credit unions (FISCUs) through § 741.201 of the NCUA's regulations.[5]
Part 704 was recently revised to amend the provision that determines the maximum amount a credit union may pay for a covered loss, or deductible, before the fidelity bond insurer makes a payment. The NCUA restricts the deductible a corporate credit union may pay to limit the potential losses to it if there is a covered claim. The maximum deductible allowed is a percentage of a corporate credit union's capital based on its leverage ratio. For example, if a corporate credit union has a greater than 2.25 leverage ratio then it may have a maximum deductible that is 15 percent of its tier 1 capital. The recent final rule updated this provision to reference tier 1 capital instead of core capital.[6] Part 713, however, has not been substantively revised since 2005 when the NCUA issued a final rule modernizing Part 713.[7]
In August 2017, the Board published and sought comment on the NCUA's regulatory reform agenda (Agenda).[8] The Agenda identifies those regulations the Board intends to amend or repeal because they are outdated, ineffective, or excessively burdensome. This is consistent with the spirit of Executive Order 13777.[9] Although the NCUA, as an independent agency, is not required to comply with Executive Order 13777, the Board has chosen to comply with it in spirit and has reviewed all of the NCUA's regulations to that end. One of the items in the Agenda is related to the NCUA's regulations on fidelity bonds. The Agenda supports exploring ways to implement the requirements of the FCU Act in this context in the least costly way possible. The Agenda further notes that while the FCU Act mandates fidelity bond coverage, the NCUA's objective should be to allow a credit union to make a business decision based on its own circumstances and needs. This would effectively reduce the NCUA's involvement in a credit union's operational decisions while remaining consistent with the FCU Act.
As discussed above, Part 713 establishes the minimum requirements for a fidelity bond for a natural person credit union. One such requirement under Part 713 is that fidelity bonds be purchased in an “individual policy.” [10] The “individual policy” provision was intended to prevent multiple credit unions from being insured under one fidelity bond policy. The Board prohibited such joint coverage because the loss suffered by one or two of the joint policyholders could reduce the amount of available coverage for the other policyholders to below the required minimum amount.[11] Before 2017, the NCUA's Office of General Counsel (OGC) had issued legal opinions stating that a credit union may not include one or more CUSOs or other parties as additional insureds under its fidelity bond because of the “individual policy” limitation.[12] It came to OGC's attention, however, that some bond issuers may have been interpreting their policies to permit the issuance of bonds that covered credit unions and their Start Printed Page 59320CUSOs, despite OGC's opinions to the contrary. This prompted OGC to review the regulation and approved bond forms. As a result of that review, OGC issued another legal opinion in September 2017 that rescinded and replaced all previous legal opinions that addressed the “individual policy” requirement.[13] The 2017 opinion concluded that the “individual policy” requirement of § 713.3(a) of the NCUA's regulations generally prohibits joint coverage under fidelity bonds, but does not prohibit a credit union from purchasing a fidelity bond that covers both the credit union and certain of its CUSOs, as discussed more fully below.
In general, Part 704 applies to all federally insured corporate credit unions. Section 704.18 provides the fidelity bond requirements for such credit unions. Proposed changes to the specific subparagraphs of § 704.18 are discussed below.
The proposed rule would amend current § 704.18(b) by dividing paragraph (b) into two subparts. Current paragraph (b) would remain unchanged and be designated paragraph (b)(1). The proposed rule would add a new paragraph as (b)(2). Proposed paragraph (b)(2) would require that a corporate credit union's board of directors and supervisory committee must review all applications for purchase or renewal of its fidelity bond coverage. After review, the corporate credit union's board must pass a resolution approving the purchase or renewal of fidelity bond coverage and delegate one member of the board, who is not an employee of the corporate credit union, to sign the purchase or renewal agreement and all attachments. No board members may be a signatory on consecutive purchase or renewal agreements for the same fidelity bond coverage policy. This proposed amendment is identical to proposed changes to Part 713 for natural person credit unions. For additional background, see the discussion below for proposed changes to § 713.2(b).
The proposed rule would make significant revisions to current § 704.18(c). In the proposed rule, § 704.18(c) is split into five new subparagraphs, each of which is described in more detail below.
Proposed § 704.18(c)(2) would state that fidelity bonds must provide coverage for the fraud and dishonesty of all employees, directors, officers, and supervisory and credit committee members. This is not a substantive change from the current requirements.
The proposed rule would substantively amend the requirements for a corporate credit union's approved bond forms. The revised requirements reflect the changes proposed for natural person credit unions in Part 713. The proposed rule would require the Board to approve all bond forms before a corporate credit union may use them. In addition, a credit union may not use any bond form that has been amended since receiving Board approval or any rider, endorsement, renewal, or other document that limits coverage of approved bond forms without first receiving approval from the Board. As would be required under proposed Part 713, approval of all bond forms expires 10 years after the date the Board approved or reapproved use of the bond form. Any currently approved bond forms would expire on January 1, 2029. For additional background, see the discussion below for proposed changes to § 713.4.
The proposed rule would add a new § 704.18(c)(4) to ensure there is an adequate discovery period, the period to discover and file a claim, following a corporate credit union's liquidation. The revised requirements reflect the changes proposed for natural person credit unions in Part 713. The proposed rule would require fidelity bonds to include an option for the liquidating agent to purchase coverage in the event of an involuntary liquidation that extends the discovery period for a covered loss for at least two years after liquidation. In the case of a voluntary liquidation, fidelity bonds would be required to remain in effect, or provide that the discovery period is extended, for at least four months after the final distribution of assets. For additional background, see the discussion below for proposed changes to §§ 713.3(a)(3) and (4).
The proposed rule would retain most of the current § 713.1 without change, with the following exceptions. The proposed rule would add the words “federally insured” before the words “credit union” to more precisely describe which credit unions are subject to the section. The current rule uses the Start Printed Page 59321term “credit union” and “federal credit union” interchangeably to mean “federal credit union.” As discussed in the background section, the requirements in Part 713 are applicable to both federal credit unions and FISCUs.[14] For clarity, the proposed rule would cross reference the requirement in Part 741 that FISCUs must comply with Part 713 and would refer to federally insured credit unions (FICUs) throughout the rule instead of federal credit unions. The Board does not intend any substantive changes by this amendment and only intends to increase the clarity and internal consistency of Part 713.
The proposed rule would also include a cross reference for corporate credit unions and would state that corporate credit unions must comply with § 704.18 instead of Part 713.
The proposed rule would amend current § 713.2 by dividing the section into two subparagraphs. Current § 713.2 would become paragraph (a). The proposed rule would retain most of the current § 713.2 without change, with the following exception. For consistency with the rest of Part 713, the term “Federal credit union” would be revised to “federally insured credit union.”
The proposed rule would add a new paragraph (b) to § 713.2. Proposed paragraph (b) increases a board of directors' oversight responsibility of its FICU's fidelity bond coverage. Specifically, the Board is proposing to require a FICU's board, and, if applicable, a FICU's supervisory committee, to review all applications for purchase or renewal of bond coverage and to pass a board resolution approving the purchase or renewal. The proposed rule would also require a FICU's board to delegate one board member, who is not an employee of the FICU, to sign the attestation for bond purchase or renewal. This proposal would prohibit the same board member from signing the attestation for renewal in consecutive years.
The proposed rule would amend current § 713.3 by renumbering and revising the section. Current § 713.3 would become paragraph (a), current paragraphs (a) and (b) would be renumbered as paragraphs (a)(1) and (a)(2), and two new subparagraphs would be added as (a)(3) and (a)(4). Finally, a new paragraph (b) would also be added.
Current paragraph (b) of § 713.3 states that, at a minimum, a credit union's fidelity bond coverage must include fidelity bonds that cover fraud and dishonesty. The proposed rule would remove the redundant phrase “[i]nclude fidelity bonds that” in current paragraph (b). The proposed rule would read “At a minimum, your bond coverage must: . . . Cover fraud and dishonesty by all employees, directors, officers, supervisory committee members, and credit committee members;”. The change is non-substantive and only intended to remove the unnecessary language and clarify the requirement.
The proposed rule would add a new paragraph (a)(3) to § 713.3. Proposed paragraph (a)(3) would require a FICU to have fidelity bond coverage that includes an option for the liquidating agent to purchase coverage that extends Start Printed Page 59322the discovery period, the period to discover and file a claim, for at least two years after liquidation. Fidelity bonds mitigate the risk presented by fraudulent and other dishonest acts to the NCUSIF and have served as a significant source of recovery in liquidations caused by fraud. However, the NCUA, as liquidating agent, can only file a claim if it discovers the loss during the contractual period permitted for filling a claim. Historically, it had been standard for fidelity bonds to permit a reasonable period for discovery and filing a claim following a FICU's involuntary liquidation. The NCUA has identified approximately $1 million in claims paid to the NCUSIF that were identified during an extended discovery period from 2006 to 2013. Since then, however, insurers have removed standard discovery coverage provisions from fidelity bond contracts. Currently, most fidelity bonds provide that the bond's coverage terminates immediately upon a credit union's liquidation and that the ability to purchase an additional period to discover loss is at the sole discretion of the insurer.
Under such contracts, the NCUA, as liquidating agent, would not have authority to extend the discovery period following a FICU's closure. There are some instances when liquidation occurs unexpectedly and there is insufficient time to discover a claim before liquidation, or where there is a covered loss, but it is unknown with the specificity required for filing a claim. In such a case, even if the liquidating agent subsequently discovers a covered loss, the fidelity bond issuer may deny the claim. If this happens when the NCUA is liquidating agent, the NCUA would either be forced into litigation to receive payment for the covered loss or not recover for the loss. In either situation, the NCUSIF bears additional losses than if the fidelity bond permitted a reasonable period of discovery. In addition to reducing losses to the NCUSIF, any funds recovered due to an extended discovery period may also be available to pay the failed FICU's creditors and uninsured depositors.[15]
The proposed rule would require that fidelity bond coverage provide a discovery period of two years because the FCU Act provides members with 18 months after the appointment of a liquidating agent to claim their insured accounts.[16] Therefore, the Board is providing six months to discover and make a claim for fidelity bond coverage following the end of the 18-month statutory period for unclaimed accounts. Further, in the Board's experience, most liquidations are resolved within two years. The Board considers two years a reasonable period to resolve the FICU's affairs, discover any losses from fraudulent or dishonest acts, and file a claim under the fidelity bond. The Board does not expect this proposed requirement to result in any additional cost or burden on FICUs. The liquidating agent would bear the cost of any extension of a discovery period following an involuntary liquidation.
The Board is also proposing to add a new paragraph (a)(4) to § 713.3 to include a requirement that, for voluntary liquidations, a FICU's fidelity bond coverage remain in effect, or provide that the discovery period is extended, for at least four months after the final distribution of assets. The Board notes that this is currently required for federal credit unions in Part 710, the NCUA's voluntary liquidation regulations, and that this proposed change only reflects that requirement, and does not impose an additional burden for federal credit unions.[17] This requirement would represent a new burden, however, for FISCUs. The Board believes that this requirement would impose only a minor burden for FISCUs, and would be beneficial to its members, as any recovery following a voluntary termination would flow through to members.
The Board is proposing to amend § 713.3 to allow a FICU to have a fidelity bond that covers both it and certain of its CUSOs, as more fully discussed below. Section 713.3 requires that a bond, at a minimum, must be purchased in “an individual policy.” [18] The NCUA added this section to Part 713 in a 1999 final rule in response to a commenter who pointed out that there had been instances of FICUs jointly purchasing fidelity bonds with each other.[19] The commenter was concerned that a loss caused by one or two of the joint policyholders could reduce the amount of available coverage for the other policyholders to below the required minimum amount. In addressing this comment, the Board provided in § 713.3 that a FICU must purchase its own individual policy.[20] The regulation did not, however, define “individual policy.”
Since inclusion of this provision in the NCUA's regulations, OGC has issued two public legal opinions interpreting the meaning of “individual policy” and opining on the type of coverage that is prohibited under § 713.3(a).[21] A 2014 OGC legal opinion states that a FICU may not include one or more of its CUSOs or other parties as additional insureds under its fidelity bond.[22] In a 2004 legal opinion, OGC opined that a CUSO that provides management services for multiple credit unions could not purchase a single fidelity bond with each credit union named as an insured.[23] In both letters, OGC explained the purpose of the individual policy requirement is to avoid diluting the individual credit union's coverage.
As noted above, OGC issued a third legal opinion on the “individual policy” requirement in 2017 (2017 legal opinion). The 2017 legal opinion rescinded and replaced the previous two opinions and expanded the permissibility for certain joint coverage provisions under the “individual policy” requirement. OGC and the NCUA's Office of Examination and Insurance determined this broader interpretation was both within the NCUA's legal authority under the FCU Act and a safe and sound practice for FICUs. For clarity and ease of reference, the Board now seeks to incorporate the 2017 legal opinion into Part 713.
The Board, therefore, is proposing to amend § 713.3 to permit a FICU to have a fidelity bond that also covers its CUSO(s). This is permissible if the FICU owns greater than 50 percent of a CUSO it wishes to cover, or a covered CUSO is organized by the FICU for the purpose of handling certain of its business transactions and composed exclusively of its employees. The 50 percent threshold reflects the standard for accounting consolidation under generally accepted accounting principles, or GAAP. A FICU would Start Printed Page 59323directly benefit from any fidelity bond insurance proceeds collected by a consolidated CUSO.[24] This proposed rule, however, would not eliminate the prohibition against joint coverage of entities not majority owned by the FICU, such as other credit unions or non-majority-owned CUSOs. The Board believes this amendment will provide greater flexibility to FICUs without affecting safety and soundness.[25]
The current rule provides that the NCUA will maintain a current list of bond forms approved by the Board for use by FICUs. The rule also states that a FICU must obtain the approval of the Board before it can use any other basic bond form or any rider or endorsement that limits coverage of an approved bond form. The Board is proposing to amend § 713.4 to make several changes to reflect the practices of the NCUA, clarify the list of documents that must have Board approval, and address the expiration and continuing review of approved bond forms. Any questions regarding the NCUA's approval of fidelity bond forms can be directed to the NCUA's OGC, (703) 518-6540, or the Office of Examination and Insurance, (703) 518-6360.
Current § 713.4(a) states that a current listing of basic bond forms that may be used without prior Board approval is on the NCUA's website. The Board is proposing to clarify this requirement by dividing paragraph (a) into two paragraphs. Proposed paragraph (a) would explicitly state that “the NCUA Board must approve all bond forms before federally insured credit unions may use them.”
Current paragraph (b), renumbered as paragraph (c), sets forth which fidelity bonds and fidelity bond documents require Board approval. The proposed rule also would set forth which fidelity bonds and fidelity bond documents require Board approval, but would rewrite this provision for clarity. The proposed rule states in paragraph (c) that “Credit unions may not use any of the following without first receiving approval from the NCUA Board.” No substantive changes are intended by this revision, and the revision is only intended to clarify the Board's expectation for FICUs.
The Board is clarifying that any bond form that has been amended or changed since the Board approved it requires new approval from the Board. The Board notes that this policy is the current practice whereby bond issuers submit amended bond forms to the Board for approval under current § 713.4(b)(1). This proposed change is only intended to make the regulation clearer with respect to this requirement.
Current § 713.4(b)(2) requires any rider or endorsement that limits coverage of approved basic bond forms to be approved by the Board. The proposed rule would clarify the list of documents that must receive Board approval. The Board is proposing to state explicitly that renewal forms (and any other document) that limit the coverage of approved bond forms must also receive Board approval. The Board is clarifying the list of documents subject to approval because the Board is aware of instances where the renewal or continuation of coverage forms included language affecting the bond coverage, including language that limited the bond coverage. As such, it is the Board's belief that the renewal form is an extension of the bond form and thus this is not an additional burden but further clarification of what constitutes the bond form.
With respect to bond forms that the Board has approved before 2019, the Board is proposing to allow its approval on these forms to continue until January 1, 2029. The Board believes this date for sunset of its approval will provide all currently approved bonds with at least ten years before they must be submitted for review and re-approval. The Board believes this will achieve the goal of ensuring all approved bond forms comply with the NCUA's regulations without imposing unnecessary burden on FICUs or bond issuers.Start Printed Page 59324
As discussed above, the proposed rule would use the term federally insured credit union instead of federal credit union in each of §§ 713.5, 713.6, and 713.7 for consistency and clarity.
All comments are a matter of public record. Comments regarding the information collection requirements of this rule should be sent to (1) Dawn Wolfgang, NCUA PRA Clearance Officer, National Credit Union Administration, 1775 Duke Street, Suite 5080, Alexandria, Virginia 22314, or Fax No. 703-519-8572, or Email at PRAcomments@ncua.gov and the (2) Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for NCUA, New Executive Office Building, Room 10235, Washington, DC 20503, or email at OIRA_Submission@OMB.EOP.gov.
The NCUA has determined that this proposed rule would not affect family well-being within the meaning of § 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998).
1. The authority citation for part 704 is revised to read as follows:
2. Section 704.18 is amended by revising paragraphs (b) and (c) to read as follows:
Fidelity bond coverage.
Start Printed Page 59325
3. The authority citation for Part 713 continues to read as follows:
4. The heading for part 713 is revised as set forth above.
5. Revise § 713.1 to read as follows:
§ 713.1
What is the scope of this section?
This section provides the requirements for fidelity bonds for federally insured credit union employees and officials and for other insurance coverage for losses such as theft, holdup, vandalism, etc., caused by persons outside the credit union. Federally insured, state-chartered credit unions are required by § 741.201 of this chapter to comply with the fidelity bond coverage requirements of this part. Corporate credit unions must comply with § 704.18 of this chapter in lieu of this part.
6. Revise § 713.2 to read as follows:
§ 713.2
What are the responsibilities of a federally insured credit union's board of directors under this section?
7. Revise § 713.3 to read as follows:
§ 713.3
What bond coverage must a federally insured credit union have?
(4) In the case of a voluntary liquidation, remain in effect, or provide that the discovery period is extended, for at least four months after the final distribution of assets, as required in § 710.2(c) of this chapter.
8. Revise § 713.4 to read as follows:
§ 713.4
What bond forms may a federally insured credit union use?
(1) Any bond form that has been amended or changed since the time the NCUA Board approved the form; andStart Printed Page 59326
§ 713.5
9. Section 713.5 is amended by:
a. In paragraphs (a) and (b) remove the word “federal” before the words “credit union's” and add in its place the words “federally insured” each place they appear.
b. In paragraph (c) add the words “federally insured” before the words “credit union,” “credit unions,” or “credit union's” each place they appear.
c. In paragraph (e) remove the word “your” and add in its place the words “a federally insured credit union's”.
§ 713.6
10. In § 713.6 remove the word “federal” before the words “credit union's” or “credit unions” and add the words “federally insured” before the words “credit union's,” “credit unions,” and “credit union” each place they appear.
11. Revise § 713.7 to read as follows:
§ 713.7
May the NCUA Board require a federally insured credit union to secure additional insurance coverage?
1. 12 U.S.C. 1761a, 1761b, and 1766.
2. The FCU Act also grants the Board the powers to require such other surety coverage as the Board may determine to be reasonably appropriate; to approve a blanket bond in lieu of individual bonds; and to approve bond coverage in excess of minimum surety coverage.
3. 12 U.S.C. 1766(h).
4. 12 CFR pts. 704 and 713.
5. 12 CFR 741.201.
6. 80 FR 25932 (May 6, 2015).
7. 70 FR 61713 (Oct. 26, 2005. In 2012, the NCUA revised Part 713 by removing reference to the agency's former Regulatory Flexibility Program. 77 FR 74112 (Dec. 13, 2012).
8. 82 FR 39702 (Aug. 22, 2017).
9. E.O. 13771 (Jan. 30, 2017).
10. 12 CFR 713.3(a). There is not an analogous provision for corporate credit unions under Part 704, therefore, the legal opinion relates only to fidelity bonds for natural person credit unions under Part 713.
11. 64 FR 28178 (May 27, 1999).
12. OGC Legal Op. 14-0311 (Mar. 21, 2014); see also OGC Legal Op. 04-0744 (Sept. 21, 2004).
13. OGC Legal Op. 17-0959 (Sept. 26, 2017).
14. Part 713 is applicable to all FISCUs through § 741.201 of the NCUA's regulations, which states that any credit union which makes application for share insurance must have the minimum fidelity bond coverage stated in Part 713 in order for its application to be approved and for such share insurance coverage to continue.
15. For the priority of payment following a liquidation, see 12 U.S.C. 1787(b)(11).
16. 12 U.S.C. 1787(o).
17. 12 CFR 710.2(c).
18. 12 CFR 713.3.
19. 64 FR 28718, 28719 (May 27, 1999).
20. Id. at 28719.
21. OGC Legal Op. 04-0744 (Sep. 21, 2004); and OGC Legal Op. 14-1013 (Mar. 21, 2014).
22. OGC Legal Op. 14-1013 (Mar. 21, 2014).
23. OGC Legal Op. 04-0744 (Sep. 21, 2004).
24. As discussed in the 2017 legal opinion, the NCUA has previously approved certain nominee provisions that included limited joint coverage. For example, a nominee provision may state that a loss sustained by any “nominee” organized by the insured for the purpose of handling certain of its business transactions and composed exclusively of its employees shall be deemed to be loss sustained by the insured.
25. Note, the proposal is not making a comparable amendment to Part 704. Corporate credit unions are not required to purchase fidelity bonds subject to an individual policy requirement. Therefore, the proposed amendment to clarify the individual policy requirement is only applicable to natural person credit unions.
[FR Doc. 2018-25402 Filed 11-21-18; 8:45 am]