Fidelity Bonds
A Fidelity Bond indemnifies the employer for loss of money or other property sustained through dishonest acts of bonded personnel. The scope of acts insured against includes larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, willful misapplication or other fraudulent or dishonest acts committed by the employee, whether acting alone or in collusion with others.
An investment adviser fidelity bond (also known as a Form 14 Fidelity Bond or Commercial Crime Policy) offers a variety of different bond coverage depending upon the insuring agreements that you choose.
The basic bond coverage provided under Form 14 consists of Insuring Agreements
A, B, C and F:
Insuring Agreement A — Fidelity
Covers loss resulting directly from dishonest or fraudulent acts committed by an employee acting alone or in collusion with others, with the manifest intent to cause the insured to sustain such loss and to obtain financial benefit for the employee and which, in fact, result in obtaining such benefit.
Insuring Agreement B — On Premises
Covers loss of property resulting directly from
- robbery, burglary, misplacement, mysterious unexplainable disappearance and damage thereto or destruction thereof, or
- theft, false pretenses, common-law or statutory larceny, committed by a person present in an office or on the premises of the insured,
while the property is lodged or deposited within offices or premises located anywhere.
Also covers loss or damage to the insured’s offices, furnishings, fixtures, supplies or equipment through specified perils, except loss or damage through fire.
Insuring Agreement C — In Transit
Covers loss of property resulting directly from robbery, common-law or statutory larceny, theft, misplacement, mysterious unexplainable disappearance, being lost or made away with, and damage thereto or destruction thereof, while the property is in transit anywhere in the custody of a natural person acting as messenger, or in the custody of a Transportation Company.
Insuring Agreement F — Counterfeit Currency
Covers loss resulting directly from the receipt by the insured, in good faith, of any counterfeit money of the United States, Canada or any other country in which the insured maintains a branch office.
The following coverages contained in Form 14 are optional and available for an additional premium:
Insuring Agreement D — Forgery or Alteration
Covers loss resulting directly from forgery or alteration of, on or in any instrument specified in the Insuring Agreement.
Insuring Agreement E — Securities
Covers loss resulting directly from the insured having, in good faith, for its own account or for the account of others, acquired, sold or delivered, or given value, extended credit or assumed liability, on the faith of any original instrument specified in the Insuring Agreement which proves to bear a forged signature or which has been altered, lost or stolen.
Coverage for Data Processing Organizations
Covers as employees, data processing organizations while acting on behalf of the insured in the data processing of checks and other accounting records of the insured.
Coverage on Partners
Covers as employees, the partners of the insured for loss resulting directly from dishonest or fraudulent acts.
When Form 14 is written to provide coverage on partners only, the separate Partnership Rider must be attached. The rider amends Form 14 to cover only the dishonest or fraudulent acts of any of the partners acting alone or in collusion with others. By the terms of the rider, all other coverage in form 14 is deleted.
For an additional premium, the following optional coverage may be added to Form 14 by rider:
Computer Systems Fraud Insuring Agreement
The rider covers loss resulting directly from a fraudulent entry of electronic data or computer program into, or change of electronic data or computer program within a computer system covered under the terms of the rider.
Extortion — Threats to Persons Insuring Agreement
The rider covers loss of property surrendered away from an office of the insured as a result of a threat communicated to the insured to do bodily harm to a director, trustee, employee or partner of the insured or a relative of theirs who was, or allegedly was, kidnapped anywhere.
Extortion — Threats to Property Insuring Agreement
The rider covers loss of property surrendered away from an office of the insured as a result of a threat communicated to the insured to do damage to the premises or property of the insured located anywhere.
Registered Representatives (NASD) Coverage
The rider amends the definition of employee to include registered representatives performing broker/dealer services for the insured but not in the immediate employment of the insured.
Click here to download a Financial Institution Bond Application.
Click here to read Frequently Asked Questions from Investment Advisers about Fidelity Bonds.
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