Regulation, Communication, Trust and Ethics All Linked
The full effect of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) is still to be felt in the financial sector. Dodd-Frank creates an environment of increased scrutiny and heightened sensitivity by regulators and consumers.
Perhaps credit unions should not be treated in the same way as other financial firms; however, regulators are reacting to this environment. With this in mind, senior management and their boards must be on top of their game today in addressing compliance issues.
Secondly, organizations must prove to regulators that there is a process in place. Being able to show that management and the board were staying abreast of best practices demonstrates that the credit union was, in fact, living up to the standard of duty of loyalty and duty of care.
Duty of Loyalty requires a director to act in good faith in the best interest of the organization and not in the director’s own interest. Accordingly, the director avoids all conflicts of interest. The board should review its Code of Ethics at least annually. Board members must fully understand the Code of Ethics and the issues involving conflicts of interests. Signing the ethics disclosure form should be part of the board’s regular duties.