Fidelity Bond Removal Disqualifies Director

ALEXANDRIA, Va.-According to a recent NCUA legal opinion letter (03-0929), the cancellation or removal of a federal credit union director’s fidelity bond does allow the board to declare the seat vacant under the FCU Bylaws unless the director resigns or another fidelity bond for the director is obtained. “NCUA’s regulations provide that an FCU’s “bond coverage must . . . [i]nclude fidelity bonds that cover fraud and dishonesty by all employees, directors, officers, supervisory committee members, and credit committee members,” NCUA Associate General Counsel Sheila Albin explained. If the director fails to qualify for bonding, the director fails to perform a necessary duty and be disqualified from serving. Then the board may designate another member to fill the position temporarily, under the FCU Bylaws. The replacement would “hold office only until the next annual meeting, at which any unexpired terms will be filled by vote of the members, and until the qualification of their successors,” the letter read. Or the board may choose to reduce the number of directors to any odd number between five and 15, “if corresponding vacancies exist as a result of deaths, resignations, expiration of terms of office, or other actions provided by these bylaws.”