Sec. 36a-454b. Conflict of interest policy. Prohibitions re insiders and family members of insiders.
Sec. 36a-454b. Conflict of interest policy. Prohibitions re insiders and family
members of insiders. (a) The governing board of a Connecticut credit union shall adopt
a written conflict of interest policy that includes provisions addressing transactions with
insiders and their immediate family members, as defined in section 36a-435b, and other
persons having a common ownership, investment or other pecuniary interest in a business enterprise with such insiders and immediate family members of such persons. As
used in this section, (1) "insider" means a director, appointed director, member of a
board-appointed committee, member of senior management and loan officer of a Connecticut credit union, and (2) "immediate family member" has the same meaning as
"immediate family member" as defined in section 36a-435b, provided the term also
includes any person related by blood, adoption or marriage to an appointed director.
(b) An extension of credit made by a Connecticut credit union to an insider shall
require the approval of the governing board if (1) such insider is the debtor, guarantor,
endorser or cosigner of the extension of credit; and (2) the extension of credit by itself
or when added to the aggregate of all outstanding extensions of credit for which such
insider is the debtor, guarantor, endorser or cosigner exceeds twenty-five thousand dollars plus pledged shares.
(c) No insider of a Connecticut credit union or professional retained by a Connecticut credit union shall in any manner, directly or indirectly, participate in any determination affecting such person's pecuniary interest or the pecuniary interest of any immediate
family member of such person or any corporation, partnership or association, other than
the Connecticut credit union, in which such person is directly or indirectly interested.
(d) An insider, immediate family member of such insider or other person having a
common ownership, investment or other pecuniary interest in a business enterprise with
an insider or immediate family member of such insider shall not obtain an extension of
credit from the Connecticut credit union with preferential rates, terms or conditions, or
act as guarantor or endorser thereon, and shall not be involved in the appraisal or valuation of assets which are to be used as collateral for an extension of credit.
(e) An insider and the immediate family member of such insider shall not receive,
directly or indirectly, any commission, fee or other compensation, except those of a
nominal value, in connection with any extension of credit by the Connecticut credit
union, provided this subsection shall not prohibit: (1) Payment by a Connecticut credit
union of: (A) Salaries to employees, (B) incentives or bonuses to employees based on
the Connecticut credit union's overall financial performance, (C) incentives or bonuses
to employees, other than a member of senior management, in connection with an extension of credit, provided the governing board establishes written policies and internal
controls in connection with such incentives or bonuses and monitors compliance with
such policies and controls at least annually, (D) fees to an insider or immediate family
member of such insider for the performance of title searches, loan closings and collections, provided the Connecticut credit union has complied with subsection (k) of this
section prior to engaging such insider or immediate family member of such insider;
and (2) receipt of compensation from a person outside a Connecticut credit union by a
director, appointed director, member of a board-appointed committee or employee who
is not a member of senior management or an immediate family member of such director,
appointed director, committee member or employee, for a service or activity performed
by the director, appointed director, committee member or employee outside the Connecticut credit union, provided no referral has been made by the credit union or the director,
appointed director, committee member, employee or immediate family member of such
director, appointed director, committee member or employee.
(f) An insider and the immediate family members of such insider or an employee
of a Connecticut credit union shall not receive anything of value in connection with the
making of an investment or deposit by the Connecticut credit union of funds of the credit
union, unless the governing board determines that the involvement of the insider, the
immediate family member of such insider or the employee does not present a conflict
of interest, and includes such determination in its minutes. The prohibition contained
in this subsection shall not prohibit the credit union from paying salaries, incentives and
bonuses to employees in connection with the making of such investments or deposits.
An insider shall conduct all transactions that are not prohibited under this subsection at
arm's length and in the best interests of the Connecticut credit union.
(g) An insider and the immediate family members of such insider shall not receive
any direct or indirect compensation or benefit in connection with the credit union's
insurance or group purchasing activities for members and employees. The prohibition
contained in this subsection shall also apply to any employee not otherwise covered if
the employee is directly involved in insurance or group purchasing activities unless the
governing board determines that the employee's involvement does not present a conflict
of interest and includes such determinations in its minutes. An insider and the immediate
family member of such insider shall conduct all transactions that are not prohibited
under this subsection at arm's length and in the best interests of the credit union.
(h) A Connecticut credit union shall not buy, lease or otherwise acquire premises
from any of the following without the prior approval of the governing board, such approval to be included in the governing board's minutes: (1) An insider or immediate
family member of such insider; (2) a corporation in which an insider or immediate family
member of such insider is an officer or director or has an ownership interest of ten per
cent or more; (3) a partnership in which any insider or immediate family member of
such insider is a general partner or a limited partner with an interest of ten per cent or
more. The prohibition contained in this subsection shall also apply to any employee not
otherwise covered if the employee is directly involved in investments in fixed assets
unless the governing board determines that the employee's involvement does not present
a conflict of interest and includes such determinations in its minutes.
(i) No insider or employee of a Connecticut credit union or the immediate family
member of any such person shall purchase, directly or indirectly, any of the assets of
the credit union for an amount less than the current market value thereof, without the
prior approval of the governing board which approval shall include a determination that
the transaction is in the best interests of the credit union. Such approval and determination shall be included in the governing board's minutes.
(j) With the approval of the commissioner, a Connecticut credit union may have as
an employee, director or appointed director a person who serves as an officer, employee,
director or appointed director of any other financial institution.
(k) When a Connecticut credit union retains an insider or an immediate family member of such insider to render services to the credit union, the governing board shall
document in its minutes that such hiring was at arm's length and in the best interests of
the credit union and was in accordance with the competitive bidding and appropriate
due diligence process as provided in the credit union's conflict of interest policy.
(l) The directors, appointed directors, members of board-appointed committees,
members of senior management and the immediate family members of such persons
that have outstanding loans or investments in a credit union service organization shall
not receive any salary, commission, investment income or other income or compensation
from such credit union service organization, either directly or indirectly, or from any
person being served through the credit union service organization. This provision shall
not prohibit (1) such Connecticut credit union insiders or the immediate family members
of such persons from assisting in the operation of such credit union service organization,
provided such persons are not compensated by the credit union service organization,
and (2) reimbursement to the Connecticut credit union for the services provided by such
directors, appointed directors, committee members or senior management members if
the accounts receivable of the Connecticut credit union due from the credit union service
organization are paid in full at least quarterly.
(m) A Connecticut credit union shall not grant a member business loan if any additional income received by the credit union or senior management of the credit union is
tied to the profit or sale of the business or commercial endeavor for which the loan is
made.
(P.A. 02-73, S. 51; P.A. 03-35, S. 6; 03-84, S. 55; P.A. 04-8, S. 7.)
History: P.A. 03-35 amended Subsec. (a) by designating definition of "insider" as Subdiv. (1), adding "appointed
director" in said Subdiv. (1) and defining "immediate family member" in new Subdiv. (2), and amended Subsecs. (e), (j)
and (l) by inserting "appointed director" and "appointed directors"; P.A. 03-84 changed "Commissioner of Banking" to
"commissioner" in Subsec. (j), effective June 3, 2003; P.A. 04-8 made a technical change in Subsec. (l)(2), effective April
16, 2004.