Broker Dealer Fidelity Bond
A broker dealer "blanket" fidelity bond is an industry specific commercial crime policy which protects the clients of a broker/dealer from the dishonest acts of its employees and registered financial advisory representatives. The Financial Industry Regulatory Authority (FINRA) regulates broker dealers. It monitors the principal's financials stability and ensures that an appropriate blanket fidelity bond is in force. Known as a Securities Dealer Blanket Bond (SBDD) the more common instrument is the standardized "Form 14" for financial institutions. The coverage must include the following coverage provisions, at minimum:
- Fidelity
- On Premises
- In Transit
- Forgery and Alteration
- Securities
- Counterfeit Currency
There must be additional endorsements or wording specific to the broker dealer class, to wit; (2) The fidelity bond must include a cancellation rider providing that the insurance carrier will use its best efforts to promptly notify FINRA in the event the bond is cancelled, terminated or substantially modified; and, (3) A member's fidelity bond must provide for per loss coverage without an aggregate limit of liability.
The blanket fidelity bond must cover all persons associated with the member, except directors or trustees who are not performing acts within the scope of the usual duties of an officer or employee, and any defense costs for covered losses must be in addition to the minimum coverage requirements.
Per the Code (4360(b)), there is a formula for determining the appropriate amount for the broker dealer fidelity bond. "A member with a net capital requirement of less than $250,000 must maintain minimum fidelity bond coverage for all Insuring Agreements required by paragraph (a) of this Rule of the greater of (A) 120% of the member's required net capital under SEA Rule 15c3-1 or (B) $100,000. A member with a net capital requirement of $250,000 or more must maintain minimum fidelity bond coverage for all Insuring Agreements required by paragraph (a) of this Rule in accordance with the following table":
| Net Capital Requirement under SEA Rule 15c3-1 |
Minimum Coverage |
|---|---|
| 250,000 - 300,000 | 600,000 |
| 300,001 - 500,000 | 700,000 |
| 500,001 - 1,000,000 | 800,000 |
| 1,000,001 - 2,000,000 | 1,000,000 |
| 2,000,001 - 3,000,000 | 1,500,000 |
| 3,000,001 - 4,000,000 | 2,000,000 |
| 4,000,001 - 6,000,000 | 3,000,000 |
| 6,000,001 - 12,000,000 | 4,000,000 |
| 12,000,001 and above | 5,000,000 |
To apply for a broker dealer fidelity bond, we require the following:
- Broker Dealer Fidelity Bond application (Form 14 for Financial Institutions)
- Most current fiscal year end financial statement
- Loss runs for previous five (5) years unless applicant is a new entity
National surety leader, Surety One, Inc. is a specialist in the bonding needs of broker dealers, financial advisers and the financial services sector. We offer both surety and fidelity bonds needed by these professionals in ALL fifty states, Puerto Rico and the U.S. Virgin Islands. Questions about this license bond? Call us at (800) 373-2804, email us at Underwriting@SuretyOne.com or click here for live chat.
Surety bond application review and quoting are free of charge. There is no obligation to purchase.
