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The Vermont Statutes Online



Title

08

:
Banking and Insurance






Chapter

221

:
ORGANIZATION AND MANAGEMENT OF CREDIT UNION






Subchapter

003
:
GOVERNING BODY, OFFICERS, AND COMMITTEES










 

§

31313. Conflict of interest

(a) The

governing body of a credit union shall adopt a written conflict of interest

policy that includes provisions addressing transactions with insiders,

employees, volunteers, and their immediate family members, 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.

(b) An extension

of credit to an insider, other than a residential real estate loan secured by a

first lien on property that is owned or will be owned by the insider as a

primary residence, shall require the approval of the governing body if such

insider is the debtor, guarantor, endorser, or cosigner of the extension of

credit. If the insider is a member of the governing body, an extension of

credit shall require the approval of the supervisory committee as well as the

approval of the noninterested members of the governing body. Notwithstanding

the foregoing, a loan to an insider that, when aggregated with the amount of

all other extensions of credit to such insider and to all related interests and

all related persons of such insider, would not exceed five percent of the

credit union's unimpaired capital and surplus or $25,000.00, whichever is less,

may be approved solely by a majority of the noninterested members of any one of

the following committees:

(1) the credit

committee, if any;

(2) the

supervisory committee; or

(3) the

governing body.

(c) An insider

of a credit union, or a professional retained by a credit union, shall not,

directly or indirectly, participate in any decision affecting such person's

pecuniary interest or the pecuniary interest of any immediate family member, or

any corporation, partnership, or association other than the credit union in

which such person is directly or indirectly interested.

(d) An insider,

an immediate family member of such insider, or any 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 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 to such person.

(e) No insider

or immediate family member of such insider shall 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 credit union.

Notwithstanding the foregoing, this subsection:

(1) shall not

prohibit payment by a credit union of:

(A) salaries to

employees;

(B) incentives

or bonuses to employees based on the 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 body 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 credit union has

complied with subsection (k) of this section prior to engaging such insider or

immediate family member of such insider; and

(2) shall not

prohibit a director, member of a governing-body-appointed committee, or

employee who is not a member of senior management or an immediate family member

of such director, committee member, or employee, from receiving compensation

from a person unrelated to the credit union for a service or activity performed

unrelated to the credit union, provided no referral has been made by the credit

union or the director, committee member, employee, or immediate family member

of such director, committee member, or employee.

(f) No insider

or his or her immediate family members or an employee of a credit union shall

receive anything of value in connection with the making of an investment or

deposit of credit union funds by the credit union, unless the governing body

determines that the involvement of the insider, his or her immediate family

member, 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 credit

union.

(g) No insider

or his or her immediate family members shall 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 body determines that the employee's

involvement does not present a conflict of interest and includes such

determinations in its minutes. An insider and his or her immediate family

member 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 credit

union shall not buy, lease, or otherwise acquire premises from any of the

following without the prior approval of the governing body, such approval to be

included in the governing body's minutes:

(A) an insider

or his or her immediate family member;

(B) a

corporation in which an insider or immediate family member is an officer or

director or has an ownership interest of ten percent or more; or

(C)(1) a

partnership in which any insider or his or her immediate family member is a

general partner or a limited partner with an interest of ten percent or more.

(2) 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 body determines that the employee's involvement

does not present a conflict of interest and includes such determinations in its

minutes.

(i) No insider,

employee, or any immediate family member of such insider or employee 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 body, 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 body's minutes.

(j) With the

prior written approval of the commissioner, a credit union may have as an

employee or director a person who serves as an officer, employee, or director

of any other financial institution.

(k) When a

credit union retains an insider or his or her immediate family member to render

services to the credit union, the hiring shall be approved by the noninterested

members of the governing body, and the governing body shall document in its

minutes that such hiring was at arm's length, was 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, committee members, 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 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 credit union for the services provided by such directors,

committee members, or senior management members if the credit union service

organization pays in full the amounts due to the credit union at least

quarterly.

(m) A 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. (Added 2005, No. 16, § 1, eff. July 1, 2005.)