Who is the insured under the insurance policy or fidelity bond?
It is important to understand who is covered under the insurance policy or fidelity bond, as certain companies or employees may not be covered. With respect to covered individuals, in 1978 the U. S. Securities and Exchange Commission issued a release that advised investment companies to ensure that fidelity bonds contain a broad definition of employees. Responding to then-recent litigation, the release addressed whether certain trading loss exclusions in fidelity bonds satisfied the requirements of Rule 17g-1 of the Investment Company Act of 1940 (1940 Act). At that time, the surety industry generally was issuing Stockbrokers Blanket Bonds (Standard Form 14) with certain modifications for investment companies. The problem with this practice was that Standard Form 14 was designed for broker-dealers and investment bankers. It did not take into account the fact that investment companies generally conduct a substantial portion of their operations through external investment advisers or oth
