Insider Activities Policy

Transcription

1 Insider Activities Policy FIRST NATIONAL BANK OF THE GULF COAST - POLICY INSIDER ACTIVITIES Board Approved: 10/29/09 Revised: Page 1 of 6 1

2 1. DIRECTOR S BRIEFING Regulatory Risk Issue(s) Studies have found insider abuse to be a primary reason for bank failure. Such abuse can take many forms: excessive and/or poor quality loans to insiders, diversion of income through excessive salaries or unjustified fees paid to insiders, excessive dividends, and more favorable terms for insider deposits. Accordingly, transaction risk exists with each insider activity. It is critical that each activity or situation be properly documented. Examiners are acutely aware of the impact of insider abuse on a bank s safety and soundness. The Office of the Comptroller of the Currency (OCC) now requires each national bank to adopt a formal, written insider-activity policy addressing its code of conduct and conflicts of interest. Insider abuse can destroy the bank s image with the public (which represents reputation risk). It can jeopardize the bank s financial condition and the safety of its customers deposits. The discovery of any insider abuse can and will result in corrective regulatory action, a significant regulatory risk. Major Policy Elements Disclosure of all potential conflicts of interest Terms under which items of value may be accepted Identification of insider abuses Consequences of noncompliance Other Considerations Also see Conflict of Interest/Code of Ethics Policy Document efforts to comply with regulatory guidelines 2. STATEMENT OF NEED AND DEFINITION The board of directors is cognizant of the important role that public confidence in the bank plays in the bank s actual condition. Honest and trustworthy conduct is required of all First National Bank of the Gulf Coast employees, officers and directors. Equally important is the public s perception of the bank and its management as honest and trustworthy. Any public feeling of impropriety can have tremendous repercussions on the bank. This Insider Activities Policy, together with the bank s Loans to Insiders Policy and its Conflicts of Interest/Code of Ethics Policy, will govern all aspects of First National Bank of the Gulf Coast insider activity. Together, these three policies will prevent not only the existence but also the appearance of any conflict of interest or breach of fiduciary responsibility and will formalize the bank s commitment to safe and sound banking operations. 3. PURPOSE The purpose of the Insider Activities Policy is to formalize the bank s commitment to safe operations and trustworthy conduct and to protect itself from the potential of insider abuse. 2

3 4. GENERAL OBJECTIVE The objective of the Insider Activities Policy is to ensure that transactions involving insiders do not compromise First National Bank of the Gulf Coast s interests. The policy serves two functions: A. To formalize the bank s expectations of proper conduct for its employees, officers and directors, and B. To reassure the public of the bank s commitment to its fiduciary responsibilities and public trust. 5. SPECIFIC GOALS The specific goals of this policy are to: A. Require arm s-length treatment for all insider transactions. B. Require disclosure of all potential conflict of interest relationships. C. Identify the types of gifts or other items of value, which may be accepted by bank officers and employees. D. Identify the consequences of unethical conduct and breaches of fiduciary responsibilities. 6. POLICY ELEMENTS Authority The board of directors is ultimately responsible for establishing specific policies to address the activities of insiders of First National Bank of the Gulf Coast. The authority to implement policy and related procedures has been assigned to the senior executive vice president. Any action taken regarding inappropriate insider activities will ultimately be reviewed and acted upon by the entire board of directors, after considering the facts, the seriousness of the conduct, and any potential breach of trust. Risk Management In addressing insider activities, the board of directors and senior management must be aware of the potential risks that arise from insider abuse and subsequent market reaction. In establishing an Insiders Activities Policy, the board has evaluated various related risks; these risks and their related management techniques, include: Transaction risk. Ensuring that the transaction is properly documented, properly recorded, and appropriately expensed. Compliance risk. Maintaining legal compliance as well as compliance with the organization s Code of Conduct. Reputation risk. Developing and retaining market place confidence in handling customers financial transactions in an appropriate manner as well as protecting the safety and soundness of the institution. Definitions Bank insider. Executive officers, directors, and principal shareholders of First National Bank of the Gulf Coast as defined in Regulation O. Conflict of interest/code of conduct. Policy to govern the disclosure of potential conflicts of interest and to prevent improper relationships. 3

4 Documentation First National Bank of the Gulf Coast will maintain a copy of the Insider Activities Policy, along with the Conflicts of Interest/Code of Ethics Policy and Loans to Insiders Policies, in its files. Each officer, director and principal shareholder will receive his/her own copies of these policies, sign a written acknowledgment of such receipt, and sign an agreement to comply with each policy. Copies of these acknowledgments must also be maintained in the bank s files. The board of directors will review this policy annually. This review, and any necessary amendments, will be noted in board minutes. Conflicts of Interest/Code of Ethics All employees, officers and directors of First National Bank of the Gulf Coast are expected and required to act in a responsible and respectable manner at all times. Further, while acting in their capacities as bank employees, all officers and employees must remain free of outside influence that could result in the loss of objectivity regarding business conducted with customers or business conducted with First National Bank of the Gulf Coast. The board has adopted a Conflicts of Interest/Code of Ethics Policy to govern the disclosure of potential conflicts of interest and to prevent the development of improper relationships between First National Bank of the Gulf Coast insiders and the customers it serves. Disclosure The bank s employees, officers and directors will disclose all potential conflicts of interest in writing annually. All written disclosures will be retained in the bank s files. These potential conflicts of interest would include, but not be limited to, the following: Management positions, such as directorships, held at outside organizations Related interests such as a company or political campaign controlled by that person, or the funds or services of which will benefit that person Any compensation (including salaries, wages, or gifts) received from outside organizations It is the responsibility of each employee, officer and director to be aware of the appearance of any potential conflict of interest and to remove himself/herself from any compromising position regarding the bank s relationship with any organization with which he/she may be connected. Acceptance of Gifts Bank officers may accept small gifts or other items of value from business associates of the bank, as long as all such acceptances are properly disclosed and the dollar value is considered nominal. Gifts valued up to $50 may be accepted without prior approval. Gifts exceeding $50 must receive the approval of the board of directors before acceptance. Bank officers may accept the following types of items from individuals doing or seeking to do business with the bank: Meals, gratuities, amenities, or favors based on obvious family or personal relationships Meals, refreshments, travel arrangements, accommodations, or entertainment of reasonable value in the course of a meeting or other bona fide business occasion Loans from other financial institutions when made on customary terms for the purpose of financing proper and usual activities 4

5 It is the responsibility of the insider accepting the loan to ensure that the loan is not contingent upon First National Bank of the Gulf Coast accepting or offering any other service. The insider must also ensure that any loan from a correspondent of First National Bank of the Gulf Coast is made on an arm s-length basis and does not include any preferential terms. Advertising or promotional material of reasonable value (pens, note pads, calendars, etc.) Discounts or rebates on merchandise or services that are available to other similar customers Gifts of reasonable value related to commonly recognized events or occasions such as a promotion, wedding, retirement, holiday, etc. Civic, charitable, educational, or religious organizational awards for recognition of service and accomplishment Other benefits or items of value, when approved, in writing, on a case-by-case basis Insider Abuses All transactions with insiders must be made on substantially the same terms as those afforded other bank customers to avoid the appearance of preferential treatment. The following types of transactions violate First National Bank of the Gulf Coast s position with respect to insider transactions and will not be tolerated: Excessive salaries and/or bonuses Excessive directors fees Fees paid without benefit to the bank Fees paid for services not yet received Fees established solely to meet an insider s need for funds Extensions of credit granted on more favorable terms than available to the general public Deposits accepted on more favorable terms than available to the general public Acceptable Insider Transactions First National Bank of the Gulf Coast may engage in legitimate and objective transactions with its insiders. Such transactions include, but are not limited to: Extensions of credit in amounts which comply with Regulation O and First National Bank of the Gulf Coast s Loans to Insiders Policy and offered at terms no more favorable than the terms offered to the public Deposits accepted at the same terms as those offered to the public Provision of fiduciary services Purchase or sale of real or personal property Purchase or sale of financial services Legitimate fees paid for actual services rendered If applicable, all such transactions must be acceptable, approved and reported as set forth in Regulation O. Fees Paid to Insiders Fees paid to insiders must be commensurate with the type, level, quality, and value of goods and services provided to the bank by the insider. Fees must directly relate to and be based solely upon the fair value of goods and services received by the bank. 5

6 Insiders may receive reasonable fees from the bank for services rendered. Fees are considered reasonable if they are based on cost plus a reasonable profit or the current fair market value of the services. An insider may recover overhead expenses (such as salaries and wages, occupancy cost, utilities, payroll taxes, supplies, and advertising) integral to the services provided. Fees paid to an insider may not exceed the level of fees that would have been paid to an outsider for the same services. Documentation of the fair value of all goods and services received from insiders must be recorded and maintained in the bank s file. This documentation will be readily available for inspection by the bank s auditors and regulators. Management fees paid to insiders must be commensurate with the value of the services received. All management fees paid to insiders will be subject to the prior approval of the bank s board of directors. Dividends The payment of dividends will be subject to First National Bank of the Gulf Coast s Formal Dividend Policy, as approved by the board of directors. No dividend will be paid for the purpose of meeting any shareholder s need for income. Consequences of Unethical Conduct or Breaches of Fiduciary Responsibility Failure to comply with the terms of this policy may result in termination of employment. The board of directors will determine the specific action to be taken after considering the seriousness of the conduct and any breach of trust. 6