The proposed regulation clarifies the fiduciary duties and responsibilities of federal credit union directors.  It is anticipated the final regulation will be forthcoming in mid-December.

The proposed rule would establish a “uniform fiduciary duty standard” for federal credit union directors. Directors  would be able to delegate operational functions to management, but not the ultimate responsibility for these operations.

The proposed rule provides the following:

  • Directors are required to carry out their duties in “good faith” in a manner reasonably believed to be in the best interest of the membership, with the care of an “ordinarily prudent person” in a “similar situation”. A director should administer the credit union’s affairs fairly and impartially.
  • Directors should understand the “balance sheet and income statement” and ask any “appropriate questions of management and auditors”. This financial literacy would need to be achieved within three months after election or appointment to the board of directors.
  • A director should ensure that the credit union’s operations are in accordance with applicable law and sound business practices. Moreover, directors may also retain individuals for advice and counsel, and rely on such advice, provided that there is a “reasonable belief” that such individuals are reliable and competent.

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