§ 1–909.09. Bonding.

(a)(1)(A) Each fiduciary of a separate fund comprising the Funds established by this chapter and each person who handles funds or other property of the Funds (“Funds Official”) shall be bonded as provided in this section, except that no bond shall be required of a fiduciary (or of any director, officer, or employee of the fiduciary) if the fiduciary:

(i) Is a corporation organized and doing business under the laws of the United States or of any state;

(ii) Is authorized under those laws to exercise trust powers or to conduct an insurance business;

(iii) Is subject to supervision or examination by federal or state authority; and

(iv) Has at all times a combined capital and surplus in excess of a minimum amount as may be established by regulations issued by the Council, which amount shall be at least $1,000,000.

(B) Subparagraph (A)(iv) of this paragraph shall apply to a bank or other financial institution that is authorized to exercise trust powers and the deposits of which are not insured by the Federal Deposit Insurance Corporation only if the bank or institution meets bonding or similar requirements under state law that the Retirement Board determines are at least equivalent to those imposed on banks by federal law.

(2)(A) The amount of the bond shall be the lesser of 10% of the amount of the funds handled by the fiduciary and $500,000, except that the amount of the bond shall be at least $1,000.

(B) The Retirement Board, after notice and opportunity for hearing to the fiduciary and all other parties in interest to the Funds, may waive the $500,000 additional requirement.

(3) For purposes of fixing the amount of the bond, the amount of funds handled shall be determined by the funds handled by the person, group, or class to be covered by the bond and by the predecessor or predecessors, if any, during the preceding reporting year, or if the Funds have no preceding reporting year under this chapter, the amount of funds to be handled during the current reporting year by person, group, or class, estimated as provided in regulations to be prescribed by the Retirement Board.

(4) The bond shall provide protection to the Funds against loss by reason of acts of fraud or dishonesty by the Fund Official, directly or through connivance with others.

(5) Any bond shall have as surety thereon a corporate surety company which is an acceptable surety on federal bonds under authority granted by the Secretary of the Treasury. Any bond shall be in a form or of a type approved by the Retirement Board, including individual bonds or schedule or blanket forms of bonds that cover a group or class.

(b) It shall be unlawful for any Funds official to receive, handle, disburse, or otherwise exercise custody or control of any of the funds or other property of any fund without being bonded as required by subsection (a) of this section, and it shall be unlawful for any Funds Official or any other person having authority to direct the performance of those functions or to permit the functions, or any of them, to be performed by any Funds Official with respect to whom the requirements of subsection (a) of this section have not been met.

(c) It shall be unlawful for any person to procure any bond required by subsection (a) of this section from any surety or other company or through any agent or broker in whose business operations the Funds or any party in interest in the Funds has any control or significant financial interest, direct or indirect.

(d) A person who is required to be bonded under subsection (a) of this subsection because he handles property of a separate fund comprising the Funds, shall not be required to obtain additional bonding with regard to the Funds.

(e) The Retirement Board may prescribe such regulations, which shall be subject to Council review, as may be necessary to carry out the provisions of this section.