The Truth About FIBS (Financial Institution Bonds) in Mississippi: When Express Terms Conflict With Statutory Requirements
23 Pages Posted: 8 Mar 2019
Date Written: February 18, 2019
Fidelity bonds are common legal instruments designed to assure that the person posting the bond will carry out his or her responsibility. In Mississippi, like many other states, Financial Institution Bonds (FIBs) are statutorily-required financial instruments that cover officers or employees of a bank (or other financial institution) to protect financial institutions against losses caused by matters such as dishonesty; forgery; fraud; kidnapping, ransom, or extortion; and counterfeiting. A problem can arise if the terms on the executed bond form do not coincide with the requirements of the state statute. On the surface, a logical case could be made for enforcing the bond as written. After all, that is the common approach for dealing with written agreements. Such an approach, however, would completely defeat the purpose of the statute. The statutes in question are not enacted solely for the benefit of the two parties to the agreement, but for the benefit of one or more third parties.
Moreover, reading the bond so as to conform to the statute is not an inequitable imposition on the obligor. All parties to the bond can fairly be charged with knowledge of statutory requirements, and they have the responsibility to negotiate with those obligations in mind when they form the agreement. As such, courts should treat FIBs as statutory bonds, and if the forms conflict with the statute, courts should enforce them pursuant to the terms of the statute.
Keywords: Fedelity Bonds, Banking, Financial Institution, Bonds
JEL Classification: K22
Suggested Citation: Suggested Citation