Fidelity Bond

Fidelity Bond  

OVERVIEW

Mercer Consumer is well-known to offer broad, comprehensive and regulatory-compliant coverage to Broker-Dealers. In partnering with our carrier for almost 40 years, Mercer has issued over 100,000 Fidelity Bonds. We are proud to offer the broadest and most innovative Fidelity Bond product to date and it is called Broker-Dealer GuardSM .

 

Highlights of the Broker-Dealer GuardSM Fidelity Bond*

  • Designed to meet all requirements for compliance with FINRA® Rule 4360
  • Unaggregated Limit; the limit of liability applies to each loss with no aggregate policy limit
  • Defense costs for covered losses are covered above and in addition to the Limit of Liability
  • Choice of two Loss Settlement Clauses: Fidelity Research Investigative Specialist Clause or Traditional Proof of Loss method inclusive of Claims Expense
  • Discounts available for two-year prepaid bonds (for limits up to $500,000)
Apply for or renew your Fidelity Bond online

 

To get a quote, please complete one of the applications below. Eligible applicants may apply, pay and issue a policy online.

 

Please review the Overview section for the Broker-Dealer GuardSM and Form 14 Fidelity Bond Eligibility Requirements.

Over Twenty Coverages are included under the standard BDG Fidelity Bond policy, such as:

  • A) Fidelity, (B) On Premises, (C) In Transit, (D) Forgery and Alteration, (E) Securities, (F) Counterfeit Currency
  • Computer Crime: seven separate coverages including telephone and email transfer fraud
  • Impersonation Fraud protection (a.k.a. social engineering)
  • ERISA coverage for in-house pension and profit-sharing plans when added by name as a joint insured; compliant with ERISA Act of 1974

 

* Coverage not available in Puerto Rico.

 

 

What are the Eligibility Requirements for the Broker-Dealer GuardSM Fidelity Bond?

  • Your firm is registered as a broker-dealer with FINRA® or is in the process of completing the registration process with FINRA® - OR - your firm is a Capital Acquisition Broker.
  • You have no claims paid under your Fidelity Bond in the past 3 years
  • Home office is domiciled in the US

 

When may the Online Application be used? 

  • The application is for the Broker-Dealer GuardSM Fidelity Bond policy (Form 14 Bond applications are not online)
  • Limits <= $1 million*
  • The Firm is domiciled in the U.S., except for Massachusetts (MA)
  • The Firm’s name has not changed since last renewal (existing customers)
  • There is no change of ownership since last renewal (existing customers)
  • Additional Insured or Joint Insured coverage is not needed
  • RIA coverage is not needed

 

If these eligibility requirements are met, you may apply online via the “Apply Online” button. If paying with credit card and no additional underwriting is necessary, your policy will be issued and provided to you immediately!  If paying with a check, you may complete the online application and once we receive your payment, if no additional underwriting is required, we will issue your policy.

 

Alternatively, you may download the applicable Broker-Dealer GuardSM Fidelity Bond pdf application from the "Download a PDF Application" button.  Both options are located above, to the right. Be sure to select the proper application based on the Firm's state of domicile.

 

When is the Form 14 Broker-Dealer Fidelity Bond Application required?

  • Firms with paid claims in the past 3 years should apply by downloading the applicable Form 14 pdf application based on the Firm’s state of domicile.
  • Firms in Massachusetts (MA) wanting to apply for BDG limits of >$2 million should use the Countrywide Form 14 application.
  • Form 14 is designed to meet all FINRA® requirements; however, your Firm is responsible to purchase adequate coverage as required by FINRA® Rule 4360.

 

Based on the above Form 14 instructions, download the applicable Form 14 Fidelity Bond pdf application from the "Download a PDF Application" menu located above, to the right. Be sure to select the proper application based on the Firm’s state of domicile.

 

If you use a paper application (Broker-Dealer GuardSM or Form 14), please submit your completed application to us either via email at pldsteam.service@mercer.com or via fax at 515-365-3005.

 

TELL ME MORE

  • Features of the Broker-Dealer GuardSM Fidelity Bond

    • No Aggregate Limit of Liability for the bond
    • Provides the following mandated coverages:
      • Fidelity
      • On Premises
      • In Transit
      • Forgery or Alteration
      • Securities
      • Counterfeit Currency
    • Additional Coverages Included:
      • Impersonation Fraud protection (a.k.a. social engineering)
      • Audit Expense
      • Credit Card Forgery
      • Unauthorized Signatures
      • Stop Payment Liability
      • Uncollectible Items of Deposit
      • Computer Crime Coverages included by rider
    • Definition of Employee automatically includes:
      • Attorneys retained by the Insured while performing legal services for the Insured
      • Registered Representatives or Registered Principals of the Insured
      • Non-fund soliciting volunteer workers under the direciton of the Insured
      • Consultants under a consultancy agreement with the Insured
      • Retired Employees employed on a consulting, contingency, or part-time basis
      • Former Employees for up to 60 days after termination
      • Data Processors
    • Choice of two Loss Settlement Clauses:
      • FRISC (Fidelity Research Investigative Specialist Clause) — an independent investigative specialist investigates the facts and determines the quantum of loss.
      • Traditional Proof of Loss method inclusive of Claims Expense
    • ERISA Compliance — loss of employee benefit plan assets for in-house pension plans
    • Discounts available for two-year prepaid bonds (for limits up to $500,000)

    Broker-Dealer GuardSM Fidelity Bond enhancements: subject to underwriting and additional premium where applicable:

    • Registered Representative Amendatory Enhancement (RRAE) — Broadens the scope of coverage by defining who is a customer and customer property, which broadens the coverage for the firm from the "selling away" activities of Registered Representatives.
    • Corporate Identity Protection (CIP) — Responds to a data breach involving personal, identifiable information. Coverage may be available for: 1) defense costs in resonse to any claim, suite or administrative action; and 2) notification costs, crisis expenses and post-event services, such as credit monitoring to affected individuals.
    • Personal Identity Coverage (PIC) — Responds to one of the fastest growing crimes in America, by offering expert assistance and financial relief should a coveraged individual become a victim of identity theft.
    • Registered Investment Advisers ad Joint Insureds (RIA) — Extends coverage to affiliated RIA's of the named insured broker-dealer.

     

    To apply for RRAE, CIP and PIC coverage, please call 1-800-978-6273 and speak with a Mercer Consumer Insurance Specialist.

  • Features of the Form 14 Broker-Dealer Fidelity Bond

    Automatically includes the following insuring agreements:

    • Fidelity*
    • On Premises
    • In Transit
    • Forgery or Alterations
    • Securities coverage
    • Counterfeit Currency

     

    *Fidelity is the protection for your firm against intentional and dishonest acts committed by your employees and registered representatives.

     

    Additional Coverages Included:*

    • Impersonation Fraud protection (a.k.a. social engineering)
    • Computer Systems Fraud Covers loss from a fraudulent entry, or change of electronic data or computer progra. Applicable to any computer system operated by the insured.
    • Destruction of Data or Program by Virus — Covers loss resulting directly form the mailicious destruction of, or damage to, Electronic Data or Computer Programs owned by the Insured or for which the Insured is legally liable while stored within a Computer System covered under the terms of the Computer Systems rider attached to this bond, or a Service Bureau's Computer System, if such destruction or damage was cuased by a computer program or similar instruction which was written or altered to incorporate a hidden instruction designed to destroy or damage Electronic Data or Computer Programs in the Computer System in which the computer program or instruction was so altered is used.
    • Telefacsimile Transfer Fraud Covers loss resulting directly from the insured having in good faith, transferref funds, certificated securities or uncertificated securities through a computer system covered under the terms of the Computer System Fraud insurance agreement due to their relicance on a fraudulent instruction transmitted by telephone.
    • Voice Initiated Transfer Fraud Covers loss resulting directly from the insured having in good faith, tranferred funds from a customer's account through a computer system covered under the terms of the Computer System Fraud insurance agreement due to their reliance on a fraudulent instruction transmitted by telephone. 
    • Unauthorized Signatures (Aggregate Limit $25,000; Subject to $5,000 Deductible) Covers loss resulting from the insured having accepted, paid or cashed any check or withdrawal order made or drawn on a customer's account that bears the signature of one other person than the person whose name and signature is on file with the insured as a signatory on such account.
    • Uncollectible Items of Deposit — ($25,000 Aggregate; $5,000 Deductible) Losses resulting from payments of dividends or funds shares, or withdrawals from a customer's account as a direct result of items of deposit that are not paid for any reason.

     

    *Additional conditions of coverage apply and are detailed in the applicable riders.

 
Click the button below to view a brief video:
 

 

 

 
Contact us
 

We're here to help! Please contact us in whatever manner is most convenient for you.

 Regular Mailing Address
Attn: Fidelity Bonds
Mercer Consumer
P.O. Box 310293
Des Moines, IA 50331-0293
 Overnight Mailing Address
Attn: Fidelity Bonds
Mercer Consumer
12421 Meredith Drive
Urbandale, IA 50398
 Phone 1-800-978-6273
 Hours M-F 8a-4:30p CT
 Fax 515-365-3005
 Email plsdsteam.service@mercer.com

FAQs

Answers about the plan, including eligibility, options, enrollment, customer service and more.
  • What is a Fidelity Bond and why does my firm need one?

    A Fidelity Bond is intended to protect your firm against intentional fraudulent and dishonest acts committed primarily by your employees and registered representatives. In cases of theft of customer funds in a broker-dealer's care, custody or control, a Fidelity Bond generally will indemnify your firm for covered losses sustained in the handling of customers' accounts. 

  • Am I eligible for the Broker-Dealer GuardSM Fidelity Bond or must I apply for a Form 14 Broker-Dealer Fidelity Bond?

    If you meet the following eligibility requirements you may apply for the Broker-Dealer GuardSM Fidelity Bond. Otherwise you will apply for a Form 14 Broker-Dealer Fidelity Bond.

    • You have no claims paid under your Fidelity Bond within the past 3 years;
    • Home office is domiciled within the United States
  • What does the Broker-Dealer GuardSM Fidelity Bond cover versus a Form 14 Broker-Dealer Fidelity Bond?

    The Broker-Dealer GuardSM Fidelity Bond provides full Limit of Liability for each and every loss during the policy period. Form 14 Broker-Dealer Fidelity Bond has an aggregate limit, which is exhausted after the losses reach the Fidelity Bond's limit of liability. The Broker-Dealer GuardSM Fidelity Bond also provides Defense Costs in addition to the Limit of Liability. Form 14 Broker-Dealer Fidelity Bond provides Defense Costs but are part of, and not in addition to, the limit of liability.

  • Can I apply for a new Fidelity Bond or renew my existing Fidelity Bond online?

    Yes, you may use the online application for the Broker-Dealer GuardSM Fidelity Bond if you meet the eligibility requirements stated above. Click on New Policy Online Application to apply to purchase a new bond and set-up your account. If you have an existing bond, click on Renewal Online Application to log in with your user name and password to renew your bond. In just a few easy steps, you can secure your bond, pay the premium and issue your bond immediately upon successful payment. If assistance is needed with your application or your log in credentials, please contact us at 1-800-978-6273, Monday - Friday, 8am - 4:30pm (CT).

  • How do I update my contact information or print a copy of my Fidelity Bond online?

    You may click here to update your address (if within the U.S.), phone number or email address online and to print a copy of your current Fidelity Bond. Any changes to the name of your firm or to your firm's CRD# must be handled in person by our underwriting team. There will be a log in page requiring you to enter your user name and password, or you may register for access if you have not done so yet. If assistance is needed with your contact information updates or your log in credentials, please contact us at 1-800-978-6273, Monday - Friday, 8am - 4:30pm (CT) or via email at plsdsteam.service@mercer.com.

  • Can this Fidelity Bond satisfy ERISA Bond requirements for my in-house pension and profit-sharing plans?

    If Broker-Dealer fidelity bond limit is sufficient to satisfy ERISA Bond requirements, the in-house pension plans can be added to the bond for no additional cost. If Broker-Dealer fidelity bond limit is insufficient to satisfy ERISA Bond requirement, (a) you can purchase a separate ERISA Bond or (b) increase Broker-Dealer Fidelity Bond limit.  For either option, please contact Mercer Consumer so it can help you comply with ERISA Bonding needs.

  • How do I determine what minimum Limit of Liability I need to purchase?

    According to FINRA Rule 4360 that governs Fidelity Bond requirements for broker-dealers, the following chart stipulates the minimum required limits based on net capital requirements.
     

    Net Capital Requirement Minimum Required Bond Amount
    Under $250,000 Greater of A) 120% of firms required net capital or B) $100,000
    $250,000 - $300,000 $600,000
    $300,001 - $500,000 $700,000
    $500,001 - $1,000,000 $800,000
    $1,000,001 - $2,000,000 $1,000,000
    $2,000,001 - $3,000,000 $1,500,000
    $3,000,001 - $4,000,000 $2,000,000
    $4,000,001 - $6,000,000 $3,000,000
    $6,000,001 - $12,000,000 $4,000,000
    $12,000,001 + $5,000,000

     

    FINRA Rule 4360 stipulates that a deductible amount exceeding 10% of the limit must be deducted from its net worth. Accordingly, the firm's net capital can be calculated for purposes of Exchange Act Rule 15c3-1.

  • What other insurance products are available for broker-dealer firms?

    Mercer Consumer offers a variety of insurance products including Cyber Security Liability Insurance, Errors and Omissions Liability Insurance, Directors and Officers Liability Insurance, Employment Practices Liability Insurance, Property & Casualty Insurance, Mail Insurance, the Signature Guarantee Medallion Bond, 1st and 3rd Party ERISA Bonds and many more products. Please feel free to browse our site in its entirety for more information, or you may contact us directly at 1-800-978-6273.

  • How can I learn more about the insurance products offered by Mercer Consumer and how they can best serve my firm?

    For more information or to speak with a Client Representative, please contact our office at 1-800-978-6273 or send us an email.

Claims Scenarios

Fidelity Bond Claims Scenarios

  • 1. Impersonation Fraud Losses

    These losses result from fraudulent schemes that involve an imposter pretending to have authority and requesting a payment, often in the form of immediate wire transfers. This type of scam may originate as a phone call, email, fax, text or other form of communication. Please click Impersonation Fraud Claims Scenarios for some examples. Also, view the brief video with some tips to keep in mind about how you can Avoid Impersonation Fraud.

  • 2. Registered Representative Loss

    Insured's registered representative separately befriended two widowed elderly women who were existing customers of the insured. He often visited them in their homes, provided them with companionship and gained their trust. Over time, he convinced them to transfer funds from accounts at other financial institutions and deposit them into two new mutual funds set up by the insured. He represented to them that the mutual funds would provide them with higher rates of return than their existing investments. He directed that they write the investment checks payable to him, and that he would deposit them into the mutual fund accounts. Over the course of two years, he received $900,000 in checks from them and provided them with altered statements showing their investment in these mutual funds. In reality, he did not deposit the checks into the mutual fund accounts, but instead endorsed the checks and deposited them into his personal bank account. The loss was discovered when his bank became suspicious about the unusually large deposits into his account, and notified the authorities.

  • 3. Registered Representative Loss

    The insured suffered a loss of $600,000 due to the dishonesty of one of its registered representatives. The registered representative transferred funds from five client accounts at the insured to his wholly owned company. He forged signatures on wire authorization letters used to make such withdrawals, used a "cut-and paste" technique (copying genuine signatures and affixing them to faxed wire authorization letters) and embezzled the funds by means of such withdrawals. The insured settled with its customers for a total of $344,000 which was an average of $68,800 per customer. The insured only had policy limits of $120,000, leaving the insured with insufficient limits to cover $224,000 of the ultimate settlement amount with its customers.

  • 4. Computer Hacking

    The insured sustained a loss due to unknown perpetrators hacking into the computers of 2 registered representatives of the insured. The hackers obtained access to customer accounts and sold securities in those accounts without the knowledge and authority of the customer and the registered representative. The hackers then purchased penny stock in order to make it appear that the stock was more valuable on the market. The amount of the loss was $170,731 and was covered under the Computer Crime endorsement of the policy.

  • 5. Employee Dishonesty

    The insured sustained a loss when its Controller made payment to his personal credit card account using the insured's funds. He had the company authorize payments to his personal credit card. In addition, he made unauthorized payments directly to himself and, in two instances, to his mortgage company. The Controller was involved in all aspects of the accounting processes at the company including the accounts payable, bank reconciliations, accounts receivables, and maintaining the general ledger which allowed him to circumvent internal controls. He would code the payments in the insured's system under another vendor payee's name. The total amount of loss was $749,062.


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