[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR721.7]



[Page 573-574]

 

                       TITLE 12--BANKS AND BANKING

 

            CHAPTER VII--NATIONAL CREDIT UNION ADMINISTRATION

 

PART 721_INCIDENTAL POWERS--Table of Contents

 

Sec. 721.7  What are the potential conflicts of interest for officials 

and employees when credit unions engage in activities approved under 

this part?



    (a) Conflicts. No official, employee, or their immediate family 

member may receive any compensation or benefit,



[[Page 574]]



directly or indirectly, in connection with your engagement in an 

activity authorized under this part, except as otherwise provided in 

paragraph (b) of this section. This section does not apply if a 

conflicts of interest provision within another section of this chapter 

applies to a particular activity; in such case, the more specific 

conflicts of interest provision controls. For example: An official or 

employee that refers loan-related products offered by a third-party to a 

member, in connection with a loan made by you, is subject to the 

conflicts of interest provision in Sec. 701.21(c)(8) of this chapter.

    (b) Permissible payments. This section does not prohibit:

    (1) Payment, by you, of salary to your employees;

    (2) Payment, by you, of an incentive or bonus to an employee based 

on your overall financial performance;

    (3) Payment, by you, of an incentive or bonus to an employee, other 

than a senior management employee or paid official, in connection with 

an activity authorized by this part, provided that your board of 

directors establishes written policies and internal controls for the 

incentive program and monitors compliance with such policies and 

controls at least annually; and

    (4) Payment, by a person other than you, of any compensation or 

benefit to an employee, other than a senior management employee or paid 

official, in connection with an activity authorized by this part, 

provided that your board of directors establishes written policies and 

internal controls regarding third-party compensation and determines that 

the employee's involvement does not present a conflict of interest.

    (c) Business associates and family members. All transactions with 

business associates or family members not specifically prohibited by 

paragraph (a) of this section must be conducted at arm's length and in 

the interest of the credit union.

    (d) Definitions. For purposes of this part, the following 

definitions apply.

    (1) Senior management employee means your chief executive officer 

(typically, this individual holds the title of President or Treasurer/

Manager), any assistant chief executive officers (e.g. Assistant 

President, Vice President, or Assistant Treasurer/Manager), and the 

chief financial officer (Comptroller).

    (2) Official means any member of your board of directors, credit 

committee or supervisory committee.

    (3) Immediate family member means a spouse or other family member 

living in the same household.