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What's New: Government Affairs

Connecticut Enacts Fidelity Bond Requirement for Exchange Facilitators

Monday, June 24, 2013  

Connecticut HB 6339 requires an exchange facilitator to be licensed and post a fidelity bond in an amount of not less than $1 million.  The new law also requires an errors and omissions policy, a deposit of cash or securities or an irrevocable letters of credit in the amount of $250,000.  Exchange facilitators are persons or entities that perform like-kind exchanges of property under the federal tax law under which the facilitator obtains contractual rights to sell the client’s property.

Legislation to regulate exchange facilitators originally was introduced as HB 5392.  That bill would have permitted any consumer injured from an exchange facilitator violation of the requirements of the law to bring suit to recover on the fidelity bond, deposit, letter of credit or errors and omissions policy.  SFAA contacted the bill sponsor and explained the differences between surety and fidelity bond coverage, and informed the sponsor that third party claims are not permitted on the fidelity bond.  The provisions in HB 5392 were included in HB 6339, which the Governor has signed into law.  While the bill sponsor seemed to understand our concerns, as enacted, HB 6339 now requires injured consumers to file a claim with the Banking Commissioner to recover from the fidelity bond, deposit, letter of credit or errors and omissions insurance policy.  The new law also allows injured consumers to bring civil suits against the facilitator.

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