Difference: Surety Bond vs Fidelity Bond

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CDA MEMORANDUM CIRCULAR NO. 2011-13: Difference: Surety Bond vs Fidelity Bond

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Title Supreme Court: Difference: Surety Bond vs Fidelity Bond

Law: Cda Memorandum Circular No. 2011-13

Decision Date: Apr 11, 2011

CDA Memorandum Circular No. 2011-13 clarifies the distinction between surety bonds, which guarantee contractual obligations, and fidelity bonds, which protect against employee dishonesty, for directors, officers, and employees managing cooperative funds and properties.

administrative law

A

Legal Requirement for Cooperative Officials

The bond required from directors, officers, and employees managing funds, securities, or property of cooperatives must be a surety bond, not a fidelity bond.
This requirement is pursuant to Article 56 of Republic Act No. 9520.

Purpose and Function of Surety Bond in Cooperatives

The surety bond guarantees the cooperative that its officers and employees will properly perform their fiduciary duties and handle cooperative assets responsibly.
It provides a legal remedy and financial protection to the cooperative if an officer or employee fails to fulfill contractual or fiduciary obligations.

Purpose and Function of Fidelity Bond

Fidelity bond insurance protects against losses incurred from intentional dishonest acts by employees.
It generally insures businesses against losses due to employee misconduct, covering theft or fraud.

Summary and Guidance

The clear distinction between surety and fidelity bonds explains why cooperatives must require surety bonds for their officials handling cooperative funds and properties.
The circular serves to clarify legal obligations and ensure proper risk management in cooperatives through appropriate bonding requirements.

Adoption and Authority

The memorandum circular is issued by the Cooperative Development Authority (CDA) and adopted by the Board of Administrators, chaired by Emmanuel M. Santiaguel, Ph.D., on April 11, 2011.

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