This guide walks the Reg 2834 fidelity bond setup from the signatory authorization step through the carrier engagement and the audit-record file.

Step 1: Identify each unlicensed signatory on the trust account

Reg 2834 runs the bonding requirement on the unlicensed employee category. The broker runs an inventory of every signatory on the trust account and runs the licensure status against each signatory. The unlicensed signatories run into the fidelity bond framework. The licensed signatories run under the employed-licensee category without a fidelity bond requirement against the broker.

Step 2: Calculate the maximum access ceiling per signatory

The access ceiling runs as the maximum trust funds the bonded employee runs withdrawal authority against. The broker runs the access ceiling against the largest single trust account balance accessible by the signatory across the policy year. A broker with a single trust account runs the ceiling against the peak trust account balance. A broker with multiple trust accounts under the same broker license runs the ceiling against the largest aggregate balance accessible by the signatory.

Step 3: Draft the written signatory authorization

Reg 2834 runs the specifically authorized signatory category on a written authorization. The broker drafts the authorization on the broker’s letterhead, runs the signatory name, the signatory role, the access scope on the trust account, the authorization period, and the broker’s signature on the document. The broker files the authorization in the broker’s recordkeeping framework against the trust account.

Step 4: Engage a fidelity bond carrier

The broker engages a commercial insurance broker or a direct fidelity bond carrier on the policy inquiry. The broker submits the access ceiling, the signatory count, the broker’s loss history, and the broker’s internal-control framework on the carrier’s underwriting application. The carrier runs the underwriting cycle and runs the binding quote against the broker’s portfolio.

Step 5: Bind the policy at the access ceiling

The broker runs the policy binding at a coverage limit at no less than the maximum access ceiling. The broker runs the per-employee sublimit at no less than the largest single-employee access ceiling. The broker runs the policy effective date against the signatory’s authorization start date and runs the policy in force across the authorization period.

Step 6: Endorse the policy for retroactive coverage if applicable

A broker who runs the bonding requirement against an active signatory who runs withdrawal authority on the trust account before the policy bind date runs the retroactive coverage endorsement on the policy. The endorsement runs the coverage scope back to the signatory’s authorization start date and runs the discovery period forward against losses discovered during the active policy.

Step 7: File the certificate of insurance in the DRE audit record

The broker runs the certificate of insurance and the declaration page from the carrier into the broker’s recordkeeping framework. The DRE audit runs the certificate and the renewal history against the broker’s Reg 2834 compliance file. The broker files the certificate against the signatory authorization and runs the renewal discipline on the policy expiration date.

Step 8: Calendar the renewal cycle

The broker runs a calendar discipline on the policy expiration date — the renewal quote inquiry against the carrier, the underwriting cycle on the renewal application, the renewal premium payment against the renewal date, and the updated certificate of insurance filed in the audit record. The discipline runs the bond in force across the renewal date without a lapse window.

Related Topics

This article is educational and does not constitute legal advice. The Reg 2834 fidelity bond framework runs under the California Department of Real Estate trust-fund framework — Cal Code Regs Title 10 §§2830–2835 and California Business and Professions Code §10145 — and the overlay frameworks under §10238 multi-lender loans and §10232.4 threshold-broker reporting. Consult qualified legal counsel and a qualified insurance broker on the specific bond coverage and signatory authorization that apply to any California broker portfolio.

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