Section 27-21A-6

Fiduciary responsibilities of directors, officers, employees, and partners.

(a) Any director, officer, employee, or partner of a health maintenance organization who receives, collects, disburses, or invests funds in connection with the activities of such organization shall be responsible for such funds in a fiduciary relationship to the organization.

(b) A health maintenance organization shall maintain in force a fidelity bond on employees and officers in an amount not less than $25,000 or such other sum as may be prescribed by the commissioner. All such bonds shall be written with at least a one-year discovery period and if written with less than a three-year discovery period shall contain a provision that no cancellation or termination of the bond, whether by or at the request of the insured or by the underwriter, shall take effect prior to the expiration of 90 days after written notice of such cancellation or termination has been filed with the commissioner unless an earlier date of such cancellation or termination is approved by the commissioner.

(c) Any officer, or director, or any member of any committee or any employee of a health maintenance organization who is charged with the duty of investing or handling the organization's funds shall not deposit or invest such funds except in the organization's corporate name; except, that such health maintenance organization may for its convenience hold any equity investment in a street name or in the name of a nominee; shall not borrow the funds of such organization; shall not be pecuniarily interested in any loan, pledge or deposit, security, investment, sale, purchase, exchange, reinsurance, or other similar transaction or property of such insurer except as a stockholder or member and shall not take or receive to his own use any fee, brokerage, commission, gift, or other consideration for, or on account of, any such transaction made by, or on behalf of, such insurer.

(d) No health maintenance organization shall guarantee any financial obligation of any of its officers or directors.

(e) This section shall not prohibit such a director, or officer, or member of a committee or employee from becoming a member of the health maintenance organization and enjoying the usual rights so provided for its members, nor shall it prohibit any such officer, director, or member of a committee or employee from participating as a beneficiary in any pension trust, deferred compensation plan, profit-sharing plan, or stock option plan authorized by the health maintenance organization and to which he may be eligible, nor shall it prohibit any director or member of a committee from receiving a reasonable fee for legal services actually rendered to such health maintenance organization.

(f) The commissioner may, by regulations from time to time, define and permit additional exceptions to the prohibition contained in subsection (c) of this section solely to enable payment of reasonable compensation to the director who is not otherwise an officer or employee of the health maintenance organization, or to a corporation or firm in which a director is interested, for necessary services performed or sales or purchases made to, or for, the health maintenance organization's business and in the usual private, professional, or business capacity of such director or such corporation or firm.

(Acts 1986, No. 86-471, p. 854, §6.)