A previous DRC solutions article described the types of financial security that may need to be posted to become a member or maintain membership in the DRC. In this article we will review the procedure to post financial security with the DRC.
Applicants for DRC membership, Members, Responsibly Connected Individuals and Employees must meet certain conditions in order for the company to become a member and maintain membership in DRC. When those conditions are not met, applicants and members may be required to post financial security. Financial security is a sum of money given to DRC (for a defined period of time) by a member as a promise to conduct business in accordance with our rules.
DRC requires financial security from certain members as assurance to our members that the entity posting the security will conduct business in accordance with our rules. The reasons for requesting bonds may include employing an individual who has previously been insolvent; been named in a court order; failed to pay an arbitration award, failed to prove that financial obligations can be met, been expelled from DRC within the last five years, etc. Additionally, a member who would normally be expelled from DRC membership may avoid expulsion by posting financial security.
Once it is determined that financial security must be posted, the person must provide the DRC with a non-refundable commencement fee of $1,000.00 plus tax, if applicable. Upon receipt, the DRC will provide information regarding the size of the bond that would need to be posted. The bond may be in the form of a surety bond, cash or certified check or an irrevocable letter of credit payable to the DRC from a financial institution.
The period to post a bond is 30 days and it begins when the non-refundable commencement fee is received.
Any bond provided to the DRC must be accompanied by the DRC security agreement. The bond will be posted for three years and nine months from the date of issuance. The period may be extended for failure to meet certain conditions of membership.
If the member violates a provision of the DRC by-laws and Operating Rules, such as failure to pay an arbitration award, DRC may distribute the funds, as provided in the Security Agreement in place between the member and DRC.
