A-Side Plus®
Shareholder Derivative Actions
A bank’s stock price drops in value from $12 per share to $6 per share following a series of poor lending decisions by the president and senior lending officer. A shareholder derivative action is filed against management and the board alleging mismanagement and misrepresentation. Since the bank cannot provide indemnification for a derivative action, the claim is settled under Insuring Agreement A of the D&O policy.
Federal Securities Laws Violations
The board of a bank is sued in a shareholder action 18 months after the bank opened. The shareholders allege that the directors, officers and organizers of the institution made misleading statements in the prospectus about the bank’s business prospects, the nature and scope of operations and projected growth potential. The lawsuit also prompts an investigation by the Securities and Exchange Commission. Since securities violations are involved, coverage available to the insureds could implicate Insuring Agreement A of the D&O policy.
Corporate Insolvency
A small community bank failed after the bank’s president embezzled enough money to significantly impair the bank’s capital position. The FDIC brought suit against the former directors and officers alleging fraud, mismanagement, and misrepresentation of the bank’s financial condition.