Today’s Board Essentials Module 2: Reg O: Insider Lending & Self-Dealing

Since preferential treatment of directors is prohibited, a loan to a director (or the director’s related interests) must be based on the same terms and underwriting criteria as loans to other customers. Moreover, a loan to a director must satisfy even higher standards. These loans must be specifically approved in advance by a majority of the entire board, and the interested director must abstain. In addition, the aggregate amount of loans to a director and their related interests is strictly limited. Regulators are quick to impose large civil monetary penalties for any Reg O violation, so it is imperative that all directors understand its requirements and limitations.