A
bond or
insurance policy covering a company in the event it
loses money as the result of employee theft or
fraud. It is important to note that blanket fidelity bonds generally only cover situations in which an employee commits fraud for personal
gain; it does not cover situations in which the employee, without support or knowledge of management, falsifies
trading so that it makes the company appear healthier than it is. The
Federal Bonding Program, run by the
Department of Labor, insures or guarantees the insurance of ex-offenders whose employment adds significant
risk of theft or fraud. The
SEC requires
brokerages to be covered by a blanket fidelity bond. See also:
Bonding, Operational Risk.