(1) Directors and officers occupy a fiduciary relationship to the association of which they are directors or officers, and no director or officer shall engage or participate, directly or indirectly, in any business or transaction conducted on behalf of or involving the association which would result in a conflict of his own personal interests with those of the association which he serves unless:

(a) the business or transactions are conducted in good faith and are honest, fair, and reasonable to the association;

(b) a full disclosure of the business or transaction and the nature of the director's or officer's interest is made to the board of directors;

(c) the business or transactions are approved in good faith by the board of directors, any interested directors abstaining, and the approval is recorded in the minutes;

(d) any profits inuring to the officer or director are not at the expense of the association and do not prejudice the best interests of the association in any way; and

(e) the business or transactions do not represent a breach of the officer's or director's fiduciary duty and are not fraudulent, illegal, or ultra vires.

(2) Without limitation by any of the specific provisions of this section, the Board may by regulation require the disclosure by directors, officers, and employees of their personal interests, directly or indirectly, in any business or transactions on behalf of or involving the association and of their control of or active participation in enterprises having activities related to the business of the association.

(3) The following restrictions governing the conduct of directors and officers expressly are specified, but this specification is not to be construed in any manner as excusing directors and officers of an association from the observance of any other aspect of the general fiduciary duty owed by them to the association which they serve:

(a) no officer of an association shall hold office or status as an officer of a nonaffiliated association the principal office of which is located in the primary service area of the association;

(b) no director shall receive renumeration as a director except reasonable fees for service as a director or for service as a member of a committee of directors, except that nothing herein contained is deemed to prohibit or in any way to limit any right of a director who is also an officer or employee of or attorney for the association to receive compensation for service as an officer, employee, or attorney;

(c) no director or officer shall have any interest directly or indirectly in the proceeds of a loan or investment or of a purchase or sale made by the association unless the loan, investment, purchase, or sale is authorized expressly by resolution by the board of directors and unless the resolution is approved by vote of at least a majority of the directors authorized by the association, any interested director taking no part in the vote;

(d) no director or officer shall have any interest, direct or indirect, in the purchase at less than its face value of any evidence of a savings account or other deposit account issued by the association;

(e) no officer or director acting as proxy for a member of an association shall exercise, transfer, or delegate this vote or votes in any consideration of a private benefit or advantage, direct or indirect; the voting rights of members and directors may not be subject of sale, barter, exchange, or similar transaction, either directly or indirectly; and any officer or director who violates the provisions of this section is in addition to the penalty specified in subsection (4) accountable to the association for any inducement received for the transaction;

(f) no director or officer shall solicit, accept, or agree to accept, directly or indirectly, from any person other than the association any gratuity, compensation, or other personal benefit for any action taken by the association or for endeavoring to procure any action.

(4) Any person violating the provisions of this section is guilty of a misdemeanor and upon conviction must be punished by a fine of not more than five thousand dollars, or by imprisonment of not more than sixty days, or both.

HISTORY: 1985 Act No. 124, Section 1.