Why Regional Centers Need Directors and Officers Insurance

On November 17, 2015 the National Law Review by Heidi A. Lawson and Daniel S. Harary explaining why Regional Centers should consider Directors and Officers Insurance, commonly known as D&O.

D&O policies indemnify the covered parties who may become involved in alleged wrongful acts. The reason that the NLR sees D&O as “imperative’ is the increased scrutiny that the Securities and Exchange Commission and the Department of Justice are giving to Regional Center Activities in order to protect investors and prevent fraud and scams. Litigation can be like a wildfire, with the spark of just one successful case fanning the flames of widespread similar suits.

 

The authors point out that “Even if a strong compliance program is in place, there is no guarantee that an EB-5 regional center will be immune to a regulatory investigation and accompanying legal proceedings, or a suit brought by a disgruntled investor.”

Coverage should be adequate enough to cover legal expenses incurred in defending against a claim and for potential settlement amounts arising out a claim or judgment.

While purchasing D&O adds another expense on the P&L statement, the heightened interest in EB-5 Regional Center activity must be acknowledged as the good thing that it is, serving to protect the interests of foreign investors who are putting several hundred thousand dollars of their personal fortune and the future of their families at risk.

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