DEFINITION of 'Fidelity Bond'
A form of business insurance that offers an employer protection against losses - either monetary or physical - caused by its employees' fraudulent or dishonest actions. Fidelity bonds are often held by insurance companies and brokerage firms, which are specifically required to carry protection proportional to their net capital. Among the possible forms of loss a fidelity bond covers include fraudulent trading, theft and forgery.
BREAKING DOWN 'Fidelity Bond'
Despite its name, a fidelity bond is solely an insurance policy and is neither tradable nor can it accrue interest like a regular bond. It is also known as an "honesty bond."
In Australia a fidelity bond is called "employee dishonesty insurance," and in the U.K. it's called "fidelity guarantee insurance."