The mission of the Association is to promote and support the general interests of the equipment finance and leasing industry. This mission will be achieved through dissemination and communication of information, representation and promotion, provision of training and educational activities and resources, and development of industry unity and strength.
Aligned with the mission statement and objectives of the Association, the purpose of the Association Code of Fair Business Practices (the "Code") is to demonstrate to the public and business community the intent of its Members to establish and reinforce industry unifying principles for conduct and business practices that are of the highest level of ethics and professional service to customers and ensure compliance with applicable governmental rules and regulations. The Code identifies basic policy and standards of professional and ethical conduct in lessor relationships with customers, with other lessors and with channel partners. Further, the Code outlines provisions for enforcement of the standards presented therein as a means to protect the integrity of the Association and greater reputation of the overall equipment finance and leasing industry. Members shall encourage any participant in our industry to comply with the terms of this Code.
Therefore, the Association hereby adopts on May 11, 2006 the following Code of Fair Business Practices for commercial equipment lease and finance transactions and / or services, subject in all instances to applicable Federal and State laws. The entire Code will be effective January 1, 2007, applying to actions taken by members after December 31, 2006, and in the interim the Association Code of Fair Business Practices, as it existed prior to this adoption, will remain in full force and effect. Notwithstanding the fore-going, the Enforcement Provisions set forth in Section V hereof and on Appendix I will be effective on the date of adoption of this Code as set forth above.
II. General Industry Standards of Professional Conduct
Standard 1: Members shall conduct their business in a manner that reflects positively on themselves, their companies and the industry. Practices and actions shall be conducted with honesty, integrity and transparency.
Standard 2: Members shall act with competence and professionalism using proper care, due diligence, and sound independent judgment in their activities. They shall strive to maintain and improve the professionalism of their organizations through continuing education and development.
Standard 3: Members that have a known actual or potential conflict of interest with respect to an activity shall disclose the nature of the conflict in writing to the concerned parties.
Standard 4: Members shall not knowingly misrepresent facts or withhold relevant non-proprietary information concerning any aspect of a transaction.
Standard 5: Members shall only disclose credit, financial and other private information supplied by any party to a transaction, relationship or service on a need-to-know basis, and always in compliance with applicable confidentiality agreements and data privacy laws.
Standard 6: Members shall apply funds received in accordance with the terms of the written agreements between the parties, and in appropriate circumstances (such as refundable security deposits and commitment fees) shall hold such funds in a fiduciary capacity. Members shall not make payments, including commissions and referral fees, to an employee or representative of another party without notice to that party.
Standard 7: Members shall not make representations to any other party on behalf of another party or act as an agent without the other party's express approval.
Standard 8: Members shall encourage compliance with this Code and shall provide training to ensure that its employees and representatives will comply with this Code and all other applicable Federal, State and local regulations. Members shall cooperate in the investigation and remedy of any alleged violations of this Code or industry applicable regulations.
III. General Standards of Professional Conduct in the Lessor/Customer Relationship
Standard 1: Members shall not take any actions, nor shall they induce a customer or other third party to take any actions, that will result in the breach of the provisions of a contract or agreement.
Standard 2: Members shall conduct their activities in the spirit of full disclosure. All relevant information as to the terms and conditions of a transaction, relationship or service that may affect either (i) the customer's decision to consummate the transaction or, (ii) the customer's ongoing obligations under the contract, shall be disclosed clearly to the customer prior to closing. Notice, return and end of term provisions of a lease shall be reasonable in light of the structure of the transaction, the type and use of equipment leased and the secondary market therefor. The terms and conditions of use and application of deposits and other funds received from a customer shall be fair, reasonable and disclosed to the customer in writing.
Standard 3: Members shall advise customers and other parties to seek independent advice and counsel in matters of tax, legal and accounting treatment of transactions to avoid conflicts of interest.
Standard 4: Members shall not knowingly mislead a customer as to their sources of funds, credit authority or the status of any required credit or transaction approval.
IV. General Standards of Professional Conduct in the Lessor/Lessor or Other Channel Partner Relationship
Standard 1: Members shall exercise reasonable diligence in the selection, scrutiny and on-going management of their sources of business. Members shall take proper care and exercise sound independent judgment that transactions are bona-fide obligations that have merit structurally and financially.
Standard 2: Members shall be vigilant as to third-party credentials, reputation, practices and their adherence to ethical standards.
Standard 3: Members shall neither withhold relevant customer information for the purpose of misleading an investor, nor shall they violate the terms of any confidentiality agreements or data privacy laws relating to customer information.
Standard 4: Members will facilitate the lawful interchange of information concerning unethical practices that could damage customers, other Members, or the industry. Reports of such practices can be provided to Association a confidential basis after following the Member company's internal guidelines for such reports. Such reports shall be investigated by Association, and reported to Members in an appropriate manner.
V. Enforcement Provisions
Article VII(2) of the Bylaws provides that a Member may be censured, suspended or expelled from the Association for violating the Code of Fair Business Practices of the Association. Accordingly, the disciplinary actions that the Association may take in the event of a violation of the Code include:
- private censure;
- public censure;
- probationary membership with such conditions as may be determined by the Association;
- suspension of membership for a term and on such conditions as may be determined by the Association;
- expulsion from membership; and (f) non-renewal of the membership of the Member.
This Code is most effective when Members ensure that their own practices and actions conform to the standards set forth in the Code. In those instances where a party alleges that a Member has violated the Code, the initial complaint, whether in writing or verbal, is to be directed to the Association President. The Association President will initially attempt to address the matter by acting as a facilitator to open up lines of communication between the parties in an effort to have the parties resolve the situation without commencing an inquiry under the formal complaint procedures. If the complaining party determines that these initial steps do not resolve the issue to the satisfaction of the complaining party, then the complaining party may avail itself of the formal complaint procedures set forth on Appendix I attached hereto and made a part hereof. The validity of the complaint will be determined by the Association Fair Business Practices Committee (the "Committee"). The Committee will consist of two (2) members of the Association Board of Directors and four (4) other individuals, who are appointed by the Chairman of the Association. The Chairman of the Association shall also designate one member of the Committee as Chairman of the Committee. If a member of the Association advises the Chairman and President of the Association in writing that the member's officials or employees may not serve on the committee, the Chairman of the Association shall not appoint such officials or employees to the committee. If a matter or dispute between the parties to the Complaint is involved in arbitration or litigation at the time of the filing of the Complaint, then a party is prohibited from availing itself of the initial complaint procedure to the Association President or the formal complaint procedure set forth on Appendix I. If arbitration or litigation is commenced subsequent to the Complaint being filed, then the pending Complaint procedure will be suspended. In those situations where a Complaint cannot be filed due to pending arbitration or litigation, or a Complaint is suspended due to subsequent arbitration or litigation, the Complaint process may commence or be reinstated, as applicable, upon action by the Complainant when the arbitration or litigation is concluded, including any applicable appeals.
Appendix I: Association Code of Fair Business Practices Formal Complaint Procedures
This Appendix I is referenced in Section V of the Association Code of Fair Business Practices (the "Code") and provides a procedure for administering formal complaints by a "Complainant" (as herein defined) that a Member has violated the Code. Complaints will be reviewed by the Association Fair Business Practices Committee (the "Committee"), the composition of which is described in Section V of the Code.
The following provisions, consistent with the provisions of Article VII(2) of the Association Bylaws, set forth the procedures to be followed in proceedings involving alleged violations of the Code.
- A proceeding alleging that an Association Member violated the Code may be initiated by a Member of Association (other than any Association Member who has a representative on the Committee), by the Executive Committee of the Association or by a non-member of Association which has suffered injury as a participant in an equipment lease or finance transaction with a Member ("Complainant"). The proceeding shall be initiated by filing a written complaint (the "Complaint") with the Association President at Association Headquarters by registered mail. The Complaint must identify the sec-tion(s) and standard(s) of the Code alleged to be violated, set forth in detail the facts claimed to support the charges of Code violation, and include documents in the possession of the Complainant which are pertinent to the Complaint. In addition, the Complainant may submit affidavits from the Complainant and others in support of the Complaint.
- Copies of the Complaint and supporting documents, if any, shall be sent by the President to the members of the Committee. If the Committee deems the Complaint to be insufficient, it may request the Complainant to provide more information, documents or affidavits in support of the Complaint. The President will ensure that the Complainant has a copy of the Code including these Formal Complaint Procedures.
- At any time during the formal complaint process, the Committee may consult with specific resources within Association such as legal, asset management, accounting, etc., which the Committee deems necessary based on the nature of the Complaint. The Committee will maintain a formal written record of all findings and proceedings of the Committee involving the Complaint.
- If the Committee determines by majority vote that the Complaint and supporting documents, on their face, do not satisfy the requirements of Paragraph 1 or do not state facts constituting a violation of the Code, the Complainant shall be so notified by the Chairman of the Committee, and no further action shall be taken.
- If the Committee determines that the Complaint and supporting documents meet the requirements of Paragraph 1 and allege facts which, if true, could constitute a Code violation, the Chairman of the Committee shall request the Association President to send a copy of the Complaint and supporting documents, by registered mail, to the party complained against (the "Respondent"). The President shall also provide the Respondent with a copy of the Code.
- The Respondent shall be afforded an opportunity to answer the Complaint (the "Answer"). The Respondent's Answer shall respond to the specific allegations contained in the Complaint. The Answer shall also notify the Committee whether or not the Respondent requests a hearing on the allegations in the Complaint, and provide the Committee with documents or affidavits from Respondent or others supporting the Answer. The Answer, supporting documents and affidavits shall be sent to the Association President by registered mail within 30 days of Respondent's receipt of the Complaint. The Association President shall promptly forward the Answer and supporting documents to the Committee and to the Complainant by registered mail, and shall notify Complainant of the right to request, within 30 days of receipt of the Respondent's Answer, a hearing on the Complaint before the Committee.
- Irrespective of whether either or both of the parties request a hearing on the Complaint, the Committee shall have the authority by majority vote to dismiss the Complaint if it determines, based upon the submissions made, that it is clear there is no violation of the Code. Should the Committee dismiss the Complaint, the parties shall be notified and no further action on the Complaint shall be taken.
- In the event the Complaint is not dismissed and a party has requested a hearing or the Committee determines a hearing is necessary, then the Committee shall notify Complainant and Respondent of the date, time and location of the hearing and their right to be represented by counsel at the hearing. During the hearing, the parties shall be afforded a reasonable opportunity to present evidence, cross-examine witnesses and be heard on matters alleged in the Complaint and Answer. The Committee may also permit others to testify at the hearing.
- The Committee shall vote on whether or not the Respondent has violated the Code based upon the record, and, if so, what disciplinary action, if any, should be taken against the Respondent as a consequence of such violation. A two-thirds vote of the Committee members is required to censure, suspend or expel a Respondent.
- The Committee's decision must be in writing and shall be sent to the Respondent and Complainant by registered mail. The Committee shall notify the Respondent of the right to appeal an adverse decision within 30 days of receipt of the decision. The Respondent's appeal, if any, shall be sent by registered mail to the Association President and shall set forth the reasons why the Com-mittee's decision should be set aside. The Association President shall promptly forward the Respondent's appeal, if any, to the Complainant via registered mail. If the Respondent does not timely appeal the Committee's decision, the decision shall be final and binding upon Respondent.
- If the Respondent elects to appeal the Committee's decision, then the matter shall be transmitted for a hearing on the existing record before the Association Board of Directors (the "Board"). The Board shall notify the parties via registered mail of the date, time and location of the hearing, and the schedule for filing written submissions with the Board. The Respondent and the Complainant may be represented by counsel and shall be permitted to provide written submissions and present oral argument to the Board. No additional documents may be filed or any testimony taken, unless ordered or requested by the Board. The Board shall vote on whether the Committee's decision should be affirmed, modified or reversed. A decision by the Board which censures, suspends or expels the Respondent must be by two-thirds vote of the members present and voting. No member of the Committee, and no Director that is a representative of an Association member that initiated the Complaint or is the Respondent, may be present during, or participate in, the voting.
Adopted May 11, 2006; amended September 21, 2006