What is the relationship between a financial institution and its affiliates?

The correct answer highlights that an affiliate is a business that is controlled by or shares common control with another company. This relationship is significant in the context of financial institutions as it pertains to regulatory compliance, particularly under laws such as the Gramm-Leach-Bliley Act (GLBA). Understanding the nature of affiliates is essential because it helps institutions identify how they must protect customer information and govern their data sharing practices.

In the financial context, affiliates may share resources, data, and even branding, which creates additional considerations regarding privacy compliance. This interconnectedness means that the privacy policies of a financial institution can extend to its affiliates, making it imperative for the institution to ensure that all entities under common control are adhering to the same standards of privacy protection.

The other statements describe aspects of ownership or control that do not accurately reflect the definition of an affiliate in this context. An affiliate is not merely an independently owned entity, nor does it operate completely independently without any control over the financial institution. Furthermore, the concept of being a nonaffiliated third party is distinctly separate from the idea of affiliation and does not apply to businesses that have any degree of shared ownership or control.