1. 1 Code of Professional Conduct Darrell Knapp Kansas City Actuaries Club Seminar June 24, 2009

2. 2 Agenda Overview and background Overview and background Review Code of Professional Conduct Review Code of Professional Conduct Case Study Case Study

3. 3 Why a Code of Conduct? Characteristics of a Profession Characteristics of a Profession Specialized knowledge or service Specialized knowledge or service Confidential relationship with employer/client Confidential relationship with employer/client Public obligation (altruistic) Public obligation (altruistic) Autonomy/clients incapable of appraising service Autonomy/clients incapable of appraising service Official recognition Official recognition Ethical code/code of conduct Ethical code/code of conduct

4. 4 Applying Code Without Knowing It Do you-- Do you-- Consider whether you are qualified to do an assignment? Consider whether you are qualified to do an assignment? Follow Actuarial Standards of Practice? Follow Actuarial Standards of Practice? Identify yourself in actuarial communications? Identify yourself in actuarial communications? Identify clients when there may be a conflict of interest? Identify clients when there may be a conflict of interest? Put limitations on the distribution of your work? Put limitations on the distribution of your work? Protect confidentiality of information? Protect confidentiality of information?

5. The Code of Professional Conduct: An Overview  The revised Code took effect January 1, 2001  Sets forth professional/ethical standards for Academy members  Adopted by the AAA, SOA, ASPPA, CAS, and the CCA  Actuaries who commit material violations are subject to counseling/disciplinary process

6. An Overview (continued)  Actuaries must remain current with the Code and comply with its provisions; violations subject to counseling and discipline procedures  Precepts are standards; annotations assist with interpretation/application  Follow applicable standards wherever you practice  Also subject to jurisdictional codes or standards  When Code and law conflict, follow the law  Definitions are provided

7. Professional Integrity Precept 1  Act honestly, with integrity and competence, and in a manner that fulfills the profession’s responsibility to the public and upholds its reputation  Perform professional services with skill and care  Refuse to provide professional services that would violate or evade the law, or damage the profession’s reputation

8. 8 Professional Integrity  Precept 1 Annotations Continued  Do not use relationship with one party to obtain illegal or improper treatment for another party  Do not engage in professional conduct that involves dishonesty, fraud, deceit, deception, or misrepresentation, or act in a way that will reflect adversely on the actuarial profession

9. 9 Qualification Standards Precept 2  Perform professional services only when qualified to do so AND in compliance with Qualification Standards  Know and follow applicable Qualification Standards for appropriate jurisdiction; in U.S., published by the Academy.  The absence of a Qualification Standard does not relieve you of the duty to comply.

10. 10 Standards of Practice Precept 3  Make sure that work performed by you, or under your direction, meets applicable standards of practice  Know and follow applicable standards for the jurisdiction; in the U.S., ASOPs of the ASB  When applying standards, use professional judgment  Be prepared to disclose and justify deviations

11. Communications and Disclosure Precept 4  Take appropriate steps to ensure that communications are clear, appropriate to the circumstances and intended audience, and comply with applicable ASOPs  Identify yourself as person responsible for your communications  Indicate your availability to provide supplemental information

12. Communications and Disclosure Precept 5  As appropriate, identify your principal(s) and the capacity in which you serve

13. Communications and Disclosure Precept 6  Make timely disclosure to Principal of all known direct and indirect sources of compensation related to the assignment  Disclose any relationships that are pertinent but may not be apparent  This applies to all such compensation, wherever received within your firm

14. Conflict of Interest Precept 7  Do not knowingly provide professional services involving a real or potential conflict of interest unless:  Your ability to act fairly is unimpaired,  There has been disclosure of the conflict to all known affected Principals, and  Such Principals have expressly agreed to your performing the professional services

15. Control of Work Product Precept 8  Take reasonable steps to ensure that your services will not be used to mislead other parties  Recognize the risk of misuse  Present your work clearly and fairly  Set appropriate limits on the use and distribution of your work

16. 16 Confidentiality Precept 9  Do not disclose confidential information unless authorized by the Principal, or required by law, to do so

17. 17 Courtesy and Cooperation Precept 10  Perform services with courtesy and professional respect and cooperate with others in the Principal’s interest  Discuss differences of opinion objectively and with courtesy and respect  You may agree to represent, in the same matter, another actuary’s current or former Principal

18. 18 Courtesy and Cooperation  Precept 10 Annotations Continued  You may issue an alternative opinion to one issued for a Principal by another actuary but include support  You may wish to consult with a prior actuary; get the Principal’s consent first  Cooperate with an actuary who takes over a Principal’s account, unless you have a pre-existing agreement with the Principal to the contrary; financial issues not a valid reason

19. 19 Advertising Precept 11  Do not engage in advertising or business solicitation that is false or misleading in any medium  Includes any communication that may directly/indirectly influence person’s or organization’s decision whether, and from whom, to obtain actuarial services

20. 20 Titles and Designations Precept 12  Use membership titles and designations only as authorized by your organizations  A “title” is a position (e.g., Committee Chairperson)  A “designation” is a class of membership (e.g., ASA, FSA, or MAAA)

21. 21 Violations of the Code Precept 13  Actuary who knows of apparent, unresolved, material breach by another actuary should consider discussing matter to obtain a resolution  If discussion not attempted or not successful, report it to ABCD, unless prohibited by law or confidential information would be divulged

22. 22 Violations of the Code  Precept 13 Annotations  Material violations are those that are important or affect an outcome; trivial infractions, or those merely of form, are not material  Not needed to be discussed if prohibited by law or is acting in an adversarial environment

23. 23 Violations of the Code Precept 14  Respond promptly, truthfully, and fully in writing to ABCD’s request for information  Cooperate fully with ABCD investigation, subject to applicable restrictions on confidential information, or those otherwise imposed by law

24. 24 Case Study