Copyright © 2013 by the American Academy of Actuaries Actuarial Board for Counseling and Discipline PROFESSIONALISM The Middle Atlantic Actuarial Club Baltimore, Maryland 13 September 2013

Copyright © 2013 by the American Academy of Actuaries Actuarial Board for Counseling and Discipline Ethics and Professionalism An Overview Curtis E. Huntington FSA, MAAA, FCA, COPA

Copyright © 2013 by the American Academy of Actuaries Agenda Background on ABCD Code of Conduct for Candidates Code of Professional Conduct Examples

Copyright © 2013 by the American Academy of Actuaries Actuarial Board for Counseling and Discipline ABCD was established in 1991 by the U.S. actuarial organizations to –Investigate alleged violations of the Code of Professional Conduct by members and recommend discipline –Counsel (provide guidance to) members –Mediate disputes between members and others.

Copyright © 2013 by the American Academy of Actuaries ABCD Membership Appointed by Selection Committee (Presidents and Presidents-elect of U.S. organizations) Member Area of Practice Robert Rietz, ChairpersonPensions Nancy Behrens, Vice ChairpersonLife Janet Fagan, Vice ChairpersonCasualty Richard BlockPensions Janet CarstensHealth Paul Fleischacker Health Curtis HuntingtonLife John PurpleCasualty Kathy RileyPensions

Copyright © 2013 by the American Academy of Actuaries ABCD Processes Follow Article X of AAA bylaws and ABCD Rules of Procedure All ABCD inquiries, guidance and mediation confidential, unless –Actuary makes public or agrees to publication –Court requires disclosure –Redacted, generic situation used for educational purposes

Copyright © 2013 by the American Academy of Actuaries An ABCD Inquiry Is a fact-finding effort, not an adversarial forum Examines whether or not an actuary materially violated the Code of Professional Conduct –not whether the actuary is liable for damages

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Applicable to Actuarial Candidates Defined as a person who has registered for or completed any SoA (or CAS) educational or evaluative activity, but is NOT a member (ASA, ACAS, CERA). Seven Rules

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates If performing actuarial work, client or employer is defined as the ‘Principal’ ‘Actuarial Services’ are professional services provided to a Principal including rendering advice, recommendations, findings based on actuarial considerations.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates CASUALTY ACTUARIAL SOCIETY (CAS) -- Adopted 1 January 2008 TITLE: Code of Professional Ethics for Candidates SOCIETY of ACTUARIES (SoA) – Adopted 1 December 2008 TITLE: Code of Conduct for Candidates

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 1 (CAS and SoA – Identical) An Actuarial Candidate shall act honestly, with integrity and competence, to uphold the reputation of the actuarial profession.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 2 (CAS and SoA – Identical) An Actuarial Candidate shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on the actuarial profession.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 3 (CAS and SoA – Identical) An Actuarial Candidate shall perform Actuarial Services with courtesy and professional respect and shall cooperate with others in the Principal’s interest.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 4 – CAS An Actuarial Candidate shall adhere to the CAS Policy on Examination Discipline. Rule 4 – SoA An Actuarial Candidate shall strictly comply with the letter and spirit of the SoA Rules and Regulations for Examinations and the e- Learning Terms and Conditions.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 5 – CAS Actuarial Candidates are not authorized to use membership designations of the CAS until they are admitted by the CAS Executive Council.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 5 – SoA Actuarial Candidates are not authorized to use, and therefore must never use membership designations of the SoA until they are admitted to membership by the SoA Board of Directors.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 6 (CAS and SoA – Identical) An Actuarial Candidate shall not disclose to another party any confidential information unless authorized to do so by the Principal or required to do so by law, statute, or regulation

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 6 – Continued Confidential information includes information of a proprietary nature and information that is legally restricted from circulation.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 7 - CAS An Actuarial Candidate shall respond promptly, truthfully, and fully to any request for information by, and cooperate fully with, appropriate counseling and disciplinary body of the CAS in connection with any disciplinary, counseling or other proceeding of such body relating to the Candidate Code.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 7 – CAS (Continued) The Actuarial Candidate’s responsibility to respond shall be subject to applicable restrictions listed in Rule 6 and those imposed by law, statute, or regulation.

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Rule 7 – SoA Differs from the CAS Rule because of references to SoA disciplinary bodies. Also differs because all references to counseling are omitted – only refers to disciplinary bodies.

Copyright © 2013 by the American Academy of Actuaries Coe of Conduct for Candidates CAS Reference CAS-Candidate-Code.pdfwww.casact.org/about/policiesProc/ CAS-Candidate-Code.pdf SoA Reference code-cond-candidates.pdf

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates On every application to take an examination, just above your signature is the following: “I acknowledge that I have read and agree to adhere to the SOA Code of Conduct for Candidates as well as the CAS Code of Professional Ethics for Candidates for jointly sponsored examinations.”

Copyright © 2013 by the American Academy of Actuaries Code of Conduct for Candidates Compare this Code with the 14 Precepts of the Code of Professional Conduct

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct The revised U.S. Code of Professional Conduct (“Code”) was adopted by the five U.S.-based actuarial organizations (Academy, ASPPA, CAS, CCA & SoA), and took effect 1 January The Code sets forth professional/ethical standards for actuarial members of the five U.S.-based actuarial organizations.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct The Code contains 14 Precepts, along with annotations providing further guidance on adhering to the Precepts. The Precepts are standards that must be followed by credentialed actuaries who are members of one of the U.S.-based organizations or whose member organizations require their members to follow the U.S. Code.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 1 Professional Integrity: An actuary shall act honestly, with integrity and competence, and in a manner to fulfill the profession’s responsibility to the public and to uphold the reputation of the actuarial profession

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 2 Qualification Standards : An Actuary shall perform Actuarial Services only when the Actuary is qualified to do so on the basis of basic and continuing education and experience and only when the Actuary satisfies applicable qualification standards.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 3 Standards of Practice An Actuary shall ensure that Actuarial Services performed by or under the direction of the Actuary satisfy applicable standards of practice.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 4 Communications An Actuary who issues an Actuarial Communication shall take steps to ensure that is clear and appropriate to the circumstances and audience and satisfies applicable Standards of Practice.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 5 Communications Appropriately identify the principals and describe the capacity in which you serve.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 6 Disclosure Make appropriate and timely disclosure to present or prospective principals of sources of all direct and indirect material compensation you or your firm receives that relates to any assignment for that principal.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 7 Conflict of Interest Do not perform actuarial services unless: 1.your ability to act fairly is unimpaired; 2.you have disclosed conflict to all; AND 3.you secure agreement from all principals.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 8 Control of Work Product Take reasonable steps to ensure your services are not used to mislead other parties.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 9 Confidentiality Do not disclose confidential information to another unless authorized by principal OR required by law.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 10 Courtesy and Cooperation Perform actuarial services with courtesy and professional respect and cooperate with others in the principal’s interest.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 11 Advertising Do not engage in advertising or business solicitation activities that are false or misleading.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 12 Titles and Designations Use membership titles and designations only in conformity with authorized practices.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 13 Violations of the Code If you know of an apparent, unresolved, material violation of the Code by another actuary and have attempted to resolve that violation through discussions that have been unsuccessful, you should disclose the violation to the ABCD.

Copyright © 2013 by the American Academy of Actuaries U.S. Code of Professional Conduct Precept 14 Cooperation with ABCD Respond promptly, truthfully and fully to requests from the ABCD subject to restrictions on confidentiality and those imposed by law.

Copyright © 2013 by the American Academy of Actuaries Request for Guidance Public guidance by ABCD –At request or agreement of actuary(ies) –Provides guidance to profession Private guidance by ABCD member –Expresses member’s own opinion –Expresses views of board Private guidance by ABCD –Expresses views of board

Copyright © 2013 by the American Academy of Actuaries Request for Guidance Example of RFG Topics How do I know if I am qualified? How can I become qualified? How can I do a job that involves more than one area of expertise? How much can I rely on my supervisor? How much can I rely on my staff? How much documentation of my work should I save? What if I leave my company? When should I refuse an assignment? When should I make a complaint about another actuary? When is a violation of the Code material? When is a violation of the Code resolved?

Copyright © 2013 by the American Academy of Actuaries Request for Guidance Examples (Most Common): 1.How do I meet Qualification Standards (#2) 2.Should I file a Complaint (#13) 3.What are my responsibilities to my Client if I have not been paid? (#1) 4.How do I manage newly found data? (#3)

Copyright © 2013 by the American Academy of Actuaries Mediation If all parties agree Facilitate resolution of issue without inquiry

Copyright © 2013 by the American Academy of Actuaries Statistics Type Total Conduct Practice Both4 4 8 RFG

Copyright © 2013 by the American Academy of Actuaries Statistics Practice Total Area Casualty Health Life Pension

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas SITUATION ONE A client of yours has retained another independent firm to provide a second opinion on some of your work. The other firm is a competitor. The other firm is now requesting information from you. They ask for copies of your notes, test runs and assumption setting analysis.

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas SITUATION ONE [Questions] 1.What are your professional responsibilities to support their work? 2.What part of the Code of Conduct and ASOPs apply to you? to them? 3.Do you need a release from the client? 4.How do you retain your proprietary rights without inappropriately frustrating their audit of your work?

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas SITUATION TWO You are taking an actuarial examination and notice another student using ‘cheat sheets’ in violation of the rules. QUESTIONS What action should you take? What provisions of the Code apply?

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas SITUATION THREE: You have prepared a proposal for a major government contract that could be worth $10 million over the next 5 years and, if you win it, would really establish your new firm (which is finding the going pretty tough).

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas You are now flying to Washington to present to the selection panel, and cannot help noticing that two partners from a (rather sleepy) large professional services firm are sitting in the two seats in front of you. The seat beside you is vacant.

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas You know who they are, but are pretty sure they don’t know who you are. They are discussing the same project that you are concerned with. They are your key competitor for the business, and if your firm is to survive, you have to win against them, and soon.

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas Try to answer yes or no, and be prepared to give reasons. A lot of very useful-sounding numbers are mentioned. Is it OK to take notes? It’s too much to write down. OK to turn on your tape recorder?

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas Is it OK to listen actively, hoping to pick up useful information? They leave papers in the seat pocket. They’re not marked “Confidential”. OK to take them? They are marked “Confidential”. OK to take them now? Etc.

Copyright © 2013 by the American Academy of Actuaries Ethical Dilemmas SITUATION FOUR You know of a candidate who has been convicted of a felony. QUESTION Do any of the Code provisions apply in this situation?

Copyright © 2013 by the American Academy of Actuaries Contacting the ABCD Letter: 1850 M St., N.W., Suite 300, Washington, D.C Telephone: (202) ; (202) (fax) Website: Contacting any individual ABCD member or ABCD staff (contact information on website)