Professional Insight
Ethical Issues

The ABCD and The CAS’s Processes and Disciplinary Actions

By MIKE SPEEDLING AND KENNETH HSU, MEMBERS OF THE CAS PROFESSIONALISM EDUCATION WORKING GROUP
Posted on Business and Technology Members

The Professionalism Education Working Group is often asked to clarify if the Code of Professional Conduct and the Actuarial Standards of Practice (ASOPs) apply to various scenarios. We have also received comments that the focus of these articles is generally on actuaries practicing in the U.S. We plan to address some of these scenarios in a miniseries of articles in Actuarial Review.

While the articles will pose scenarios as they apply to credentialed actuaries, we feel that these could apply to anyone performing work of an actuarial nature, regardless of whether they intend to become credentialed.

To continue improving this professionalism experience, we want your feedback. You can send your comments and questions to ar@casact.org.

In our last column (AR, March-April 2023), we saw our protagonist Bilbo in a dilemma. He had questions about an actuarial report that he was reviewing as part of his M&A work. Without getting answers to these questions, he would have to report his concerns, which potentially could kill or seriously affect the deal. The problem was that Bilbo had signed a non-disclosure agreement (NDA) related to the M&A, and the actuary, Gollum, who produced the report was not part of the M&A project, so Bilbo couldn’t talk to her.

Now, let’s assume that Bilbo decides that he cannot opine on the report without talking to Gollum. He approaches his firm’s partner, I.M. Balrog, FCAS, who is in charge of the M&A deal to get permission to talk to Gollum, but the partner tells him “You shall not pass!” any information or questions onto Gollum. Bilbo decides to ignore Balrog and talk directly to Gollum. He justifies his non-compliance because otherwise it could lead to decisions  based on incomplete information. In addition, this might result in damage to his client’s and his firm’s reputation being damaged due to their inability to fully complete the work and secure the deal.

He approaches his firm’s partner, I.M. Balrog, FCAS, who is in charge of the M&A deal to get permission to talk to Gollum, but the partner tells him “You shall not pass!” any information or questions onto Gollum.

 

So, Bilbo does contact Gollum. Gollum cooperates with Bilbo based on Precept 10 of the Code of Conduct that states an Actuary “shall cooperate with others in the Principal’s interest.” Eventually, Balrog finds out that Bilbo has broken the NDA by talking to Gollum without permission. He also believes that Bilbo has violated the precepts of confidentiality (Precept 9) and professional integrity (Precept 1). Balrog feels that he is bound by Precept 13 on Violations of the Code. Balrog is unsuccessful at discussing the issue with Bilbo. Balrog has a couple of choices: He could do nothing, contact the ABCD for counseling or submit a complaint to the ABCD. If he chooses the latter, or if the ABCD counsels him to submit a complaint, this is how it would proceed.

Balrog believes that Bilbo’s contacting Gollum is an action that might adversely reflect upon the actuarial profession adversely. Balrog reports Bilbo to the ABCD, believing that Bilbo had violated Precepts 1 and 9 by not upholding the conditions of the NDA and contacting Gollum to discuss items within the M&A project. This sets the wheels of the ABCD in motion.

At this point, the complaint would be forwarded to Bilbo for Bilbo’s response. Once the response is provided, generally within 30 days, the ABCD Chairs will review both the complaint and response and then will decide to either dismiss the complaint or determine that an investigation is warranted. If the Chairs decide that an investigation is needed, an investigator will be appointed, and Bilbo will be notified. Bilbo has the option to appeal the choice of the appointed investigator in the event Bilbo believes the investigator will not be impartial, for example, if they have an  adverse relationship.

Once the investigation is complete, the investigation report will be forwarded to Bilbo for his response. The ABCD, as a whole, will then review the investigative report and Bilbo’s response and will decide either to dismiss the complaint, counsel Bilbo or conduct a further fact-finding hearing. If the ABCD will hold a hearing. Bilbo can appear with or without an attorney; however, the attorney can only engage in a limited fashion by lodging legal objections or advising Bilbo. The lawyer does not actively participate in the hearing. Bilbo is allowed to give an opening statement to the ABCD to share his view on the matter, question the investigator and present a case in defense, including the presentation of witnesses.

After the hearing is adjourned, the ABCD will go into an executive session where a recommendation will be rendered. The flowchart of Figure 1 shows the process post recommendation.

The ABCD will notify all actuarial organizations of which Bilbo is a member . However, if the complaint is dismissed or only counseling is required, the ABCD will conduct this counseling with Bilbo and no actuarial organizations will be involved. If disciplinary action is recommended by the ABCD and Bilbo is a member of the CAS, the CAS president, CEO, and the chair of the Discipline Committee are notified. The ABCD also notifies Bilbo of its disciplinary recommendation.

When the chair of the Discipline Committee receives the recommendation, they make a determination on whether further fact-finding or investigation is required. Upon receipt of the ABCD recommendation or following the CAS factfinding or investigation, the CAS conducts a disciplinary hearing, as shown in the flowchart in Figure 2.

The ABCD and CAS Discipline Committee proceedings are confidential. The hearing panel consists of six members of the Discipline Committee and the Discipline Committee Chair; CAS counsel also attends. Bilbo can provide supplemental material in his defense at least 15 days in advance of the hearing. Bilbo has the right to appear at the hearing, with or without his attorney, and may make an oral presentation and respond to questions posed by the Discipline Committee panel members. Bilbo’s attorney has a limited role similar to the ABCD hearing. The Discipline Committee Panel then goes into an executive session and renders a decision. The Discipline Committee Panel has the discretion to accept, reject or modify the recommendation received from ABCD. The decision is binding; however, Bilbo can appeal the decision to the CAS Board of Directors, if he has grounds to appeal.

For further information on ABCD and CAS disciplinary processes, visit the links below:

Special thanks to the ABCD General Counsel and CAS Discipline Committee Chair for their help with this article.