In this issue, we continue from where we left off in the last column and wrap up with the remaining Code precepts. We also review the candidate codes of ethics for the CAS and SOA.
Precept 7: Conflict of Interest
“An Actuary shall not knowingly perform Actuarial Services involving an actual or potential conflict of interest unless: a) the Actuary’s ability to act fairly is unimpaired; b) there has been disclosure of the conflict to all present and known prospective Principals whose interests would be affected by the conflict; and c) all such Principals have expressly agreed to the performance of the Actuarial Services by the Actuary.”
If you are providing Actuarial Services for both the buyer and the target during a merger/acquisition, you need to disclose this to both parties and get express permission to continue. The Actuary also has to be fair and unbiased when performing these services.
Precept 8: Control of Work Product
“An Actuary who performs Actuarial Services shall take reasonable steps to ensure that such services are not used to mislead other parties.”
Some examples: If you provide a range of reserves in your actuarial report with the sole intention of demonstrating the volatility of the estimates, then you must clearly disclose the purpose of the range to avoid misinterpretation that any value in the range would be appropriate to use.
Recalling Precept 2, if you don’t meet the requirements set forth by the U.S. Qualification Standards (USQS) (i.e., basic education, CE or experience) and intentionally withhold this information from your Principal, it could potentially mislead the users of your Actuarial Services into believing you are fully qualified to provide the work product.
Precept 9: Confidentiality
“An Actuary shall not disclose to another party any Confidential Information2 unless authorized to do so by the Principal or required to do so by Law.”3
A violation of this precept can arise from sharing confidential information, even if from accidental or unintentional means. If you leave your computer unlocked in a public place, and an unintended user gathers confidential information as a result, it may be a violation of Precept 9.
Precept 10: Courtesy and Cooperation
“An Actuary shall perform Actuarial Services with courtesy and professional respect and shall cooperate with others in the Principal’s interest.”
As a professional, this precept should be easy to obey; however, there may be times when working with others may create an adversarial circumstance. For example, if you previously provided Actuarial Services for Company XYZ, but you were fired after that assignment, you may have bad feelings about the situation. If a new actuarial firm is reviewing your work and wants to discuss your work product, Precept 10 says that you must be courteous and cooperative.
Another example of a potential violation of this precept is if you continuously ignore a Principal’s call because you know they are upset with the results from your actuarial study and don’t want to face them. You would be violating Precept 10 and Precept 1 by not acting with integrity.
Precept 11: Advertising
“An Actuary shall not engage in any advertising or business solicitation activities with respect to Actuarial Services that the Actuary knows or should know are false or misleading.”
If you advertise your services, a violation of this precept would be to claim that you are faster, cheaper and more adept than a prospective client’s current Actuary. Any claims should be based on fact and not personal opinion.
Precept 12: Titles and Designations
“An Actuary shall make use of membership titles and designations of a Recognized Actuarial Organization (RAO) only in a manner that conforms to the practices authorized by that organization.”
If you don’t fulfill USQS requirements as an FCAS or aren’t current on your CAS dues, you can’t use your designation. Actuarial candidates who have passed their final exam for Associateship may be tempted to use the credential immediately; however, they need to receive approval and express permission from their RAO before they add it to their signature.
Precepts 13 and 14: Violations of the Code of Professional Conduct
“An Actuary with knowledge of an apparent, unresolved, material violation of the Code by another Actuary should consider discussing the situation with the other Actuary and attempt to resolve the apparent violation. If such discussion is not attempted or is not successful, the Actuary shall disclose such violation to the appropriate counseling and discipline body of the profession, except where the disclosure would be contrary to Law or would divulge Confidential Information.” (Precept 13)
If you are reviewing another Actuary’s work product and find inappropriate assumptions with inadequate documentation that have a substantial impact on the outcome of the analysis, Precept 13 states that you should consider discussing this with the other Actuary. It does not say to immediately report it to the Actuarial Board for Counseling and Discipline (ABCD). Like Precept 10, this conversation may be uncomfortable, but a discussion with the other Actuary may help to clarify their actions.
If you’ve made a reasonable attempt to contact the other Actuary to no avail, then a discussion with the ABCD may be warranted. The ABCD is not a disciplinary body,4 but it does offer guidance and confidential counseling.5
“An Actuary shall respond promptly, truthfully, and fully to any request for information by, and cooperate fully with, an appropriate counseling and disciplinary body of the profession in connection with any disciplinary, counseling or other proceeding of such body relating to the Code. The Actuary’s responsibility to respond shall be subject to applicable restrictions on Confidential Information and those imposed by Law.” (Precept 14)
If the ABCD reaches out to you, it is in your best interest to respond to it in a timely manner and to answer its inquiries to the best of your ability. The ABCD is a body that helps our profession stay self-regulated by ensuring that we are all exercising skill and care.
What professional code do actuarial candidates need to follow?
While actuarial candidates are not subject to the Code, they still must perform and behave in a way that protects and elevates the reputation of the profession.
The SOA6 and the CAS7 have their own sets of rules that are specific to candidates. There is a lot of overlap with the Code, but some rules are more specific to the actions of a candidate.
Rule 1 of both the SOA Candidate Code of Conduct and the CAS Candidate Code of Ethics aligns with Precept 1: “An actuarial candidate shall act honestly, with courtesy, integrity, and competence, to uphold the reputation of the actuarial profession.” An actuarial candidate doesn’t have the same responsibilities as an Actuary, but they have the same expectations of behavior. Other candidate rules overlap with Precepts 9, 10, 12 and 14.
Both sets of rules for candidates include a rule discussing the adherence to the examination discipline policy. It’s important for actuarial candidates to realize that, even though they don’t yet carry the actuarial designation, their actions could prevent them from achieving that goal if they are in violation of their actuarial organization’s rules.
Act with professional integrity
When I tell people that I’m an actuary, I am greeted with awe and respect (after the comments about their rising auto rates). That is a direct result of how effectively our profession maintains its reputation through following the Code, USQS and the Actuarial Standards of Practice.
With our adherence to the Code, we can continue to foster this respect for generations of actuaries to come. ●
