1 Professional Ethics University of Waterloo Bob Howard 24 October 2012 University of Waterloo Bob Howard 24 October 2012

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ProfessionalEthics

ProfessionalEthics

University of Waterloo

Bob Howard24 October 2012

University of Waterloo

Bob Howard24 October 2012

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Web version available at

www.howardfamily.ca/~bob

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Ethics – Absolute or Relative

• “Relativity applies to physics, not ethics.” – Albert Einstein

• Relative to profession

• Absolute within profession

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Is “Actuary” a Profession?

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Requirements

1. Skilled intellectual technique

2. Voluntary association

3. Code of conduct and enforcement

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Characteristics

1. Intensive training

2. Public perception of skill

3. Primacy of public interest

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Is “Actuary” a Profession?

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R1: Skilled intellectual technique

• Degree in actuarial science

• Not enough for fellowship

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R2: Voluntary association

• Act of incorporation

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R3: Code of conduct

• Guiding Principle #3

• The Institute develops standards of professional practice and codes of conduct and, through its disciplinary process, ensures their compliance by its members.

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C1: Intensive training

• Know it “cold”

• Pass rates

• PEC

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C2: Public perception of skill

• Positive anecdotes

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C3: Primacy of public interest

• Guiding Principle #1

• In carrying on its activities and programs, the Institute holds the duty of the profession to the public above the needs of the profession and its members.

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Public Interest - Collective

• Maintain competence, integrity

• Keep the spirit of the law

• Follow rules of conduct

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Public Interest - Clients

• Direct, personal and fiduciary

• Only appropriate advice

• Ensure understanding

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Public Interest - Regulation

• Codified conduct

• Codified practice

• Disciplinary process

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Conclusion

• Actuaries are a profession

• You are on the path to becoming a professional

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Agenda – Professionalism

• Introduction

• Primary documents

• Rules

• Standards

• Discipline

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Structure - Guidance

• Act of Incorporation

• Bylaws

• Guiding Principles

• Rules of Professional Conduct

• Standards of Practice

• Educational Notes

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Act of Incorporation

• Federal act - 1965

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Bylaws

• Governance structure

• Responsibilities

• Discipline

• Requirements of membership

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Confidentiality

23.02 Any Member … who, as a result of involvement in any [CIA activity], obtains confidential information … shall not use or disclose any such information except in the discharge of … responsibilities arising from such involvement…

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Confidentiality

23.02 Any Member … who, as a result of involvement in any [CIA activity], obtains confidential information … shall not use or disclose any such information except in the discharge of … responsibilities arising from such involvement…

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Guiding Principles

• What we must do

• May not be changed without member vote

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Agenda

• Introduction


• Rules

• Standards

• Discipline

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Rules of Professional Conduct

• Conduct vs. Work

• Ethics

• No exceptions

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Rule 1

A member 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.

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When is a professional not a professional?

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Rule 1

A member 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.

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Annotation 1-1

A member shall perform professional services with skill and care.

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Annotation 1-2

It is the professional responsibility of the member not to be associated with anything which the member knows or should know is false or misleading.

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Annotation 1-3

A member shall not engage in any professional conduct involving dishonesty, fraud, deceit or misrepresentation or commit any act that reflects adversely on the actuarial profession.

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Rule 2

A member shall perform professional services only when the member is qualified to do so and meets applicable qualification standards.

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Rule 2


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Rule 2


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CPD

• Continuing Professional Development

• Minimum 100 hours over 2 years

• Annual filing

• Necessary, but not sufficient

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Rule 3

A member shall ensure that professional services performed by or under the direction of the member meet applicable standards of practice.

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Rule 3

A member shall ensure that professional services performed by or under the direction of the member meet applicable standards of practice.

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Rule 5

A member shall not perform professional services involving an actual or potential conflict of interest unless:

(a) … ability to act fairly is unimpaired,

(b) … full and timely disclosure

(c) all … direct users have expressly agreed …

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Rule 5


(a) …ability to act fairly is unimpaired,



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Rule 5





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Rule 5





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Rule 6

A member who performs professional services shall take reasonable steps to ensure that such services are not used to mislead other parties or to violate or evade the law.

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Rule 7

A member shall not disclose to another party any confidential information obtained through a professional assignment ... unless expressly or implicitly authorized to do so by the client or employer, or required to do so under Rule 13, or …

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Rule 7

A member shall not disclose to another party any confidential information obtained through a professional assignment ... unless expressly or implicitly authorized to do so by the client or employer, or required to do so under Rule 13, or …

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Rule 8

A member shall perform professional services with courtesy and professional respect, shall avoid unjustifiable or improper criticism of other members, and shall cooperate with others in the client’s or employer’s interest.

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Rule 8

A member shall perform professional services with courtesy and professional respect, shall avoid unjustifiable or improper criticism of other members, and shall cooperate with others in the client’s or employer’s interest.

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Rule 11

A member shall be subject to the Institute’s disciplinary procedures if the member is convicted or found guilty of or pleads guilty to any criminal or similar offence.

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Rule 13

A member who becomes aware of an apparent material noncompliance with the Rules or the standards of practice by another member shall attempt to discuss the situation with the other member and resolve the apparent noncompliance.

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Rule 13

In the absence of such discussion and resolution, the member shall report such apparent noncompliance to the Committee on Professional Conduct

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Ethical Challenges

• Pressure from client or manager

• Rules/Standards protect you

• Justifying vs. rationalizing

• Rule 3

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Ethical Challenges

• Errors

• Still human

• Disclose and correct

• Don’t cover it up

• Rule 1

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Ethical Challenges

• Area of competence

• Opinions within specialty

• Some knowledge is not enough

• Rule 2

Case Study

You are Fran Fraser, FCIA, responsible for product pricing. You recently hired Abe Acker, ACIA from a competitor. You have assigned him to work on pricing a new product. Abe tells you that he worked on pricing a similar product for his prior company. He offers you a copy of the pricing report.

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Case Study

• What are the ethical issues?

• What action should Fran take?

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Case Study

• Primary focus: rectification

• Secondary focus: making Abe into a professional

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Agenda

• Introduction

• Structure


• Rules

• Standards

• Discipline

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Standards of Practice

• Work vs. Ethics

• Exceptions can be justified

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1210.01 Accepted Actuarial …

The actuary should conform to accepted actuarial practice except when it conflicts with law or the terms of an appropriate engagement…

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1210.01 Accepted Actuarial …

... A user of the actuary’s work may assume that it is in accordance with accepted actuarial practice except when the actuary reports otherwise.

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1410.05 Appropriate engagement

An appropriate engagement is one that does not impair the actuary’s ability to conform to the rules... An engagement that leads to deviation from … standards and even to a deviation from accepted actuarial practice may be an appropriate engagement in the circumstances.

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1340.01 Materiality

Deviation from a particular recommendation or other guidance in the standards is accepted actuarial practice if the effect of so doing is not material.

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1510.04 Approximation

…approximation pervades virtually all work and affects the application of nearly all standards. The words “approximation” and “approximate” seldom appear in the standards, but are understood throughout them.

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1720.01 Selection of Assumptions

The assumptions that the actuary selects or for which the actuary takes responsibility … should be appropriate in the aggregate. These assumptions should also be independently reasonable ...

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Agenda

• Introduction


• Rules

• Standards

• Discipline

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Discipline

• Bylaw 20

• Protect the public

• Protect the member

• Confidential until charged

• Public hearing

• Public result

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Discipline - Sanctions

• (Private admonishment)• Public reprimand• Suspension from CIA• Expulsion from CIA• Refresher training• Fine and/or costs

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Agenda

• Introduction

• Structure


• Rules

• Standards

• Discipline

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Vision

To make CIA members recognized leaders in the management of risk and contingent events and to be a significant contributor to public policy and a strong influence in the continuing evolution of international financial standards.

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Questions / Comments

Documents

1 Professional Ethics University of Waterloo Bob Howard 24 October 2012 University of Waterloo Bob Howard 24 October 2012