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The Actuaries Act,2006

S. P. SubhedarSr. Advisor, Prudential Corporation Asia

August 2007

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The Actuaries Act,2006 - Disclaimer

The objective of this presentation is only to familiarize the participants with the provisions of the Act. For any action in connection with the provisions of the Act, the participants are advised to refer to the Act.

Further, the views expressed during discussions at the session will be entirely presenter’s personal views and in no way be construed as the views of the IAI.

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Agenda

Background

The Actuaries Act, 2006

- Chapter I - Preliminary- Chapter II - Institute of Actuaries of India- Chapter III - Register of Members- Chapter IV - Misconduct- Chapter V - Appeals- Chapter VI - Penalties- Chapter VII - Quality Review Board- Chapter VIII - Dissolution of the Actuarial Society of India

Registered Under The Societies Registration Act

- Chapter IX - Miscellaneous- The Schedule

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Background

“Government should consider granting a charter to the society at an appropriate time” -- Malhotra Committee recommendation (1994).

Insurance Regulatory Authority, an interim authority, set up by an executive order initiated action in this regard in late 1996.

After extensive debate at the professional level and discussionswith the IRA, the draft Bill to be submitted to the government took final shape in 1997.

The IRDA Act was enacted in December 1999.

The IRDA then pursued the matter and the draft Bill was reviewed.

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Background

The Bill when introduced in the Parliament was referred to the Standing Committee.

The Standing Committee held discussions with the various stakeholders and gave its report on the basis of which the Bill was amended.

The Bill was passed in the monsoon session of the Parliament in August 2006 and received the assent of the President on 27th August 2006.

The Actuaries Act, 2006 was published in the Gazette of India dated 28th August 2006.

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Chapter I - Preliminary

The Act envisages that it shall come into force on such date as the Central Government may appoint.

The Act provides for different dates to be appointed for different provisions of the Act.

Through a notification dated 8th November 2006, the Government appointed 10th November 2006 as the date from which all the provisions of the Act shall come into force.

Definition of “Actuary”, inter alia, stipulates that he has to be “a fellow member of the Institute”.

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Chapter I - Preliminary

A member of the Institute shall be deemed “to be in practice”when - individually; or

- in partnership with Actuaries in practice as a member oran employee of a company,

he - engages himself in actuarial practice; or- offers to perform or performs services involving the

application of actuarial techniques in the field of insurance, pension, investment…..

- renders such other services as, in the opinion of theCouncil, are or may be rendered by an actuary in practice;

- is in employment of a person engaged in one or of the activities mention above.

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Chapter II - Institute of Actuaries of India

On the “appointed day” , i.e. 10th Nov 2006,- a body corporate was constituted by the name of the

Institute of Actuaries of India; and- all the assets and liabilities of the Actuarial Society stand

transferred to, and vested in, the Institute.

Entry of names in Register:- any person who immediately before 10th Nov 2006 was

an associate or fellow member of the ASI;- any person who has passed the examinations of the ASI

and has completed specified training, except any such person who is not a permanent resident of India;

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Chapter II - Institute of Actuaries of India

- any person who has passed specified examination andcompleted specified training for membership of theInstitute;

- any person who has passed examination and completed training outside India as is being specified as beingequivalent to that specified under the Act for membershipof the Institute. In case the person is not permanently residing in India, he will have to satisfy conditions as mayimposed by the Government / Council.

The members of the Institute shall be divided into two classes :Associates and Fellows.

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Chapter II - Institute of Actuaries of India

Honorary, Affiliated and Student Members:- the Council may confer Honorary membership on persons

of eminence in matters relating to and of interest to theactuarial profession;

- a person who is a holder of membership equivalent to fellow membership of the Institute may be admitted as an Affiliate for such period and on such terms and conditions as will be laid down in the regulations;

- a person having specified academic qualification and has enrolled himself for examination of the Institute may be admitted as Student member.

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Chapter II - Institute of Actuaries of India

Honorary Member, Affiliate Member and Student Member shall have no right to vote on any matter or resolution.

No member of the Institute shall be entitled to practice unless he fulfills the qualifications as may be specified and obtains from the Council a Certificate of Practice (CoP).

Fees for CoP shall be payable on or before 1st April every year.

CoP may be cancelled by the Council under such circumstances as may be laid down in the regulations.

Every member of the Institute in practice shall, and any other member may, use the designation of an Actuary.

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Chapter II - Institute of Actuaries of India

Composition of the Council: - minimum of nine and maximum of twelve elected members;- an officer not below the rank of Jt.Secretary nominated by

the Government of India to represent the Finance Ministry;- a person from the IRDA nominated by the Central

Government;- two persons to be nominated by the Central Government

from amongst the persons having knowledge of insurance,law, finance or any other discipline as would be useful to the Council.

One third of the members of the Council shall retire every second year by rotation.

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Chapter II - Institute of Actuaries of India

The first AGM of the Institute shall be held within a period of not more than 18 months from the appointed day.

Not more than 15 months shall elapse between the date of one AGM and that of the next.

An elected member of the Council shall be eligible for re-election but not for more than two consecutive terms, I.e. three consecutive terms in all.

A member of the Council who has been elected as a President shall not be eligible for election or nomination as a member of the Council.

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Chapter II - Institute of Actuaries of India

The Council shall refer all election disputes to the Tribunal established by the Central Government for this purpose.

The Council shall elect three of its elected members as the President, Vice President and Hon. Secretary.

These office bearers shall hold office for a period of two yearsprovided they continue to be the members of the Council.

The duty of carrying out the functions under the provisions of the Act shall be vested in the Council.

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Chapter II - Institute of Actuaries of India

The Council may constitute such committees from amongst its members, and co-opt therein persons who are not members of the Institute, as it deems necessary for the purpose of carrying out the provisions of the Act.

The co-opted members shall not exceed one-third of the total membership of the committee.

The Council shall cause to be published in the Gazette of India a copy of the audited accounts and its report for the year not later than 30th September of the year next following.

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Chapter III - Register of Members

The Council shall cause to be published a list of members as on 1st April each year, and shall, if requested to do so by any member, send him a copy of such list on payment of such amount as may be laid down in the regulations.

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Chapter IV - Misconduct

The Council shall constitute a Disciplinary Committee consistingof:

- the President or the Vice President as the presidingofficer;

- two members of the Council, elected by the Council; and- two members to be nominated by the Central Government

The Council may appoint a Prosecution Director and other employees to assist the Disciplinary Committee in making inquiries in respect of the complaint received.

The Disciplinary Committee to submit report of its inquiry to the Council

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Chapter IV - Misconduct

For an inquiry under the provisions of the Act, the Appellate Authority, the Disciplinary Committee and the Prosecution Director shall have the same powers as are vested in a civil court in respect of the following matters:

- summoning and enforcing attendance of any person and examining him on oath;

- the discovery and production of any document; and- receiving evidence on affidavit.

The Council is the final authority on all disciplinary matters.

When the Council finds a member guilty of professional misconduct it shall afford a member a reasonable opportunity of being heard before making any order against him.

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Chapter IV - Misconduct

Section 31 of the Act confers on the Disciplinary Committee or the Prosecution Director powers to inquire into the conduct of any member of the Institute under any circumstances other than thoselisted in the Schedule.

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Chapter V - Appeals

A member aggrieved by the order of the Council imposing on him the penalty may within 90 days of the date of the order prefer an appeal to the Appellate Authority.

The Appellate Authority constituted under the Chartered Accountants Act, 1949, shall be the Appellate Authority for thispurpose subject to the following modification:

- the Central Government shall, by notification, appoint twopart-time Members from amongst the persons who havebeen members of the Council of the IAI for at least one fullterm and who are not sitting members of the Council.

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Chapter VI - Penalties

Penalty for falsely claiming to be a member, etc.- first conviction with fine which may extend up to one

lakh rupees; and- any subsequent conviction - imprisonment up to one year

or fine up to two lakh rupees or both.

Except as otherwise provided in the Act,no person shall:- use a name or a common seal which is identical with that

of the Institute…- award any degree, diploma or certificate or bestow any

designation which purports to indicate any qualificationsimilar to that of a member of the Institute.

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Chapter VI - Penalties

This shall not apply to any University or other institution established by law or to any body affiliated to the Institute.

Companies not to engage in Actuarial practice. Contravention of this provision shall be punishable with fine - first conviction fine of Rs 10,000 - subsequent conviction fine of Rs 25,000.

Only fellow members can sign documents on behalf of an actuary in practice or a firm of actuaries in his or its professional capacity.

Contravention of these provisions shall be punishable - first conviction fine up to Rs 25,000 - subsequent conviction -imprisonment up to one year or fine up to one lakh or both.

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Chapter VII - Quality Review Board

The Central Government shall constitute a Quality Review Board consisting of a Chairperson and not more than four members.

Two members of the Board shall be nominated by the Council and the other two shall be nominated by the Central Government.

If the Board is constituted with two members, one each shall be nominated by the Council and the Central Government.

The Board shall perform the following functions:- to fix standards for the services provided by the members

of the Institute;- to review the quality of services provided by the members

of the Institute.

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Chapter VII - Quality Review Board

- to guide the members of the Institute to improve the quality of services and adherence to the various statutory and other regulatory requirements.

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Chapter VIII - Dissolution of the Actuarial Society of India Registered Under the Societies Act

On the appointed day, the Actuarial Society of India shall standdissolved.

Every persons employed in the dissolved society and continuingin its employment immediately before the commencement of the Act shall become an employee of the Institute.

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Chapter IX - Miscellaneous

Where an actuary in practice or a firm of such actuaries has more than one office, each one of such offices shall be in charge of a fellow member of the Institute.

The Council may in suitable cases exempt any Actuary in practiceor firm of such Actuaries from the operation of the above provision.

The Central Government may, by notification, make rules to carry out the functions of the Act.

The Council may, with the previous approval of the Central Government make regulations to carry out the provisions of the Act.

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The Schedule

Part I - Professional misconduct in relation to members of the Institute in practice.

An Actuary in practice shall be deemed to be guilty of professional misconduct, if he :

- allows any person to practice in his name as an actuaryunless such person is also an actuary in practice and is inpartnership with or employed by himself;

- if he pays by way of remuneration to an employee any share, commission or brokerage in the fees or profits of hisprofessional business;

- if he pays any share, commission or brokerage in the feesor profits of his business to any person other than a member of the Institute;

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The Schedule

- if he enters into partnership with any person other than an actuary in practice or if he enters into partnership with an actuary resident outside India and does not share in the fees or profits of the business of the partnership both within and and outside India;

- secures either through the services of a person who is notan employee of such actuary or who is not qualified to be hispartner any professional business;

- accepts an assignment as Actuary previously held by another Actuary without communicating with him in writing;

- charges or accepts in respect of any professional employment fees which are based on percentage of profitsor which are contingent on the findings or results..

- ……….

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The Schedule

The other items in this Part are relatively simple.

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The Schedule

Part II - Professional Misconduct in relation to the members of the Institute in service.

The acts of misconduct covered in the Part are:- paying/allowing/ agreeing to pay directly/indirectly any

share in the emoluments of the employment;- accepting/ agreeing to accept any part of fees/profits/

gains by way of commission; - disclosing confidential information acquired in the course

of employment except when required by law.

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The Schedule

Part III: - Professional misconduct in relation to members of the Institute generally.

The acts of misconduct covered in the Part are:- giving particulars to the Council knowing those to be false- acting as a fellow member when not being a fellow

member;- not complying with the requirements asked by the

Council;- contravening any pf the provisions of the Act or

regulations made thereunder or guidelines issued by theCouncil

- guilty of any other act as may be specified by the Council.

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The Schedule

Part IV:- Other misconduct in relation to member of the Institute generally.

The acts of misconduct covered in the Part are:- being held guilty by any civil or criminal court which is

punishable with imprisonment;- member, in the opinion of the Council, bringing disrepute

to the profession.

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Thank you