Code of Professional Conduct

1. Code of Professional Conduct Darrell Knapp Kansas City Actuaries Club Seminar June 24, 2009

2. Agenda • Overview and background • Review Code of Professional Conduct • Case Study

3. Why a Code of Conduct? • Characteristics of a Profession • Specialized knowledge or service • Confidential relationship with employer/client • Public obligation (altruistic) • Autonomy/clients incapable of appraising service • Official recognition • Ethical code/code of conduct

4. Applying Code Without Knowing It • Do you-- • Consider whether you are qualified to do an assignment? • Follow Actuarial Standards of Practice? • Identify yourself in actuarial communications? • Identify clients when there may be a conflict of interest? • Put limitations on the distribution of your work? • Protect confidentiality of information?

5. The Code of Professional Conduct: An Overview • The revised Code took effect January 1, 2001 • Sets forth professional/ethical standards for Academy members • Adopted by the AAA, SOA, ASPPA, CAS, and the CCA • Actuaries who commit material violations are subject to counseling/disciplinary process

6. An Overview(continued) • Actuaries must remain current with the Code and comply with its provisions; violations subject to counseling and discipline procedures • Precepts are standards; annotations assist with interpretation/application • Follow applicable standards wherever you practice • Also subject to jurisdictional codes or standards • When Code and law conflict, follow the law • Definitions are provided

7. Professional Integrity Precept 1 • Act honestly, with integrity and competence, and in a manner that fulfills the profession’s responsibility to the public and upholds its reputation • Perform professional services with skill and care • Refuse to provide professional services that would violate or evade the law, or damage the profession’s reputation

8. Professional Integrity • Precept 1 Annotations Continued • Do not use relationship with one party to obtain illegal or improper treatment for another party • Do not engage in professional conduct that involves dishonesty, fraud, deceit, deception, or misrepresentation, or act in a way that will reflect adversely on the actuarial profession

9. Qualification Standards Precept 2 • Perform professional services only when qualified to do so AND in compliance with Qualification Standards • Know and follow applicable Qualification Standards for appropriate jurisdiction; in U.S., published by the Academy. • The absence of a Qualification Standard does not relieve you of the duty to comply.

10. Standards of Practice Precept 3 • Make sure that work performed by you, or under your direction, meets applicable standards of practice • Know and follow applicable standards for the jurisdiction; in the U.S., ASOPs of the ASB • When applying standards, use professional judgment • Be prepared to disclose and justify deviations

11. Communications and Disclosure Precept 4 • Take appropriate steps to ensure that communications are clear, appropriate to the circumstances and intended audience, and comply with applicable ASOPs • Identify yourself as person responsible for your communications • Indicate your availability to provide supplemental information

12. Communications and Disclosure Precept 5 • As appropriate, identify your principal(s) and the capacity in which you serve

13. Communications andDisclosure Precept 6 • Make timely disclosure to Principal of all known direct and indirect sources of compensation related to the assignment • Disclose any relationships that are pertinent but may not be apparent • This applies to all such compensation, wherever received within your firm

14. Conflict of Interest Precept 7 • Do not knowingly provide professional services involving a real or potential conflict of interest unless: • Your ability to act fairly is unimpaired, • There has been disclosure of the conflict to all known affected Principals, and • Such Principals have expressly agreed to your performing the professional services

15. Control of Work Product Precept 8 • Take reasonable steps to ensure that your services will not be used to mislead other parties • Recognize the risk of misuse • Present your work clearly and fairly • Set appropriate limits on the use and distribution of your work

16. Confidentiality Precept 9 • Do not disclose confidential information unless authorized by the Principal, or required by law, to do so

17. Courtesy and Cooperation Precept 10 • Perform services with courtesy and professional respect and cooperate with others in the Principal’s interest • Discuss differences of opinion objectively and with courtesy and respect • You may agree to represent, in the same matter, another actuary’s current or former Principal

18. Courtesy and Cooperation • Precept 10 Annotations Continued • You may issue an alternative opinion to one issued for a Principal by another actuary but include support • You may wish to consult with a prior actuary; get the Principal’s consent first • Cooperate with an actuary who takes over a Principal’s account, unless you have a pre-existing agreement with the Principal to the contrary; financial issues not a valid reason

19. Advertising Precept 11 • Do not engage in advertising or business solicitation that is false or misleading in any medium • Includes any communication that may directly/indirectly influence person’s or organization’s decision whether, and from whom, to obtain actuarial services

20. Titles and Designations Precept 12 • Use membership titles and designations only as authorized by your organizations • A “title” is a position (e.g., Committee Chairperson) • A “designation” is a class of membership (e.g., ASA, FSA, or MAAA)

21. Violations of the Code Precept 13 • Actuary who knows of apparent, unresolved, material breach by another actuary should consider discussing matter to obtain a resolution • If discussion not attempted or not successful, report it to ABCD, unless prohibited by law or confidential information would be divulged

22. Violations of the Code • Precept 13 Annotations • Material violations are those that are important or affect an outcome; trivial infractions, or those merely of form, are not material • Not needed to be discussed if prohibited by law or is acting in an adversarial environment

23. Violations of the Code Precept 14 • Respond promptly, truthfully, and fully in writing to ABCD’s request for information • Cooperate fully with ABCD investigation, subject to applicable restrictions on confidential information, or those otherwise imposed by law

24. Case Study