Actuarial Board for Counseling and
Discipline
IABA
Annual Meeting
Atlanta, Georgia
August 3, 2012
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
1
Actuarial Board for Counseling and
Discipline
THE ABCDs of
PROFESSIONALISM
Robert J. Rietz
FSA, MAAA, FCA, MSPA
2
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Agenda
•
•
•
•
Background on ABCD
Code of Professional Conduct
Discipline Process
Case Studies
3
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Actuarial Board for Counseling and
Discipline
ABCD was established in 1991 by the
U.S. actuarial organizations to
– Investigate alleged violations of the
Code of Professional Conduct by
members and recommend discipline
– Counsel (provide guidance to)
members
– Mediate disputes between members
and others.
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
4
ABCD Membership
Appointed by Council of U.S. Presidents - CUSP
(Presidents and Presidents-elect of U.S. organizations)
Member
Paul Fleischacker, Chairperson
Janet Fagan, Vice Chairperson
Robert Rietz, Vice Chairperson
Nancy Behrens
James Gutterman
Curtis Huntington
Kurt Piper
John Purple
Kathleen Riley
Area of Practice
Health
Casualty
Pension
Life
Health
Life
Pensions
Casualty
Pension
5
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Processes
• Follow Article X of AAA bylaws and
ABCD Rules of Procedure
• All ABCD inquiries, guidance and
mediation confidential, unless
– Actuary makes public or agrees to
publication
– Court requires disclosure
– Redacted, generic situation used for
educational purposes
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
6
An ABCD Inquiry
• Is a fact-finding effort, not an
adversarial forum
• Examines whether or not an actuary
materially violated the COPC
• Does not administer discipline, but
may recommend a level of discipline
to an actuary’s membership
7
organizations
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
U.S. Code of Professional Conduct
• The revised U.S. Code of Professional
Conduct (“Code” or “COPC”) was
adopted by the five U.S.-based actuarial
organizations (AAA, ASPPA, CAS, CCA
& SoA), and took effect 1 January 2001.
• The Code sets forth professional/ethical
standards for actuarial members of the
five U.S.-based actuarial organizations.
8
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
U.S. Code of Professional Conduct
• The Code contains 14 Precepts, along
with annotations providing further
guidance on adhering to the Precepts.
• The Precepts are standards that must be
followed by credentialed actuaries who
are members of one of the U.S.-based
organizations or whose member
organizations require their members to
follow the U.S. Code.
9
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
U.S. Code of Professional Conduct
Precept 1 Professional Integrity
Precept 2 Qualification Standards
Precept 3 Standards of Practice
Precept 4 Actuarial Communications
Precept 5 Principal
Precept 6 Disclosure
Precept 7 Conflict of Interest
10
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
U.S. Code of Professional Conduct
Precept 8
Precept 9
Precept 10
Precept 11
Precept 12
Precept 13
Precept 14
Control of Work Product
Confidentiality
Courtesy and Cooperation
Advertising
Titles and Designations
Knowledge of Violation
Cooperation with ABCD 11
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Request for Guidance
• Private guidance by ABCD member
– Expresses member’s own opinion
• Private guidance by ABCD
– Expresses views of board
• Public guidance by ABCD
–
–
–
–
At request or agreement of actuary(ies)
Provides guidance to profession
Expresses views of board
Usually printed in Contingencies
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
12
Request for Guidance
Example of RFG Topics
• How do I know if I am qualified?
• How can I become qualified?
• How can I do a job that involves more than one area of
expertise?
• How much can I rely on my supervisor?
• How much can I rely on my staff?
• How much documentation of my work should I save?
What if I leave my company?
• When should I refuse an assignment?
• When should I make a complaint about another actuary?
• When is a violation of the Code material?
• When is a violation of the Code resolved?
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
13
Mediation
• If all parties agree
• Facilitate resolution of issue without
inquiry
14
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
2011 Caseload
• 55 Requests for Guidance
• 21 Discipline cases
– 9 pension
– 6 life
– 5 casualty
– 1 health
– Evenly split between conduct and
practice
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
15
Contacting the ABCD
• Letter: 1850 M St., N.W., Suite 300,
Washington, D.C. 20036
• Telephone: (202) 223-8196; (202) 8721948 (fax)
• Website: www.abcdboard.org
• Contacting any individual ABCD member
or ABCD staff (contact information on website) 16
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Inquiry Process
• Step 1: Initiation of Inquiry
– Complaint received
• Reviewed by staff for completeness
– Information based
• Chairs review public document and
decide to proceed
– Sent to Subject Actuary (“SA”) for
response
17
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Inquiry Process
• Step 2: Chairs’ review
– Chairs evaluate complaint and response for
possible material violation
– Chairs decide whether to
•
•
•
•
Seek additional information
Dismiss complaint
Offer mediation
Commence investigation
– Notify Subject Actuary, complainant and
ABCD
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
18
ABCD Inquiry Process
• Step 3: Notification
– Notify Subject Actuary and
complainant, if any, of Chairs’ decision
– Notify ABCD at next meeting
19
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Inquiry Process
• Step 4: Investigation
– Appoint investigator, subject to
challenge by the Subject Actuary
– Investigator
• obtains and reviews documents,
• interviews individuals involved,
• prepares report of results, i.e. facts as
investigator understands them
• does not offer opinions or conclusions
– Report sent to SA for response
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
20
ABCD Inquiry Process
• Step 5: ABCD consideration
– All documents sent to ABCD members
– Case discussed at ABCD meeting
– ABCD decides whether to
•
•
•
•
Seek additional information
Dismiss (with/without guidance)
Counsel the Subject Actuary
Conduct a hearing
21
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Inquiry Process
• Step 6: Notification
– Notify Subject Actuary, complainant
and investigator of decision
– Schedule hearing, if so decided
22
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Inquiry Process
• Step 7: Hearing
– Conduct fact finding hearing attended by
• Investigator
• Subject Actuary
• Witnesses
– Hearing is recorded by a court reporter
– Investigator presents results
• ABCD and SA question investigator
– Subject Actuary presents case
• ABCD questions Subject Actuary
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
23
ABCD Inquiry Process
• Step 8: Deliberations
– ABCD discusses hearing and
documents
– Decides whether to
•
•
•
•
Dismiss
Counsel
Recommend discipline
Obtain more information, reopen hearing
24
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Inquiry Process
• Step 9: Notification
– Notify Subject Actuary, complainant
and investigator of decision
– If discipline is recommended, transmit
to appropriate organization(s)
• Statement of ABCD findings
• All documents used by ABCD
• Transcript of hearing
25
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ABCD Inquiry Process
• Step 10: Member Organization
– If discipline is recommended
– Conducts “proceedings” hearing
according to its rules
– May decide to
•
•
•
•
Impose recommended discipline
Impose greater level of discipline
Impose lower level of discipline
Not impose any discipline
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
26
Case Studies
CASE STUDY #1
27
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
• Actuarial Firm (AF) has a long-term
relationship with M, a management
company. AF had many duties at
M: completing schedules to be
submitted to government entities;
calculating pension expenses;
drafting correspondence related to
the plan; and advising M regarding
compliance issues.
28
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
• M wanted to offer its employees an
Early Retirement Plan (ERP). AF
prepared estimates of the cost of
establishing an ERP (including 8
different ERP designs) and
prepared the final draft resolution
adopted by the Board to amend the
retirement plan to include the ERP.
29
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
The Board adopted the amended
retirement plan to include the ERP. The
ERP provided alternative methods of
payment through a single life annuity or
a social security leveling option, at the
discretion of the employee. AF
prepared benefit plan information for
each eligible employee, including
calculation of benefits under the regular
30
plan and the ERP, with both options.
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
Four employees retired pursuant to
the ERP and began to receive their
benefits pursuant to the social
security leveling option. AF
discovered, a year later, that it had
miscalculated the social security
leveling payment option for the
ERP.
31
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
What should the AF actuaries who
worked on the assignment do?
What Precepts of the COPC apply?
Do any ASOPs apply?
32
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
AF informed M and instructed it to correct
its overpayment. One of the retirees had
died and M notified the remaining three
retired employees by phone and through
a letter drafted under AF’s supervision.
AF agreed to pay the retirement fund for
the payments made in excess, caused
by its miscalculations Retirees were not
required to return the overpayments.
33
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
Do the AF actuaries who worked on
the assignment have any further
responsibilities under the COPC?
What Precepts of the COPC might
apply?
Would any ASOPs apply?
34
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #1
Have the AF actuaries satisfied their
responsibilities under the Code of
Professional Conduct?
Is AF a fiduciary? What roles, duties,
or actions point to a fiduciary
status?
35
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Studies
CASE STUDY #2
36
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #2
• Actuary provides services to an insurer
which is being sold. Actuary established
the reserves recorded on the balance
sheet at effective date of sale.
Subsequent to the effective date of sale,
Actuary becomes aware of three large
claims: one reported just before the
effective date of sale; one which
occurred before the effective date but
was reported afterward; and one which
occurred just after the affective date.
37
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #2
• The claims were unusual and could
not be foreseen when Actuary
calculated reserves for effective
date of sale. These three claims
would have a material impact on
Actuary’s reserve estimate.
• Sales agreement calls for a “trueup” of the balance sheet within 90
days after the effective date of sale.
38
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Case Study #2
• What should the actuary do?
• What Precepts apply?
• Do any ASOPs apply?
39
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ACTUARIAL BOARD for COUNSELING
and DISCIPLINE
QUESTIONS?
40
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
ACTUARIAL BOARD for COUNSELING
and DISCIPLINE
THANK YOU !
41
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries
Contacting the ABCD
• Letter: 1850 M St., N.W., Suite 300,
Washington, D.C. 20036
• Telephone: (202) 223-8196; (202) 8721948 (fax)
• Website: www.abcdboard.org
• Contacting any individual ABCD member
or ABCD staff (contact information on website) 42
Copyright
© 2009
by by
the the
Actuarial
Board Academy
for Counseling
and Discipline
Copyright
© 2010
American
of Actuaries