A call for clarity
It can’t have escaped the notice of actuaries that the professional body that represents them has been experiencing considerable change and development, including changes to governance structures, establishing vibrant member interest groups and the proposed merger between the Faculty and the Institute. One area that is developing apace is professional regulation.
This article is designed to present an overview of current and upcoming issues on the professional regulation agenda. Following the restructure, the professional regulation executive committee, at its inaugural meeting in April, established four subcommittees to address key issues:
>> Designated professional body committee — to oversee the licensing of firms operating under the Institute’s designated professional body regime
>> Professionalism awareness committee — will plan and deliver a range of professionalism events and develop and deliver a range of projects and initiatives to raise awareness of professionalism
>> Standards review committee — to consider and approve proposals to draft Actuarial Profession Standards and Information and Assistance Notes
>> Validation committee — responsible for membership issues, the monitoring of mandatory CPD and, through the practising certificates committee which sits within this committee, the issue of practising certificates.
Actuaries’ Code
The professional regulation executive committee will continue the work of the professional affairs board to develop and launch the Actuaries’ Code and supporting standards, which will replace the professional conduct standards. Many of you responded to the draft exposure of the Code that was published last autumn, and the professional regulation executive committee is now considering the feedback from members of the profession and other stakeholders, including the professional oversight board of the FRC.
The envisaged framework of a short Code and attendant standards still holds but we have undertaken some reshaping and restructuring, which we hope to share with you in the near future. Consultation meetings on the draft Code and standards are scheduled to take place in Edinburgh and London at the end of May and into June.
At the apex of the framework we propose an overarching Actuaries’ Code. The principles-based code will outline the principles of ethical behaviour for the profession at the very highest level. On its own, we recognise that it will not be sufficient to give a full picture of the responsibilities of the actuary but it should be concise and focused enough to allow him or her to have a clear picture of the areas of ethical behaviour which must always be borne in mind.
Each of the overarching principles will be expanded upon in a core Actuarial Profession (AP) standard. The aim is to couch these in terms of principle, while recognising that some degree of prescription will be necessary. We have attempted to strike a balance between principle and prescription. Principles prescribe higher-level, less specific requirements, which have wider application, but thereby challenge people to give more careful consideration to their application in different contexts. Rules prescribe more detailed provisions, which may relate more obviously and directly to specific circumstances.
Principles are no less ‘mandatory’ than ‘rules’ but it is in the level of detail where the difference can be found and it is not surprising that principles require the exercise of a greater level of judgement as to their implications and application. In an attempt to aid understanding, we continue to use a similar approach to the FSA’s use of guidance through the inclusion of ‘For amplification’ paragraphs.
Once these core AP standards are in place we plan to develop role or function-specific standards. An example of this could be the development of a scheme actuary’s standard.
There are, it can be argued, additional regulatory burdens placed upon scheme actuaries, not least the proposed conflicts of interest material. The professional regulation executive committee envisages, for example, the production of an AP standard for scheme actuaries, under which all the additional issues for a scheme actuary could be brought together under one standard. This would mean that a scheme actuary would need to know the Code, the AP standards and the AP standard for a scheme actuary. Similar standards would apply to:
>> Actuarial function
>> Reviewing actuary
>> With profits actuary
>> Appropriate actuary (Friendly Societies)
>> Lloyd’s syndicate actuaries.
The rationale for this is the assumption that an actuary holding a specific role wants clarity and surety of where he or she must go for the ‘rule book’. This assumption has yet to be tested with the relevant practice executive committees.
Finally, to complete the framework, we may provide interpretation and advice on issues of professionalism, including, but not limited to, the application of the Code and standards through a range of non-mandatory Information and Assistance Notes.
Richard Maconachie
