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The Actuary The magazine of the Institute & Faculty of Actuaries
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The Actuaries’ Code: a modern statement of principles for a thriving profession

At the beginning of September, the presidents of the Faculty and Institute wrote to all actuaries, drawing their attention to the new Actuaries’ Code, which comes into force on 1 October. The Code, which replaces the former Professional Conduct Standards (PCSs), represents the cornerstone of a new professional regulation system for UK actuaries.

Serving the public
Since its beginnings, the Actuarial Profession has prided itself on setting and keeping high standards in serving the public, its clients and employers. As members of a chartered profession, actuaries have a core obligation to serve the public interest. The Profession’s quality framework — which requires compliance with clear standards of ethical behaviour as well as of technical competence and professional attainment — is the means by which, as chartered professional bodies, the Faculty and the Institute seek to ensure that members of the Actuarial Profession discharge that obligation.

In recent years, the Profession’s expectations of its members have been embodied in the PCSs. But as they developed to serve an ever-growing profession, they have become increasingly complex.

A move to principles-based regulation
They are also out of step with contemporary ideas of best practice in professional regulation. These avoid relying on detailed sets of rules, instead identifying core principles which can be applied in any set of professional circumstances.

The new Actuaries’ Code — drawn up after extensive consultation not only with the Profession but with the Professional Oversight Board and other external interests — follows this pattern. It provides a short statement, in relatively simple terms, of the standards actuaries can be expected to observe when serving the public and their clients (including their employers).

Over time, the Code will be supplemented by new Actuarial Profession Standards and Information and Assistance Notes which will offer additional reassurance to clients and advice to members on what is expected of actuaries in particular contexts. I pay tribute to Andrew Chamberlain, my predecessor as chairman of the Professional Regulation Executive Committee, and his colleagues, for their work in bringing the new Code to fruition.

Five key principles
The Code sets out five key principles which all actuaries are expected to observe in the way they conduct their professional life. These are:
>> Integrity — acting honestly and with the highest standards of integrity
>> Competence and care — performing professional duties competently and with care
>> Impartiality — not allowing bias, conflict of interest or the undue influence of others to override professional judgment
>> Compliance — with all relevant legal, regulatory and professional requirements; taking reasonable steps to avoid being placed in a situation of non-compliance; and challenging non-compliance by others
>> Open communication — communicating effectively and meeting all applicable reporting standards. These principles are not in themselves new, but the new Code expresses them in contemporary terms.

To whom and when does the Code apply?
The Code applies to all actuaries, i.e. to anyone who is subject to the Disciplinary Schemes of the Faculty or Institute. It applies at all times to members’ conduct in their work as actuaries but will also be taken into consideration where members’ conduct in other contexts could reasonably be considered to reflect on the Profession.

How does it apply?
Unlike the PCSs, breach of the Code will not of itself be grounds for disciplinary action. However, where an actuary’s conduct is called into question, the Code will be taken into account in any determination of whether there has been “misconduct” within the terms of the Profession’s Disciplinary Scheme.

Since the Code is not a set of rules, conduct that apparently falls short of it will not necessarily constitute “misconduct” within the terms of the Scheme. For example, it will be open to anyone facing a charge of misconduct to show that, in the particular circumstances of their case, the conduct complained of was reasonable, or was not of such a nature as to amount to misconduct meriting a disciplinary penalty. Nevertheless, the Code sets the benchmark by which an actuary’s conduct will be judged.

What is the ‘public interest’?
Knowing that actuaries are required to follow the Code and any associated standards enables the clients and employers of actuaries to rely on them to act with integrity and competence, having regard to the public interest. But how do actuaries know, in any given situation, what is the public interest?

The answer to this question will inevitably depend on the circumstances of the particular case. However, by applying the principles set out in the Code, actuaries will have an ethical compass with which to guide themselves in exercising their professional judgment. At the end of the day, no set of rules can anticipate every situation (and the danger of a purely rules-based system is that it becomes ever more elaborate and ends up by usurping the exercise of individual judgment, so that the response of those whose actions are questioned becomes the classic: “But I was only following the rules”). We all have to exercise judgment in how we conduct ourselves — that is both the burden and the privilege of being a professional. The Code is an aid to all actuaries in exercising that judgment.

Embedding and monitoring the Code
The introduction of the new Code represents a radical shift in the style of the Profession’s quality framework, if not in the core principles which underpin it. In a companion article to this one (see page 12), Roger Dix describes how the Profession will be seeking to help all its members to think through what the change means for them. The Committee I chair on behalf of the Profession will be monitoring the operation of the Code closely. We shall review it formally in two years’ time and, meanwhile, will be glad of feedback from members about their experience. This can be sent to Fiona.Goddard@actuaries.org.uk

As we build on the Code and thereby further modernise the Profession’s quality framework, we are keen to maintain close dialogue with the Profession as well as with interested parties outside it. Our aim is simple but challenging — to build a system of professional regulation for actuaries in the UK which is recognised as first class both by actuaries themselves and those they serve. With the introduction of the new Code, we are off to a good start in ensuring that the Actuarial Profession can face the rest of the 21st century with confidence in a dynamic, exciting and thriving future.

Visit www.actuaries.org.uk/ActuariesCode