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The Actuary The magazine of the Institute & Faculty of Actuaries

Institute of Actuaries Adjudication Panel

On 9 October 2008 the Adjudication Panel considered a complaint that:

(a) As the Actuarial Function Holder for a company whose liabilities included with-profits business, he acted in that capacity without holding a Life Actuary Certificate (including with-profits), in breach of paragraph 3.1 of version 2.0 of Guidance Note 40

(b) Said conduct falling below the standards of behaviour, integrity, reputation, competence or professional judgment which other members or the public might reasonably expect of a Member, as set out in the definition of misconduct as referred to in paragraph 4 of the Case Report and in breach of paragraphs 2.1 and 2.2 of version 3.0 of the Professional Conduct Standards.

The Panel determined that the Case Report disclosed a prima facie case of misconduct and that the Respondent should be invited to accept that there had been misconduct.

The Panel’s reasons were as follows:

1 The Respondent had admitted the matters alleged at (a) above. The facts of the case were, therefore, not in dispute.

2 In his comments on the Case Report, the Respondent explained that his breach arose as a consequence of an incorrect assumption made by him (and admitted) which led him to sincerely believe that following renewal of his practising certificate in January 2008, he was holding a practising certificate appropriate for the duties that he was then carrying out. The Respondent mistakenly reached the conclusion that as he would not have duties as a With-profits Actuary for the period that would be covered by the practising certificate, he only needed a Life Actuary Certificate (not including with-profits) and not a Life Actuary Certificate (including with-profits), notwithstanding that the Practising Certificates Committee, in implementing the requirements of the FSA framework, had grandfathered him in to the Life Actuary Certificate (including with-profits) in December 2004, and he had held such a certificate until January 2008.

3 The Panel determined that, in acting as Actuarial Function Holder for a company including with-profits business, whilst holding a Life Actuary Certificate (not including with-profits), the Respondent was in breach of paragraph 3.1 of Guidance Note 40 and had thus failed to comply with paragraph 1.2 of the Professional Conduct Standards version 3.0.

4 While accepting the Respondent’s contentions that the breach was the result of an honest mistake, and noting that it had caused no damage to the company for which he was working nor its policy holders, the Panel nevertheless concluded that it was a material breach, having regard to the nature of the error and the context within which it had been made, for the following reasons:

>> The Profession had in 2004 put in place new requirements to ensure that Life Actuaries held the appropriate certificates and renewed them on an annual basis.

>> Compliance with the certificate requirements plays an integral part in underpinning the trust of those who use the services of actuaries and of the general public, that the actuarial advice and formal opinions are only given by actuaries who possess the necessary competence and professional experience.

>> The advice from the Institute of September 2004 to all Life Actuary Certificate holders was, in the Panel’s view, unequivocal. This, together with the fact that the Institute had grandfathered the Respondent using a certificate which included with-profits business, together with the other material available to Life Actuaries from 2004 to 2008, should in the Panel’s view have made it clear to the Respondent that he was required to have a with-profits certificate. In failing to obtain the correct certification, the Respondent was in breach of paragraph 3.1 of Guidance Note 40, which states that the Actuarial Function Holder must hold a practising certificate, which must cover withprofits insurance business if he or she is appointed in respect of such business.

>> As a senior and experienced actuary, holding the most senior of the regulated roles in life insurance, the Respondent would have been expected by the generality of other members and by the general public to have properly understood and complied with the regulatory requirements on an issue so central to the system of regulation.

5 These considerations lead the Panel to the unavoidable conclusion that the Respondent should be invited to accept that there had been misconduct, since his conduct fell below the standards of competence that members of the profession and the public might expect, although his integrity and professional judgment were not in question.

6 The Panel also concluded that it would not be appropriate to invite the Respondent to accept any sanction, in view of the fact that the breach had caused no damage to the company for which he was working nor its policyholders, and that he had since apologised and had co-operated fully with the investigation.

Ken Ayers FIA
Chairman of the panel
9 October 2008

The respondent did not exercise his right of appeal against this decision.