1. Introduction

2. What is a Conflict of Interest?

3. Identifying a Conflict of Interest

4. Managing and reconciling conflicts of interest

5. Further guidance and advice

Appendices

 

Back to the Code

1. Introduction 

1.1. Principle 3 on ‘Impartiality’ of the Actuaries’ Code (“the Code”) provides that:

“Members must ensure that their professional judgement is not compromised, and cannot reasonably be seen to be compromised, by bias, conflict of interest, or the undue influence of others.”

1.2. Because conflicts of interest are a particular threat to this ‘impartiality’ principle, the Code then adds the following amplifications:

1.3. Conflicts of interest can be complex and require use of professional judgement. This Guide is intended to assist Members with understanding their responsibilities in relation to conflicts of interest and to help with that exercise of professional judgement.

1.4. Ensuring that conflicts are (a) understood; (b) identified; and (c) reconciled or eliminated, is the key to meeting the requirements of the Code.

1.5. All Members have an individual responsibility to be familiar with their obligation to identify conflicts and to know what to do if they encounter one. This responsibility exists regardless of their particular role in the work or level of seniority, including actuarial students, more junior members of an actuarial team and those working as part of a multidisciplinary team.

1.6. There may also be practice-specific conflict of interest provisions for Members, such as any contained in the relevant professional standards [1]. Additionally, Members need to have regard to any relevant legal and regulatory requirements in the country in which they are practising [2].

1.7. If Members are unsure how to act at any stage, the IFoA encourages them to seek guidance from appropriate sources.  A note regarding further sources of advice can be found below at Section 5.


2. What is a conflict of interest?

2.1. ‘Conflicts of interest’ can arise in any situation where two or more separate parties are involved, and the interests of those parties differ.   As conflicts can be complex, it is not possible to give an exhaustive list.  However, common examples of situations where conflicts of interests can arise are where a Member’s professional responsibility to a user of their work conflicts or is seen to conflict with:

(a) the Member’s own interests (or those of close family) (“personal conflict”); or

(b) an interest of the Member’s employer, in situations where the employer is not also the Member’s client/user (“employer conflict”); or

(c) an interest of another client of the Member (“client conflict”).

2.2. Taking each of these in turn, some examples could be:

(a) A Member – or their friends or family – may have a financial interest in the outcome of a transaction that will be influenced by advice being given by the Member.  In addition to direct financial interests, relevant considerations may also include personal appointments or memberships or, in some circumstances, ethical values or beliefs which make it difficult for Members to act, and to be seen to act, in the interests of the user.

(b) Similarly, a Member’s employer might (even where it is not also the Member’s client/user) have a financial or other interest in the outcome of the Member’s work.  A conflict could therefore arise between their professional judgement in providing advice to a client/user and the commercial objectives of their employer.  Members might then be put under pressure, directly or indirectly, by their supervisor or other person within their organisation to act in a way which they would not otherwise judge to be in the interests of a client/user.

(c) Situations can also arise in which a Member has two separate clients whose interests come into conflict. The Member might then be tempted to act in the interests of one client, in a manner which works against the interests of the other client or user.

2.3. More examples of situations where there might be a possible conflict of interest are included at Appendix A.


3. Identifying a conflict of interest

3.1. The effective understanding and identification of conflicts of interest is key to their reconciliation. Amplification 3.1 of the Code provides that Members take reasonable steps to ensure they are aware of any interests that might create a conflict.

3.2. In order to identify conflicts it may be useful for Members to approach this in two steps:

(i) Establish what various interests are involved in the particular scenario – who do you work for? Who are the users for the piece of work? Do you have a personal interest in the matter? Does anyone else have an interest which I should take into account?

(ii) Assess whether the differing interests of relevant parties involved (including your own interests and those of the person you work for) might make it hard for you to continue to act without compromising your objectivity or your professional responsibility to the user (or any of the users) of your work. Or are the interests of parties other than the principal user so remote or generic that they will not compromise, or be seen to compromise, your professional judgement?

3.3. When establishing the various interested parties, Members need to be alert to the possibility that within one legal entity there are two separate bodies with divergent interests (for example, a finance committee and a remuneration committee), or one body with two different responsibilities (for example, the sponsoring employer of a pension scheme might also be the trustee or manager of that scheme). In such circumstances, a Member might conclude that there are two distinct ‘users’, giving rise to a possible conflict.

3.4. Taking ‘reasonable steps’ to identify potential conflicts would normally involve Members following any internal processes established for this purpose by their own organisation, and might typically include sending out a ‘conflict check’ email to appropriate staff in the organisation and/or to the relevant conflict committee, and/or a search of the organisation’s conflicts database. 

3.5. Arrangements implemented by a Member or their organisation for ensuring that conflicts of interest are effectively identified could include:

  • Regular training to ensure all employees are aware of their duties and can identify conflicts;
  • A practice of recording gifts and hospitality, ensuring that amounts are not out of line with any organisational policy and that the Member does not knowingly receive gifts or hospitality which could lead to an actual or perceived conflict of interest.

3.6. Members are required to respect confidentiality [3]. Therefore, before taking on any new engagement, Members are advised to consider whether they have an existing duty of confidentiality to any existing or former users, which would give rise to a conflict of interest with the proposed new engagement.

3.7. A note of some helpful questions for Members to consider when identifying conflicts is included at Appendix B.


4. Managing and reconciling conflicts of interest

4.1. Once a conflict of interest is identified, amplification 3.2 of the Code states that Members must not act if there is an unreconciled conflict of interest. This means that the conflict needs to be managed appropriately or the Member must decline or cease to act in the specific situation.

4.2. “Reconciliation” can be understood to mean carefully managing the conflict such that, within the scope of an engagement, the conflict does not have (and is not seen to have) any adverse effect on the work for the users

4.3. It is also necessary that Members are alert to situations where others perceive that there may be a conflict of interest or the possibility of a conflict of interest, even when an actual conflict of interest does not exist. In these situations it is still necessary for the perception of the conflict to be appropriately addressed in order for the Member to continue to act. 

4.4. Reconciling a conflict of interest will likely involve disclosing the existence of the conflict of interest to the user(s) concerned and explaining the relevant issues, risks and any constraints on the work in a manner so that the user understands them. However, Members also need to consider any underlying confidentiality obligations to other parties.

4.5. There may be internal guidance in Members’ organisations on how conflicts of interest are to be managed. Members need to satisfy themselves that such guidance is appropriate and sufficient, and if/where necessary supplement it with their own arrangements and tools for managing conflicts.

These arrangements and tools may incorporate some or all of the following, taking into account any established market practices for handling such conflicts:

Scoping the engagement

When agreeing the scope of an engagement, Members may wish to define especially clearly any limitations on the extent of their role and the type of advice which they can provide on the engagement.

Conflicts management plan

A written ‘conflicts management plan’ can be shared with (and may be explicitly agreed by) the relevant user(s). Such a plan might typically cover:

  • The extent to which information will remain confidential;

  • The systems and controls in place to identify and assess potential and actual conflicts of interest;

  • The steps taken to reconcile any conflict, and the steps to be taken if the Member cannot continue to act because of an irreconcilable conflict.

Separation of teams

If a Member works within an organisation that has engagements with two users with competing interests, it may be possible to ensure that the users are advised by different teams within the organisation. In some cases, the more ‘mechanical’ work might still be undertaken for both users by a common team.

Information barriers

One option for managing conflicts of interest internally is to establish and maintain arrangements which restrict the flow of sensitive information within the Member’s organisation. Information barriers are administrative, electronic and/or physical barriers to ensure that information used by one part of the organisation is withheld from, or not used by, other parts of the organisation.

Work review

The work review under APS X2 can form an appropriate component of a conflict management policy. Where the work for one user might be seen as potentially creating a conflict with work for another user, independent peer review of that work can form part of the process for ensuring the transparency and objectivity of a Member’s work [4].

Remuneration arrangements

It is important that Members ensure that they are not incentivised by their employer in a way that might be seen to encourage them to provide anything other than the most suitable and appropriate advice to a user of their work.

User consent

Members may be able to reconcile a potential or perceived conflict by obtaining consent from a user to act or continue to act for another user with conflicting interests.  In such cases, the Member will need to consider what will happen if that consent is withdrawn, making it likely that they will have to cease acting for one or both users.

4.6. Where a conflict of interest is identified, Members are encouraged to carefully document the reasoning for their decision to either continue or desist from acting, including the steps that they have taken to reconcile the conflict. Being able to explain and justify the approach they have taken in reaching their decision will assist the Member when being called upon to do so, for example in response to a request from a user or a regulator.

4.7. A note of some helpful questions for Members to consider when managing conflicts is included at Appendix C.


5. Further guidance and advice

5.1. The IFoA offers a confidential Professional Support Service [5]. to assist Members with professional ethical matters, including conflicts of interest. The service is free to all Members.

5.2. This Guide is intended as a useful starting point for Members when considering their conflicts of interest obligations. Some local organisations and regulators, depending on which country or practice area Members are working in, may offer additional guidance which may be of assistance.


Appendices

Appendix A - Examples of possible conflicts of interest

Appendix B - Sample questions for Members to consider in identifying a conflict

Appendix C - Sample questions for Members to consider in managing a conflict

 


[1] Such as those included in the Actuarial Profession Standard: APS P1 “Duties and responsibilities of Members Undertaking Work in Relation to Pension Schemes”. This contains specific requirements for those involved in pensions work in relation to the production of a conflicts of interest management plan and some specific restrictions on the types of advice which may be provided to both the trustees and the sponsoring employer.

[2]  For further information see paragraph 6.4 of the Code Guidance

[3] Amplification 1.2 of the Actuaries’ Code and paragraph 3.9 of the Code Guidance

[4] See Actuarial Professional Standard APS X2: Review of Actuarial Work.

[5] http://www.actuaries.org.uk/regulation/pages/professional-support-service

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Events calendar

  • KSS event – GAD: the 100 year life (Glasgow)

    Barnett Waddingham 163 West George Street, Glasgow, G2 2JJ
    24 October 2019

    Spaces available

    The Government Actuary’s Department (GAD) marks its centenary this year. George Russell, formerly Deputy Government Actuary, who currently heads up GAD’s Edinburgh office, leading on GAD support to the devolved administrations in Scotland and Northern Ireland, will outline GAD’s development over that period and its range of work today. Having just “celebrated” his 25th anniversary of joining GAD, George will also reflect on some of the challenges and opportunities of advising at the interface of the actuarial and the political worlds.

  • Sessional Meeting - Autonomous Vehicles and impacts on the wider insurance industry

    Staple Inn, High Holborn, London WC1V 7QJ         
    28 October 2019

    Spaces available

    The Sessional Meeting is now fully booked.

    Please click here to register on the waiting list.

    The Institute and Faculty of Actuaries is running a sessional meeting on autonomous vehicles on 28th October.  The session will showcase the work of the IFoA “Autonomous Vehicles” working party alongside a number of expert external presenters. 

  • ARC Event: Beyond Proportional Hazards

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    30 October 2019

    Spaces available

    ARC Event: Beyond Proportional Hazards: Statistical methods for assessment of the impact of medical advances and health interventions on longevity and population projections.

    This workshop is being delivered by the Actuarial Research Centre’s (ARC) ‘Big Health and Actuarial Data’ Research Programme.

  • Joint IFoA/SAS Cyber Risk Presentation and Roundtable Discussion, Singapore

    Peach Garden, OCBC Centre, Level 33 (access via West Lobby), 65 Chulia Street, Singapore 049513
    31 October 2019

    Spaces available

    Organised by IFoA GI Asia International Working Group and SAS Emerging Risk Working Group, this session titled "Addressing Cyber Risks Portfolio Accumulation and Methodologies to Qualify and Quantify Losses" is aimed at raising cyber awareness within the actuarial community, encouraging discussion and collaboration to address new challenges from this emerging frontier.

    Speakers: Peter Hacker, International Cyber Security Expert and Thought Leader

  • Hot Topics in Health and Care: Networking and Drinks

    Staple Inn, 4 High Holborn, London WC1V 6DR
    4 November 2019

    Spaces available

    This evening will feature two new cases studies that highlight the implications for insurers of issues impacting on health and mortality for life, pensions, and health and care products; Impactability modelling: a worked example in Type II diabetes presented by Josephine Robertson, and Seasonal Mortality in England and Wales 1993-2016 presented by Mary Hall, Dublin City University.

  • SIAS Event: Introduction to the Mortality Research Steering Committee (MRSC)

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    5 November 2019

    Spaces available

    The MRSC is responsible for guiding the profession’s research in the areas of longevity, mortality and morbidity such that it is recognised as a thought leader in this area. It has recently been reviewing what the priorities and have identified 6 areas that we believe are the most important areas of research that should be the current focus and these are:

  • Spaces available

    On behalf of the International Actuarial Association’s (IAA) Banking Working Group, the Actuarial Society of South Africa’s (ASSA) Banking Committee and the Institute and Faculty of Actuaries’ (IFoA) Banking Member Interest Group, you are invited to participate in the upcoming webinar entitled Career opportunities in Banking: Retail and Group Risk.

    The actuarial profession has much to offer the world of banking. In this second webinar on opportunities for actuaries in banking, we have three actuaries sharing their experiences:

  • IFoA CPD Co-ordinators' Briefing

    Staple Inn Hall, High Holborn London WC1V 7QJ
    7 November 2019

    Spaces available

    The theme of this year’s annual briefing is: Lifelong Learning – providing continuous development for our members.

    This event is primarily for volunteer CPD Co-ordinators, who attend to represent their organisation. CPD Co-ordinators play a key role in effective engagement between organisations who employ our members and the Institute and Faculty of Actuaries (IFOA).

  • The challenges for AI in Autonomous driving – Professor Andrew Blake

    Royal College of Physicians of Edinburgh, 11 Queen Street, Edinburgh, EH2 1JQ
    11 November 2019

    Spaces available

    In conjunction with the Scottish Board and supporting the IFoA’s focus on data science.

    The IFoA’s Scottish Board have arranged for UK pioneer in Computer Vision and Machine Intelligence, Professor Andrew Blake to speak to delegates on the subject of AI in Autonomous driving. This lecture will focus on safety-critical operation and the computation of risk.  

  • Autumn Pension Seminar

    Grand Connaught Rooms, 61-65 Great Queen St, Holborn, London WC2B 5DA
    13 November 2019

    Spaces available

    Join us for this brand new seminar that brings together our Current Issues in Pensions, Pensions and the Law, and Investment for Pension Actuaries events. The seminar builds on the IFoA’s Annual Pension Conference with sessions covering CDC, TPR’s code of practice, investments, legal updates and Professional Skills Training with a focus on interactive discussion throughout.

  • KSS event: How is Scotland’s population changing and what are the implications?

    Barnett Waddingham, 163 West George Street, Glasgow, G2 2JJ
    14 November 2019

    Spaces available

    The National Records of Scotland (NRS) collects, preserves and produces information about Scotland's people and history to inform current and future generations - work that underpins the fabric of Scottish society and tells the story of our nation. This KSS talk will explore the following and other areas impacting Scotland’s changing population, and assess the potential implications of the changes:

    • population statistics
    • life expectancy
    • changes in age structure
    • birth and death rates, including causes of death statistics.
  • Professional Skills Training - Edinburgh (14 November 19)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    14 November 2019

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Life Conference 2019

    The Convention Centre Dublin, Spencer Dock, North Wall Quay, Dublin 1
    20-22 November 2019
    Spaces available

    The Life Conference is the premier event for professionals interested in life insurance.  Offering a wide range of workshops and plenary sessions it’s the perfect opportunity to discover what’s hot and current in life insurance ensuring you get up to date on the latest thinking and innovation whilst meeting and exchanging ideas with a broad range of professionals.

  • Professional Skills Training - London (20 November 2019)

    Staple Inn Hall, High Holborn London WC1V 7Q
    20 November 2019

    Spaces available

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • ARC Workshop: Modelling Socio-Economic Differences in English Mortality

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    2 December 2019

    Spaces available

    Purpose
    The workshop will give participants detailed insights into how a large and detailed dataset can be used to assess levels of mortality inequality in England, using a number of novel statistical methods. We will also address the question: are regional variations in mortality real or imaginary?

  • Professional Skills Training - Edinburgh (3 December 19)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    3 December 2019

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • SIAS Event: Discount Rates are Flawed

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    3 December 2019

    Spaces available

    This talk will be given by Jon Spain who, as far back as 1983, has been working independently, trying to bring “long-term” back to UK actuarial thinking. His current focus is on discount rates (see discrate.com).

  • A Holistic Study into Cash flow Driven Investment

    Staple Inn, 4 High Holborn, Holborn, London WC1V 6DR, UK
    4 December 2019

    Spaces available

    Given that Cashflow Driven Investment strategy has attracted growing interests from pension funds and insurers at the backdrop of current market conditions and clients’ circumstances, the objective of this event is to gather thought leaders from asset managers, banks and insurers to offer attendees their perspectives and insights on main aspects of consideration when adopting this strategy.

  • Professional Skills Training - London (10 December 2019)

    Staple Inn, High Holborn, London WC1V 7QJ  
    10 December 2019

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • SIAS Event: My Journey to Data Science, Big Data and AI

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    7 January 2020

    Spaces available

    Patrick Lee is an actuary who has made the transition to working in software architecture and artificial intelligence (AI). He holds Microsoft Professional qualifications in Data Science, Big Data and AI and is currently working towards a DevOps (the automation of software testing and deployment) qualification. He is a member of the IFoA Council and is also President of the Wessex Actuarial Society. He is also a member of the IFoA and the RSS's joint Data Science Focus Group and will talk on the ethical use of AI. 

  • Behavioural Finance Research Launch- 14 January 2020

    Staple Inn, 4 High Holborn, Holborn, London WC1V 6DR
    14 January 2020

    Fully booked.

    We are delighted to announce the launch of the findings from our ARC funded Behavioural Finance research with a special evening event at Staple Inn on Tuesday 14th January 2020. Entitled Behavioural Aspects of Institutional Investment Decision-Making, this research programme is being delivered by City, University of London, Leeds University Business School and Ipsos.

    This event is now full. Please register for the waiting list.

  • IFoA Volunteer Recognition Reception

    Staple Inn, 4 High Holborn, Holborn, London WC1V 6DR, UK
    15 January 2020

    Spaces available

    As a thank you to all our Institute and Faculty of Actuaries (IFoA) volunteers, you are invited to join us at Staple Inn Hall, for an evening of drinks, canapes and networking, in London.

    IFoA President, John Taylor, will be attending and will make a speech

    If you support the IFoA as a volunteer (member or non-member), or in any other role, and you are going to be in London on 15 January, please book your place and join us at this reception.

     

  • Professional Skills Training - London (16 January 2020)

    Staple Inn, High Holborn, London WC1V 7QJ
    16 January 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Professional Skills Training - Edinburgh (23 January 2020)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    23 January 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Professional Skills Training - London (11 February 2020)

    Staple Inn, High Holborn, London WC1V 7QJ         
    11 February 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Sessional: Impact of E-cigarettes Working Party

    Royal College of Physicians, 9 Queen St, Edinburgh EH2 1JQ
    24 February 2020

    Spaces available

    This sessional meeting will be of direct interest to actuaries and others working in the in the Health and Care, Life or Pensions sectors or indeed actuaries with an interest in morbidity or mortality.

  • Professional Skills Training - Edinburgh (25 February 2020)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    25 February 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • IFoA Asia Conference 2020, Kuala Lumpur

    CCEC Nexus, 7, Jalan Kerinchi, Bangsar South, 59200 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia
    24-25 June 2020
    Spaces available

    The sixth annual Asia Conference once again offers a prestigious line-up of home and international speakers discussing the insurance and financial industry’s innovation and change in Asia. This year's conference in Kuala Lumpur will be hosted by Tan Suee Chieh, IFoA’s first Asian President. He will also make his Presidential address at this conference and will expand on the important elements of IFoA’s new strategy. 

    Additionally, this landmark conference will showcase how the IFoA is reinventing itself to support its members to succeed and thrive in a digital age, within traditional businesses and beyond, as a global organisation. 

    No tot be missed by international industry players, opinion formers, academic and industry leaders, actuaries and non-actuaries.