Rule 5 – Conflict of Interest
A member shall not perform professional services involving an actual or potential conflict of interest unless:
- the member’s ability to act fairly is unimpaired,
- there has been full and timely disclosure of the conflict tall known present and prospective direct users, and
- all known present and prospective direct users have expressly agreed to the performance of the services by the member.
Protecting objectivity and sound judgment
Actuaries must be able to act independently of any outside influences. Rule 5 expects members to protect their professional objectivity by identifying potential real or apparent conflicts of interest and sharing them so all parties can make informed choices about how to move forward. If conflicts exist and cannot be managed, members should not perform the work.
“Rule 5 isn’t unique to actuaries. Anyone providing professional services needs to consider whether they have any interests – financial or otherwise – that could create a conflict of interest or unduly influence their judgment in work for clients or employers.”
— Naveed Irshad, FCIA
Why rule 5 is important
Protects integrity of actuarial work
Disclosure and proper handling of any conflicts between personal, employer, or client interests helps ensure objectivity and credibility in professional judgment.
Builds trust
Full disclosure of conflict gives clients, employers and stakeholders confidence in the judgment and integrity of members.
Upholds the profession’s reputation
Reducing the risks of unethical conduct that could lead to lawsuits or disciplinary action protects the reputation of the entire profession.
Reduces bias and promotes fairness
Prevents misuse of information for personal gain or preferential treatment, while promoting fairness in recommendations creates a level playing field for all stakeholders.
Contributes to full transparency
Disclosure and express agreement to proceed allow all users of professional services to make informed decisions and be assured their interests are protected.
Provides a basis for enforcement
Provides CIA with a mechanism to enforce required conduct if members fail in their duty to identify and disclose conflicts or potential conflicts.
What rule 5 means for members
It is your responsibility to maintain independence
It is essential that you make sure your view is independent and that you do not subordinate your professional judgment to external influences. If not, you need to decline or stop work. It is your credibility and accreditation at risk.
You must identify all types of conflicts or compensation from any source
Conflicts can be complex. They can arise any time your professional responsibility may conflict or be perceived as conflicting with your own interests or the interests of those close to you, your employer, another client, or another relevant stakeholder.
Know how to recognize conflicts
You can approach this in two steps. First, list the various interests you or others have in the matter. Next, assess whether these interests might make it hard for you to act without compromising your objectivity or responsibility to the user of your professional services.
Understand what full and timely disclosure means
Disclosure of all material facts concerning the nature and extent of conflicts that may be relevant to a direct user’s decision, and in sufficient time for the direct user to make an informed and independent decision.
Take measures to resolve conflicts
Identified conflicts need to be resolved by either declining or ceasing work or carefully managing the conflict so that, within the scope of an assignment, the conflict does not have or is not seen to have any adverse effect for the users of your professional services.
When in doubt, seek advice
If you are not sure whether a conflict exists or how to act at any stage, you are encouraged to err on the side of caution while seeking guidance from appropriate sources, including other members, CIA committees, or employer resources.
