Rule 4 – Disclosure
A member shall make full and timely disclosure to a client or employer of the sources of all direct and indirect compensation that the member or the member’s firm has received or may receive in relation to an assignment for which the member provides professional services to that client or employer.
Being transparent about all forms of compensation
Business transactions by actuaries must be beyond reproach. To avoid any questions of bias or conflict of interest, Rule 4 expects members to disclose all forms of compensation or potential compensation – including money, gifts, favour or influence – from any source for performing professional services.
“Rule 4 is pretty straightforward. If you receive any form of compensation from any source that could be perceived to affect your judgment, you have to share that information. Actuaries need to avoid any questions of impropriety.”
— Sarah Bhanji, FCIA
Why Rule 4 is important
Ensures impartiality and integrity of actuarial work
Pre-emptively identifying and managing situations where compensation could bias recommendations helps ensure that professional judgment is not compromised by financial interests.
Builds trust
Full disclosure of compensation gives clients, employers and stakeholders confidence in the judgment and integrity of members.
Upholds the profession’s reputation
Reducing the risk of misconduct or the perception of misconduct protects the reputation of the entire profession.
Contributes to full transparency
Disclosure requirements discourage hidden incentives or improper influence and ensure clients and the public can make informed decisions knowing all financial relationships are declared.
Provides a basis for enforcement
Provides CIA with a mechanism to enforce required conduct in the event of an ethical breach.
What Rule 4 means for members
Disclose any form of compensation
Compensation can come in many forms, including financial remuneration, additional work, referrals, non-monetary gifts, preferential treatment or benefits.
Disclose compensation from any source
Compensation can be direct or indirect. It can be made through a branch or subsidiary of your company, another site or jurisdiction, another position you hold, or another business or project you have an interest in.
Consider and manage perceptions
Undisclosed compensation can be perceived as a sign of professional misconduct even when you believe your judgment has not been affected.
Understand what full and timely disclosure means
Disclosure should be made of all material facts concerning direct or indirect compensation that may be relevant to a client’s or employer’s decision. This should be done in sufficient time for the client or employer to make an informed and independent decision.
Several factors determine
relevance of compensation
You should consider the value of compensation relative to services provided, the timing, your ability to disclose ;and explain it, and the potential for the compensation to affect or be perceived to affect your professional judgment.
When in doubt, disclose
If you are not sure whether a form of compensation should be disclosed, you are encouraged to err on the side of transparency.
