The IFoA's FAQs misleads by omission

This is an update to my previous article on the Institute and Faculty of Actuaries' proposed new Disciplinary Scheme and the current member vote on this. In that article I referred to 4 major changes that the IFoA had not drawn to its members' attention, and the fact that it ought to have disclosed a legal challenge as a material fact.

The IFoA have produced a Frequently Asked Questions (FAQs) page which they say they are updating during the voting period in the light of questions that arise, including from posts on Linked In.

Unfortunately the FAQs document is not dated. Given that they say they may update it regularly (and already seem to have updated it at least once since a version I saw a few days ago), I think they should put the date and a number on each different version.

The FAQs page that I am commenting on here is the one available yesterday (15 October 2022). (It doesn't seem to have changed when I look at it today, but without a version number or date I can't be sure.)

Major Change no 1: a new gagging order on accused members and witnesses

Unlike in the new proposed scheme, there is nothing in the current scheme rules which prohibits an accused member from making allegations against them or poor behaviour by the IFoA in an investigation against them public. As I said in my original article, the words "confidential" or "confidentiality" do not appear in the existing scheme rules.

The FAQs claim otherwise (in paragraph 8), but that is sleight of hand by the IFoA.

Paragraph 8 says (the emphasis is mine):

The revised Disciplinary Scheme does not propose to change the current approach to confidentiality and publication of disciplinary proceedings.

As with the Current Scheme, disciplinary investigations remain confidential until there is an adverse finding against the Respondent. If an allegation is dismissed by an Adjudication Panel, the allegation will never be made public. Members and Respondents are therefore currently asked to keep all information they receive in relation to these proceedings confidential. The position is formalised in the revised Disciplinary Scheme, which requires Respondents and members to treat as confidential all information they receive that is not in the public domain. By protecting the confidentiality of information obtained during an investigation, Respondents and witnesses can feel confident that the information they provide to the IFoA will be handled appropriately, enabling cases to be investigated thoroughly and sensitively.

The protection of confidential information is balanced against the publication of public interest outcomes. Disciplinary Orders and accepted adverse Adjudication Panel determinations are normally published as it is in the public interest for members and the public to be aware of findings of Misconduct. Disciplinary Tribunal Panel, Appeal Tribunal Panel and Readmission proceedings are normally held in public and determinations are usually published. Capacity for Membership hearings are normally held in private as there is often sensitive health information discussed during these hearings, however the outcomes from the hearing may be published.?

There is a significant difference between asking respondents and members to keep things confidential, when that is not in the rules (the current position), and requiring them to keep things confidential (the new proposed position).

As put in my original article, under the new rules, the IFoA (which has behaved questionably in several disciplinary cases - for example it lost 3 out of 6 Disciplinary Tribunal Panel cases in 2020-2021 with Panels awarding costs totalling ￡69,000 against the IFoA, on the grounds that the IFoA had acted improperly or negligently) would indeed be able to gag any further improper or negligent behaviour against accused members by threatening them with additional misconduct charges if they spoke up (a requirement of the IFoA's own Actuaries' Code!) about such poor treatment.

There is more sleight of hand in the final part of the FAQs paragraph 8. This implies (see the quote above) that the IFoA needs to publish determinations because it is in the public interest for members and the public to be aware of misconduct by members. It fails to mention that the determinations of the cases the IFoA lost (due to its own improper or negligent conduct) have not been published. Yet there is a clear public interest in members and the public being made aware of poor conduct by powerful regulatory organisations like the IFoA.

Under the new rules, there is even less to discourage future similar negligent or improper behaviour by the IFoA. As with the Post Office scandal, several members could be treated improperly at the same time, and would be unaware of the existence of similar cases, each thinking that they were alone, and therefore the "system" must be right.

Major Change no 2: a further reduction in independence: the IFoA (prosecution) appoints panel members (judges), plus:

The legal challenge

It is good that the IFoA have admitted in the FAQs page of yesterday (in a new inserted paragraph 14, with subsequent paragraphs renumbered) that they are facing a legal challenge. This should have been disclosed to members before the vote, not (reluctantly) during it. Paragraph 14 states:

14. Are the IFoA’s disciplinary processes subject to a legal challenge? Members may have seen reference to the independence of the IFoA’s disciplinary processes being legally challenged. These are live proceedings which are connected to a live disciplinary case; no adverse findings have been made against the IFoA. The challenges relate mainly to the governance arrangements of the IFoA’s regulatory function, which do not fall within the scope of the Disciplinary Scheme. The IFoA does not intend to comment further given that the proceedings are live.

I'm not a lawyer, but I am concerned that this (and other parts of the FAQs) currently fails to meet the Communication Principle of the Actuaries' Code, in particular paragraphs 6.3 and 6.4 (the bold emphasis is mine):

"6.3?Members must take reasonable steps to ensure that any communication for which they are responsible or in which they have a significant involvement is accurate, not misleading, and contains an appropriate level of information.

6.4?Where Members identify that a user of their work has, or is reasonably likely to have, misunderstood or misinterpreted the information or?advice provided by them in a way that could have a material impact, Members should draw the user's attention to this."

Members might be forgiven from reading the FAQs, particularly the passage "The challenges relate mainly to the governance arrangements of the IFoA’s regulatory function, which do not fall within the scope of the Disciplinary Scheme." that the legal challenge is nothing to do with the disciplinary scheme.

On the contrary, the Judicial Review is about the want of independence (and hence impartiality) of the IFoA's current disciplinary scheme, something that will if anything be exacerbated in my opinion under the IFoA's proposed new scheme.

The Judicial Review seeks amongst other things:

"A declaration that the [IFoA]'s disciplinary scheme is neither independent nor impartial as required by Article 6 of the ECHR."

I suspect that members will be puzzled how that can be reconciled with the IFoA's claim that the JR relates "mainly to the governance arrangements of the IFoA’s regulatory function". On the contrary, the challenge goes to the heart of the IFoA's claim that their disciplinary arrangements are properly independent and not subject to either actual, or the appearance of, significant influence by the IFoA.

Why will the new scheme exacerbate the want of independence? Because at the moment, everyone appointed to any role under the scheme is appointed by the IFoA's Regulatory Appointments Committee (RAC), a majority of whose members are IFoA appointees. (So insufficiently independent). Under the existing scheme, it is the Convener of Panels who selects panel members.

Under the new proposed scheme, appointments to Panels will be made by "the Executive" (Rationale document page 6) . The updated FAQs page clarifies that it is the Judicial Committees Secretary, an employee of the IFoA who will do this.

A major point of the Judicial Review is that (unlike with the Bar Standards Board and Bar Tribunals Adjudication Service) the IFoA has too much influence over who gets appointed to all parts of the process. Under the new scheme, the IFoA (prosecution) gets to choose panel members (judge), which arguably further reduces independence. This is precisely the sort of thing that is being put before the High Court. Members might well prefer to wait to see what the Judge's decision is.

Major Change no 3: a power grab to remove the need to obtain members' permission for further significant changes

Paragraph 9 of the FAQs includes:

The Disciplinary Scheme will be supported by more detailed Regulations which include the detailed operational processes and procedures. The Regulations can be amended by the Disciplinary Committee, allowing the operational processes to adapt more easily to changes in best practice and feedback from users. The Regulations will be subject to regular review by the Disciplinary Committee. The Disciplinary Committee is made up of IFoA members and lay persons. It reports to the Regulatory Board and is subject to oversight by the UK Financial Reporting Council.

This gives the impression that moving the details to Regulations is a mere convenience to make it easier to make changes and that members need not worry, because the Disciplinary Committee, the Regulatory Board and the FRC will look after members' interests.

The Disciplinary Committee (and its predecessor, the Disciplinary Board, with until recently almost identical members) has a shockingly poor track record in acting in an impartial way. Since 2020 it has made a succession of changes increasing the power of the IFoA vis a vis accused members, often mid membership year, without consulting or even informing IFoA Council until several months later. For example, they:

• increased members' liability for costs by an order of magnitude (mid membership year, arguably breaking the agreement that members had signed up to)
• very swiftly agreed to an IFoA request that conduct by actuaries acting on IFoA business would normally be exempt from disciplinary procedures
• agreed to this proposed new disciplinary scheme without any qualms as to the significant defects in it.

The Regulatory Board and FRC did nothing to stop these changes, despite the lack of impartiality displayed by the IFoA and the Disciplinary Board/Committee.

The safeguards that the IFoA refers to simply cannot be relied upon.

Under the new scheme, the IFoA would have carte blanche to make further significant changes to the scheme's operation which, on its past track record, the Disciplinary Committee could be expected to nod through. Members would have zero say, and little or no recourse.

Major Change no 4: you become bound by the IFoA's rules for the rest of your life

The FAQs say that conduct that takes place after a member leaves is not subject to the disciplinary scheme (with one exception: non co-operation in an investigation about conduct while a member). Paragraph 7 includes (the bold emphasis is mine)

Misconduct can only include conduct which took place while the individual was a member of the IFoA, subject to the exceptions explained below. As with the Current Scheme, the IFoA can investigate a former member in relation to conduct which occurred while they were a member of the IFoA. This is to ensure that Respondents do not simply resign their membership in order to avoid a disciplinary investigation.?

But (as pointed out in my previous article), that is not what the proposed new scheme wording says, and the IFoA have not said that they will correct the wording to make clear that conduct after leaving (with that one exception) is not subject to the disciplinary scheme. It is the Scheme rules that count, not what the FAQs say.

A further point about scope: there is another gap between what the FAQs say and what the proposed new rules say:

Paragraph 7 of the FAQs includes:

Misconduct is defined as follows under the revised Disciplinary Scheme (see Rule 2.1): “Misconduct means any act or omission or series of acts or omissions by a Member, in their professional or non-professional life, which falls significantly short of the standards of behaviour, integrity, competence or professional judgment which other Members or the public might reasonably expect of a Member.”

Note the symmetry in the new proposed definition between professional and non-professional life: there is no difference in scope.

Paragraph 7 of the FAQs goes on to introduce an asymmetry that isn't there in the rules, implying that the conditions under which non-professional conduct is considered are weaker (the bold emphasis is mine):

Misconduct can include conduct in a member’s professional and non-professional life; however non-professional conduct can only be considered to be Misconduct if it could reasonably be considered to reflect upon the profession. For example, a conviction which has occurred in a member’s non-professional life may be considered to reflect upon the IFoA given the public nature of a conviction.

If so, why hasn't the IFoA made that clear in the wording of the actual proposed Scheme rules? The latter are what matter, not the FAQs.

In any case, the example given in that paragraph is misleading, because it implies that only really serious things like a criminal conviction (e.g. past cases have included murder, indecent exposure, theft and drink driving) are likely to be considered. On the contrary, (and the Judicial Review is arising because of this) there are several examples of the IFoA pursuing members for exercising perfectly legal free speech in a personal capacity which someone (often of a different political or ideological persuasion) or the IFoA itself (an increasingly political organisation) feels offended by.

Conclusions

If an actuary has written the FAQs, shouldn't they redraft them to make them less misleading?

If not, shouldn't the IFoA do this anyway?

Again, wouldn't it have been better for the IFoA to consult its members before trying to push through such major changes?